Title
Resolution Regarding Approval of Series Ordinance Authorizing Issuance and Sale of Sewage Disposal System Revenue Bonds in an Aggregate Amount Not to Exceed $108,988,000 (Ordinance 2025-04) for FY 2025 Clean Water State Revolving Fund (CWSRF) Projects
Body
Agenda of: June 25, 2025
Item No.: 2025-164
Amount: Not to Exceed $108,988,000
TO: The Honorable
Board of Directors
Great Lakes Water Authority
FROM: Suzanne R. Coffey, P.E.
Chief Executive Officer
Great Lakes Water Authority
DATE: June 25, 2025
RE: Resolution Regarding Approval of Series Ordinance Authorizing Issuance and Sale of Sewage Disposal System Revenue Bonds in an Aggregate Amount Not to Exceed $108,988,000 (Ordinance 2025-04) for Fiscal Year (FY) 2025 Clean Water State Revolving Fund (CWSRF) Projects
MOTION
Upon recommendation of Nicolette N. Bateson, Chief Financial Officer (CFO) and Treasurer, the Board of Directors (Board) of the Great Lakes Water Authority (GLWA), approve a resolution for the Series Ordinance Authorizing Issuance and Sale of Sewage Disposal System Revenue Bonds in an Aggregate Amount Not to Exceed $108,988,000 as presented, and authorizes the Chief Executive Officer (CEO) to take such other action as may be necessary to accomplish the intent of this vote.
BACKGROUND
GLWA and the Detroit Water and Sewerage Department (DWSD) were awarded low-interest funding for sewer system improvement projects through the Michigan Department of Environment, Great Lakes, and Energy (EGLE) FY 2025 CWSRF program. The regional and local sewer system projects are both supported by this series ordinance (Series 2025 SRF-1/2: with 1 representing the GLWA Oakwood and Leib project and 2 representing the DWSD Sewer Rehabilitations project) in an aggregate amount of $108,988,000.
The calculation of this Series Ordinance not to exceed (NTE) amount includes a 10% loan financing contingency to allow for fluctuations in the final SRF award amount. The scope of this Series Ordinance also includes $24,900,000, which is the amount of increased estimated cost for the Oakwood project. This allows for the possibility of additional funding from EGLE if available. The NTE amount for each project is listed below and the calculation summary is included in Attachment 1 Table 1.
GLWA Oakwood and Leib (Series 2025-SRF-1) NTE amount: $ 90,200,000
DWSD Sewer Rehabilitations (Series 2025-SRF-2) NTE amount: $ 18,788,000
Aggregate Series Ordinance amount: $108,988,000
There are two considerations related to this resolution: the projects being funded and financing:
CWSRF Funding
GLWA Oakwood and Leib Combined Sewer Overflow (CSO) Facility Improvements - (Series 2025-SRF-1, CIP No. 270004, SRF No. 6001-01): On April 24, 2024, the GLWA Board adopted a resolution approving the project plan following a public hearing on the same date. This project was subsequently approved for funding as notified on EGLE’s final CWSRF Intended Use Plan (IUP) in October 2024. The funding allocation with updated project cost estimates are summarized below and in Attachment 2 Table 1.
• Total funding awarded:
CWSRF Loan Amount: $ 50,248,000
Principal Forgiveness: $ 6,852,000
Total IUP Award Amount $57,100,000
• The estimated project cost was revised to $82,000,000 based on current bid submissions
• GLWA requested additional funding of $24,900,000 to include the increased project cost
• This series ordinance references a potential loan amount of $82,000,000 to allow for the possibility of that additional funding from EGLE
Note: The project cost estimates presented at the Public Hearing differ from those in this Board letter as design details and costs are refined as the project progresses towards the formal bid process.
DWSD Sewer System Rehabilitations - District 1, 2, 4, 5, 6 and 7 (Series 2025-SRF-2, Contract No. DWS-977, SRF No. 6002-01): On February 21, 2024, the DWSD Board of Water Commissioners adopted a resolution approving the project plan following a public hearing on the same date. The projects were subsequently approved for funding as notified on EGLE’s final CWSRF Intended Use Plan (IUP) in October 2024. The funding allocation is summarized below and in Attachment 2 Table 1.
CWSRF Loan Amount: $13,664,000
Principal Forgiveness: $3,416,000
Total IUP Award Amount: $17,080,000
Financing
The 2025 SRF-1/2 Junior Lien Bonds will be sold through the Michigan Finance Authority under the state of Michigan’s CWSRF program. The amount to be financed through the CWSRF bonds is within GLWA’s authorized limits. On July 29, 2022, the GLWA Board of Directors approved Resolution 2022-312, “Resolution of the Great Lakes Water Authority Authorizing Publication of Notice of Intent (NOI) to Issue Sewerage Disposal System Revenue Bonds” in a principal amount not to exceed $650,000,000 (the “Notice of Intent”). This is the eighth and ninth series of sewer bonds from that NOI.
JUSTIFICATION
The approval of this series ordinance is the next formal step required by the GLWA Board in the bond issuance process, and this proposed action authorizes the bonds to be issued. The series ordinance also sets forth the guidelines for the CWSRF bonds, designates the bonds as 2025 SRF-1/2 Junior Lien Bonds and authorizes the CEO or the CFO/Treasurer to execute the final terms of the bonds, paying issuance costs, and signing of the Purchase Contract and Sale Order within the parameters set forth in the Series Ordinance.
The bond series authorized by this ordinance will support both the Regional and Local Sewer System improvements. GLWA secures capital improvement financing for DWSD in accordance with foundational documents related to the establishment of GLWA. Pursuant to Section 7.2(b) of the Regional Sewage Disposal System Lease between the City of Detroit and GLWA, the Authority shall cooperate fully with the City in the implementation of this Detroit capital improvement, including financing through the Authority. GLWA is the loan applicant on behalf of DWSD, and DWSD will be the CWSRF loan recipient. All project costs financed by GLWA through this program, and resulting principal and interest payments on the bonds, will be directly allocable to the DWSD local system.
An advantage of the SRF program is the low interest rates. Potential dollar savings are significant when compared to municipal bond interest rates in a market-based transaction. The current interest rate on a 20-year and 30-year loan for an overburdened applicant is 2%, and 1% for a significantly overburdened applicant. By way of example, GLWA qualified as an overburdened applicant for the Oakwood and Leib project. The anticipated CWSRF loan amount is $82 million. Compared to an estimated market-based rate of 4.5%, potential interest savings on a 20-year loan would be approximately $25.8 million and $41.2 million for a 30-year loan. See Attachment 1 Table 3 for additional cost savings details.
Another advantage of the SRF program is that interest costs are only incurred on the amount drawn from the loan as project expenditures are incurred. This results in additional debt service savings early in the term of the loan compared to market-based transactions. Further, use of SRF funding as junior lien does not impact GLWA debt reserve requirements.
BUDGET IMPACT
GLWA will be the loan applicant on CWSRF loans issued on behalf of the DWSD, and DWSD will be the CWSRF loan recipient as determined by EGLE. All project costs financed by GLWA, on behalf of DWSD, through the program bonds and resulting principal and interest payments on the bonds will be directly allocable to the DWSD local system. Debt service for both projects is anticipated to begin in October 2026 and will be included as part of the FY 2026 - FY 2027 biennial budget.
COMMITTEE REVIEW
This matter was reviewed by the GLWA Audit Committee at its meeting on May 23, 2025. The Audit Committee unanimously recommended the Board of Directors approve a resolution for the Series Ordinance Authorizing Issuance and Sale of Sewage Disposal System Revenue Bonds in an Aggregate Amount Not to Exceed $108,988,000 as presented and authorizes the Chief Executive Officer (CEO) to take such other action as may be necessary to accomplish the intent of this vote.
SHARED SERVICES IMPACT
This item does not impact the shared services agreement between GLWA and DWSD beyond the terms outlined above as well as reimbursement of financing costs incurred.