The Public Utilities Commission of the City and County of San Francisco sold more than $515 million in bonds to improve its water system.
The commission sold the bonds in two series. The 2023 Sub-Series C bonds, consisting of $487 million, mature between 2028 and 2043, yielding between 2.43% and 3.42%. The 2023 Sub-Series D bonds, consisting of $28 million, mature between 2026 and 2035, yielding between 2.43% and 2.74%. The securities received a rating of Aa2 from Moody’s Investors Service and AA- from S&P Global Ratings.
“The Aa2 rating reflects the enterprise’s stable financial operations, strong water supply and a large, wealthy and diverse service area, inclusive of retail customers within San Francisco and wholesale customers serving some of the wealthiest communities in the Bay Area,” according to Moody’s.
The issuance signals San Francisco’s investment in environmentally sustainable infrastructure. The 2023C bonds, which the commission designated as “green bonds,” will finance projects aimed at continuing water service in the event of a natural disaster. Many of these improvements, including upgrades to pipelines that run through the city, are focusing on mitigating the risk of earthquakes.
The bonds are limited obligations of the commission, secured by revenue from the water management system. The commission projects a net operating revenue of $383 million for fiscal year 2023, and a net debt service of $307 million. It expects net operating revenue to exceed debt service by at least $40 million each year over the next five years.
Jefferies LLC served as lead underwriter on the issuance, purchasing the bonds for $593 million. The price reflected a premium of $79 million.