Water Authority sets 2017 rates near low end of projections

Strong financial management avoids rate spikes, maintains strong credit ratings

SAN DIEGO – The San Diego County Water Authority Board of Directors adopted on June 23 rate increases of 6.4 percent for untreated water and 5.9 percent for treated water in 2017, near the low end of projections and similar to the increases adopted by the Board of Directors for 2016.

Rates adopted today by the Board are primarily driven by higher costs from the Metropolitan Water District of Southern California, though they also incorporate higher costs for drought-proof water supplies from the Claude “Bud” Lewis Carlsbad Desalination Plant. They also were impacted by state-mandated reductions in water use that decreased sales more than earlier projections.

Careful financial management by the Water Authority kept the rate increases near the low end of earlier projections and well below the double-digit increases during the last drought that were driven by steep price hikes from MWD. Higher rate increases also were avoided by successful regional efforts to keep MWD from adopting a new fixed water treatment charge in April that would have disproportionally harmed San Diego County ratepayers.

“The region has invested more than $3 billion in diversifying our water systems and is a model for water agencies across the state. Thanks to the addition of supplies from the Lewis Desalination Plant, our region is less vulnerable to extended droughts than it had been in the past,” said Mark Weston, chair of the Water Authority’s Board of Directors. “That benefit becomes clear at times like now, when the region can sustain multiple dry years without experiencing water shortages that could harm the local economy and our quality of life.”

One way the Water Authority avoided larger rate increases in 2017 is through a planned draw of approximately $20 million from the agency’s Rate Stabilization Fund – created in 1990 – in accordance with the agency’s long-term financial strategy to maintain smooth water rate adjustments over time.

The 2017 rates were designed to ensure debt-coverage ratios that support the Water Authority’s strong credit ratings and minimize the cost of borrowing money for construction projects. S&P Global Ratings announced in May that it had upgraded the Water Authority’s senior lien credit rating to AAA, a first for the Water Authority and a boon for ratepayers who will benefit from lower financing costs. The two other major ratings agencies also issued strong and stable ratings for the Water Authority: Moody’s Investor Service affirmed its Aa2 rating for the Water Authority’s senior lien debt while Fitch Ratings affirmed its AA+ senior lien rating for the agency; all three rating agencies rated the Water Authority’s outlook as stable.

The Water Authority demonstrated the positive effects of its credit ratings earlier in June when it priced a $340 million bond refunding sale that reduced the cost of financing vital water supply reliability projects that are already completed, such as the Water Authority’s All-American Canal Lining Project. Approximately $63.2 million – calculated on a present-value basis over the life of the refinanced bonds – was saved by refunding the Water Authority’s fixed-rate bonds issued in 2008 and 2010.

The Water Authority’s strong fiscal management is also regularly recognized with awards by leading industry associations. The Water Authority has received the Distinguished Budget Presentation Award from the nonprofit Government Finance Officers Association for each of its budgets adopted since 1995, and it has received the Operating Budget Excellence Award from the California Society of Municipal Finance Officers for each of its past 15 adopted budgets.

For more information about the Water Authority’s rates and charges, go to http://www.sdcwa.org/water-rates-charges.