The accelerating growth of Cape Coral, Florida, is spurring the town to tap the municipal bond market for basic needs like running water and working toilets.
(Bloomberg) — The accelerating growth of Cape Coral, Florida, is spurring the town to tap the municipal bond market for basic needs like running water and working toilets.
The Gulf Coast city plans to sell $138 million in debt next week, with proceeds used for water systems to reduce reliance on wells and site-specific septic tanks. Cape Coral joins other Florida cities building and expanding water and sewer facilities to meet demand from a US migration that’s given the state the fastest-growing population in recent years.
“We didn’t expect this to happen this quickly,” Ryan Rossi, director of the South Florida Water Coalition, said regarding the population growth in the region. “We really need in Florida to update a lot of our infrastructure.”
Cape Coral, whose number of residents ballooned almost 40% to more than 200,000 in the last decade, intends to install water mains and improve its sewage system in the developing north part of town. The infrastructure is needed to move from a dependence on wells and septic tanks that will threaten to pollute the aquifer as more residents arrive, according to city officials and bond filings.
The Covid-19 pandemic accelerated Florida’s population growth as especially those in colder northern states, moved south for both the warm weather and lower tax rates. State and local officials increasingly saw the need to shift from limited wastewater solutions such as septic tanks.
Miami-Dade County, for example, has spent $1 billion on water and sewer lines, with another $1 billion proposed for an incinerator and power plant. The city of Miami, where Citadel founder Ken Griffin moved the firm’s headquarters from Chicago last year, faces the risk of running out of landfill space and overwhelming its sewer systems because of population increases.
For Cape Coral, expanding its water and sewer facilities is likely to be an ongoing project. More than half the city’s land is undeveloped and officials expect its population to grow at a 3% clip over the next five to 10 years.
It’s among the top 10 cities homebuyers are looking to move into, according to a July report based on searches by 2 million users of the online real estate firm Redfin. The city estimates the population will reach more than 400,000 by 2080.
The bond sale is expected to help address the rising density and allow for more growth, Mark Mason, the city’s director of financial services, said in an email. The primary revenue source backing the bonds is an assessment on property owners in the area of town being developed.
Mason said that about half the assessment area is being built out, triggering the need for more water and sewer lines. Once those systems are completed, additional building can occur in an almost 1,500-acre tract known as North 1 West Area.
Fitch Ratings assigned the bonds an A rating, five notches into investment grade, partly given a “rapidly growing service area.”
Cape Coral’s growth follows the state’s development trend, even with the risks climate change may present, said Dora Lee, director of research for Belle Haven Investments, which holds $16.2 billion of municipal assets.
“The fact that it still continues to grow despite worsening hurricanes shows how resilient the demand is for housing in Florida,” Lee said.
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