11-Resolution establishing and approving a Water and Sewer Rate Maintenance PolicyCITY COUNCIL AGENDA ITEM BRIEFING SHEET
Submittal Date:
Originating Depattrnent:
Presented By:
Agenda Item No.:
O1/19/10
Council Date:
Finance
Gene Anderson
11.
O1/25/10
RECOMMENDED MOTION:
Move to approve a resolution establishing and approving a Water and Sewer Rate Maintenance Policy.
POLICY ISSUE(S):
Fiscal Management
The refunding of all City of Paris water and sewer revenue debt obligations into a general obligation
refunding bond effectively eliminates the rate covenants included in all ordinances dealing with water
and sewer system debt issues. It was recommended by the City's financial advisor, Dan Almon of
Southwest Securities, Inc., that the City adopt a water and sewer rate and reserve policy that requires an
identical maintenance of water and sewer rates and associated reserves. Such a policy is good business
practice and is an attractive feature to point to the rating agencies when the City is preparing to issue
debt. The policy states that the City agrees to set rates and other charges at a level that will produce
gross revenues sufficient to pay all expenses of operation and maintenance of the System and to provide
net revenues equal to 1.1 times the principal and interest requirements of all outstanding bonds or
certificates of obligation. In addition, rates should generate a reserve equal to the average annual
principal and interest payments of all outstanding bonds or certificates. Plus, rates should generate
sufficient revenue to create a contingency fund of $500,000. The policy as proposed meets the
requirements of existing bond covenants.
BOARD/COMMISSION RECOMMENDATION:
EXHIBITS:
Resolution and Water & Sewer Rate Maintenance Policy
ACTION:
BUDGET INFO:
Z Financial Report ❑ Minute Order
Expense
$N/A
❑ Department Report Z Resolution
Budgeted Amt.
$N/A
❑ Presentation ❑ Ordinance
y'I'D Actual
$N/A
❑ Public Hearing ❑ Other
Acct. Name
N/A
Acct. Number
N/A
FISCAL NOTES:
REVIEWED AND APPROVED BY:
Z Administration Z City Clerk ❑ Community Development ❑ EMS/IT Z Finance ❑ Fire
❑ Municipal Court E Legal ❑ Library ❑ Police ❑ Eng./Public Works ❑ Utilities
City of Paris n , Revised 2/04/08
000t,7.S~
DRAFT
attorney\reswork\current\Policy - Utility Rates & Reserves 2030
RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PARIS, TEXAS,
ESTABLISHING AND APPROVING A POLICY GOVERNING UTILITY RATES AND
RESERVES; MAKING OTHER FINDINGS A1VD PROVISIONS RELATED TO THE
SUBjECT; A1VD DECLARIIVG AN EFFECTIVE DATE.
WHEREAS, the refunding of all City of Paris water and sewer revenue debt obligations into a
general obligation refunding bond effectively eliminates the rate covenants included in all
ordinances dealing with water and sewer system debt issues; and,
WHEREAS, the City's Financial Advisor and Bond Counsel recommended that the City adopt
a water and sewer rate and reserve policy that requires an identical maintenance of water and
sewer rates and associated reserves; and,
WHEREAS, the proposed Water & Sewer Rate Maintenance Policy, attached hereto as
Exhibit "A", should in all things be approved.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PARIS,
TEXAS, THAT:
Section 1. The findings set out in the preamble to this resolution are hereby in all things
approved.
Section 2. The Water & Sewer Rate Maintenance Policy, attached hereto as Exhibit "A" be,
and the same is hereby approved.
Section 3. This resolution shall be effective immediately upon passage.
DULY PASSED AND APPROVED this 25th day of January, 2010.
Jesse James Freelen, Mayor
ATTEST:
Janice Ellis, City Clerk
APPROVED AS TO FORM:
W. Kent McIlyar, City Attorney
a ~~~007~
WATER & SEWER RATE MAINTENANCE POLICY
In order to safeguard the financial integrity of the City of Paris' Water Works and Sewer System, the City
Council hereby establishes the following policy regarding the setting of rates and the establishment of
necessary reserves and interest & sinking funds.
Section 1. MAINTENANCE OF RATES.
The City of Paris agrees that it will at all times charge and collect for services rendered by the System
rates and other charges that will produce gross revenues sufficient to pay all expenses of the System's
operation, maintenance, improvement, replacement, and expansion including expenses paid to the
City's General Fund for administrative services and utility franchise fees and to provide net revenues
equal to 1.1 times the principal and interest payments on all outstanding debt of the System.
Section 2. Interest & Sinking Fund(s).
An interest & sinking fund(s) shall be established for the purpose of paying the principal and interest
payments of any outstanding System bonds or certificates of obligation. The interest and sinking fund(s)
will be funded from net system revenues by monthly deposits in amounts sufficient to pay the next
maturing principal and interest payment.
Section 3. Reserve Fund
A Reserve Fund will be accumulated and maintained for all outstanding debt issues in an amount equal
to the average annual principal and interest requirements for all outstanding debt issues. When debt is
issued, the Reserve Fund must accumulate any additional reserves needed within five years of the new
debt issuance.
Section 4. Contingency Fund
Further security will be provided by a$500,000 Contingency Fund to be accumulated over no longer
than a five year period and maintained at the City's depository for the purpose of paying the cost of any
repairs or extensions to the System for which no other funds are available. The Contingency Fund may
also be used to pay principal and interest payments on outstanding System debt if there is a deficiency
in the Interest & Sinking Fund and the Reserve Fund.
EXHIBiTA