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$35,000.
<br />-Residential sewer tap fees are $8,500 per connection. Commercial and industrial sewer tap fees are also
<br />$8,500.
<br />-According to the Town, the decrease in water tap fee revenue in 2001 was because no significant areas were • -
<br />in the final stages of development during that time period. In 2002, the Town increased water tap fee rates to
<br />$17,500 from $7,500. In addition, the Town's board increased the amount of water taps available to
<br />developers from twenty per year to ten taps per month, or 120 per year.
<br />Property Tax: The Town does not support the water enterprise with property tax revenue. The Town does not plan to
<br />pledge property tax revenue for repayment of the proposed loan.
<br />-The total assessed value of the Town has increased 91% since 1997 from $9,563,700 to $18,295,324 for
<br />2003. This represents an average annual increase of 11.42 %.
<br />FINANCIAL ANALYSIS: Of the twenty current indicators calculated, eight are in the "strong" category, six are in the
<br />"average" category, and six are in the "weak" category. Total debt plus projected debt on a per capita and per tap basis,
<br />current water debt plus projected debt on a per tap basis, and coverage ratios with the new loan calculated both with and
<br />without the tap fee revenue all indicate weak positions. The water operating ratio and reserves to expense ratio indicate
<br />average positions. Current debt on a per capita and per tap basis and current water debt plus projected debt compared to
<br />assessed value indicate average positions.
<br />-According to the Town's cash flow projection, monthly water rates are expected to increase significantly
<br />during the term of the loan. Rates are projected to increase 33% from $42.78 in 2003 to $56.98 in 2004, and
<br />to almost double to $80.80 by 2009.
<br />-Using the Town's projection of ten new taps per year, the Town's coverage ratio remains strong for the life
<br />of the loan. When tap fee revenue is included in the calculation, a coverage ratio of 129% is projected for
<br />2003, and a range of between 112% and 165% is projected for 2004 through 2023. When tap fee revenue is
<br />not included, the coverage ratio drops to a weak rating of 32.32% in 2003, and continues to be weak for the
<br />life of the loan, ranging from 62.75% to 92.93% from 2004 to 2023. The Town has indicated that their
<br />estimate of ten new taps per year is conservative, and they are willing to increase rates if this projection is not
<br />met. •
<br />-Although the total number of new taps in 2001 was only six, previous years show a total of 33 in 1998, 22 in
<br />1999 and 16 in 2000, which is above the Town's forecast of ten new taps per year for the term of the loan.
<br />The Town also increased the water tap fee from $7,500 in 2001 to $17,500 in 2002 in anticipation of paying
<br />for improvements to the water treatment plant.
<br />Debt: At the end of 2001, the Town's outstanding debt totaled $1,866,989 with $682,826 of that being water debt.
<br />According to the Town's 2001 audit, total debt service is scheduled to be between $182,757 and $229,648 from 2002 to
<br />2006. As of December 31, 2001 total outstanding debt consisted of:
<br />•A DWRF loan payable from the water fund with an outstanding balance of $422,932, an interest rate of
<br />4.5 %, and annual payments of $38,048 through 2017.
<br />•A CWCB loan payable from the water fund with an outstanding balance of $197,393, an interest rate of 5 %,
<br />and annual payments of $18,213 through 2017.
<br />•A WPCRF loan payable from the sewer fund with an outstanding balance of $423,778, an interest rate of
<br />4.5 %, and annual payments of $38,124 through 2017.
<br />-Revenue bonds with an outstanding balance of $125,000, an average interest rate of 4.04 %, and annual
<br />payments through 2005 ranging from $30,095 in 2002, $29,120 in 2003, $33,120 in 2004, and $46,890 in
<br />2005. The revenue bonds are payable from both the water and sewer fund with each fund responsible for .
<br />equal amounts of the principal balance.
<br />•A lease purchase agreement with Wells Fargo Brokerage Services payable from the property fund with an
<br />outstanding balance of $697,885, an interest rate of 9 %, and final payment due in 2015.
<br />Monthly User Charges: The proposed DWRF loan is estimated to represent a $25.40 per tap monthly rate increase for
<br />the Town's customers.
<br />-To make up for the expected tap fee revenue from ten new taps annually in a "no growth" scenario, the
<br />Town's monthly user rates would need to increase to $62.65 in 2003, $76.58 in 2004, and over $100 by 2009
<br />to maintain a strong coverage ratio. •
<br />-Using an estimate of ten taps per year as shown in the cash flow projection, the Town's monthly user rates
<br />would need to increase to $42.78 in 2003, $56.98 in 2004, and $80.80 by 2009 to maintain a strong coverage
<br />ratio.
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