KBRA Affirms Ratings for City of San Diego, CA Senior Water Revenue Bonds and Subordinate Water Revenue WIFIA Loans at AA/AA-; Outlook Stable
10 Jun 2026 | New York
KBRA affirms the long-term rating on the City of San Diego, CA (the "City") Senior Water Revenue Bonds at AA. Concurrently, the long-term rating on the Subordinate Water Revenue WIFIA Loans (the "WIFIA Loans") is affirmed at AA-. Both liens have a Stable Outlook.
The Senior Water Revenue Bonds (the "Bonds") are issued by the Public Facilities Financing Authority of the City of San Diego and secured by installment payments made by the City of San Diego. The City’s obligation to make the installment payments on the Bonds is secured by a senior net revenue pledge of the City’s water system revenues. The WIFIA Loans are secured by a subordinated net revenue pledge of the water system revenues.
Key Credit Considerations
The rating was affirmed because of the following key credit considerations:
Credit Positives
- Diversified, largely residential customer base in a broad service area with above average socioeconomic indicators.
- A history of implementing timely water rate increases to support financial performance.
- Solid financial performance, characterized by strong debt service coverage and manageable leverage.
Credit Challenges
- Large capital program with considerable debt requirements pressuring leverage, utility rate requirements, and affordability.
- Rapidly rising cost of largely purchased water supply.
- Continued risk of legal rate challenges in the State (i.e., Proposition 218) potentially affecting water utilities’ implementation of water rate increases and/or rate design.
Rating Sensitivities
For Upgrade
- Debt service coverage and liquidity that outperforms projections despite implementation of a large, complex CIP.
For Downgrade
- Significant delay and cost escalations relating to the CIP, which drives leverage and water rates materially higher than expected.
- Inability to effectuate timely water rate increases as needed.
- Inability to moderate growth in account receivables which materially weakens liquidity.
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