Laserfiche WebLink
<br />. <br /> <br />. <br /> <br />. <br /> <br />...- <br /> <br />.. <br /> <br />The 1994 loan contract is silent on the issue of additional debt or bonds. Because the CWCB <br />perfected its security interest in the Town's water revenues in 1994, any subsequent debt of the <br />Town is junior to the CWCB's lien on those revenues. <br /> <br />While the Town does not need the CWCB's consent to issue additional debt junior to the <br />CWCB's lien, the Town must obtain consent from the CWCB to issue parity debt. Because the <br />1994 loan contract does not specify conditions for obtaining such consent, the Board is not <br />required to give such consent, but may elect to apply its present parity lien test in considering the <br />Town's request. <br /> <br />1998 Bonds <br /> <br />The 1998 Town of Erie's water revenue bonds were issued December 30, 1998 for $16,240,000 <br />at an average coupon rate of 4.98 percent. The proceeds will be used to refund a 1997 issue of <br />water revenue bonds and for water system improvements. The Town placed $1.5 million in an <br />escrow account pending the resolution of the parity question. <br /> <br />If the CWCB consents to parity for the 1998 Bonds, the Town will release the money from the <br />escrow account. If the CWCB denies the parity request, the Town may either pay offthe CWCB <br />loan in full, or leave the escrow account intact and repay the loan per the terms of the loan <br />contract. <br /> <br />The bond insurer requires parity as a condition of insuring the bonds. If the CWCB denies the <br />parity request, this condition also may be fulfilled by the Town maintaining the $1.5 million <br />escrow account. <br /> <br />Financial Analysis <br /> <br />Staffhas prepared a financial analysis of net revenues, debt service coverage, and tap fees as a <br />percent of revenues for the years 1995 to 1998 based upon our interpretation of data given in the <br />Official Statement for the 1998 Bonds. The results of the analysis are shown in attached table for <br />each of the four years, with and without tap fees. Debt service coverage was estimated based on <br />historic debt service numbers from the Official Statement and by using the expected debt service <br />in the year 1999 (1999 Debt Service Coverage) which includes the CWCB loan payment as well <br />as debt service on the 1998 Bonds. <br /> <br />With tap fees included in the calculations, net revenues are positive and debt service coverage is <br />adequate in each year. The last row in the table indicates that tap fees as a percent of total <br />revenues ranged from 64 to 86 percent from 1995 to 1998. <br /> <br />Without tap fees, the last four columns of the table indicate that net revenues are negative in each <br />year except 1997. Debt service coverage is inadequate in each year with both debt service <br />scenarios (historic or 1999). <br /> <br />2 <br />