O-1998-2234 - Laserfiche WebLink

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e e The City of La Porte operates under financial policies adopted by Council in 1991. Included in these policies is the definition of the amount of the Working Capital Reserve for Operating Funds. The simple definition is that the targeted end of year balance for Working Capital is between 90 to 120 days of operating expenses. As of September 30,1997, the Working Capital Balance for the Operating Fund was $496,530. The operating expenses for the year were $628,186. This represents 288 days of Working Capital. The Authority can very easily utilize $341,635 of the available working capital balance and still have 90 days remaining. This is shown as line 1.c. The sum of these three currently available resources is $987,653, which is more than adequate to meet the $500,000 down payment by June 1, 1998 requirement. Currentlv Proarammed Future Funds After paying the down payment, the Authority will still have $487,653 available to fund the project. In addition to this current funding amount, there are other items currently programmed to generate revenues. First, interest income (at 5.75%) should generate $97,137 on the $487,653 balance from June 1,1998 to August 1, 2001. This is shown as line 2.a. Also, the continued billing of the Capital Reserve Amount will generate an additional $610,724 for the same period. This is shown as line 2.b. The result of on hand funding and currently programmed funding generates $1,195,514 towards the $2,912,700 to fund the project. This leaves a balance of $1,717,186 for us to plan funding. Future Funds There are several different methods to fund the additional amount that is needed for the purchase. As previously indicated, either the Authority or the City can issue debt for the difference. If it was necessary to issue debt, the amount of the annual debt service payments would be very similar to the amount that is currently being billed as the Capital Reserve Fee. However, before considering the issuance of $1.7 million in debt, we need to discuss the impact of refunding. On December 1, 1998, the Authority can refund the 1988 issue. At that time, a decision will be made as to how the refunding will occur. There are three different methods of refunding. Briefly, they are: Level Annual Savings - a method whereby the savings are spread over the life of the existing debt. For example, you have annual payments of $825,000 for 18 years. When you refund you have annual payments of $750,000 over the same 18 years. In other words, you have level savings from year to year.