Facing option of water rate hike, board OKs refinancing for Lake Mead pipeline

Sam Morris / Las Vegas Sun

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Putting off another more immediate water rate increase, a county board unanimously agreed to refinance payment of some $300 million in bonds that are funding the third intake pipeline from Lake Mead, which is still under construction.

Refinancing will add some $25 million in interest payments on the $300 million, but it will prevent an increase of some 20 cents per 1,000 gallons of water.

The Las Vegas Valley Water District Board, whose members are the seven members of the Clark County Board of Commissioners, approved the refinancing with a bit of warning.

Steve Sisolak, president of the board, said the move is yet another example of failing to do what is necessary — in this case, increase water rates — to pay for a project that is needed to maintain water reliability.

“This has nothing to do with growth,” he said of the third intake pipeline, which was described as a project needed simply to keep residents in Southern Nevada supplied with a reliable water source.

Water users already paid for rate increases of 10 cents per 1,000 in January of this year and January 2010.

Pat Mulroy, who oversees the Water District’s operations, said that without the refinancing, she would have to dip into her agency’s $311 million in reserves. The biggest reason for that is because planning in the past relied so heavily upon connection fees. But connection fee revenues have fallen from some $180 million each year to virtually nothing, Mulroy said, because growth in the Las Vegas Valley is virtually at a standstill.

Failing to refinance, she added, would endanger the Water District’s bond rating, which has already fallen to double A-minus. The lower the bond rating falls, the more expensive it is to borrow money.

And the district is going to have to borrow another $400 million later this year to finish the third intake, she noted. Economist Guy Hobbs, consulting for the Water District, said a rate increase would likely also be needed to help pay off the third intake.

“My concern … is we’re pushing so much debt so far out there, at some point we’ve got to start paying for this stuff … We wouldn’t be in this position if the folks ahead of us hadn’t pushed the debt out so far. I don’t think it’s fair to the next group that comes after us,” Sisolak said.

“We need to pay now or pay later,” added board member Chris Giunchigliani.

Mulroy noted that if the economy improves and revenues increase, nothing prevents the Water District from paying off their debt earlier, which would decrease some of the interest payments.