Taking advantage of lower interest rates, the city of San Luis Obispo is set to sell $5.48 million of water revenue bonds Wednesday that would replace a 2002 bond refinancing.
That would save the city’s water fund about $50,000 a year until the bonds mature in 2023, city Utilities Director Carrie Mattingly said in a news release.
Called a re-funding in the municipal bond market, Wednesday’s issue replaces the remaining principal of a $9.485 million bond sale from 2002, according to the issue’s preliminary official statement by Irvine-based Fieldman, Rolapp & Associates, the city’s financial adviser for the sale.
That sale refinanced what remained of San Luis Obispo’s $10.89 million 1993 water revenue bond, according to the statement.
The 2002 refinancing was done to save about $60,000 a year, or $1.3 million over the 20 years that remained of the bonds, according to a Nov. 19, 2002, report to the City Council by then-city Finance Director Bill Statler.
The 1993 sale had financed major upgrades to the city’s Stenner Canyon water treatment plant, according to Statler’s report.
Those bonds were sold with a 30-year maturity, which is being maintained with Wednesday’s scheduled sale, according to the city’s news release.
Mattingly said that the savings from this latest refinancing would be used toward water system maintenance and repairs.
In a Jan. 3 report, Wall Street credit rating service Standard & Poor’s Corp. rated the Wednesday sale AA-minus, the fourth rank in the agency’s 22-level rating scale and third lowest in the high-grade category.
S&P defines that rating as a “very strong capacity to meet financial commitments.”
The agency praised San Luis Obispo’s water fund for having a “strong cash position,” as well as a “history of raising rates annually and management’s plan to continue this practice.”
On Jan. 9, Fitch Ratings Inc. issued a higher AA rating for the refinancing, and affirmed the same rating for $21.6 million of San Luis Obispo’s other outstanding water revenue bonds, according to a news release from that agency.
— Antonio A. Prado