Refinancing of Nacimiento Water Project bond debt saves ratepayers $12.7 million

San Luis Obispo County in August secured lower interest rates on its Nacimiento Water Project bond debt, saving ratepayers in Paso Robles, San Luis Obispo and Templeton $12.7 million over the life of the bonds, the county announced Thursday.

The water project includes a massive pipeline and related infrastructure designed to boost water supplies for Atascadero, part of Cayucos, Paso Robles, San Luis Obispo and Templeton by drawing from Nacimiento Lake. The pipeline stretches from the lake, just west of Paso Robles, 45 miles south to San Luis Obispo.

Not all the water project participants will see the savings. Atascadero Mutual Water Co., as a private shareholder utility, received a different type of bond than the government entities did, so it wasn’t part of the refinance, County Auditor Jim Erb said.

The Cayucos portion of the project, paid for by the county, also won’t see a savings because it wasn’t part of the pipeline’s original financing.

In 2007, $196.41 million in revenue bonds were issued to finance the project, which was completed in 2011. The county led the project, and its community participants pay the debt service through their customers’ water rates.

“Issues such as interest rates potentially increasing and the drought provoked doubt from potential investors,” Erb said in a statement. “I believe we structured the refunding just in time. One more year of drought or rising interest rates could render the refunding economically unfeasible.”

The new interest rates vary, depending on when the series of bonds mature, Erb said.

The county achieved a gross cash savings of more than $12.7 million over the life of the bonds. That translates to a net present value savings (in 2015 dollars) of more than 4.5 percent, or $5 million, on refinancing approximately $107 million in bonds, according to a statement from the county’s Auditor-Controller-Treasurer-Tax Collector’s Office.

The bonds were rated “A” by Standard and Poor’s Ratings and “A+” by Fitch Ratings, both bond rating firms.

In all, the refinance will reduce the annual payment on the project by about $550,000 per year. That equals to an average net present value savings of about $380,000 per year for San Luis Obispo, about $160,000 a year for Paso Robles and about $10,000 a year for Templeton, Erb said.

For Paso Robles, San Luis Obispo and Templeton, it’s up to each community on how they will use the debt savings, Erb said.

So far, San Luis Obispo and Paso Robles have said they plan to use the refinance credit toward buying more water from the lake. Templeton Community Services District officials didn’t immediately respond to questions Thursday on how it would use the credit, but its board will consider whether it wants additional lake water on Oct. 6.

This story was originally published September 24, 2015 at 6:41 PM with the headline "Refinancing of Nacimiento Water Project bond debt saves ratepayers $12.7 million."