Minutes 07/25/1978 - Laserfiche WebLink

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"-) TUESDAY JULY 25, 1978 Mr. Greene's Statement: 1. The City Needs the Project. According to Mr. Brown, the City's water system is NOT adequate to meet the documented expansion plans of industry. 2. The City Needs the Money. In the past six years, including this year's budget, the profit of the City Water and Sewer Funds has declined 74.4%. The combined revenues of both funds have increased 53.2% and expenses have increased 133.8%. In dollars, the combined profit of both funds, before debt service, which was consistently over $300,000 from fiscal 71 through fiscal 76, is budgeted at only $81.000 this year. This year's debt service payment will be $73,000, and the projected profit after debt service is only $8,000. Fortunately, there is no outstanding Water Fund Debt Service and Sewer Fund Debt Service will terminate in three more years; however, as I see it, costs are escalating so much faster than revenues that the two Funds will be shortly operating at either a break-even or deficit situation. In view of this, it seems to me that under current situations, an increase in City Water rates may have to be considered by the City in future years to keep the system in the black, and that a substantial increase in Water rates will be necessary if the City undertakes a major capital expenditure. Mr. Brown's research indicates that the City needs to spend $3,240,000 in order to provide the water necessary to meet anticipated industrial, residential and commercial water needs of the City. I asked R. Stephens Pannill, Assistant Vice President. Investments, First National Bank, what the debt payments to finance such a project would cost the City. The City currently has $424,259 of past year's profits encumbered for various capital improvements, so Mr. Pannill assumed a bond issue of $3,000,000 with the City paying $240,000 out of encumbered funds. To be conservative, Mr. Pannill assumed a general obligation scale which is the lowest cost interest type of financing with 25-year Seriel Bonds issued on 9-1-78. at an average net interest charge of 5.79%. He cautions that there are a multitude of ways to structure debt service payments to meet the needs of the City, but he felt that this example would give a good ballpark figure of the City's yearly debt service requirements. Mr. Pannill's figures show that the City's interest and principle payments over 25 years would total $5,757,968, an average of $230.319 per year, which totals 36.9% of current budgeted Water Fund revenues.