Utility Committee Agenda and Packet 2020 07 28

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projections that we've done. We'll be able to make an educated guess from. I think there are other factors that will be more influential than the interest rate comparison but we are waiting to get some of those details back from the Northern District. Councilmember Jeff Lipton asked Mr. Manire once he gets his comparison if the issue of defusement by virtue of having a City bond versus being part of this pool whether we have more flexibility in the future if we wanted to defuse and to have more cash to eliminate our debt, the two different approaches may be very different and a have an effect on that kind of scenario and the next round of analysis you can give us some comparison. Mr. Manire said of those two we are hoping to get clarity from Northern at that point. Since there is going to be a bond financing done it may be difficult for them to give us as much flexibility on prepayment if we are borrowing through their pool because they have to line up with their own bond. Councilmember Jeff Lipton concluded by saying, please include in the next round of analysis. Councilmember Deborah Fahey said she was wondering why we are choosing scenario 8 over scenario 1 where we pay significantly less. Mr. Peterson referred to the chart on page 24. Page 24 — Debt Coverage Ratio Comparison. Mr. Peterson said the big driver for staff's recommendation in going with the group financing is avoiding complications with the debt coverage ratio. He continued saying the recent model suggest 5% increase in water for 2021. If we assume self-financing, in order to meet the debt coverage of 1.2, the 5% increase in 2021 needs to be increased to 12%. This utilizes the combined debt coverage of the other two funds of wastewater and storm. If the water fund were to cover the entire ratio the increase would need to go as high as 21 %. Mr. Peterson add this the worst case scenario and other factors can be included. This is also the first major step in this analysis and will continue to be evaluated. Mr. Kowar added that some communities view these bonds as intergenerational equity. So if you increase rates now then a lot of folks will pay for the projects now versus spreading it out over a generation but you do pay more interest with that philosophy. Also "Utility Funds" I think is an ongoing conversation of the Utility Committee and how much reserve we continue to carry. One of our biggest drivers of money coming in the door is debt coverages. As staff, we are sensitive to this because it tucks money in the bank. We have had a lot of upgrades we needed to spend money on but there will be periods where we'll be bringing in money because of debt requirements but we may not have as big of upgrades in the system where we will be collecting money that we may not have to spend in some years. So those are a couple things to consider on those, beyond how much interest you would pay. Councilmember Jeff Lipton stated that maybe we look at this over a longer period of time and don't need to be so aggressive on the projects. Mr. Kowar said we could look at that and continued saying that we have been trimming through the years and trimmed at the COVID analysis. He thinks the pivot point is really how the community builds out in the near term and what we need to build to meet our capacity requirements. Councilmember Jeff Lipton asked what the check in points are. Mr. Peterson stated • The Northern Board is negotiating the allotment contract now. • The next Utility Committee is schedule for the end of July.