Agenda - 09-29-1999 - 9c - Laserfiche WebLink

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As mentioned above, the LGC recommended two possible courses of action that the County could pursue in addressing the sewer fund's financial condition. • Eliminate the Obligation -Elimination of the obligations could be accomplished by adoption of a resolution by the Board amending the Water and Sewer policy. Elimination of the debt would have minimal impact on the financial condition of the General and Capital Project Funds and would move the sewer fund to a more sound financial condition. However, if the debt is eliminated the Board could lose an opportunity to benefit from the potential for repayment in the future, if the Efland Sewer System becomes economically viable. Adopt a Repayment Schedule for the Balance Owed -There is no repayment schedule currently in existence for the sewer fund debt. Once the Sewer System began receiving operating revenues, all debt became due and payable. This means that the $202,983 in total debt is classified as a current liability or obliga#ion, for which the sewer fund lacks the resources to pay. Adoption of a repayment schedule that identifies payment due dates would mean that the $202,983 could be classified as a long-term liability. For example, If the Board were to adopt a repayment plan that began in 2005 for a period of 10 years and eliminated the interest requirements, the sewer fund would be liable for annual payments of approximately $20,000. In this scenario the debt would remain on the books as long term with no current obligations due. There are numerous scenarios and potential repayment options that can be explored. It is important to note that the Board has complete control over the debt itself as well as any repayment. This control is established in the Board's ability to amend the Water and Sewer Policy. This issue comes about because of good intentions of the Board, at that time, to ensure that the monies provided to the Efland Sewer Project could be returned to the General and County Capital Projects Funds. This matter is essentially an accounting issue related to the classification of long and short-term obligations., FINANCIAL IMPACT: There is no real overall monetary gain or loss to the County in either option listed above. This is due to the fact that the resources of the Sewer fund, the General Fund, and the County Capital Projects Fund are all under the County's umbrella. In the repayment of these loans, the County would be essentially "writing itself a check" from one account and depositing it into another, if the sewer fund becomes economically viable. In the elimination of the debt the County would be removing the need to "write itself a check". RECOMMENDATION(S): The Manager Recommends that the Board provide direction to the staff as to the option to pursue and direct staff to prepare and submit the necessary documents for consideration at an October 1999 Board meeting.