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FUD plan to take advantage of low interest rates


First Utility District could be taking out a more than $15 million bond for capital improvements this year — a move designed to take advantage of extremely low interest rates.

“If we start it now and get those real low rates, it’d benefit us for 20 years, as we’re paying these off for the next 20 years,” Wayne Watson, FUD assistant manger, said at the Utility’s commission meeting, Monday, Sept. 19.

“These are very low rates and very favorable for us,” he added.

The Utility would need a $15 million bond in the next year or so anyway, Watson said, to keep up with capital improvement projects such as the utility’s pipe rehabilitation program and construction of various pump stations and improvements.

By issuing the bonds a year early, the Utility would be taking advantage of interest rates of about 3.5 percent. If rates rose even one percent, Watson said, that would translate to more than $2 million in interest.

But, by issuing bonds early, the Utility would have to pay one year’s debt service at that 3.5 percent rate, or about $570,000.


“I guess I’m gambling a little bit,” Watson said of the $570,000 balancing out the potential $2 million.

The bond and low interest rates would mean FUD could pursue more improvements without having to hike customer rates.

“This will keep us a step ahead of the game,” commission chair Zola Turley said.

FUD’s three commissioners unanimously agreed that FUD should go forward with pursuing the bond issue.

Watson also presented commissioners with the Utility’s cash flow to date.

In receipts, “we’re roughly $700,000 ahead, year to date,” Watson said. Sales were up in the most recent quarter largely due to irrigation.

“It’s that second and third quarter where you make or break your profits,” he added.

FUD employees also updated commissioners on water loss studies, stating they had examined 19 of the largest customer meters to check calibrations and were repairing any malfunctions they found.

FUD also is on the lookout for customers tampering with meters and irregularities that show up in the utility’s own billing process.

“Our water losses are significantly better than other [utilities’],” commissioner Richard Maples said.

 

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