Mary Hansen Staff Writer @maryfhansen

In 2015, City Water, Light and Power came to the Springfield City Council with a problem. The public utility was at risk of a technical default on its bonds and needed a quick infusion of cash.

The council eventually approved what amounted to a $4.4 million bailout for CWLP. City officials then went to work on refinancing the electric funds debt, renegotiating its coal contract and restructuring electric rates, which they see as largely successful efforts to turn around CWLPs finances.

With the city facing dropping revenues and a tough budget year, some aldermen say now its time for the utility to pay back at least some of that $4.4 million.

But utility and city officials warn that a transfer could set back the progress theyve made. City lawyers are looking intoif its legally possible.

The situation is in fact the reverse of what it was two years ago, said Ward 7 Ald. Joe McMenamin, who is pushing for the transfer of $1.3 million from CWLP to the citys main account, which is called the corporate fund and pays for most non-utility city services.

The electric division was suffering financially and the corporate fund was growing, he said. Now the electric division is very healthy and corporate fund is suffering because of a downturn in the local economy.

Worries about rating agencies

Mayor Jim Langfelder has often touted CWLPs turnaround, including its stable bond rating, as a key accomplishment for his administration and the council that took office in 2015. He has said a payback could send the wrong message to credit rating agencies.

Chief engineer Doug Brown echoed these concerns, saying the agencies would have a negative outlook on the transfer and it could lead to a credit downgrade. Credit ratings determine how much interest the utility pays on its bonds.

It will take a very long time to recover from this action and counter another negative outlook, Brown wrote in an emailed statement. Any ratings downgrade is an increase in costs to our customers, the citizens of Springfield.

CWLPs contracted financial analyst told the utility any transfer would trigger a credit review by an agency, according to spokeswoman Amber Sabin.

A spokesman for Moodys Investors Service declined to comment so early in the discussion on the proposal but said Moody's would be monitoring the situation.

In the fall of 2015, Moodys improved its outlook on the CWLP electric funds finances, changing it from negative to stable, just after the council voted change the way the utility charged customers.

In its report, the agency said that if officials stopped supporting improvements to CWLPs financial position, it could lead to a downgrade of the utilitys credit rating.

The $1.3 million transfer could be seen as weakening support, Sabin said.

But McMenamin argued that the transfer amount is relatively small compared to the utilitys more than $300 million budget.

I think the bond rating agencies are looking at broader trends than a $1.3 million transfer, he said. Theyll be looking at continued strength of the debt coverage ratio and continuing reserves of electric division, which is whats happening.

He pointed to a recent quarterly update from the utility that put its monthly reserves at $18 million in November.

Still, according to the utility, the standards set by rating agencies for utilities CWLPs size is having $33.9 million cash on hand.

Legal issues

McMenamin has introduced two measures to repeal the 2015-bailout ordinances, which the council could discuss Tuesday at its committee meeting.

At the time, the ordinances waived the utilitys payment in lieu of taxes, which is money CWLP pays into the corporate fund, and instituted a refund of previous payments if necessary to ensure that CWLP had enough money to meet its debt coverage ratio for the fiscal year.

Payments were waived or refunded enough for the utility to meet their obligations that year. But, Sabin warns, if the money was paid back, auditors could revise that fiscal years books, triggering a review and potential downgrade from rating agencies.

Plus, the first ordinance stated that the amount would not have to be repaid, Brown pointed out.

But the council has the power to change what the previous council passed and should do so because the financial situation has changed, McMenamin countered.

That should be an option on the table for the mayor, McMenamin said. There should be a full repayment if the electric division continues to grow more financially healthy and if there is a need.

-- Contact Mary Hansen: 788-1528, mary.hansen@sj-r.com, twitter.com/maryfhansen.

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CWLP officials: Bailout repayment would set back progress - The State Journal-Register