02-14-11 Regular Meeting of Fiscal Affairs Committee

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CITY OF LA PORTE, TEXAS Notes to the Financial Statements September 30, 2010 5. Long Term Liabilities - Continued Revenue Bonds - Water and Sewer Revenue Bonds constitute special obligations of the City solely secured by a lien on and pledge of the net revenues of the water and sewer system. The Revenue Bonds are collateralized by the revenue of the water and sewer system and the various special funds established by the bond ordinances. The ordinances provide that the revenue of the system is to be used first to pay operating and maintenance expenses of the system and second to establish and maintain the Revenue Bond funds. Remaining revenues may then be used for any lawful purpose. The ordinances also contain provisions, which, among other items, restrict the issuance of additional Revenue Bonds unless the special funds noted above contain the required amounts and certain financial ratios are met. The City is in compliance with all significant financial requirements as of September 30, 2010. Below is a reconciliation of the various restricted cash and cash investments: Customer Deposits Payable $ 503,260 Debt Service 684,768 Total Restricted Cash and Cash Investments as of September 30, 2010 $ 1,188,028 In May 2010, the City refunded $4.375 million in general obligation and certificates of obligation debt and issued $4.295 million in certificates of obligation. The net carrying amount of the old debt and the reacquisition price were approximately the same amount. The transaction resulted in an economic gain of $345,083. 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 %. The refunded bonds were considered to be defeased. The net carrying amount of the old debt exceeded the price requisition by $13,212. This amount is being netted against the new debt and amortized over the remaining life of the refunded debt, which is shorter to the life of the new debt issued. The authority completed the current refunding to reduce its debt service payments over the next 7 years by $314,685 and to obtain an economic gain (difference between the present values of the old and new debt service payments) of $295,735. The bonds are payable from the net revenue of the Authority. The bonds are in $5,000 denominations. Interest on all bonds is payable on March 15 and September 15 of each year until maturity. The Authority is in compliance with all significant requirements and restrictions contained in the bond resolution. Also on May 13, 2010, the city issued new certificates of obligation totaling $6.265 million to provide funds for street, drainage and park improvements. These certificates have interest rates ranging from 3% to 4% and are payable in annual payments through March 15, 2026. 62