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ORANGE COUNTY <br />BOARD OF COMMISSIONERS <br />ACTION AGENDA ITEM ABSTRACT <br />Meeting Date: October 5, 1999 <br />Action Agenda <br />Item No. ~' g <br />SUBJECT: Efland Sewer Fund Inter-fund Debt <br />DEPARTMENT: Finance PUBLIC HEARING: (Y/N) No <br />ATTACHMENT(S): INFORMATION CONTACT: <br />None Ken Chavious, ext 2453 <br />TELEPHONE NUMBERS: <br />Hillsborough 732-8181 <br />Chapel Hill 968-4501 <br />Durham 688-7331 <br />Mebane 336-227-2031 <br />PURPOSE: To provide direction to staff on resolving debt issues related to the Efland Sewer <br />Fund. <br />BACKGROUND: In a memorandum dated April 23, 1999, the Manager informed the Board of <br />a letter received from the Local Government Commission (LGC) discussing the unstable <br />financial condition of the Efland Sewer Fund. Since the beginning of operations, the Efland <br />Sewer enterprise fund has shown signs of financial weakness. This is due mainly to debts <br />owed to the General Fund and County Capital Projects Fund. The LGC recommended that the <br />County either eliminate the debts or adopt a repayment plan for the debt. As mentioned in the <br />Manager's memorandum, these debts are a product of the Water and Sewer Policy adopted by <br />the Board in the mid-1980s. <br />The debts were created during construction of the Efland Sewer lines. The County <br />Commissioners at that time provided a total of $223,000 from the general fund toward the <br />construction. Of the $223,000, $87,000 was required as matching funds to grants used for <br />construction and the remaining $136,000 was considered as a loan from the County general <br />fund. The Board, in formulating the Water and Sewer policies, affirmed that this loan was to be <br />repaid from operating revenues of the system. The County Commissioners also provided a loan <br />of $66,983 from the county capital project fund with same expectations for repayment. In <br />addition to the principal amounts mentioned, the Water and Sewer Policies also state that <br />interest is to be paid on the loans at an annual rate equal to the interest rate on annual <br />delinquent tax collections (9%). As reported to the Board on previous occasions, the revenue <br />currently generated by the Efland Sewer operating fund is insufficient to cover the operating <br />costs associated with the sewer system. In fact, without annual appropriations from the General <br />