1994 AGN NOV 15 I22A - Laserfiche WebLink

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CITY OF COLTON AGENDA REPORT For Council Meeting of November 15, 1994 TO: Honorable Mayor, City Council, and City Manager FROM: Thomas K. Clarke, Electric Utility Director Date: 11/9/94 SUBJECT: CONSIDER FIRST READING OF AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF COLTON, CALIFORNIA, APPROVING THE ENTERING INTO OF A LEASEBACK AGREEMENT (ELECTRIC SYSTEM IMPROVEMENTS) BACKGROUND The Colton Electric Utility is proposing to issue electric revenue bonds through the Colton Public Financing Authority for needed improvements to the electric system. Even though the Authority will be the issuer of the debt, the payment for debt service will come from electric sales revenues. In order to assign the payment obligation to the Electric Utility, a leaseback agreement between the Authority and the Utility will be established in an Installment Purchase Agreement. STATEMENT OF THE PROBLEM The Electric Utility is not empowered to issue debt on its own. However, the formation of the Colton Public Financing Authority creates a vehicle whereby the Authority may issue debt on behalf of the City of Colton, or the Electric Utility in this instance. ALTERNATIVES Since there is nothing in place which currently allows the Electric Utility to issue long-term debt, the only existing alternative would be to raise electric rates in a sufficient amount to provide funds for the projected construction projects of the Utility. This would result in a substantial rate revision. In addition, increasing rates to current customers would violate the principal of having ratepayers pay for the benefits of the system improvements. The benefits of the work will accrue over the ensuing 30 years. It is over this period that the benefits should be paid for. Page 1 of 2 Item No. 22 A