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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 r i- -'• - 5- jj . ! rr r ;• f-- ft. 5'- ^ . Bartle Wells Associal Municip 26.0 Calii March Mr . C . " "City of 2960 Pi<*+ x \J\J JL, JL' Carlsba Dear Cl T7 n/^ T c^ocH!fllCJLUoc creases ance to tive ana Samuel appears least Se Your re and cou He urge bond pr effectiv I shall 1 offer m Sincere BARTL1 /U^ Richard A RMB:njl Enclosi. 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. INITIALS DATE c L 1 N E No. 6 7 a 9 to i i 12 13 14 15 1 6 17 18 19 2O 21 22 23 24 25 26 27 28 29 3O 3 1 32 33 34 35 36 37 38 39 4O 006 'L?Zj_. Or?*,. '/te ..:_J— 430. J j%^: X I Cx Xs \^s r\\ v- ,^j. \ '.-)|~"~.^ri' ^ <•*' ^ -- N >K ^ • ~ ^ •! "i Ox si > ^ i ^ ^ro i CN. *?. X t ; X '-• x-A (• * [£,> _^sl t !<Ss, xs XS 'n; QX. -\ •"S •* S o '"M -M-xv V-_^_ ^_14 'A <o ^ ^-X>^1^,^ ' \ _XS . • .J- ^L..._- ~ri *=>, x^\^«=NJ>» S VS-x \s ^ *0tx. Cs, x, ^> .N Sf S