Indio approves $38 million water bond refunding and restructuring of utility governance

Indio approves $38 million water bond refunding and restructuring of utility governanceThe Indio City Council and Indio Water Authority have authorized Series 2026A Water Revenue Refunding Bonds to refinance existing debt and terminate a 2001 lease agreement, effectively returning direct ownership of the water system to the City.

Authorization of up to $38 million in Series 2026A Water Revenue Refunding Bonds to refinance 2015A bonds.

Projected gross savings of $1.8 million over the remaining 14-year term, with an annual average savings of $131,000.

Execution of a Termination Agreement to dissolve the 2001 lease/sublease structure between the City and IWA.

Consolidation of the water system into a standard City enterprise fund to eliminate cumbersome financial covenants.

Standard & Poor's assigned an A+ rating to the water system ahead of the bond sale.

The Indio City Council, acting concurrently as the Board of Directors for the Indio Water Authority (IWA) and the Indio Public Financing Authority, has approved a series of resolutions facilitating the issuance of Water Revenue Refunding Bonds, Series 2026A. The transaction, authorized in an amount not to exceed $38 million, is designed to refinance outstanding 2015A bonds and fundamentally restructure the legal governance of the municipal water system. According to the presentation delivered by the City's financing team, the primary financial driver for the transaction is debt service savings. Ralph Holmes of Piper Sandler, the City's bond underwriter, stated that the issuance is expected to be approximately $33 million to refund the 2015 bonds. Piper Sandler is consistently ranked as one of the top underwriters of California municipal bonds, having managed thousands of local authority issues nationwide over nearly five decades. Holmes projected that the move will save the utility approximately $131,000 annually over the remaining 14 years of the term, totaling roughly $1.8 million in gross savings. In present value terms, the savings are estimated at $1.5 million, or slightly less than 4 percent. Beyond the financial refinancing, the approval includes a "Termination Agreement" that alters the operational relationship between the City and the IWA. Brian Forbath of Stradling Yocca Carlson & Rauth, serving as bond counsel, explained the historical context to the Council. In 2001, the City elected to lease its water system to the IWA, a separate legal body created between the City and its redevelopment agency. Since then, the IWA has managed the system on the City's behalf. Forbath noted that the existing lease structure and financial covenants had become "cumbersome." He described the refunding as a "unique opportunity for the city to, in essence, sort of consolidate and recollapse the water system back into the city... and have the city's water system, just like most other cities, be an enterprise fund of the city." Under the new agreements, the lease and sublease arrangements will be terminated, returning full ownership and operational control of the water system directly to the City of Indio. Forbath clarified that this legal restructuring would not impact IWA employees, who would continue to operate in due course. Jim Fabian of Fieldman, Rolapp & Associates, the City's municipal advisor, outlined that the new bonds will be secured by the net revenues of the water system. The structure requires the utility to generate net revenues equal to 120 percent of debt service annually. The bonds are scheduled for sale on February 19, 2026, with a closing date of March 19, 2026. The transaction received a favorable credit assessment ahead of the vote. Holmes reported that Standard & Poor's assigned an A+ rating to the water system on January 26, citing the system's "good credit, strong management, solid system," and residential customer base. The Council and Authority Boards voted unanimously to adopt the resolutions approving the bond issuance, the installment purchase agreement, and the termination of the prior lease arrangements.