SFPUC refinancing reduces water enterprise debt-service costs by $56.2 million, staff say

SFPUC finance staff reported on May 20 that a recent multi-part refunding produced about $56.2 million in estimated future ratepayer savings and an average all-in interest cost of about 3.28 percent, and that green bonds were included as part of the transaction.

Nikolai Sklaroff, who presented the sale results, told the commission the refunding transaction totaled roughly $523 million and used a two-day order period (day one for retail orders, day two for institutional orders). The sale closed before some tariff announcements that increased market volatility, Sklaroff said.

"After this process... we were able to deliver $56,200,000 of future, ratepayer savings on our debt service," Sklaroff said. He also reported net-present-value savings of 6.8% for tendered bonds and 7.6% for current refundings; the combined net-present-value savings equaled about $42.4 million by his calculation, while the projected cash-flow savings in future annual budgets totaled about $56.2 million.

The refunding included taxable and tax-exempt bonds; staff said they accepted most taxable tenders and refinanced them into tax-exempt issues to lower long-term interest costs and improve future flexibility. Sklaroff said investor demand produced a subscription about 1.9 times the offering, which helped push pricing lower.

Commissioners asked clarifying questions about mechanics, the role of independent pricing consultants (PFM Financial Advisors reviewed the transaction), and specific maturities where underwriters had to take unsold balances. Finance staff said the transaction included green bonds and emphasized continued attention to maintaining high credit ratings.

Ending: Finance staff said the savings reduce future rate pressure and were achieved through a coordinated refinancing strategy; commissioners did not vote on the report, which was presented for information.