02-08-12 Regular Meeting of the La Porte Area Water Authority

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LA PORTE AREA WATER AUTHORITY EXHIBIT B-4 NOTES TO FINANCIAL STATEMENTS NOTE 7 - CONTRACT REVENUE BONDS PAYABLE, DEBT SERVICE REQUIREMENTS AND BOND RESOLUTION REQUIREMENTS (continued) As of September 30, 2011, the debt service requirements on contract revenue bonds outstanding for the next five fiscal years and thereafter through 2017 are as follows: Due During Fiscal Year Annual Reauirement for All Bond Series Ending Total Total Total 9/30 Principal Interest Requirements 2012 $ 605,000 $ 88,150 $ 693,150 2013 625,000 73,556 698,556 2014 630,000 58,650 688,650 2015 650,000 41,838 691,838 2016 670,000 22,850 692,850 2017 320,000 6,400 326,400 $ 3,500,000 $ 291,444 $ 3,791,444 NOTE 8 - FUND NET ASSETS The Authority provides surface water to the City of La Porte, Texas (the "City") and the Cities of Shoreacres and Morgan's Point in order for these entities to comply with certain requirements imposed by the Harris County Subsidence District. The City retains the rights to approximately 86% of the water capacity of the Authority with the Cities of Shoreacres and Morgan's Point retaining the rights to the remaining 14%. The City, Shoreacres and Morgan's Point have agreed to service the debt on the Authority's contract revenue bonds and to fund operations of the Authority in relation to their capacity rights and to purchase water based on actual consumption. As part of the debt service requirements, the participants are billed to build a reserve for future debt service requirements as set forth in the contract revenue bonds of the Authority. During the year, the Authority's billings were applied as follows: Water Supplied and Operating costs( User fees) $ 1,246,186 Debt Service Billings/ Charges 689,796 Capital recovery billings 101,639 Total Billings $ 1,935,982 NOTE 9 — RISK MANAGEMENT The Authority is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; and natural disasters for which the Authority participates (through an endorsement on the City of La Porte's contract) along with other entities in the Texas Municipal League's Intergovernmental Risk Pool. The pool purchases commercial insurance at group rates for participants in the pool. Neither the Authority nor the City has additional risk or responsibility to the pool, outside of payment of insurance premiums. Neither the Authority nor the City had significantly reduced insurance coverage or had settlements that exceeded coverage amounts for the past three fiscal years. 18