Nacimiento Water Bonds refunding in August will reduce annual payment by $550,000
San Luis Obispo, Templeton, and Paso Robles water ratepayers will save more than $12.7 million after the County of San Luis Obispo successfully refinanced a portion of the Nacimiento Water Bonds in August 2015, taking advantage of lower interest rates.
In 2007, $196.41 million in revenue bonds were issued in order to finance the project, which was successfully completed in 2011. Tax exempt bonds were issued to benefit the municipal participating agencies and taxable bonds were issued to benefit the private Atascadero Mutual Water Company as required by IRS regulations.
With the refinancing of the 2007 bonds, County ratepayers will save more than $12.7 million over the life of the bonds. This translates to a net present value savings (in 2015 dollars) of over 4.5 percent, or $5 million, on refinancing approximately $107 million in bonds. The refinance will reduce the annual payment by about $550,000 per year, savings that will benefit ratepayers in San Luis Obispo, Templeton, and Paso Robles (the taxable bonds issued by the Atascadero Mutual Water Company were determined not cost beneficial for refunding and were not included). The refinanced bonds were rated A by Standard and Poor’s Ratings and A+ by Fitch Ratings.
“Issues, such as interest rates potentially increasing and the drought, provoked doubt from potential investors, but the detailed knowledge of the pipeline project presented by Will Clemens of the County’s Public Works Department was instrumental in obtaining high ratings by Fitch and Standard and Poor’s,” said County Auditor-Controller-Treasurer-Tax Collector-Public Administrator Jim Erb. “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 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.
“The bonds are not a debt of the County itself, but the benefit to the participating agencies was great enough that it made it worth the effort to facilitate the refunding on their behalf,” Erb said. “I suspect that once interest rates begin to rise, they won’t come down for a while and maybe never as low as we have seen them in the past couple of years.”