AgdaPkt 2005-01-24 - Laserfiche WebLink

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come from bond issues, financing would be spread out in four additional bond issues and sold approximately one per year over the next four years. Debt service on this first bond issue is expected to be approximately $2.3 million annually. The City will covenant in the installment purchase contract to maintain net operating revenues (total revenues less operating expenses plus depreciation, "Net Revenues") in an amount that is at least 120% of debt service. Even if no provision is made in next year's budget for the next bond issue, if these bonds are sold, retail water rates will have to be increased next year by approximately 11 % in order to satisfy this rate covenant, meet increased operating costs, and provide $2 million of cash flow for the water utility's capital improvement program. Alternatively, Council could direct staff to identify expense reductions in the water utility system, transfer in resources from the general fund, or use existing net working capital of the water fund to satisfy the rate covenant to mitigate the otherwise required rate increase. A rate increase for next year of approximately 12% will be necessary to provide sufficient Net Revenues to allow for the sale of bonds in February 2006 for the next component of the project. In order to fully finance this project, the City's independent finance consultant has projected that three successive annual rate increases of 120/0 followed by at least three successive annual rate increases of 6.50/0 will be necessary. Approximately 60% of the rate increases through FY 2009/10 will be necessary to pay for the cost of the recycled water project. The remaining 400/0 of these rate increases will pay for projected large increases in the City's wholesale cost of water, inflationary increases in costs associated with operating the system, and required continuing investment in the repair and replacement of the water enterprise existing infrastructure. Alternative The Council may reject staffs recommendation to sell bonds to fund this initial phase of the recycled water project. In such event, construction of improvements at the SBSA facility to recycle water will not proceed as planned. ~ /j , / /./ U:/ .- L . , ) ,; ~~~ (" /_~------ ~' I l./. .' ", ,~/ .' Ed'Everett City Manager 1/ I '/' f/ ! Brian J. onty Director of Finance and Financial Planning Attachments: I Capital Expenditure Schedule II Estimated Sources and Uses of Funds III Summary of Principal Legal Documents IV Preliminary Official Statement 5 '..... "