Financing

The New York City Municipal Water Finance Authority

The New York City Municipal Water Finance Authority (NYW) was created in 1984 to finance capital improvements to the City’s water and sewer system. Since its first bond sale in November 1985, the Authority has sold $81.5 billion of bonds. These bond issuances included a combination of general (first) resolution, second general resolution and subordinated special resolution crossover refunding water and sewer system revenue bonds.

Of the aggregate bond par amount sold, as of April 13, 2023, $32.3 billion is outstanding, $35.4 billion, including $665 million of special resolution crossover bonds, was refinanced, $6.6 billion was defeased with Authority funds prior to maturity, and $7.3 billion was retired with revenues as they matured. In addition to this long-term debt, NYW uses bond anticipation notes (BANs) issued to the New York State Environmental Facilities Corporation (EFC) and has used a commercial paper program as a source of flexible short-term financing. As of April 13, 2023, NYW had $90.2 million in outstanding BAN draws and available undrawn BAN capacity of $599 million pursuant to agreements with EFC to fund certain projects. NYW is authorized to draw up to $600 million of commercial paper notes, including up to $400 million of the Extendable Municipal Commercial Paper. Currently, the Authority has no commercial paper outstanding, and does not expect to issue commercial paper for the remainder of the current fiscal year and in 2024.NYW’s outstanding debt also includes floating rate bonds, which have been a reliable source of cost-effective financing. NYW has $4.8 billion of floating rate bonds or approximately 15 percent of its outstanding debt, including $401 million which was swapped to a fixed rate. NYW’s floating rate exposure consists primarily of tax-exempt floating rate debt supported by liquidity facilities. NYW also has $600.1 million of floating rate bonds which do not require a bank facility, where interest rates are set periodically according to a benchmark index, or by a remarketing agent.

NYW is a party to two interest rate exchange agreements (swaps) with a total notional amount of $401 million. Under these agreements, the Authority pays a fixed interest rate of 3.439 percent in exchange for a floating rate based on 67 percent of one-month LIBOR. As of March 31, 2023, the combined mark- to-market value of the swaps was negative $48.4 million. This is the theoretical amount which NYW would pay if both swaps were terminated as of March 31, 2023. As described above, NYW has adhered to the ISDA 2020 IBOR Fallbacks Protocol to address the discontinuation of LIBOR after June 30, 2023.

NYW participates in the State Revolving Fund (SRF) program administered by the EFC. The SRF provides a source of long- term below-market interest rate borrowing, subsidized by federal capitalization grants, state matching funds, and other funds held by EFC. The Authority’s BAN draws are expected to be refinanced with fixed rate second resolution bonds issued to EFC.

Summarized in the following table are the issuances that have closed to date in fiscal year 2023. The proceeds of the bonds were applied to pay the cost of improvements to the system or paid principal and interest on certain of the Authority’s outstanding debt and paid the costs of issuance. 

During the period from 2022 to 2025, NYW expects to sell an average of approximately $1.7 billion of new money bonds per year. Of this amount, NYW plans to issue about $432 million of bonds in 2022 and $300 million bonds annually thereafter to EFC, taking advantage of the interest rate subsidy available for qualifying projects, and minimizing the overall costs of its financing program. NYW expects to issue approximately 90 percent of its new debt per year as fixed rate debt with the remainder issued as floating rate debt, subject to market conditions.

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