AgdaPkt 2003-08-11 - Laserfiche WebLink

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8. A'WZ Capital Project Financing Summary The recycled water project should be financed by a combination of grants and bonds as shown below. The City may be eligible for partial grant funding and estimates it could receive from $0 to $5 million in grants. Remaining project costs should be financed with water revenue bonds. Revenue bonds would enable the City to obtain low, tax- exempt municipal bond yields and would spread financing costs over the life of the project. Recycled Water Project Cost (future $) $47,946,000 Sources of Funds Revenue Bonds $42,946,000 Grants 5.000.000 Total 47,946,000 Existing water enterprise fund reserves should not be used to fund the project. A spend - down of fund balances would draw reserves below prudent levels and reduce future financing flexibility. Additionally, the use of reserves would not result in lower rate increases. While use of fund reserves would reduce the amount borrowed and lower debt service payments, it would also result in a corresponding decrease in interest earnings. In addition to bonds, the City should also consider the use of State Revolving Fund (SRF) Loans from the State Water Resources Control Board (SWRCB). Such loans are currently available for 20 years at under 3% interest. These loans typically require additional engineering, administration, and environmental work and can require up to three years to obtain. Under certain conditions and subject to prior approval by the SWRCB, bonds may be issued and later retired with SRF proceeds. The financing plan developed in this report assumes the City will sell a single issue of revenue bonds corresponding with a single -phase construction schedule for the recycled water project. The revenue bonds can be used to fund up to three years of anticipated capital expenditures. Total net annual debt service on the bonds is estimated at about $3.3 million assuming a) 25 -year term, b) 5.25% average interest rate, c) funded debt service reserve, and d) receipt of $5.0 million in grant funding. The City should continue to pursue funding from grants and/or subsidized loans to the extent possible. Additional funding received from these sources will result in a corresponding decrease in the amount of bonds issued. Likewise, without any grant funding, additional bonds will be required. Revenue Bond Sizing and Debt Service Estimates Bond issue $47,400,000 Proceeds for construction $42,950,000 Issuance costs, discount, bond ins. $1,000,000 Debt service reserve fund $3,448,000 Estimated average interest rate 5.25% Term (years) 25 Net annual debt service $3,275,600 Total net payments over 25 years $78,442,000 Water Financing Plan ES4 02/24/03