County Saves Water Ratepayers $4 Million
Author: Auditor-Controller-Treasurer-Tax Collector's Office
4/26/2018 9:13:52 AM
San Luis Obispo, Templeton, and Paso Robles water ratepayers will save $4.0 million after the County of San Luis Obispo successfully refunded a portion of the Nacimiento Water Bonds in April, taking advantage of lower interest rates.
The County achieved gross cash savings of $4.0 million over the life of the bonds. This translates to a net present value savings (in 2018 dollars) of approximately 8.5 percent, or $2.4 million, on refunding approximately $28.3 million in bonds. The refunding will reduce the annual payment by an average of $172,241 per year over the next 23 years. The final payment is scheduled for June 2041. The bonds were rated A+ by both Standard and Poor’s Ratings and Fitch Ratings.
“The possibility of interest rate increases and the drought were potential concerns for investors, but the detailed knowledge of the pipeline project presented by the County Public Works Department was instrumental in conveying the high credit quality of the bonds to rating agencies and ultimately achieving a successful sale” said County Assistant Auditor-Controller-Treasurer-Tax Collector Jim Hamilton, “Another year of drought and rising interest rates may have rendered the refunding economically unfeasible.”
The Nacimiento Water Project consists of 45 miles of pipeline with storage tanks, pump stations and facilities to convey up to 15,750-acre feet of water from Lake Nacimiento to local water agencies within the boundaries of the County Flood Control and Water Conservation District. The water is delivered to the communities of Paso Robles, Templeton, Atascadero and San Luis Obispo.
In 2007, $196.41 million in revenue bonds were issued in order to finance the project, which was successfully completed in 2011. In August of 2015 the County refunded $107 million in Nacimiento Water Bonds saving $12.7 million in interest payments.
“The County is not a party to these bonds, but the benefit to the community was significant and worth the refunding effort,” Hamilton said. “I suspect that once interest rates begin to rise, they won’t come down for a while, maybe never as low as we have seen in the past couple of years where successful bond refundings like this one are possible.”
For media inquiries, please contact Jim Hamilton at (805) 781-5831.