Corpus Christi is getting encouraging news from the financial world as it prepares for its next major round of borrowing to help pay for water infrastructure projects.
Two major bond rating agencies have improved the city’s outlook, a development city officials say could help as Corpus Christi prepares to sell bonds to finance major water system improvements.
The improved outlook comes as the city also plans to borrow significantly less than originally expected.
The city initially anticipated selling about $500 million in bonds. That amount has now been reduced to about $300 million.
City Councilman Mark Scott said the improved outlook from the rating agencies is positive as the city prepares to enter the bond market.
“The fact that they have upgraded our outlook is a positive thing,” Scott said. “When you go to sell a lot of bonds, you’re looking for anything positive to pitch to the bond rating agencies and to those who were going to buy our bonds.”
Scott said the improved outlook could also have an impact on the interest rate the city ultimately pays when those bonds are sold.
“I don’t know what the interest rate will ultimately be, but the interest rates to some extent are tied to what the bond rating agencies said,” Scott said. “If the bond rating agencies say that our outlook is improving, that’s gotta have an impact on the bond sale.”
Corpus Christi City Manager Peter Zanoni said Fitch Ratings and S&P Global Ratings both improved the city’s outlook.
“This is very good news,” Zanoni said. “Both Fitch and Standard & Poor’s increase the outlook projection for the city, enhanced it. So, that we are in better shape today than what we were months ago.”
One factor helping the city’s water outlook is the recent increase in water flowing into the Coastal Bend following heavy summer rains and flooding in the Hill Country.
The additional rainfall helped refill Lake Corpus Christi and send more water into the Choke Canyon Reservoir.
At the same time, the city continues to make major investments in its water infrastructure, including hundreds of millions of dollars in improvements at the O.N. Stevens Water Treatment Plant.
But the city’s decision to reduce its planned bond sale from $500 million to $300 million is tied to another major water project.
The city had anticipated spending about $176 million to purchase water rights associated with the Evangeline project. That purchase has been delayed because the water rights are now part of a contested case hearing in the court system.
Zanoni said the delay is the reason the city no longer needs to borrow the full $500 million originally planned.
“The reason we dropped from 500 to 300 is the delay in the water right purchase,” Zanoni said.
The Evangeline project remains a major part of the city’s long-term plans to secure additional water supplies, but the legal challenge must be resolved before the city can move forward with the purchase.
For now, Corpus Christi is moving ahead with a smaller bond sale while officials wait for the Evangeline water-rights issue to be resolved.
The improved bond outlook gives the city more favorable financial news as it continues working to fund major water infrastructure projects and secure additional water supplies for the future.