Title
Resolution Regarding Approval of Series Ordinance Authorizing Issuance and Sale of Water Supply System Revenue and Revenue Refunding Bonds in a Principal Amount Not to Exceed $945,000,000 (Ordinance 2026-02)
Body
Agenda of: April 22, 2026
Item No.: 2026-109
Amount: Not to Exceed $945,000,000
TO: The Honorable
Board of Directors
Great Lakes Water Authority
FROM: Suzanne R. Coffey, P.E.
Chief Executive Officer
Great Lakes Water Authority
DATE: April 22, 2026
RE: Resolution Regarding Approval of Series Ordinance Authorizing Issuance and Sale of Water Supply System Revenue and Revenue Refunding Bonds in a Principal Amount Not to Exceed $945,000,000 (Ordinance 2026-02)
MOTION
Upon recommendation of Nicolette N. Bateson, Chief Financial Officer\Treasurer, the Board of Directors (Board) of the Great Lakes Water Authority (GLWA), approves the resolution for the Series Ordinance Authorizing Issuance and Sale of Water Supply System Revenue and Revenue Refunding Bonds in a Principal Amount Not to Exceed $945,000,000 (Ordinance 2026-02) as presented, and authorizes the CEO to take such other action as may be necessary to accomplish the intent of this vote.
BACKGROUND
The Great Lakes Water Authority (“GLWA”) annually evaluates funding needed for its capital improvement program for the upcoming fiscal year within the available resources established by the annual budget and charge setting process. In addition, GLWA also utilizes this process to identify potential bond refunding candidates to reduce the cost of debt service as well as other debt structure considerations to support effective financial management. GLWA, working with a team of public finance professionals, has performed a preliminary scope analysis for the upcoming bond transaction in relation to market conditions. To prepare for all reasonable scenarios, the documents presented with this agenda item encompass both new money and refunding strategies.
New for the 2026 transaction, the bond documents encompass provisions to allow for variable rate debt to control the cost of borrowing. As it relates to these provisions, please note the following.
• In November 2025, GLWA and its financial advisor, PFM Financial Advisors LLC (“PFM”), met individually with each firm in the underwriting pool seeking benchmarking and best practice feedback from their experience with other water sector utilities. A consistent concept that emerged from these discussions was to consider variable rate debt.
• At the December 19, 2025 Audit Committee meeting, PFM, presented a municipal market outlook and considerations for the upcoming FY 2026 bond transaction - including consideration of including variable rate and the different variable rate products that are available to GLWA.
• At the January 30, 2026 Audit Committee meeting, PFM, presented an in-depth report on variable rate debt - including a history of a DWSD’s use of variable rate date prior to the establishment of GLWA, analysis of variable rate debt in GLWA’s current debt portfolio, and a review of current variable rate alternatives.
• One of those alternatives discussed, and recommended for consideration in the upcoming transactions, is a “Term Rate” structure as it carries a favorable risk profile. Term Rate bonds offer an intermediate option between fixed rate debt and floating rate debt. The bonds bear interest at a fixed rate through the expiration of each Term Rate Period of up to 7 years. The key benefits of term rate bonds are they take advantage of the short end of the yield curve but gain budgetary certainty, limit impacts of short-term interest rate volatility, and eliminate exposure to bank counterparties. The key risks to consider are increased interest costs in the future if rates are higher at the remarketing date or if the issuer credit rating deteriorates between the issuance date and remarketing date and failed remarketing is possible due to market disruption or issuer market access. See attached PFM presentation.
• GLWA’s debt management policy allows for the use of variable rate debt. The variable rate debt structure considered in the proposed Series Ordinance aligns with priorities identified in the debt management policy, such as the anticipation of lower debt service costs, added flexibility of the capital structure, and diversification of investor base.
• During March 2026, GLWA sought feedback from three rating agencies related to variable rate debt. The consistent response was that the use of variable debt as part of an overall debt structure strategy is not viewed negatively if risks are appropriately managed and the exposure to variable rate obligations is not excessive.
• In addition to authorizing the issuance of variable rate debt in a “Term Rate” mode, the proposed Series Ordinance also authorizes the issuance of fixed rate bonds to provide flexibility in sourcing new money and to refund existing fixed rate obligations for debt service savings.
• The language authorizing the issuance and sale of variable rate debt is included in the proposed Series Ordinance and is highlighted in grey for reference.
For the Great Lakes Water Authority (“GLWA”) to proceed with the issuance of new money bonds to support regional capital improvements and refunding of various outstanding water supply system bonds for the purpose of achieving annual debt service savings, the GLWA Board must approve the included resolution approving the Series Ordinance.
The Series Ordinance sets forth the guidelines for the New Money and Refunding Bonds and authorizes the Chief Executive Officer or the Chief Financial Officer/Treasurer to execute the final terms of the Bonds, paying issuance costs and signing of the Bond Purchase Agreement, within the parameters set forth in the Series Ordinance.
JUSTIFICATION
New Money Portion: The authorized amount for the New Money Bonds is for an aggregate principal amount not to exceed $315 million for the regional water system.
Refunding Portion: The authorized amount for the Refunding Bonds is presented for an aggregate principal amount of not to exceed $630 million. The final par amount of the Refunding Bonds will be determined at the time of pricing and is based on current bond market pricing levels, issuance costs, and the par amount of the bonds to be refunded by GLWA as determined by the savings level achieved.
Key Provisions:
• Not to Exceed Par Amount: $945 million ($315 million for new money, $630 million for refunding)
• Maximum Coupon Rate Fixed Rate Bonds Only: 6.00%
• Maximum Coupon Rate for All Bonds: 9.00%
• Minimum Purchase Price: 98% of principal amount of bonds
• Maximum Underwriter Discount: 0.40% of principal amount of bonds
• Present Value Savings: Greater than 2.50% of principal amount of bonds to be refunded
• Permits the issuance of bonds in a “Term Rate Mode”, under which the bonds bear a fixed interest rate for an initial interest period and are subsequently remarketed into a new “Term Rate Mode” or converted to a permanent “Fixed Rate Mode”, as defined in the Series Ordinance.
• Authorizes an authorized officer to establish a “Stepped Rate” that will apply if the bonds cannot be successfully remarketed at the end of any interest period while in a “Term Rate Mode”.
BUDGET IMPACT
Savings resulting from the potential Water Refunding Bonds are not included in the FY 2027 budget or ten-year financial plan. When savings are achieved, the financial plan will be revised if necessary.
COMMITTEE REVIEW
This matter was reviewed by the GLWA Audit Committee at its meeting on March 27, 2026. The Audit Committee unanimously recommends the resolution for the Series Ordinance Authorizing Issuance and Sale of Water Supply System Revenue and Revenue Refunding Bonds in a Principal Amount Not to Exceed $945,000,000 as presented.
SHARED SERVICES IMPACT
This item does not impact the shared services agreement between GLWA and DWSD.