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SFPUC Wastewater Bond Ratings Help Secure Long-Term Affordability for Ratepayers

Large industrial storage tanks at a chemical plant under a partly cloudy sky.
  • Nikolai Sklaroff

The San Francisco Public Utilities Commission’s (SFPUC) latest wastewater bond ratings will help keep sewer rates affordable over the long term. 

Last week, the bond rating agencies Moody’s Investors Service and S&P Global Ratings each announced a “Stable” outlook on the SFPUC’s wastewater revenue bonds while affirming their Aa2 and AA long-term bond ratings, respectively. Both rating affirmations are a reflection of the SFPUC’s strong financial management and other credit fundamentals. The rating actions were taken in conjunction with planned wastewater revenue bond sales next month.

Aerial view of an industrial facility with large cylindrical tanks and surrounding buildings near a residential area.
Aerial view of the Biosolids Digester Facilities Project at the Southeast Treatment Plant.

The SFPUC uses bonds to pay for many of the major infrastructure investments needed to continue providing reliable service to San Francisco residents and businesses. The SFPUC finances much of its long-term capital program through the municipal bond market. Just as individuals with stronger credit generally qualify for lower borrowing costs, strong bond ratings help public agencies borrow at more favorable interest rates — usually low-cost, tax-exempt interest rates. Those lower rates mean lower costs, which helps keep utility bills as affordable as possible.

“As a not-for-profit public utility, we do everything we can to keep borrowing costs down and pass those savings on to our ratepayers,” said SFPUC Capital Finance Director, Nikolai Sklaroff. “Keeping our bond ratings strong is a critical part of that.”

Maintaining strong credit ratings is also a responsibility established in the San Francisco City Charter, which directs the Commission to establish rates and charges sufficient to maintain appropriate financial strength and preserve access to the capital markets.

Lower financing costs mean that more of every ratepayer dollar can be invested in maintaining and improving critical infrastructure rather than paying interest. The SFPUC is making needed investments to modernize wastewater treatment facilities, replace aging infrastructure, improve climate resilience, and comply with evolving environmental regulations. Maintaining strong credit quality helps deliver those investments at the lowest practical long-term cost for customers.

Latest Bond Ratings

On July 24, besides announcing a “Stable” outlook on the SFPUC’s wastewater revenue bonds and affirming its AA long-term bond rating, S&P also assigned AA/Stable ratings to the SFPUC's upcoming 2026 Wastewater Revenue Bonds and affirmed the highest short-term rating (A-1+) on several wastewater commercial paper programs. Moody's Investors Service likewise affirmed its Aa2 rating and stable outlook on the Wastewater Enterprise.

These ratings help the SFPUC focus more ratepayer dollars on capital projects and fewer on debt service, keeping rates more affordable over the long term.

Taking Action for Financial Strength

These ratings came as a result of SFPUC actions to address concerns among the ratings agencies. In 2024, S&P revised the Wastewater Enterprise's outlook from “Stable” to “Negative,” reflecting concerns that increasing capital investment and debt service could pressure future financial metrics. While the enterprise's underlying AA rating remained unchanged, the outlook signaled that the rating could be in jeopardy within the next two years and that maintaining the rating would require continued financial discipline. 

Industrial facility with large green storage tanks connected by extensive white piping under a clear blue sky.
Crew member walking by the Biosolids Digester Facilities Project at the Southeast Treatment Plant.

General Manager Dennis Herrera directed staff to address those concerns. Teams across the agency worked together to shape 10-year financial and capital plans that balanced the need to invest in essential wastewater infrastructure with the responsibility to maintain strong financial performance, preserve financial flexibility, and protect the Wastewater Enterprise's long-term borrowing capacity.

The SFPUC provided information to S&P Global Ratings and Moody's Ratings. Among the materials shared was the SFPUC's inaugural Impact Report, highlighting how the commission's investments are strengthening climate resilience, reducing climate related credit risks, improving environmental outcomes, and delivering long-term value to the communities it serves.

In its published report, S&P cited the SFPUC's comprehensive long-range financial planning, implementation of approved rate plans, strong management policies, and commitment to addressing significant regulatory and capital needs as key factors supporting the revised “Stable” outlook. S&P noted that the SFPUC’s financial management is “Strong” while the median for AA rated issuers is merely “Good.”

S&P also noted the 2025 U.S. Supreme Court decision in San Francisco’s favor as providing additional clarity and helping support its assessment.

Although credit ratings remain independent opinions and are influenced by broader economic conditions outside of the SFPUC’s full control, the revised outlook reflects confidence in the SFPUC's long-term financial strategy and the collaborative work of teams across the organization.