HomeMy WebLinkAbout1970-04-01; City Council; 117; Sale of Water Bondsfl,c
THE CITY O F CARLSBAD,CALIFORNIA
Agenda Bill Wo. // *7
-Referred To: City Council
Date: April 1, 1970
Subject:•?•.
Sale of Water Bonds
Submitted By:
City Manager
Statement of the Matter
Some action must be taken in the very near future to expedite the
sale of bonds for water system improvement.
ExAifcit
(a) Report of March 24 from the Water Committee.
(b) Bartle-Wells report of March 14, 1968.
(c) Estimated results of 1969-70 operations.
(d) Projected cash balances 1969-70 to 1972-73.
Staff Recommendations (Water Committee)
The Water Committee met on March 24, 1970 and a motion was made and
unanimously recommended that the City Council proceed with the sale
of bonds for the Water Improvement System in the minimum amount of
$1,000,000 and that the Council authorize the necessary professional
services to commence immediately. It is estimated by the Water Com-
mittee that in the future years the Water Department will have an esti-
mated net income of $90,000. This income is further predicated on the
release of certain monies now in the banks that are in excess of the
needs to service the two existing bond issues.
We offer for your further consideration the attached exhibits and sug-
gestions in order to sell the full $1,800,000 worth of bonds.
AB No.117 Date: April 1, 1970
City Manager's Recommendation
Recommend action be taken as suggested in Water Committee report of
March 24.
Council Action
4-7-70 Approval was given the sale of $1,000,000 Water Revenue Bonds, and
authorization given for the employment of the necessary professional
services.
Agenda. Bill #117 was approved in accordance with the recommendation
of the Water Committee.
-2-
fi ^ ..-v^.. 11 n
March 24, 1970
TO: City Manager
FROM: Finance Director
SUBJECT: Report to Council from Water Committee
The Water Committee met on March 24, 1970 and on motion of
Chairman 'Bob1 Watson recommended that the City Council proceed
with the sale of Bonds for the Water Improvement System in the
minimum amount of one million dollars and that the Council
authorize the necessary professional services to commence
immediately. They further and separately recommended that the
City Council place on the June Primary Election Ballot a pro-
position in which the interest rate be increased from 6 to
7% on the Water Improvement Revenue Bonds passed on November
5, 1968.
Attached are copies of projected income for a three year
period with anticipated servicing of $1,800,000 Bonds. Copies
of Bartle Wells report of March 16, 1968; updated by City
staff as of February 28, 1970.
Mr. Esterline requested summary of costs concerned with the
financing of the Bonds at 6% and 7%. This information is in-
cluded in the attached sheets. He also requested that the
Water Committee list alternative suggestions as to the funding
of the bonds .
Suggested:
1 . Increase Water Rates
2. Ad Valorem Tax
3. Sale of Lake Calavera
The engineering costs on the current contract with Engineering
Science will be approximately $140,000. the complete study is
timely and delays would result in additional costs to the Water
Department.
Project Cost Estimate
R/W
Const . 1
Cont .
Engr.
Other
Costs
Total
150,000
,853,400
100,600
140,000
246,000
City's
Share
75,000
926,700
50,300
140,000
246,000
HUD
Participation
75,000
926,700
50,300
1.
2 .
3.
4.
2,490,000 1,438,000 1,052,000
Water Revenue Bonds
Date of Voter Approval - 11/5/68
Amount - $1 ,800,000
Interest Rate - 6%
Cost of Engineering & Financial Studies
Date
6/61
5/66
2/67
to date
Anti ci pated
Company
Boyle Engr.
Kubota-Lill
Bartle-WelIs
Engr.-Science
Engr.-Science
Cost
3,500
12,510
3,500
115,735
25,000
$ 160,245
Cost of Servicing Bonds @ 6% and 7!
Amount
$1 ,800,000
1 ,000,000
"1*800,000
1 ,000,000
Rate
6
6
7
7
Years
29
29
29
29
Annual Rate
$ 132,444
73,580
144,841
79,580
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BARTL1
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Richard
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Richard
Edwin ^
Municipal Financing Consultants
26.0 California Street, San Francisco 94111 415 YU 1-5751
Mr. C. E . Martin, City Manager
Enclosed is a brief report on financing capacity and required rate in-
creases for the municipal water system. It is intended to furnish guid-
ance to you and to the City Council, but do not consider it a final, defini-
Samuel Wetnstein of HUD advises me that yours is an eligible project and
appears very likely to get a grant. Approval cannot be given until at'
least September because of the limited funds available for these grants .
Your receiving a grant then depends on the 1968/69 federal appropriation
and could be delayed if new applicants with higher priority were to appear,
He urges you to go ahead with the bond election but to make sure that the
bond proposition is very broadly stated so that a grant can be utilized
I shall be happy to go into more detail in these analyses if you wish or
offer more explanatory comments. Let me know what you wish to do.
BARTLE WELLS ASSOCIATES
MEMORANDUM
FROM Richard M. Bartle
DATE March 14, 1968
SUBJECT Revised Estimates of Revenue Bond Financing Capacity and Water Revenue
Requirements
City of Carlsbad
Our report entitled, "Financing of Water System Improyerneiats, " was submitted to the
City of Carlsbad February 27, 1967. This report analyzed tfee city's ability to issue ad-
ditional water revenue bonds to finance recommended improvements to the municipal
water system. It presented estimates of the increases in water rates which would be
necessary in order to finance successfully the recommended first-stage project and the
entire project programmed for implementation through 1975.
This memorandum report brings up to date some of the findings and conclusions of the
February 27, 1967 report. The following additional factors axe considered:
1. The city has recorded approximately one full year of additional operating experi-
ence. Audited figures for 1966/67 water system operations are available, and data are
available for more than half of the 1967/68 fiscal year.
2. All water rates were increased by 10 per cent, effective July 18, 1967.
3. The transfer of the North Carlsbad system was completed., affecting 215 meters.
4. New cost estimates have been made for certain project features, and the city has ap-
plied for a water facilities grant from the Department of Housing and Urban Development.
The city's project is reported as qualifying under the HUD requirements, but final grant
approval cannot be expected prior to about September 1968.
Revenue bonds are still considered the preferred financing method for the recommended
improvements. While the February 27, 1967 report presented detail on general obliga-
tion bond financing, these analyses are not updated here. Similarly, the 1967 report in-
cluded analyses and recommendations relative to the form of any water rate increase, and
this material is not included here.
Table 1 shows the recorded revenues and expenditures for 1955/66 and 1966/67, and
Table 2 presents our estimates of gross and net revenues for 1967/68. Table 2 reflects
the 10 per cent rate increase, allows for 110 meters to be addled during the year, and de-
ducts NortK Carlsbad revenues for 10 months of the year. Expenditures are based on
extrapolation of seven months' experience. The resulting year's total is about 10 per
cent below the current budget estimate. .
Table 3 shows the probable bonding capacity of the water system based on estimated
1967/68 net revenues. The city is shown as able to sell between $700,000 and $750, 000
MEMORANDUM
FROM Richard M. Bartle
DATE March 14, 1968
SUBJECT Bond Reserve Fund
Waterworks Revenue Bonds
City of Carlsbad
Two series of revenue bonds have been issued by the City of Carls bad. _.. These _rankj3n
a parity, with the 1960 bonds having been issued pursuant to the limitations of Covenant
11 of Resolution No. 397, which governed issuance of the 1958 bonds.
A reserve fund is required by Section 17 of each bond resolution. This section pro-
vides "there shall be maintained in said Reserve Fund a sura equal to said maximum a-
mount of annual debt service." "Maximum amount of annual debt service" is defined
as "the maximum amount required to be paid in any fiscal year on account of interest
and principal coming due on said bonds."
The reserve fund requirement appears clearly to apply to combined debt service onboth
outstanding series of bonds . It is not the sum of individual maximums but is the amount
payable in any one year to meet requirements of both series.
My computations show that the maximum year of debt service is the 1981/82 fiscal year
and that annual interest and principal payments in that year total(|70, 600/751 The city's
audit report for the fiscal year ending June 30, 1967 shows a total of $119, 876 in the
reserve funds for two issues of revenue bonds. A total of $115, 000 is in time deposits.
I believe, therefore, that the reserve fund balances as of June 30, 1967 exceeded re-
quirements by $49,275.25. This should be checked out carefully with your auditors and _ -
with your bond counsel. ' 'ft ti
-TABLE 1
REVENUES AND EXPENDITURES
CARLSBAD MUNICIPAL WATER SYSTEM
1965/66 1966/67
REVENUES
Water sales
Other operating revenue
Interest earnings
EXPENDITURES21*
Production, purification
n-i • • j • . .-t ,.1 ransmission, distribution
General, administrative
.
NET REVENUES
$361, 244
7,944
17, 753
$386, 941
$146, 844
rf f.c.150, OD/ •
46,312
$249, 813
-•
$137, 128
$374, 757
10, 150
22, 706
$407, 613
$160,571
Q1 AQAyi, 4bo
59,010
$311,067
47,098
$263, 969
$143, 644
a) Excluding depreciation.
Note: Refer to page 3 of February 27, 1967 report.
TABLE 2
ESTIMATED RESULTS OF
1967/68 OPERATIONS
Gross water sales revenues
1966/67 $374,757
110 added @ $100 11,000
10% rate increase 38, 576
less 10 mo. North Carlsbad -24, 569 $399,764
Other operating revenue and inter-
est earnings (same as 1966/67) 32, 856
Gross revenues $432,620
Expenditures
7 months 1967/68 $176,713
7 months 1966/67 174,667
12 months 1966/67 263, 969
Assume 12 months 1967/68 $270, 000
(budget allows $297,573).
Net revenues $162, 620
TABLE 3
PROBABLE BONDING CAPACITY
BASED ON 1967/68 OPERATIONS
Net revenues $162, 620
Bond service supportable (1.35 coverage) $120,459
Maximum debt service, outstanding bonds 70,601
Available for new bonds $ j49, 858
Principal amount based on 29-year — --
amortization at 5 per cent . $754, 800
*Principal amount at 5-1/2 per cent: $714, 600
TABLE 4
ESTIMATED PROJECT COST
1968 REVISION
Present project cost $2,490,000
Federal grant requested 1,052, OOP
$1,438,000
Incidental expenses 72,000
Bond reserve fund " 115,000
Miscellaneous projects and
allowance for inflation 75, OOP
$1, 700, 000
TABLE 5
Revision of March 13, 1968
MINIMUM REQUIRED REVENUES TO SUPPORT
$1, 700, 000 REVENUE BOND ISSUE
Principal amount of revenue bonds $1,700, OOP
Average annual interest and principal
(29 years, 5%) $112,200
Combined bond service:
1958 and 1960±»onds (maximum) ~—$ 70, 601
$1, 700, 000 new bonds (average) 112, 200
Total - $ 182,801
Net revenues for 1.35 coverage $ 246,781
Two-year average net revenues
(1966/67 and 1967/68*) 153, 250
New revenues needed $ 95,531
Gross water sales revenues
(1967/68*) $ 399,764
Percentage increase indicated 23.4%
Net revenues for 1.35 coverage $ 246,781
1967/68 net revenues* 162, 620
Added net revenues required
under 75% rule $ 84,161
Estimated net revenue increase ($84, 161 -t- .75) $ 112, 215
Percentage increase indicated 28.1%
*Estimates for 1967/68 are based
on actual data for first seven months.
Adjustment made for North Carlsbad
transfer.
Note: Refer to page 13 of February 27, 1967 report.
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