Whitesburg KY
Mostly clear
Mostly clear

Should we look at issuing bonds for water and sewer?

To the Editor:

Someone raised the idea of issuing bonds for water and sewer. That is worth a really close look, for several reasons.

One: Interest rates are as low as they have been in many years, so the timing couldn’t be better for issuing municipal bonds. In fact, this is probably the best time for issuing bonds since the 1950s. But this window of opportunity won’t last forever. Inflation is already on the way up. As that happens, and as we get by the sub-prime loan crisis, there will be a lot of pressure on the Federal Reserve to raise rates again.

Two: As inflation goes up, the materials needed to put in water and sewer will get more and more expensive. Furthermore, scarcity is driving up materials prices over and above normal inflation. Just consider what has happened to the price of copper. Or to gasoline and diesel. The sooner we get water and sewer to the whole county, the less we will pay for the materials to do it. The way to get it soonest is to issue the bonds.

Three: If you issue bonds now, you lock in the price you have to pay for that money. Prices keep going up, but that won’t affect the loan. Consider this: What if you could buy your kids’ clothes and your food and gasoline ten or twenty years from now at the price you’re paying now? That would be fantastic, and that’s what you’d be doing if you issued bonds now and paid them off ten or twenty years from now.

Four: Coal severance is not a stream of revenue that will last forever but it is a sure source for ten or twenty years. That means you will get a higher bond rating because of the almost certainty that the money to pay the bonds off will be available. A higher bond rating means you can sell the bonds at a lower interest rate. Furthermore, there will be a revenue stream from water and sewer that could, if necessary, be used to augment coal severance funds as a way to pay off the bonds. If you are really concerned that the Legislature will take away the money needed to pay for the bonds – an unlikely occurrence – get a commitment from the state that it won’t do that.


Leave a Reply