M&C Review


COUNCIL ACTION:  Approved on 9/26/2017 - Ordinance Nos. 22913-09-2017 & 22914-09-2017

DATE: 9/26/2017 REFERENCE NO.: **G-19110 LOG NAME: 13WATERTRANSFER
CODE: G TYPE: CONSENT PUBLIC HEARING: NO
SUBJECT:  

Authorize Transfers from the Water Operating Fund Totaling $8,000,000.00 to the Water Priority Lien and Water Subordinate Lien Debt Service Funds and Adopt Appropriation Ordinances (ALL COUNCIL DISTRICTS)


RECOMMENDATION:

It is recommended that the City Council:

1.  Authorize the transfer of $6,205,021.99 in available funds from the Water & Sewer Operating Fund to the Water Priority Lien Debt Service Fund to support an initiative to fulfill transfer and fund balance / net position covenants required for debt service as laid out in the bond documents;

2.  Adopt the attached appropriation ordinance increasing the estimated receipts and appropriations in the Water Priority Lien Debt Service Fund in the amount of $6,205,021.99 for the purpose of paying debt service coming due and supporting the initiative to fulfill transfer and fund balance / net position covenants required as laid out in the bond documents;

3.  Authorize the transfer of $1,794,978.01 in available funds from the Water & Sewer Operating Fund to the Water Subordinate Lien Debt Service Fund to support the initiative to fulfill transfer and fund balance / net position covenants required for debt service as laid out in the bond documents; and

4.  Adopt the attached appropriation ordinance increasing the estimated receipts and appropriations in the Water Subordinate Lien Debt Service Fund in the amount of $1,794,978.01 for the purpose of paying debt service coming due and supporting initiative to fulfill transfer and fund balance / net position covenants required as laid out in the bond documents.

 
DISCUSSION:

The purpose of this Mayor and Council Communication (M&C) is to take actions to enhance compliance with bond covenants of the Water and Sewer System Revenue Financing Program.

The Department of Finance, in conjunction with the Water Department, has completed a review of existing debt covenants and requirements associated with the System's current outstanding revenue bond issues.  As a result of this review, it has been determined that the current balances maintained within the Water & Sewer Debt Service Funds (Priority Lien and Subordinate Lien) are below calculated requirements.  The appropriations and transfers outlined within this M&C reallocate funds that are available within Fiscal Year 2017 as a result of positive operating results in the Water Department to the debt service funds to increase the balances within these funds.  This activity is planned on an annual basis until adequate reserves are in place.

The City's current practice includes budgeting funds required to meet the annual debt service obligations for each Fiscal Year, and then transferring that total via a series of equal monthly installments that commences on October 1 and continues through the subsequent and respective debt service payment date.  In effect, the yearly transfer amounts have equaled the total principal and interest payments due for the Fiscal Year.  While this practice has supported the timely payment of principal and interest of all bonds outstanding without missing a debt service payment, it is not in full compliance with the technical requirements of certain bond covenants.

The System's bond documents call for monthly installments of a portion of the subsequent principal and interest payments that are due, with those transfers to occur on an on-going basis from each principal or interest payment date to the next, resulting in a funding schedule that would cross Fiscal Years.  As such, the actions outlined within this M&C are a step toward ensuring the fulfillment of covenants moving forward.

This M&C does not request approval of a contract with a business entity.

 
FISCAL INFORMATION/CERTIFICATION:

The Director of Finance certifies that funds are available in the Water Operating Fund, as appropriated, to support the above recommendations and the transfers to the Water & Sewer Priority Lien Debt Service Fund and the Water & Sewer Subordinate Lien Debt Service Fund.

TO
    Fund Department
ID
Account Project
ID
Program Activity Budget
Year
Reference #
(Chartfield 2)
Amount
2) 56009 0132000 4956001           $6,205,021.99
4) 56010 0132000 4956001           $1,794,978.01

FROM
    Fund Department
ID
Account Project
ID
Program Activity Budget
Year
Reference #
(Chartfield 2)
Amount
1) 56001 0608001 5939802           $6,205,021.99
3) 56001 0608001 5939802           $1,794,978.01

Submitted for City Manager's Office by:
Susan Alanis (8180)
Originating Department Head:
Aaron Bovos (8517)
Additional Information Contact:
Alex Laufer (2268)

 
 
ATTACHMENTS
  Priority Lien Fund AO.docx
  Subordinate Lien Fund AO.docx