1982-01-06 Regular Meeting - Laserfiche WebLink

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• • Minutes, Regular Meeting, La Porte City Council January 6, 1982, Page 14 Askins: On that section of the bill, the Texas Constitution puts a limit of 40 years on contracts by governmental agencies and also the life of bonds. I think it is important to realize this, this entity would strictly have the power to pass revenue bonds, no ad valorem tax power, and in sequence you would have to have your engineering study, develop your customers, cost estimates then contracts with your customers, and the bond purchasers are going to determine the coverage or how much net revenue will the authority have after paying its normal opera- tion for principal and interest. Very similar to the way La Porte Water Bonds are done. You have to have one and a half times coverage. No bond will ever be offered for sale unless there was a signed contract with a purchaser. The major pur- chaser being the City of La Porte. Those contracts would be collateral for the payment of the revenue bonds. The Attorney General is not going to approve the bonds until he approves the contract and approves that there is adequate revenue gener- ated by the contracts from the various entities purchasing to cover operational expenses and to cover the bonds. So you would never have any disastrous financial situation because the law determines the Attorney General is not going to ap- • prove the bonds until he sees through the paper work that the financing is in order, that there is going to be enough income to engineer it, develop it, build it and operate it on a day- to-day basis at a sufficient profit to pay the bonds. The full faith and credit of the City is never pledged in any way, directly nor indirectly to these bonds. The City of La Porte, nor any other customers of the Authority would ever have any direct obligation on these bonds. The obligation would be under the purchase contract to buy the water. It's got to be a long term obligation over a period of years to give you a sufficient. number of years to amoritize that investment. The large capitol investment you are going to have to build these facilities. So all of this would be subject to your final engineering study. We have the preliminary reports that were done June 1976 and submitted to the Subsidence Board, and by the way, these are public record and available to any citizen or the newspaper. The City's Municipal Bond advisors would have to study it and pass on the financial soundness of it because you are talking about several million dollars in bonds. One of the reasons for the creation of the district is the fact that the potential customers of the Authority are entities in addition to the City of La Porte. What you get into in a situa- tion like that is when you go out to negotiate the contract every- one is going to want to know what are the costs, and it has been found. I'll get back to this later; what we have done on this • bill is, it was very closely modeled after the Baytown Water