Agenda - Council - 06/12/1984 - Laserfiche WebLink

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To fund these expenditures, the I~CC is proposing that six bond issues be sold, the first in September 1984 tn the amount of $22 million. In 1981 and 1982, the Council°s two sewer bond issues were $32.2 millfon and $36.6 million. Because of the large size of these issues, the potential bidders merged into t~o syndicates to bid on each issue, thus reducing the competition tn the bidding process. Therefore, in an effort to improve the competitive bidding rocess, the I~CC is recommending smaller bond sales at more frequent ntervals. This wi]l increase administrative costs but should reduce interest rates to an even greater extent. Succeeding bond issues are proposed for 1985 (two issues at $15.9 million each), one in 1986 for the same amount, and one each in 1987 in the face amount of $18.3 million for a total new debt of $106.3 million. Approximately 82 percent ($87 million) would be available for improvement costs. The balance would be used for capitalized interest and for costs associated with the sale of each issue. In recommending the proposed debt programs, the MWCC has included several assumptions. The first is that the debt will be repaid over a period of 20 years, and that interest cost and investment income will each be at a rate of nine percent. These bond issues will include capitalized interest, the interest costs of the first 12 to 24 months of each bond issue, until the interest can be added into the cost allocation structure. The balloon payments on the current debt expire in approximately 1990. Succeeding bond issues are intended to be designed without the use of capitalized interest. The debt retirement schedules would be of equal annual amounts, or would wrap around the existing debt so that the total payments would tend to be equal. Actual decisions on the alternatives of the bond issues should not be made until each specific issue is designed. The MWCC has estimated that the operating and debt service budgets for the years 1984 to 1988 will increase an average of 7.2 percent per year. This includes inflation factors of six to eight percent annually, and the operation and maintenance costs of the new improvements after they become operational. Including an annual increase in sewage flow of one percent, the costs in the total system are estimated by the MWCC to be allocated as follows (based on per household contributions of 100,000 gallons per year): 1984 1988 Average Annual Increase (Percent) Treatment costs only Treatment and service area costs: Service Area #1 76.53 Service Area #2 81.63 Service Area #3 94.97 Service Area #4 93.37 Service Area #5 79.82 Service Area #6 75.40 $67.65 $85.10 5.9% 95.64 5.7 108.88 7.5 I22.92 6.7 111.67 5.8 98.09 5.3 94.48 .5.8 One effect of some of the new improvements will be to add additional capacity to the interceptor systems. Therefore, a larger proportion of the debt service costs will be assigned to future costs of operation. This means that the need for service availability charge (SAC) funding will be greater than currently is