California reported an all-in true interest cost of 4.14% on a $546 million water revenue bond deal as it launched its spring slate of bond sales.
Joint senior managers Barclays Capital Inc. and Raymond James & Associates Inc. led the 16-bank syndicate that priced the debt on Tuesday. Montague DeRose & Associates was the municipal advisor. Orrick, Herrington & Sutcliffe was bond counsel.
The California Department of Water Resources issued the Central Valley Project Water System Revenue Bonds under its new 2026 general bond resolution, which replaced the 1986 bond resolution that had previously backed the state water system's bonds. The new resolution reflects a 50-year extension of the long-term contracts with the 29 water agencies served by the system, to 2085.
It was the inaugural deal under the new resolution.
The bonds, sold with 5% coupons and yields ranging from 1.70% to 4.27%, have maturities from 2027 to 2056.
State Treasurer Fiona Ma said healthy demand on the deal "is a strong sign that investors believe in California's water infrastructure and in the Department of Water Resources."
Over the 2024-25 period, California bond rates followed the general, often volatile, trend of the AAA MMD benchmark, with 30-year spreads occasionally compressing to levels around -5 basis points to the national AAA curve, indicating they often trade richer than the national index, according to the state's October 2025
The deal came during a week that saw $12 billion in new issuance including $930 million of general obligation bonds from the District of Columbia, $550 million of GOs from the State of Wisconsin, $231 million in revenue refunding bonds from the University of Arizona Board of Regents and $206 million in revenue and refunding bonds from the University of Oregon.
The proceeds from the DWR bonds will refinance commercial paper notes issued to finance State Water Project capital improvements.
The bonds are rated Aa1 by Moody's Investors Service and AA-plus by S&P Global Ratings. Both assign stable outlooks.
The State Water Project transports water from northern to southern California via a 705-mile network of dams, reservoirs, aqueducts, pipelines, pumping plants, and hydroelectric facilities. It provides water to more than 27 million residents as well as commercial and industrial customers.
The state has a busy spring slate of bond sales planned. The next three sales are a Regents of the University of California deal pricing Feb. 25, a competitive clean water and drinking water revolving fund revenue bond deal pricing March 5, and the state's various purpose GO bonds pricing March 11. Their sale amounts have yet to be determined.
Following those, the state will price $150 million in California Department of Veterans home purchase revenue bonds on April 12 and State Public Works Board revenue bonds in two tranches, a $1 billion tax exempt tranche and a $200 million taxable tranche on March. 26.
The state has GO ratings of Aa2 from Moody's Ratings, AA-minus from S&P Global Ratings and AA from Fitch Ratings. All assign stable outlooks.
