2000 JT CUA AGN JUL 18 I01 - Laserfiche WebLink

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As indicated from the analysis, it is not possible to construct the mandated wastewater improvements or finance them without a rate increase. The wastewater fund would operate at a $857,086 annual loss and bond coverage is merely 0.61 which would not meet the required minimum of 1.25. It certainly is possible to increase rates and cover the required improvements without establishing the Authority. However, a 22% rate increase is necessary (instead of 17.3% with the Authority) and bond coverage is substantially lower than what it is with the Authority in place. In addition, use of the Authority enables the coverage requirement to be met for several additional years. A logical question is, "can't the City lower its in -lieu payments without establishing the Authority?" The answer is yes, but any such reduction is relatively non-binding and is not backed by the legal framework, valuations, and analysis associated with the Authority and the lease arrangement. Furthermore, use of the Authority and the related legal provisions clearly make the lease payments to the General Fund subordinate to operating requirements of the water and the wastewater funds. Again, under the present environment the in -lieu payments to the General Fund are not technically subordinate. In summary, establishment of the Colton Utility Authority significantly clarifies the financial relationship of the water and wastewater funds with the City and provides substantial protection against arbitrary increases in the in -lieu payments to the General Fund. As a result of establishing the Authority, customer rates are lower than what they would be otherwise. FINANCIAL IMPACT: This entire staff report addresses "fiscal impact" ENVIRONMENTAL IMPACT: none RECOMMENDATIONS: Staff recommends that the City Council approve the following resolutions, categorized by legal entity: City Council Resolution of the City Council of the City of Colton Authorizing the creation of the Colton Utility Authority; ratifying the solicitation of a proposal for the lease of the City Water and Wastewater Systems; and taking certain other actions in connection therewith Redevelopment Agency Resolution of the Redevelopment Agency for the City of Colton authorizing the creation of the Colton Utility Authority, and taking certain other actions in connection therewith Colton Public Financing Authorit Resolution of the Board of Directors of the Colton Public Financing Authority approving an Amendment to a 1998 installment purchase agreement with the City of Colton and taking certain other actions in connection therewith