August 2008 -- The Public Utilities Commission (PUC) of the City of Princeton, Minnesota recently began a project to build a new water treatment facility for the municipality to accommodate its growing population. Construction of the new facility began in 2005 and was financed by a Revenue Bond. As construction progressed, material and construction costs were greater than originally budgeted, resulting in cost overruns over $2 million. Trying to refinance the existing bonds to a new public issue for a greater amount would impose yet another delay to completing the project. Not only did Princeton PUC need to get these overrun costs and Siemens Water Technologies equipment financed in a quick manner, they also wanted to refinance the revenue bonds.
Solution
Working together with both the PUC and the City of Princeton, Siemens Financial Services Inc. (SFS) was able to structure a private placement General Obligation Bond permitted by state law to meet the criteria set forth by the PUC. SFS financing totaled $4.9 million and included the cost overruns, Siemens Water Technologies equipment, and a refinance of the previously issued revenue bonds at a lower rate.
Results
The private placement General Obligation Bond structure allowed Princeton to refinance their existing bonds while avoiding further delays associated with a public issuance. This allowed Princeton to have the water treatment facility completed on time and without the any disruption to their customers. The private placement aspect of the bond also reduced the number of fees. By using SFS, Princeton was able to complete their project on time and therefore avoid any additional material or construction cost increases.
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