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Council authorizes preliminary official statement for $140M estimated senior water revenue bonds; Moody’s downgrades water rating
Summary
San Diego council authorized release of a Preliminary Official Statement for 2026 senior water revenue bonds that include an estimated $140 million of new money and refinancing that staff said would yield approx. $32.3M in net present value savings; Moody’s downgraded the water utility rating from Aa2 to Aa3 with a stable outlook earlier that day.
The City Council and the Public Facilities Financing Authority authorized release of a Preliminary Official Statement (POS) June 16 for the city’s planned 2026 Senior Water Revenue Bonds. Finance staff told the council the financing plan (based on market estimates dated May 20) would generate roughly $140 million in new‑money proceeds, an estimated true interest cost near 4.42 percent and projected net present value refinancing savings of about $32.3 million.
Timing and ratings: Staff said they expected to market the bonds immediately after POS approval and price the bonds July 1 with a planned closing on July 14. Moody’s Investors Service issued a morning downgrade of the water utility’s senior rating from Aa2 to Aa3 and changed the outlook from negative to stable; Fitch’s action was expected later that day. Finance staff said the downgrade related to liquidity and debt coverage concerns specific to the water utility and could modestly affect borrowing costs (staff estimated a worst‑case effect of roughly 5 basis points on interest cost).
Council action: Councilmember Ilo Rivera moved approval and the council voted (roll call) to authorize the POS and related actions; the vote passed unanimously in the session recorded as 8–0 with one member absent. Staff said the transactions do not affect the city’s general fund debt ratios because water bonds are supported by utility revenues and water‑specific metrics.
Why it matters: The financing will fund capital improvements, repay commercial paper, and refund outstanding water revenue bonds. The Moody’s downgrade drew attention because credit ratings influence the city’s borrowing costs and reflect liquidity and rate‑setting challenges the water utility is managing.
What’s next: With POS authorization, staff will distribute documents to the market, respond to investor due diligence and proceed with pricing and closing in July unless market conditions change.
