The Santa Clarita Valley Water Agency unanimously approved a bond issuance that would raise $75 million by 2032 and a debt-financing plan that would saddle the water retailer with a little more than a half-billion dollars in debt, according to the agency’s plans.
The efforts are expected to help the agency address capital projects’ costs estimated in the neighborhood of $747 million through the life of the bond issuance, according to SCV Water’s financial advisers.
The agency is planning to finance that over time, as that’s the appropriate way to insure all of the projects’ beneficiaries contribute to the cost, which are expected to benefit the region for decades. The alternative would be having current ratepayers charged with double-digit rate increases, Rochelle Patterson, CFO of SCV Water, said in a phone interview Wednesday.
The agency plans to finance most of its expected debt with the following: about 44% of the money coming from the rate hikes the agency is planning and the agency’s reserves; debt funding opportunities through a federal loan program that could cover up to 43% of that total; and additional proceeds from the $75 million bond that could cover around 12%, according to a presentation from Lora Carpenter, vice president of Fieldman Rolapp & Associates, an agency the water retailer uses as a financial adviser.
“Due to these incoming and ongoing capital project needs, this funding strategy assumes rate increases in addition to what was previously approved by the board,” Carpenter said, “starting in the fiscal year 2026 to increase that prior approved rate from 6.5% to a 9% increase in fiscal year 2026, 8%, 7% and then 4% thereafter.”
Patterson noted Wednesday the agency is in the middle of a five-year period of rate increases of 6.5% approved in 2020. The projected rate increases would be subject to a state-mandated Proposition 218 hearing, which SCV Water would likely take to the public in 2025, Patterson said.
To put the figures in perspective, the peak rate increase for the average customer in 2026 paying a three-quarters customer meter bill for 18 cubic feet of water per month would be about $6 per month, she added. In dollars, that works out to an average yearly increase of about $4.70 on the monthly bill over the life of the bond. The average monthly bill by 2032 would be about $102, she added.
In October, SCV Water’s Finance and Administration Committee meeting received presentations on a range of four financial scenarios, including one that would raise rates by about 10.5% annually and leave the agency with $271 million in debt in 2032, and the one that was ultimately decided on, which would raise rates by about 6.25% on average over the same timeframe, starting this year when the bond would be issued.
The total debt figure in Scenario 3A, which was presented to the board and approved this week, would leave SCV Water with about $530 million in debt for the fiscal year 2031-32, according to a report from agency staff.
The calculations also note two outstanding factors that could impact the projections, namely the federal Water Infrastructure Finance and Innovation Act loan program, which the agency was just invited to participate in, and a “significant” financial award SCV Water expects to recover from a judgment over its costs to remove perchlorate and volatile organic compounds from the water supply. (The U.S. Central District of California awarded SCV Water a final judgment of $68.8 million in June 2022 for the cleanup of local groundwater contamination by the Whittaker Corp. over the Whittaker-Bermite property — the site of a World War II munitions plant.)