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APPROPRIATION COMMITTEE REPORT TO THE MARCH 2013 ATM
<br /> 2011 Wafer Dist. Improvements SO $900,000
<br /> Water Tank Rehab SO $160,000 $1,060,000
<br /> 2012 None SO SO SO
<br /> 2013 Water Dist. Improvements SO $900,000 $900,000
<br /> 2014 (rec) Water Dist. Improvements $700,000 $200,000 $900,000
<br /> Prior to FY2006, as shown in the table above, capital expenditures for water distribution and related im-
<br /> provements were funded by a combination of enterprise fund cash capital, which was raised in the rates,
<br /> and borrowing. Subsequently, there was a transition to funding these ongoing improvements exclusively
<br /> with debt. While the transition to debt financing in the enterprise funds mitigated the need for rate in-
<br /> creases early on, that change, together with the fund's allocated contribution to the debt service for the
<br /> new DPW facility, has steadily increased the annual debt service costs of the sewer enterprise fund, both
<br /> in dollar and percentage terms, as illustrated below.
<br /> Growth in Water Fund Debt Service Costs
<br /> Fiscal Year Water Debt Service Total Budget Debt Service Ratio
<br /> 2006 $213,150 $6,237,235 3.4%
<br /> 2007 $358,301 $6,514,502 5.5%
<br /> 2008 $425,565 $6,469,388 6.6%
<br /> 2009 $757,247 $7,190,800 10.5%
<br /> 2010 $1,074,551 $7,241,304 14.8%
<br /> 2011 $1,137,075 $7,619,919 14.9%
<br /> 2012 $1,258,968 $8,039,413 15.7%
<br /> 2013 $1,299,091 $8,124,846 16.0%
<br /> 2014 $1,260,655 $8,707,219 14.5%
<br /> Recent borrowings, including the water fund's 17% contribution to the financing of the new DPW facili-
<br /> ty, have tripled the annual debt service costs since FY2008 to a level that represents a significant portion
<br /> of the overall Water Enterprise Fund operating budget. Future borrowings for water distribution im-
<br /> provements will continue to increase the annual debt service costs of the Water Enterprise Fund until a
<br /> new equilibrium between issuance and retirement of debt is reached.
<br /> The Committee has previously noted that judicious use of some of the fund's accumulated retained earn-
<br /> ings could help defray the impact of these growing capital costs and help to maintain long-term rate sta-
<br /> bility. We are delighted to see that this recommendation has been adopted, at least for the current fiscal
<br /> year, with a substantial cash contribution from retained earnings to the annual water distribution system
<br /> improvements cost. Even if this cash contribution cannot be sustained in future years, it will nevertheless
<br /> help to moderate debt service costs that would otherwise have to be included in rate requests going for-
<br /> ward, and is a productive use of excess reserves.
<br /> The Committee recommends approval of this request(9-0).
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