Highest GB1 Grade Assigned to Green Bonds to Finance Eligible Sustainable Water Management Projects; First Time GBA Assigned in the US.
New York, August 10, 2016 -- Moody's Investors Service has today assigned a Green Bond Assessment (GBA) of GB1 to the $8,775,000 Upper Mohawk Valley Regional Finance Authority, NY (MVWA), Water System Revenue Bonds, Series 2016 (A1), that are to be issued with maturities ranging from 2017 to 2031. Corresponding dollar amounts and interest rates will be determined at the time of sale.
The proceeds from the issuance will be used exclusively to fund or refinance projects and activities that serve to increase the water system's resiliency, provide greater operational continuity and further the authority's mission of providing safe drinking water to water users within its service area. These prospective as well as previously funded undertakings qualify as eligible sustainable water management project categories.
The regional water authority is effectively organized and properly staffed with qualified and experienced personnel, including reliance on external parties, to undertake regular examinations of the capital expenditures required to maintain and upgrade the regional system beyond that covered by normal maintenance expenditures. While the framework for evaluating eligible investments and allocating proceeds was not specifically crafted for the purposes of issuing green bonds, this takes the form of a capital improvement plan to improve the water system's infrastructure through increased system capacity and dependability based on formal evaluation of a specific list of rank ordered projects that are selected for financing based on the importance of each issue or problem.
The revenue bonds are explicitly designated as Green Bonds in the Official Statement to be issued by MVWA as the proceeds will be used exclusively for projects and activities that serve to increase the water system's resiliency, provide greater operational continuity and further the authority's mission of providing safe drinking water to water users within its service area.
These prospective as well as previously funded undertakings qualify as eligible sustainable water management project categories. They include:
-$4,050,000 allocated to raw water transmission upgrades, Phase 1, to cover a new third preengineered pipe bridge located south of the existing bridges and new piping to facilitate future extension of the new pipeline upstream toward the Hinckley Reservoir intake. The result of this multiphase project will be a major improvement in the authority's ability to draw ample supplies from Hinckley Reservoir during times of significant drought that would result in below-normal water levels within the reservoir.
-$650,000 to fund the design of two new water storage facilities in Marcy, lagoon improvements at the water treatment plant in Prospect, New York, and upgrades to several pump and regulating stations.
-$4,125,000 to refinance previously issued 1999 and 2000 callable bonds which were originally issued to finance the replacement, upgrading, cleaning or new construction of treatment facilities, pump stations, open reservoirs, storage tanks, metering stations, regulating stations, transmission mains and other facilities.
In addition to disclosures in the published annual comprehensive financial reports, the authority also publishes and posts on its website its Capital Projects Committee reports as well as various project descriptions and project photographs.
The net proceeds of the 2016 Bonds will be deposited directly into special segregated accounts maintained by and held at The Bank of New York Mellon acting in its capacity as Trustee pursuant to a supplemental resolution entered into between MVWA and the Trustee. These accounts include (1) a 2016 Project Account established under an existing Construction Fund as well as (2) a new Refunded Bonds Escrow Fund created and established to earmark proceeds used to refund prior obligations. Both accounts are governed by the provisions of a Trust Agreement pursuant to which moneys segregated in the Construction Fund are only used to fund future construction projects to maintain and enhance the current water system while funds held in the Refunded Bonds Escrow Fund will be used only to redeem the remaining 2006 Bonds.
The MVWA has committed to track the net proceeds of the 2016 Bonds and will confirm that such proceeds were used to finance the projects set forth above.
Pending disbursements, which are released by the Trustee in response to a letter of transmittal conveyed by the authority, the net proceeds will be invested pursuant to the MVWA's investment guidelines. New York State investment statutes govern the water authority's cash investment policies. In addition, the water authority has its own investment policy that complies with New York State statutes.
A comprehensive audited annual report is published by the regional water system within six-months after the end of its December 31 fiscal year. The annual report discloses the dollar amounts outstanding in such accounts as well as the securities in which such sums are invested.
The MVWA is committed to providing disclosures that demonstrate the environmental benefits resulting from the planned expenditures of the 2016 Bonds. Construction and final use of the proceeds is expected to be completed within twelve months after receipts of funds. The disclosure will take the form of an annual report to be incorporated into the authority Comprehensive Annual Financial Report (CAFR), and also posted annually on the Authority website.
The first-year initial disclosure will indicate in detail how the proceeds were expended, the contractors performing the work and receiving payments, and the actual work that was
completed. Annual reporting will also include updates on four key metrics that at the same time link up to base line disclosures that permit comparative analysis. These include reservoir water levels versus transmission capacity, conveyance of purified potable water during the year, Trihalomethane (THM) levels and the total amount of hydro-electric power produced by the turbines within the water treatment facility.
The Upper Mohawk Valley Regional Finance Authority is a corporate municipal instrumentality of the State of New York that was established pursuant to various acts that became effective in 1994 to more equitably represent the service area it provides water service to and to promote the strengthening and improvement of the regional water system. The primary mission of the regional authority is to provide safe, healthy and reliable drinking water to water users within its service area. The regional water system serves a population of almost 130,000 through over 38,900 service connections located in the eastern portion of Oneida and Herkimer Counties as well as the City of Utica in New York State.
Moody's GBA represents a forward-looking transaction-oriented opinion on the relative effectiveness of the issuer's approach to manage, administer, allocate assets to and report on environmental projects financed by proceeds from green bond offerings. GBAs are expressed using a five-point relative scale, ranging from GB1 (Excellent) to GB5 (Poor). A GBA does not constitute a credit rating.
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