Contra Costa pivots to debt financing for $2.6 billion canal overhaul in new capital plan

Contra Costa pivots to debt financing for $2.6 billion canal overhaul in new capital planThe California district's draft ten-year outlook prioritizes seismic upgrades to its primary conveyance system, projecting steady rate hikes and a rejection of federal WIFIA loans in favor of private market bonds.

The draft FY2027-2036 CIP totals nearly $1.7 billion, with $1.2 billion in funded projects.

The Canal Replacement Program accounts for over 50% of the CIP, with a total lifecycle cost of $2.6 billion.

Debt service is projected to peak at 30% of total revenue requirements, driving annual rate increases of 4-6%.

Management noted that federal WIFIA loans are currently pricing 1-2% higher than the district's private market options.

The Contra Costa Water District (CCWD) has outlined a draft ten-year Capital Improvement Program (CIP) and financial plan for fiscal years 2027 through 2036, signaling a major shift toward debt financing to support a massive infrastructure renewal effort. Presented to the Board of Directors on February 18, 2026, the plan identifies nearly $1.7 billion in investment needs, with $1.2 billion designated as funded Priority 1 and 2 projects. The driving force behind the expanded capital program is the Canal Replacement Program, a multi-phase initiative to replace the district’s 90-year-old conveyance system. The project aims to address seismic risks from the Concord Fault and landslide vulnerabilities that have previously threatened operations. Director of Engineering Peter Stab noted that of the $800 million allocated to the Untreated Water Facilities program in this CIP, $700 million is specifically for the canal replacement. The total cost for all phases of the canal program is estimated at nearly $2.6 billion, with the first phase alone costing $1.3 billion and spanning more than a decade of construction. To fund this "multigenerational investment," as Board President Avila described it, the district plans to utilize significant debt financing. Assistant General Manager Jeff Quimby reported that the financial plan assumes approximately $922 million in new debt financing over the ten-year window. At the peak of repayment in 2045, debt service is expected to account for roughly 30% of the district's overall revenue requirement, a level comparable to the district's financial position during the Los Vaqueros Reservoir expansion in the early 2000s. Notably, the district is currently favoring private market financing over federal options. Quimby informed the board that while the district is monitoring the Water Infrastructure Finance and Innovation Act (WIFIA) program, which offers longer repayment terms of up to 55 years, current WIFIA interest rates are approximately 1% to 2% higher than what CCWD can secure in the private market. This advantage is underpinned by the district's strong financial standing, including a 2025 upgrade to AA+ by Fitch Ratings and a AAA long-term rating from Standard & Poor’s on recent issuances, which allow for lower borrowing costs despite the massive capital outlay. The financial plan currently assumes 30-year debt issuances at a 4.5% interest rate. The CIP also incorporates operational cost pressures, including a doubling of property and liability insurance costs over the last four years and expenses related to fleet electrification and responding to invasive golden mussels. To support the capital and operating needs, the plan projects annual revenue increases ranging from 4% to 6% for both treated and untreated water customers. The board is expected to consider adoption of the final CIP at its March 4 meeting.