Capital Financing Plan
Fiscal Year 2024
-
25 Nikolai J. Sklaroff
Capital Finance Director
August 27, 2024
• Large outstanding debt portfolio and significant projected future debt issuance and credit needs
• Activities guided by Commission Policy
• Debt Management Policies and Procedures, updated
November 2019
• Capital Financing Policy, adopted March 2017
• Debt Service Coverage Policy, adopted March 2017
• Annual Capital Financing Plan
• Provides the Commission visibility regarding upcoming capital financing activity
Debt Management Overview
2 Outstanding and Anticipated Debt
• $10.2 billion outstanding debt, excludes more than $1 billion of undrawn Federal and State Loan Capacity*:
3 • 10-year (FY 2024-25 to 2033-34) Financial Plan
approved by Commission in February, includes
over $11 billion of additional borrowing, including
approximately $1.9 billion in this current year.
*Chart excludes approximately $1.2 billion of undrawn interim funding, $668 million of undrawn WIFIA commitments and $348 million of undrawn SRF commitment.
4 *Water Infrastructure Finance and Innovation Act (WIFIA) Loans, State Revolving Fund (SRF), New Clean Renewable Energy Bonds (NCREB), Qualified Energy Conservation Bonds (QECB), Certificates of Participation (COPS)- 525 Golden Gate Ave +Includes approved amounts for reimbursement but not yet received.
Summary of Enterprise Debt
Summary of Enterprise Debt ($ Million)
As of August 1, 2024
Water Wastewater Power Total
Senior*
Public Market Revenue Bonds 4,634 3,431 282 8,347
Federal WIFIA Loans (Undrawn) - 668 - 668
Federal WIFIA Loans (Drawn) - 915 - 915
State SRF Loans (Undrawn) 284 64 - 348
State SRF Loans (Drawn)+ 145 337 - 482
Subordinate*
NCREBs and QECBs -- 3 3
Certificates of Participation 89 24 12 125
Commercial Paper (Drawn) 190 - 91 281
5 ^Updated ratings available from Moody’s Investors Service (www.moody’s.com), S&P Global Ratings (www.spglobal.com) and Fitch Ratings (www.fitchratings.com).
†CleanPowerSF received an A2 issuer rating from Moody’s Investors Service in December 2020, however the CleanPowerSF Program currently does not have any debt outstanding
Summary of Enterprise Credit Ratings
Credit Ratings (Credit Outlook)^
Moody's Investors
Service
S&P Global
Ratings
Fitch
Ratings
Long-Term Long-Term Long-Term
Water Enterprise Aa2
(Stable)
AA-
(Stable)
*
Wastewater Enterprise Aa2
(Stable)
AA
(Negative)
*
Power Enterprise * AA
(Stable)
AA-
(Stable)
CleanPowerSF† A2
(Stable)
**
New Money/Credit Needs
• Issue debt to meet ongoing enterprise capital requirements • Regular monitoring/analysis of how much and when funds are needed Administration of Existing Debt Portfolio
• Renew or replace bank credit facilities for Interim Funding Commercial Paper (CP) Programs
• Increase program authorization, when needed
• Provide disclosure training to the Commission
• Develop PowerBI dashboards, manage resources for reserve releases and debt issuance to optimize borrowing costs
Market Opportunities
• Active monitoring of credit markets
• Identify and execute debt refunding opportunities for ratepayer relief • Limited by tax-exempt advance refunding repeal in 2017 Capital Financing Activities
6 Market Conditions
• The Federal Reserve has
paused rate action longer
than initially forecasted
but is expected to cut rates
by 2025
Source: Courtesy of Financial Advisor
• Yield inversion persists in
municipal market.
• Volatility in both the
taxable and tax-exempt
markets remains, creating
potential for new refunding
opportunities.
FY 2024-25 Capital Financing Plan
8Note: Dates and amounts are preliminary and subject to change.
Commission Action Estimated
Transaction Size
($ Million)
Commission
Action
Closing
1. Water, Wastewater, and Power - Authorize
expansion of interim funding program and approve
bank credit facilities agreements
$250 – Water
$500 – Wastewater
$200 – Power
Q1 and Q3
FY24-25 Q3 FY24-25
2. Amend Municipal Advisor Agreements – Approve
increased capacity for municipal advisor agreements
serving all enterprises
-- Q2 FY24-25 Q2 FY24-25
3. Water - Authorize Revenue Bonds to refinance
outstanding commercial paper, deposit funds into
project fund accounts and allow new project
encumbrance.
Up to $762 Q2 FY24-25 Q3 FY24-25
4. Wastewater – Authorize Clean Water State
Revolving Fund (SRF) execution of Loan Agreement $170 Q2 FY24-25 Q2 FY24-25
5. Water - Approve renewal or replacement of bank
credit facilities for interim funding programs Up to $100 Q4 FY24-25 Q4 FY24-25
6. Debt Policy Update - Adopt an update to the Debt
Management Policy and Procedures -- Q4 FY24-25 --
7. Wastewater – Approve second loan under the
WIFIA Programmatic Master Agreement $145 Q4 FY24-25 Q1 FY25-26 Other Initiatives
9 x Direct Pay Tax Credits Authorized in the Inflation Reduction Act (IRA) o Evaluate and pursue potential capital financing opportunities created by the IRA.
• Managing in a Dynamic Rate Environment
o Work with municipal advisors to reassess existing and planned debt in light of a changing rate environment.
• Meeting Unique Finance Needs
o Evaluate potential capital financing options for unique capital finance needs such as energy procurement and prepayment options for the CleanPowerSF or unique financing arrangements involving third parties related to Alternative Water Supply projects for the Water Enterprise.
• Green Bond Program
o Build on the work that began in FY2023-24 to enhance SFPUC’s Green Bond Program in light of recent market development and regulatory changes. • Updating Data and Technology Systems
o Evaluate and procure new data management and technology systems to efficiently manage the SFPUC’s growing Capital Financing Program. 10 Questions