Water Authority Executes $627 Million Bond Sale
January 22, 2010
The San Diego County Water Authority on Wednesday successfully completed bond sales of $627 million to provide continued funding for…
The San Diego County Water Authority on Wednesday successfully completed bond sales of $627 million to provide continued funding for the Water Authority’s Capital Improvement Program (CIP). High investor demand for the bonds helped the Water Authority secure very low interest rates that will save its ratepayers over $50 million in financing costs on a present value basis over the life of the bonds.
The sale, Water Revenue Bonds Series 2010A and 2010B, included $99 million in tax-exempt serial bonds and $528 million in Build America Bonds (BABs). The order period, originally scheduled to take place over two days, was completed in only three hours.
“The overwhelming investor interest in our bonds, on top of the availability of the Build America Bonds and favorable market conditions, resulted in extremely attractive interest rates to fund essential long-term water reliability projects for our region,” said Eric Sandler, the Water Authority’s Director of Finance. “The demand from investors is an affirmation of the Water Authority’s strong credit ratings, prudent financial management policies set by our Board of Directors, and our aggressive investor outreach program.”
The tax-exempt serial bonds, with terms between 4 and 17 years, locked in interest rates between 1.64 percent and 4.08 percent. The BABs, with a 40-year term, have a net interest rate of 3.989 percent. The BABS, a new taxable financing instrument that is a part of the American Recovery and Reinvestment Act of 2009, provide a direct federal subsidy payment for a portion of borrowing costs equal to 35 percent of the total coupon interest paid to investors.
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.
Proceeds from the sales may also be used to refund approximately $51 million of outstanding callable Water Revenue Certificates of Participation, Series 1998A.
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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The San Diego County Water Authority sustains a $268 billion regional economy and the quality of life for 3.3 million residents through a multi-decade water supply diversification plan, major infrastructure investments and forward-thinking policies that promote fiscal and environmental responsibility. A public agency created in 1944, the Water Authority delivers wholesale water supplies to 24 retail water providers, including cities, special districts and a military base.
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