The San Diego County Water Authority Board of Directors approved issuing up to $686 million in debt, Water Revenue Bonds Series, 2010A and 2010B, to provide continued funding of its Capital Improvement Program (CIP). The bond sale, scheduled for early 2010, may also be used to refund approximately $51 million of outstanding callable Water Revenue Certificates of Participation, Series 1998A
“This bond offering is important for maintaining momentum on key Water Authority construction projects,” said Claude A. “Bud” Lewis, Water Authority Board Chair. “Issuing these bonds now will provide essential funding over the next 24 months for work on critical projects such as the San Vicente Tunnel and San Vicente Dam Raise projects. The bond sales also help to reduce long-term financing costs for our ratepayers.”
The bond sale will take advantage of historically low interest rates and the availability of federal Build America Bonds (BAB). The BABs are a new taxable financing instrument that is part of the American Recovery and Reinvestment Act of 2009. BABs lower the borrowing costs on local and state capital projects to provide economic stimulus and job creation. Municipal bond issuers receive a rebate equal to 35 percent of the interest paid to investors. BABs are currently scheduled to be available only through the end of 2010.
An additional infusion of funds is needed because current CIP funds from the Water Authority’s last debt issue, Series 2008A Water Revenue Certificates of Participation (COPs), are projected to be fully spent by April 2010.
The Water Authority has one of the largest capital improvement programs among California urban water agencies, with a $3.77 billion budget and a two-year appropriation for fiscal years 2010 and 2011 of $556 million. To read more about the budget, view the news release at: Release: Water Authority Board Approves $1.65 Billion Budget.
Credit ratings are one of the primary criteria used by investors in determining the rate of return required when purchasing the Water Authority’s debt. The Water Authority’s current credit ratings of AA+, AA and Aa3 from Standards and Poor’s, Fitch, and Moody’s, respectively, are considered high quality by all standards and are held by only a few select water agencies in California.
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