1 Nikolai J. Sklaroff,
Capital Finance Director
June 24, 2025
Results of Recent
Water Enterprise Bond Sale
Recent Water Bond Authorization
(Series 2025DEF)
2 2025 Series DE 2025 Series F
Authorized
Bond Par
and
Purpose:
Up to $474 million
to fund regional,
local, and Hetchy
water capital
projects (new
money and retire
commercial paper)
Up to $1,056
million to
refinance certain
outstanding Build
America Bonds
(BABs) by
exercising the
extraordinary
redemption
Bond
Approval:
May 27
th Commission Meeting
Bond
Ratings:
Moody’s Investors Services affirmed
Aa2 water revenue bond rating; Stable
outlook
S&P Global Ratings affirmed AA- water
revenue bond rating; Stable outlook
The Water Revenue Bond Sale
(Series 2025DEF)
3 2025
Series D
2025
Series E
2025
Series F Total
Par $304,505,000 $133,480,000 $550,275,000 $988,260,000 Purpose
Fund Regional
and Local Water
Capital Projects
Fund Hetch
Hetchy Water
Capital Projects
Build America
Bonds (“BABs”)
Refinancing
Fund Water
Capital Projects
and Refinance
BABs
Pricing June 4-5, 2025
Sale
J.P. Morgan Securities LLC as Senior Manager
Goldman Sachs & Co. LLC as Co-Senior Manager
Barclays Capital Inc., Ramirez & Co., Inc, Siebert Williams Shank & Co., LLC, and Stifel Nicolaus & Company, Inc as Co-Managers
BABs Refinancing Timeline
4 2009 and 2010
The SFPUC took advantage
of a federal program made
available in these years to
issue taxable bonds called
“Build America Bonds”
(BABs).
BABs were issued at
higher taxable rates but
the Federal Government
was obligated to pay the
issuer a 35% subsidy on
bond interest payments.
March 2013
The 35% subsidy
has been reduced
below the obligated
level since March
2013 due to
sequestration from
the Budget Control
Act of 2011.
2021
The subsidy cuts have
been as high as 8.7%
in 2013 but since 2021,
the subsidy payments
have been reduced by
5.7%. The 5.7%
reduction is expected to
continue through Fiscal
Year 2031, which
translates into a 33%
subsidy.
2025
The subsidy
reduction has
resulted in more
than $25 million
in cost to date
for SFPUC’s
three enterprises.
Jan 2024 – Apr 2025
$19.3 billion of outstanding
BABs have been refinanced
with extraordinary optional
redemption provisions.
June 2025
The SFPUC
executed a
BABs refunding
for outstanding
water revenue
bonds Series
2010E and
2010E with tax-
exempt bonds.
BABs Refinancing PV Savings
5 Source: Montague De Rose & Associates
Negative PV savings capped at -25%, adjusted for Cost of Issuance/Underwriter’s Discount Excludes 2025 and 2010E 2026 and 2026 Maturities
Volatility in Interest Rates
(June 2015 – June 2025)
6 0%
1%
2%
3%
4%
5%
6%
6/5/2015 6/5/2016 6/5/2017 6/5/2018 6/5/2019 6/5/2020 6/5/2021 6/5/2022 6/5/2023 6/5/2024 6/5/2025
10 Year
30 Year
0%
1%
2%
3%
4%
5%
6%
6/5/2015 6/5/2016 6/5/2017 6/5/2018 6/5/2019 6/5/2020 6/5/2021 6/5/2022 6/5/2023 6/5/2024 6/5/2025 10-Year
30-Year
AAA Municipal Market Data (MMD) Rates
US Treasury Rates
2025DEF Bond Sale Conditions
(AAA Rated Bond Yield Curves Over Time)
7 • At the time of pricing, the broader U.S. financial markets had largely recovered from the post-April 2nd tariff announcement volatility
• AAA yields were near the top of their twelve-month trading ranges, except in the first ten years of the yield curve
Source: Montague De Rose & Associates; Municipal Market Data Index data as of June 5, 2025
The 2025DEF Bond Sale Process
(Strong demand generated lower rates)
8 After final adjustments, corrections, and drops, final orders were $2.17 billion for $988 million in available bonds for 2.2x subscription
Due to strong investor demand, rates were lowered by 0.01% to as much as 0.08% along the interest rate curve during the entire pricing process Institutional Order Period (IOP)
At time of verbal award, orders totaled about $2.3
billion, for 2.3x subscription
All the non-call maturities created prior to the IOP
to maximize BAB refunding savings were
successfully sold with at least 2.0x subscription
Retail Order Period (ROP)
Generated about $715 million of orders. Overall
subscription was 0.7x
Bonds maturing 2026 to 2036 were more than
fully subscribed by individual and professional
retail investors
2025DEF Final Pricing Results
2025 Series DEF
Water Revenue Bonds
Par Amount $988,260,000
Premium $70,011,933
Original Issue Discount -$498,465
Total Proceeds $1,057,773,468
All-in True Interest Cost 4.42%
Closing Date June 12, 2025
Series D
(Regional and
Local Water)
Series E
(Hetch Hetchy
Water)
Series F
(Refinancing Build
America Bonds)
Final Maturity November 1, 2055 November 1, 2055 November 1, 2040 First Call Date November 1, 2035 November 1, 2035 November 1, 2035 Average Life 28.6 Years 29.0 Years 9.0 Years
All-in True Interest Cost 4.90% 4.99% 3.54%
Purpose $304.5M to fund Regional
and Local Water Capital
Projects
$133.5M to fund Hetch Hetchy
Water Capital Projects
$550.3M to refinance certain
outstanding Water Revenue Build
America Bonds
9 BABs Savings Summary
(Cash Flow vs. Present Value Savings)
Refunding of Series 2010B and 2010E BABs
Cash Flow Savings The Annual Reductions in Expenses
Paid by Ratepayers
Annual Cash Flow Savings Average $1.99 million per year through 6/30/2041 Total Cash Flow Savings Total: $39,440,204
Net Present Value Savings Financial analysis of savings reflecting the time value of money
Present Value of savings from
cashflow
$32,153,661
(Cash flow savings discounted to today’s dollars)
Less: Prior funds on hand
-$32,731,407
• $26,541,480 in Debt Service Reserve Fund
• $6,032,986 in May 2025 BABs subsidy
• $156,941 in Debt Service Fund Principal and Interest) Plus: Refunding funds on hand $5,005
Net Present Value (NPV) Savings ($) -$572,742
Net Present Value (NPV) Savings (%) -0.09%
10 Independent Pricing Consultant
(2025 Series DEF Report)
11 In addition to our two Municipal Advisory
firms, we engaged an Independent Pricing
Consultant (PFM Financial Advisors LLC) to
evaluate the results of the sale as required by
our SFPUC Debt Policy.
• “We have analyzed the sale results in
reference to market information showing
national indices during the time of the sale and
other similar bond sales pricing at approximately
the same time as the Bonds, as well as
monitored order flow during the pricing.”
• “Based on the data noted in this report, the
orders received by the Underwriters during the
marketing and the final pricing levels, we have
concluded that the 2025DEF Bonds were
reasonably and fairly priced in light of the
market conditions on June 5, 2025.”
2025 Water Bond Summary
(Series 2025ABC and Series 2025DEF)
Purpose Par Financial Impact
2025A
Refunding
Refinance WSIP Bonds through a tender
process and current refund 2015A and 2017A $467,960,000 PV savings of $38.3 million (7.25%)
Introduced optional call for taxable tenders
2025B
Refinance Regional and Local Bonds through
a tender process and current refund 2017B $37,400,000
PV savings of $2.8 million (6.34%)
Introduced optional call for taxable tenders
2025C
Refinance Hetch Hetchy Bonds through a
tender process and current refund 2017C $523,435,000
PV savings of $1.4 million (6.56%)
Introduced optional call for taxable tenders
2025D
New Money
Fund Regional and Local Water Capital
Projects $304,505,000
Refunded $200.6 million in outstanding
Commercial Paper and secured $79.8 million in
project funds
2025E Fund Hetch Hetchy Water Capital Projects $133,488,000 Refunded $112.8 million in outstanding
Commercial Paper and secured $12.6 million in
project funds
2025F
Refunding
Refinance 2010B and 2010E Water Build
America Bonds $550,275,000
Risk Mitigation – Eliminate exposure to $11.7
million of annual Federal subsidy subject to
sequestration ($107.1 million by FY 2041)
PV dissavings of $572 thousand (-0.09%)
Cashflow savings of $39.4 million
Introduced optional call for $79 million of taxable
bonds
Outstanding Water Debt
($million)
13 Before
2025ABCDEF
After
2025ABC
After
2025DEF
Revenue Bonds $4,496 $4,427 $4,801
Commercial Paper
• Authorized
• Drawn
$750
$311
$750
$332
$750
$20
Net result: Retired $313 million in outstanding Commercial Paper and secured $92.4 million in project funds to fund anticipated future capital project expenses through October 2025.
Refinanced outstanding 2010B and 2010E Water Revenue Build America Bonds into tax-exempt bonds. Gained $39.4 million in cash flow savings over the next 16 years.
-
50,000,000
100,000,000
150,000,000
200,000,000
250,000,000
300,000,000
350,000,000
400,000,000
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
2051
2052
2053
2054
2055
2056
2057
2058
Water Debt Service Projections (2025F BABs Refunding)
Westside SRF Mnt Tunnel SRF Outstanding Revenue Bond NDS Series 2025F BAB Refunding Previous Revenue Bond NDS & SRFs Projected Aggregate Net Debt Service
14 Achieved Cash Flow
Savings of $1.9 million
per year to 2041
Projected Aggregate Net Debt Service
15 FY2025-26 to FY2034-35 Financial Plan Projected Debt Issuance FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 FY 2032 FY 2033 FY 2034 FY 2035 Total - $1,083 - - $1,045 - - $771 - - $2,899
-
50,000,000
100,000,000
150,000,000
200,000,000
250,000,000
300,000,000
350,000,000
400,000,000
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
2051
2052
2053
2054
2055
2056
2057
2058
Water Debt Service Projections (2025DEF)
Westside SRF Mnt Tunnel SRF Outstanding Revenue Bond NDS Series 2025F BAB Refunding Series 2025D&E New Money Previous Revenue Bond NDS & SRFs • Wrapped structure to
mitigate debt service
coverage impact in
the near term
• All-in TIC of 4.9% for
New Money Bonds vs
6% assumption in the
Financial Plan
Water Enterprise BABs
(Original Position and Results)
16 Series Final
Maturity Original Par Outstanding
as of 4/1/2025
Average Annual Subsidy
FY26-FY30
(assuming
35% subsidy)
(assuming
33% subsidy)
Water Series 2010B 11/1/2040 $417,720,000 $323,145,000 $(5,712,766) $(5,387,138) Water Series 2010E 11/1/2040 344,200,000 304,680,000 (5,606,591) (5,287,015) Water Series 2010G 11/1/2050 351,470,000 351,470,000 (8,549,508) (8,062,186) Total $1,113,390,000 $979,295,000 ($19,868,865) ($18,736,339) • 2010B and 2010E Refunded - $2 million a year annual cash flow savings (only 0.09% NPV dissavings); elimination of Federal subsidy exposure on these bonds; and added refunding opportunity on $79.1 million of these bonds in 10 years
• 2010G Not Yet Refunded - $351.5 million principal of 2010G Water Revenue Build America Bonds were not refinanced. Cashflow and NPV dissavings. The 20-year UST yield would have to rise about 75 bps (0.75%) or MMD would have to fall about 90 bps (0.90%) for NPV break even; will continue monitor. 17 Questions
SFPUC's Capital Finance Analyst Team
Edward Kwong, Capital Finance Analyst,
Dan Fuchs, Capital Finance Analyst,
Eric Kwak, Debt Analyst,
Earl Dunivan, Debt Analyst
Gisele de Araujo, San Francisco Fellow