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Table 28. Projected Debt Service Coverage, FY 2026 to FY 2031
<br />Total Revenue
<br />$76,799,349
<br />$76,968,296
<br />$77,078,259
<br />$77,249,242
<br />$77,427,046
<br />$77,535,498
<br />Total Operating Expense
<br />$73,493,080
<br />$76,476,623
<br />$79,581,992
<br />$82,770,189
<br />$86,099,883
<br />$89,367,767
<br />Total Debt Service
<br />$3,176,056
<br />$4,152,633
<br />$4,148,508
<br />$4,147,008
<br />$4,175,633
<br />$4,175,133
<br />Debt Service Coverage Ratio
<br />1.04
<br />0.12
<br />-0.60
<br />-1.33
<br />-2.08
<br />-2.83
<br />DSCR Requirement
<br />1.25
<br />1.25
<br />1.25
<br />1.25
<br />1.25
<br />1.25
<br />Reserves
<br />The City must maintain an appropriate reserve balance to ensure the day-to-day operation will continue
<br />during emergencies and guarantee the future stability of the system. The City's financial goal is to build
<br />an appropriate level of cash reserves for each reserve fund included in the financial plan of this Study.
<br />The reserve target for the water utility is described below:
<br />• Operating Reserve: three months of operating expenses
<br />• Capital Reserve: 50 percent of the 10-year average in planned rate funded capital expenditures10
<br />• Emergency Reserve: $4.0 million
<br />The reserve target at the end of the study period reaches $30.3 million. Table 29 shows the City's reserve
<br />targets for FY 2026 through FY 2031 based on the current reserve policy. Figure 6 displays the resulting
<br />cash balances versus the reserve target under the current rates. Reserve targets based on reserve policy
<br />shown in Table 16 and operating and capital expenditure totals shown in Tables 25 and 26, respectively.
<br />Table 29. Water Reserve Target, FY 2026 to FY 2031
<br />Operating Reserve
<br />$18,373,270
<br />$19,119,156
<br />$19,895,498
<br />$20,692,547
<br />$21,524,971
<br />$22,341,942
<br />Capital Reserve
<br />$4,000,000
<br />$4,000,000
<br />$4,000,000
<br />$4,000,000
<br />$4,000,000
<br />$4,000,000
<br />Emergency Reserve
<br />$4,000,000
<br />$4,000,000
<br />$4,000,000
<br />$4,000,000
<br />$4,000,000
<br />$4,000,000
<br />Total
<br />$26,373,270
<br />$27,119,156
<br />$27,895,498
<br />$28,692,547
<br />$29,524,971
<br />$30,341,942
<br />10 The annual average of total planned capital spending over ten years was used to calculate this reserve target
<br />City of Santa Ana - 2026 Water and Sewer Rate Study
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