Utility board reviews utility fund debt

From Weatherford Democrat, By TYLER MASK, July 9, 2014 –

Chandor Gardens

Weatherford’s Chandor Gardens

As a part of an ongoing discussion, the Weatherford Municipal Utilities Board Tuesday afternoon convened in a special board session to hear a presentation from City of Weatherford Finance Director David Croft regarding the utility fund debt review as of June 2014, and to learn more about the cost of service and rate design study from NewGen Strategies and Solutions.

Utility fund debt review

At the beginning of his presentation, Croft reminded the board that the current debt structure was not “kicking the can down the road.” When the city refunded 2005 and 2008 bonds, which were the most recent refunded bonds, the city successfully attained lower interest rates while keeping the existing amortization levels in place.

“Had we gone out and reissued a new 20-year or 30-year amortization for the refunding bond, yes that would be kicking the can down the road, but we did not do that,” Croft said.

The 2005 and 2008 bonds will be paid off in 2018, and the 2006 bond, which was a brand new issue, will continue until 2026.

In 2018, when the 2005 and 2008 bonds are paid off, if interest rates remain the same as they are now, it would open up approximately $20 million in debt service capacity that could be reissued. In 2026, the city will be opened to tacking on an additional $11 million in debt service capacity.

The board, doubting that rates will remain stagnant, asked Croft what would happen if the rates doubled by the time the city could take on new debt.

The answer was that they’d be able to take on approximately half of what is currently projected, Croft said.

The council proceeded to ask if paying for rate protection was a possibility and what it would cost to secure this type of insurance. Croft said it can be done, but did not have the details on hand.

Cost of service and rate design study

New Gen Strategies and Solutions’ Chris Ekrut took the board through some information previously revealed to them, but expounded on some viable directions for increasing the cost of water and wastewater utilities over a three or five year period. Although mentioned in meetings prior, electric rates have fallen off the agenda, as they should not be going up at this point, Ekrut said.

The rate making process consists of three steps, Ekrut said, including:

1. Financial forecast (determining what revenue is needed).

2. Discovering who the revenue comes from.

3. Rate design (discovering how the revenue is received).

The city is currently on step one.

The current study for the future water and wastewater utility projects is looking at three and five year funding scenarios at a 50/50 debt to cash, 75/25 debt to cash or 100 percent debt.

A majority of the council favored the three year, 50/50 scenario. With this scenario the likelihood of having to go back and increase rates again in the near future would be lowered because 50/50 produces more cash flow, Ekrut said.

Presently the city charges $35.02 for the use of 5,000 gallons of water. At the three year 50/50 level, rates would increase to $57.73.

On the wastewater front, rates are currently $26.27 per 5,000 gallons of water. At the three year 50/50 level, rates would increase to $37.26.

The total impact concerning water and wastewater on customers at this level would be $94.99. This figure could change some as things move forward, Weatherford Assistant City Manager Sharon Hayes said.

No decisions were made Tuesday, and the Weatherford City Council will have to review the board’s recommendations.

– See more at: http://www.weatherforddemocrat.com/newstoppers/x611407851/Utility-board-reviews-utility-fund-debt?zc_p=1#sthash.RgT2oG5P.dpuf


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