HomeMy WebLinkAboutN.B. 3 WTR FD SURCHG 03-02-92r
J
NEW BUSINESS N0. 3
Tom
3-2-92
inter- Com
DATE: FEBRUARY 26, 1992
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: WILLIAM A. HUSTON, CITY MANAGER
SUBJECT: WATER FUND DEBT SURCHARGE
Councilmember Edgar has requested that the City Council consider
reducing the existing water debt surcharge by five (5) percent. The
current bi-monthly surcharge is $4.75 for a 5/8 -inch meter (typical
residential meter).
The surcharge was enacted to generate income to retire debt incurred
when the City purchased the water system in 1980. The City assumed
responsibility for bonds issued by the Tustin Water Works Company. The
City subsequently issued new bonds in 1983 to finance the balance of the
acquisition cost. The Tustin Water Works bonds were paid off last year.
Debt service on the remaining 1983 bonds ranges from $500,000 to
$550,000 per year.
The current debt surcharge generates approximately $850,000 per year in
revenue. Excess revenue (difference between the cost of annual debt
service and debt surcharge income) remains in the debt service fund and
can be used to redeem outstanding bonds in the future.
A five (5) percent reduction in the debt surcharge would reduce the bi-
monthly charge to $4.51, a reduction of approximately $41,000 per year
in revenue. This would not affect the City's ability to cover the
current annual cost of debt service. The only implication would be the
reduction in annual fund balance available to redeem bonds early.
Staff will be submitting a report to the City Council this fiscal year
which evaluates water rates for operating expenses and the amount of
revenue required for needed water capital improvement projects. The
City Council reviewed a study last year which indicates the City has
approximately 26 million dollars in water system projects that need to
be undertaken. The report to be considered by the City Council at a
later date will show that additional revenue is required to finance the
26 million dollars in needed improvements to the water system.
WAH
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