1985-08-28 Special Called Meeting

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Lastly, general obligation bonds issued for utility purposes were shown as fully funded by the utility fund in the original study. The revised schedules now reflect the current thoughts, consistent with the proposed budget under consideration, which anticipates X348,850 of the G. 0. debt to be funded from tax sources in 1985-86 and a slightly lower amount thereafter. 3) The rate determination factors have been slightly modified to be in agreement with the proposed revenue bond ordinance and to be more informative. Days In Working Capital and the Average Working Capital Reserve are show as before. The working capital level will be decreased significantly due to the early funding of the debt reserve requirement. The target of 60 to 120 days was used to determine the appropriate level. In addition, a Financial Coverage Ratio was used to measure how well the utility fund stands on its on in each year of the planning period. This ratio is related to the changes in working capital and is ideally above 1.0 times. When this ratio is less than 1.0, the working capital level decreases. The reverse is true when the ratio is above 1.0 times. Since the working capital level is projected to decrease by X296,622 this fiscal year and $399,199 next year, it is important to look at the financial plan from the multi-year perspective. Since the working capital balance is projected to decrease to X1,038,556 at the end of 1985-86, X695,820 less than at the end of 1983-84, the next two years become highlighted to show how the trend is to be reversed. In essence, the financial plan provides for the working capital levels to be lowered in 1985-86, to remain constant in 1986-87 and to begin increasing in 1987-88. Since the City has the good fortune to go into a major capital expansion program with significant reserves, rates can be projected to show what it will take to cause them to stabilize at a responsible level. THE BOTTOti LINE SEWER RATES. The sewer rates for 1985-86 have been computed to increase 18.30, the same as shown in the original study. The Financial Coverage Ratio in the original study was approximately 1.0 times. However, the same Ratio is .90 times in the revised schedule, reflecting a decrease in working capital of $208,397. The sewer schedule is submitted herein to show the financial results of the rates at the same level as originally presented. This rate increase level would generate enough revenues to exceed the Legal Debt Coverage Ratio and is possible only because the City is able to absorb the revenue difference in the reserves. The revenues would have to be increased by 32.57 to prevent a decrease in working capital reserves related to sewer. The financial plan further shows that it will take an additional 7.69 rate increase in 1986-87 to stabilize the working capital reserves. There was no increase projected for 1986-87 in the original study. The differences are related to those changes outlined in the first section of this letter.