Explanation of Utility Debt Service Fund

The Utility Debt Service Fund is used for the accumulation of resources for the payment of Water and Sewer Revenue Bonds; and also, to provide a reserve as provided by the City’s bond ordinances. The debt service on these bonds, i.e., the amount transferred from the Utility Fund, is provided by water and sewer fees. Issuance of additional bonds may impact water and sewer fees but will have no impact on property tax rates.

The bond ordinances require that amounts sufficient to pay the next scheduled principal and interest payment be paid into a sinking account in monthly installments. Additionally, bond ordinances require a reserve in an amount equal to the succeeding fiscal year’s interest and principal payment be accumulated and maintained. The reserve is to be accumulated within 61 months from the date additional bonds are issued. Thus, each month there must be deposited in this fund 1/6th of the next maturing interest (which is paid semiannually), and 1/12th of the next maturing principal (which is paid annually).

On September 30, 2021 our required balance in this fund, after accounting for the new bond issuance, will be:

Reserve Portion $1,207,335

Interest and Sinking Portion: October 15, 2021 interest payment (5/6th) 186,988

April 15, 2022 principal payment (5/12th) 497,917 Total $1,955,239

On September 30, 2022 our required balance in this fund for the current debt issuances will be: Reserve Portion $1,352,070

Interest and Sinking Portion: October 15, 2022 interest payment (5/6th) 169,779

April 15, 2023 principal payment (5/12th) 416,667 Total $1,918,516

It is the City’s policy to fund as many projects as possible from the Utility Projects Fund and to incur new debt on only the larger projects. In determining the timing for issuance of new debt, the objective is to minimize the overall debt service. Therefore, new debt issuance is usually timed to coincide with a decrease in current debt service.