Water Bonds Shrivel as California Sees Driest Year

http://www.bloomberg.com/news/2014-01-02/water-bonds-shrivel-as-california-sees-driest-year-muni.html



The driest year on record for Los Angeles and San Francisco is threatening water supplies to the world’s most productive agricultural region and almost doubling borrowing costs on some bonds issued by California water agencies.

Los Angeles, which normally gets almost 15 inches (38 centimeters) of rain a year, got less than 4 inches in 2013, according to the National Weather Service. San Francisco, where 22 inches is typical, got 6. Severe or extreme drought grips 85 percent of California, a federal monitor reported Dec. 24.

The scarcity is depleting California’s reservoirs and jeopardizing the credit of at least 30 water agencies that had been considered safe bets because their debt is backed by user fees rather than general taxes. Concern grew in November when the California Water Resources Department, the state’s largest supplier, said it was filling just 5 percent of orders from local water agencies, the lowest in five years. Less supply means lower sales and revenue.

“Supply is always at the center of our analysis of California water agencies,” said Michael E. Johnson, managing director of Gurtin Fixed Income Management LLC in Solana Beach, California.