BOARD00063 ‎(2)‎

• Board Meeting Date: 11/13/2006
• Description: CF Section - Construction Fund and Severance Tax Trust Fund Perpetual Base Account New Loans - Penrose Water District - Water Rights Purchase and Raw Water Pipeline Project
• Board Meetings - Doc Type: Memo

Penrose Water District
November 13-15, 2006

Agenda Item 10c

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The source of Enterprise funding for the CWCB loan payment will come from a combination of .
restructuring existing debt (discussed below in Creditworthiness), directing revenue from the voter-
authorized Special Revenue Fund 3.00 mi.lllevy toward debt service, and an increase in base water
rate revenues accruing to the Enterprise. The Enterprise will payoff the existing DOLA loan and
the existing USDA-RD loan, which will free up $21,689 of annual debt service. Also, a 2003
Revenue Bond Refunding issue will be retired by the District in 2012, freeing up $171,875 for the
CWCB loan. That portion of the base rate revenue that historically covered this obligation will be
re-allocated to the Enterprise. This will leave an additional $203,770 to be covered by the proposed
base water rate increase of $9.25 per tap per month. Interim base rate increases will be used to
pay Interest During Construction (I DC). Potential incremental increases over the existing $18 per
tap base rate are: 2007 - +$3.00; 2008 - +$5.30; 2009 - +$7.50; and 2010 - +$9.25. Loan
payments in 2011 and 2012 will be supplemented by cash on hand until the 2003 Bond is retired. A
summary of sources of future Enterprise funding for the CWCB loan repayment, will be as follows:

Enterprise savings from retirement of DOLA & RD loans
3.00 mill Special Revenue levy applied to debt service
Re-allocated savings from retirement of 2003 Bond
Increase in base water rate of $9.25

$ 21,689
64,000
$171,875
$203,770
$461,334

Table 2 shows the Financial Ratios for the Enterprise and indicates overall average ability to repay
the $8,757,000 CWCB loan, with the increased water rates and existing debt restructuring and
retirement. No tap fee revenue is assumed in the calculations.

Table 2. Financial Ratios

Financial Ratio Without With project
the project Future Years*
(Aver. 2004-05) 2013+
Operating Ratio (revenue/expense) 1325%
weak: less than 100% N/A**
average: 100% - 120% (strong)
strong: greater than 120%
(397K/30K)
Debt Service Coverage Ratio
(revenues-expenses )/debt service 110% 101%
weak: less than 100% (average) (aver.)
average: 100% - 125%
strong: greater than 125% (24K-O /22K) (497K-30/461 K)
Cash Reserves to Current Expense
weak: less than 50% 10% 1 0% ***
average: 50% - 100% (weak) (weak)
strong: greater than 100%
(2K/22K) (50K/491K)
Debt per Tap (1,700 taps) (3,200K/1700) (8,800K/1700)
weak: greater than $5000
average: $2500 - $5000 Enterprise $1 ,777 $5,151
strong: less than $2500 Total $2,397 $5,151
(strong) (weak)
(4,OOOK/1700) (8,800K/1700

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