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<br />Arkansas Valley Conduit <br />November 13-15, 2006 <br /> <br />Agenda Item10a <br /> <br />3. The loan is being made to the Water Activity Enterprise with a pledge of user revenues, as . <br />opposed to the District overall with a pledge of property tax revenue (similar to the USSR <br />Fry-Ark Project Obligation), which would provide stronger security. A 40-year term would <br />therefore result in more risk to the CWCS than a 30-year term. <br />4. CWCS has made a number of loans to Low-Income Municipalities with a 30-year term. If <br />the Soard decides to grant the request for a 40-year term, Staff recommends that the <br />interest rate be increased by 0.25%. <br />It should also be noted that interest on the 40-year loan would be $13.3 million more than for the <br />30-year loan, increasing from $34.8 million to $48.1 million. <br /> <br />Table 1. Financial Summary <br /> <br />Total Proiect Cost $300,000,000 <br />Number of Financial Participant Entities 41 <br />Number of Taps Served 20,100 <br />Population Served 47,200 <br />CWCS Loan Amount (30 years) $60,000,000 <br />CWCS Loan Payment (includes 10% reserve) $3,476,993 <br /> <br />Creditworthiness: The Enterprise has one long-term contract obligation with the USSR covering <br />the District's share of various dam safety repair costs. The original obligation was $1,322,000, and <br />the current balance is $962,000 with an annual payment due of $60,000 through 2021. The <br />Enterprise maintains a reserve account to secure this debt, as opposed to a pledge of revenues. <br /> <br />Table 2 shows the Financial Ratios and indicates overall average ability for the Enterprise to repay . <br />the $60,000,000 CWCS loan, with revenues received from participating entities. Future Year ratios <br />should be considered preliminary, pending completion of the final feasibility study. <br /> <br />Table 2. Financial Ratios <br /> <br />Financial Ratio Without With the project - <br /> the project Future Year <br /> (A ver. 2004-05) <br />Operating Ratio (revenue/expense) <br />weak: less than 100% 156% 287% <br />average: 100% - 120% (strong) (strong) <br />strong: greater than 120% <br /> (969K/644K) (5746K/2000KJ <br />Debt Service Coverage Ratio <br />(revenues-expenses )/debt service 540% 106% <br />weak: less than 100% (strong) (average) <br />average: 100% - 125% <br />strong: greater than 125% (969K-644K/60K) (5746K-2000K/3537K) <br />Cash Reserves to Current Expense <br />weak: less than 50% 87% 10% <br />average: 50% - 100% (average) (weak) <br />strong: greater than 100% <br /> (615K1704K) (650K/5537K) <br />Annual Operating Cost per Acre-Ft. (6,555 AF) <br />weak: greater than $20 N/A $729* <br />average: $10 - $20 <br />strong: less than $10 4777K/6555AF) <br /> <br />. <br /> <br />Page80f12 <br />