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Bond Refinancing Push Saves Over $460 Million for the City and Taxpayers

Faulconer Administration Takes Advantage of Historically Low Interest Rates to Save Taxpayers an Average of $15M Annually

Thursday, July 5, 2018 - NEWS RELEASE

San Diego – Continuing to bring fiscal responsibility to City government by spending tax dollars wisely and efficiently, Mayor Kevin L. Faulconer today announced that the City’s efforts to take advantage of historic low interest rates by refinancing a large portion of its municipal bonds has resulted in savings of $464 million in future interest payments and freed up an additional $24.5 million for infrastructure projects.

“We’re continually looking for new ways to improve City finances and then pour those savings right back into our neighborhoods for critical road repair and infrastructure projects,” Mayor Faulconer said. “The goal is to get the most value out of every tax dollar. By taking advantage of low interest rates, we’re paying millions less in debt and can use those dollars in future budgets for top priorities such as streets, parks and neighborhood improvements.”

The bond refinancing push that began in 2015 has involved over $2.15 billion in municipal bonds that were used to construct Petco Park, redevelopment projects, neighborhood improvements, and various water and wastewater projects. The amount refinanced represents approximately 65 percent of the City’s total outstanding debt.

The latest moves include:

  • Restructuring the City’s tobacco settlement revenue to lower the interest rate and free up $24.5 million in cash to fund priority infrastructure projects.
  • Lowering the interest rate on $132.5 million in outstanding deferred capital bonds to save $28.4 million in future interest payments over the next two decades. The savings were accomplished using taxable markets because the recent Tax Reform Act eliminated the previously available advance refunding option for the state and local governments.

The City locked in lower interest rates and will pay off this refunded debt in annual installments over the course of 14 to 23 years. With these various refinancings, the average annual savings for the City over this period will be approximately $15.3 million. Now, instead of paying off debt service, that money can be used for priorities such as fixing streets, upgrading neighborhood infrastructure and funding new water and sewer projects.

Prior to refinancing, the interest rates for the bonds averaged 5.5 percent. After the refinancing, the interest costs now average 3.1 percent.

The following chart lists the refinanced bonds along with the average annual and cumulative savings over the life of the bonds:


Refunded Debt

Refinance Date

Avg. Annual Savings

Cumulative Savings (Fiscal Years)

CFD #2*


June 2015


$2M (2017-2034)

RDA 2016**


Jan 2016


City Share $811K

$83.4M (2017-2034),

City Share $15M

Sewer Utility***


March 2016


$98M (2016-2039)



May 2016


$32M (2017-2032)

Water Utility****


June 2016


$120.7M (2017-2040)

CFD #4*


June 2016


$3.9M (2018-2038)

RDA 2017**


Feb 2017


City Share $700k

$96M (2018-2041),

City Share $16.8M

Tobacco Revenue Restructuring*****


March 2018


$24.5M in new capital bond proceeds in 2018

General Fund Deferred Capital


June 2018






City Share $15.3M

City Share $341.3M

*CFD stands for Community Facilities Districts – a special Mello-Roos district allowed by state law for financing of public improvements and services. They are commonly used in areas with newer development.

**Combines three series of Sewer Utility bonds refinanced by two bond issuances in 2015 and 2016.

***Successor Agency to the Redevelopment Agency. The savings benefit is shared by affected local taxing entities, including school districts and the County. The City’s estimated share is 17.5 percent.

**** Combines 3 series of Water Utility bonds and one Water State Revolving Fund Loan refinanced with one bond issuance.

***** Tobacco Revenue Restructuring produced $24.5 million upfront bond proceeds for General Fund capital projects.

CONTACT: Greg Block at 619-227-3752 or [email protected]

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