C153719 Misc Corespondances - Laserfiche WebLink

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Table 2 gives the annual operating revenues (total revenues less tap fees) and annual operating expenses as derived from the PRC compendium, and the total annual debt service for the sum of (1) a CWCB loan of $2,542,500, (2) the Water & Power loan, and (3) the existing general obligation refunding bonds all under two scenarios and in two different periods of time as taken from the PRC compendium. Those numbers are then used to calculate three important financial indicators: the debt service coverage ratio, the debt per capita, and the debt per tap. The same type of analysis was done for a CWCB loan of$I,721,250 as shown in Table 3. In each case, the debt service ratio is less than 1.2 and, in fact, during the first few years of loan repayment the ratio is less than 1.0 indicating insufficient revenues are available to cover debt service (a ratio of 1.2 or greater is considered desirable). For the $1,721,250 .CWCB loan, the debt service ratio approaches 1.0 beginning in year 5. Desirable levels of debt per capita and debt per tap would be less than $2,000 and less than $5,000, respectively. As shown in Table 2, the ratios for the $2,542,500 are unacceptably high. For the $1,721,250 loan shown in Table 3, the ratios fall into the acceptable category. Conclusions The preceding analysis along with the financial projections in the compendium indicate reasons for concern with repwent of the CWCB loan. Projected shortfalls in each and every year during the first~ to ten years of the repayment period should be alleviated in some way other than the use of reserve funds. A $2,542,500 CWCB financing would clearly not be financially feasible at this time without a substantial rate increase. For the $1,721,250 financing to be feasible debt service ratios should be at least somewhat closer to 1.20 than the numbers in Table 3 and the annual operating deficits as projected in the compendium should be eliminated.