Bonds - - CA Water

Section § 80540

This law allows California's department to borrow money by issuing bonds to support the Wildfire Fund and related expenses, but only if the bond payments can be covered by funds expected to be available. The bonds must be paid off by January 1, 2036. If all large electric companies choose to participate in a specific account, the department can issue additional bonds, ensuring the debts can be paid with projected funds from this account.

The department can issue up to $10.5 billion in bonds for one purpose and up to $9 billion for another if certain conditions are met. However, bonds issued to refinance at lower interest rates or due to changes in credit ratings aren’t counted in these limits.

Before selling bonds publicly, they must be rated at investment-grade and repayment must be structured to be on time. Bonds cannot be issued until earlier of two conditions: either existing power supply revenue bonds are paid or legally nullified, with notification to the commission.

(a)

(1) The department may incur indebtedness and issue bonds as evidence thereof solely for purposes of supporting the Wildfire Fund and other related expenses incurred by the department pursuant to this division, provided that bonds authorized pursuant to this paragraph shall not (A) be issued in an amount the debt service on which, to the extent payable from the fund, is estimated by the department to exceed the amounts estimated to be available in the fund for their payment, and (B) mature after January 1, 2036.

(2) If the administrator provides the notification pursuant to subdivision (b) of Section 3299.1 of the Public Utilities Code, the department may incur indebtedness and issue bonds as evidence thereof solely for purposes of supporting the account and other related expenses incurred by the department pursuant to this division, provided that bonds authorized under this paragraph shall not be issued in an amount the debt service on which, to the extent payable from the account, including the annual contributions and additional contribution pursuant to Section 3299.2 of the Public Utilities Code, is estimated by the department to exceed the amounts estimated to be available in the account for their payment. This paragraph shall become operative upon all large electrical corporations electing to participate in the account pursuant to Section 3299 of the Public Utilities Code.

(b)

(1) The department may authorize the issuance of bonds pursuant to paragraph (1) of subdivision (a), excluding any notes issued in anticipation of the issuance of bonds and retired from the proceeds of those bonds, in an aggregate amount up to ten billion five hundred million dollars ($10,500,000,000).

(2) In addition to paragraph (1), if the administrator provides the notification pursuant to subdivision (b) of Section 3299.1 of the Public Utilities Code, the department may authorize the issuance of bonds pursuant to paragraph (2) of subdivision (a), excluding any notes issued in anticipation of the issuance of bonds and retired from the proceeds of those bonds, in an aggregate amount up to nine billion dollars ($9,000,000,000). This paragraph shall become operative upon all large electrical corporations electing to participate in the account pursuant to Section 3299 of the Public Utilities Code.

(c) Refunding bonds for any of the following purposes shall not be included in the calculation of the aggregate amount described in subdivision (b):

(1) Refunding bonds to obtain a lower interest rate.

(2) Refunding bonds bearing a variable interest rate with bonds bearing interest at a fixed rate.

(3) Refunding bonds if any nationally recognized rating agency reduces or withdraws, or proposes to reduce or withdraw, the rating assigned to securities that are secured by bond insurance policies, credit or liquidity facilities issued by the provider of a bond insurance policy, or a credit or liquidity facility securing the bonds being refunded.

(d) Before the issuance of bonds in a public offering, the department shall establish a mechanism to ensure the bonds are sold at investment grade ratings and repaid on a timely basis from pledged revenues. This mechanism may include, but is not limited to, an agreement between the department and the commission as described in Section 80524.

(e) Notwithstanding any provision of this division to the contrary, the department shall not issue any bonds pursuant to this division until the earlier of either of the following:

(1) The date on which the department shall have legally defeased all of its outstanding power supply revenue bonds issued pursuant to Section 80134 and provided written notice to the commission.

(2) The date on which the department shall have paid in full, at maturity, all of its outstanding power supply revenue bonds issued pursuant to Section 80134 and provided written notice to the commission.

Wildfire Fund bonds department indebtedness bond issuance limits investment grade bonds large electrical corporations refund bonds investment grade ratings debt service electric companies participation power supply revenue bonds lower interest rate refinancing bond maturity date credit ratings pledged revenues defeased bonds

(Amended by Stats. 2025, Ch. 119, Sec. 70. (SB 254) Effective September 19, 2025.)

Section § 80542

This law section explains how the California Department of Water Resources can issue bonds to raise funds. It describes the procedure for issuing bonds, which requires approval from key officials and sets terms for bond sales to ensure they're secure for bondholders. These bonds can be linked with a trust agreement that provides further security.

The bonds issued are considered safe investments for a variety of entities, like banks and pension funds, and they are negotiable, meaning they can be sold or transferred easily. They are exempt from state and local taxes and do not count as debt for the state, meaning they do not affect California's credit. They are solely the responsibility of the department that issues them.

The law also allows the department to use revenue as collateral to secure its bonds, and such pledges are recognized as legally binding from the moment they are made, having a lien status without needing physical documentation.

(a) Bonds may be issued by the department, upon authorization by written determination of the director of the department, with the approval of the Director of Finance and the Treasurer, on terms acceptable to and approved by the administrator. The Department of Finance shall notify the Chairperson of the Joint Legislative Budget Committee and the chairpersons of the fiscal committees of each house of the Legislature of its written determination. The bonds shall be sold at the prices and in the manner, and on the terms and conditions, as shall be specified in that determination, and the determination may contain or authorize any other provision, condition, or limitation not inconsistent with this division and those provisions as may be deemed reasonable and proper for the security of the bondholders. Bonds may mature at the time or times, and bear interest at the rate or rates, which may be fixed or variable and be determined by reference to an index or such other method, that are specified in the determination. Neither the person executing the determination to issue bonds nor any person executing bonds shall be personally liable therefor or be subject to any personal liability or accountability by reason of the issuance of the bonds.

(b) In the discretion of the department, any bonds may be secured by a trust agreement by and between the department and a corporate trustee, which may be any trust company or bank having trust powers within or outside the state, or the Treasurer. Notwithstanding any other law, the Treasurer shall not be deemed to have a conflict of interest by reason of acting as the trustee. The department may enter into such contracts or arrangements as it shall deem to be necessary or appropriate for the issuance and further security of the bonds.

(c) Bonds shall be legal investments for all trust funds, the funds of all insurance companies, savings and commercial banks, trust companies, executors, administrators, trustees, and other fiduciaries, for state school funds, pension funds, and for any funds that may be invested in county, school, or municipal bonds.

(d) Notwithstanding that bonds may be payable from a special fund, the bonds shall be deemed to be negotiable instruments for all purposes.

(e) Any bonds, and the transfer of and income derived from those bonds, shall at all times be free from taxation of every kind by the state and by the political subdivisions of the state.

(f) Bonds shall not be deemed to constitute a debt or liability of the state or of any political subdivision thereof, other than the department, or a pledge of the faith and credit of the state or of any such political subdivision, but shall be payable solely from the funds herein provided for. All bonds shall contain a statement to the following effect: “Neither the faith and credit nor the taxing power of the State of California is pledged to the payment of the principal of or interest on this bond.” The issuance of bonds shall not directly or indirectly or contingently obligate the state or any political subdivision thereof to levy or to pledge any form of taxation whatever therefor or to make any appropriation for their payment.

(g)

(1) The department may pledge or assign any revenues under any obligation entered into, and rights to receive the same, and moneys on deposit in the fund and income or revenue derived from the investment thereof, as security for the department’s obligations pursuant to this division.

(2) It is the intent of the Legislature that any pledge of moneys, revenues, or property made by the department shall be valid and binding from the time when the pledge is made; that the moneys, revenues, or property so pledged and thereafter collected from retail end use customers, or paid directly or indirectly to or for the account of the department, is hereby made, and shall immediately be, subject to the lien of that pledge without any physical delivery thereof or further act; that the lien of any such pledge shall be valid and binding against all parties having claims of any kind in tort, contract, or otherwise against the department irrespective of whether those parties have notice thereof, and that no resolution or instrument by which the pledge or lien created pursuant to this subdivision is expressed, confirmed, or approved need be filed or recorded in order to perfect the pledge or lien. These provisions shall in all respects govern the creation, perfection, priority, and enforcement of any lien created by or under this division.

bond issuance Department of Water Resources financial securities trust agreements tax-exempt bonds negotiable instruments investment security state debt bond maturity director approval pledge of funds lien creation revenue collateral trustee agreements water department bonds

(Added by Stats. 2019, Ch. 79, Sec. 22. (AB 1054) Effective July 12, 2019.)

Section § 80544

This law explains how certain funds collected by a department should be allocated each year. The funds are used to pay off bonds, fulfill contract obligations, maintain reserves, repay loans to the Wildfire Fund, cover administrative costs, and any leftovers go to the Wildfire Fund.

It also stipulates that the commission cannot change the revenue requirement for these funds until after 2036. Plus, the revenue won't be collected until some specific bonds are paid or secure, and written notice is given to the commission.

(a) If, pursuant to subdivision (b) of Section 80524, the commission makes a just and reasonable determination with respect to that revenue requirement, the department shall, and in any obligation entered into pursuant to this division may covenant to, at least annually, and more frequently as required, allocate or cause to be allocated moneys collected pursuant to this division to provide any of the following:

(1) The amounts necessary to pay the principal of, and premium, if any, and interest on, bonds issued pursuant to paragraph (1) of subdivision (b) of Section 80540 as and when the bonds shall become due.

(2) The amounts necessary to make payments under any contracts, agreements, or obligations entered into by it pursuant hereto, in the amounts and at the times they shall become due.

(3) Reserves in such amount as may be determined by the department from time to time to be necessary or desirable.

(4) Consistent with Section 3288 of the Public Utilities Code, repayment of loans made from the Surplus Money Investment Fund to the Wildfire Fund.

(5) The administrative costs of the department incurred in administering this division.

(6) After meeting the purposes in paragraphs (1) to (5), inclusive, the transfer of any remaining revenue requirement amount to the Wildfire Fund.

(b) The commission shall not revise the revenue requirement established pursuant to subdivision (b) of Section 80524 at any time before January 1, 2036. For avoidance of doubt, the revenue requirement established pursuant to that subdivision shall not be imposed and collected until the department has legally defeased or paid at maturity the power supply revenue bonds issued pursuant to Section 80134 and provided written notice thereof to the commission.

revenue allocation principal payment premium payment interest payment bond issuance contract payments reserve funds loan repayment Surplus Money Investment Fund Wildfire Fund administrative costs revenue requirement power supply revenue bonds defeased bonds commission restrictions

(Amended by Stats. 2025, Ch. 119, Sec. 71. (SB 254) Effective September 19, 2025.)

Section § 80544.5

This section deals with how funds collected under specific water-related laws in California should be managed. It requires that each year, or more often if needed, money is allocated to pay for bond debts, contracts, and necessary reserves. Administrative costs also need to be covered. Leftover funds can be transferred to a specified account. The commission can't change the revenue requirement until 2046, and it can only be imposed after related bonds are settled and the commission is notified. Additionally, this section stops being active if a large electrical corporation opts out, per certain public utility rules.

(a) If, pursuant to subdivision (c) of Section 80524, the commission makes a just and reasonable determination with respect to that revenue requirement, the department shall, and in any obligation entered into pursuant to this division may covenant to, at least annually, and more frequently as required, allocate or cause to be allocated moneys collected pursuant to this division to provide any of the following:

(1) The amounts necessary to pay the principal of, and premium, if any, and interest on, bonds issued pursuant to paragraph (2) of subdivision (b) of Section 80540 as and when the bonds shall become due.

(2) The amounts necessary to make payments under any contracts, agreements, or obligations entered into by it pursuant hereto, in the amounts and at the times they shall become due.

(3) Reserves in such amount as may be determined by the department from time to time to be necessary or desirable.

(4) The administrative costs of the department incurred in administering this division.

(5) After meeting the purposes in paragraphs (1) to (4), inclusive, the transfer of any remaining revenue requirement amount to the account.

(b) The commission shall not revise the revenue requirement established pursuant to subdivision (c) of Section 80524 at any time before January 1, 2046. For avoidance of doubt, the revenue requirement established pursuant to subdivision (c) of Section 80524 shall not be imposed and collected until the department has legally defeased or paid at maturity the bonds issued pursuant to paragraph (1) of subdivision (a) of Section 80540 and provided written notice thereof to the commission.

(c) This section shall become inoperative if a large electrical corporation elects not to participate pursuant to Section 3299 of the Public Utilities Code and is repealed on January 1 of the year following the notification by the commission pursuant to subdivision (c) of Section 3299 of the Public Utilities Code.

revenue requirement bond repayment fund allocation administrative costs reserve funds contracts payment annual allocation financial obligations commission restrictions water law funds utility revenue defeasing bonds electric corporation participation section 3299 notification public utilities code

(Added by Stats. 2025, Ch. 119, Sec. 72. (SB 254) Effective September 19, 2025. Conditionally inoperative on date prescribed by its own provisions. Repealed as of January 1 following inoperative date.)