SFPUC moves to issue up to $285.6 million in wastewater bonds, updates indenture terms

SFPUC finance staff briefed commissioners Feb. 9 on a proposed issuance of up to $285.6 million of wastewater revenue bonds to refund outstanding commercial paper and to provide new capital for previously authorized wastewater projects.

Todd Reesstrom, chief of finance, said staff recommend modernizing the wastewater indenture to conform with current market norms by funding debt-service reserves to one-half maximum annual debt service (half MADS) instead of a full year's debt-service reserve. Reesstrom said that change would free capital for the 10-year capital plan or reduce interest costs over time; staff estimated roughly $167 million in interest savings over 30 years if the change is implemented as part of the new documents.

The proposed sale anticipates a competitive bond offering, a 30-year term and the use of Build America Bonds where advantageous to reduce net borrowing costs; the sale is intended to provide approximately $233 million net for projects after capitalized interest, reserves and costs of issuance, with about $85 million available for new project funding and $137.5 million refunding commercial-paper exposure. Reesstrom said underwriting assumptions use a 5.5 percent long-range borrowing assumption for planning but noted that day-of-sale pricing will determine actual rates.

The Commission approved the resolution authorizing staff to proceed, subject to Board of Supervisors review and final market determinations. The debt-issuance action is an example of near-term financing steps designed to support multi-year capital investments in wastewater system replacement and SSIP-related work.