1997-10-20 Special Called Regular and Workshop Meeting of City Council

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e e u~ La Porte Area Water Authority Interoffice Memorandum To~ From: LPAWA Board Members Robert T. Herrera, General Manager Steve Gillett, Director of Public Works &eft Litchfield, Director of Finance August 20, 1997 Date: Subject: Hypothetical Funds Available for Purchase of Additional Capacity With the recent news of the opportunity to obtain additional capacity for the La porte Area Water Authority and its customers, I have taken the liberty to prepare a work sheet that shows funds that will more than likely be available resources. The work sheet that is attached shows that $2,013,516 will be available at 9/30/01, (four years from now). Assumptions in the work sheet are: left Over Distribution Funds - These are funds left over from the bonds that were sold in 1988. They can be used for improvements to the system, including the purchase of additional capacity. Contingency Fund - These funds represents amounts that have to be reserved under the current bond ordinance. This type of contingency is special to the Water Authority Bonds and I fully expect them to be freed up with the refunding in 1998. Billing for Capital Reserve - This is the Capital Reserve Fee already approved by the Board and for which we began billing the three cities this year. Debt Service Difference - This amount represents a savings that will be proposed next year. In the past, we have billed the Cities the exact amount of the Debt Service each year. Interest that has been earned on the billed funds have accumulated in the Debt Service Fund to give us a working capital balance. At this point, the working capital plus monthly billings is sufficient to cover the first debt payment, which occurs in November each year. It will be staffs recommendation that the billing to the Cities be lowered by $25,000 per year. I suggest we approach the entities and allow this $25,000 to continue to be billed and be accumulated in the reserve fund. Our purpose for this logic is that it is easier on the customers to have a constant cost for the service, Le. not have large increases and decreases in fixed costs from year to year. Interest Income will be earned on these funds and would be available for use. Interest is based on a yield of 5.75%. Current yields are 5.90%.