10/02/2018 (2) - Laserfiche WebLink

Home Browse Search

Revenue Sufficiency A review of whether operating revenues adequately cover operating costs to meet or exceed bond coverage covenants was conducted. Inflation and customer growth were factored into this analysis. The analysis confirms that revenues from existing user rates are adequate for operating and maintenance costs as well as debt service payments. However, the revenues fall short in addressing renewal and replacement and operating capital outlay (OCO) costs. R&R costs include expenses such as repairs to water mains or replacement of lift station pumps. Operating capital outlay items are new fixed assets that are needed for operations but not to facilitate growth. An example of operating capital outlay is replacement of a service truck. For the near future, the unrestricted fund reserves are sufficient to cover these costs but reserves should not be relied upon as a long-term funding source. An alternative suggested by the consultant is to use impact fee reserves to pay for expansion -related portions of debt service, thereby freeing up additional unrestricted operating funds. Long-term funding of R&R and OCO should not be problematic as the remaining Series 2015 Refunding Note will reach maturity in 2022 and the remainder of the Series 2009 bonds will mature in 2024. Once again, this will free up more operating funds and with the debt paid off, the utility will be in even stronger financial shape. Capital Improvement Plan (CIP) The County's CIP includes a five-year Capital Improvements Program under the Capital Improvements Element (CIE) of the plan. On December 5, 2017, the BCC approved the County's five-year CIE for Fiscal Year (FY) 2017-18 through 2021-22. Although Florida Statute no longer requires local CIPS to be financially feasible, the County's CIP is financially feasible. In other words, the County does not have to borrow funds in order to fund its CIP. A comparison of the utility section of the CIE with utility unencumbered reserve funds confirms that IRCDUS has adequate reserves to fund its five year CIP. Credit Worthiness There shall be an appropriate balance between debt service coverage, reserve fund balances, and requirements of primary credit rating agencies. Typically, debt service coverage requirements are at 1.5 times the required funding needed to pay principal and interest on existing debt. Since 1999, IRCDUS has far exceeded the requirement. A snapshot of the most recent five years is reflected on schedule 14 of the County's Comprehensive Annual Financial Report (CAFR) for FY 2016-17. In addition, the 2016 Fitch Ratings review affirmed the County's "AAA" status for its series 2009 Water and Sewer System Revenue Refunding bonds. Below is a table depicting the most recent five years of debt service coverage as depicted in the 2016-17 CAFR. Fiscal Year 2012-13 2013-14 2014-15 2015-162016-17 Debt Coverage 2.60 2.63 2.68 3.34 3.44 Although the four major areas reviewed did not reveal any inequities, glaring revenue shortfalls or credit concerns, certain revenue neutral modifications to the rate structure were suggested in order to simplify the presentation of the utility bill, better reflect customer usage characteristics, and encourage water conservation. Some changes in business practices are suggested as well in order to ensure that prudent levels of unrestricted reserve funds are available to cover emergencies, provide rate stability, and manage CIPS while maintaining credit worthiness. First, to provide for simplification of the bill presentment, it is suggested to roll the utility billing charge and service availability charge into one line, still referred to as the service availability charge. The costs 265 Page 3 of 9