An estimated $21 million in Sewer Fund savings over the next 15 years will help minimize future rate increases for Riverside residents while maintaining the city’s sewer system at a high level, officials said Monday.
A recent refinancing of $139.16 million in revenue bonds led to the savings, according to the city. Favorable market conditions and strong investor demand drove interest in the bonds. The long-term savings equates to $17.9 million in 2025 dollars, over $3 million more than projected in a staff report to the City Council.
The 2025A Refunding Sewer Revenue Bonds were sold with a True Interest Cost of 3.34%, which was well below expected interest rates. Officials said that signified confidence in the city’s financial position and capability to meet its sewer demands.
The savings from the bonds, rated AA- by S&P and Aa3 by Moody’s, “will reduce near-term debt service requirements, creating critical budgetary flexibility within the Sewer Fund,” according to the city.
“Our refinancing strategy and decisive action locked in these financial benefits,” Edward Enriquez, assistant city manager/chief financial officer/treasurer, said in a statement. “This will assist in maintaining future sewer rates at affordable levels and protect the integrity of the sewer system for years to come.”
In June 2015 the city issued $200 million of 2015A Sewer Revenue Bonds, according to a city staff report. Bond proceeds funded $144 million of Sewer Fund capital improvements and refunded a portion of the 2014 bonds, which were originally issued to pay for the Regional Water Quality Control Plant and collection system.
Remaining outstanding 2015A Bonds total $161.1 million, with final maturity on Aug. 1, 2040 and an average interest rate of 4.9%.
“Based on near term financial pressures” such as no rate increases for eight years and rising overhead costs to maintain the sewer system, “the proposed refunding structure will be a hybrid of short-term and long-term savings,” according to the report.
In addition to officials from the Riverside Finance Department, City Attorney’s Office and Public Works Sewer, the city’s finance team includes rate consultant Carollo, financial legal advice from Stradling, Yocca, Carlson & Rauth LLP, along with NHA Advisors, credit rating agencies Moody’s and S&P, underwriting banks BofA Securities Inc., Cabrera Capital Markets and US Bank National Association.
After evaluating nine applicants, the city selected BofA Securities Inc. as the sewer bonds’ senior underwriter and Cabrera Capital Markets as co-managing underwriter. Officials selected these firms “based on their qualifications, bond structuring strategies, credit ratings and market timing approaches, interest rates and credit spread expectations, and competitive fees.”
The staff report projected the bonds’ annual fiscal impact of about $1.3 million in fiscal year 2025-26, $10.6 million in 2026-27, $12.8 million in ’27-28 and $13.8 million a year from 2028-29 to 2040-41.
Those payments represent savings of about $2.5 million in 2025-26, $4.0 million in 2026-27, $1.7 million in 2027-28 and approximately $708,000 annually from 2028-29 to 2040-41, compared with current debt service obligations. Officials said annual debt service payments will be funded by sewer revenue.
For a typical residential customer in Riverside receiving both water and sewer service, the first-year impact on a combined monthly bill is approximately $13.01, according to the Western Municipal Water District.
