Moody's Assigns Aa2 Ratings to San Francisco Water Revenue Bonds

Strategic Insights -

Moody's Ratings has assigned Aa2 ratings to San Francisco Public Utilities Commission, CA's (SFPUC) proposed Water Revenue Bonds, 2025 Series DEF, comprising 2025 Sub-Series D (Regional Water and Local Water), 2025 Sub-Series E (Hetch Hetchy Water), and 2025 Sub-Series F (Refunding), with a combined estimated par amount of $1.37 billion. The rating reflects the SFPUC Water's stable financial operations, strong water supply, and large, wealthy service area. The outlook is stable, with factors that could lead to an upgrade or downgrade of the ratings identified.

The SFPUC Water Enterprise serves as the retail water supplier for San Francisco and is responsible for water deliveries to residents and institutions within the city limits, as well as a number of retail accounts outside of the city limits. In addition, the SFPUC sells water to 27 wholesale customers located in the counties of San Mateo, Alameda, and Santa Clara. The SFPUC is a department of the City and County of San Francisco responsible for the maintenance, operation, and development of the water and wastewater enterprises, as well as a power enterprise and a community choice aggregator.

Key Takeaways:

  • Moody's Ratings has assigned Aa2 ratings to SFPUC's proposed Water Revenue Bonds, 2025 Series DEF, with a combined estimated par amount of $1.37 billion.
  • The rating reflects the SFPUC Water's stable financial operations, strong water supply, and large, wealthy service area.
  • The outlook is stable, with factors that could lead to an upgrade or downgrade of the ratings identified, including material stronger debt service coverage and sustained reduction of debt burden.
  • The SFPUC has a track record of complying with policy targets for debt service coverage, which Moody'sexpects to continue.
  • The SFPUC serves high-income communities that have been able to afford recent high rate increases.
  • The SFPUC's debt burden was elevated at 7.1 times revenue in 2024, following significant investment in its vast regional water system, but has been declining.

Statistics:

  • $1.37 billion: Combined estimated par amount of SFPUC's proposed Water Revenue Bonds, 2025 Series DEF.
  • 4.9 billion: SFPUC's current total water revenue bonds outstanding.
  • Aa2: Moody's rating assigned to SFPUC's proposed Water Revenue Bonds, 2025 Series DEF.
  • Aa1: Moody's rating for San Francisco, where the SFPUC serves as the retail water supplier.
  • 1.9 million: Estimated serviced population of the 27 wholesale customers served by the SFPUC.
  • 843,000: Population of the retail customers served by the SFPUC.
  • 373 days: SFPUC's strong days cash on hand.
  • 1.26 times: SFPUC's current-basis debt service, inclusive of pension and OPEB cost adjustments.
  • 2.0 times: Debt service coverage ratio that Moody's expects to be sustained without material decline in cash.
  • 7.1 times: SFPUC's debt burden in 2024, following significant investment in its vast regional water system.

Sources:

  • Moody's Ratings release.
  • Moody's Rating Methodology: US Municipal Utility Revenue Debt (published in March 2024).
  • https://ratings.moodys.com/rmc-documents/416489.
  • https://ratings.moodys.com.