KBRA Affirms AA Rating for San Mateo-Foster City Public Financing Authority's, City of San Mateo Sewer Enterprise WIFIA Loan
3 Sep 2025 | New York
KBRA affirms the long-term rating of AA for the San Mateo-Foster City Public Financing Authority's, City of San Mateo (the "City") Sewer Enterprise 2020 U.S. Environmental Protection Agency (EPA) WIFIA Loan, for the San Mateo Wastewater Treatment Plant's Upgrade and Expansion Project. The Outlook is Stable.
In 2020, the San Mateo-Foster City Public Financing Authority (the "Authority"), a joint exercise of powers authority established in 2016, entered into a WIFIA Loan Agreement with the EPA, on behalf of the City, for borrowings of up to $210 million to finance a portion of the San Mateo Wastewater Treatment Plant ("WWTP") Upgrade and Expansion Project. Concurrently, the Authority and the City entered into a financing agreement under which the City pledges the Sewer Enterprise’s net revenues to repay the WIFIA Loan, which is fully drawn to date and ranks on parity with the Sewer Enterprise’s outstanding long-term debt, which totaled $689.6 million as of July 1, 2025.
Key Credit Considerations
The rating was affirmed because of the following key credit considerations:
Credit Positives
- Strong cash flow, debt service coverage, and liquidity for the past five years.
- Implementation of timely rate increases to support the City’s large CIP and maintain solid financial performance.
- Affluence of the service area, with a primarily residential customer base.
Credit Challenges
- Completion of the WWTP is moderately behind schedule, though total project costs to date remains close to budget.
- While the City is taking advantage of low-cost state and federal loans for its large capital requirements, leverage is high (78.3% at FY 2024), but moderating prospectively as no new debt is projected over the five-year horizon.
Rating Sensitivities
For Upgrade
- Completion of the WTTP capital program, with no further delays and outperformance of DSC projections.
- Sustained improvement in the Sewer Enterprise’s leverage.
For Downgrade
- Material capital plan cost overruns that negatively affect leverage and/or liquidity.
- Inadequate sewer rate adjustments that result in a sustained decline in revenues and DSC.
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