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Strong Water Authority Credit Saves $67.4 Million for Ratepayers

/in , , /by /Water News Network Quoted: San Diego County Water Authority

Strong credit ratings for the San Diego County Water Authority will save water ratepayers across the region $67.4 million on bond sales executed Wednesday in New York — $27 million more than staff forecasted in May. All three major rating agencies – S&P, Moody’s and Fitch – recently affirmed the Water Authority’s positive ratings and stable outlook, creating the opportunity for ratepayers to benefit from lower financing costs for critical water infrastructure.

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Bond Sales-Credit Ratings-Desalination Plant

Strong Water Authority Credit Saves $67.4 Million for Ratepayers

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Strong credit ratings for the San Diego County Water Authority will save water ratepayers across the region $67.4 million on bond sales executed Wednesday in New York — $27 million more than staff forecasted in May. All three major rating agencies – S&P, Moody’s and Fitch – recently affirmed the Water Authority’s positive ratings and stable outlook, creating the opportunity for ratepayers to benefit from lower financing costs for critical water infrastructure.

The savings resulted from the Water Authority’s refinancing of $283.5 million in Series 2020A Bonds (Green Bonds) and $117.7 million in Series 2021A (Green Bonds) senior-lien water revenue refunding bonds. Technical factors in the market provided favorable conditions – including more demand for bonds than supply – that the Water Authority team moved quickly to capture.

Most significant savings in bond refundings in the past decade

The Water Authority bonds were priced July 8 – a week ahead of schedule – and the strong credit ratings, strong bond policies, and swift action by the Board of Directors in June, helped lower the interest rates compared to what the Water Authority would have had to pay with downgraded credit. Since 2010, the Water Authority has saved a total of $235 million through 10 bond refundings, including the latest transactions.

“Thanks to strategic, courageous action by the Water Authority Board of Directors in June to set rates for 2021, the agency has secured the most significant savings from bond refundings in the past decade,” said Water Authority Board Chair Jim Madaffer. “The Water Authority maintains a strong financial position even in these difficult times, and that ultimately benefits everyone who calls San Diego County home.”

Credit ratings: Strong financial leadership, prudent strategies

In affirming their credit ratings over the past few weeks, the three rating services cited the Water Authority’s strong financial leadership, including prudent strategies to manage issues related to COVID-19, its success diversifying water supply sources, its commitment to infrastructure maintenance, and its financial reserves for managing contingencies, among other factors.

‘Investments in water supply diversification, conservative financial practices’

  • S&P affirmed its highest rating – AAA– June 25. “The authority has been successful in their efforts to increase control over their supply and diversify the source of their supply. Management has also demonstrated an ability to navigate volatile hydrological cycles through adopting rate increases as needed and building prudent financial reserves and storage to mitigate variability.”
  • Fitch Ratings affirmed its AA+ rating July 2. The Water Authority’s “significant investments in supply diversification, have allowed the Authority to continue to meet water demands in its service area.” Fitch also said “the SDCWA benefits from very strong purchaser credit quality.”
  • Moody’s Investor Service affirmed its Aa2 rating June 29. Moody’s praised the Water Authority “for increasingly diverse sources for water supply purchases; and conservative financial practices with adopted reserve and debt policies.” Moody’s also said that “liquidity, including a rate stabilization fund, remains satisfactory and serves to insulate the San Diego County Water Authority from risks associated with variable water supplies, including California’s current drought conditions, as well as unanticipated events such as the coronavirus crisis. The stable outlook reflects our expectation that the Authority’s favorable operating performance will continue.”

“In the midst of a global pandemic and a challenging economy, the Water Authority continues proactively managing its finances and lowering the cost of debt,” said Lisa Marie Harris, finance director for the Water Authority. “We have strong debt coverage, healthy reserves and an experienced management team to sustain our fiscal health.”

For more information about the Water Authority’s finances go to: www.sdcwa.org/finance-investor-relations.

Series 2020A – Taxable Refunding

Issue Size: $283,470,000

Bond maturities: 2024-2034

Bond yields: .59% – 1.95%

Refunding savings: $38.7 million

Savings as % of refunded bond par: 15.3% (board min savings 2-5%)

Top Investors: Progressive, Morgan Stanley, Goldman Sachs, and State Farm

Series 2021A –Tax-Exempt Refunding (Forward Delivery)

Issue Size: $117,690,000

Bond maturities: 2022 – 2031

Bond yields: .45% – 1.13%

Refunding savings: $28.7 million

Savings as % of refunded bond par: 19.7% (Board Min savings 2-5%)

Top Investors: Vanguard, Alliance Bernstein, Seix Investors, and MIZUHO Bank

PFAS Management to Drive $12.1 Billion in Water Utility Spending Over Next Decade

/in , , /by /WaterWorld Magazine

Mounting public concerns and new state regulations in the U.S. are compelling water & wastewater utilities to address health risks associated with per- and polyfluoroalkyl substances (PFAS) – a class of pervasive chemicals found in drinking water and wastewater biproducts.

According to a new report from Bluefield Research, PFAS: The Next Challenge for Water Utilities, more than US $3 billion is forecasted to be spent annually on drinking water remediation technologies by 2030. While any significant increase in water treatment solutions hinges on federal policies, 29 states have already implemented a mix of policy directives, including testing requirements, prohibitions on product applications (e.g., food packaging), and the elimination of select fiirefighting foam constituents.

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SanVicente-sun-PRIMARY-June-2020-WNN

Stimulus Funds Would Create Regional Jobs, Enhance Water Reliability

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Water suppliers in San Diego County say future COVID-19 federal and state stimulus packages should include funding for shovel-ready projects that would create jobs in the region.

In a letter to members of California’s congressional delegation, a group of 13 agencies, including the San Diego County Water Authority and 10 of its member agencies, and the cities of Del Mar, Oceanside and Poway, say the region’s water utilities have dozens of infrastructure projects that could be launched with an infusion of state and federal stimulus funding.

“As the water suppliers throughout San Diego County, across the state, and around the nation are confronting the unprecedented impacts of the COVID-19 pandemic, there are several actions that the federal government could take to provide some much-needed relief,” according to the letter dated May 31.

From replacing valves in pipelines to building water purification facilities, to developing a major pumped hydropower energy storage project for the region, the funding boost would advance efforts to enhance water reliability and increase jobs across San Diego County.

Financial stress, economic fallout from pandemic

The letter requests the following action items be supported as Congress discusses additional legislative relief packages:

  • Allow for use of federal funds to backfill for lost revenue: The largest issues that water suppliers are currently facing are the immediate budgetary impacts and the ongoing effects of lost revenues. Allowing water systems to use federal funds to fill the gap being created by lost revenue would provide significant assistance to prevent layoffs or furloughs, minimize project deferrals or delays, and help avoid other associated impacts that may have a lingering negative effect on regional economies. An analysis produced last month by the Association of American Metropolitan Water Agencies and the American Water Works Association estimated that drinking water utilities throughout the county are facing an annualized revenue loss of approximately $13.9 billion as a result of the pandemic – a sum equal to nearly 17% of the sector’s annual revenue.  We strongly encourage Congress to set aside robust funding for water utilities to help offset these fiscal losses. Otherwise, ratepayers will face escalating costs and reduced economic activity related to delayed capital investments, which will only further hinder the nation’s, state’s, and region’s economic recovery. 
  • Extend the Emergency Payroll Tax Credit to Public Entities: The “Families First Coronavirus Response Act” required public employers to provide paid sick and family leave, yet the law excludes these same employers from receiving payroll tax credits made available to private employers. Extending this tax credit to local governments would help cover the costs associated with these programs.
  • Restore advance refunding for tax-exempt bonds: This action would allow flexibility for local government entities to access billions of dollars to reallocate and spend on other projects and priorities, which would be much needed during this time.
  • Aid to low-income ratepayers: COVID-19 response legislation should also include a separate component to ensure that low-income customers are able to afford to keep up with their utility bills throughout the pandemic. Without federal assistance targeted at these customers, some low-income households will fall even further behind on their bills, making it that much more difficult for them to catch up with their payments once the crisis ends.

San Vicente Energy Storage Facility

Pumped Energy Storage-WNN-June 2020-graphic

Pumped energy storage facilities are part of an integrated and sustainable energy system that includes the production, storage and distribution of clean energy.

Regional energy project needs regulatory path

One of those shovel-ready projects does not require any state investment or financial assistance to generate economic stimulus. But it needs a regulatory path forward, which could come in the form of state legislation or decisions by the California Public Utilities Commission.

The Water Authority and the City of San Diego have been working on the San Vicente Energy Storage Facility project for several years. All equity and debt financing would be provided by a private investor.

Generating renewable energy and jobs

The project would create a small upper reservoir above the existing San Vicente Reservoir, along with a tunnel system and an underground powerhouse to connect the two water bodies. The powerhouse would contain up to four reversible pump turbines.

During off-peak periods – when power is inexpensive and renewable supplies from wind and solar facilities exceed demand – turbines would pump water to the upper reservoir where it would act as a battery of stored energy. During peak energy use, the system would create clean energy as water from the upper reservoir flows downhill through the turbines.

“Our developer estimates the project could generate more than 50,000 hours of preconstruction work, followed by more than 1,000 jobs during a four-year construction period,” said Gary Bousquet, with the San Diego County Water Authority. “When it’s completed, the facility could store huge volumes of renewable energy and then use that energy when renewables are not available, such as nighttime.”

Bousquet said the project, when completed, would also generate additional revenue to offset water agency costs and help stabilize water rates.