2000 JT CUA AGN JUL 18 I01 - Laserfiche WebLink

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Essentially, the JPA leases the water and wastewater assets on a long-term basis from the City. An advance lease payment can be made to the City by the JPA from any surplus cash in those funds in addition to the annual lease payment from the JPA to the City. While it is permissible within the JPA structure for the City to use lease payments from the JPA to finance generic capital improvements benefiting activities of the City other than the Water and Wastewater funds, it is presently anticipated that the only financing activity will be limited to raising funds for the necessary "emergency" improvements associated with the Wastewater Fund. The new lease arrangement between the City and the JPA contains language to assure adequate bond coverage and the establishment of prudent operating margins for the related enterprise finds. The lease payments to the City will be subordinate to any future bond payments for the Water and Wastewater Systems. The lease payments to be made to the General Fund are also subordinate to debt service coverage requirements and full funding of all required water and wastewater reserve accounts. This subordination clause provides optimum protection for the ratepayers (customers) and represents a significant improvement over the present "in lieu" payment arrangement. Currently, "in -lieu" payments are not technically subordinate, and they can be easily increased to provide additional funding for the General Fund. The formation of the Authority and the formalization of the lease arrangement with the City prevent arbitrary transfer increases but do pose some risk for the General Fund. To help mitigate the risk and assure adequate General Fund cash flows, an advance lease payment to the General Fund will be made equal to 'one year's" lease payment ($870,000 water and $570,00 wastewater). An additional $300,000 payment will be made by the Water Fund to be immediately transferred by the General Fund to the Wastewater Fund for the purposes of establishing a rate stabilization fund. The Wastewater rate stabilization fund provides further protection against future rate increases. Exhibit A-1 through A-3, attached, contains a detailed comparison of projected wastewater financial results showing the impacts of 1.) no rate increase, 2.) rate increase without the Colton Utility Authority, 3.) rate increase with the Colton Utility Authority. Following is a brief summary of that exhibit, using the 5 year mid -point, 2002/03: 5 YEAR MID -POINT 2002/03 SCENARIO 1 SCENARIO 2 NO RATE INCREASE RATEINCREASE NO JPA NO JPA RATE INCREASE % ------- Q ---- 22Y2 NET INCOME (LOSS) BOND COVERAGE 0.51 ____1,7_7 SCENARIO 3 RATEINCREASE WITH JPA ___1Z 30/Q