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<br />" <br /> <br />. <br /> <br />. <br /> <br />"Staff has reviewed financial data for the Town's Utility Fund for the years 1994 to 1996 <br />and finds that operating revenues and operating expenses are essentially in balance in <br />each of those years. Debt service coverage is adequate due to the transfer of county sales <br />tax revenues to the Utility Fund. The sales tax transfer has also resulted in a cash reserve <br />of about $1.4 million in the Utility Fund. Existing long-term debt includes a general <br />obligation bond issue to be retired in 2000 and a Construction Fund loan with a balance <br />of $283,500. The Town is current on both obligations." <br /> <br />The following updated analysis is based on information for the Town's Utility Fund (which <br />includes both water and sewer) as presented in the audit reports for 1997 and 1998: <br /> <br />Item 1997 1998 <br />Total Revenue (1) $1,180,280 $1,387,267 <br />Operating Ratio (2) 1.40 1.36 <br />Existing Debt Service Coverage (3) 1.07 1.40 <br />Future Debt Service Coverage (3) 0.98 1.27 <br />Debt per Tap $1,574 $1,570 <br />Cash Reserves $1,477,608 $2,180,130 <br />Reserves to Current Expense 2.91 3.78 <br /> <br />(1) Operating revenue + county sales tax + interest income <br />(2) Operating revenue/operating expense <br />(3) (Total revenue - operating expense - depreciation)/total debt service <br /> <br />The preceding table utilizes the ratios adopted by the Board in September 1999 for analysis of <br />creditworthiness. The Operating Ratio for both years is in the strong category. Existing Debt <br />Service Coverage is also good in both years. Future Debt Service Coverage (with repayment ofa <br />$922,000 loan at 4.0 percent for 30 years) is a little weak in 1997 but in the strong category in <br />1998. Debt per Tap and Cash Reserves to Current Expense are both in the strong category in <br />both years. <br /> <br />Conclusion <br /> <br />In summary, the Town's Utility Fund appears to be in very good condition based on the <br />information in the audit reports. As mentioned in the November 1997 memo to the Board, this is <br />due in great part to an annual sales tax transfer to the Utility Fund, which has necessitated an <br />Amendment One election. From a purely financial standpoint, however, I do not believe there is <br />any reason to require more than a pledge of revenues backed by a rate covenant and annual <br />financial reporting for this loan. <br /> <br />Cc: Peter Evans <br />Mike Serlet <br />Jan Illian <br />Linda Bassi, AGO <br /> <br />~ / ~~ h ///lL /;dJ S~~ <br />/1# WI/' r17' tj-;t0.yo ,,6d ~ <br />~A"~/V NAS' ~ @Y~ ~ <br />-I/~ /'.7/ /~~// 4~7 <br />'75 d/~ <br /> <br />2 <br />