San Luis Obispo, Templeton, and Paso Robles water ratepayers will save more than $12.7 million after the County of San Luis Obispo successfully refunded a portion of the Nacimiento Water Bonds in August, taking advantage of lower interest rates.
The County achieved a gross cash savings of 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 refunding approximately $107 million in bonds. The refunding will reduce the annual payment by about $550,000 per year. The 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.
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.
“The County is not a party to these bonds, but the benefit to the community was great enough that it made it worth the refunding effort,” 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.”
For more information on the refunding, call Jim Erb at (805) 781-5831.
ABOUT THE AUDITOR-CONTROLLER-TREASURER-TAX COLLECTOR’S OFFICE
The Auditor-Controller-Treasurer-Tax Collector’s office (ACTTC) ensures the public’s trust by serving as the guardian of assets and funds administered for the County of San Luis Obispo, cities, schools and special districts. As an independent source of financial information and analysis for the public, local government agencies, County departments and other stakeholders, the ACTTC investigates potential financial fraud, waste and abuse reported via the County’s Whistleblower Hotline. For more information, visit www.slocounty.ca.gov/ACTTC.htm.