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Committee recommends resolution backing up to $600 million in SFPUC water revenue bonds
Summary
The Budget and Finance Committee recommended the Board approve up to $600 million in Public Utilities Commission water revenue and refunding bonds, noting the SFPUC aims to lock in low interest rates and capture a 35% federal Build America Bond subsidy before it expires; the committee approved the measure as amended to correct a numeric inconsistency and clarify oversight-fee language.
Supervisor John Avalos said the committee would consider a resolution authorizing issuance of water revenue bonds and refunding bonds in an aggregate principal amount not to exceed $600,000,000 by the Public Utilities Commission (SFPUC).
Todd Reitstrom, Assistant General Manager and CFO of the SFPUC, told the committee this is part of the agency's regular quarterly bond-sales program. He said the SFPUC has issued about $2.2 billion in bonds in recent years for water-system improvements and that that financing has produced roughly $400,000,000 in estimated debt-service savings for ratepayers over a multi-decade horizon. Reitstrom said the SFPUC is seeking to capture one more quarter of the federal Build America Bond subsidy (a roughly 35% interest subsidy) before that program is scheduled to expire on Dec. 31 unless Congress renews it.
Reitstrom described a hybrid sale that would combine tax-exempt bonds and Build America taxable bonds in a competitive sale to lock in historically low borrowing costs for long-lived water projects; he said recent bond sales yielded roughly 3.7% total interest on comparable 30-year financings and illustrated that each percentage point below a 5% planning model saves roughly $23 million per $100 million borrowed over 30 years.
Mr. Rose, the budget analyst, summarized the committee report and gave estimated debt-service figures for the proposed issuance: he stated estimated total debt service of $1,320,010,050, composed of $600,000,000 principal and $720,010,050 interest, and estimated average annual debt service of about $32,200,000 over a 40-year term. The committee considered and accepted an "amendment of the whole" that corrected a digit on page 3 (making the exhibit consistently show $600,000,000) and incorporated city-attorney-proposed language clarifying that nothing in the resolution precludes the SFPUC from paying oversight-committee fees from any legally available funds of the commission.
There was no public comment. The committee continued the motion as amended and agreed to forward the resolution to the full Board of Supervisors for consideration at its Nov. 23, 2010 meeting.
