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Water district to issue bonds

Coastline Pilot

South Coast Water District will float $37.12 million in AA+-rated water and wastewater bonds to refinance debts and pay for some major projects.

The district has identified an estimated $75 million in needed major improvements within the next five years, part of which will be paid by proceeds from the bonds, the rest funded by working capital — cash on hand, sometimes called pay-go, and reserves.

“Use of long-term debt is appropriate as capital improvements benefit not only current customers but also future residents and businesses in the district’s service area,” said Wayne Rayfield, board president.

The district, founded 1932 to serve the unincorporated areas in today’s South Laguna and northern Dana Point, now provides water and wastewater services to about 40,000 residents, 1,000 businesses and more than 2 million visitors a year in Dana Point, South Laguna and portions of north San Clemente and north San Juan Capistrano.

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“The district will be able to maintain an adequate level of reserves and minimize any rate increases by financing $23.5 million toward the acquisition and construction of major water and wastewater system improvements,” Rayfield said.

Some of the new financing will go toward the district’s tunnel stabilization and sewer pipeline replacement project, already underway. The two-mile project, which stretches along the ocean bluffs from Three Arch Bay to Aliso Beach, flushes 1.1 million gallons of wastewater a day to the Coastal Treatment Plant.

New financing will also be used for improvements associated with the Dana Point project to revitalize its town center, for which the district will supply water and sewer pipes.

Other projects that will benefit include increased water storage from the purchase of capacity in a Santa Margarita Water District reservoir and the district’s share of capital costs associated with the Joint Regional Water Supply System and South Orange County Wastewater Authority.

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Proceeds are also earmarked for the expansion of the Groundwater Recovery Facility in Capistrano Beach that now supplies up to 10% of the district’s total water supply; and recycled water systems for irrigation purposes.

These are the most likely projects, said Linda Homscheid, district public information officer.

However, that does not prelude the desalinization project currently funded by five participants, including South Coast and the Laguna Beach County Water District, nor a proposed Aliso Creek irrigation project, Homscheid said.

The Aliso project was reduced by the State Water Resources Control Board from a diversion of 890 acre feet of water per year to 88 acre feet. The reduction has been appealed.

Projects will be financed by Series 2010B taxable Build America Bonds, which mature in 2040, with a maximum interest of 6.666% per year.

Proceeds from Series 2010A tax-exempt bonds, that mature in 2029 with a maximum interest of 4.545% a year, will refinance existing bonds, allowing the district to combine issues from different times that have different provisions and covenants, Homscheid said.

The existing debt includes $10 million in bonds issued in 1998 by Capistrano Beach Water District, which was consolidated in 1999 with the Dana Point Sanitary District and South Coast.

“By refinancing $13.6 million in existing bonds, the District will save $2.1 million in interest over 10 years without increasing the debt period,” Rayfield said.

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Standard and Poors and Fitch gave the district bonds an AA+ rating, crediting the district’s financial stability and management.

According to the rating agencies, key factors behind the District’s credit strength are its strong reserves, comprehensive long-term financial planning model, strong record of consistent expenditures, and stable management team, Homscheid said.

Bonds will be priced at market levels on or about Wednesday according to the news release issued by the district.

Individual purchases and sales of the bonds may be made in book-entry form only in $5,000 denominations or integral multiples.

The district supplied the names and telephone numbers of firms to contact for more information or to obtain copies of the Preliminary Official Statement: Wedbush Securities, (949) 719-3200 and Stone & Youngberg, (800) 447-8663.


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