|
Page 4
<br />
<br />With the issuance of the Bonds, the Reserve Requirement will be equal to 125% of average
<br />annual debt service on the Bonds and the Parity Bonds. The current amount on deposit in
<br />the Reserve Account is $997,660. It is anticipated that the Reserve Requirement will
<br />increase to approximately $1,273,479 with the issuance of the Bonds. The proceeds of the
<br />Bonds will fund the difference between the new Reserve Requirement and the current
<br />balance in the Reserve Fund of $997,660, or approximately $275,819.
<br />A portion of the current balance in the Reserve Fund was originally funded with proceeds of
<br />the Series 2014A Bonds, which mature on August 1, 2018. We have confirmed with Utility
<br />staff that the final payment on the Series 2014A Bonds will be paid from net revenues of the
<br />City’s Electric System, and therefore the current balance in the Reserve Fund will be
<br />available to fund the increase in the Reserve Requirement resulting from this new financing.
<br />SECURITY AND
<br />SOURCE OF
<br />PAYMENT:
<br />The Bonds will not be a general obligation of the City but are special limited obligations
<br />payable solely from net revenues of the City's Electric System.
<br />The Bonds are being issued as Additional Bonds, on parity with the outstanding Parity
<br />Bonds.
<br />The table below demonstrates that the issuance of the Bonds satisfies the Additional Bonds
<br />test described above.
<br />Elk River Utilities Electric Fund
<br />Net Revenues Available for Debt Service
<br />Fiscal Years Ended December 31, 2015, 2016 and 2017
<br />
<br />
<br />December 31, 2015 December 31, 2016 December 31, 2017
<br /> Operating Revenue $ 32,551,722 $ 34,464,396 $ 36,120,824
<br />Operating Expense (29,896,154) (31,826,599) (33,394,471)
<br />Net Operating Income (Loss) $ 2,655,568 $ 2,637,797 $ 2,726,353
<br />Add Back Depreciation 1,922,359 2,005,093 2,046,935
<br />Add Other Income 375,020 372,506 424,101
<br />Available for Debt Service $ 4,952,947 $ 5,015,396 $ 5,197,389
<br />Average Annual Debt Service * $ 1,013,595
<br />Coverage
<br />
<br /> 5.12x
<br /> * Includes the combined average annual debt service for the Bonds and the Parity Bonds.
<br />Source: Elk River Municipal Utilities Annual Financial Reports for the Years Ended December 31, 2015
<br />through 2017.
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
|