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 6 - SOUTHEAST WATER PURIFICATION PLANT The Authority and the City of Houston, Texas have entered into a Cost Sharing Water Project Contract (the "Contract") wherein the Authority, the Cities of La Porte, Morgan's Point and Shoreacres agree to jointly finance the construction and operation of the Southeast Water Purification Plant (Southeast Plant). Under the terms of the Contract, the Authority purchased 4.2 million gallons per day production and 5.25 million gallons per day pumping capacity. The Cities of LaPorte, Morgan's Point and Shoreacres have agreed to demand and pumping allocations of the Authority's purchase of water from the Southeast Plant. The required funds for the undivided interest in the Southeast Plant and the construction of a transmission and distribution system to transport water from the Southeast Plant were provided by issuance of $9.8 million revenue bonds. The water rate to be set by the Authority will not be less than an amount sufficient to provide for payment of all expenses in producing, treating and pu nping the water in connection with transmission and distribution systems and to provide payment for the interest and principal of all bonds when the bonds become due and payable. NOTE 7 - CONTRACT REVENUE BONDS PAYABLE, DEBT SERVICE REQUIREMENTS AND BOND RESOLUTION REQUIREMENTS On May 13, 2010, the La Porte Area Water Authority issued $4.085 million in Contract Revenue Refunding Bonds, Series 2010, with an average interest rate of 2.773% to purchase U.S. Government State and Local Government Series securities that were place in an irrevocable trust for the purpose of generating resources for all future debt service payments of $4.085 million of unlimited tax bonds. As a result, the refunded bonds are considered to be defeased and the liability has been removed from the statement of net assets. The bonds are payable from the net revenue of the Authority. The bonds are in $5,000 denominations. Interest is payable on March 15 and September 15 of each year to maturity. The Authority is in compliance with all significant requirements and restrictions contained in the bond resolution. Bonds payable at September 30, 2011 are comprised of the following issue. Interest Amount Interest Maturity Payment Outstanding Rate Date Date $ 3,500,000 2.25-4.00% March 15, 2017 March 151 September 15 Bonds payable activity for the year ended September 30, 2011 was as follows: Amounts Beginning Retirements & Ending Due Within Bonds and Notes Payable Balance Additions Adjustments Balance One Year Contract Revenue Refunding Premium on bonds Deferred amount on refunding $ 4,085,000 $ 111,846 13,212 $ 4,210,058 $ 17 $ (585,000) $ 3,500,000 $ 605,000 (17,312) 94,534 17,312 (2,044) 11,168 2,044 $ (604,356) $ 3,605,702 $ 624,356