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A <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 /> 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 /> 1998 Bonds <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 /> 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 off the CWCB <br /> loan in full, or leave the escrow account intact and repay the loan per the terms of the loan <br /> contract. <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 /> Financial Analysis <br /> Staff has 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 /> 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 /> 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 />