City of San Diego, CA – Water System Surveillance Report

Rating Summary

The long-term ratings reflect the City of San Diego's (the “City's”) Water System’s provision of an essential service to a large and diverse service territory, with strong sociodemographic characteristics, a history of implementing rate increases as needed, and sound financial performance, highlighted by strong debt service coverage. Offsetting these credit strengths is the City’s sizeable FY 2027-2031 capital plan (CIP, $2 billion), which is needed to replace aging infrastructure, address regulatory requirements, and develop an alternative long-term water supply resource. Considerable debt funding for the capital plan, along with the rising cost of purchased water supply, will require continued annual water rate increases, placing upward pressure on leverage and rates through FY 2030.

Senior Water Revenue Bonds (the “Bonds”) are secured by installment payments derived from net revenues of the Water System made by the City to the San Diego Facilities and Equipment Leasing…