The San Diego County Water Authority on Wednesday priced a $195 million bond sale that will reduce the cost of financing vital water supply reliability projects over the next two decades.
The sale generated more than $1 billion in demand by a diverse array of investors, allowing the Water Authority to lower yields in each maturity versus the initial launch of the pricing. Despite today’s market volatility, investors cited confidence in the Water Authority’s strong credit, management team, and its history of successful planning and project execution to provide water supply reliability.
When completed, the sale of Senior Lien Water Revenue Refunding Bonds Series 2015A will refund $195 million in long-term, fixed-rate bonds issued in 2008 and 2010. Refinancing will save the Water Authority $15.1 million through 2029 on a net present-value basis. Closing is expected in about two weeks.
“This strategic move is part of our overall effort to cut expenses so we can continue to provide a safe and reliable water supply at the lowest possible cost,” said Water Authority Board Chair Mark Weston. “By maintaining strong credit ratings even during challenging drought conditions and systematically seeking better rates on our debt, we have saved ratepayers tens of millions of dollars in recent years and reduced the impact of future water rate increases.”
This week’s sale is part of a long-term plan by the Water Authority to cut the cost of financing its Capital Improvement Program. In July 2011, the Water Authority executed a $139.9 million senior lien refunding bond sale designed to save $13.5 million over 15 years. In September 2011, the Water Authority saved $5.2 million on a $94.5 million bond refunding sale. And in February 2013, the Water Authority saved $51 million by refunding $299 million in revenue bonds.
Combined with the current transaction, the Water Authority’s refinancing actions over the past five years will save ratepayers an estimated $85 million in interest on a present-value basis over the life of the bonds.
The Water Authority is nearing completion of one of the largest capital improvement programs among California urban water agencies, with a $2.8 billion budget and a two-year appropriation of $136.8 million for fiscal years 2016 and 2017. Payments on debt to finance these capital projects – vital infrastructure such as dams, large-diameter pipelines, a treatment plant and hydropower facilities – also is a significant cost. The Water Authority estimates debt service costs represent $283 million, or 19 percent of its total budget, for fiscal years 2016 and 2017.
During the refunding process, the Water Authority affirmed its long-term senior lien credit ratings of stable AA+, AA+ and Aa2 with Standard and Poor’s, Fitch and Moody’s rating agencies, respectively. The Water Authority’s current credit ratings are considered high quality by all standards and are held by only a few water agencies in California.