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San Diego County Water Authority saves $51 million with bond refunding

Strong agency credit ratings benefit ratepayers by reducing cost of debt

Thursday, February 14th, 2013
Issue 07, Volume 17.

SAN DIEGO - The San Diego County Water Authority on Wednesday priced a $299 million bond sale that will reduce the cost of financing vital water supply reliability projects over the next two decades.

When completed, the sale of Senior Lien Water Revenue Refunding Bonds Series 2013A will refund $299 million in long-term, fixed-rate bonds from the agency’s 2004A series. Closing is expected in about four weeks.

Refinancing will save the Water Authority $51 million through 2034 on a net present-value basis. Strong credit ratings and aggressive investor outreach allowed the Water Authority to win favorable financing terms despite weakness in the municipal bond market.

"This is the capstone of a successful bond refinancing strategy that will benefit ratepayers for years," said Water Authority Board Chairman Thomas V. Wornham. "Our strong fiscal policies and credit ratings allowed us to reduce our borrowing costs again, despite challenging market conditions. That’s good for everyone in the region."

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 bond sale Advertisement
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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.

Combined with the current transaction, the Water Authority’s refinancing actions over the past three years will save ratepayers an estimated $67.5 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 $3.6 billion budget and a two-year appropriation of $324.4 million for fiscal years 2012 and 2013. 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 $280 million, or 20 percent of its total budget, for fiscal years 2012 and 2013.

The Water Authority holds long-term senior lien credit ratings of AA+, AA+ and Aa2 from Standard and Poor’s, Fitch and Moody’s, 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.



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