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SFPUC finance update: reserves, RBOC oversight and $700M bond inducement authorized
Summary
The commission received a quarterly financial briefing on retail and wholesale demand trends, heard the Revenue Bond Oversight Committee's annual report, and authorized staff to pursue up to $700 million in water revenue bonds to fund WESIP and related capital needs.
Commissioners spent substantial time on fiscal matters at the May 10 meeting: staff briefed the commission on quarter‑to‑date financials, the revenue bond oversight committee (RBOC) delivered its annual report, and the commission approved an inducement resolution to pursue up to $700 million in water revenue bonds under voter‑authorized Proposition E.
Todd Reedstrom, assistant general manager and CFO, summarized fiscal trends: retail water use showed a modest uptick driven by higher volumes at San Francisco International Airport, while wholesale deliveries remained weak (down about 4.7% year‑to‑date), creating an approximate $25 million shortfall for wholesale revenues. He said the water enterprise had ending reserves that were lower than initially budgeted but that updated projections showed reserves near $11.5 million for the current year after accounting for some savings and retail upticks.
Amy Brown, chair of the Revenue Bond Oversight Committee, presented the committee’s report and independent‑review priorities. Brown noted the RBOC has a full seven‑member complement for the first time since 2004 and summarized priorities for independent consultant reviews of project expenditures, change orders, contingencies and program management costs. The RBOC requested support to extend its sunset date from January 2013 so it can continue oversight during the water system rebuild.
On the bond item, staff requested authorization to proceed with an inducement resolution for up to $700 million in water revenue bonds, with projected uses including $565 million for the Water System Improvement Program (WESIP), $31 million for upcountry projects, and $38 million for local mains. Staff projected true interest costs in the 5–5.5% range and asked for flexibility on term (up to 40 years) and on whether sales should be competitive or negotiated. Commissioners asked about the resulting annual debt service burden (staff estimated roughly $360–370 million annual water debt service once all bonds were issued) and how that burden translates into pennies per gallon for ratepayers; staff emphasized that even with the debt, modeled costs per gallon remain competitive with peer California utilities.
The commission approved the inducement resolution to allow preparation for bond sales and to seek CDLAC volume cap allocation as appropriate.
