SUBJECT
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Adopt Resolution 2026-11 to Approve the Truist Loan Refinancing and New Money Interim Loan (Action Item)
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DESCRIPTION
In April 2023, the PRWC Board of Directors approved the WIFIA loan agreement in the amount of $305,799,441 to provide long-term funding for eligible project costs through the anticipated five-year construction period. The WIFIA loan closed in May 2023 and has an interest rate of 4.02%.
As an alternative to drawing from the WIFIA loan for the initial three years of construction, Truist Bank proposed a $154,338,308 fixed-rate tax-exempt bank loan to be used as interim financing. The Truist loan had an interest rate of 3.55% with tender dates beginning in November 2025 and every six months thereafter until November 2028. The Truist loan was fully funded at closing, allowing for the loan proceeds to be invested in a fully collateralized depository account with Truist Bank Interest on the Truist loan has been paid annually by member payments. The net interest cost of the Truist loan, when considering investment earnings, results in debt service savings when compared to draws on the higher interest rate WIFIA loan.
Additionally, by delaying draws on the WIFIA loan using the Truist loan, the PRWC maintained the flexibility to request a one-time interest rate reset on the WIFIA loan if rates declined and certain conditions were met. Interest rates have increased since May 2023, and the WIFIA loan rate of 4.02% is much lower than the current applicable WIFIA loan rate of approximately 5.26%.
In November 2025, the PRWC extended the Truist loan for one year to continue to access interim financing at a lower interest rate than WIFIA. The loan was extended to November 13, 2026, at an interest rate of 3.78%.
The PRWC would like to continue to access interim financing at a lower interest rate than WIFIA and may wish to repay portions of the interim financing from WIFIA, grants, and/or SRF loan proceeds over the next year. To be able to pay off a loan at any time without penalty, the PRWC would like to refinance the loan with a variable rate, non-revolving line of credit. The WIFIA loan agreement restricts variable rates to no more than 25% of its indebtedness. SRF has also notified PRWC that its federal funding has been reduced and the PRWC must seek other funds for $81M, which is discussed further below.
To obtain additional interim financing and meet these requirements, the PRWC requested:
1) a non-revolving, variable rate loan in the amount of approximately $135M to refinance a portion of the existing Truist loan, and
2) a non-revolving, fixed rate loan in the amount of approximately $65M to refinance the remaining portion of the existing Truist loan and provide approximately $45.7M in additional interim financing to be deposited into an escrow account.
The interest rate on the variable rate loan will reset monthly at 79% of 1-Month Term SOFR plus 0.70%, which is currently approximately 3.63%. The fixed rate loan is currently at an estimated interest rate of 3.90%, with the $45.7M new money portion.
These proposed obligations are summarized as follows:
Below is a summary of the current funding for the Southeast Wellfield project after notification from SRF of the $81M reduction in funding. The most recent plan of finance reduced the amount of WIFIA funding and increased the low-interest rate SRF funding. Given SRF’s notification, the $81M will be funded by increasing WIFIA to the full amount available and interim financing from the new Truist fixed rate loan. The interim financing can be taken out by additional SRF, if available, and/or a long-term bank loan or bonds.
The following table summarizes the PRWC’s total fixed and variable rate debt after the issuance of the new Truist loans.
RECOMMENDATION
Adopt Resolution 2026-11 to approve the new Truist variable rate loan to refinance $134.9M of the prior Truist loan and approve the new Truist fixed rate loan to refinance $19.4M of the prior Truist loan and provide $45.7M in new interim financing for construction.
FISCAL IMPACT
The PRWC has utilized the lower interest rate Truist loan and has not made a draw upon the WIFIA loan. Given the upcoming mandatory put date on the Truist loan and notification from SRF that it cannot commit to $81M in funding at this time, refinancing the loan continues to provide funding at a lower interest cost than WIFIA and the increased new money provides interim funds for construction. If additional SRF funding becomes available, the PRWC could pay off an equal amount of the new Truist loan with low interest cost SRF funding. The flexibility for PRWC to provide more time for SRF funds to become available is valuable due to the subsidized interest rates and potential principal forgiveness. The interest rates on the new Truist loan are as of this date below the WIFIA loan. Also, the interest earnings on the unspent Truist loan proceeds help offset the interest cost of the new money portion of the loan.
CONTACT INFORMATION
Julie Santamaria, PFM Financial Advisors LLC