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<br />.. <br /> <br />. Discussion <br /> <br />The analyses in the attached table clearly indicate that debt service coverage ratios without tap <br />fees under historic financial conditions and with the increase in debt service to begin this year do <br />not meet the Board's existing parity lien test. The "Without Tap Fees" ratios for the 1999 level of <br />debt are, in fact, an order of magnitude from what might generally be considered as acceptable. <br /> <br />The numbers for the tap fees as a percent of total revenues is also a matter of concern. While <br />there are no hard and fast rules about an allowable percentage of tap fees to revenues, these <br />numbers are very high. <br /> <br />Staff does not recommend applying the parity lien test in an inflexible manner simply to <br />disqualify new debt from parity status. Nevertheless, this situation goes well beyond most tests <br />that are applied. While recognizing that many smaller communities may need to borrow to meet <br />the demands of growth and development, recognition also needs to be given to the degree of risk <br />inherent in this type of situation should development fail to take place. <br /> <br />Recommendation <br /> <br />. <br /> <br />Staff recommends that the Board postpone the question of parity status for the Town of Erie's <br />Water Enterprise Revenue Refunding and Improvement Bonds, Series 1998 until such time as <br />the Town can demonstrate that it is capable of meeting the Board's parity lien test as defined in <br />the attachment to this memo. <br /> <br />Attachments <br /> <br />Cc: Dave Stahl, Town of Erie <br />Linda Bassi, AGO <br /> <br />. <br /> <br />3 <br />