O-1998-2234 - Laserfiche WebLink

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e e At this time, we believe we have a good agreement, which is as follows: The Authority agrees to purchase 3 million gallons capacity from Gulf Coast. The Authority will agree to put up $500,000 out of its current funds as a down payment towards this purchase. The Authority agrees to fully fund an escrow account with an additional $2,912,700 over the next 39 months (with no specific deposit schedule being stated). The cost of water purchased is at 99 cents per gallon for the $500,000 being paid now and at $1.1688 per gallon for the amounts paid in 39 months. The Authority gets full credit for all interest paid into the escrow account. Meeting our Financial Obligation Since we have determined we would like to pay for the purchase without issuing debt, the process becomes very complicated. In the next few paragraphs, I will outline the guidelines that I am working under in order to make this deal become a reality. First and foremost is the assumption that if, at the end of the term, there are not sufficient funds to pay for the full purchase price, the issuance of debt will be required. The debt can be issued either by the Authority or the City of La Porte. Please keep this in mind as we go through this discussion. A work sheet has been prepared to walk us through a portion of the funding scenario. It is attached to this letter. Currentlv Available Funds The best place to begin our discussion is to cover funds that are currently available. The remaining 1988 Bonds Funds are available to pay for this project. The balance of these funds will be about $339,417 at May 30, 1998. These funds are shown as line 1.a. The next best source are the funds that we began collecting last fiscal year as Capital Recovery Fees. These fees were specifically assessed to offset the impact of purchasing additional capacity. As of May 30, 1998, these funds should have grown to $306,601. This is depicted on line 1.b. Next is a source that we have not discussed in any great detail. It is the use of the operating fund Working Capital Balance. Working Capital is how the City (and most governmental entities) measure their financial condition. Working capital is very simply the difference between Current Assets and Current Liabilities. It is important that a fund maintain a certain level of Working Capital in order to meet financial obligations during billing and payment cycles as well as handle unforeseen emergencies.