201 S. Anaheim Blvd.
Suite #1101
Anaheim, CA 92805
Tel: (714) 765-5173
www.anaheim.net
ANAHEIM HOUSING AND PUBLIC IMPROVEMENTS
AUTHORITY AGENDA REPORT
City of Anaheim
PUBLIC UTILITIES DEPARTMENT
DATE: AUGUST 12, 2025
FROM: PUBLIC UTILITIES DEPARTMENT
SUBJECT: AUTHORIZE THE ISSUANCE OF NOT-TO-EXCEED
$275,000,000 AGGREGATE PRINCIPAL AMOUNT OF ANAHEIM
HOUSING AND PUBLIC IMPROVEMENTS AUTHORITY
REVENUE BONDS, SERIES 2025-A (ELECTRIC UTILITY
DISTRIBUTION SYSTEM IMPROVEMENTS) AND REVENUE
REFUNDING BONDS, SERIES 2025-B (ELECTRIC UTILITY
DISTRIBUTION SYSTEM REFUNDING)
ATTACHMENT (Y/N): YES ITEM # 02-A
GOVERNMENT CODE § 84308 APPLIES: YES
RECOMMENDATION:
That the Anaheim Housing and Public Improvements Authority (AHPIA), by Resolution:
1. Authorize an issuance of not-to-exceed $275 million aggregate principal amount of AHPIA Revenue Bonds, Series 2025-A (Electric Utility Distribution System Improvements) and Revenue Refunding Bonds, Series 2025-B (Electric Utility Distribution System Refunding) (collectively, the Bonds) in accordance with the terms of the Indenture of Trust with the City of Anaheim (City) and the U.S. Bank Trust Company, National Association (Trustee);
2. Approve the following documents in substantial form (collectively, the Bond Agreements):
a. Indenture of Trust with the City and the Trustee;
b. Installment Purchase Agreement with the City;
c. Purchase Contract with the City and J.P. Morgan Securities LLC, as Representative of the Underwriters, for the purchase and sale of the Bonds; d. Delivery of a Preliminary Official Statement, including its later Official Statement, for the Bonds; and
3. Authorize and direct the Executive Director; Treasurer; Auditor; Public Utilities General Manager; Public Utilities Assistant General Manager – Finance and Energy Resources, as designee of the Treasurer and Auditor; and other officers, employees, and agents of AHPIA to (a) execute and deliver the Bond Agreements with any changes that, as determined by Authority Counsel, are not inconsistent with the terms and conditions of the Bond Agreements approved under the Resolution and (b) take such actions as are necessary or advisable to complete the transactions contemplated by the Bond Agreements and to implement and administer the same.
Authorize the Issuance of Not-to-Exceed $275,000,000 Aggregate Principal Amount of AHPIA Revenue Bonds, Series 2025-A (Electric Utility Distribution System Improvements) and Revenue Refunding Bonds, Series 2025-B (Electric Utility Distribution System Refunding) August 12, 2025
DISCUSSION:
To maintain a high level of service reliability, APU continually reinvests in infrastructure using a mix of utility revenues, bond financing, and available grant funding. This strategic, flexible approach to funding capital projects has kept Anaheim customer utility bills stable and affordable in comparison to other Orange County communities.
Public utilities use bonds as a standard and effective tool to fund infrastructure due to the capital-intensive nature of utility systems. These systems typically require large upfront investments in assets that often last decades. Public utilities use bond financing to spread these costs over time, thereby aligning payments with asset lifespans and to avoid sudden rate volatility that may occur if paid entirely with cash or rate revenue.
To minimize borrowing costs, APU’s financial strategy includes issuing bonds with early call (redemption) options as early as five years after issuance to allow for timely refinancing when interest rates drop. Over the past decade, APU has refinanced electric utility bonds using this approach, generating over $180 million in interest cost savings while also reducing the average bond term by three years.
Consistent with this strategy, APU proposes refinancing existing electric bonds to achieve economic savings. In addition, APU proposes to issue new bonds to fund critical electric system upgrades and replacements to address aging infrastructure and to meet increases in electric capacity needs over the coming years.
Anaheim’s Electric Utility holds investment-grade credit ratings of AA- from both Fitch and Standard & Poor’s that contribute to lower borrowing costs. Additionally, APU manages its debt portfolio to avoid overreliance on bond financing. As an example, the American Public Power Association reported in 2024 that public electric utilities have an average debt-to-asset ratio of 67%, whereas APU is at 40%, which is well under the industry average.
Refinancing Plan & New Issuance
APU proposes a combined, not-to-exceed bond issuance of $275 million, which includes refinancing $173 million in existing callable bonds for savings, issuing $100 million in new bonds to fund critical electric system improvements, and the remaining amount for issuance-related costs such as bond counsel and underwriting services.
The refinancing proposal targets approximately $173 million in existing bonds that are eligible for redemption on October 1, 2025 or earlier. Based on current market conditions, this refinancing plan generates approximately $7.5 million in interest rate savings and reduces the life of the original bonds by nearly one year. The following bonds are eligible for redemption and being considered for refinancing:
2015-B: Issued as tax-exempt bonds for $92.9 million in 2015, these bonds mature in 2035. Approximately $29.9 million of the $37.2 million outstanding is callable. proceeds from this bond refunded higher interest bonds (1999 and 2007A). At current rates, refunding these bonds generates nearly $2 million in savings.
Authorize the Issuance of Not-to-Exceed $275,000,000 Aggregate Principal Amount of AHPIA Revenue Bonds, Series 2025-A (Electric Utility Distribution System Improvements) and Revenue Refunding Bonds, Series 2025-B (Electric Utility Distribution System Refunding) August 12, 2025
2020-A: Issued as tax-exempt bonds for $59.2 million in 2020, these bonds mature in 2050. Approximately $37.8 million of the $38.9 million outstanding is callable.
Refunding these bonds at current rates generates approximately $3.8 million in interest savings.
2020-B: Issued as taxable bonds for $121.8 million in 2020, these bonds mature in 2034. Approximately $44.1 million of the $46.1 million outstanding is callable. At current rates, refunding these bonds does not result in interest savings; however, these bonds are proposed for consideration to retain flexibility should interest rates decline before the bonds are priced (which may result in cost savings). 2020-C: Issued as tax-exempt bonds for $42.3 million in 2020, these bonds mature in 2045 and all $22.0 million outstanding is callable. Refunding these bonds at current rates produces approximately $1.7 million in savings. 2022-D: Issued as taxable bonds for $79.9 million in 2022, these bonds mature in 2033 and may be redeemed at a make-whole price, covering the remaining principal and expected interest earnings at approximately $39.0 million. Refunding these bonds does not provide savings at current interest rates, but the bonds are proposed for consideration to retain flexibility should interest rates decline before the bonds are priced (which may result in cost savings).
The proposal to issue $100 million in new bonds helps fund upcoming capital projects such as new substation equipment to meet growing capacity and operational demands, replacement of field equipment and direct buried cable nearing the end of their useful life to maintain dependable service, automation upgrades to restore power outages more quickly, a new maintenance facility to replace a 50-year old building that no longer meets the needs of field crews, and new street lights to improve roadway visibility. As part of this financing proposal, APU recommends a 30-year fixed-rate structure that is aligned with the expected life of the infrastructure, and a five-year optional call provision, preserving flexibility for future refinancing and reducing borrowing costs when market conditions allow. This structure best meets APU’s capital financing needs while supporting long-term rate stability and minimizing future impacts on customer bills.
Summary
Reliable and affordable utility service is critical not only to residents and businesses, but to schools, hospitals, and City facilities that support the vibrancy and wellbeing of the Anaheim community. Utilizing bond financing allows APU to maintain a high level of service reliability by continually replacing aging infrastructure in a prioritized fashion, helping to limit service disruptions that could impact Anaheim’s economy and neighborhoods.
The proposed financing supports the Citywide Strategic Plan, Goal C – Invest in Infrastructure and Amenities, Strategy 13 – Address deferred and ongoing maintenance needs.
Authorize the Issuance of Not-to-Exceed $275,000,000 Aggregate Principal Amount of AHPIA Revenue Bonds, Series 2025-A (Electric Utility Distribution System Improvements) and Revenue Refunding Bonds, Series 2025-B (Electric Utility Distribution System Refunding) August 12, 2025
IMPACT ON BUDGET:
Sufficient funds for issuance and annual bond payments are included in APU’s Fiscal Year 2025/26 budget from restricted Electric Utility Funds, and capital projects are subject to City Council approval of appropriations.
Respectfully submitted,
Dukku Lee
Public Utilities General Manager
Attachments:
1. AHPIA Resolution
2. Indenture of Trust
3. Installment Purchase Agreement
4. Purchase Contract
5. Preliminary Official Statement