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Credit Agencies Affirm Water Authority’s Strong Ratings Despite Headwinds

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All three major rating agencies – S&P, Moody’s, and Fitch – have affirmed the San Diego County Water Authority’s strong credit ratings, which will help the Water Authority optimize its debt portfolio and minimize the cost of financing important water reliability projects.

The reports cited the Water Authority’s strategic management, its conservative approach to water sales projections, and the benefits of the Water Authority’s rate case litigation that recently resulted in $44.4 million being refunded to local retail water agencies – among many other factors.

Significant challenges

However, rating agencies also noted significant challenges ahead, including efforts by Fallbrook Public Utility District and the Rainbow Municipal Water District to “detach” from the Water Authority – a move that could negatively impact ratepayers across San Diego County. If the two North County agencies leave per their plans, Water Authority analysis shows that the other 22 member agencies will have to pay $16 million to $46 million more per year to cover the cost of the departing agencies.

Moody’s said detachment could lead to a credit downgrade, which would increase borrowing costs for critical water reliability projects. S&P Global called detachment uncertainty “an additional credit stressor” – “especially if an approved detachment sets a precedent if members can easily detach from the authority.” S&P added that, “this would be further exacerbated if the two members are not required to pay for their portion of the associated debt and infrastructure costs that the authority has undertaken to provide reliable water sources.”

Solid financial position

Water Authority General Manager Sandra L. Kerl said, “The Water Authority maintains a solid financial position even in these difficult times, and the credit ratings reflect that. But the challenges are real as well, and they should unify the region to ensure that we continue to benefit from the safe, reliable water supplies we’ve invested in together for the past 30 years.”

In affirming their credit ratings, the 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.

  • Fitch Ratings affirmed its AA+ rating and gave a stable outlook on March 15. Fitch noted the Water Authority’s “operating costs are low”  and credited the Water Authority for “significant investments in supply diversification (that) have allowed SDCWA to continue to meet water demands in its service area.” Fitch also accounted for the Water Authority’s current hiring freeze, spending cuts and deferral of $30 million in planned capital spending to proactively manage finances during the pandemic.
  • Moody’s Investors Service affirmed its Aa2 rating and stable outlook March 14. Moody’s said, “the stable outlook reflects our expectation that the Authority’s satisfactory operating performance will continue, supported by strong management practices in the face of challenges associated with variable water supplies, rising costs, and the coronavirus pandemic.” Moody’s added: “Liquidity, including a rate stabilization fund, remains sound serving to insulate the Authority from risks associated with variable water supplies, including California’s (Aa2 stable) current drought conditions, as well as unanticipated events such as the coronavirus pandemic.”
  • S&P affirmed its AAA rating on March 17 and issued a negative outlook based on “heightened business risks associated with potential projected declines in water sales.” On the plus side, S&P cited the Water Authority’s demonstrated ability to navigate highly variable demands and weather cycles. The agency also said, “management is taking important steps” to balance fixed and variable costs, and it praised the Water Authority’s “robust infrastructure maintenance and operational policies.”

Risks include detachment

All three agencies addressed risks, such as additional local supplies that reduce Water Authority sales and member agency detachment. As proposed by Fallbrook and Rainbow, the detachments would allow those agencies to avoid paying for water supplies and infrastructure that have been developed in collaboration with those agencies and are currently being used by those agencies to meet their customers’ needs. Abandoning those cost obligations would force other ratepayers countywide to cover their portion of the bills already incurred for decades of investments in supply reliability.

In May 2020, the Water Authority’s Board of Directors voted to oppose detachment unless four conditions can be met related to protecting Fallbrook and Rainbow ratepayers, avoiding negative impacts for other member agencies, protecting the Sacramento-San Joaquin Bay-Delta, and maintaining the Water Authority’s voting rights at MWD.

The issue is under review by the San Diego Local Agency Formation Commission, known as LAFCO. The LAFCO process, which is designed to provide for an impartial analysis of these issues, will allow the Water Authority and all other affected parties to determine if these conditions are satisfied. If not, the Water Authority will oppose detachment.

For more information about the Water Authority’s finances go to: www.sdcwa.org/finance-investor-relations. Information about detachment is at https://www.sdcwa.org/member-agencies/lafco-reorganization/.

Opinion: Racial Justice Requires Equitable Access to Reliable Drinking Water

/in , /by /The Orange County Register by Jose Barrera

Vice President Kamala Harris was right on point last year when she said that clean water is a fundamental human right. President Biden has put those words into action by signing an executive order establishing a White House council on environmental justice.

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Some California Water Well Permits Require Environmental Review

/in , /by /Bloomberg Lawby Maeve Allsup

Proposed water wells in California don’t all require environmental review under state and local permit laws, but state standards governing well location will sometimes require local governments to make discretionary decisions, triggering such a look, a state appellate court said.

The California Environmental Quality Act requires discretionary decisions—those that require an agency to exercise judgment in deciding whether to approve a project—to undergo an environmental review. Ministerial decisions made to determine legal compliance, however, don’t require such weighing.

 

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Humans Have Completely Transformed How Water Is Stored on Earth

/in , /by /Gizmodoby Molly Taft

Human fingerprints are all over the world’s freshwater. A new study published Wednesday in the journal Nature shows that while human-controlled freshwater sources make up a minimal portion of the world’s ponds, lakes, and rivers, they are responsible more than half of all changes to the Earth’s water system.

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Valadao Hopes to Pump Funding Into Water Infrastructure

/in , /by /The Sun-Gazette

Despite taking two years off from Congress, David Valadao (R—Hanford) is getting back to work by introducing new legislation to help keep water flowing in the Central Valley.

Early this month, Valadao introduced the Responsible, No-Cost Extension of Western Water Infrastructure Improvements, or RENEW WIIN, Act, a no-cost, clean extension of operations and storage provisions of the WIIN Act.

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Water Authority Board Supports Regional Potable Reuse Projects

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

The San Diego County Water Authority’s Board of Directors today unanimously approved a formal resolution reaffirming its longstanding support for potable reuse and water recycling projects developed by local member agencies across the region.

“Projects such as Pure Water San Diego, Pure Water Oceanside and the East County Advanced Water Purification Project are critical to the continued development of local water sources that help sustain the region’s 3.3 million residents and $245 billion economy,” said Water Authority Board Chair Gary Croucher.

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Water Authority Board Supports Regional Potable Reuse Projects

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February 25, 2021 – The San Diego County Water Authority’s Board of Directors today unanimously approved a formal resolution reaffirming its longstanding support for potable reuse and water recycling projects developed by local member agencies across the region.

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Water Main Breaks Decline in San Diego for Fourth Year in a Row

/in , , /by /Water News Network

Increased maintenance efforts by the City of San Diego of its water system infrastructure is paying off for ratepayers. For the fourth year in a row, the number of water main breaks has decreased in the City of San Diego. Thirty-three water main breaks were reported in 2020, the lowest total in more than 15 years.

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Vallecitos Water District Recognized for Algae Control

/in , , /by /WaterWorld Magazine

The Vallecitos Water District won an Excellence in Innovation and Resilience Award with environmentally-friendly algae control technology. Known for its sustainable approach to water treatment, the award-winning utility chose to control algal blooms with LG Sonic technology. The award recognizes efforts in the innovative application of technology to the wastewater field and was handed by California Association of Sanitation Agencies.

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The City of San Diego's aggressive maintenance program has resulted in fewer water main breaks in 2020. Photo: City of San Diego

Water Main Breaks Decline in San Diego for Fourth Year in a Row

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Increased maintenance efforts by the City of San Diego of its water system infrastructure is paying off for ratepayers. For the fourth year in a row, the number of water main breaks has decreased in the City of San Diego. Thirty-three water main breaks were reported in 2020, the lowest total in more than 15 years.

The City credits its aggressive multi-year program to replace aging pipelines for bringing the numbers far below the peak of 131 breaks in 2010.

“The City’s Public Utilities Department has worked very hard to improve the reliability of our water system infrastructure,” said Shauna Lorance, director of public utilities. “Our citizens benefit greatly from fewer main breaks because it means less water loss and lower emergency repair costs.”

Fifty-five miles of pipeline replaced in next four years

Crews replace old cast iron pipe with new PVC pipe along Park Boulevard. Photo: City of San Diego

Crews replace old cast iron pipe with new PVC pipe along Park Boulevard. Photo: City of San Diego

San Diego’s continuing program to replace old cast iron water mains has played a major part in the decrease in breaks. Some cast-iron pipes had been in service for more than a century. Since 2013, the city has replaced approximately 180 miles of water pipelines. By 2025, the last 55 miles of cast iron water mains are scheduled to be replaced with water mains made of durable polyvinyl chloride.

Water infrastructure maintenance programs also deliver a benefit to our region’s overall economy. According to the Economic Policy Institute, $188.4 billion spent on water infrastructure investments over five years would yield $265 billion in economic activity and create 1.9 million jobs.

“Improving and maintaining our water infrastructure is an important part of our commitment to serving our customers,” said Lorance. “We will continue to provide reliable water services our customers deserve.”

City of San Diego public utilities crew members replace an aging cast iron water pipe at 5th and Robinson in Hillcrest. Photo: City of San Diego water main breaks

City of San Diego public utilities crew members replace an aging cast iron water pipe at 5th and Robinson in Hillcrest. Photo: City of San Diego

City of San Diego public utilities crews routinely oversee preventative maintenance work to help determine potential leaks and breaks before they occur. Private contractors have completed the bulk of the pipeline replacement projects under the direction of the City’s Engineering and Capital Projects Department.