AgdaPkt 2012-06-18 Special - Laserfiche WebLink

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8.A. - Page 6 Expected Debt Service — Debt service on the proposed bonds will depend on the interest rate at the time the bonds are priced. Based on the current interest rate estimate of 4.135% annual debt service is expected to be approximately $744,640. Net Revenues in FY 2012-13 (gross revenues after the payment of operation and maintenance expenses) are expected to exceed estimated debt service by 190% (1.90 times debt service coverage). City Subvention Payment Subordinated to Bonds — In connection with the issuance of the 1999 Bonds the City agreed to subordinate to the 1999 Bonds and any parity bonds issued under the 1999 Bonds master indenture the annual subvention payment made by the Port to the City. The Port's estimated FY 2011-12 subvention payment to the City is estimated to be $355,000. The Port has successfully made this payment to the City every year since the issuance of the 1999 Bonds. Risks to Payment of Subvention — Despite its revenue and expense projections, the Port is engaged in a business enterprise that is subject to business risks over which the Port may have little or no control. The bulk of the Port's revenue comes from maritime activities related to the import of construction materials and the export of scrap metal, and various property leases for companies engaged in these activities that use the Port's maritime facilities, as well as with companies that lease land but are not maritime tenants. The loss of one or more major tenants and the failure to promptly replace those tenants with similar lease provisions could cause the Port to experience financial difficulties. In such an event the Port could be unable to make all or a portion of the payment due to the City, even if the Port is not in default on its bonds. The subvention the City receives from the Port should not be jeopardized unless the Port's coverage ratio declines to a point where the coverage ratio approaches 1:1. As previously mentioned, the Port's coverage ratio has historically been quite high, averaging 4.5:1 over the past five years. ALTERNATIVES Not authorizing the Port to issue revenue bonds would result in no bond proceeds being available for the Wharves 1& 2 Project. Of the $19.3 million of Port cash reserves (as of April 30, 2012) approximately $4 million is required for prudent operating and contingency reserves. The balance is available for capital projects but would be insufficient to fund this project. If the Project is not undertaken, no major changes would occur at the site. Although the hopper and conveyor system could continue to operate, the old wooden wharf would need increasing costly maintenance to keep it safe for any access. Over the last five years maintenance cost for Wharves 1& 2 averaged $15,000 to $20,000 annually and are expected to decline significantly upon completion of this project. The old warehouse is structurally unsound and would remain vacant. Because no large scale improvements would be made, it is likely that the use of the wharves and the warehouse would cease at some point in the near future due to poor condition of these structures and the potential hazards that would be presented.