San Diego water system ratings affirmed on senior bonds, WIFIA loans

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San Diego water ratings affirmed

Highlights

On June 10, 2026, Kroll Bond Rating Agency affirmed ratings on the City of San Diego Water System's Senior Water Revenue Bonds and Subordinate Water Revenue WIFIA Loans.
The senior bonds retain a high-grade rating backed by installment payments secured with a senior net revenue pledge, while WIFIA loans remain backed by a subordinated pledge.
A Stable Outlook signals no expected near-term rating changes, reinforcing market confidence in municipal utility debt secured by pledged utility revenues.

Rating action and debt structure

As reported by Kroll Bond Rating Agency, the June 10, 2026 rating action covers the City of San Diego, California Water System's Senior Water Revenue Bonds and Subordinate Water Revenue WIFIA Loans.

The senior bonds are issued by the Public Facilities Financing Authority of the City of San Diego and are secured by installment payments made by the city. The city's obligation to make those payments is backed by a senior net revenue pledge of water system revenues, while the WIFIA loans are secured by a subordinated net revenue pledge of the same revenue stream.

Implications for municipal utility financing

The affirmation keeps the water system in the high-grade rating category across both layers of debt, supporting the credit standing of a major municipal utility borrower in California. A Stable Outlook indicates no near-term change in the agency's view of the credit profile based on the information provided.

For the public finance sector, the action highlights the continued importance of pledged utility revenues in supporting long-term borrowing structures. The distinction between senior and subordinate claims also shows how repayment priority remains central to the way rating agencies assess municipal water debt.

KBRA’s affirmation of all ratings on the ALA 2025-OANA single-borrower CMBS highlighted stable collateral performance for a $2.4 billion first-lien mortgage tied to Honolulu retail and office assets. Our earlier article noted that the loan’s floating-rate, interest-only structure and updated valuation and leverage metrics supported KBRA’s view that the credit profile remained steady after its surveillance review.

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