NEW ISSUE OFFICIAL STATEMENT RATING: Book-Entry Only S&P “A+” (Stable Outlook)
In the opinion of Bond Counsel, under existing law, the interest on the Bonds is excluded from gross income for Federal income tax purposes; it should be noted, however, that for the purpose of computing the alternative minimum tax imposed on certain corporations, such interest is taken into account in determining adjusted current earnings as provided in Appendix “G.” See “TAX EXEMPTION” herein. Under the provisions of Chapter 1 of Title 47 of the Louisiana Revised Statutes of 1950, as amended, interest on the Bonds owned by corporations or residents of the State of Louisiana is exempt from Louisiana state income taxation to the extent such interest is exempt from federal income taxation. $28,075,000 UTILITIES REVENUE BONDS, SERIES 2014 CITY OF ALEXANDRIA, STATE OF LOUISIANA Dated: Date of Delivery Due: May 1 as shown below The referenced Bonds (the “Bonds”) of the City of Alexandria, State of Louisiana (the “Issuer”) are being initially issued as fully registered bonds without coupons in denominations of $5,000 each, or any integral multiple thereof within a single maturity, and when issued will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”). DTC will act as securities depository for the Bonds. Purchasers of the Bonds will not receive certificates representing their interest in the Bonds purchased. Purchases of the Bonds may be made only in book-entry form in authorized denominations by credit to participating broker-dealers and other institutions on the books of DTC as described herein. Principal of and interest on the Bonds will be payable by Argent Trust Company, N.A., in the City of Ruston, Louisiana, or any successor paying agent (the “Paying Agent”), to DTC, which will remit such payments in accordance with its normal procedures, as described herein. Interest on the Bonds is payable on May 1, 2014, and semiannually thereafter on May 1 and November 1 of each year. See “BOOK-ENTRY ONLY SYSTEM” herein.
The Bonds are subject to optional and mandatory sinking fund redemption prior to maturity at the times, in the manner and at the redemption prices set forth herein.
The Bonds constitute legally binding and special limited obligations of the Issuer and are payable equally with the Outstanding Parity Bonds (as hereinafter defined), solely from the income and revenues to be derived from the operation of the combined electric power and light plant and system, waterworks plant and system, natural gas system and sewer system of the Issuer (collectively, the “Utilities System”), after provisions have been made for payment therefrom of the reasonable expenses of administering, operating and maintaining the Utilities System, and shall enjoy complete parity of lien on said revenues of the Utilities System with the Issuer’s Utilities Revenue Bonds, Series 2010B, Utilities Revenue Bonds, Series 2011, Utilities Revenue Bond (DHH), Series 2012A, Utilities Revenue Bond (DEQ), Series 2012B, Utilities Revenue Refunding Bonds, Series 2013A, Taxable Utilities Revenue Refunding Bonds, Series 2013B and Utilities Revenue Bonds, Series 2013A, as more fully described herein.
The Bonds are being issued for the purpose of constructing, acquiring, extending and/or improving the Utilities System, paying capitalized interest with respect to the Bonds, and paying the costs of issuance of the Bonds.
MATURITY SCHEDULE (Base CUSIP No. 015086)
Due Interest Due Interest May 1 Amount Rate Yield CUSIPs May 1 Amount Rate Yield CUSIPs 2016 $325,000 2.00% 0.600% MQ1 2021 $425,000 3.50% 2.670% MV0 2017 355,000 2.00% 0.875% MR9 2022 445,000 5.00% 2.950% MW8 2018 365,000 2.50% 1.300% MS7 2023 470,000 4.00% 3.200% MX6 2019 380,000 3.00% 1.750% MT5 2024 780,000 4.00% 3.360% MY4 2020 405,000 3.00% 2.220% MU2 2025 815,000 4.00% 3.500%* MZ1
$3,605,000 4.00% Term Bonds due May 1, 2029, Yield 4.111%, CUSIP NA5 $5,530,000 5.00% Term Bonds due May 1, 2034, Yield 4.380%*, CUSIP NB3 $7,100,000 5.00% Term Bonds due May 1, 2039, Yield 4.630%*, CUSIP NC1 $7,075,000 4.75% Term Bonds due May 1, 2043, Yield 4.814%, CUSIP ND9
* Priced to May 1, 2024 par call.
The Bonds are offered subject to the joint approving opinion of Foley & Judell, L.L.P., New Orleans, Louisiana, and Roedel, Parsons, Koch, Blache, Balhoff & McCollister, A.L.C., Baton Rouge, Louisiana, Co-Bond Counsel. Certain legal matters will be passed upon for the Underwriter by its Counsel, Breazeale, Sachse & Wilson, L.L.P., Baton Rouge, Louisiana, and the Law Office of Bernard L. Charbonnet, Jr., New Orleans, Louisiana, Co-Underwriter’s Counsel. It is expected that the Bonds will be delivered in New Orleans, Louisiana, and will be available for delivery to DTC in New York, New York, on or about February 25, 2014, against payment therefor. Stephens Inc.
The date of this Official Statement is January 15, 2014. This cover page contains information for quick reference only. It is not a summary of this issue. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision. CUSIP Numbers © Copyright 2014, American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, which is managed on behalf of the American Bankers Association by S&P Capital IQ., a business line of The McGraw-Hill Companies, Inc. Neither the Issuer nor the Underwriter and its agents take responsibility for the accuracy of the CUSIP numbers, now or at any time in the future, which are included solely for the convenience of the owners of the Bonds. The CUSIP number for a specific maturity is subject to being changed after the issuance of the Bonds as a result of various subsequent actions including, but not limited to, a refunding in whole or in part of such maturity or as a result of the procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of certain maturities of the Bonds. NO DEALER, BROKER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED BY THE CITY COUNCIL OF THE CITY OF ALEXANDRIA, STATE OF LOUISIANA (THE “GOVERNING AUTHORITY”), THE CITY OF ALEXANDRIA, STATE OF LOUISIANA (THE “ISSUER”) , OR STEPHENS INC. (THE “UNDERWRITER”), TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS WITH RESPECT TO THE OBLIGATIONS HEREIN DESCRIBED OTHER THAN THOSE CONTAINED IN THIS OFFICIAL STATEMENT, AND IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE GOVERNING AUTHORITY. THE INFORMATION SET FORTH HEREIN HAS BEEN OBTAINED FROM THE ISSUER AND OTHER SOURCES WHICH ARE BELIEVED TO BE RELIABLE BUT IS NOT GUARANTEED AS TO ACCURACY OR COMPLETENESS, AND IS NOT TO BE CONSTRUED AS A REPRESENTATION BY THE UNDERWRITER. THE INFORMATION AND EXPRESSIONS OF OPINION HEREIN ARE SUBJECT TO CHANGE WITHOUT NOTICE, AND NEITHER THE DELIVERY OF THIS OFFICIAL STATEMENT NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE ISSUER SINCE THE DATE HEREOF. THIS OFFICIAL STATEMENT DOES NOT CONSTITUTE A CONTRACT BETWEEN THE ISSUER OR THE UNDERWRITER AND ANY OF THE PURCHASERS OR REGISTERED OWNERS OF THE BONDS.
THE UNDERWRITER HAS REVIEWED THE INFORMATION IN THIS OFFICIAL STATEMENT IN ACCORDANCE WITH, AND AS PART OF, ITS RESPONSIBILITY TO INVESTORS UNDER THE FEDERAL SECURITIES LAWS AS APPLIED TO THE FACTS AND CIRCUMSTANCES OF THIS TRANSACTION, BUT THE UNDERWRITER DOES NOT GUARANTEE THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION. BY ITS PURCHASE OF THE BONDS, AN INVESTOR IS ACKNOWLEDGING THAT IT HAS REVIEWED ALL THE INFORMATION IT DEEMS NECESSARY TO MAKE AN INFORMED DECISION, AND THAT IT IS NOT RELYING ON ANY REPRESENTATION OF THE UNDERWRITER OR ANY OF ITS OFFICERS, REPRESENTATIVES, AGENTS OR DIRECTORS IN REACHING ITS DECISION TO PURCHASE THE BONDS. THE INVESTOR, BY ITS PURCHASE OF THE BONDS, ACKNOWLEDGES ITS CONSENT FOR THE UNDERWRITER TO RELY UPON THE INVESTOR’S UNDERSTANDING OF AND AGREEMENT TO THE PRECEDING PARAGRAPH AS SUCH RELATES TO THE DISCLOSURE AND FAIR DEALING OBLIGATIONS THAT MAY BE APPLICABLE TO THE UNDERWRITER UNDER APPLICABLE SECURITIES LAWS AND REGULATIONS.
THIS OFFICIAL STATEMENT IS BEING PROVIDED TO PROSPECTIVE PURCHASERS EITHER IN BOUND PRINTED FORM (“ORIGINAL BOUND FORMAT”) OR IN ELECTRONIC FORMAT ON THE FOLLOWING WEBSITE: http://www.i-dealprospectus.com. THIS OFFICIAL STATEMENT MAY BE RELIED UPON ONLY IF IT IS IN ITS ORIGINAL BOUND FORMAT OR AS PRINTED IN ITS ENTIRETY DIRECTLY FROM SUCH WEBSITE.
Cautionary Statements Regarding Forward-Looking Statements in this Official Statement This Official Statement is marked with a dated date and speaks only as of that dated date. Readers are cautioned not to assume that any information has been updated beyond the dated date except as to any portion of the Official Statement that expressly states that it constitutes an update concerning specific recent events occurring after the dated date of the Official Statement. Any information contained in the portion of the Official Statement indicated to concern recent events speaks only as of its date. The Issuer expressly disclaims any duty to provide an update of any information contained in this Official Statement, except as agreed upon by said parties pursuant to the Continuing Disclosure Certificate included herein as Appendix “H.” The information contained in this Official Statement may include forward looking statements by using forward-looking words such as “may,” “will,” “should,” “expects,” “believes,” “anticipates,” “estimates,” “budgets” or others. The reader is cautioned that forward-looking statements are subject to a variety of uncertainties that could cause actual results to differ from the projected results. Those risks and uncertainties include general economic and business conditions, and various other factors which are beyond the control of the Issuer. This Official Statement contains projections of revenues, expenditures and other matters. Because the Issuer cannot predict all factors that may affect future decisions, actions, events or financial circumstances, what actually happens may be different from what is included in forward-looking statements.
THE BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR HAS THE BOND ORDINANCE BEEN QUALIFIED UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, IN RELIANCE UPON EXEMPTIONS CONTAINED IN SUCH ACTS. THE REGISTRATION OR QUALIFICATION OF THE BONDS IN ACCORDANCE WITH APPLICABLE PROVISIONS OF SECURITIES LAWS OF THE STATES IN WHICH THE BONDS HAVE BEEN REGISTERED OR QUALIFIED AND THE EXEMPTION FROM REGISTRATION OR QUALIFIED IN OTHER STATES CANNOT BE REGARDED AS A RECOMMENDATION THEREOF. NEITHER THESE STATES NOR ANY OF THEIR AGENCIES HAVE PASSED UPON THE MERITS OF THE BONDS OR THE ACCURACY OR COMPLETENESS OF THIS OFFICIAL STATEMENT. ANY REPRESENTATION TO THE CONTRARY MAY BE A CRIMINAL OFFENSE. IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR EXAMINATIONS OF THE STATE AND TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED.
THE REGISTRATION, QUALIFICATION OR EXEMPTION OF THE BONDS IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAW PROVISIONS OF THE JURISDICTIONS IN WHICH THESE SECURITIES HAVE BEEN REGISTERED, QUALIFIED OR EXEMPTED DOES NOT MEAN THAT EITHER THESE JURISDICTIONS OR ANY OF THEIR AGENCIES HAVE PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED, THE SECURITIES, OR THEIR OFFER OR SALE. NEITHER THESE JURISDICTIONS NOR ANY OF THEIR AGENCIES HAVE GUARANTEED OR PASSED UPON THE SAFETY OF THE BONDS AS A INVESTMENT, UPON THE PROBABILITY OF ANY EARNINGS THEREON OR UPON THE ACCURACY OR ADEQUACY OF THIS OFFICIAL STATEMENT. The prices and other terms respecting the offering and sale of the Bonds may be changed from time to time by the Underwriter after the Bonds are released for sale, and the Bonds may be offered and sold at prices other than the initial offering prices, including sales to dealers who may sell the Bonds into investment accounts. In connection with the offering of the Bonds, the Underwriter may over allot or effect transactions which stabilize or maintain the market price of the Bonds at a level above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time. TABLE OF CONTENTS
INTRODUCTION...... 1 GENERAL COVENANTS OF THE ISSUER. 27 Bond Ordinance to Constitute Contract...... 27 PURPOSE OF ISSUE...... 1 Operation Covenant...... 27 Maintenance of Utilities System; Disposition...... 27 Reports and Annual Audits...... 27 PLAN OF FINANCE...... 2 BOOK-ENTRY ONLY SYSTEM...... 27 THE BONDS...... 2 Amount of Bonds Being Issued...... 2 Date of Bonds...... 2 BONDHOLDER RISKS...... 30 Authority for Issue...... 2 General...... 30 Outstanding Parity Bonds...... 2 Acquisition Risk...... 30 Security for Issue...... 2 Operating Risk...... 30 Average Life...... 3 General Economic Factors Affecting the Issuer...... 31 Security Interest...... 3 Reliance on Projections...... 31 Form and Denomination...... 3 Events of Default...... 31 Maturities; Interest Payment Dates...... 3 Rights of Owners...... 32 Provisions Applicable if Book-Entry Only System Limited Obligations of the Bonds...... 33 is Terminated...... 4 Limitations on Remedies Available to Bondholders. . 33 General...... 4 Secondary Market...... 34 Place of Payment...... 4 Homeland Security...... 34 Payment of Interest...... 4 Environmental Risks...... 34 Provisions for Transfer, Registration and Early Redemption...... 35 Assignment...... 4 Pension Fund...... 35 Redemption Provisions...... 4 Defeasance of Outstanding Series 2004 Bonds...... 5 TAX EXEMPTION...... 40 Defeasance...... 6 Interest on Bonds...... 40 State Taxes...... 40 THE UTILITIES SYSTEM...... 6 Alternative Minimum Tax Consideration...... 40 The Electric Utility...... 6 General...... 40 The Gas Utility...... 7 Changes in Federal and State Tax Law...... 41 The Water Utility...... 7 Qualified Tax-Exempt Obligations (Non-Bank The Wastewater Utility...... 8 Deductibility)...... 41 Largest Customers of the Utilities System...... 8 Tax Treatment of Original Issue Premium...... 42 Schedule of Current Utility Rates...... 9 Tax Treatment of Original Issue Discount...... 42
MANAGEMENT’S DISCUSSION AND LEGAL MATTERS...... 42 ANALYSIS...... 13 Utilities System Fund...... 13 UNDERWRITING...... 43
PROJECT DESCRIPTION...... 14 GOVERNING AUTHORITY...... 43 Governmental Regulations and Approvals...... 14 Fuel Supply...... 14 BOND RATING...... 43 Transmission Access...... 14 CERTIFICATION AS TO OFFICIAL CONSULTING ENGINEER'S REPORT...... 15 STATEMENT...... 43
CERTAIN FACTORS AFFECTING THE CONTINUING DISCLOSURE...... 44 ELECTRIC UTILITY INDUSTRY...... 15 The Electric Utility Industry Generally...... 15 Security Issues...... 17 ADDITIONAL INFORMATION...... 44 Environmental Issues...... 17 Energy Policy Act of 2005...... 17 MISCELLANEOUS...... 44 Louisiana Legislation...... 18 MAPS OTHER REGULATORY MATTERS...... 18 Environmental, Conservation and Other Regulations Appendix “A” - Financial and Statistical Data and Permitting Requirements...... 18 Relative to the City of Alexandria Power Sales Contract with Louisiana Energy and Appendix “B” - Consulting Engineer's Report Power Authority...... 19 Appendix “C” - Audited Financial Statements Appendix “D” - Budget Summary Appendix “E” - Debt Statement SECURITY PROVISIONS AND PROTECTIVE Appendix “F” - Annual Debt Service Requirements COVENANTS...... 20 Appendix “G” - Form of Legal Opinion Defined Terms...... 20 Appendix “H” - Form of Continuing Disclosure Security for Issue...... 20 Certificate Obligation to Fix Rates...... 21 Flow of Funds...... 22 MISO Collateral Account...... 24 Investment of Funds...... 24 Issuance of Additional Bonds...... 24 Additional Provisions of the Bond Ordinance...... 26 OFFICIALS
CITY OF ALEXANDRIA, STATE OF LOUISIANA
MAYOR
Jacques M. Roy
CITY COUNCIL
James “Jim” Villard, Councilman-at-Large Lee Rubin, Councilman-at-Large Ed Larvadain, III, District 1 Mitzi LaSalle, District 2 Jules Green, District 3 Harry Silver, District 4 Charles L. “Chuck” Fowler, District 5
CITY CLERK
Nancy Thiels
OTHER CITY OFFICIALS
Charles E. “Chuck” Johnson, Jr., City Attorney David Johnson, Director of Finance Michael P. Marcotte, Director of Utilities
CO-BOND COUNSEL
Foley & Judell, L.L.P. Roedel, Parsons, Koch, Blache, Balhoff & McCollister, A.L.C.
CO-UNDERWRITER’S COUNSEL
Breazeale, Sachse & Wilson, L.L.P. Law Office of Bernard L. Charbonnet, Jr.
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OFFICIAL STATEMENT
$28,075,000 UTILITIES REVENUE BONDS, SERIES 2014 CITY OF ALEXANDRIA, STATE OF LOUISIANA INTRODUCTION
This Official Statement of the City of Alexandria, State of Louisiana (herein sometimes referred to either as the “Issuer” or the “City”) provides information with respect to the referenced Utilities Revenue Bonds, Series 2014 (the “Bonds”). This Official Statement contains summaries of certain of the provisions of the ordinances of the Issuer adopted by the City Council of the City of Alexandria, State of Louisiana (the “Governing Authority”) on January 8, 2013 and to be adopted by the Governing Authority on January 21, 2014, pursuant to which the Bonds are being issued (collectively, the “Bond Ordinance”).
Brief descriptions of the Issuer, the Bonds and the Bond Ordinance and other acts, resolutions, ordinances, documents and instruments described herein are contained in this Official Statement, and reference to such matters is qualified by reference to such entity, act, resolution, ordinance, document or instrument so referred to or summarized.
Additional information about the Issuer is included in Appendix “A” hereto. The Report of GDS Associates, Inc., Marietta, Georgia, the Issuer's consulting engineer, is included in Appendix "B" hereto. Audited financial statements of the Issuer for fiscal year ending April 30, 2013 are included in Appendix “C” hereto. The proposed form of the joint opinion of Foley & Judell, L.L.P. and Roedel, Parsons, Koch, Blache, Balhoff & McCollister, A.L.C., Co-Bond Counsel, is included in Appendix “G” hereto.
Reference in this Official Statement to owner, holder, registered owner, Bondholder or Bondowner means the registered owner of the Bonds determined in accordance with the Bond Ordinance.
PURPOSE OF ISSUE
The Bonds are being issued for the purpose of constructing, acquiring, extending and/or improving the Utilities System, paying capitalized interest to and including August 1, 2014, and paying the costs of issuance therefor.
More specifically, the City anticipates using most of the proceeds of the Bonds to pay the capital costs associated with the City’s acquisition of Bayou Cove Unit No. 1, a nominal 75MW GE Frame 7EA combustion turbine-generator and related auxiliary equipment (the “Project”) from Bayou Cove Peaking Power LLC, an affiliate of NRG. For more information on the Project, see "PROJECT DESCRIPTION" herein and APPENDIX B - "Consulting Engineer's Report" attached hereto.
1 PLAN OF FINANCE
The Issuer estimates the sources of funds from the Bonds, and their respective uses, to be as follows:
SOURCES Bond Principal $28,075,000.00 Original Issue Premium 651,448.70 Total $28,726,448.70
USES Deposit to Project Fund $27,800,000.00 Deposit to Capitalized Interest Account 553,697.09 Underwriter’s Discount 196,525.00 Costs of Issuance(1) 176,226.61 Total $28,726,448.70
(1) Includes legal and required fees and costs and other issuance costs.
THE BONDS
Amount of Bonds Being Issued
Twenty Eight Million Seventy-Five Thousand Dollars ($28,075,000) of Bonds of the Issuer are being issued.
Date of Bonds
The Bonds are dated as of the delivery date, which is anticipated to be February 25, 2014.
Authority for Issue
The Bonds are authorized under the authority of Section 1430 of Title 39 of the Louisiana Revised Statutes of 1950, as amended (the “Act”).
Outstanding Parity Bonds
The Bonds are being issued on a parity (except with regard to certain reserve funds) with the Issuer’s outstanding Utilities Revenue Bonds, Series 2010B (the “Series 2010B Bonds”); Utilities Revenue Bonds, Series 2011 (the “Series 2011 Bonds”); Utilities Revenue Bond (DHH), Series 2012A (the “Series 2012A Bonds”); Utilities Revenue Bond (DEQ), Series 2012B (the “Series 2012B Bonds”); Utilities Revenue Refunding Bonds, Series 2013A (the “Series 2013A Refunding Bonds”); Taxable Utilities Revenue Refunding Bonds, Series 2013B (the “Series 2013B Refunding Bonds”); and Utilities Revenue Bonds, Series 2013A (the “Series 2013A Bonds,” and collectively, the “Outstanding Parity Bonds”), as more fully described herein. The Series 2010B Bonds, Series 2011 Bonds, Series 2012A Bonds and Series 2012B Bonds are further secured by separate accounts in the Reserve Fund as set forth in various ordinances of the Governing Authority. See “SECURITY PROVISIONS AND PROTECTIVE COVENANTS” hereto.
Security for Issue
The Bonds constitute legally binding and special limited obligations of the Issuer and are payable, equally with the Outstanding Parity Bonds, solely from the income and revenues (the “Revenues”) to be derived from the operation of the combined electric power and light plant and system, waterworks plant and system, natural gas system and sewer system of the Issuer
2 (collectively, the “Utilities System” or the “System”), after provisions have been made for payment therefrom of the reasonable expenses of administering, operating and maintaining the Utilities System (collectively, the “Net Revenues”), all as more fully described herein. See “SECURITY PROVISIONS AND PROTECTIVE COVENANTS” herein.
Average Life
The average life of the Bonds is approximately 19.524 years from their dated date.
Security Interest
The Issuer in the Bond Ordinance pledges the Net Revenues of the System as security for the Bonds. (See “SECURITY PROVISIONS AND PROTECTIVE COVENANTS - Security for Issue” herein.) Pursuant to Section 39:1430.1 of the Louisiana Revised Statutes of 1950, as amended, the Net Revenues so pledged and then or thereafter received by the Issuer or Paying Agent (hereinafter defined) shall be subject to the lien of such pledge. The lien of the Bondholders on the Net Revenues is a first priority lien, and no filing is required under Chapter 9 of the Uniform Commercial Code as enacted in the State of Louisiana (“Chapter 9”).
Section 39:1430.1 of the Louisiana Revised Statutes of 1950, as amended, states in pertinent part as follows:
Any pledge of and grant of security interest in taxes, income, revenues, monies, … or receipts … made by a public entity in connection with the issuance of securities shall be valid, binding, and perfected from the time when the pledge is made. The taxes, income, revenues, monies … or receipts … so pledged and then held or thereafter received by the public entity or any fiduciary shall immediately be subject to the lien of such pledge and security interest without any physical delivery thereof or further act, and the lien of such pledge and security interest shall be first priority and valid and binding as against all parties having claims of any kind in tort, contract, or otherwise against the public entity, whether or not such parties have notice thereof…. No filing with respect to such pledge and security interest made by a public entity need be made under Chapter 9 ... for the perfection or priority of such pledge and security interest.
Form and Denomination
The Bonds will be initially issued as fully registered bonds in “book-entry only” form registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”). DTC will act as securities depository for the Bonds, and purchasers of the Bonds will not receive certificates representing their interest in the Bonds purchased. The Bonds are in the denomination of $5,000, or any integral multiple thereof within a single maturity. See “BOOK-ENTRY ONLY SYSTEM” in herein.
Maturities; Interest Payment Dates
The Bonds will mature on May 1 in the years and in the principal amounts indicated on the cover page of this Official Statement and will bear interest from the dated date of the Bonds, payable on May 1 and November 1 of each year, commencing May 1, 2014 (each an “Interest Payment Date”), at the rates per annum indicated on the cover page hereof.
The Bonds shall bear interest from the date thereof or from the most recent Interest Payment Date to which interest has been paid or duly provided for. Interest on the Bonds will be computed on the basis of a 360-day year consisting of twelve 30-day months. The record date for the Bonds is the 15th day of the month preceding the Interest Payment Date.
3 Provisions Applicable if Book-Entry Only System is Terminated
General. Purchasers of Bonds will receive principal, and interest payments, and may transfer and exchange Bonds, pursuant to the following provisions only if the book-entry only system is terminated. Otherwise, payments and transfers will be made only as described in “BOOK-ENTRY ONLY SYSTEM” hereto.
Place of Payment. Principal of the Bonds is payable at Argent Trust Company, N.A., in the City of Ruston, Louisiana, or any successor thereto (the “Paying Agent” and the “Registrar”).
Payment of Interest. Upon discontinuation of the book-entry only system, interest on the Bonds will be payable by check mailed on or before the Interest Payment Date by the Paying Agent to the registered owner, determined as of the close of business on the 15th calendar day of the month next preceding an Interest Payment Date, whether or not such day is a Business Day (the “Record Date”), at the address of such registered owner as it appears on the registration books of the Paying Agent.
The person in whose name any Bond is registered at the close of business on the Record Date with respect to an Interest Payment Date (unless such Bond has been called for redemption on a redemption date which is prior to such Interest Payment Date) shall be entitled to receive the interest payable with respect to such Interest Payment Date notwithstanding the cancellation of such Bond upon any registration of transfer or exchange thereof subsequent to such Record Date and prior to such Interest Payment Date.
Provisions for Transfer, Registration and Assignment. The Bonds may be transferred, registered and assigned only on the registration books of the Paying Agent, and such registration shall be at the expense of the Issuer. A Bond may be assigned by the execution of an assignment form on the Bonds or by other instruments of transfer and assignment acceptable to the Paying Agent. A new Bond or Bonds of the same series will be delivered by the Paying Agent to the last assignee (the new registered owner) in exchange for such transferred and assigned Bonds after receipt of the Bonds to be transferred in proper form. Such new Bond or Bonds must be in the denomination of $5,000 or any integral multiple thereof within a single maturity. Neither the Issuer nor the Paying Agent shall be required to issue, register the transfer of, or exchange any Bond during a period beginning at the opening of business on the 15th day of the month next preceding an Interest Payment Date and ending at the close of business on the Interest Payment Date.
Redemption Provisions
Optional Redemption. The Bonds maturing May 1, 2025 and thereafter, are callable for redemption at the option of the Issuer in full, or in part, at any time on or after May 1, 2024, in such order of maturity determined by the Issuer and if less than a full maturity, then by lot within such maturity, at the principal amount thereof plus accrued interest from the most recent Interest Payment Date to which interest has been paid or duly provided.
In the event a Bond is of a denomination larger than Five Thousand Dollars ($5,000), a portion of such Bond ($5,000 or any multiple thereof) may be redeemed. Official notice of such call of any of the Bonds for redemption will be given by first class mail, postage prepaid, by notice deposited in the United States mails not less than thirty (30) days prior to the redemption date addressed to the registered owner of each bond to be redeemed at his address as shown on the registration books of the Paying Agent.
4 Mandatory Redemption. The Term Bonds maturing on May 1, 2029 shall be subject to mandatory sinking fund redemption on May 1 in the years and in the principal amounts set forth below at a redemption price equal to 100% of the principal amount thereof, plus accrued interest thereon:
Year Principal (May 1) Amount 2026 $845,000 2027 885,000 2028 920,000 2029 955,000* * Final Maturity.
The Term Bonds maturing on May 1, 2034 shall be subject to mandatory sinking fund redemption on May 1 in the years and in the principal amounts set forth below at a redemption price equal to 100% of the principal amount thereof, plus accrued interest thereon:
Year Principal (May 1) Amount 2030 $ 995,000 2031 1,050,000 2032 1,105,000 2033 1,160,000 2034 1,220,000* * Final Maturity.
The Term Bonds maturing on May 1, 2039 shall be subject to mandatory sinking fund redemption on May 1 in the years and in the principal amounts set forth below at a redemption price equal to 100% of the principal amount thereof, plus accrued interest thereon:
Year Principal (May 1) Amount 2035 $1,280,000 2036 1,345,000 2037 1,415,000 2038 1,490,000 2039 1,570,000* * Final Maturity. The Term Bonds maturing on May 1, 2043 shall be subject to mandatory sinking fund redemption on May 1 in the years and in the principal amounts set forth below at a redemption price equal to 100% of the principal amount thereof, plus accrued interest thereon:
Year Principal (May 1) Amount 2040 $1,645,000 2041 1,725,000 2042 1,805,000 2043 1,900,000* * Final Maturity.
Defeasance of Outstanding Series 2004 Bonds
As a condition of the issuance of the Bonds, the Issuer has covenanted that it will deposit irrevocably in trust with Argent Trust Company, N.A., acting as Escrow Agent, sufficient moneys as will provide at least the required cash amount on or before the May 1, 2014 payment date for the outstanding maturities of the Issuer’s Utilities Revenue Bonds, Series 2004 (the “Series 2004 Bonds”). Pursuant to the Act and the ordinance of the Governing Authority issuing the Series 2004 Bonds, such deposit will cause the Series 2004 Bonds to be defeased, at which point, the Series 2004 Bonds are no longer considered outstanding.
5 Defeasance
Pursuant to Chapter 14 of Title 39 of the Louisiana Revised Statutes of 1950, as amended, and the Bond Ordinance, the Bonds, in whole or in part, shall be defeased and shall be deemed to be paid and shall no longer be considered to be outstanding under the Bond Ordinance, and the covenants, agreements, and obligations contained in the Bond Ordinance with respect to such Bonds shall be discharged if one of the following shall occur:
(1) There is deposited in an irrevocable trust with a bank which is a member of the Federal Deposit Insurance Corporation, or its successor, or with a trust company, monies in an amount sufficient to pay in full the principal of and interest and call premiums, if any, on such Bonds to their stated maturity.
(2) There is deposited in an irrevocable trust with a bank which is a member of the Federal Deposit Insurance Corporation, or its successor, or with a trust company, noncallable direct general obligations of the United States of America or obligations unconditionally guaranteed in principal and interest by the United States of America, including certificates or other evidence of an ownership interest in such noncallable direct obligations, which may consist of specified portions of interest thereon, such as those securities commonly known as CATS, TIGRS, and STRPS, the principal of and interest on which, when added to other monies, if any, deposited therein, shall be sufficient to pay when due the principal of and interest and call premiums, if any, on such Bonds to their stated maturity.
Neither the obligations or the moneys deposited in irrevocable trust nor the principal or interest payments on any such obligations shall be withdrawn or used for any purpose other than and shall be held in trust for the payment of the principal of and premium, if any, and interest on the Bonds defeased. The owners of the Bonds which are so defeased shall have an express lien on such moneys or governmental obligations until paid out, used, and applied as set forth above.
THE UTILITIES SYSTEM
The Utilities System consists of the electric power generation and distribution system, a water works plant and distribution system, a natural gas distribution system, and a wastewater collection system and treatment plant, owned and operated by the Issuer. These utilities provide electric, gas, water and wastewater service to customers located within, and in areas adjacent to, the City of Alexandria. These utilities are operated by the City as a single revenue producing utility known as the Utilities System.
The Electric Utility
The electric power supply of the City's electric utility is currently provided from the City's D. G. Hunter (“Hunter”) generating station, participation power from Rodemacher Unit No. 2 acquired through the Louisiana Energy and Power Authority (“LEPA”), and economy energy from the Central Louisiana Electric Company (“CLECO”). LEPA has entered into an agreement with the Southwestern Power Administration (“SWPA”) whereby LEPA purchases hydroelectric power resulting from fixed power allocations of SWPA's available peaking capacity and then resells hydroelectric power to the City. Off-system power is delivered to the City through two interconnections with CLECO. The original 138 kV interconnection with CLECO at the Pineville substation has been reconductored and has an interconnection capability of 300 MVA. The second interconnection with CLECO is at the City's Twin Bridges substation at 230 kV with an interconnection capability of 300 MVA. The 138 kV transmission line connecting the Twin Bridges substation to the City's 138 kV transmission loop around the City has been reconductored and the
6 total electric load of the City can be served entirely from either CLECO interconnection. The 195 MW power supply of the City is comprised of 130 MW of certified capacity from two gas fired generating units at Hunter station, 54 MW from the City's entitlement share of Rodemacher Unit No. 2 and 11 MW from SWPA Hydro. The historic system peak demand has been about 190 MW.
Seven distribution substations transform electric power from 138 kV to 12 kV for delivery to customers. There is also one step-down substation that transforms the 12 kV primary voltage down to 2.4 kV for distribution to customers in the older sections of the City. Projects are underway to eliminate this last remaining 2.4kV station.
Future Generation
In addition to the Project and the City's continued participation in LEPA, the City anticipates its future electric power supply will come from the following sources:
D.G. Hunter Facility
The proceeds of the Series 2013A Bonds are being used by the City to improve its existing Hunter facility. Once renovated, Hunter will feature Seven Wärtsilä 20V34SG or similar reciprocating internal combustion engine-generators nominally rated at 9 MW each.
CLECO Purchased Power Agreement (30 to 60 MW)
The City has contracted with CLECO to provide 30 to 60 MW of intermediate capacity and energy as required. The agreement has a 20 year term, beginning July 1, 2015.
The resulting resources of the City after the Project is placed in service are anticipated to be as follows:
1. Hunter 64 MW 2. The Project 75 MW 3. CLECO Purchased Power Agreement 30 MW - 60 MW 4. LEPA/Rodemacher Unit 2 54 MW 5. LEPA/SWPA Hydro 11 MW Total 234 MW - 264 MW The Gas Utility
Purchased gas is delivered by the Crosstex-LIG (“LIG”) at five delivery points within the City. The 150 pound pressure from LIG is reduced by the City's gas utility to serve a 60 pound pressure transmission system which loops the City. Some 60 regulator stations on the City's transmission system reduce the gas pressure further into various separate sub-distribution systems which deliver natural gas to the City's customers. The sub-distribution systems utilize a 25 pound pressure, which is further reduced for household usage by regulators at customer meters. Approximately 505 miles of gas lines provide natural gas service to approximately 16,181 customers. The City’s natural gas purchases were approximately $7.5 million in fiscal year 2011; approximately $6.3 million in fiscal year 2012; and approximately $6.6 million in fiscal year 2013.
The Water Utility
The source of water supply for the City is from 64 wells, 38 of which are located in the Kisatchie field south of the City. Total production capacity is rated at approximately 26.5 million gallons per day. The remaining 26 wells are located at various sites within and outside the City. Chlorination is the only required treatment and some of the wells pump directly into the water distribution system. Well water collection mains at the Kisatchie field discharge into a ground
7 storage tank at the field from which water flows to the Adams ground storage tanks just south of the City. Water is pumped from this tank through parallel sets of pumps. One set delivers water to the southern end of the City, through a 42-inch main, and the other set of pumps delivers water through a 24 inch main to the City's central and northern ends of the distribution system. The City is in the process of constructing a parallel 24-inch main to insure against catastrophic loss of its 42-inch main. The distribution system contains storage with a total capacity of 11 million gallons and a network of mains ranging in size from 6 to 24 inches and the former is the nominal size serving most of the customers.
The Wastewater Utility
The City's wastewater facilities consist of waste water collection mains, trunk sewers, pumping stations and wastewater treatment facilities. The wastewater treatment plant, constructed in 1975 and upgraded over the years to a capacity of 22 mgd, includes the activated sludge process followed by aerated lagoons. The plant discharges into the Red River under a permit issued by the Louisiana Department of Environmental Quality the (“LDEQ”). The average daily flow for the calendar year of 2012 was 11 mgd. The waste treatment process is preceded by grit removal facilities. The City is active in a sewer line rehabilitation program.
Largest Customers of the Utilities System
Listed below are the largest customers for the water, gas, electric and sewer systems for Fiscal Year 2013:
WATER (a) GAS (b) 1. England Economic and Industrial Development District 1. Union Tank Car 2. Rapides Regional Medical Center 2. Christus St. Frances Cabrini 3. Christus St. Frances Cabrini 3. Diamond B Construction 4. Rapides Parish School Board 4. Rapides Regional Medical Center 5. Work Release Detention Ctr #2 5. England Economic and Industrial Development District 6. Latanier Water Association 6. AFCO Industries 7. Durawood Treatment 7. Rapides Parish School Board 8. Alexandria Mall 8. Work Release Detention Ctr #2 9. Wal-Mart 9. Huey Long-England Airpark 10. Rapides Parish Detention Center #3 10. Rapides Parish Detention Center #3
(a) Approximately 5% of FY 2013 total water sales. (b) Approximately 32% of FY 2013 total gas sales.
WASTEWATER (c) ELECTRIC (d)
1. England Economic and Industrial Development District 1. Christus St. Frances Cabrini 2. Rapides Regional Medical Center 2. Rapides Regional Medical Center 3. Christus St. Frances Cabrini 3. Rapides Parish School Board 4. Rapides Parish School Board 4. Wal-Mart 5. Rapides Detention Parish Center #3 5. Alexandria Mall 6. Wal-Mart 6. Sam’s Club 7. Best Western 7. Super One Foods 8. Alexandria Mall 8. AFCO Industries 9. Union Tank Car 9. Lowe’s Home Improvement 10. Sam’s Club 10. Best Western
(c) Approximately 7% of FY 2013 total wastewater sales. (d) Approximately 16% of FY 2013 total electricity sales.
8 Number of Customers as of April 30
Type of Service 2000 2001 2002 2003 2004 2005 2006 Electricity 24,847 24,728 24,952 24,678 24,744 24,749 25,151 Water 20,164 20,157 20,296 20,252 20,441 20,475 20,917 Gas 17,173 17,040 17,083 16,905 16,909 16,686 16,651 Sewer 16,217 16,174 16,235 16,142 16,294 16,598 16,832
2007 2008 2009 2010 2011 2012 2013 Electricity 24,531 24,540 24,509 24,600 24,503 24,593 24,605 Water 21,212 21,374 21,435 21,684 21,601 21,709 21,783 Gas 16,473 16,600 16,511 16,453 16,208 16,134 16,181 Sewer 17,102 17,188 17,196 17,351 17,223 17,306 17,336
Source: Department of Finance, City of Alexandria.
Schedule of Current Utility Rates
The following rate schedules are currently effective for the various utilities included in the Utilities System:
Electric Rates: Residential
Inside City Limits: Outside City Limits: Net Net
$ 0.141 per kWh for the first 25 kWh $0.159 per kWh for the first 45 kWh 0.086 Per kWh for the next 100 kWh 0.092 per kWh for the next 80 kWh 0.075 Per kWh for the next 875 kWh 0.080 per kWh for the next 875 kWh 0.072 Per kWh for all additional kWh 0.073 per kWh for all additional kWh
Net Minimum Bill $2.20 for single phase Net Minimum Bill $2.67 for single phase $4.40 for three phase service $5.33 for three phase service
There is further currently imposed for electrical service to all electric consumers located inside the city limits and to electric customers located outside the city limits, a monthly electrical service infrastructure renewal assessment:
Inside City Limits Outside City Limits $0.00098 per kWh $0.00113 per kWh
Electric Rates: Commercial
Monthly Rate: Inside City Limits Outside City Net Energy Charge: $0.146 per kWh $0.1671 per kWh for the first 100 kWh 0.130 per kWh 0.1490 per kWh for the next100 kWh 0.091 per kWh 0.0944 per kWh for the next 800 kWh 0.080 per kWh 0.0824 per kWh for the next 9,000 kWh 0.0769 per kWh 0.0795 per kWh for the next 15,000 kWh 0.0687 per kWh 0.0703 per kWh for all over 25,000 kWh
Energy Cost Adjustment
All monthly rates charged for metered sales are increased or decreased 0.011 cent per kWh for each 0.01 cent per kWh, or major fraction thereof, by which the rolling six month average cost per kWh for net generation and purchased energy is greater or less than 3.00 cents per kWh. The average cost per kWh for net generation and purchased energy each month is the sum for the second preceding calendar month of a) the fuel, operation and maintenance costs of City-owned generation; b) the total invoiced cost of purchased power; c) any outside transmission charges incurred as a result of delivering purchased energy or energy from City-owned generation and d) one-twelfth of any generation asset debt service payable in the current fiscal year; divided by the total kWh delivered to the City system during the second preceding calendar month. In the event the average cost per kWh for net generation and
9 purchased energy in any two consecutive months exceeds the rolling six month average cost per kWh for net generation and purchased energy, the City’s Utility Director, with the consent of the Director of Finance of the City may increase the monthly rate charged for metered sales to no more than the most recent month’s average cost per kWh for net generation and purchased energy.
Natural Gas Rates
Inside City Limits: Outside City Limits: (A) Monthly Rate: All customers except service to Internal Combustion Engines. Customer Charge $1.86 $2.48 Volume Charge: First 20,000 cu. ft. $6.17 per 1,000 cu. ft. $7.46 per 1,000 cu. ft. Next 30,000 cu. ft. 6.09 per 1,000 cu. ft. 7.35 per 1,000 cu. ft. Next 50,000 cu. ft. 5.96 per 1,000 cu. ft. 7.11 per 1,000 cu. ft. Next 250,000 cu. ft. 5.68 per 1,000 cu. ft. 6.65 per 1,000 cu. ft. Over 350,000 cu. ft. 5.61 per 1,000 cu. ft. 6.45 per 1,000 cu. ft.
(B) Monthly Rate: Internal Combustion Engine Service Customer Charge $6.20 per month Volume Charge $6.47 per 1,000 cu. ft.
There is further currently imposed for gas service to all consumers located inside the city limits and to customers located adjacent to existing gas mains outside the city limits, a monthly gas service infrastructure renewal assessment:
Inside City Limits Outside City Limits $0.02507 per Ccf $0.03008 per Ccf
Water Rates
MONTHLY RATE Inside City Limits: Outside City Limits: Service Charge 1 inch and smaller meters $ 3.67 $ 6.11 1 ½ inch meter 14.67 18.34 2 inch meter 20.79 28.12 3 inch meter 51.34 67.24 4 inch meter 84.36 112.48 6 inch meter 171.15 227.39 8 inch meter 244.51 325.2
Commodity Charge First 2,000 cubic feet $1.65 per CCF $2.20 per CCF Next 6,000 cubic feet 1.78 per CCF 1.62 per CCF Next 32,000 cubic feet 0.79 per CCF 1.05 per CCF over 40,000 cubic feet 0.61 per CCF 0.81 per CCF
CCF = 100 cubic feet
There is further currently imposed for water service to all consumers located inside the City limits and to customers connected to the City’s water system outside the City limits, a monthly water service infrastructure renewal assessment:
Inside City Limits Outside City Limits $0.06673 per Ccf $0.08808 per Ccf
Minimum Monthly Charge: The minimum monthly charge shall be the Customer Service Charge.
10 Wastewater Rates
(a) The computation of monthly residential and commercial charges for wastewater service shall be according to the formula:
RC + M plus (K times V)
Where,
RC = the residential and commercial charge applicable to all customers receiving service M = the fixed monthly service charge based on water meter size K = the volume charge in dollars per hundred cubic feet (Ccf) V = the hundred cubic feet (Ccf) of water used during the billing month by the wastewater customer
(b) The values for M and K shall be reviewed annually by the Director of the Utilities System.
Inside City Limits: Outside City Limits: MONTHLY RATE:
Customer Service Charge, or M factor
1 inch and smaller meters $ 3.36 $ 7.33 1 ½ inch meter 6.11 8.56 2 inch meter 8.56 12.23 3 inch meter 21.37 29.34 4 inch meter 36.68 48.91 6 inch meter 73.35 97.80 8 inch meter 110.03 146.71
Commodity Charge, or K factor
All cubic feet $ 1.29 per CcF $ 1.59 per CcF
Ccf = 100 cubic feet
There is further currently imposed for waste water discharges from all consumers located inside the city limits and from customers connected to existing sewer mains outside the city limits, a monthly wastewater service infrastructure renewal assessment:
Inside City Limits Outside City Limits $0.082621 per Ccf $0.10163 per Ccf
An additional charge of fifteen dollars ($15.00) per month shall be imposed as a wastewater service charge on all consumers that are served by the sanitary wastewater system of the City of Alexandria but are not served by the City’s water distribution system.
Minimum Monthly Charge: The minimum monthly charge shall be the Customer Service Charge.
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11 CITY OF ALEXANDRIA SUMMARY STATEMENT OF REVENUES, EXPENSES, CHANGES IN RETAINED EARNINGS - UTILITIES SYSTEM
Fiscal Year Ended April 30 2011 2012 2013 OPERATING REVENUES Charges for sales and services $ 99,921,462 $ 97,439,793 $92,718,677 Other 200,923 213,056 291,949 Total Operating Revenue $100,122,385 $ 97,652,849 $93,010,626
OPERATING EXPENSES Production, distribution, treatment and collection $ 70,820,465 $ 62,943,518 $56,434,651 General and Administrative 10,177,587 11,474,803 13,215,524 Depreciation 7,202,609 7,388,887 7,202,610 Total Operating Expense $ 88,200,661 $ 81,807,208 $76,852,785
OPERATING INCOME (LOSS) $ 11,921,724 $ 15,845,641 $16,157,841
NON-OPERATING REVENUES (EXPENSES) Investment Revenue $ 107,934 $ 77,761 105,143 Disposition of Fixed Assets 0 11,493 (4,373) Interest & Fiscal Charges (1,642,512) (1,586,740) (1,558,637) Total Non-Operating Revenues (Expenses) $ (1,534,578) $ (1,497,486) (1,457,867)
INCOME (LOSS) BEFORE OPERATING TRANSFERS $ 10,387,146 $ 14,348,155 $14,699,974
OPERATING TRANSFERS Transfers In $ 190,046 $ 160,374 $886,553 Transfers Out (9,636,079) (10,878,243) (10,732,207) Capital Contributions 883,979 754,866 370,104 Special Item - Project Performance 0 1,898,286 0 Total Operating Transfers $ (8,562,054) $ (8,064,717) $(9,475,550)
NET INCOME $ 8,125,092 $ 6,283,438 $ 5,224,424
RETAINED EARNINGS Beginning of Year $ 97,592,233 $ 99,417,325 $105,449,458 End of Year $ 99,417,325 $105,700,763 $110,673,882
______Source: Annual Financial Reports, City of Alexandria, Louisiana.
12 MANAGEMENT’S DISCUSSION AND ANALYSIS
Fiscal Year 2012
Utilities System Fund
The Utilities System Fund is the largest of the City’s proprietary funds. Revenues from the Utilities System are based primarily on the sales of electricity, water, natural gas, and wastewater service to customers. These revenues and charges for services were down $2.4 million in 2012 compared to the prior year. This was partially due to fuel cost recovery. The City does not benefit from fuel cost as the City is passing on costs incurred to its customers. However, the incurred and subsequent recovery of these costs can cause considerable fluctuations in the revenues and expenses of the Utilities System. Electric and gas fuel recovery accounts were down a combined $3.8 million in fiscal year 2012 compared to fiscal year 2011. The offsetting $1.4 million increase in charges for services represents an actual increase in proceeds from the sale of utilities services to customers. Lastly, the City received nearly $1.9 million from the proceeds of a performance bond originally intended to compensate a contractor performing work for the City, which was later determined to be sub-standard. The City will use said proceeds to compensate an alternate contractor to perform and complete the work.
Operating expenses were down $6.4 million in fiscal year 2012 compared to the previous year. The largest factor being the expense of fuel cost, which was down $6.6 million compared to fiscal year 2011. It should be noted that whereas the revenue and expense of fuel cost were both up, they were not equal due to timing differences and fluctuations in consumption. This condition can significantly influence the net income or net loss of a given year in the Utilities System Fund. The reduction in fuel cost was joined by decreases in personnel costs of $1.2 million. Payments in lieu of insurance were up $1.0 million, while depreciation was up nearly $0.2 million, partially offsetting the reductions. Increases in vehicle expense and contracted services were up $0.1 million each. Other relatively minor changes in items such as supplies and utilities accounted for the remaining changes in expenses. Transfers-out were up $1.2 million compared to the prior year, partly due to increases in deficit support of the City’s General Fund in the amount of $1.4 million. Other expenses were down in the Utilities System Fund as in other funds due to diligent cost cutting measures in response to the economy.
The results of the above were net income to the Utilities System Fund of almost $6.3 million for Fiscal Year 2012. This was reflected as an increase in total net assets.
Fiscal Year 2013
Utilities System Fund
Revenues in the Utilities System were down $4.7 million in 2013 compared to the prior year. This was partially due to fuel cost recovery. The City does not benefit from fuel cost as the City is passing on costs incurred by the City to its customers, but the incurred and subsequent recovery of the costs can cause considerable fluctuations in the revenues and expenses of the System. Electric and gas fuel recovery accounts were down a combined $4.2 million in fiscal year 2013 compared to the prior year. The remaining $3.2 million reduction in Charges for Services represents actual decrease in proceeds from the sale of utilities services to customers, the greatest change being attributable to electrical sales.
13 Operating expenses were down $5.0 million in fiscal year 2013 compared to the previous year. The largest factor being the expense side of fuel cost, which was down $6.2 million compared to the prior year. It should be noted that whereas the revenue and expense of fuel cost are both down, they are not equal due to timing differences and fluctuations in consumption. This condition can significantly influence the net income or net loss of a given year in the Utilities System Fund. The reduction in fuel cost is joined by a decrease in personnel costs of $0.6 million, and utilities of $0.3 million. Payments in lieu of insurance were up $1.6 million, while repairs and maintenance were up $0.3 million, while services and supplies are up nearly $0.2 million each, partially offsetting the reductions. Other relatively minor changes in items such as supplies and utilities account for the remaining change in expenses.
The results of the above were net income to the Utilities System Fund of approximately $5.2 million for fiscal year 2013. This is reflected as an increase in total net assets.
PROJECT DESCRIPTION
The City has signed an Asset Purchase Agreement for the purchase from Bayou Cove Peaking Power LLC (an affiliate of NRG) of the Project, one of four existing GE Frame 7EA combustion turbine-generators at the Bayou Cove Generating Station located near Jennings, Louisiana. The Project is nominally rated at 75 MW. The Bayou Cove Generating Station was designed and constructed by Shaw and placed in service in 2002.
The Project, along with certain auxiliary equipment, will be procured by the City through an Asset Purchase Agreement, anticipated to be finalized by early 2014. The entire Bayou Cove Generating station, including the Project, will continue to be operated and maintained by NRG.
GDS Associates, Inc., Marietta, Georgia (the "Consulting Engineer"), is the consulting engineer for the City.
Governmental Regulations and Approvals
The Bayou Cove Generating Station is permitted as a minor source of toxic air pollutants. The Project is restricted to emission rates of 73.0 lbs/hour of carbon monoxide (“CO”) and 110.0 lbs/hr of NOx. These allowed rates are well in excess of the typical emission rates provided by the DLN1 burners installed on the Bayou Cove units and have allowed NRG to operate the units under all weather conditions without incurring emission violations. The Bayou Cove Generating Station as a whole is restricted to 240.07 tons of CO and 249.8 tons of NOx emissions annually, amounts sufficient for generation at a capacity factor approach 50%.
Fuel Supply
The primary natural gas fuel supplier for the Bayou Cove Generating Station is Spectra, the owner of the Egan storage hub. According to NRG, fuel supply has been curtailed only when maintenance (pigging, etc.) has been required on the pipeline. The City is currently negotiating a Fuel Services Agreement with NRG to secure the natural gas supply necessary for operating the Project, to the extent called upon to generate.
Transmission Access
Power is generated by the Bayou Cove units at 13.8 kV. A single generator step-up transformer serves both the Project and Unit No. 2 (a similar setup is provided for Units 3 and 4) and transforms power to 138 kV. Power from all four Bayou Cove units then leaves the Bayou Cove
14 Generating Station site via NRG’s 138 kV gas breaker to Entergy’s Bayou Cove Substation. The 138 kV power is transported to Entergy’s Richard, Jennings or Lake Charles Bulk stations. The nearest connection to the 500 kV grid is through a 500/138 kV transformer at Entergy’s Richard station.
The transmission availability/deliverability to the City was studied by Cleco as the City’s transmission provider and long-term network resource service has been granted for the life of the project. Since the Bayou Cove Generating Station is located on the Entergy transmission system, NRG has submitted a request for 80 MW of firm point-to-point service between Entergy and Cleco. The study was completed in May 2013, and no transmission improvements were identified as needing to be constructed prior to granting service.
CONSULTING ENGINEER'S REPORT
The report of the Consulting Engineer prepared for the Issuer is included in Appendix "B" hereto. The report of the Consulting Engineer contains further detail on the Project, the Utilities System, anticipated debt service coverage and other matters relating to the Bonds.
The report of the Consulting Engineer has been furnished by the Consulting Engineer and the information set forth therein, including, but not limited to, any projections set forth therein, has not been independently verified by the Issuer or Stephens Inc., as Underwriter of the Bonds.
Portions of the Consulting Engineer's report are summarized herein; however, such summaries are expressly qualified by reference to the entire report.
CERTAIN FACTORS AFFECTING THE ELECTRIC UTILITY INDUSTRY
The Electric Utility Industry Generally
The electric utility industry has been, and in the future may be, affected by a number of factors which could impact the financial condition and competitiveness of electric utilities, such as that operated as part of the Utilities System. Such factors include, among others, (i) effects of compliance with rapidly changing environmental, safety, licensing, regulatory and legislative requirements, (ii) changes resulting from conservation and demand-side management programs on the timing and use of electric energy, (iii) other federal and state legislative changes, (iv) effects of competition from other electric utilities (including increased competition resulting from mergers, acquisitions, and “strategic alliances” of competing electric (and gas) utilities and from competitors transmitting less expensive electricity from much greater distances over an interconnected system) and new methods of producing low cost electricity, (v) increased competition from independent power producers and marketers and brokers, (vi) “self-generation” by certain industrial and commercial customers, (vii) issues relating to the ability to issue tax-exempt obligations, (viii) severe restrictions on the ability to sell to non-governmental entities electricity from generation projects financed with outstanding tax-exempt obligations, (ix) changes from projected future load requirements, (x) increases in costs, (xi) shifts in the availability and relative costs of different fuels, (xii) inadequate risk management procedures and practices with respect to, among other things, the purchase and sale of energy and transmission capacity, and (xiii) effects of possible manipulation of electric markets. Any of these general factors and the factors discussed below (as well as other factors) could have an effect on the financial condition of the Utilities System. Electric utilities are subject to various federal and state laws requiring compliance with environmental rules and regulations. In addition, the operation of the Utilities System is also subject to various federal and state laws which affect the construction and operation of its facilities.
15 Open Access Rule. In 1996, to remove impediments to competition in the wholesale bulk power marketplace, to remedy undue discrimination by transmission providers against wholesale competitors, and to thereby bring more efficient, lower cost power to electricity consumers, the Federal Energy Regulatory Commission (“FERC”) issued Order No’s. 888 and 889 (each as subsequently amended and clarified), which required all jurisdictional utilities to offer open access, non-discriminatory transmission service pursuant to a uniform, pro forma tariff. In addition, non-jurisdictional utilities must provide comparable transmission service as a condition of receiving service from jurisdictional utilities under the pro forma tariff. As noted below, MISO (hereinafter defined) administers an Open Access Transmission Energy and Operating Reserve Markets Tariff throughout parts of 15 states (including Louisiana).
Order No. 889, among other things, required FERC-jurisdictional utilities owning or operating transmission facilities to establish an “Open Access Same-time Information System” (“OASIS”) to share transmission-related information (including information about available capacity) on the Internet, to use the OASIS as the exclusive means for scheduling transactions on the transmission system, and to use OASIS for their own wholesale power transactions. Order No. 889 also adopted standards of conduct for utilities that offer open access transmission services to ensure that transmission owners and their affiliates do not have an unfair competitive advantage in using transmission to sell power. Such standards of conduct, among other things, require transmission owners to separate the personnel with access to information about the status of the transmission system from power marketing personnel.
In 2007, FERC issued Order No. 890 (Preventing Undue Discrimination and Preference in Transmission Service), which requires transmission planning on a region-wide basis. Non-jurisdictional utilities may be compelled to participate. In 2011, FERC issued Order No. 1000 (Transmission Planning and Cost Allocation by Transmission Owning and Operating Public Utilities), further reforming its electric transmission planning and cost allocation requirements for public utility transmission providers. The rule buildings on the reforms of Order No. 890. FERC conditionally accepted MISO’s Order No. 1000 compliance filing in 2013 subject to further compliance filings. The Issuer participates through MISO.
In 2008, FERC approved a plan that encourages coordinated generation planning for MISO, by enabling MISO to establish reserve requirements, and for requiring utilities that fail to meet reserve requirements for a month to purchase reserves from other utilities. In 2012, MISO replaced the monthly reserve/capacity requirements with annual reserve requirements that feature zonal requirements for capacity.
Regional Transmission Organization Rule. To promote more competition in the electric service industry and to remedy continued undue discrimination in the provision of transmission service by fostering the development of regional transmission organizations (“RTO”), FERC issued Order No. 2000 (December 1999) and Order No. 2000-A (February 2000). These Orders established certain minimum characteristics an RTO must meet, and functions an RTO must provide. These orders also require jurisdictional transmission entities to file with FERC, a proposal to either participate in an RTO, or, in the case of an independent transmission system operator (“ISO”), address the extent to which such operator confirms, and any obstacles to conformance, with Order No. 2000.
On February 1, 2002, MISO began providing regional transmission service as an RTO. Upon commencement of its membership in MISO, the Issuer will purchase transmission service from MISO under the MISO Tariff. MISO and Midwest Reliability Organization (“MRO”) currently provide the reliability function with respect to utilities within MISO. MISO has a FERC- approved Open Access Transmission, Energy and Operating Reserve Markets Tariff, meeting both
16 the transmission open access and standardized wholesale electric market design requirements. All transmission facilities of participating transmission owners within the MISO footprint have been placed under the operational control of MISO. In 2005, MISO also implemented its “Day Two” energy market, which incorporates open and transparent spot energy markets, including both financially binding Day-Ahead and Real-Time (i.e. balancing) energy markets. The energy markets ensure optimal dispatch of all generation resources within the region by centrally dispatching all resources in the region, and using a Locational Marginal Pricing, or LMP, as a market-based pricing mechanism for congestion management. In 2009, MISO implemented its centralized ancillary services market.
Security Issues
Following the terrorist attacks of September 11, 2001, increased emphasis has been placed on addressing security measures for the infrastructure systems and facilities throughout the United States. In 2002, the Public Health Security and Bioterrorism Preparedness and Response Act of 2002 (“Bioterrorism Act”) was signed. The Bioterrorism Act requires that certain community water systems conduct Vulnerability Assessments and prepare Emergency Response Plans. Full compliance with the Bioterrorism Act included two parts:
1. Developing a Vulnerability Assessment (VA) and submitting that VA and a VA Certification to Environmental Protection Agency (EPA) Headquarters; and
2. Updating the System’s Emergency Response Plan (ERP) and submitting an Energy Response Plan certification within six months of completing the VA.
As of June 24, 2004, the City met all three requirements, and the Utilities System remains in full compliance with the Bioterrorism Act.
Environmental Issues
The Issuer is subject to federal and state laws and regulations governing the protection of the environment. The State of Louisiana (the “State”) through the LDEQ establishes standards of performance and requires permits for the generating units of the Issuer. In addition, the LDEQ has been delegated authority over and implements certain programs established by Environmental Protection Agency (“EPA”). The Issuer has obtained all necessary environmental permits for construction and operation of its generating units. All the units are currently in compliance with the permit conditions. Issuer also actively follows proposed and new environmental regulations, legislation and major environmental court decisions. The Issuer performs significant planning around future potential compliance obligations.
The Issuer cannot predict whether any future environmental measure will be adopted or imposed, or the extent to which such measures, if adopted or imposed, will actually impact the Issuer or the operation of the Utilities System.
Energy Policy Act of 2005
The Energy Policy Act of 2005 (“EPAct 2005”) covers many components that may affect the Utilities System and related energy markets in the future. This legislation was signed into law in August 2005 and addresses, among other things, energy efficiency; renewable energy; nuclear energy; electricity related reforms; provides incentives for oil and gas production; and encourages the deployment of clean coal technology. A summary of the reforms made by EPAct 2005 relating to electricity and renewable energy and certain relevant FERC actions related thereto follows.
17 Electricity — Title XII. Title XII of EPAct 2005 covers electricity, with the majority of the provisions requiring implementation by FERC, some of which have already been acted on or are in process as discussed below.
EPAct 2005 creates a self-regulating reliability organization that is charged with developing electric reliability rules that are mandatory and subject to enforcement penalties for all market participants, including the Utilities System, with FERC having oversight over the rules and their enforcement. FERC issued a final rule implementing the new organization titled “Rules Concerning Certification of the Electric Reliability Organization; and Procedures for the Establishment, Approval, and Enforcement of Electric Reliability Standards” on November 16, 2006.
EPAct 2005 repeals the Public Utility Holding Company Act and transfers consumer protection authorities from the SEC to FERC and the states. In March 2007, FERC issued Order No. 693 entitled “Mandatory Reliability Standards for the Bulk-Power System” or “Reliability Standards Order.”
In February 2007, FERC issued Order No. 890 reforming its pro forma Open Access Transmission Tariff (“OATT”) adopted in 1996 pursuant to Order Nos. 888 and 889. Order No. 890’s reforms include: (1) greater consistency and transparency in available transmission capacity calculations; (2) open, coordinated and transparent planning; (3) reforms of energy imbalance penalties; (4) reform of rollover rights policy; (5) clarification of tariff ambiguities; and (6) increased transparency and customer access to information. FERC reaffirmed many of the core elements of the Order No. 888 proforma OATT in Order No. 890 including: (1) the comparability requirement wherein third party users of the transmission system must receive service in a manner comparable to the transmission owner’s use of the system; (2) the continuance of protections for native load customer’s transmission service rights; and (3) FERC’s approach to reciprocity for non-jurisdictional transmission owners. All public utilities, including RTOs and Independent System Operators are required to file revisions to their OATT to conform to Order No. 890 pursuant to a compliance schedule established by FERC. Order No. 890 became effective May 17, 2007.
Louisiana Legislation
Deregulation of the electric utility industry at the retail level is currently not an issue of significance in the State. Although retail deregulation is in place in neighboring Texas and in other states across the country, the movement has lost much political and public interest in the last decade. Crises in the California market, as well as a significant weakening in the financial condition of the electric utilities across the country, have caused regulators and consumers to rethink the benefits of retail deregulation. However, at the wholesale level, as provisions in the Energy Policy Act of 1992 were implemented by the FERC Orders 888 and 889, the City is facing new challenges resulting from increased competition in the wholesale power market. The Issuer’s generating facilities have become a commodity that competes in the market against other similar resources. The Utilities System will continue to be affected as it intends to be an active participant in wholesale sales and purchases.
OTHER REGULATORY MATTERS
Environmental, Conservation and Other Regulations and Permitting Requirements
Other operations of the Utilities System outside the electric portion are likewise subject to continuing environmental, conservation and other regulation and permitting requirements by federal, state and local authorities. The Issuer believes that its operations are currently in substantial compliance with the provisions with all such regulations and permitting requirements. Federal, State standards and procedures that govern the control of the environment, conservation and system operations can change. These changes may arise from continuing legislative, regulatory, and
18 judicial action regarding the standards, procedures and requirements for compliance and the issuance of permits. Therefore, there is no assurance that the units in operation, under construction, or contemplated will remain subject to the regulations that are currently in effect. Furthermore changes in clean air laws and environmental standards may result in increased capital and operating costs.
Power Sales Contract with Louisiana Energy and Power Authority
The City is a member of LEPA (the “Authority”). LEPA was created in 1979 under a Joint Action Agency created pursuant to Title 33 of the Louisiana Revised Statutes of 1950, Chapter 10-A, Sections 4545.1 through 4545.37, as amended, as a political subdivision of the State and pursuant to elections in each municipality to provide facilities for the generation and transmission of electric power and energy for the benefit of participating Louisiana municipalities. Currently, the Authority comprises seventeen participating municipalities (Abbeville, Alexandria, Houma, Jonesville, Kaplan, Lafayette, Minden, Morgan City, Natchitoches, New Roads, Plaquemine, Rayne, St. Martinville, Vidalia, Vinton, Welsh and Winnfield) (the “Member Municipalities”). The City is a participant in LEPA's interest in Rodemacher Unit No. 2 in Boyce, Louisiana.
Under Power Sales Contracts, dated as of October 1, 1982 (the “Power Sales Contracts”), between the LEPA and five of its Member Municipalities (Alexandria, Houma, Morgan City, New Roads, and Jonesville) (the “Participants”), LEPA sells its portion of the capacity and energy of Rodemacher Unit No. 2 to the Participants and each Participant purchases its respective Entitlement Share of such capacity and energy. The aggregate Entitlement Shares of all Participants equals 100% of the capacity and energy of LEPA's portion of Rodemacher Unit No. 2. The payments pursuant to the Power Sales Contracts are required to be sufficient to pay all costs of the LEPA in connection with Rodemacher Unit No. 2, including debt service requirements and other requirements under LEPA’s Bond Resolution.
Midcontinent Independent Transmission Operator, Inc.
The City is a member of the Midcontinent Independent System Operator, Inc. (“MISO”). MISO is an independent, non-profit regional transmission organization, responsible for maintaining reliable transmission of power in eleven U.S. states and the Canadian province of Manitoba.
MISO’s real-time and day-ahead energy markets use centralized economic dispatch to optimize the use of all generation resources within the region based on bids and offers by market participants. Market Participants (“MP”) such as the City of can offer to sell the output of its owned or contracted generation to the market and, in turn, purchase its energy needs at a day-ahead marginal price which is based on the cleared offers from all generation participating in the market. MISO allocates Auction Revenue Rights, which the City may convert to Financial Transmission Rights (“FTR”), which entitle the City to receive revenues or incur the obligation to pay charges associated with the delivery of energy from its owned resources as well as the MISO energy market. FTRs represent an obligation, not an option, to receive revenues or pay charges for transmission congestion associated with those energy deliveries. These FTR revenues or costs vary on an hourly basis depending on the amount of transmission congestion. MISO operates three competitive markets and acts as a financial clearinghouse for electric energy supply, electric energy load, and FTRs. The purpose of these markets is to facilitate competition between MPs, dispatch the least cost available generation resources, optimize the use the Transmission System, and provide MPs with the ability to hedge future energy and congestion costs.
While the City expects that its membership in MISO will lower its operational costs and improve the reliability for the provision of electrical power to its customers, there can be no guarantees that such benefits will materialize.
19 SECURITY PROVISIONS AND PROTECTIVE COVENANTS
Defined Terms
In addition to other terms defined in this Official Statement, certain terms used in this section shall have the following meanings:
“Additional Parity Bonds” means any additional pari passu bonds which may hereafter be issued pursuant to the Bond Ordinance on a parity with the Bonds and the Outstanding Parity Bonds.
“Additional Parity Bond Ordinance” means any ordinance adopted by the governing authority of the Issuer authorizing the issuance of the Additional Parity Bonds.
“Bond Year” means the one-year period ending on the principal payment date of the Bonds (May 1) of each year.
“Capital Additions and Contingencies Fund” means fund by such name described herein.
“MISO Collateral Account” means the account by such name described herein.
“Outstanding Parity Bond Ordinances” means collectively, the ordinances adopted by the Governing Authority of the Issuer on January 12, 2010, June 14, 2011, November 1, 2011, December 13, 2011, September 3, 2013 and October 15, 2013, authorizing the issuance of the Outstanding Parity Bonds.
“Person” means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, or government or any agency or political subdivision thereof.
“Qualified Investments” means any investments which are at the time legal for investment of the Issuer’s funds pursuant to the laws of the State, the value of which shall be determined by either its fair market value or its face amount plus accrued interest thereon, as set forth in the Bond Ordinance.
“Reserve Fund Alternative Investment” means a surety bond or insurance policy issued by an insurance company or an irrevocable letter of credit issued by a bank to be deposited in a Reserve Account.
“Reserve Insurer,” with respect to any issue of Additional Parity Bonds, shall have the meaning set forth in the applicable Additional Parity Bond Ordinance.
“User Fees” means charges or fees levied on users of the Utilities System for the cost of operation, maintenance and replacement of the Utilities System, for the repayment of debt incurred with respect to the Utilities System and for such purposes as may be determined by the Governing Authority from time to time.
“Utilities System Fund” means the fund of such name established pursuant to the Outstanding Parity Bond Ordinances into which the Issuer deposits Revenues as received.
Security for Issue
The Bonds, equally with the Outstanding Parity Bonds, shall be payable as to both principal and interest solely from the Net Revenues. The Net Revenues derived from the operation of the Utilities System have been irrevocably and irrepealably pledged and dedicated in an amount sufficient for the payment of the Bonds and the Outstanding Parity Bonds in principal and interest
20 as they respectively become due and payable, and for other purposes set forth in the Bond Ordinance. The Net Revenues shall be set aside in the Utilities Revenue Fund and shall be and remain so pledged for the security and payment of the Bonds in principal and interest, and for all other payments provided in the Bond Ordinance, until the Bonds shall be fully paid and discharged.
Obligation to Fix Rates
The Issuer, pursuant to the Bond Ordinance, has covenanted to fix, establish, maintain and collect such rates, fees, rents or other charges for the services and facilities of the Utilities System, and all parts thereof, and to revise the same from time to time whenever necessary, as will always provide Revenues in each year sufficient to pay (i) the necessary expenses of administering, operating and maintaining the Utilities System in each year, (ii) one hundred twenty percent (120%) of the principal maturing and interest and other amounts, if any, due on the Bonds, the Outstanding Parity Bonds and any Additional Parity Bonds in each year, (iii) all reserves or sinking funds or other payments required for such year by the Bond Ordinance, the Outstanding Parity Bond Ordinances, and any Additional Parity Bond Ordinance, and (iv) all other obligations or indebtedness payable out of the Revenues of the Utilities System for such year. The Issuer has further covenanted that such rates, fees, rents or other charges shall not at any time be reduced so as to be insufficient to provide adequate Revenues for such purposes.
Except as provided therein, nothing in the Bond Ordinance or in the Bonds shall be construed to prevent the Issuer from altering, amending or repealing from time to time as may be necessary any resolution or ordinances setting up and establishing a schedule or schedules of rates and charges for the services and facilities to be rendered by the Utilities System, said alterations, amendments or repeals to be conditioned upon the continued preservation of the rights of the Owners with respect to the Revenues of the Utilities System, not alone for the payment of the principal of and interest on the Bonds, but to give assurance and insure that the Revenues shall be sufficient at all times to meet and fulfill the other provisions stated and specified in the Bond Ordinance. It is understood and agreed, however, that the Issuer shall fix and maintain and collect rates and charges for the services and facilities to be rendered by the Utilities System, irrespective of the user thereof, that no free service shall be furnished to any Person, association of Persons or corporation, public or private, or even to the Issuer itself and that all water, gas and electricity shall be metered; provided, however, that the Issuer shall not be required to meter electricity used by the Issuer for street lighting purposes, nor shall the Issuer be required to meter water used for fire fighting purposes through its fire hydrants, but the Issuer pays from its general revenues a minimum annual rental of Twenty-Five Dollars ($25.00) per year for each fire hydrant connected to the Utilities System and available for fire fighting and also a minimum of two and one-half cents (2½ ¢) per KWH of electricity used for street lighting, such consumption of electricity to be computed by multiplying the wattage of the street lights by 4,000 hours per year, the estimated average operating time of such lights. It is further understood and agreed that the schedule of rates, fees, rents or other charges being charged as of the date of the adoption of the Bond Ordinance for services and facilities rendered by the Utilities System shall remain in effect until changed in compliance with other provisions of the Bond Ordinance.
It is expressly provided in the Bond Ordinance that (i) all charges owed by any individual, partnership or corporation for electric, water, gas and sewer services rendered by the Utilities System shall be billed and collected as a unit; (ii) failure of any Person to pay said combined charge within fifteen (15) days of the date on which it is due shall cause such charge to become delinquent; (iii) if such delinquent charge, is not paid within ten (10) days from the date on which it became delinquent, the Issuer will shut off water, gas and electric services to the affected premises; and (iv) the Issuer and the Governing Authority and its officials, agents and employees will do all things necessary and will take advantage of all remedies afforded by law to collect and enforce the prompt payment of all charges made for electricity, water, gas and sewer services rendered by the Utilities System.
21 All delinquent charges for utilities services shall on the date of delinquency have added thereto a penalty established by the Issuer as a percentage of the amount of the charge and the amount so due, including the penalty charge, shall, after thirty (30) days from the date of delinquency, bear interest at a rate specified by the Issuer. If services shall be discontinued as provided in the Bond Ordinance, the customer shall, in addition to paying the delinquent charges, penalties and interest, pay as a condition precedent to the resumption of service, a reconnection charge designated by the Issuer.
Flow of Funds
The Issuer shall deposit all of the Revenues earned or derived from the operation of the Utilities System daily as the same may be collected in the Utilities System Fund maintained with the regularly designated fiscal agent of the Issuer from time to time. The Utilities System Fund shall be maintained and administered in the following order of priority and for the following express purposes:
(a) The payment of all reasonable expenses of administration, operation and maintenance of the Utilities System, notwithstanding anything in the Bond Ordinance to the contrary, any amounts required to be deposited into the MISO Collateral Account pursuant to the Bond Ordinance shall be included as a reasonable expense of the administration, operation and maintenance of the Utilities System.
(b) The maintenance of a "Sinking Fund - 2014" (the "Sinking Fund") sufficient in amount to pay promptly and fully the principal of and the interest on the Bonds, the Outstanding Parity Bonds and any Additional Parity Bonds issued hereafter in the manner provided by the Bond Ordinance, as they severally become due and payable (whether at maturity or upon optional or mandatory redemption), by transferring from the Utilities System Fund to the Sinking Fund, monthly in advance on or before the 20th day of each month, a sum equal to 1/6th of such interest and Administrative Fee (as defined in the Outstanding Parity Bond Ordinances and any Additional Parity Bond Ordinance), if any, falling due on the next Interest Payment Date, and a sum equal to 1/12th of such principal falling due on the next principal payment date, together with such additional proportionate sum as may be required to pay said principal and interest as the same respectively become due. The depository for the Sinking Fund shall transfer from said Sinking Fund to the paying agent bank or banks for all Bonds payable from said Fund at least three (3) days in advance of each Interest Payment Date funds fully sufficient to pay promptly the principal and interest so falling due on such date.
Interest accruing through August 1, 2014 will be paid from bond proceeds deposited in the Project Fund.
There is no Reserve Account in the Reserve Fund dedicated to the Bonds. Funds may not be withdrawn from any other Reserve Account for the payment of any amounts due on the Bonds.
Except with respect to the Series 2010B Reserve Account, the Series 2011 Reserve Account, the Series 2012A Reserve Account, or the Series 2012B Reserve Account, the Issuer may cause to be deposited into any Reserve Account a Reserve Fund Alternative Investment for the benefit of the holders of the bonds secured thereby as may be authorized by an Additional Parity Bond Ordinance.
In the event of the refunding of any bonds, the Issuer may withdraw from the applicable Reserve Account all, or any portion of, the amounts accumulated therein with respect to the Bonds being refunded and deposit such amounts to be held for the payment of the principal or redemption premium, if applicable and interest on the Bonds being refunded; provided that such
22 withdrawal shall not be made unless (i) immediately thereafter the Bonds being refunded shall be deemed to have been paid pursuant to the Bond Ordinance and (ii) the amount remaining in the applicable Reserve Account, after giving effect to the issuance of the refunding bonds and the disposition of the proceeds thereof, shall not be less than the Series 2014 Reserve Fund Requirement, as applicable.
If at any time it shall be necessary to use moneys in any Reserve Account for the purpose of paying principal or interest on bonds secured by such Reserve Account as to which there would otherwise be default, then the moneys so used or drawn upon shall be replaced or reimbursed from the Net Revenues of the System first thereafter received, not hereinabove required for payments into the Sinking Fund, it being the intention hereof that there shall as nearly as possible be at all times in each Reserve Account the amounts established in the Bond Ordinance or in the applicable Additional Parity Bond Ordinance.
The Issuer’s repayment of any draws under the Reserve Fund Alternative Investment and related reasonable expenses incurred by the Reserve Insurer shall be in accordance with the terms of the Reserve Fund Alternative Investment and Insurance Agreement.
(c) The maintenance of the Capital Additions and Contingencies Fund to care for extensions, additions, improvements, renewals and replacements necessary to properly operate the Utilities System by transferring from said Utilities System Fund to the Capital Additions and Contingencies Fund, monthly on or before the 20th day of each month of each year, a sum equal to nine percent (9%) of the gross revenues of the Utilities System for the preceding month, provided that such sum is available after provision is made for the payments required under paragraphs (a) and (b) above. Such payments into the Capital Additions and Contingencies Fund shall continue until such time as there has been accumulated therein the sum of One Million Dollars ($1,000,000), whereupon such payments may cease and need be resumed thereafter only if the total amount of money on deposit therein is reduced below the sum of One Million Dollars ($1,000,000), in which event such payments shall be resumed and continue until said maximum of One Million Dollars ($1,000,000) is again accumulated. In addition to caring for extensions, additions, improvements, renewals and replacements necessary to properly operate the Utilities System, the money in the Capital Additions and Contingencies Fund may also be used to pay the principal of and the interest on the Bonds, the Outstanding Parity Bonds, and any Additional Parity Bonds for the payment of which there is not sufficient money in the Sinking Fund and applicable Reserve Account, but the money in said Capital Additions and Contingencies Fund shall never be used for the making of improvements and extensions to the Utilities System or for payment of principal or interest on bonds if the use of said money will leave in said Capital Additions and Contingencies Fund for the making of emergency repairs or replacements less than the sum of Twenty-Five Thousand Dollars ($25,000).
If at any time there are sufficient moneys on deposit in the Capital Additions and Contingencies Fund to retire all outstanding bonds payable from the Sinking Fund by exercising the redemption option provided by such bonds or by purchase on the open market, the Issuer may utilize such funds for such purpose, in its sole discretion.
(d) Any moneys remaining in said Utilities System Fund after making the above- required payments may be used by the Issuer for the purpose of calling and/or purchasing and paying any bonds payable from the Revenues of the Utilities System, or for such other lawful corporate purposes as the Governing Authority may determine, whether such purposes are or are not in relation to the Utilities System.
23 MISO Collateral Account
The MISO Collateral Account shall be maintained with the regularly-designated fiscal agent of the Issuer, or the bank or other financial institution (the “Letter of Credit Provider”) providing a letter of credit or other security (the “Letter of Credit”) on behalf of the Issuer to MISO, its successors or assigns, pursuant to the MISO Credit Policy (the “Credit Policy”). The MISO Collateral Account shall be funded to the amount required from time to time by the Credit Policy, and the funds held in the MISO Collateral Account are to be retained solely for the purpose of (a) paying the fees of or making reimbursement or other payments to the Letter of Credit Provider as required by the Letter of Credit and related documents, and (b) making any other payments to or providing additional security for MISO as required by the Credit Policy. If at any time it shall be necessary to use funds in the MISO Collateral Account for any such purpose, then the moneys so used shall be replaced from the Utilities System Fund. It is expressly provided that funds held in the MISO Collateral Account shall not form part of the security for the Bonds issued and are not considered Net Revenues of the System pursuant to the Bond Ordinance. Notwithstanding the foregoing, to the extent that the MISO Collateral Account is not funded or is dissolved pursuant to the terms of the Credit Policy referenced in the Bond Ordinance, as amended or supplemented, the MISO Collateral Account shall be dissolved and any funds contained therein not required pursuant to the provisions of law or other agreements (including but not limited to the Letter of Credit and any related documents) to be used for other purposes shall be deposited in the Utilities System Fund.
Investment of Funds
All or any part of the moneys in any Reserve Account and the Capital Additions and Contingencies Fund shall, at the written request of the Issuer, be held in cash or cash equivalents or shall be invest in Qualified Investments. All income derived from such investments shall be added to the money in said respective funds or to the Utilities System Fund, and such investments shall, to the extent at any time necessary, be liquidated and the proceeds thereof applied to the purpose for which the respective funds are created.
Issuance of Additional Bonds
All of the Bonds shall enjoy complete parity of lien on the Revenues of the Utilities System despite the fact that any of the Bonds may be delivered at an earlier date than any other of the Bonds. The Issuer covenants in the Bond Ordinance that it shall issue no other bonds or obligations of any kind or nature payable from or enjoying a lien on the revenues of the Utilities System having priority over or parity with the Bonds or enter into any take or pay contracts or guaranteed contracts payable from Revenues of the System and with a term in excess of five (5) years (“Contracts”); provided, however, that Additional Parity Bonds may hereafter be issued or Contracts may be entered into under the following conditions:
1. The Bonds or any part thereof may be refunded with the consent of the Owners thereof (except that as to Bonds which are then subject to redemption and have been properly called for redemption, such consent shall not be necessary) and the refunding bonds so issued shall enjoy complete equality of lien with the portion of the Bonds which is not refunded, if there be any, and the refunding bonds shall continue to enjoy whatever priority of lien over subsequent issues as may have been enjoyed by the Bonds refunded; provided, however, that if only a portion of the Bonds outstanding is so refunded and if the refunding bonds require total principal and interest payments during any Bond Year in excess of the principal and interest which would have been required in such Bond Year to pay the Bonds refunded thereby, then such Bonds may not be refunded without the consent of the Owners of the unrefunded portion of the Bonds and the Outstanding Parity Bonds.
24 2. Additional Parity Bonds may also be issued if all of the following conditions are met:
(a) Either (i) the average annual Net Revenues for the two (2) completed Fiscal Years immediately preceding the issuance of the Additional Parity Bonds must have been not less than 125% of the highest combined principal and interest requirements for any succeeding Fiscal Year period on all Bonds then outstanding, including any Outstanding Parity Bonds and Additional Parity Bonds theretofore issued and then outstanding and any other bonds or obligations whatsoever then outstanding which are payable from the income and revenues of the Utilities System (but not including bonds which have been refunded or provisions otherwise made for their full and complete payment and redemption), and the bonds so proposed to be issued. In making the calculation required by this subparagraph (2)(a), if the Issuer has adopted higher rates for services rendered by the Utilities System on or before the date of issuance of the Additional Parity Bonds, the calculation of average Net Revenues for the previous two completed Fiscal Years may be made assuming such rates had been in effect during such period; or (ii) a consulting engineer retained for such purposes by the Issuer certified that, based upon the average annual Net Revenues projected by such consulting engineer for a period of five fiscal years immediately following the date on which the project financed with the proceeds of the proposed Additional Parity Bonds is place in service by the Issuer, such projected average Net Revenues of the System in each such fiscal year will be sufficient to pay an amount representing not less than 135% of the highest combined principal and interest requirements on the Bonds, any Outstanding Parity Bonds and the proposed Additional Parity Bonds for any fiscal year following the date on which the project financed with the proceeds of the proposed Additional Parity Bonds is placed in service by the Issuer.
(b) The payments required to be made into the various funds provided in the Bond Ordinance must have been made in full.
(c) The existence of the facts required by paragraphs (a) and (b) above must be determined and certified by the Director of Finance of the Issuer or by the independent certified public accountants who have previously audited the books of the Issuer as hereinbefore required, or by such successors thereof who may have been employed for that purpose.
(d) The additional bonds must be payable as to principal on May 1 of each year in which the principal falls due and payable as to interest on May 1 and November 1 of each year.
(e) The proceeds of the additional bonds must be used solely for the making of improvements, extensions, renewals, replacements or repairs to the Utilities System.
(f) No Event of Default shall have occurred and be continuing. (See “BONDHOLDER RISKS - Events of Default” herein.)
3. The Issuer may enter into Contracts, as defined above, provided that there shall have been delivered to the Issuer a certificate from a consulting engineer to the effect that, assuming that the Contract had been in effect during the most recently completed Fiscal Year, the Net Revenues for such Fiscal Year, (adjusted to account for the
25 payments to be made under such Contract and any savings which are estimated to be derived as a result of the Contract) would have been not less than 1.3 times the highest combined principal and interest requirements for any succeeding Fiscal Year period on all Bonds and Outstanding Parity Bonds then outstanding, including any Additional Parity Bonds theretofore issued and then outstanding and any other bonds or obligations whatsoever then outstanding which are payable from the income and revenues of the Utilities System (but not including bonds which have been refunded or provisions otherwise made for their full and complete payment and redemption), and the payments required pursuant to the proposed Contract.
Additional Provisions of the Bond Ordinance
Supplemental Ordinances Effective Without Consent of Owners. For any one or more of the following purposes and at any time from time to time, an ordinance supplemental to the Bond Ordinance may be adopted, which, upon the filing with the Registrar and any rating agency which is then rating the Bonds, of a notice thereof at least fifteen (15) days prior to the adoption thereof, and thereafter a certified copy thereof, but without any consent of Owners, shall be fully effective in accordance with its terms:
(a) to add to the covenants and agreements of the Issuer in the Bond Ordinance other covenants and agreements to be observed by the Issuer which are not contrary to or inconsistent with the Bond Ordinance as theretofore in effect;
(b) to add to the limitations and restrictions in the Bond Ordinance other limitations and restrictions to be observed by the Issuer which are not contrary to or inconsistent with the Bond Ordinance as theretofore in effect;
(c) to surrender any right, power or privilege reserved to or conferred upon the Issuer by the terms of the Bond Ordinance, but only if the surrender of such right, power or privilege is not contrary to or inconsistent with the covenants and agreements of the Issuer contained in the Bond Ordinance;
(d) to cure any ambiguity, supply any omission, or cure or correct any defect or inconsistent provision of the Bond Ordinance; or
(e) to insert such provisions clarifying matters or questions arising under the Bond Ordinance as are necessary or desirable and are not contrary to or inconsistent with the Bond Ordinance as theretofore in effect.
Supplemental Ordinances Effective With Consent of Owners. Except as provided above, any modification or amendment of the Bond Ordinance or of the rights and obligations of the Issuer and of the Owners of the Bonds thereunder, in any particular, may be made by a supplemental ordinance, with the written consent of the Owners of a majority of the outstanding principal amount of the Bonds at the time such consent is given. The Issuer shall give a notice thereof to the Registrar and any rating agency which is then rating the Bonds, at least fifteen (15) days prior to the adoption thereof, and thereafter shall furnish to said Persons a certified copy thereof. No such modification or amendment shall permit a change in the terms of prepayment or maturity of the principal of any outstanding Bond or of any installment of interest thereon or a reduction in the principal amount or the prepayment price thereof or in the rate of interest thereon without the consent of the Owner of such Bond, or shall reduce the percentages of Bonds the consent of the Owner of which is required to effect any such modification or amendment, or change the obligation of the Issuer to levy and collect user fees as provided in the Bond Ordinance, without the consent of the Owners of all of the Bonds then outstanding, or shall change or modify any of the rights or obligations of the Registrar without its written assent thereto.
26 Additional Requirements for Supplemental Ordinances. Any rating agency rating the Bonds shall also receive notice of each amendment and a copy thereof at least 15 days in advance of its execution or adoption.
GENERAL COVENANTS OF THE ISSUER
Bond Ordinance to Constitute Contract
In consideration of the purchase and acceptance of the Bonds by those who shall own the same from time to time, the provisions of the Bond Ordinance shall be a part of the contract of the Issuer with the Owners and shall be deemed to be and shall constitute a contract between the Issuer and the Owners from time to time of the Bonds.
Operation Covenant
The Issuer has covenanted to operate the Utilities System in a business like manner and to operate the Utilities System in such manner in order to insure the continued availability of Net Revenues to pay all costs required by the Bond Ordinance. The Issuer covenants to adequately maintain and improve the Utilities System and to employ the necessary staff and employees, as required by industry practice and as necessary to properly operate and protect the Utilities System.
Maintenance of Utilities System; Disposition
The Issuer will maintain the Utilities System and all parts thereof in good condition and will operate the same in an efficient and economical manner, making such expenditures for such equipment, maintenance and repairs and for renewals and replacements thereof as maybe proper for its economical operation and maintenance, provided, however, that nothing shall be construed to prevent the Issuer from ceasing to operate or maintain, or from leasing or disposing of any portion or component of the Utilities System if, in the judgment of the Issuer, (i) it is advisable to lease, dispose of, or not operate and maintain the same, and (ii) the lease, disposition or failure to maintain or operate such component or portion of the Utilities System will not prevent the Issuer from meeting the requirements of the Bond Ordinance. Notwithstanding anything in the foregoing to the contrary, the sale-leaseback or lease-leaseback of any portion or component of the Utilities System or any similar contractual arrangements the effect of which is that the Issuer continues to retain as part of the Revenues, the Revenues from such portion or component of the Utilities System, shall not constitute a lease or disposition thereof for purposes of the Bond Ordinance.
Reports and Annual Audits
The Issuer shall require that an annual audit of the accounts and records with respect to the Utilities System be completed as soon as reasonably practicable after the end of each fiscal year by a qualified independent certified public accountant. Such audit shall be conducted in accordance with generally accepted auditing standards as applied to governments and shall include a statement by such auditors that no default on the part of the Issuer of any covenant or obligation hereunder has been disclosed by reason of such audit, or, alternatively, specifying in reasonable detail the nature of such default.
BOOK-ENTRY ONLY SYSTEM
The Bonds initially will be issued solely in book-entry only form to be held in the system maintained by DTC. So long as such book-entry only system is used, only DTC will receive or have the right to receive physical delivery of the Bonds and Beneficial Owners will not be or be considered to be, and will not have any rights as, owners or holders of the Bonds under the Bond Ordinance.
27 The following information about the book-entry only system applicable to the Bonds has been supplied by DTC. The Issuer makes no representations, warranties or guarantees with respect to its accuracy or completeness.
1. The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered bonds registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Bond will be issued for each maturity of the Bonds, in the aggregate principal amount of such maturity, and will be deposited with DTC.
2. DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.
3. Purchases of the Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.
4. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.
28 5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.
6. Redemption notices shall be sent to DTC. If less than all of the Bonds within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.
7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’ s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).
8. Redemption proceeds, distributions, and dividend payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the Issuer or Paying Agent, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, Paying Agent, or the Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Issuer or Paying Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.
9. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the Issuer or Paying Agent. Under such circumstances, in the event that a successor depository is not obtained, the Bonds are required to be printed and delivered.
10. The Issuer may decide to discontinue use of the system of book-entry only transfers through DTC (or a successor securities depository). In that event, Bonds will be printed and delivered to DTC.
11. The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that the Issuer believes to be reliable, but the Issuer takes no responsibility for the accuracy thereof.
THE ISSUER AND THE UNDERWRITER CANNOT AND DO NOT GIVE ANY ASSURANCES THAT THE DTC PARTICIPANTS OR THE INDIRECT PARTICIPANTS WILL DISTRIBUTE TO THE BENEFICIAL OWNERS OF THE BONDS (I) PAYMENTS OF PRINCIPAL OF OR INTEREST AND PREMIUM, IF ANY, ON THE BONDS; (ii) CONFIRMATION OF
29 BENEFICIAL OWNERSHIP INTERESTS IN BONDS; OR (iii) REDEMPTION OR OTHER NOTICES SENT TO DTC OR CEDE & CO., ITS NOMINEE, AS THE REGISTERED OWNERS OF THE BONDS, OR THAT THEY WILL DO SO ON A TIMELY BASIS OR THAT DTC, DTC PARTICIPANTS OR INDIRECT PARTICIPANTS WILL SERVE AND ACT IN THE MANNER DESCRIBED IN THIS OFFICIAL STATEMENT. THE CURRENT “RULES” APPLICABLE TO DTC ARE ON FILE WITH THE SECURITIES AND EXCHANGE COMMISSION AND THE CURRENT “PROCEDURES” OF DTC TO BE FOLLOWED IN DEALING WITH DTC PARTICIPANTS ARE ON FILE WITH DTC.
NEITHER THE ISSUER, THE UNDERWRITER NOR THE PAYING AGENT WILL HAVE ANY RESPONSIBILITY OR OBLIGATIONS TO SUCH DTC PARTICIPANTS OR THE BENEFICIAL OWNERS WITH RESPECT TO (1) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY DTC PARTICIPANT; (2) THE PAYMENT BY ANY DTC PARTICIPANT OF ANY AMOUNT DUE TO ANY BENEFICIAL OWNER IN RESPECT OF THE PRINCIPAL AMOUNT OR INTEREST OR PREMIUM, IF ANY, ON THE BONDS; (3) THE DELIVERY BY ANY DTC PARTICIPANT OF ANY NOTICE TO ANY BENEFICIAL OWNER WHICH IS REQUIRED OR PERMITTED UNDER THE TERMS OF THE BOND ORDINANCE TO BE GIVEN TO BONDHOLDERS; (4) THE SELECTION OF THE BENEFICIAL OWNERS TO RECEIVE PAYMENT IN THE EVENT OF ANY PARTIAL REDEMPTION OF THE BONDS; OR (5) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC AS BONDHOLDER.
BONDHOLDER RISKS
General
Prospective purchasers of the Bonds should consider carefully all possible factors which may result in a default in the payment of the principal of, or interest on the Bonds or the redemption of the Bonds prior to maturity and any other facts which may affect the payment of the principal of, premium, if any, and interest on the Bonds and the timing thereof. The following description of certain factors affecting electric utilities is a brief description of the matters addressed herein. It does not purport to be comprehensive or definitive, and these factors are subject to change subsequent to the date hereof as a result of changes in regulatory policy at both the state and federal levels.
The purchase of the Bonds involves certain investment risks which are discussed throughout this Official Statement, and each prospective investor should make an independent evaluation of all information presented in this Official Statement in order to make an informed investment decision. Particular attention should be given to the factors described below which, among others, could affect the payment of debt service on the Bonds.
Acquisition Risk
The City may not have completed the acquisition of the Project at the time the Bonds are delivered. Any such delay or cancellation of the acquisition of the Project may materially and adversely affect the System’s operating results.
Operating Risk
As with any power plant, operation of the Project could be affected by many factors, including start-up problems, the breakdown or failure of equipment or processes, the performance of the units below expected levels of output or efficiency, labor disputes, interruption in fuel supply, changes in laws and regulations governing its operation and catastrophic events such as fires, explosions or similar events. The occurrence of such events could significantly prevent, hinder or increase the
30 costs of operating the Project. While the City will maintain insurance to protect against certain of these operating risks, the proceeds of such insurance may not be adequate to cover the entire Project’s lost revenues or increased costs. There can be no assurance that the Project will operate at design specifications.
In addition, the City will execute an Operation and Maintenance Agreement with NRG which will name NRG as operator. The City will pay a pro-rata share of the operating costs of the Project; however, NRG will operate the Project in its discretion within the terms of the Operation and Maintenance Agreement.
General Economic Factors Affecting the Issuer
Economic factors could have an adverse economic impact on the Issuer or the electric systems of the Issuer. These factors include, among others, the increased costs of operation and maintenance of the electric utility; competition from public or private suppliers of electricity at lower prices; adverse demographic changes (i.e. reductions in population or users) in the service area of the electric utility; and general adverse changes in the economy which reduce the consumption of electricity and inhibit the ability of users to pay their electric bills.
Reliance on Projections
All projections of future operations and the economic results thereof included in the report of the Consulting Engineer have been prepared by the Consulting Engineer, based in part on information provided to the Consulting Engineer by the City. For purposes of preparing the projections, certain assumptions have been made, of necessity, with respect to general business and economic conditions and other matters that are not within the control of the City and the outcome of which cannot be predicted by the City, the Consulting Engineer or any other person with any expectation of accuracy. These assumptions and other assumptions used in the projections are inherently subject to significant uncertainties, and actual results may differ, perhaps materially, from those projected. Accordingly, the projections are not necessarily indicative of current values or future performance and neither the City, the Consulting Engineer nor any other person assumes any responsibility for their accuracy. Therefore, no representation is made or intended to be made, nor should any be inferred, with respect to the likely existence of any particular set of future facts or circumstances.
Events of Default
If one or more of the following events (“Events of Default”) shall happen:
(a) if default shall be made in the due and punctual payment of the principal of any Bond when and as the same shall become due and payable, whether at maturity or otherwise; or
(b) if default shall be made in the due and punctual payment of any installment of interest on any Bond when and as such interest installment shall become due and payable; or
(c) if default shall be made by the Issuer in the performance or observance of any other of the covenants, agreements or conditions on its part in the Bond Ordinance, any supplemental ordinance or in the Bonds contained and such default shall continue for a period of forty-five (45) days after written notice thereof to the Issuer by the Owners of not less than 25% of the Bond Obligation (as defined in the Bond Ordinance); or
31 (d) if the Issuer shall file a petition or otherwise seek relief under any Federal or State bankruptcy law or similar law; then, upon the happening and continuance of any Event of Default the Owners of the Bonds shall be entitled to exercise all rights and powers for which provision is made under State law.
Rights of Owners
The Owners of the Bonds from time to time shall be entitled to exercise all rights and powers for which provision is made in the laws of the State of Louisiana. Any Owners of the Bonds or any trustee acting for such Owners in the manner provided in the Bond Ordinance, may, either at law or in equity, by suit, action, mandamus or other proceeding in any court of competent jurisdiction, protect and enforce any and all rights under the laws of the State of Louisiana, or granted and contained in the Bond Ordinance, and may enforce and compel the performance of all duties required by the Bond Ordinance, or by any applicable statutes to be performed by the Issuer or by any agency, board or officer thereof, including the fixing, charging and collecting of rentals, fees or other charges for the use of the System, and in general to take any action necessary to most effectively protect the rights of the said Owners.
Upon the occurrence of any Event of Default, any Owner of Bonds or any trustee appointed to represent such Owners, shall be entitled as of right to the appointment of a receiver of the System in an appropriate judicial proceeding in a court of competent jurisdiction.
The receiver so appointed shall forthwith directly or by his agents and attorneys, enter into and upon and take possession of the System, and each and every part thereof, and shall hold, operate and maintain, manage and control the System, and each and every part thereof, and in the name of the Issuer shall exercise all the rights and powers of the Issuer with respect to the System as the Issuer itself might do. Such receiver shall collect and receive all rates, fees, rentals and other revenues, maintain and operate the System in the manner provided in the Bond Ordinance, and comply under the jurisdiction of the court appointing such receiver, with all of the provisions of the Bond Ordinance.
Whenever all that is due upon the Bonds and interest thereon, and under any covenants of the Bond Ordinance for reserve, sinking or other funds, and upon any other obligations and interest thereon, having a charge, lien or encumbrance upon the fees, rentals or other revenues of the System, shall have been paid and made good, and all defaults under the provisions of the Bond Ordinance shall have been cured and made good, possession of the System shall be surrendered to the Issuer upon the entry of an order of the court to that effect. Upon any subsequent default, any Owner of Bonds, or any trustee appointed for Owners , shall have the same right to secure the further appointment of a receiver upon any such subsequent default.
Such receiver shall in the performance of the powers hereinabove conferred upon him be under the direction and supervision of the court making such appointment, shall at all times be subject to the orders and decrees of such court, and may be removed thereby and a successor receiver appointed in the discretion of such court. Nothing herein contained shall limit or restrict the jurisdiction of such court to enter such other and further orders and decrees as such court may deem necessary or appropriate for the exercise by the receiver of any function not specifically set forth herein.
Any receiver appointed shall hold and operate the System in the name of the Issuer and for the joint protection and benefit of the Issuer and Owners of the Bonds. Such receiver shall have no power to sell, assign, mortgage or otherwise dispose of any property of any kind or character belonging or pertaining to the System but the authority of such receiver shall be limited to the possession, operation and maintenance of the System for the sole purpose of the protection of both the Issuer and Owners and the curing and making good of any default under the provisions of the Bond
32 Ordinance, and the title to and the ownership of the System shall remain in the Issuer, and no court shall have any jurisdiction to enter any order or decree permitting or requiring such receiver to sell, mortgage or otherwise dispose of any property of the System except with the consent of the Issuer, and in such manner as the court shall direct.
The Owner or Owners of Bonds in an aggregate principal amount of not less than twenty-five percent (25%) of the Bonds, Outstanding Parity Bonds and Additional Parity Bonds then Outstanding, may by a duly executed certificate appoint a trustee for the Owners with authority to represent such Owners in any legal proceedings for the enforcement and protection of the rights of such Owners. Such certificate shall be executed by such Owners, or by their duly authorized attorneys or representatives, and shall be filed in the office of the City Clerk of the Issuer.
Until an Event of Default shall have occurred, the Issuer shall retain full possession and control of the System with full right to manage, operate and use the same and every part thereof with the rights appertaining thereto, and to collect and receive, and, subject to the provisions of the Bond Ordinance, to take, use and enjoy and distribute the earnings, income, rent, issue and profits accruing on or derivable from the System.
Limited Obligations of the Bonds
The Bonds shall not be or constitute general obligations or indebtedness of the Issuer within the Constitution, but shall be payable solely from and secured by a lien upon and a pledge of the Net Revenues of the System. No bondholder shall ever have the right to seize any assets of the City (including but not limited to the Project) upon an Event of Default or compel the exercise of ad valorem taxing power of the Issuer or taxation in any form on any real or personal property (other than the collection of the Tax) to pay the Bonds or interest thereon, nor shall any bondholder be entitled to the payment of such principal and interest from any other funds of the Issuer other than the Net Revenues in the manner and to the extent provided in the Bond Ordinance. In addition, no recourse shall be had for the payment of the principal or interest on the Bonds or for any claim based thereon or the Bond Ordinance against any member of the Governing Authority as defined herein or officer of the Issuer or any person executing the Bonds. Therefore, the security for the punctual payment of the principal of and interest on the Bonds is dependent on the Issuer’s ability to collect such Net Revenues of the System in an amount sufficient to meet the debt service requirements of the Bonds and all other parity obligations.
THIS BOND CONSTITUTES A BORROWING SOLELY UPON THE CREDIT OF REVENUES OF THE ISSUER PLEDGED FOR SUCH PURPOSE AND DOES NOT CONSTITUTE AN INDEBTEDNESS OR PLEDGE OF THE GENERAL CREDIT OF THE ISSUER OR THE PARISH OF IBERIA, STATE OF LOUISIANA, WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY PROVISIONS RELATING TO THE INCURRING OF INDEBTEDNESS.
Limitations on Remedies Available to Bondholders
The remedies available to the owners of the Bonds upon an event of default under the Bond Ordinance are in many respects dependent upon judicial actions which are often subject to discretion and delay. Under existing constitutional and statutory law and judicial decisions, including specifically in the United States Bankruptcy Code, 11 U.S.C. § 101, et seq. (the “Bankruptcy Code”), the remedies provided in the Bond Ordinance may not be readily available or may be limited. The various legal opinions delivered concurrently with the delivery of the Bonds will be qualified as to the enforceability of the various legal instruments by limitations imposed by general principles of equity and by bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally.
33 The enforceability of the rights and remedies of the owners of the Bonds, and the obligations incurred by the Issuer in issuing the Bonds, are subject to the Bankruptcy Code and applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or affecting the enforcement of creditors’ rights generally, now or hereafter in effect to the extent constitutionally applicable; equity principles which may limit the specific enforcement under State law of certain remedies; the exercise by the United States of America of the powers delegated to it by the federal Constitution; and the exercise of the sovereign police powers of the State or its governmental bodies. Consistent with the Contracts Clauses of the Louisiana and United States Constitutions, in a bankruptcy proceeding or due to the exercise of powers by the federal or State government, bondowners could be subject to judicial discretion and the interpretation of their rights in bankruptcy or otherwise, which consequently may entail risks of delay, limitation, or modification of their rights. Under current State law, no political subdivision of the State, including the Issuer, may file for protection under Chapter 9 of the Bankruptcy Code unless such filing is approved by the Louisiana State Bond Commission and the Governor and Attorney General of the State. Further, no political subdivision of the State, after filing for bankruptcy protection, may carry out a plan of readjustment of debts approved by the bankruptcy court until such plan is approved by the Louisiana State Bond Commission and the Governor and Attorney General of the State.
The obligations of the Issuer under the Bond Ordinance may be secured on a parity with other obligations of the Issuer so that any proceeds that might be derived from the exercise of remedies would be required to be shared among the owners of the Bonds and the holders of any additional parity bonds.
The pledge of the Revenues by the Issuer to secure its obligations with respect to the Bonds may be ineffective as to certain revenues or under certain circumstances.
Secondary Market
There is no guarantee that a secondary trading market will develop for the Bonds. Consequently, prospective bond purchasers should be prepared to hold their Bonds to maturity or prior redemption. Subject to applicable securities laws and prevailing market conditions, the Underwriter (hereinafter defined) intends, but is not obligated, to make a market in the Bonds. As a result, Owners of the Bonds may be unable to dispose of the Bonds should they no longer desire to own the Bonds. The Underwriter cannot guaranty the liquidity of the Bonds; consequently, prospective purchasers of the Bonds should be prepared to hold such bonds until maturity.
If such secondary market exists after the issuance of the Bonds, events such as decreases in benchmark interest rate indices, downward revisions or withdrawals of ratings on the Bonds or the Issuer, and general market turmoil, among others, may adversely affect the value of the Bonds on such secondary market. The Underwriter cannot guaranty that the owner of a Bond will not experience a loss of value of such Bond prior to maturity.
Homeland Security
As a result of worldwide terrorist activities, utilities must increase their physical and cyber security in order to protect their assets. These efforts to increase security may materially increase expenditures.
Environmental Risks
To the extent the Issuer contracts with third parties for power supply or sales, the Issuer bears the risk of nonperformance by those parties if such nonperformance will result in a default by the Issuer of its contractual obligations.
34 Superfund. The Comprehensive Environmental Response, Compensation and Liability Act of 1980 imposes strict liability for cleanup costs upon those who own or operate facilities from which or at which hazardous substances are released or who generate or dispose of hazardous substances at off-site locations. Past releases at the Issuer’s facilities or at off-site locations may result in liability for cleanup or removal of hazardous substances at these locations. As a result, the Issuer may incur substantial, but presently unknown, costs as a participant in the cleanup of such sites.
Clean Air Act. The Federal Clean Air Act, as amended (the “Clean Air Act”), regulates emissions of air pollutants, establishes national ambient air quality standards for major pollutants, and requires permitting of both new and existing sources of air pollution. Among the provisions of the Clean Air Act that affect the operations of the Issuer is (i) the acid rain program, which requires nationwide reductions of sulfur dioxides (“SO2") and nitrogen oxides (“NOx”) from existing and new fossil fuel electric generating plants, (ii) provisions related to toxic or hazardous pollutants, and (iii) requirements to address regional haze. None of these programs is likely to have a significant impact upon the costs of operations or the emissions control requirements applicable to the Issuer’s owned or leased electricity generating facilities.
Many of the existing regulations and proposed regulations under the Clean Air Act will have a disproportionate impact on coal-fired power plants, in particular, older plants that do not have the same level of air pollution controls as required for newer facilities. These requirements could apply to the Rodemacher Unit No. 2 acquired through the LEPA. The Issuer purchases electricity from this plant, but would not be responsible for upgrading its facilities or pollution control equipment to achieve new or more stringent environmental requirements. The Rodemacher Unit No. 2 may be subject to such requirements, and such requirements could affects it costs of operation or its ability to continue operating.
Early Redemption
The Bonds are, in certain circumstances, subject to redemption at a redemption price equal to 100% of the principal amount being redeemed, plus accrued interest to the redemption date in the event such Bonds are redeemed prior to maturity. See “THE BONDS - Redemption Provisions”.
Pension Fund
Defined Benefit Pension Plans
The City contributes to two single-employer defined benefit pension plans. The City also contributes to four statewide cost-sharing, multiple-employer, defined benefit public employee retirement systems.
Information relative to the four statewide cost-sharing, multiple-employer, defined benefit public employee retirement systems is presented below:
Municipal Police Employees’ Retirement System of Louisiana (MPERS)
Plan Description. Membership is mandatory for all full-time police officers employed by the City, provided they meet statutory criteria. Any member is eligible for normal retirement benefits after participant has been a member of the System for one (1) year, if participant has twenty-five (25) years of creditable service at any age, or if participant has twenty (20) years of creditable service and is age fifty (50), or has twelve (12) years of creditable service and is age fifty-five (55). Benefit rates are three and one-third percent (3a%) of final compensation per number of years of creditable service not to exceed one hundred percent (100%). Benefit and contribution requirements are established
35 by state law. MPERS issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained by writing to Municipal Police Employees' Retirement System, P. O. Box 94095, Baton Rouge, LA 70804-9095.
Funding Policy and Annual Pension Costs. Members are currently required to contribute ten percent (10.00%) of their annual salary to the system, including supplemental pay. The City contributes an actuarially determined rate, presently set at thirty-one percent (31.00%) of the member's salary, including supplemental pay. The City’s contributions to MPERS, for the fiscal years ended April 30, 2013, 2012, and 2011, were $2,705,994, $2,176,798 and $2,128,329 respectively.
Firefighters’ Retirement System of Louisiana (FRS)
Plan Description. This Plan is a defined benefit pension plan covering firemen employed by a municipality, parish, or fire protection district of the State hired after December 31, 1979. Employees with twenty (20) or more years of service who have attained age fifty (50), employees who have twelve (12) years of service who have attained age fifty-five (55), or employees who have twenty-five (25) years of service at any age are entitled to annual pension benefits equal to three and one-third percent (3a%) of their average final compensation based on the thirty-six (36) consecutive months of highest pay multiplied by their total years of service, not to exceed one hundred percent (100%). Employees may elect to receive their pension benefits in the form of a joint and/or survivor annuity. If employees terminate before rendering twelve (12) years of service, they forfeit the right to receive the portion of their accumulated plan benefits attributable to their employer's contributions. Benefits are payable over the employees' lives in the form of a monthly annuity. Benefit and contribution requirements are established by state law. FRS issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained by writing to Firefighters' Retirement System, 3100 Brentwood Drive, Baton Rouge, LA 70809.
Funding Policy and Annual Pension Costs. Members are currently required to contribute ten (10%) of their annual salary, including supplemental pay to the Plan. The City contributes an actuarially determined rate, presently at twenty-four percent (24%) of the member's salary, including supplemental pay. The City’s contributions to FRS, for the fiscal years ended April 30, 2013, 2012, and 2011, were $1,385,096, $1,404,511 and $1,284,842, respectively.
Louisiana State Employees’ Retirement System (LASERS)
Plan Description. All state employees, except certain classes of employees specifically excluded by statute, become members of the system as a condition of employment. Statewide elected officials and officials appointed by the governor may, at their option, become members of the System. The only member of this System from the City is the City Court Judge. The age and years of creditable service required in order for a member to retire with full benefits are established by Statute and vary depending on the member's employer and job classification. The substantial majority of members may retire with full benefits at ages ranging from any age upon completing thirty (30) years of creditable service to age sixty (60) upon completing ten (10) years of creditable service.
The basic annual retirement benefit for substantially all members is equal to two and one-half percent (2½%) of average compensation multiplied by the number of years of creditable service plus three hundred dollars ($300). Average compensation is defined as the member's average annual earned compensation for the period of thirty-six (36) consecutive months of employment during which the member's aggregate earned compensation was greatest. The maximum annual retirement benefit cannot exceed the lesser of one hundred percent (100%) of average compensation or certain specified dollar amounts or actuarially determined monetary limits, which vary depending upon the member's age at retirement. Judges and court officers and certain elected officials receive an additional annual retirement benefit equal to one percent (1%) of average compensation multiplied by the number
36 of years of creditable service in their respective capacity. As an alternative to the above basic retirement benefit, a member may elect to receive his retirement benefits under any one of four different options providing for a reduced retirement benefit payable throughout his life with certain benefits being paid to his designated beneficiary after his death.
Benefit and contribution requirements are established by state law. LASERS issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained by writing to Louisiana State Employees’ Retirement System, P. O. Box 44213, Baton Rouge, LA 70804-4213.
Funding Policy and Annual Pension Costs. Judges, court officers, and legislators contribute eleven and one-half percent (11.50%) of their salary to the System. The City contributes an actuarially determined rate, presently set at thirty-four and eight tenths percent (34.80%) of the member's annual salary. The City’s contributions to LASERS for the years ended April 30, 2013, 2012, and 2011 were $16,631, $13,977 and $9,847, respectively.
Parochial Employees’ Retirement System of Louisiana (PERSL)
Plan Description. The only member of this System from the City of Alexandria is the Clerk of City Court. Participants become fully vested after ten (10) years of service. Any member is eligible for normal retirement at age sixty (60) with at least ten (10) years of creditable service, at age fifty-five (55) with twenty-five (25) years of creditable service, or at any age with at least thirty (30) years of creditable service. The retirement benefit, payable monthly for life, is equal to three percent (3%) of the member’s final-average salary for each year of creditable service not to exceed the greater of one hundred percent of final salary (last 12 months) or final average compensation. Final average salary is the employee's average salary over the thirty-six (36) consecutive or joined months that produce the highest average. The System also provides death and disability benefits. Benefit and contribution requirements are established by state law. PERSL issues a publicly available financial report that may be obtained by writing to the Parochial Employees’ Retirement System, P.O. Box 14619, Baton Rouge, LA 70898-4619.
Funding Policy and Annual Pension Costs. The member contributes nine and one-half percent (9.50%) of their salary to the System. The City presently contributes fifteen and three-fourth percent (15.75%) to the System as an employer match. The City’s contributions to PERSL, for the fiscal years ended April 30, 2013, 2012, and 2011, were $3,977, $3,920 and $3,920, respectively.
Information relative to the two single-employer defined benefit pension plans is presented below:
City of Alexandria Employees’ Retirement System (COAERS)
Plan Description. Substantially all employees of the City, except firemen and policemen, become members of the COAERS as a condition of employment. The System provides retirement benefits, disability benefits, and survivors’ benefits.
Members with 10 years of creditable service may retire at age 62; members with at least 20 years of creditable service may retire at age 60; members with twenty-five years of service may retire at age fifty-five; members with 30 years of service may retire regardless of age. The retirement allowance is equal to 3% of the member's average compensation multiplied by their number of years of creditable service, not to exceed 100% of their average compensation. Average compensation is defined as the highest 3 year average annual compensation.
37 Benefit and contribution provisions are established by state statute and may be amended only by the Louisiana Legislature. COAERS issues a publicly available financial report that may be obtained by writing to the City of Alexandria Employees' Retirement System, P.O. Box 71, Alexandria, Louisiana 71309-0071.
Funding Policy and Annual Pension Cost. Covered employees are required by statute to contribute 10% of their salary to the System. The City is required by statute to contribute remaining amounts necessary to finance the System at an actuarially determined rate currently set at 25.97%. The City’s contributions to COAERS, for the fiscal years ended April 30, 2013, 2012, and 2011 were $4,584,161, $5,033,392 and $5,134,545 respectively.
Firemen’s Pension and Relief Fund (FPARF)
Plan Description. Effective May 1, 1993, the Fund merged into the statewide Firefighters' Retirement System (FRS). On this date, all retirees and survivors receiving benefits at April 30, 1993, transferred to the FRS.
In the event that a firefighter, hired prior to January 1, 1980, exercises their right to a 20 year retirement any time under the age of 50 and is not eligible to receive benefits from the state FRS, then the Fund shall provide benefits until that person is eligible for benefits under the FRS. In addition, the City of Alexandria and the Fund guaranteed that if a firefighter dies, retires, or becomes disabled subsequent to the merger, then the Fund shall pay to the firefighter, or the firefighter's survivors and/or beneficiaries, the difference, if any, where those benefits payable under the Fund prior to the merger exceed those benefits payable under the FRS.
Benefits and contribution provisions are established by state statute and may be amended only by the Louisiana Legislature. FPARF issues a publicly available financial report that may be obtained by writing to the Firemen’s Pension and Relief Fund of the City of Alexandria, P. O. Box 71, Alexandria, Louisiana 71309-0071.
Funding Policy and Annual Pension Cost. Covered members are not required to contribute to the Fund. The City is required to contribute an amount sufficient to meet any deficit of the Fund without regard for reserve requirements accruing or having accrued on an actuarial basis. The City’s contributions to FPARF for the years fiscal ended April 30, 2013, 2012, and 2011 were $21,500, $21,500 and $25,000 respectively.
For the two single-employer defined benefit pension plans of the City, benefit and contribution provisions are established by state law and may be amended only by the Louisiana Legislature.
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38 The City’s annual pension cost for the current year and related information for each of the City’s single-employer plans is as follows:
COAERS FPARF Contribution rate City 25.97% n/a Plan members 10.00% n/a Annual pension cost $4,584,161 $21,500 Contributions made $4,584,161 $21,500 Actuarial valuation date 12/31/12 n/a Actuarial cost method Frozen Entry n/a Age Normal Remaining amortization period 7 years n/a
Asset valuation method Five year n/a smoothing for stocks. Other assets at amortized cost.
COAERS FPARF Actuarial assumptions Investment rate of return 7.75% n/a Projected salary increases 5.50% n/a Includes inflation rate of 3.00% n/a Includes merit raises at 2.50% n/a Cost of living adjustments None n/a
Three Year Trend Information
Annual Percentage Net Year Pension of APC Pension Ending Cost (APC) Contributed Obligation City of Alexandria 04/30/13 $4,584,161 100% $ - Employees’ Retirement 04/30/12 4,915,468 100% - System 04/30/11 5,382,069 100% -
Firemen’s Pension 04/30/13 21,500 100% - and Relief Fund 04/30/12 21,500 100% - 04/30/11 25,000 100% - Defined Contribution Pension Plan
The City sponsors a defined contribution plan (the Plan) available to unclassified employees who elect to participate. The Plan is administered by a third party administrator. The City's covered payroll for employees participating in the Plan for the current year was $1,099,624. Employer contributions for Fiscal Year 2013 were $152,971 or approximately thirteen and ninty-one hundredths percent (13.91%). Employees do not contribute to the plan.
Under the provisions of the Plan, City contributions are determined annually and contributions are allocated to participants based on participant's compensation. All monies in the employee's accounts, including the City's contributions, are immediately vested.
39 TAX EXEMPTION
Interest on Bonds
The delivery of the Bonds is subject to the opinions of Foley & Judell, L.L.P., New Orleans, Louisiana and Roedel, Parsons, Koch, Blache, Balhoff & McCollister, A.L.C., Baton Rouge, Louisiana, Co-Bond Counsel, to the effect that interest on the Bonds is excluded from gross income for federal income tax purposes, and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; it should noted, however, that for the purpose of computing the alternative minimum tax imposed on certain corporations, such interest is taken into account in determining adjusted current earnings. (See Appendix “G”.)
State Taxes
The opinion of Co-Bond Counsel will state that, under the provisions of Chapter 1 of Title 47 of the Louisiana Revised Statutes of 1950, as amended, interest on the Bonds owned by corporations or residents of the State of Louisiana is exempt from Louisiana state income taxation to the extent such interest is exempt from federal income taxation. Each prospective purchaser of the Bonds should consult his or her own tax advisor as to the status of interest on the Bonds under the tax laws of any state other than Louisiana.
Alternative Minimum Tax Consideration
Except as hereinafter described, interest on the Bonds will not be an item of tax preference for purposes of the federal alternative minimum tax on individuals and corporations. The Code imposes a 20% alternative minimum tax on the “alternative minimum taxable income” of a corporation, if the amount of such alternative minimum tax is greater than the amount of the corporation’s regular income tax. Generally, a corporation’s alternative minimum taxable income includes 75% of the amount by which a corporation’s “adjusted current earnings” exceeds a corporation’s alternative minimum taxable income. Interest on the Bonds will be included in a corporation’s “adjusted current earnings.”
General
The Code imposes a number of requirements that must be satisfied for interest on state and local obligations to be excluded from gross income for federal income tax purposes. These requirements include limitations on the use of bond proceeds and the source of repayment of bonds, limitations on the investment of bond proceeds prior to expenditure, a requirement that excess arbitrage earned on the investment of certain bond proceeds be paid periodically to the United States, except under certain circumstances, and a requirement that information reports be filed with the Internal Revenue Service (the “IRS”).
The opinion of Co-Bond Counsel will assume continuing compliance with the covenants in the Bond Ordinance pertaining to those sections of the Code which affect the exclusion from gross income of interest on the Bonds for federal income tax purposes and, in addition, will rely on representations by the Issuer with respect to matters solely within the knowledge of the Issuer, which Co-Bond Counsel has not independently verified. If the Issuer should fail to comply with the covenants in the Bond Ordinance or if the foregoing representations should be determined to be inaccurate or incomplete, interest on the Bonds could become included in gross income from the date of original delivery of the Bonds, regardless of the date on which the event causing such inclusion occurs.
This section contains a summary of certain anticipated United States federal income tax consequences of the purchase, ownership and disposition of the Bonds. The summary is based upon the provisions of the Code, the regulations promulgated thereunder and the judicial and
40 administrative rulings and decisions now in effect, all of which are subject to change. The summary generally addresses the Bonds held as capital assets and does not purport to address all aspects of federal income taxation that may affect particular investors in light of their individual circumstances or certain types of investors subject to special treatment under the federal income tax laws, including but not limited to financial institutions, insurance companies, dealers in securities or currencies, persons holding such Bonds as a hedge against currency risks or as a position in a “straddle” for tax purposes, or persons whose functional currency is not the United States dollar. Potential purchasers of the Bonds should consult their own tax advisors in determining the federal, state or local tax consequences to them of the purchase, holding and disposition of the Bonds.
Changes in Federal and State Tax Law
From time to time, there are legislative proposals in the Congress and in the states that, if enacted, could alter or amend the federal and state tax matters referred to herein. In addition, such legislation (whether currently proposed, proposed in the future or enacted) could affect the market value or marketability of the Bonds. For example, ongoing negotiations between the Executive and Legislative Branches of the United States government to resolve federal budget conflicts may result in the enactment of tax legislation that could significantly reduce the benefit of, or otherwise affect, the exclusion of gross income for federal income tax of interest on all state and local obligations, including the Bonds. It cannot be predicted whether or in what form any such proposals might be enacted or whether if enacted such proposals would apply to bonds issued prior to enactment. In addition, regulatory actions are from time to time announced or proposed and litigation is threatened or commenced which, if implemented or concluded in a particular manner, could adversely affect the market value of the Bonds. It cannot be predicted whether any such regulatory action will be implemented, how any particular litigation or judicial action will be resolved, or whether the Bonds or the market value thereof would be impacted thereby. Prospective purchasers of the Bonds should consult their tax advisors regarding any pending or proposed legislation, regulatory initiatives or litigation.
The opinions expressed by Co-Bond Counsel are based upon existing legislation and regulations as interpreted by relevant judicial and regulatory authorities as of the date of issuance and delivery of the Bonds, and Co-Bond Counsel has expressed no opinion as of any date subsequent thereto or with respect to any pending or proposed federal or state tax legislation, regulations or litigation.
THE FOREGOING DISCUSSION OF CERTAIN FEDERAL AND STATE INCOME TAX CONSEQUENCES IS PROVIDED FOR GENERAL INFORMATION ONLY. INVESTORS SHOULD CONSULT THEIR TAX ADVISORS AS TO THE TAX CONSEQUENCES TO THEM IN LIGHT OF THEIR OWN PARTICULAR INCOME TAX POSITION, OF ACQUIRING, HOLDING OR DISPOSING OF THE BONDS.
Qualified Tax-Exempt Obligations (Non-Bank Deductibility)
The Tax Reform Act of 1986 revised Section 265 of the Code so as to generally deny financial institutions 100% of the interest deductions that are allocable to tax-exempt obligations acquired after August 7, 1986. However, an exception is permitted under the Tax Reform Act of 1986 for certain qualified tax-exempt obligations which allows financial institutions to continue to treat the interest on such obligations as being subject to the 20% disallowance provision under prior law if the Issuer, together with certain subordinate entities, reasonably expects that it will not issue more than $10,000,000 of governmental purpose bonds in a calendar year and designates such bonds as “qualified tax-exempt obligations” pursuant to the provisions of Section 265(b)(3)(B) of the Code. The Bonds are NOT designated as “qualified tax-exempt obligations” pursuant to Section 265(b)(3)(B) of the Code.
41 Tax Treatment of Original Issue Premium
The Bonds maturing May 1, 2016 to May 1, 2025, inclusive, and the Term Bonds maturing May 1, 2034 and May 1, 2039, respectively (the “Premium Bonds”), are being offered and sold to the public at prices in excess of their stated principal amounts.
Such excess is characterized as a “bond premium” and must be amortized by an investor purchasing the Premium Bonds on a constant yield basis over the remaining term of the Premium Bonds in a manner that takes into account potential call dates and call prices. An investor cannot deduct amortized bond premium related to a tax-exempt bond for federal income tax purposes. However, as bond premium is amortized, it reduces the investor’s basis in the Premium Bonds. Investors who purchase Premium Bonds should consult their own tax advisors regarding the amortization of bond premium and its effect on the Premium Bonds’ basis for purposes of computing gain or loss in connection with the sale, exchange, redemption or early retirement of the Premium Bonds.
Tax Treatment of Original Issue Discount
The Term Bonds maturing May 1, 2029 and May 1, 2043, respectively (the “OID Bonds”), are sold to their original owners at a discount. The difference between the initial public offering prices and their stated amounts constitutes original issue discount treated as interest which is excluded from gross income for federal income tax purposes and which is exempt from all present State taxation subject to the caveats and provisions described herein.
Owners of OID Bonds should consult their own tax advisors with respect to the determination for federal income tax purposes of original issue discount accrued with respect to such OID Bonds as of any date, including the date of disposition of an OID Bond and with respect to the state and local consequences of owning OID Bonds.
LEGAL MATTERS
No litigation has been filed questioning the validity of the Bonds or the security therefor and a certificate to that effect will be delivered by the Issuer to the Underwriter (hereinafter defined) of the Bonds upon the issuance of the Bonds.
The approving opinions of Foley & Judell, L.L.P. and Roedel, Parsons, Koch, Blache, Balhoff & McCollister, A.L.C., Co-Bond Counsel, are limited to the matters set forth therein, and Co-Bond Counsel is not passing upon the accuracy or completeness of this Official Statement. Co- Bond Counsel’s opinions are based on existing law, which is subject to change. Such opinions are further based on factual representations made to Co-Bond Counsel as of the date thereof. Co-Bond Counsel assumes no duty to update or supplement its opinions to reflect any facts or circumstances that may thereafter come to Co-Bond Counsel’s attention, or to reflect any changes in law that may thereafter occur or become effective. Moreover, Co-Bond Counsel’s opinions are not a guarantee of a particular result and are not binding on the Internal Revenue Service or the courts; rather, such opinions represent Co-Bond Counsel’s professional judgment based on its review of existing law and in reliance on the representations and covenants that it deems relevant to such opinions.
A manually executed original of each such opinion will be delivered to the Underwriter on the date of payment for and delivery of the Bonds. The forms of said legal opinions appear in Appendix “G” to this Official Statement. For additional information regarding the opinions of Co-Bond Counsel, see the preceding section titled “TAX MATTERS.” The compensation of Co-Bond Counsel is contingent upon the sale and delivery of the Bonds.
42 Certain legal matters will be passed upon on behalf of the Underwriter (as defined below) by Breazeale, Sachse & Wilson, L.L.P., and the Law Office of Bernard L. Charbonnet, Jr., Co-Underwriters Counsel.
UNDERWRITING
The Bonds are being purchased by Stephens Inc., Baton Rouge, Louisiana (the “Underwriter”), at a purchase price of $28,529,923.70 (representing the principal amount of the Bonds, plus an original issue premium of $651,448.70, and less Underwriter’s discount of $196,525.00).
GOVERNING AUTHORITY
The City is governed by the Mayor and the Council. The Council consists of seven members, including two members elected at-large and five members elected from single member districts. The names of the members of the Council, as well as the Mayor and other City officials, appear at the beginning of this Official Statement.
BOND RATING
Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business (“S&P”), has assigned its municipal debt rating of “A+/Stable” to the Bonds. The rating reflects only the views of S&P and is not a recommendation to buy, sell or hold the Bonds. Any desired explanation of the significance of such rating should be obtained from S&P, at the following address: Standard & Poor’s Ratings Services, Lincoln Plaza, Suite 3200, 500 N. Akard, Dallas, Texas 75201, telephone 214-871-1400. The Issuer may have furnished to S&P information relating to the Bonds and other matters, certain of which information and materials have not been included in this Official Statement. Generally, a rating agency bases its rating on the information and materials so furnished and on investigations, studies and assumptions by such rating agency. Ratings may be changed, suspended or withdrawn as a result of changes in, or unavailability of, information. There is no assurance that the rating on the Bonds will not be changed or withdrawn entirely if, in the judgment of S&P, circumstances so warrant. Any downward change or withdrawal of the rating could have an adverse effect on the market price for the Bonds.
CERTIFICATION AS TO OFFICIAL STATEMENT
At the time of payment for and delivery of the Bonds, the Governing Authority of the Issuer will furnish the Underwriter a certificate signed by its Mayor to the effect that (i) the descriptions and statements, including financial data, of or pertaining to the Issuer, on the date of the Preliminary Official Statement, on the date of the sale of the Bonds and on the date of the delivery thereof, were and are true in all material respects, and, insofar as such matters are concerned, the Official Statement did not and does not contain an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, (ii) insofar as the descriptions and statements, including financial data, of or pertaining to governmental and/or non-governmental entities other than the Issuer and their activities contained in the Official Statement are concerned, such descriptions, statements, and data have been obtained from sources which the Governing Authority believes to be reliable and the Governing Authority has no reason to believe that they are untrue or incomplete in any material respect, and (iii) there has been no adverse material change in the affairs of the Issuer between the date the Official Statement was deemed final by the Issuer and the date of delivery of the Bonds.
43 CONTINUING DISCLOSURE
The Issuer will, pursuant to a Continuing Disclosure Certificate, covenant for the benefit of Bond owners to provide certain financial information and operating data relating to the Issuer in each year no later than six (6) months from the end of the Issuer’s fiscal year, with the first such report due not later than October 31, 2014 (the “Annual Report”), and to provide notices of the occurrence of certain enumerated events, if deemed by the Issuer to be material. The Annual Report will be filed by the Issuer with the MSRB (and with any future Louisiana officially designated State Information Depository). Any notices of material events will be filed by the Issuer with the MSRB (and with any future Louisiana officially designated State Information Depository). The specific nature of the information to be contained in the Annual Report or the notices of material events is set forth herein under the caption “APPENDIX H - Form of Continuing Disclosure Certificate.” These covenants have been made in order to assist the Underwriter in complying with S.E.C. Rule 15c2-12(b)(5) (the “Rule”). Except as provided in the Continuing Disclosure Certificate, the Issuer has not undertaken to provide all information investors may desire to have in making decisions to hold, sell or buy the Bonds.
The Issuer’s initial Dissemination Agent for the above information is the City Clerk, or any successor Dissemination Agent designated by the Issuer, P.O. Box 71, Alexandria, Louisiana 71309, telephone 318-449-5048.
The Issuer has filed all continuing disclosure reports currently required by its prior undertakings under the Rule; however, not all reports were timely filed. On November 19, 2010, the Issuer satisfied the reporting requirement for fiscal year 2010 and on November 21, 2011, the Issuer satisfied the reporting requirement for fiscal year 2011. The Issuer’s Annual Reports for fiscal years 2007 through 2009 were filed as required but were not properly indexed by the repositories at the time; these reports were refiled with the MSRB on August 10, 2012 for convenience. The Issuer’s Annual Reports for fiscal year 2012 and 2013were filed timely. The Issuer has established procedures with respect to all undertakings (including those in connection with the Bonds) to ensure proper filing of such reports with the MSRB in the future.
ADDITIONAL INFORMATION
Included in Appendix “A” of this Official Statement is certain financial and statistical data pertaining to the Issuer, its economy, and its finances.
This Official Statement was prepared by Foley & Judell, L.L.P., 365 Canal Street, Suite 2600, New Orleans, Louisiana 70130-1138 (telephone 504-568-1249).
For any additional information concerning the Issuer, please address Mr. David Johnson, Director of Finance, City of Alexandria, P.O. Box 71, Alexandria, Louisiana 71309 (telephone 318- 449-5034). For additional information concerning the Bonds now offered for sale, please address Co-Bond Counsel.
MISCELLANEOUS
This Official Statement has been prepared in connection with the initial offering and sale of the Bonds to the purchasers on the date hereof and is not intended for use in connection with any subsequent sale, reoffering or remarketing of the Bonds. Subsequent purchasers must therefore rely on their own examination of the offering, including the merits and the risks involved.
44 The Issuer has authorized the delivery of this Official Statement to the Underwriter. The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information.
Potential purchasers of the Bonds should consult their own tax advisors as to the consequences of investing in the Bonds. See also “TAX EXEMPTION” herein.
CITY OF ALEXANDRIA, STATE OF LOUISIANA
/s/ Jacques M. Roy /s/ Nancy Thiels Jacques M. Roy Nancy Thiels Mayor Council Clerk
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APPENDIX “A”
FINANCIAL AND STATISTICAL DATA
RELATIVE TO THE CITY OF ALEXANDRIA
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FINANCIAL AND STATISTICAL DATA RELATIVE TO THE CITY OF ALEXANDRIA AND THE PARISH OF RAPIDES, STATE OF LOUISIANA
Boundaries and Area of the City
The City of Alexandria, State of Louisiana (the “City” or “Issuer”) is located in the Parish of Rapides, State of Louisiana (the “Parish”) on the west bank of the Red River, and has an area of approximately 30 square miles.
Population
The trend in population of the City follows:
Year Population 1940 27,066 1950 34,913 1960 40,279 1970 41,811 1980 51,565 1990 49,049 2000 46,342 2010 47,723
2012 48,367
Source: U.S. Census Bureau.
Assessed Valuation
The trend in the assessed valuation of the City, all of which is taxable for municipal purposes, follows:
Tax Fiscal Assessed Year Year Valuation 2001 2002 $243,903,013 2002 2003 249,906,042 2003 2004 251,243,392 2004 2005 266,186,468 2005 2006 287,234,773 2006 2007 301,283,723 2007 2008 323,937,050 2008 2009 339,391,204 2009 2010 352,225,258 2010 2011 358,234,238 2011 2012 366,352,112 2012 2013 366,401,651 2013 2014 372,299,033
Sources: Rapides Parish Assessor; Louisiana Tax Commission.
A-1 A breakdown of the 2013 assessed valuations of the City by classification of property follows:
2013 Assessed Valuation Real Estate $268,756,920 Personal Property 88,019,163 Public Service Property 15,522,950 Total $372,299,033
Sources: Rapides Parish Assessor; Louisiana Tax Commission.
Tax Collection Record
The City reported the following ad valorem tax collections for the tax years indicated:
Tax Taxes Taxes Percentage Year Levied Collected Collected 2003 $5,240,090 $5,140,698 98.10% 2004 5,498,639 5,441,697 98.96% 2005 5,799,503 5,636,203 97.18% 2006 6,094,970 5,993,995 98.34% 2007 6,553,247 6,460,377 98.58% 2008 6,865,884 6,797,930 99.01% 2009 7,125,563 7,005,646 98.32% 2010 7,247,125 7,143,017 98.56% 2011 7,411,350 7,317,616 98.74% 2012 7,412,305 7,158,587 96.58% 2013 7,412,346 7,299,919 98.48%
Source: City of Alexandria Finance Department. All figures unaudited.
Millage Rates
The recent trend in the ad valorem tax rates levied by the City follows:
Millage Rates 2009 2010 2011 2012 2013 City of Alexandria General 6.83 6.83 6.83 6.83 6.83 Public Safety Complex 2.15 2.15 2.15 2.15 -- Capital Improvement 11.25 11.25 11.25 11.25 11.25 Totals: 20.23 20.23 20.23 20.23 18.08
Parishwide Taxes Sheriff Maintenance 16.97 16.97 16.97 17.46 17.46 Health Unit Maintenance 1.03 1.03 1.03 1.06 1.06 Assessor Maintenance 2.04 2.04 2.04 2.10 2.10 Senior Citizens Maintenance 1.03 1.03 1.03 1.06 1.06 Red River Waterway 2.34 2.34 2.34 2.34 2.34 Library Maintenance 7.09 7.09 7.09 7.29 7.29 Renaissance Maintenance 2.00 2.00 2.00 2.06 2.06 School Constitutional Tax 4.79 4.79 4.79 4.93 4.93 School Maintenance 21.03 21.03 21.03 21.64 21.64 Coliseum Bond ------2.55 Maintenance ------1.00
(Table Continued on next page.)
A-2 Millage Rates 2009 2010 2011 2012 2013 Other Parish and District Taxes Parish Tax (Inside City) 1.95 1.95 1.95 2.02 2.02 Consolidated School District No. 62 Maint. 8.40 8.40 8.40 8.52 8.52 Consolidated School District No. 62 Bond 10.00 10.50 10.50 9.50 9.50 Gravity Drainage District No. 1 1.02 1.02 1.02 1.02 1.02 Road District 36A 10.77 10.77 10.77 10.77 10.77
Source: Louisiana Tax Commission.
Leading Taxpayers The ten largest property taxpayers of the City and their 2013 assessed valuations follow: 2013 Assessed Name of Taxpayer Type of Business Valuation 1. Central LA Healthcare System, LP Healthcare $12,332,097 2. Union Pacific Railroad Company Railroad 7,479,660 3. Red River Bank Bank 5,056,866 4. Rapides Regional Medical Center Healthcare 4,471,611 5. BellSouth Communications Telecommunications 4,381,681 6. Alexandria Mall Retail 3,281,480 7. Capital One, National Association Banking 2,708,172 8. Walmart Supercenter Retail Store 2,683,719 9. Alexandria Lincoln Road LLC Retail Management 2,166,040 10. JPMorgan Chase Bank, National Association Banking 2,161,023 Total $46,722,349* ______*Approximately 12.55% of the 2013 total assessed valuation of the City. Source: Rapides Parish Assessor.
SUMMARY DEBT STATEMENT AS OF JANUARY 2, 2014 (For additional information, see Appendix “E” of this Official Statement)
A. Direct Debt of the City of Alexandria
Type of Obligation Principal Outstanding Unlimited Ad Valorem Tax Bonds $ 1,775,000 Utilities Revenue Bonds 134,676,000* Sales Tax Bonds 30,500,000 Limited Tax Revenue Bonds 8,625,000 Taxable Limited Tax Bonds 9,455,000
* Includes $1,810,000 of bonds to be defeased, as of February 20, 2014.
B. Overlapping Debt of the Parish of Rapides
Type of Obligation Principal Outstanding Unlimited Ad Valorem Tax Bonds $ 23,000,000 Public Improvement Bonds 710,000 Limited Tax Certificates 407,000
C. Overlapping Debt of the Rapides Parish School Board
Type of Obligation Principal Outstanding Certificates of Indebtedness $ 8,675,000 Revenue Bonds 10,000,000
A-3 D. Overlapping Debt of Consolidated School District No. 62
Type of Obligation Principal Outstanding Unlimited Ad Valorem Tax Bonds $ 19,320,000
Default Record
According to the Director of Finance, the City has never defaulted in the payment of its outstanding bonds or obligations.
Outstanding Short Term Indebtedness
According to the Director of Finance, the City has no short term indebtedness, other than normal accounts payable or as otherwise stated in this Official Statement.
Fund Balances
The City reported the following balances in its various funds as of October 31, 2013:
Balances Name of Fund Cash Investments Total General Fund $3,285,017 $4,432,212 $7,717,229 Community Development (21,658) -- (21,658) Economic Development Assistance 895 -- 895 HUD Emergency Shelter Fund (43,199) -- (43,199) HOME Investment Partnership Fund (19,051) -- (19,051) Hotel Fund 318,527 -- 318,527 Neighborhood Stabalization Fund 59,104 -- 59,104 ARRA Fund (5,924) -- (5,924) Debt Service 2004 Sales Tax 97,493 287,603 385,096 Debt Service 2004 GO Refunding Bonds 960,601 888,209 1,848,810 Debt Service 2008 Sales Tax Bonds 244,372 2,464,554 2,708,926 Debt Service 2008 Limited Tax Bonds 528,888 481,509 1,010,397 General Capital Projects 86,525 14,158,058 14,244,583 General Capital Projects-2008 Sales Tax Bonds -- 11,023,661 11,023,661 General Capital Projects-2008 Property Tax Call -- 3,523,237 3,523,237 Utility System Fund 6,007,322 16,728,772 22,736,094 Sanitation Fund -- 1,277,309 1,277,309 Zoo Fund -- 1,466,553 1,466,553 Golf Course Fund -- 272,391 272,391 Utility Capital Projects -- 9,071,907 9,071,907 Utility Capital Projects-2008 Utility Revenue Bonds (21,072) -- (21,072) Municipal Transit Fund -- 672,931 672,931 Risk Management Fund -- 5,390,592 5,390,592 Employee Benefits Fund -- 2,499,036 2,499,036 Unemployment Benefits Fund -- 308,907 308,907 Totals $11,477,840 $74,947,441 $86,425,281
Source: City of Alexandria Finance Department. Figures unaudited. Audit
Included in Appendix “C” hereto are the audited financial statements of the City for the fiscal year ended April 30, 2013, audited by Payne, Moore & Herrington, LLP, Certified Public Accountants, and their report, dated as of October 24, 2013, is included therein. The audited financial statements pertaining to the City which are included in this Official Statement have been included in reliance upon said report; however, such Auditors have not consented to inclusion of the financial statements herein and have not performed any additional review procedures related thereto. The Auditors did not perform any procedures relating to any of the information in this Official Statement.
A-4 Budget
Included in Appendix “D” to this Official Statement is the budget summary of the City for the fiscal year ending April 30, 2014.
GASB 45
Effective with the fiscal year beginning May 1, 2008, the City implemented Government Accounting Standards Board Statement Number 45 (“GASB 45”). A summary of the impact of the City's post-employment benefit obligations on the finances of the Issuer is further explained in Note 18- Post-employment benefits-of the 2013 audited financial statements of the City found in Appendix “C” hereto. See page 62 of the audit.
ECONOMIC INDICATORS
Per Capita Personal Income
A comprehensive revision of the estimates of Per Capita Personal Income by State were published in November 2013 by the Bureau of Economic Analysis of the U.S. Department of Commerce. The recent trends in revised per capita personal income for Rapides Parish, Louisiana, and the Nation are indicated in the following table:
Per Capita Personal Income 2008 2009 2010 2011 2012 Rapides Parish $38,330 $38,027 $34,848 $37,628 $39,222 Louisiana 37,799 36,378 37,217 38,623 40,057 United States 40,873 39,357 40,163 42,298 43,735
Source: U.S. Department of Commerce, Bureau of Economic Analysis. November 21, 2013.
(The personal income level for the United States is derived as the sum of the county estimates; it differs from the national income and product accounts (NIPA) estimate of personal income because by definition, it omits the earnings of Federal civilian and military personnel stationed abroad and others. It can also differ from the NIPA estimate because of different data sources and revision schedules.)
Employment The Louisiana Workforce Commission has issued revised not seasonally adjusted annual average statistics for various employment areas within Louisiana. The revised annual average figures for Rapides Parish and Louisiana were reported as follows:
Year Labor Force Employment Unemployment Parish Rate State Rate 2007 59,283 57,059 2,224 3.8 3.8 2008 61,413 58,862 2,551 4.2 4.4 2009 60,405 56,659 3,746 6.2 6.6 2010 59,517 55,356 4,161 7.0 7.4 2011 58,853 54,700 4,153 7.1 7.3 2012 58,085 54,400 3,685 6.3 6.4
Source: Louisiana Workforce Commission.
A-5 The preliminary figures for the Parish for November 2013 were reported as follows:
Month Labor Force Employment Unemployment Parish Rate State Rate 11/13 58,086 54,793 3,293 5.7 5.6*
The preliminary figures for the Alexandria Metropolitan Statistical Area (“MSA”) for November 2013 were reported as follows:
Month Labor Force Employment Unemployment MSA Rate State Rate 11/13 67,378 63,497 3,881 5.8 5.6*
* Seasonally adjusted rate was 6.5. Source: Louisiana Workforce Commission. November 27, 2013.
The names of several of the largest employers located in the City are as follows:
Approximate No. of Name of Employer Type of Business Employees 1. Rapides Parish School Board Education 3,400 2. Rapides Regional Medical Center Healthcare 1,338 3. Christus St. Frances Cabrini Hospital Healthcare 1,250 4. CLECO Electric Utility 800 5. City of Alexandria Municipal Government 800 6. Union Tank Car Protective Manufacturing 650 7. Procter & Gamble Detergent Manufacturing 500 8. GE Energy Industrial Supplies (Valves) 450 9. Gilchrist Construction Highway & Steel Construction 350 10. Pastipak Packaging Plastic Containers 323
Source: City of Alexandria Finance Division.
No assurance may be given that any employer listed above will continue to locate in the City or continue employment at the level stated.
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A-6 ANNUAL AVERAGE RAPIDES PARISH CONCURRENT ECONOMIC INDICATORS, 2009, 2010, 2011, 2012 AND SECOND QUARTER 2013 (All data not seasonally adjusted.)
RAPIDES PARISH 2009 2010 2011 2012 2013:2 EMPLOYMENT Total 60,323 58,757 58,801 58,036 57,954 Agriculture, Forestry, Fishing, and Hunting 692 655 672 669 694 Mining 210 195 217 212 194 Utilities 621 619 598 583 567 Construction 5,101 3,942 3,791 3,534 3,684 Manufacturing 3,766 3,583 3,906 4,138 4,398 Wholesale Trade 1,911 1,282 2,165 2,139 1,711 Retail Trade 7,593 7,533 7,759 7,784 7,540 Transportation & Warehousing 1,189 11,770 1,134 1,084 1,120 Information 820 733 683 653 646 Finance & Insurance 1,717 1,678 1,695 1,643 1,680 Real Estate and Rental and Leasing 835 761 713 664 625 Professional & Technical Services 1,899 2,021 2,189 2,176 2,107 Management of Companies and Enterprises 553 553 567 590 502 Administrative and Waste Services 2,429 2,545 2,492 2,421 2,934 Educational Services 5,092 4,982 4,734 4,771 5,009 Health Care and Social Assistance 15,929 15,721 15,541 15,135 14,528 Arts, Entertainment, and Recreation 286 272 256 238 258 Accommodation and Food Services 4,433 4,389 4,501 4,506 4,541 Other Services, except Public Administration 1,580 1,602 1,605 1,610 1,708 Public Administration 3,627 3,594 3,536 3,448 3,387
EARNINGS ($ in Thousands) Annual Annual Annual Annual Quarterly Total $2,147,675 $2,102,312 $2,130,359 $2,155,956 $538,330 Agriculture, Forestry, Fishing, and Hunting 23,842 23,452 24,359 25,238 7,444 Mining 21,298 17,762 19,714 18,822 3,403 Utilities 31,236 30,530 31,714 31,344 7,793 Construction 232,950 175,977 167,028 163,811 42,939 Manufacturing 175,744 175,171 184,453 195,482 52,599 Wholesale Trade 79,072 83,350 81,843 83,892 19,291 Retail Trade 174,614 178,020 187,470 195,481 46,479 Transportation & Warehousing 51,723 50,767 50,344 48,246 12,197 Information 28,834 26,863 26,267 25,237 6,234 Finance & Insurance 66,329 67,240 69,556 69,388 19,389 Real Estate and Rental and Leasing 24,779 23,945 23,236 21,182 4,763 Professional & Technical Services 80,366 85,029 92,852 97,206 23,708 Management of Companies and Enterprises 44,045 45,237 49,794 60,127 8,878 Administrative and Waste Services 62,996 64,441 68,412 74,408 18,674 Educational Services 157,855 156,854 157,468 155,733 43,992 Health Care and Social Assistance 625,410 628,745 622,710 620,387 149,078 Arts, Entertainment, and Recreation 3,879 3,511 4,236 3,896 1,103 Accommodation and Food Services 58,110 60,424 61,661 62,434 15,770 Other Services, except Public Administration 36,870 39,524 40,379 40,873 11,223 Public Administration 167,031 165,966 165,762 162,020 41,454
Source: Louisiana Workforce Commission.
A-7 Banking Facilities
The City is served by the following financial institutions:
Banks
BancorpSouth Bank Red River Bank Capital One, National Association Regions Bank The Evangeline Bank & Trust Company Sabine State Bank & Trust Company First Federal Bank of Louisiana Southern Heritage Bank JPMorgan Chase Bank, National Association The Union Bank MidSouth Bank, N.A. Whitney Bank National Independent Trust Company Woodforest National Bank
GENERAL REMARKS
History
The City of Alexandria was founded in 1785, incorporated in 1819 and chartered in 1932. Spanish Franciscan missionaries arrived about 1690. Tradition has it that the mission they built was located within the boundaries of what is today the Rapides Cemetery in Pineville. In the early 1700's St. Denis ascended the Red River with the French and ordered the Spanish priests to leave Louisiana. The French then stationed a small detachment at the rapids in 1723. The beginning of today's crossroads was secured by “Post du Rapide”. Nature and geography played important roles in establishing twin communities on opposite banks of the Red River. In those early days, a ledge of limestone crossed the Red River forming a rapids just above what is now the site of Alexandria and Pineville.
General
The City of Alexandria serves as the Parish Seat, and is the located near the geographic center of Louisiana along the south bank of the Red River. Alexandria is central Louisiana's largest populated and commercial activity center with an estimated M.S.A. population of 154,505. The Alexandria area, the “Crossroads of Louisiana,” is a center for commercial trade, and the City is the tenth largest in the state, by population.
Alexandria adopted a City Charter which became effective in 1977 and which provides for a Mayor-Council form of government consisting of a full time Mayor and seven Councilmen, five of which are elected from districts and two of which are elected at large. The Council members elect their president, appoint the City Clerk, adopt ordinances and perform the duties outlined in the Charter. The Charter also sets forth the duties of the Mayor, who is the Chief Executive Officer of the City. The City Administration includes an Executive Division, a Public Works Division, a Utilities Division, a Finance Division, a Planning Division, a Personnel Division, a Legal Division, and Police and Fire Departments.
A-8 The Charter also sets forth certain procedures relating to the financial operations of the City, including but not limited to, the preparation, adoption and administration of a City budget, the adoption of supplemental and emergency appropriations, the reduction of and transfer of appropriations (with the limitation that no appropriation for debt service on bonds of the City may be reduced or transferred) and the provision of a five year capital outlay program. The City is empowered to incur debt in accordance with the City Charter and the constitution and statutes of the State of Louisiana.
Utilities
The City owns and operates its own Utilities System consisting of a combined electric power and light plant and system, waterworks plant and system, gas system and wastewater plant and system. The City also owns and operates its own Municipal Transit and Sanitation systems.
Economy
Alexandria's economy is based upon agriculture and timber production, wholesale and retail trade, services and public sector activity. Unlike some other areas of Louisiana, it is not dependent on the oil and gas industries.
Alexandria’s importance in the trade sector has been enhanced by the addition of the two regional shopping malls within the City limits. In 2010, Forbes Magazine ranked Alexandria’s projected job growth as 76th of the best small places for business.
The region is home to numerous manufacturers including UTLX Manufacturing, located just northwest of Alexandria. Plastipak Packaging, Proctor & Gamble, and GE Energy are all located in the City of Pineville. Together, these companies provide hundreds of jobs to the area, and contribute significantly to the local economy.
The vitality of Alexandria's service sector is evidenced by two four year colleges, five T.V. stations, one newspaper, twelve radio stations and three major medical facilities. This includes Rapides Regional Medical Center, located in the City, which in March, 2012, was verified as Louisiana’s first Level II Trauma Center. Residents of the region now have access to a facility that specializes in treating traumatic injury, which has previously been unavailable to them.
The December, 1992 closure of England Air Force Base prompted the creation of the England Economic and Industrial Development District (England Authority), and the geographic entity known as England Airpark. The England Authority is responsible for the commercial and industrial development of the base through the reuse of the land infrastructure improvements. In August of 1993, Alexandria International Airport (AEX) was opened for service, and in August 1996, commercial air service commenced with flights to Houston, Dallas, Memphis and Atlanta. With the doubling of air traffic, leasing of over 1 million square feet of commercial space and facilitation of approximately 2,000 jobs, the England Airpark and AEX have become a model for the transfer of a former military base to a rural community.
A-9 Culture, Recreation and Tourism
Capitalizing on Alexandria's historic and central location, a healthy tourism sector has been established with over 2,000 guest rooms available in the City and a combined convention center seating capacity of approximately 10,000.
In addition, the Alexandria area offers visitors many historic sites to visit such as Kent Plantation House, built in 1796; the Alexandria Museum of Art; the Louisiana History Museum; the Alexandria Historical and Genealogical Library and Museum; and the Louisiana Seminary Site, first home of Louisiana State University, opened in 1860 with William Tecumseh Sherman as headmaster.
Other attractions include, but are not limited, the Alexandria Zoological Park; recreational areas in the vicinity such as Valentine Lake, Cotile and Kincaid Lake, which are located in Kisatchie National Forest, Indian Creek, and Kees Park; the Azalea Trail; Rapides Parish Coliseum; and churches such as the Emanuel Baptist Church, St. Francis Xavier Cathedral, Mt. Olivet Chapel & Cemetery, and the St. James Episcopal Church established in 1844. River Oaks Square is the site of painters, weavers, sculptors and stained glass artists creating and exhibiting their works of art.
Recreational opportunities abound in the Alexandria area with over 100 civic clubs and organizations, five recreation centers, 29 local parks which include numerous ball fields, including the Alexandria Zoological Park, theaters at Louisiana College, LSU-A and the City Park Players, six golf courses including the Bringhurst Golf Course, known as the nation’s oldest par three course and semi-professional baseball at Bringhurst Stadium. Alexandria also hosts several celebrations including “Que’in on the Red, BBQ Festival”, Christmas lighting attractions and parades, Mardi Gras parades, etc.
A-10 APPENDIX “B”
CONSULTING ENGINEER’S REPORT
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GDS Associates, Inc. Engineers and Consultants
CONSULTING ENGINEERE ’S REPORT UTIILITY REVENUE BONDS, SERIES 2014
For the Purchase of Bayou Cove Generating Station Unit 1
Prepared for: THE CITY OF ALEXANDRIA, LOUISIANA
January 15, 2014
GDS Associates, Inc. 1850 Parkway Place Suite 800 Marietta, GA 30067 www.gdsassociates.com
CONSULTING ENGINEER’S REPORT – CITY OF ALEXANDRIA, LOUISIANA SERIES 2014 BONDS
PURPOSE AND BACKGROUND
PURPOSE AND SCOPE Pursuant to its duties as Consulting Engineer to the City of Alexandria, Louisiana (“City”), GDS Associates, Inc. (“GDS”) has prepared this Consulting Engineer’s Report (“Report”) with respect to the proposed issuance by the City of $28,075,000 aggregate principal amount of Utilities Revenue Bonds, Series 2014 (the “Series 2014 Bonds”). The Series 2014 Bonds are being issued pursuant to Chapter 13 of Title 39 of the Louisiana Revised Statues of 1950, as amended (the “Act”) and other constitutional and statutory authority. The Council of the City of Alexandria (the “Council”) approved the issuance of the Series 2014 Bonds pursuant to Bond Ordinance No. 29-2014, anticipated to be enacted on January 21, 2014, in accordance with the provisions of the Act. Presented herein is a summary of our review and analyses conducted in connection with the proposed issuance of the Series 2014 Bonds.
The Series 2014 Bonds are being issued to (i) finance the capital costs associated with the acquisition of the Bayou Cove Generating Station Unit 1 (“the “Bayou Cove Project”), as further discussed herein; (ii) pay for the costs of the combustion inspection of the Bayou Cove Project, as further discussed herein; (iii) pay for certain capitalized interest on the Series 2014 Bonds; and (iv) pay costs of issuance of the Series 2014 Bonds. For further information, see the section of the Official Statement entitled “Plan of Finance.”
For purposes of this Report, GDS has relied upon the City’s audited financial statements, certain financial, management, and operating data provided by the staff of the City, and certain documents provided in connection with the issuance of the Series 2014 Bonds. In addition, GDS has relied upon certain documents provided in connection with the recently issued Series 2013A Bonds for financing of the capital costs associated with the Reciprocating Internal Combustion Engine Project (the “RICE Project”). GDS has previously made site visits in connection with the City’s electric utility system for purposes of inspecting the electric facilities of the City, but such site visits were limited in nature and primarily related to the suitability of the D.G. Hunter Generating Station as a potential site for the installation of reciprocating internal combustion engine generators.
Any capitalized term used in this Report, to the extent not defined herein, indicates that such term is defined in the particular agreement or document being discussed, or is defined in the Official Statement issued in connection with the Series 2014 Bonds. Any summary descriptions of agreements or other documents in this Report are (i) based on our understanding of such agreements, (ii) are not to be regarded as full statements, and consequently do not purport to be complete in every respect, and (iii) are qualified by reference to such agreement or document. For a more complete discussion of certain provisions of some of the agreements or documents referred to herein, see the applicable section(s) of the Official Statement.
BACKGROUND AND OVERVIEW OF THE CITY OF ALEXANDRIA THE CITY The City is a home rule charter municipality organized under the Constitution and the statutes of the State of Louisiana as a municipal corporation. The population of the City is approximately 51,000, according to recent census estimates. The City is located in the Parish
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of Rapides, State of Louisiana on the west bank of the Red River, and has an area of approximately 30 square miles.
The City adopted a City Charter which became effective in 1977 and which provides for a Mayor-Council form of government consisting of a full time Mayor and seven Councilmen, five of which are elected from districts and two of which are elected at large. The Council members elect their president, appoint the City Clerk, adopt ordinances and perform other duties outlined in the Charter. The Charter also sets forth the duties of the Mayor, who is the Chief Executive Officer of the City. The City Administration includes an Executive Division, a Public Works Division, a Utilities Division, a Finance Division, a Planning Division, a Personnel Division, a Legal Division, and Police and Fire Departments.
The Charter also sets forth certain procedures relating to the financial operations of the City, including but not limited to the preparation, adoption and administration of a City budget, the adoption of supplemental and emergency appropriations, the reduction of and transfer of appropriations (with the limitation that no appropriation for debt service on bonds of the City may be reduced or transferred) and the provision of a five-year capital outlay program. The City is empowered to incur debt in accordance with the City Charter and the constitution and statutes of the State of Louisiana.
THE UTILITIES SYSTEM The City owns and operates a combined electric power and light system, waterworks plant system, natural gas system and sewer system (collectively the “Utilities System”). The City also owns and operates a Municipal Transit System; however, the revenues and expenses of the Municipal Transit System are separate from those of the Utilities System.
Electric Power and Light System The City’s electric power and light system currently meets the electric capacity and energy requirements of its consumers through wholesale power purchases delivered over the Cleco Corporation (“CLECO”) transmission system and 130 MW of the City-owned and operated generating capacity located at the City’s D.G. Hunter Generating Station. The City’s electric system is interconnected to the CLECO transmission system at two points of interconnection. The City and CLECO are parties to an Electric System Interconnection Agreement dated February 24, 2010, which governs the interconnected operations of their respective systems. The City receives transmission service under CLECO’s Open Access Transmission Tariff pursuant to a Network Integration Transmission Service Agreement between the City and CLECO.
BONDS ISSUED BY THE CITY Utilities Revenue Bonds issued by the City are payable solely from the revenues of the Utilities System, after provisions have been made for the payment therefrom of the reasonable and necessary expenses of administering, operating and maintaining the Utilities System, pursuant to the provisions of the constitution and statutes of the State of Louisiana. As of the date of delivery of the Series 2014 Bonds, the City expects to have outstanding the following bonds payable from a pledge and dedication of the income and revenues of the Utilities System:
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. $2,979,000 Utilities Revenue Bonds, Series 2010B, maturing on May 1st of the years 2014 to 2030, inclusive (the “2010B Bonds”); . $4,326,000 Utilities Revenue Bonds, Series 2011, maturing on May 1st of the years 2014 to 2032, inclusive (the “2011 Bonds”); . $1,929,000 Utilities Revenue Bonds, Series 2012A, maturing on May 1st of the years 2014 to 2032, inclusive (the “2012A Bonds”); . $4,342,000 Utilities Revenue Bonds, Series 2012B, maturing on May 1st of the years 2014 to 2032, inclusive (the “2012B Bonds”); . $9,420,000 Utilities Revenue Refunding Bonds, Series 2013A, maturing on May 1st of the years 2014 to 2024, inclusive (the “2013A Refunding Bonds”); . $13,720,000 Utilities Revenue Refunding Bonds, Series 2013B, maturing on May 1st of the years 2014 to 2024, inclusive (the “2013B Refunding Bonds”); and . $96,150,000 Utilities Revenue Bonds, Series 2013A, maturing on May 1st of the years 2024 to 2043, inclusive (the “2013A Bonds”). The 2010B Bonds, the 2011 Bonds, the 2012A Bonds, the 2012B Bonds, the 2013A Refunding Bonds, the 2013B Refunding Bonds and the 2013A Bonds are collectively referred to herein as the “Outstanding Parity Bonds.” The Outstanding Parity Bonds are secured and payable from the revenues of the Utilities System, after provisions have been made for the payment therefrom of the reasonable and necessary expenses of administering, operating and maintaining the Utilities System.
SERIES 2014 BONDS The following table sets forth the sources and uses of the Series 2014 Bonds proposed to be issued by the City. As shown in the Table 1 below, the bond proceeds are sufficient to cover (i) the cost of acquisition of the Bayou Cove Project, (ii) capitalized interest costs through August 1, 2014, and (iii) bond issuance costs.
Table 1: Estimated Sources and Uses of Series 2014 Bonds Amounts in Thousands of Dollars
Sources Of Funds Par Amount of Bonds 28,075 Original Issue Premium 651 Total Sources (Bond Proceeds) 28,726
Uses Of Funds Deposit to Project Construction Fund* 27,800 Deposit to Capitalized Interest Fund 554 Costs of Issuance/Underwriter's Discount 373 Total Uses (Bond Proceeds) 28,726
* Includes proceeds to cover the costs of the acquisition of the Bayou Cove Project and fees for consultants and attorneys associated with the purchase. Also includes proceeds to the cover the costs of the combustion inspection for the Bayou Cove Project.
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INTEGRATED RESOURCE PLANNING
During 2012, the City engaged GDS to prepare a long-term Integrated Resource Plan (“IRP”) that included (1) developing a 20-year electric load forecast, (2) developing and issuing a Request for Proposals (“RFP”) to assess power supply alternatives, (3) creating 20-year supply plans to serve the City’s future electric requirements using self-build generation alternatives and/or purchased power arrangements in conjunction with the City’s existing generation resource entitlements, (4) performing a transmission assessment to determine the ability of the City and CLECO transmission systems to deliver capacity and energy from the various resources being considered, and (5) providing conclusions and recommendations on the best approach for the City to implement the IRP.
The City currently purchases from CLECO capacity and energy in excess of that supplied by (i) the D.G. Hunter Plant, (ii) Rodemacher Unit 2, pursuant to its purchase from Louisiana Energy and Power Authority (“LEPA”), and (iii) purchases from Southwestern Power Administration (“SWPA”). The CLECO partial requirements power agreement is scheduled to expire May 31, 2015. The City has determined that the D.G. Hunter Plant will not be capable of providing reliable capacity and energy over the long-term future, based on the Environmental Protection Agency’s proposed Cross-State Air Pollution Rule (CSAPR), which would have effectively limited operation to just over 1% capacity factor due to insufficient awarding of seasonal NOX allowances. Given recent court rulings that have indefinitely stayed CSAPR, the D.G. Hunter Generating Station is able to provide some power to the City over the next several years, but will remain susceptible to any future environmental regulations regarding NOX and potentially other emissions. The IRP therefore reflects the need to replace both the remaining Units 3 and 4 at the D.G. Hunter Generating Station, which began operation in 1965 and 1974 respectively, and the CLECO partial requirements power supply agreement that expires in 2015.
The City’s peak demand grew from 177 MW in 2007 to 189 MW in 2012 (a 1.3% compounded rate of growth) while the City’s total energy requirement ranged between 768 and 923 GWh over the same period. In 2015, the City’s total capacity and energy requirements are projected to be 194 MW and 846 GWh, respectively. The electric load forecast developed in 2012 projects demand and energy requirements of the City to increase by an average of 0.9% per year through 2031, with the City system continuing as a summer peaking system. The total capacity and energy requirements projected for 2031, the last year of the load forecast, are 225 MW and 980 GWh, respectively.
As part of the IRP development process, GDS performed screening curve analyses utilizing specific generation technologies, and identified the need for intermediate and peaking sources of power for the City starting in June 2015 when the CLECO partial requirements power agreement expires and the D.G. Hunter Plant is assumed to be retired. In evaluating responses to the RFP, GDS performed production cost modeling, including sensitivity analyses on key variables affecting the City’s power supply plan. Responses to the RFP included unit contingent purchases, system power sales, ownership options, renewable resources, and new build alternatives. In addition to the technologies that had already been identified as the self-build option, including development of additional generation at the D.G. Hunter Plant, CLECO and Constellation provided the City with partial requirements proposals that would provide the City with capacity and energy to meet requirements above load served by the City’s LEPA/Rodemacher and SWPA resources.
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In arriving at conclusions and recommendations on the best approach to implementing the IRP, in addition to overall cost, the City considered resource mix and diversity, fuel supply diversity, environmental risk, contract term diversity, and transmission deliverability. However, the key criteria utilized in interpreting model results and selecting the best power supply scenarios was to address the City’s main power supplly goal of being able to reliably and cost-effectively serve its retail customers and minimize future risk. As a result of the IRP process, the City has concluded that the self-build option involving approximately 63 MW of new generation at the existing D.G. Hunter Plant, the purchase of the 75 MW Bayou Cove Generating Station Unit 1 (from NRG), and a new CLECO Partial Requirements Agreement (the “CLECO PRA”) described below are its best long-term power supply options. Figure 1 depicts the power supply portfolio that reflects thhe City’s Integrated Resource Plan.
Figure 1: Generating Capacity Portfolio
The City and CLECO joined the Midcontinent Independent System Operator, Inc. (“MISO”) system and began to participate in the MISO market when it was activated on December 19, 2013. At that time, as shown in Figure 2 below, the new southern region (highlighted in blue) added 18,000 miles of transmission lines, 40,000 MW of generation capacity and load, including CLECO and the City, into the MISO footprint. The characteristics of having this system run by an indepenndent Regional Transmission Organization and System Operator (RTO and ISO) include centralized unit commitment and dispatch, a single balancing authority, nodal energy pricing and congestion charges, and market-based pricing for ancillary services. FERC has encouraged these market structures because they offer improved transparency and independence in market operation, lower energy costs through economies of scale, maximum economic use of the grid, and efficient price signals for new generation and transmission projects.
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Figure 2: MISO Service Area
GDS, through use of the Ventyx PROMOD IV software, modeled a system-wide dispatch of MISO’s Southern Region. The generator and load portfolio modeling package was used to project nodal locational marginal prices based on the nominal gas forecast from the Energy Information Administration’s (“EIA”) 2013 Annual Energy Outlook released on April 14, 2013. Table 2 below presents the projected annual peak demand and energy requirements of the City and the resources that are planned to be used to meet those load requirements through the first 5 years of the RICE Project, the Bayou Cove Project, and the new CLECO PRA. Thhe Reserve Margin shown on Table 2 is within the range of reserves considered to be good utility practice.
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Table 2: Requirements and Resources Amounts Shown at Generation Level
2013 2014 2015 2016 2017 2018 2019 Requirements Annual Peak Demand (MW) 190.7 192.3 194.1 195.9 197.7 199.5 201.4 Energy (GWh) 831.0 838.1 845.9 853.7 861.6 869.6 877.6
Resources Capacity (MW) Rodemacher Unit 2 54.0 54.0 54.0 54.0 54.0 54.0 54.0 SWPA 11.0 11.0 11.0 11.0 11.0 11.0 11.0 D.G. Hunter 102.0 102.0 - - - - - Cleco PRA - - 30.0 30.0 30.0 30.0 30.0 RICE Project - - 64.8 64.8 64.8 64.8 64.8 Bayou Cove Unit 1 - 75.0 75.0 75.0 75.0 75.0 75.0 MISO Market Purchases 52.3 ------Total Capacity Resources 219.3 242.0 234.8 234.8 234.8 234.8 234.8 Capacity Reserves 28.6 49.7 40.6 38.8 37.0 35.2 33.4 Reserve Margin (%) 15% 26% 21% 20% 19% 18% 17%
Energy (GWh) Rodemacher Unit 2 402.1 402.1 402.1 402.1 402.1 402.1 402.1 SWPA 29.9 29.9 29.9 29.9 29.9 29.9 29.9 D.G. Hunter ------Cleco PRA 399.0 406.2 180.8 14.3 18.3 22.3 26.3 RICE Project/1 - - 5.2 9.0 12.1 15.3 18.4 Bayou Cove Unit 1 ------MISO Market Sales - - (5.2) (9.0) (12.1) (15.3) (18.4) MISO Market Purchases - - 233.1 407.4 411.3 415.2 419.3 Total Energy Resources 831.0 838.1 845.9 853.7 861.6 869.6 877.6
1/ RICE Project and Bayou Cove energy shown represent those resources dispatched into the MISO market.
CAPITAL PROJECTS TO BE FUNDED BY THE SERIES 2014 BONDS
BAYOU COVE UNIT 1 PURCHASE PROJECT DESCRIPTION On December 9, 2013, the City signed an Asset Purchase Agreement with Bayou Cove Peaking Power LLC (an affiliate of NRG) for the purchase of Bayou Cove Unit 1. Bayou Cove Unit 1 is one of four existing GE Frame 7EA combustion turbine-generators at the Bayou Cove Generating Station, each with a nominal summer capacity of 75 MW located near Jennings, Louisiana – approximately 72 miles from Alexandria. The negotiated purchase price for Bayou Cove Unit 1 and associated auxiliary equipment is $26,775,000 ($357/kW).
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The Bayou Cove plant was designed and constructed by Shaw and placed in service in 2002. Auxiliary equipment included in the purchase of Bayou Cove Unit 1, which will be procured by the City through the Asset Purchase Agreement, will include:
. Continuous Emissions Monitoring Module - One per unit (100%) . Packaged Electrical/Electronic Controls Center - One per unit (100%) . Power Distribution Center - One for four units (25%) . Gas Heaters (two total) - Shared among all four units (25%) . Transformers - Shared between Units 1 and 2 (50%) . Fire Suppression - Shared among all four units (25%) Pumps – electrically driven Water tank Pond
The plant is not designated for black start. The entire Bayou Cove Generating station, including Unit 1, will continue to be operated and maintained by NRG.
EQUIPMENT ASSESSMENT Professional representatives from GDS visited the Bayou Cove Generating Station on August 21, 2012 and met with plant operating staff and NRG representatives for purposes of conducting due diligence relative to the Bayou Cove assets proposed to be purchased. Plant operating staff and NRG provided certain responses to document requests and due diligence questions during the meeting, and the remaining responses were provided during the third and fourth quarters of 2012. A follow-up visit to review plant documents was conducted on May 31, 2013. At the time of both site visits, the plant appeared to be in good condition and well-maintained.
Bayou Cove Unit 1 is a General Electric PG7121EA (“Frame 7 EA”) combustion turbine (“CT”) coupled to a GE Model GE Model 7A6 Open-Ventilated Air-Cooled (“OVAC”) generator. The combustion turbine generator (“CTG”) is controlled by a GE Mark 5 SPEEDTRONIC system.
The PG7121 design includes a three bearing single shaft machine with a bolted rotor. The generator is connected to the gas turbine or “hot” end. The turbine is comprised of compressor and turbine sections with a cold-end (compressor side) electric starter drive. The axial flow compressor has seventeen stages with modulating inlet guide vanes. Inter-stage air extraction is used for cooling and sealing air for turbine nozzles, wheel spaces, and bearings and for surge control during startup. The turbine section utilizes a three stage design to convert energy from the hot pressurized air and gas produced in the compressor and combustion sections into mechanical energy. The turbine section is comprised of the combustion wrapper, turbine rotor, turbine shell, exhaust frame, exhaust diffuser, nozzles, diaphragms, stationary shrouds and the number 3 bearing assembly.
The CTG is equipped with a dual stage, multi-mode dry low oxides of nitrogen (“NOX”) (DLN-1) combustor. The major components of the combustor are arranged to form two
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The 7EA basic design evolved from the 7B model that has been in production since 1972 and the 7E units of the mid-1980s. The 7E/EA is a proven and mature turbine technology. With over 750 7B, 7E and 7EA units installed and in operation, this fleet has accumulated tens of millions of operating hours of service and is well recognized for its high availability and reliability.
Bayou Cove Unit 1’s generator is a three phase, synchronous machine designed for continuous operation at rated conditions. The generator consists of a stator, rotor (generator field) and brushless exciter sections. The rugged design of the generator contributes to long- lived low-maintenance operation.
As of the end of 2001, (the approximate time Bayou Cove Unit 1 was manufactured), GE had shipped over 500 Frame 7E/EA units. The Frame 7E/EA units are considered to be among the most reliable CTGs available and, based upon industry data, it is anticipated that the availability of these units will exceed 94%.
BAYOU COVE SITE As shown in Figure 3, the Bayou Cove Generating Station is located approximately five miles northeast of Jennings, Louisiana, near the intersection of Bergeaux and Riverside Roads (N 30°17’ W92°36’), approximately 0.85 miles west of Louisiana Highway 97. The plant site comprises approximately 118.5 acres, and Bayou Cove Unit 1 is located approximately 700 feet from the nearest residence. Figure 4 provides an aerial view of the Bayou Cove Generating Station site. As all four Bayou Cove units are surrounded by sound attenuating baffles, NRG reports that there have been no noise complaints from neighbors. The plant appears to be in good condition and has been well-maintained.
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Figure 3: Bayou Cove Map Location
Figure 4: Bayou Cove Aerial View
OPERATING HISTORY Based on the information provided by NRG, the Bayou Cove plant (all four units) has generated in a range from 36,000 megawatt-hours (“MWh”) or 1.3% Capacity Factor (“CF”) to 100,000 MWh or 3.8% CF annually since entering commercial operation as a merchant facility in 2002. Through July 2013, Unit 1 had recorded 367 factored fired starts (“FFS”) and had not had a combustion inspection (planned for 450 FFS). From the beginning of
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2006 through the end of July 2013, Unit 1 had operated 2,026 hours. Although the plant is permitted to operate at a capacity factor approaching 50%, GDS does not expect much change to the historical operating mode with change of ownership, taking into account the City’s transfer of generating assets to MISO control, which will be coordinated through the Scheduling Agent Agreement, as negotiated with NRG.
MAINTENANCE ORGANIZATION AND STAFFING Three full-time personnel (two electrical/instrumentation technicians and an engineer) work at the plant site, which is dispatched from NRG’s Big Cajun I plant located near New Roads, Louisiana. Preventive maintenance activities are performed by the plant staff, NRG technical staff, and by contractors, as necessary. As noted above, Unit 1 has not yet had any GE recommended inspections as it has not reached the number of factored starts normally specified by GE for the first combustion inspection (500 factored starts). Based on discussions with NRG staff in December 2013, NRG indicated that Unit 1 is currently scheduled for a combustion inspection in the fall of 2014 (or later depending on the number of starts incurred) when it is expected to have approximately 450 factored fired starts. NRG does not own a set of spare parts for combustion inspections and intends to have personnel from its maintenance support group disassemble the units and send the combustion parts out to a vendor (not yet selected) that specializes in the refurbishment of gas turbine combustion parts. There are several vendors in addition to GE who perform this service. Combustion inspections will be conducted on Units 1 and 2 simultaneously, and NRG expects the units to be out of service for approximately 70 days while the combustion parts are being refurbished. Re-assembly will also be accomplished by NRG’s support group. The costs of the combustion inspection on Unit 1, which are currently estimated to be $300,000, are to be funded with the proceeds of the Series 2014 Bonds.
NRG owns and operates several other General Electric combustion turbines and steam turbines and states that it has a very good relationship with GE and, despite the lack of a long-term service agreement for the Bayou Cove units, has had no problem receiving parts or services from GE for the Bayou Cove Generating Station.
OPERATING COST Variable Costs. NRG provided historical actual Bayou Cove operating expenses for calendar years 2007-2012 and budgeted operating expenses for 2013. In addition, the proposal provided in response to the City’s RFP contained cost estimates for variable O&M of $2.43/MWh and start-up costs of $3,500/start. Our discussions with NRG and analysis of the financial information provided lead us to believe that the variable O&M cost estimate provided in NRG’s proposal is reasonable and that the start-up cost estimate is more than sufficient to allow for the accrual of funds necessary to perform inspections on Unit 1 according to GE’s recommended start-based schedule.
Fixed Costs. Our review of NRG’s historical O&M for Bayou Cove Unit 1 led GDS to include approximately $1.14 million annually or $0.63/kW-mo for fixed costs including payroll, preventive maintenance, corporate support (dispatch and other functions), environmental permits and equipment maintenance in Bayou Cove Unit 1 operating cost projections.
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FUEL SUPPLY The primary natural gas fuel supplier for Bayou Cove is Spectra, the owner of the Egan storage hub. According to NRG, fuel supply has been curtailed only when maintenance (pigging, etc.) has been required on the pipeline. The City has negotiated a Fuel Services Agreement with NRG to secure the natural gas supply necessary for operating Bayou Cove Unit 1, to the extent called upon to generate.
TRANSMISSION INTERCONNECTION Power is generated by the Bayou Cove units at 13.8 kV. A single generator step-up transformer serves both Units 1 and 2 (a similar setup is provided for Units 3 and 4) and transforms power to 138 kV. Power from all four Bayou Cove units then leaves the Bayou Cove Generating Station site via NRG’s 138 kV gas breaker to Entergy’s Bayou Cove Substation. The 138 kV power is transported to Entergy’s Richard, Jennings, or Lake Charles Bulk stations. The nearest connection to the 500 kV grid is through a 500/138 kV transformer at Entergy’s Richard station.
The transmission availability/deliverability to the City was studied by CLECO as the City’s transmission provider and long-term network resource service has been granted for the life of the project. The Study was completed in May 2013 and no transmission improvements were identified as needing to be constructed prior to granting service. Since Bayou Cove is located on the Entergy transmission system, NRG had previously submitted a request for 80 MW of firm point-to-point service between Entergy and CLECO. The request has been approved and was converted to network service upon integration of Entergy and CLECO into MISO.
ENVIRONMENTAL The Bayou Cove plant is permitted as a minor source of toxic air pollutants. Unit 1 is restricted to emission rates of 73.0 lbs/hour of carbon monoxide (“CO”) and 110.0 lbs/hr of NOX. These allowed rates are well in excess of the typical emission rates provided by the DLN1 burners installed on the Bayou Cove units and have allowed NRG to operate the units under all weather conditions without incurring emission violations. The plant as a whole is restricted to 240.07 tons of CO and 249.8 tons of NOX emissions annually, amounts sufficient for generation at a capacity factor approaching 50%. CONTRACTS AND AGREEMENTS As previously mentioned, the City has executed the Asset Purchase Agreement with Bayou Cove Peaking Power, LLC and NRG. The Asset Purchase Agreement provides for the terms and conditions governing the sale of NRG's Bayou Cove Unit 1, and certain common facilities, to the City of Alexandria. Important terms include: sales/purchase price, description of purchased assets, deadline for closing date, and transference of ownership rights to a third-party.
In addition, the City anticipates executing the following contracts and agreements with Bayou Cove Peaking Power, LLC and NRG upon closing of the sale of the Bayou Cove Unit 1 to the City:
. Joint Ownership Agreement – establishes ownership rights and responsibilities for the City and NRG. . Operation and Maintenance Agreement - terms and conditions regarding the ongoing operations and maintenance at the Bayou Cove Generating Station and specifically
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naming NRG, or its successor, as the plant operator and entity responsible for providing maintenance. City of Alexandria will pay a pro-rata share of the cost of O&M expenses at Bayou Cove. The O&M agreement also contains provisions in the event the City chooses to sell or transfer its unit to a third-party, in which case NRG will remain the plant operator and maintenance provider for a minimum of five years from the date of the transaction. . Fuel Services Agreement – establishes NRG’s responsibility to procure fuel and fuel transportation for Bayou Cove Unit 1 and to invoice for fuel procured. . Scheduling Agent Agreement – dictates the scheduling agent who will be responsible for dispatching the City's Bayou Cove Unit 1 into the MISO market with specific responsibilities for the scheduling agent to bid the City's unit into the MISO market and coordinate communications with NRG as the plant operator.
ADDITIONAL POWER SUPPLY RESOURCES (NOT FUNDED BY THE SERIES 2014 BONDS)
THE RICE PROJECT The City proposes to construct a nominal 63 MW reciprocating internal combustion engine generating facility on its existing D.G. Hunter plant site in Alexandria, Louisiana. The RICE Project, as currently proposed, will initially consist of seven Wärtsilä 20V34SG or similar reciprocating internal combustion engine-generators nominally rated at approximately 9 MW each. These units will be designated D.G. Hunter Units 5 through 11. Although the City has based its project cost estimates on the installation of Wärtsilä generators, the City is required by law to secure bids for equipment purchases and construction, and it is possible that lower- priced or more economical units with suitable emissions from other vendors will be secured through the bidding process. The City intends to procure the engine-generators and project construction services through two separate competitive bidding processes with a target in- service date of August 1, 2015. Additional large equipment including generator step-up transformers and other long lead-time items may also be bid separately.
According to its Official Statement dated October 9, 2013, the City issued the Series 2013A Bonds for the purpose of providing proceeds to pay for the capital costs associated with the RICE Project.
CLECO PARTIAL REQUIREMENTS ARRANGEMENT The City’s current power needs in excess of its owned capacity resources are provided by purchases from CLECO, LEPA (Rodemacher Unit 2) and the SWPA (hydropower allocation). The new CLECO partial-requirements arrangement (“CLECO PRA”), effective June 1, 2015, will provide Alexandria with supplemental capacity and energy to fulfill its total demand and energy requirements. The CLECO PRA will provide up to 60 MW of capacity and associated energy to Alexandria, in addition to energy management services in the MISO market, over a term of twenty (20) years.
Capacity purchases will be based on Alexandria’s summer peak demand requirements less its generation ownership and purchased power entitlements from other capacity resources, and a fixed demand price. Energy purchases will be based on Alexandria’s hourly energy
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There are other minor provisions within the new CLECO PRA, such as the option for Alexandria to purchase replacement capacity from CLECO if Alexandria experiences an extended outage at any of its generation resources; however, the other notable provision is a “bridge” arrangement that allows Alexandria to purchase capacity and energy from CLECO for a specified period of time if Alexandria’s new proposed RICE Project has not achieved commercial operation by June 1, 2015. This and the presence of a MISO capacity market will ensure that Alexandria has adequate power supply resources if there is an unexpected delay in the construction of the new generation.
PRINCIPAL ASSUMPTIONS
This report was prepared by GDS expressly for the purposes set forth herein. In preparing this report, GDS has relied upon certain information furnished by the City, the City’s Independent Auditor and other independent consultants to the City, all of which are believed to be reliable, accurate, and reasonable for purposes of this report. Given that this report contains observations, evaluations, analyses, projections, summary statements, opinions and/or conclusions that are based on what GDS believes are reliable information and reasonable assumptions and conditions, GDS makes no assurances with respect thereto. Accordingly, GDS in no way warrants or represents that any such observations, evaluations, analyses, projections, summary statements, opinions and/or conclusions will not vary as a result of changes in such assumptions or conditions. The principal assumptions that GDS relied upon are as follows:
REGARDING THE BAYOU COVE PROJECT 1. The actual purchase price for Bayou Cove Unit 1 and attendant assets is assumed to be the price contained in the Asset Purchase Agreement between the City and NRG. 2. Operating cost and dispatch cost estimates were prepared by GDS based upon the firm’s experience as asset manager for very similar facilities. The escalation on O&M charges in this analysis is based upon the 2012 EIA Annual Energy Outlook CPI- Energy index. The escalation factors for the 2016-2019 time frame average 2.7%. 3. The combustion inspection of the Bayou Cove Project Unit 1 is anticipated to occur in the fall of 2014 and cost approximately $300,000, which costs are to be funded with the proceeds of the Series 2014 Bonds. 4. GDS has assumed that there will be no unscheduled natural gas fuel interruptions to Bayou Cove. The Fuel Services Agreement establishes NRG’s responsibility to procure fuel and fuel transportation for Bayou Cove Unit 1 and to invoice for fuel procured. The natural gas price forecast used for PROMOD inputs is based upon the EIA’s 2013 Annual Energy Outlook released on April 15, 2013 for 2015-2019. 5. Economic dispatch of Bayou Cove Unit 1 will not be impacted by the plant’s minor source permit.
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6. Transmission interconnection will be granted with no significant system upgrade costs. 7. Due to the very limited dispatch forecasted, no significant capital additions are anticipated over the next ten years the Bayou Cove Unit 1 project is in operation. Due to the same consideration, the plant’s useful operating life is expected to extend well beyond the 30-year period over which the bonds to be issued are assumed to be amortized.
REGARDING THE RICE PROJECT 8. Turnkey cost estimate provided by Zachry, and assumption that the responses to the RFP for generating equipment will result in construction costs that are equal to or less than the cost estimates assumed. 9. The commercial operation date of the Rice Project is currently anticipated to be August 1, 2015. 10. Operating/maintenance cost estimates and dispatch cost PROMOD (production cost modeling) inputs were developed by GDS using data provided by Wärtsilä, which was confirmed through discussions with operators of currently operating RICE units. The escalation on O&M charges are based upon the 2012 EIA Annual Energy Outlook CPI-Energy index. The escalation factors for the 2016-2019 time frame average 2.7%. 11. Alexandria’s natural gas supply contract was reviewed by GDS to confirm availability and flexibility. The natural gas price forecast used for PROMOD inputs is based upon the EIA’s 2013 Annual Energy Outlook released on April 15, 2013 for 2015- 2019. 12. Environmental restrictions to dispatch are assumed not in effect until after 2019, based on information contained in the permit issued by the LDEQ on October 8, 2013. 13. Transmission interconnection will be granted with no significant system upgrade costs. 14. Due to the very limited dispatch forecasted, no significant capital additions are anticipated over the first ten years the RICE project is in operation. Due to the same consideration, the plant’s useful operating life is expected to extend well beyond the 30-year period over which the Series 2013A Bonds are to be amortized.
REGARDING THE SERIES 2014 BONDS 15. Interest rate, term, and principal amortization schedule on the Series 2014 Bonds, were provided by Stephens. 16. Interest on the Series 2014 Bonds is assumed to be capitalized from the date of issuance through August 1, 2014.
REGARDING COMBINED UTILITY REVENUES AND EXPENSES 17. Annual growth in consumers and sales is assumed to be 0.9%, an amount which closely approximates long-term historical trends and is consistent with the forecast of electric loads reflected in the City’s IRP.
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18. The base rate revenue assumes continuation of the current approved retail rates for all the utility services. However, the Energy Cost Adjustment (ECA) revenues for the Electric Utility and Purchased Gas Adjustment (PGA) revenues for the Gas Utility are assumed to track the projected increases in the costs of generation (including debt service) and purchased power, and the cost of purchased gas, pursuant to certain technical amendments to the ECA that were adopted by the City Council on December 10, 2013. 19. Operating expenses (with some adjustments being made to reflect the expected retirement of D.G. Hunter Units 3 and 4) are projected to escalate at 2% per year, reflecting the change in the Bureau of Labor Statistics: Employment Cost Index for total compensation for civilian workers in natural resources, construction and maintenance from June 2012 to June 2013.
PROJECTED OPERATING RESULTS
The projected operating results are presented in Exhibit 1, attached to this report.
The annual revenue requirements for the City’s Combined Utilities System for the historical period (fiscal years 2010 through 2012), Budget Years 2013 and 2014, and projected fiscal years (FY) 2015 through 2019 are shown on Exhibit 1. Projections for each of the four utility systems are shown on individual pages following the summary page. The costs associated with the new electric power supply arrangements, including the debt service payments on the Series 2014 Bonds, following the capitalized interest period, first appear in FY 2015. Beginning in that fiscal year, the financial projection shows annual surpluses averaging approximately $3.6 million, or roughly 3.5% of annual revenues. Since the base retail rates of each of the individual utilities (Electric, Gas, Water, Wastewater), have been in effect for many years, the City has engaged GDS to conduct a cost of service and retail rate study that will provide the basis for implementing base rate revisions, and is currently in process. The magnitude of the recommended rate increase for each utility will vary based on that utility’s revenue requirements and other generally accepted ratemaking parameters. It is anticipated that the rates for water and wastewater utility services, if necessary, would increase more significantly than the rates for electric and gas utility services. Any retail base rate increases implemented for the respective utilities could possibly be mitigated or phased-in by use of the Utilities System’s retained earnings, which were approximately $26 million at the end of FY2013.
Exhibit 1 was prepared assuming that the City would supply all energy requirements above those provided by its contracts with LEPA (Rodemacher Unit 2) and SWPA (Hydro) from the two projects to be financed (RICE Project and Bayou Cove Unit 1), as such generating resources are dispatched into the MISO market, along with capacity and energy provided under a partial-requirements contract with CLECO. As part of the MISO market participation, the City’s energy requirements will also be provided through purchases from the MISO market. For purposes of the projected operating results shown on Exhibit 1, the net fuel and purchased power costs, as affected by the MISO market interaction, along with debt service on the Series 2014 Bonds are assumed recovered through the City’s Energy Cost Adjustment. Other potential revenues, including potential ancillary service revenues from the City’s generating units, have not been reflected in the projected operating results shown on Exhibit 1.
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The following Table 3 is a computation of debt service coverage for the City’s Utilities System for the historical period (fiscal years 2010 through 2012), Budget Years 2013 and 2014, and projected FY 2015 through 2019, derived from Exhibit 1. Table 3 reflects the debt service on the Series 2014 Bonds issued to fund the Bayou Cove Project.
Table 3: Debt Service Coverage for Utilities System Amounts in Thousands of Dollars
Historical Budget Projected 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Combined Utility Revenue [1] 101,721 101,505 99,050 94,249 94,964 94,831 106,569 111,064 114,818 118,284
Less: Operating Expenses [2] 91,490 93,306 87,826 84,954 86,680 81,642 88,977 92,971 96,974 100,691
Net Available for Debt Service 10,232 8,199 11,224 9,295 8,284 13,188 17,592 18,094 17,844 17,593 Debt Service 4,171 4,164 4,576 5,053 4,086 4,779 9,367 10,147 10,128 10,134 Debt Service Coverage Ratio 2.45 1.97 2.45 1.84 2.03 2.76 1.88 1.78 1.76 1.74 [1] Reflects use of retained earnings (generated in previous years) during 2013 and 2014. [2] Equal to total revenue requirements per Exhibit 1, less debt service.
As discussed above, the revenues associated with the Energy Cost Adjustment have been projected assuming recovery of the power supply costs associated with ownership of the RICE and Bayou Cove Projects, as shown on Exhibit 1. Table 4 reports on the average cost of electricity charged by the City, based on the combination of Base revenues and ECA revenues, as shown on page 2 of Exhibit 1 (Electric Utility).
Table 4: Electric Retail Revenues and Rate Impacts
HistoricalBudget Projected 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Sales Revenues ($000) $73,118 $77,278 $73,971 $68,715 $64,085 $66,625 $76,923 $80,555 $83,198 $85,853
MWh Sales 725,768 748,159 741,185 691,056 727,778 734,200 740,987 747,836 754,749 761,726
Average Revenue Per kWh Sold (¢/kWh) 10.07 10.33 9.98 9.94 8.81 9.07 10.38 10.77 11.02 11.27
Yr-to-Yr Increase/Decrease: Per kWh (¢/kWh) 0.25 (0.35) (0.04) (1.14) 0.27 1.31 0.39 0.25 0.25 Percent Higher/Lower than Prior Year 2.5% -3.4% -0.4% -11.4% 3.1% 14.4% 3.8% 2.3% 2.2%
Average 2010 - 2013 (¢/kWh) 10.08 10.08 10.08 10.08 Increase vs. Average (¢/kWh) (1.28) (1.01) 0.30 0.69 0.94 1.19 Percent Higher/Lower than 2010-2013 Average -12.7% -10.0% 3.0% 6.8% 9.3% 11.8%
CONCLUSIONS
Based on (i) the analyses we have conducted to date with respect to the IRP and the City’s combined utility systems’ cost of service and retail rate study, (ii) our review of all of the contracts and agreements related to the RICE Project and Bayou Cove Project that have been negotiated to date, and (iii) the principal assumptions reflected in the projected operating results as described herein, GDS Associates has reached the conclusions that:
1. The development of the RICE Project, the acquisition of the Bayou Cove Project, and the partial requirements arrangements with CLECO, taken together with the
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City’s existing generating and purchased resources, represent a power supply plan that is reasonably related to the City’s needs and can be expected to reliably and cost- effectively serve its retail customers, while minimizing future risk. 2. The capital costs associated with the RICE Project, which are being funded with the proceeds of the Series 2013A Bonds, and the cost of the Bayou Cove Project acquisition to be funded with the proceeds of the Series 2014 Bonds, as currently estimated, are reasonable when compared to the power supply alternatives studied. 3. Taking into account the approved technical amendments to the Energy Cost Adjustment to allow for the recovery of the cost of power generated (including debt service) and purchased through the ECA, the revenues of the combined utilities of the City, under current base retail rate levels, are projected to (i) be sufficient to pay the debt service on the Series 2014 Bonds that are being issued to fund the purchase of the Bayou Cove Project, and (ii) be sufficient to pay an amount representing not less than 135% of the combined debt service on the Series 2014 Bonds and the Outstanding Parity Bonds through the fiscal year 2015-2019 projected period.
* * *
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Historical and Projected Revenue and Revenue Requirements Exhibit 1 - Page 1 For Twelve Months Ending April 30
Line Historical Budget Budget Projected No.Item 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 (a)(b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) 5 6 7 9 10 11 12 13 14 REVENUE
1 Base $42,462,664 $43,869,063 $45,171,520 $43,536,639 $43,536,664 $45,041,594 $45,466,838 $45,895,976 $46,329,048 $46,766,091 2 ECA/PGA $53,074,013 $54,470,508 $50,650,985 $43,000,000 $43,000,000 $45,107,392 $56,365,422 $60,375,372 $63,639,860 $66,611,688 3 Additional Revenue $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 4 Infrastructure Renewal Assessment $0 $0 $0 $2,000,000 $2,000,000 $1,671,352 $1,696,422 $1,721,869 $1,747,697 $1,773,912 5 Subtotal $95,536,677 $98,339,571 $95,822,505 $88,536,639 $88,536,664 $91,820,338 $103,528,682 $107,993,216 $111,716,604 $115,151,691
6 Other Operating $2,085,550 $2,050,377 $1,883,502 $1,801,671 $1,801,646 $1,819,662 $1,837,862 $1,856,240 $1,874,803 $1,893,550 7 Environmental Compliance $419,479 $418,166 $702,000 $652,941 $652,941 $659,470 $666,065 $672,726 $679,453 $686,248 8 Other Charges $3,421,655 $411,235 $414,424 $365,700 $365,700 $369,357 $373,051 $376,781 $380,548 $384,353 9 Investment Income $80,076 $95,846 $67,195 $0 $0 $0 $0 $0 $0 $0 10 Internal Services/Interfunds $177,951 $190,046 $160,374 $190,046 $160,374 $161,977 $163,597 $165,233 $166,885 $168,554 11 Use of Retained Earnings $0 $0 $0 $2,701,831 $3,446,533 $0 $0 $0 $0 $0
12 Total Revenue $101,721,388 $101,505,241 $99,050,000 $94,248,828 $94,963,858 $94,830,804 $106,569,257 $111,064,196 $114,818,293 $118,284,396
REVENUE REQUIREMENTS
Allocated 13 Finance $2,320,656 $391,128 $415,465 $375,000 $375,000 $382,500 $390,150 $397,953 $405,912 $414,031 14 Budget Office $166,922 $159,115 $74,327 $188,124 $296,740 $302,676 $308,730 $314,905 $321,204 $327,629 15 Customer Services $3,354,831 $3,247,064 $3,329,543 $3,899,359 $3,924,619 $4,003,112 $4,083,173 $4,164,838 $4,248,133 $4,333,095 16 Customer Field Services $929,928 $965,397 $961,504 $962,356 $979,699 $999,294 $1,019,279 $1,039,664 $1,060,457 $1,081,667 17 Management Information Services $1,627,425 $1,457,285 $1,617,705 $1,750,978 $2,120,512 $2,162,923 $2,206,182 $2,250,305 $2,295,311 $2,341,219 18 Administration $423,679 $314,362 $419,700 $577,032 $673,826 $687,302 $701,050 $715,070 $729,373 $743,960 19 Environmental Services $514,652 $522,096 $529,175 $566,181 $622,672 $635,125 $647,827 $660,783 $673,998 $687,478 20 Environmental Compliance $141,770 $91,581 $120,085 $408,000 $408,000 $416,160 $424,483 $432,973 $441,632 $450,465 21 Utility Services $1,028,462 $994,142 $949,682 $1,111,444 $1,342,886 $1,369,744 $1,397,137 $1,425,080 $1,453,583 $1,482,656 Interfund Transfers: 22 General Fund (5%) $5,200,000 $5,200,000 $6,633,347 $6,633,347 $5,883,347 $4,741,541 $5,328,464 $5,553,210 $5,740,915 $5,914,221 23 Planned Utility Capital Projects $5,478,240 $5,701,240 $4,466,047 $4,954,549 $4,953,657 $2,740,000 $2,794,750 $2,850,321 $2,906,726 $2,963,977 24 Other $1,215,316 $674,682 $2,194,968 $1,174,197 $1,925,562 $1,944,818 $1,964,266 $1,983,908 $2,003,747 $2,023,784 25 Utility Debt Service $4,170,560 $4,163,846 $4,576,043 $5,052,988 $4,086,235 $3,820,614 $3,879,289 $3,858,146 $3,836,951 $3,836,396 26 Utility Debt Service - New $0 $0 $0 $0 $0 $958,322 $5,487,966 $6,288,507 $6,291,407 $6,297,282 27 Total Allocated $26,572,441 $23,881,938 $26,287,591 $27,653,555 $27,592,755 $25,164,131 $30,632,746 $31,935,663 $32,409,349 $32,897,860
Direct Assigned 28 Salaries $6,798,132 $6,391,204 $6,177,353 $6,642,178 $6,519,176 $6,429,556 $6,562,545 $6,698,198 $6,836,559 $6,977,689 29 Fringe $2,762,438 $3,106,950 $2,838,971 $2,958,709 $2,967,089 $2,926,069 $2,986,599 $3,048,336 $3,111,311 $3,175,544 Operational and Contractual: 30 Purchases - Energy $40,412,681 $48,424,266 $43,189,509 $35,000,000 $35,000,000 $35,000,000 $40,313,241 $42,732,482 $44,824,490 $46,924,469 31 Purchases - Plant Fuel $1,277,129 $482,033 $317,846 $600,000 $600,000 $600,000 $759,894 $884,112 $1,134,846 $1,384,643 32 Purchases - Natural Gas $9,719,513 $7,508,830 $6,287,073 $8,000,000 $8,000,000 $8,262,400 $9,470,363 $10,118,136 $11,003,473 $11,597,661 33 Utilities $1,569,507 $1,457,016 $1,528,157 $1,752,400 $1,722,400 $1,756,848 $1,791,986 $1,827,825 $1,864,381 $1,901,668 34 Maintenance $4,344,087 $3,964,916 $3,808,140 $4,594,583 $4,720,103 $4,417,309 $4,155,873 $4,195,374 $4,235,078 $4,276,022 35 Renewals and Replacements $2,204,244 $2,252,647 $1,967,262 $2,805,686 $3,644,369 $1,865,000 $1,671,000 $1,677,090 $1,683,271 $1,689,545 36 Total Direct Assigned $69,087,731 $73,587,862 $66,114,311 $62,353,556 $63,173,137 $61,257,182 $67,711,501 $71,181,553 $74,693,409 $77,927,241
37 TOTAL REVENUE REQUIREMENTS $95,660,172 $97,469,800 $92,401,902 $90,007,111 $90,765,892 $86,421,313 $98,344,247 $103,117,216 $107,102,758 $110,825,101
38 DISCRETIONARY GENERAL FUND TRANSFER $3,628,061 $3,965,362 $3,594,896 $4,241,717 $4,197,966 $4,239,945 $4,282,344 $4,325,167 $4,368,418 $4,412,103
39 REVENUE REQUIREMENT W/DISCRETIONARY $99,288,233 $101,435,162 $95,996,798 $94,248,828 $94,963,858 $90,661,258 $102,626,591 $107,442,383 $111,471,176 $115,237,204
40 TOTAL SURPLUS (DEFICIT) $2,433,155 $70,079 $3,053,202 $0 $0 $4,169,546 $3,942,666 $3,621,813 $3,347,117 $3,047,192
41 PERCENT REVENUE SURPLUS (DEFICIENCY) 2.5% 0.1% 3.2% 0.0% 0.0% 4.6% 3.9% 3.4% 3.0% 2.7%
42 Net Surplus = Line 12 - (Line 37 - Line 25 - Line 26) $10,231,776 $8,199,287 $11,224,141 $9,294,705 $8,284,201 $13,188,427 $17,592,265 $18,093,633 $17,843,893 $17,592,973 43 Debt Service $4,170,560 $4,163,846 $4,576,043 $5,052,988 $4,086,235 $4,778,936 $9,367,255 $10,146,653 $10,128,358 $10,133,678 44 Coverage Ratio 2.45 1.97 2.45 1.84 2.03 2.76 1.88 1.78 1.76 1.74 CITY OF ALEXANDRIA Exhibit 1 - Page 2 ELECTRIC UTILITY
Historical and Projected Revenue and Revenue Requirements For Twelve Months Ending April 30
Line Historical Budget Budget Projected No.Item 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) 5 6 7 9 10 11 12 13 REVENUE
1 Base $29,902,903 $30,577,536 $30,613,259 $29,084,639 $29,084,639 $30,069,092 $30,359,091 $30,651,770 $30,947,155 $31,245,270 2 ECA $43,511,709 $46,991,753 $43,649,507 $35,000,000 $35,000,000 $36,555,808 $46,563,596 $49,903,101 $52,251,265 $54,608,109 3 Additional Revenue $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 4 Infrastructure Renewal Assessment $0 $0 $0 $866,066 $858,103 $723,921 $734,780 $745,802 $756,989 $768,343 5 Subtotal $73,414,612 $77,569,289 $74,262,766 $64,950,705 $64,942,742 $67,348,821 $77,657,467 $81,300,673 $83,955,409 $86,621,722
6 Other Operating $1,149,273 $1,138,560 $769,138 $925,000 $925,000 $934,250 $943,593 $953,029 $962,560 $972,185 7Environmental Compliance $0$0$0$0$0$0$0$0$0$0 8 Other Charges $2,476,153 $155,405 $192,126 $140,402 $140,402 $141,806 $143,224 $144,656 $146,102 $147,563 9 Investment Income $61,431 $73,529 $51,549 $0 $0 $0 $0 $0 $0 $0 10 Internal Services/Interfunds $54,881 $58,612 $49,460 $58,612 $49,460 $49,955 $50,454 $50,959 $51,469 $51,983 11 Use of Retained Earnings $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
12 Total Revenue $77,156,351 $78,995,395 $75,325,040 $66,074,718 $66,057,604 $68,474,831 $78,794,738 $82,449,316 $85,115,539 $87,793,453
REVENUE REQUIREMENTS
Allocated 13 Finance $805,446 $141,902 $273,114 $246,514 $246,514 $251,444 $256,473 $261,603 $266,835 $272,172 14 Budget Office $57,935 $57,727 $48,860 $123,667 $195,068 $198,970 $202,950 $207,009 $211,150 $215,374 15 Customer Services $1,164,384 $1,178,038 $2,188,743 $2,563,323 $2,579,928 $2,631,527 $2,684,157 $2,737,841 $2,792,597 $2,848,448 16 Customer Field Services $322,756 $350,247 $632,064 $632,624 $644,025 $656,906 $670,044 $683,444 $697,113 $711,056 17 Management Information Services $564,841 $528,704 $1,063,431 $1,151,041 $1,393,962 $1,421,841 $1,450,279 $1,479,284 $1,508,869 $1,539,048 18 Administration $147,049 $114,051 $275,898 $379,324 $442,953 $451,812 $460,849 $470,066 $479,468 $489,057 19 Environmental Services $178,624 $189,417 $347,864 $372,191 $409,326 $417,512 $425,862 $434,379 $443,066 $451,928 20 Environmental Compliance $49,205 $33,226 $78,940 $268,207 $268,207 $273,571 $279,043 $284,624 $290,316 $296,122 21 Utility Services $356,955 $360,676 $624,293 $730,630 $882,773 $900,429 $918,436 $936,805 $955,542 $974,654 Interfund Transfers: 22 General Fund (5%) $1,804,799 $1,886,565 $4,360,566 $4,360,566 $3,867,538 $3,423,742 $3,939,737 $4,122,466 $4,255,777 $4,389,673 23 Planned Utility Capital Projects $1,901,370 $2,068,415 $2,935,847 $3,256,974 $3,256,387 $2,090,000 $2,135,000 $2,180,675 $2,227,035 $2,274,091 24 Other $421,808 $244,775 $1,442,907 $771,882 $1,265,807 $1,278,466 $1,291,250 $1,304,162 $1,317,204 $1,330,376 25 Utility Debt Service $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 26 Utility Debt Service - New $0 $0 $0 $0 $0 $958,322 $5,487,966 $6,288,507 $6,291,407 $6,297,282 27 Total Allocated $7,775,173 $7,153,741 $14,272,528 $14,856,943 $15,452,490 $14,954,544 $20,202,046 $21,390,865 $21,736,379 $22,089,279
Direct Assigned 28 Salaries $2,540,612 $2,452,778 $2,301,709 $2,544,441 $2,517,342 $2,347,687 $2,399,040 $2,451,421 $2,504,849 $2,559,344 29 Fringe $1,010,736 $1,148,180 $1,048,237 $1,123,001 $1,144,086 $1,066,604 $1,089,944 $1,113,750 $1,138,032 $1,162,799 Operational and Contractual: 30 Purch-Dir Engy Costs / Rod#2 & Hydro $23,970,107 $21,678,207 $25,749,112 $26,000,000 $26,000,000 $26,000,000 $22,921,863 $23,553,276 $24,083,640 $24,628,517 31 Purch-Oth Engy Costs / MISO, CLECO & Transm. $16,442,574 $26,746,059 $17,440,397 $9,000,000 $9,000,000 $9,000,000 $17,391,378 $19,179,206 $20,740,850 $22,295,952 32 Purch-Plt Fixed and Variable $1,277,129 $482,033 $317,846 $600,000 $600,000 $600,000 $759,894 $884,112 $1,134,846 $1,384,643 33 Utilities $205,369 $224,674 $191,135 $216,000 $216,000 $220,320 $224,727 $229,221 $233,805 $238,481 34 Maintenance $2,279,260 $2,027,766 $1,874,396 $2,244,625 $2,247,900 $1,920,380 $1,633,972 $1,648,251 $1,662,483 $1,677,702 35 Capital Outlay $1,585,106 $1,437,840 $1,269,857 $1,713,722 $1,987,477 $765,000 $765,000 $765,000 $765,000 $765,000 36 Total Direct Assigned $49,310,893 $56,197,537 $50,192,689 $43,441,789 $43,712,805 $41,919,991 $47,185,818 $49,824,237 $52,263,505 $54,712,438
37 TOTAL REVENUE REQUIREMENTS $57,086,066 $63,351,278 $64,465,217 $58,298,732 $59,165,295 $56,874,535 $67,387,864 $71,215,102 $73,999,884 $76,801,717
38 DISCRETIONARY GENERAL FUND TRANSFER $1,259,216 $1,438,637 $2,363,178 $2,788,379 $2,759,618 $2,787,214 $2,815,086 $2,843,237 $2,871,669 $2,900,386
39 REVENUE REQUIREMENT W/DISCRETIONARY $58,345,281 $64,789,915 $66,828,395 $61,087,111 $61,924,913 $59,661,749 $70,202,950 $74,058,338 $76,871,552 $79,702,103
40 TOTAL SURPLUS (DEFICIT) $18,811,070 $14,205,480 $8,496,645 $4,987,607 $4,132,691 $8,813,083 $8,591,788 $8,390,978 $8,243,987 $8,091,350
41 PERCENT REVENUE SURPLUS (DEFICIENCY) 25.6% 18.3% 11.4% 7.8% 6.4% 13.2% 11.2% 10.4% 9.9% 9.4%
42 TOTAL KWH SALES 725,768,324 748,158,723 741,185,204 727,777,786 734,199,792 740,986,562 747,836,066 754,748,886 761,725,606
43 REVENUE REQUIREMENT PER KWH SOLD $0.080390 $0.086600 $0.090160 $0.085090 $0.081260 $0.094740 $0.099030 $0.101850 $0.104630 CITY OF ALEXANDRIA Exhibit 1 - Page 3 GAS UTILITY
Historical and Projected Revenue and Revenue Requirements For Twelve Months Ending April 30
Line Historical Budget Budget Projected No.Item 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 (a)(b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) 5 6 7 9 10 11 12 13 14 REVENUE
1 Base $3,428,560 $2,920,383 $2,986,881 $3,000,000 $3,000,000 $3,199,837 $3,229,127 $3,258,679 $3,288,495 $3,318,582 2 PGA $9,562,304 $7,478,755 $7,001,478 $8,000,000 $8,000,000 $8,551,584 $9,801,826 $10,472,271 $11,388,595 $12,003,579 3 Additional Revenue $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 4 Infrastructure Renewal Assessment $0 $0 $0 $479,076 $487,157 $404,185 $410,248 $416,401 $422,648 $428,987 5 Subtotal $12,990,864 $10,399,138 $9,988,359 $11,479,076 $11,487,157 $12,155,606 $13,441,200 $14,147,351 $15,099,737 $15,751,148
6 Other Operating $468,442 $465,908 $615,799 $382,000 $382,000 $385,820 $389,680 $393,576 $397,512 $401,487 7Environmental Compliance $0$0$0$0$0$0$0$0$0$0 8 Other Charges $386,263 $77,049 $69,997 $68,043 $68,043 $68,723 $69,411 $70,105 $70,806 $71,514 9 Investment Income $8,290 $9,922 $6,956 $0 $0 $0 $0 $0 $0 $0 10 Internal Services/Interfunds $36,004 $38,452 $32,448 $38,452 $32,448 $32,772 $33,100 $33,431 $33,765 $34,103 11 Use of Retained Earnings $0 $0 $0 $0 $670,148 $0 $0 $0 $0 $0
12 Total Revenue $13,889,863 $10,990,469 $10,713,559 $11,967,571 $12,639,796 $12,642,922 $13,933,391 $14,644,463 $15,601,820 $16,258,252
REVENUE REQUIREMENTS
Allocated 13 Finance $382,006 $64,115 $31,407 $28,348 $28,348 $28,915 $29,493 $30,083 $30,685 $31,299 14 Budget Office $27,477 $26,083 $5,619 $14,221 $22,432 $22,881 $23,338 $23,805 $24,281 $24,767 15 Customer Services $552,243 $532,267 $251,697 $294,773 $296,682 $302,616 $308,668 $314,842 $321,138 $327,561 16 Customer Field Services $153,077 $158,250 $72,685 $72,749 $74,061 $75,542 $77,053 $78,594 $80,165 $81,769 17 Management Information Services $267,893 $238,882 $122,291 $132,365 $160,300 $163,507 $166,777 $170,112 $173,514 $176,985 18 Administration $69,742 $51,531 $31,727 $43,621 $50,938 $51,957 $52,996 $54,056 $55,137 $56,240 19 Environmental Services $84,718 $85,583 $40,003 $42,801 $47,071 $48,012 $48,973 $49,952 $50,951 $51,970 20 Environmental Compliance $23,337 $15,012 $9,078 $30,843 $30,843 $31,460 $32,089 $32,731 $33,385 $34,053 21 Utility Services $169,297 $162,962 $71,791 $84,020 $101,516 $103,546 $105,617 $107,729 $109,884 $112,082 Interfund Transfers: 22 General Fund (5%) $855,979 $852,397 $501,449 $501,449 $444,753 $632,146 $696,670 $732,223 $780,091 $812,913 23 Planned Utility Capital Projects $901,780 $934,562 $337,612 $374,540 $374,473 $200,000 $203,000 $206,045 $209,136 $212,273 24 Other $200,055 $110,596 $165,929 $88,764 $145,563 $147,019 $148,489 $149,974 $151,474 $152,988 25 Utility Debt Service $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 26 Utility Debt Service - New $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 27 Total Allocated $3,687,604 $3,232,239 $1,641,288 $1,708,494 $1,776,979 $1,807,600 $1,893,163 $1,950,146 $2,019,842 $2,074,899
Direct Assigned 28 Salaries $1,423,762 $1,249,186 $1,174,355 $1,314,484 $1,248,198 $1,273,163 $1,298,624 $1,324,599 $1,351,090 $1,378,112 29 Fringe $562,027 $608,270 $552,689 $601,691 $593,500 $605,370 $617,478 $629,827 $642,424 $655,273 Operational and Contractual: 30 Purchases - Energy $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 31 Purchases - Plant Fuel $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 32 Purchases - Natural Gas $9,719,513 $7,508,830 $6,287,073 $8,000,000 $8,000,000 $8,262,400 $9,470,363 $10,118,136 $11,003,473 $11,597,661 33 Utilities $3,377 $4,028 $6,325 $3,800 $3,800 $3,876 $3,954 $4,033 $4,114 $4,196 34 Maintenance $325,402 $319,224 $301,680 $361,700 $400,900 $404,909 $408,961 $413,051 $417,183 $421,354 35 Capital Outlay $117,274 $86,399 $128,136 $161,700 $442,700 $125,000 $126,875 $128,778 $130,710 $132,670 36 Total Direct Assigned $12,151,355 $9,775,937 $8,450,258 $10,443,375 $10,689,098 $10,674,718 $11,926,255 $12,618,424 $13,548,994 $14,189,266
37 TOTAL REVENUE REQUIREMENTS $15,838,959 $13,008,176 $10,091,546 $12,151,869 $12,466,077 $12,482,318 $13,819,418 $14,568,570 $15,568,836 $16,264,165
38 DISCRETIONARY GENERAL FUND TRANSFER $597,220 $650,012 $271,757 $320,653 $317,346 $320,519 $323,725 $326,962 $330,231 $333,534
39 REVENUE REQUIREMENT W/DISCRETIONARY $16,436,179 $13,658,188 $10,363,303 $12,472,522 $12,783,423 $12,802,837 $14,143,142 $14,895,531 $15,899,067 $16,597,699
40 TOTAL SURPLUS (DEFICIT) ($2,546,315) ($2,667,719) $350,256 ($504,951) ($143,627) ($159,915) ($209,751) ($251,068) ($297,247) ($339,447)
41 PERCENT REVENUE SURPLUS (DEFICIENCY) -19.6% -25.7% 3.5% -4.6% -1.3% -1.4% -1.6% -1.8% -2.0% -2.2% CITY OF ALEXANDRIA Exhibit 1 - Page 4 WATER UTILITY
Historical and Projected Revenue and Revenue Requirements For Twelve Months Ending April 30
Line Historical Budget Budget Projected No.Item 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 (a)(b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) 5 6 7 9 10 11 12 13 14 REVENUE
1 Base $5,770,373 $6,394,591 $6,920,183 $6,843,000 $6,843,000 $7,091,968 $7,155,796 $7,220,197 $7,285,181 $7,350,746 2 ECA/PGA $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 3 Additional Revenue $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 4 Infrastructure Renewal Assessment $0 $0 $0 $368,705 $345,570 $286,724 $291,025 $295,390 $299,821 $304,318 5 Subtotal $5,770,373 $6,394,591 $6,920,183 $7,211,705 $7,188,570 $7,378,692 $7,446,821 $7,515,587 $7,585,002 $7,655,064
6 Other Operating $370,792 $369,294 $440,740 $397,146 $397,146 $401,117 $405,129 $409,180 $413,272 $417,405 7Environmental Compliance $0$0$0$0$0$0$0$0$0$0 8 Other Charges $315,694 $99,569 $84,949 $87,589 $87,589 $88,465 $89,350 $90,243 $91,145 $92,057 9 Investment Income $5,879 $7,036 $4,933 $0 $0 $0 $0 $0 $0 $0 10 Internal Services/Interfunds $48,445 $51,738 $43,660 $51,738 $43,660 $44,097 $44,538 $44,983 $45,433 $45,887 11 Use of Retained Earnings $0 $0 $0 $0 $1,272,186 $0 $0 $0 $0 $0
12 Total Revenue $6,511,183 $6,922,229 $7,494,465 $7,748,178 $8,989,151 $7,912,371 $7,985,837 $8,059,993 $8,134,852 $8,210,413
REVENUE REQUIREMENTS
Allocated 13 Finance $546,457 $89,242 $67,236 $60,687 $60,687 $61,901 $63,139 $64,402 $65,690 $67,004 14 Budget Office $39,306 $36,305 $12,029 $30,445 $48,022 $48,983 $49,963 $50,962 $51,981 $53,021 15 Customer Services $789,979 $740,868 $538,831 $631,046 $635,134 $647,837 $660,793 $674,009 $687,489 $701,239 16 Customer Field Services $218,975 $220,270 $155,603 $155,741 $158,548 $161,719 $164,953 $168,252 $171,617 $175,050 17 Management Information Services $383,218 $332,502 $261,798 $283,366 $343,169 $350,033 $357,034 $364,174 $371,458 $378,887 18 Administration $99,766 $71,727 $67,921 $93,383 $109,047 $111,228 $113,453 $115,722 $118,037 $120,397 19 Environmental Services $121,188 $119,124 $85,638 $91,627 $100,769 $102,784 $104,840 $106,937 $109,075 $111,257 20 Environmental Compliance $33,383 $20,896 $19,434 $66,028 $66,028 $67,349 $68,695 $70,069 $71,471 $72,900 21 Utility Services $242,177 $226,829 $153,690 $179,869 $217,324 $221,670 $226,103 $230,625 $235,238 $239,943 Interfund Transfers: 22 General Fund (5%) $1,224,470 $1,186,461 $1,073,496 $1,073,496 $952,121 $395,619 $399,292 $403,000 $406,743 $410,521 23 Planned Utility Capital Projects $1,289,989 $1,300,827 $722,755 $801,811 $801,666 $200,000 $203,000 $206,045 $209,136 $212,273 24 Other $286,177 $153,939 $355,219 $190,024 $311,620 $314,736 $317,884 $321,062 $324,273 $327,516 25 Utility Debt Service $3,336,448 $3,331,077 $3,660,834 $4,042,390 $3,268,988 $3,056,491 $3,103,432 $3,086,517 $3,069,561 $3,069,117 26 Utility Debt Service - New $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 27 Total Allocated $8,611,532 $7,830,068 $7,174,485 $7,699,914 $7,073,124 $5,740,351 $5,832,581 $5,861,778 $5,891,769 $5,939,125
Direct Assigned 28 Salaries $1,296,752 $1,252,183 $1,295,305 $1,367,305 $1,377,998 $1,405,558 $1,433,669 $1,462,341 $1,491,586 $1,521,418 29 Fringe $579,318 $663,935 $626,907 $626,016 $616,473 $628,802 $641,378 $654,205 $667,290 $680,637 Operational and Contractual: 30 Purchases - Energy $0 $0 $0 $0 $0 $0 $0 $0 31 Purchases - Plant Fuel $0 $0 $0 $0 $0 $0 $0 $0 32Purchases - Natural Gas $0$0$0$0$0$0$0$0 33 Utilities $1,024,468 $939,816 $879,673 $1,032,600 $1,002,600 $1,022,652 $1,043,105 $1,063,967 $1,085,246 $1,106,951 34 Maintenance $811,659 $830,423 $797,316 $1,104,670 $1,134,770 $1,146,121 $1,157,582 $1,169,159 $1,180,850 $1,192,657 35 Capital Outlay $326,512 $351,387 $303,864 $489,564 $498,542 $700,000 $500,000 $500,000 $500,000 $500,000 36 Total Direct Assigned $4,038,709 $4,037,744 $3,903,065 $4,620,155 $4,630,383 $4,903,133 $4,775,734 $4,849,672 $4,924,972 $5,001,663
37 TOTAL REVENUE REQUIREMENTS $12,650,241 $11,867,812 $11,077,550 $12,320,069 $11,703,507 $10,643,484 $10,608,315 $10,711,450 $10,816,741 $10,940,788
38 DISCRETIONARY GENERAL FUND TRANSFER $854,318 $904,759 $581,774 $686,451 $679,370 $686,164 $693,026 $699,956 $706,955 $714,025
39 REVENUE REQUIREMENT W/DISCRETIONARY $13,504,559 $12,772,571 $11,659,323 $13,006,519 $12,382,878 $11,329,648 $11,301,341 $11,411,405 $11,523,696 $11,654,813
40 TOTAL SURPLUS (DEFICIT) ($6,993,376) ($5,850,343) ($4,164,858) ($5,258,341) ($3,393,727) ($3,417,277) ($3,315,503) ($3,351,412) ($3,388,844) ($3,444,399)
41 PERCENT REVENUE SURPLUS (DEFICIENCY) -121.2% -91.5% -60.2% -76.8% -49.6% -48.2% -46.3% -46.4% -46.5% -46.9% CITY OF ALEXANDRIA Exhibit 1 - Page 5 WASTEWATER UTILITY
Historical and Projected Revenue and Revenue Requirements For Twelve Months Ending April 30
Line Historical Budget Budget Projected No.Item 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 (a)(b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) 5 6 7 9 #REF! #REF! #REF! #REF! REVENUE
1 Base $3,360,828 $3,976,553 $4,651,197 $4,609,000 $4,609,025 $4,680,697 $4,722,824 $4,765,330 $4,808,217 $4,851,493 2 ECA/PGA $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 3 Additional Revenue $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 4 Infrastructure Renewal Assessment $0 $0 $0 $286,153 $309,170 $256,522 $260,370 $264,275 $268,240 $272,263 5 Subtotal $3,360,828 $3,976,553 $4,651,197 $4,895,153 $4,918,195 $4,937,219 $4,983,194 $5,029,605 $5,076,457 $5,123,756
6 Other Operating $97,043 $76,615 $57,825 $97,525 $97,500 $98,475 $99,460 $100,455 $101,459 $102,473 7 Environmental Compliance $419,479 $418,166 $702,000 $652,941 $652,941 $659,470 $666,065 $672,726 $679,453 $686,248 8 Other Charges $243,545 $79,211 $67,352 $69,666 $69,666 $70,363 $71,067 $71,777 $72,495 $73,220 9 Investment Income $4,476 $5,358 $3,756 $0 $0 $0 $0 $0 $0 $0 10 Internal Services/Interfunds $38,620 $41,245 $34,805 $41,245 $34,805 $35,153 $35,505 $35,860 $36,218 $36,580 11 Use of Retained Earnings $0 $0 $0 $2,701,831 $1,504,199 $0 $0 $0 $0 $0
12 Total Revenue $4,163,991 $4,597,148 $5,516,935 $8,458,361 $7,277,307 $5,800,680 $5,855,290 $5,910,423 $5,966,082 $6,022,277
REVENUE REQUIREMENTS
Allocated 13 Finance $586,747 $95,870 $43,707 $39,450 $39,450 $40,239 $41,044 $41,865 $42,702 $43,557 14 Budget Office $42,204 $39,001 $7,819 $19,791 $31,217 $31,842 $32,479 $33,128 $33,791 $34,467 15 Customer Services $848,225 $795,891 $350,272 $410,217 $412,875 $421,132 $429,555 $438,146 $446,909 $455,847 16 Customer Field Services $235,120 $236,629 $101,151 $101,241 $103,066 $105,127 $107,229 $109,374 $111,561 $113,793 17 Management Information Services $411,473 $357,197 $170,185 $184,205 $223,080 $227,542 $232,093 $236,735 $241,470 $246,299 18 Administration $107,122 $77,054 $44,153 $60,704 $70,887 $72,305 $73,751 $75,226 $76,731 $78,266 19 Environmental Services $130,123 $127,971 $55,670 $59,563 $65,506 $66,816 $68,152 $69,515 $70,905 $72,324 20 Environmental Compliance $35,845 $22,448 $12,633 $42,922 $42,922 $43,781 $44,656 $45,549 $46,460 $47,389 21 Utility Services $260,033 $243,675 $99,908 $116,925 $141,273 $144,099 $146,981 $149,920 $152,919 $155,977 Interfund Transfers: 22 General Fund (5%) $1,314,752 $1,274,577 $697,836 $697,836 $618,935 $290,034 $292,765 $295,521 $298,304 $301,114 23 Planned Utility Capital Projects $1,385,101 $1,397,436 $469,834 $521,225 $521,131 $250,000 $253,750 $257,556 $261,420 $265,341 24 Other $307,277 $165,372 $230,913 $123,527 $202,571 $204,597 $206,643 $208,710 $210,797 $212,905 25 Utility Debt Service $834,112 $832,769 $915,209 $1,010,598 $817,247 $764,123 $775,858 $771,629 $767,390 $767,279 26 Utility Debt Service - New $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 27 Total Allocated $6,498,133 $5,665,890 $3,199,290 $3,388,205 $3,290,162 $2,661,637 $2,704,957 $2,732,875 $2,761,359 $2,794,557
Direct Assigned 28 Salaries $1,537,006 $1,437,057 $1,405,984 $1,415,948 $1,375,638 $1,403,148 $1,431,212 $1,459,837 $1,489,034 $1,518,815 29 Fringe $610,357 $686,565 $611,138 $608,001 $613,030 $625,293 $637,799 $650,554 $663,565 $676,835 Operational and Contractual: 30 Purchases - Energy $0 $0 $0 $0 $0 $0 $0 $0 31 Purchases - Plant Fuel $0 $0 $0 $0 $0 $0 $0 $0 32Purchases - Natural Gas $0$0$0$0$0$0$0$0 33 Utilities $336,293 $288,498 $451,024 $500,000 $500,000 $510,000 $520,200 $530,604 $541,216 $552,040 34 Maintenance $927,766 $787,503 $834,748 $883,588 $936,533 $945,899 $955,358 $964,913 $974,562 $984,309 35 Capital Outlay $175,352 $377,021 $265,405 $440,700 $715,650 $275,000 $279,125 $283,312 $287,562 $291,875 36 Total Direct Assigned $3,586,774 $3,576,644 $3,568,299 $3,848,237 $4,140,851 $3,759,340 $3,823,694 $3,889,220 $3,955,939 $4,023,874
37 TOTAL REVENUE REQUIREMENTS $10,084,907 $9,242,534 $6,767,589 $7,236,442 $7,431,013 $6,420,977 $6,528,651 $6,622,095 $6,717,297 $6,818,431
38 DISCRETIONARY GENERAL FUND TRANSFER $917,308 $971,954 $378,187 $446,234 $441,631 $446,047 $450,508 $455,013 $459,563 $464,159
39 REVENUE REQUIREMENT W/DISCRETIONARY $11,002,215 $10,214,487 $7,145,776 $7,682,676 $7,872,644 $6,867,024 $6,979,158 $7,077,108 $7,176,860 $7,282,589
40 TOTAL SURPLUS (DEFICIT) ($6,838,224) ($5,617,339) ($1,628,841) $775,685 ($595,337) ($1,066,344) ($1,123,868) ($1,166,685) ($1,210,779) ($1,260,312)
41 PERCENT REVENUE SURPLUS (DEFICIENCY) -203.5% -141.3% -35.0% 16.8% -12.9% -22.8% -23.8% -24.5% -25.2% -26.0%
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APPENDIX “C”
AUDITED FINANCIAL STATEMENTS
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City of Alexandria, Louisiana
Financial Report
April 30, 2013
City of Alexandria, Louisiana April 30, 2013 Table of Contents
Exhibit Page
Financial Section Independent Auditor’s Report 1-3
Required Supplemental Information - Part I Management’s Discussion and Analysis 4-16
Basic Financial Statements 17
Government-Wide Financial Statements (GWFS) 18 Statement of Net Position A 19 Statement of Activities B 20
Fund Financial Statements 21 Balance Sheet - Governmental Funds C 22 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position D 23 Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds E 24 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities F 25 Statement of Net Position - Proprietary Funds G 26 Statement of Revenues, Expenses, and Changes in Fund Net Position - Proprietary Funds H 27 Reconciliation of Change in Net Position for Enterprise Funds to the Statement of Activities I 28 Statement of Cash Flows - Proprietary Funds J 29-30 Statement of Fiduciary Net Position - Fiduciary Funds K 31 Statement of Changes in Fiduciary Net Position - Fiduciary Funds L 32
Notes to Financial Statements 33-69
City of Alexandria, Louisiana April 30, 2013 Table of Contents
Schedule Page
Required Supplemental Information - Part II 70 General Fund - Budgetary Comparison Schedule 1 71 Schedule of Funding Progress 2 72
Supplemental Information 73 Schedule of Expenditures of Federal Awards 3 74-75 Utilities System Enterprise Fund - Unaudited Summary of Utility Service Customers 4 76 Unaudited Listing of Insurance in Force 5 77-78
Other Reports Required By Government Auditing Standards and OMB Circular A-133 79 Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 80-82 Report on Compliance with Requirements Applicable to Each Major Program and on Internal Control Over Compliance in Accordance with OMB Circular A-133 83-85 Schedule of Findings and Questioned Costs 86-88
Other Comments and Recommendations 89-91
Special Letter Re: Resolution Number 2341-1982 Requirement of Specific Recommendations 92-93
Management’s Corrective Action Plan 94-96
Management’s Schedule of Prior Year Findings 97-98
PAYNE, MOORE& HERRINGTON, LLP
mnmo PUOll[ ACCOUNTANTS Established 1945
Independent Auditor's Report
The Honorable Mayor and City Council City of Alexandria, Louisiana
We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Alexandria, Louisiana, as of and for the year ended April 30, 2013, and the related notes to the financial statements, which collectively comprise the City's basic financial statements as listed in the table of contents.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
1
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The Honorable Mayor and City Council City of Alexandria, Louisiana
Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Alexandria, Louisiana, as of April30, 2013, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management's discussion and analysis, budgetary comparison information, and schedule of funding progress on pages 4- 16 and 70-72 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Other Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Alexandria, Louisiana's basic financial statements. The summary of utility service customers and listing of insurance in force are presented for purposes of additional analysis and are not a required part of the basic financial statements. The schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is also not a required part of the basic financial statements.
The schedule of expenditures of federal awards is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the
2 PAYNE, MOORE & HERRINGTON, LLP
The Honorable Mayor and City Council City of Alexandria, Louisiana basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of expenditures of federal awards is fairly stated, in all material respects, in relation to the basic financial statements as a whole.
The summary of utility service customers and listing of insurance in force have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated October 24, 2013, on our consideration of the City of Alexandria, Louisiana's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City of Alexandria, Louisiana's internal control over financial reporting and compliance.
Certified Public Accountants Alexandria, Louisiana
October 24, 2013
3
Required Supplemental Information – Part I
Management’s Discussion and Analysis
4 City of Alexandria, Louisiana Management's Discussion and Analysis Year ended April 30, 2013
Our discussion and analysis of the City of Alexandria’s financial performance provides an overview of the City’s financial activities for the fiscal year ended April 30, 2013. Please read it in conjunction with the City’s financial statements, which begin on page 17. For ease of understanding, figures are rounded to the nearest tenth of $1 million or the nearest $1 thousand, as appropriate.
Financial Highlights
The City’s assets exceeded liabilities by $305.7 million. Of this total, $45.1 million in net position are unrestricted, and may be used to meet future obligations of the City’s creditors. The City’s net position increased by over $9.1 million during the 2013 Fiscal Year. This is the combined result of decrease of around $.2 million in net position from governmental activities offset by an increase of $9.3 million in net position from business activities. Unrestricted net position increased by $11.7 million in Fiscal 2013. This is the combined result of an increase of $7.0 million from governmental activities and an increase of $4.7 million from business type activities. Unassigned fund balance in the General Fund is $20.4 million, which amounts to approximately 38% of the expenditures of the General Fund in Fiscal 2013. The City’s long-term debt decreased by $4.1 million, the net effect of issuing new debt offset by scheduled payments of existing debt.
Overview of the Financial Statements
This annual report consists of a series of financial statements. The Statement of Net Position and the Statement of Activities (on pages 19 and 20) provide information about the activities of the City as a whole and present a longer-term view of the City's finances. Fund financial statements start on page 21. For governmental activities, these statements tell how these services were financed in the short term as well as what remains for future spending. Fund financial statements also report the City's operations in more detail than the government-wide statements by providing information about the City's most significant funds. The remaining statements provide financial information about activities for which the City acts solely as a trustee or agent for the benefit of those outside of the government.
Reporting on the City as a Whole
One of the most important questions asked about the City's finances is, "Is the City as a whole better off or worse off as a result of the year's activities?" The Statement of Net Position and the Statement of Activities report information about the City as a whole and about its activities in a way that helps answer this question. These statements include all assets and liabilities using the accrual basis of accounting, which is similar to the accounting used by most private-sector companies. All of the current year's revenues and expenses are taken into account regardless of when cash is received or paid.
These two statements report the City's net position and changes in them. You can think of the City's net position-the difference between assets and liabilities-as one way to measure the City's financial health, or financial position. Over time, increases or decreases in the City's net position are one indicator of whether its financial health is improving or deteriorating. You will need to consider other non-financial factors, however, such as changes in the City's property tax base and the condition of the City's roads, to assess the overall health of the City.
5 See independent auditor’s report. City of Alexandria, Louisiana Management's Discussion and Analysis Year ended April 30, 2013
In the Statement of Net Assets and the Statement of Activities we divide the City into two kinds of activities:
Governmental activities - Most of the City's basic services are reported here, including the police, fire, public works and parks departments, and general administration. Property taxes, sales taxes, franchise fees, and state and federal grants finance most of these activities.
Business-type activities - The City charges a fee to customers to help it cover all or most of the cost of certain services it provides. The City's utilities, sanitation and transit are reported here.
Reporting the City's Most Significant Funds
Fund Financial Statements
The fund financial statements begin on page 21 and provide detailed information about the most significant funds - not the City as a whole. Some funds are required to be established by State law and by bond covenants. However, the City Council establishes many other funds to help it control and manage money for particular purposes or to show that it is meeting legal responsibilities for using certain taxes, grants, and other money (like grants received from the U.S. Department of Housing and Urban Development). The City's two kinds of funds - governmental and proprietary - use different accounting approaches.
Governmental funds - Most of the City's basic services are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end that are available for spending. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the City's general government operations and the basic services it provides. Governmental fund information helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance the City's programs. We describe the relationship (or differences) between governmental activities (reported in the Statement of Net Position and the Statement of Activities) and governmental funds in a reconciliation following these fund financial statements.
Proprietary funds - When the City charges customers for the services it provides - whether to outside customers or to other units of the City - these services are generally reported in proprietary funds. Proprietary funds are reported in the same way that all activities are reported in the Statement of Net Position and the Statement of Activities. In fact, the City's enterprise funds (a component of proprietary funds) are the same as the business-type activities we report in the government-wide statements but provide more detail. We use internal service funds (the other component of proprietary funds) to report activities that provide supplies and services for the City's other programs and activities, such as the City's Risk Management.
6 See independent auditor’s report. City of Alexandria, Louisiana Management's Discussion and Analysis Year ended April 30, 2013
The City as Trustee
Reporting the City's Fiduciary Responsibilities
The City is the trustee, or fiduciary, for its employees' pension plans. It is also responsible for other assets that, because of a trust arrangement, can be used only for the trust beneficiaries. All of the City's fiduciary activities are reported in separate Statements of Fiduciary Net Position and Changes in Fiduciary Net Position on pages 31 and 32. We exclude these activities from the City's other financial statements because the City cannot use these assets to finance its operations. The City is responsible for ensuring that the assets reported in these funds are used for their intended purposes.
Government Wide Financial Analysis
The following table reflects a condensed version of the Statement of Net Position displaying 2013 and 2012:
City of Alexandria, LA Condensed Statement of Net Position (in millions) April 30, 2013 and April 30, 2012
2013 2012 2013 2012 2013 2012 Governmental Business Total Assets Current & Other Assets 73.1 78.1 29.3 25.9 102.4 104.0 Restricted Assets 0 0 20.4 18.1 20.4 18.1 Capital Assets 172.1 171.3 131.3 123.5 303.4 294.8 Total Assets 245.2 249.4 181.0 167.5 426.2 416.9
Liabilities Current Liabilities 14.2 12.8 11.5 7.3 25.7 20.1 Long-Term Liabilities 56.1 61.5 38.7 38.4 94.8 99.9 Total Liabilities 70.3 74.3 50.2 45.7 120.5 120.0
Net Position Invested in Capital Assets (Net) 138.8 146.7 95.5 89.8 234.3 236.5 Restricted 24.0 23.3 2.3 3.7 26.3 27.0 Unrestricted 12.1 5.1 33.0 28.2 45.1 33.3 Total Net Position 174.9 175.1 130.8 121.7 305.7 296.8
As of April 30, 2013 the City’s net position totals $305.7 million, showing an increase of about 3% over the 2012 total of $296.8 million. Roughly 75% of the City’s total net position resides in the Invested in Capital Assets category. These are land, buildings, infrastructure, equipment and other items required for the City to furnish its goods and services to citizens on the governmental side of operations and customers on the business side of operations. These assets are not available for appropriation (spending), as they are not intended to be sold. Net position restricted for particular purposes accounts for $26.3 million, or 9%, of the total. Restrictions are placed by entities outside the City government, such as bondholders. These assets are also not available for appropriation. The remaining $45.1 million, or 15%, of net position is unrestricted and is available for appropriation. 7 See independent auditor’s report. City of Alexandria, Louisiana Management's Discussion and Analysis Year ended April 30, 2013
The following table is a condensed version of the Statement of Activities displaying 2013 and 2012:
City of Alexandria, LA Condensed Statement of Activities (in millions) April 30, 2013 and April 30, 2012
2013 2012 2013 2012 2013 2012 Governmental Business Total Revenues Program Revenues: Charges for Services, Fines, Fees 4.4 4.2 99.6 104.1 104.0 108.3 Grants & Contributions 7.5 5.5 4.9 3.3 12.4 8.8 General Revenues: Sales Taxes 43.0 42.4 43.0 42.4 Other Taxes 8.8 8.1 8.8 8.1 Other .9 1.1 .1 1.9 1.03.0 Total Revenues 64.6 61.3 104.6 109.3 169.2 170.6
Expenses General government 13.9 14.1 13.9 14.1 Public safety 27.9 28.9 27.9 28.9 Public works 26.4 18.2 26.4 18.2 Community and economic development 1.0 2.6 1.0 2.6 Interest on long-term debt 2.9 2.7 1.6 1.6 4.5 4.3 Electricity 49.1 55.0 49.1 55.0 Gas 12.7 12.2 12.7 12.2 Water 6.7 7.1 6.7 7.1 Wastewater 8.2 7.9 8.2 7.9 Transit 2.9 3.1 2.9 3.1 Sanitation 3.8 4.1 3.8 4.1 Zoological Park 2.0 1.9 2.0 1.9 Golf Course 1.0 1.0 1.0 1.0 Hotel Operating .0 .1 .0 .1 Total Expenses 72.1 66.5 88.0 94.0 160.1 160.5
Change in Net Position before Transfers -7.5 -5.2 16.6 15.3 9.1 10.1
Transfers 7.3 7.5 -7.3 -7.5 0.0 0.0
Increase (Decrease) In Net Position -.2 2.3 9.3 7.8 9.1 10.1
8 See independent auditor’s report. City of Alexandria, Louisiana Management's Discussion and Analysis Year ended April 30, 2013
The City’s total revenues were $169.1 million and total expenses were $160.1 million for Fiscal 2013. This results in an increase of net position before transfers of $9.0 million. This can be broken down first by governmental and business activities, and then broken down further at the fund level.
Net Position in Governmental Activities decreased by $.2 million in Fiscal 2013 compared to an increase of $2.3 million in Fiscal 2012. Examining the expenses for the 2 years, we see that they are up from $66.5 million in 2012 to $72.1 million in 2013, roughly an 8% difference. We see a decrease of $.2 million in General Government, a decrease of $1.0 million in Public Safety, a substantial $8.2 million increase in Public Works mostly from Streets and Drainage construction, a $1.6 million decrease in Community Development and a $.2 million increase in Interest on Long Term Debt. Revenues are the lesser change from the prior year reflecting an increase of $3.3 million. Grants and Contributions account for $2.0 million of the increase, Sales Taxes account for $.6 million of the increase; while lesser changes in the remaining revenue categories make up the remaining difference. Increases in expenses can be deceptive in that Capital Projects Funds can raise or lower them in a given year depending on the progress of active construction projects. Expenditures in the combined capital projects were actually up by $10.3 million for Fiscal 2013 compared to the prior year, reflected mostly in Public Works activities as indicated earlier.
Business-type Activities net position increased $9.3 million for Fiscal 2013, compared to the increase in the prior year of $7.8 million. Expenses are down from $94.0 million in 2012 to $88.0 million in Fiscal 2013, a decrease of over 6%. This decrease is largely due to Electric Fuel Cost, the City’s cost for purchasing electricity for sale to customers, which decreased from the prior year by approximately $6.5 million. Other minor changes round out the differences in expenses. Transfers to the Governmental Activities are $7.3 million in Fiscal 2013 compared to $7.5 million in the prior year. Revenues are down from $109.3 million in 2012 to $104.6 in 2013, a change of over 4%, largely due to the recovery of fuel cost being down by $4.2 million. The largest categorical change is in Grants and Contributions, showing an increase of $1.5 million. Other minor changes in revenue account for the remainder.
The City was rebating electric fuel cost in Fiscal 2012, while Fiscal 2013 saw a recovery of fuel cost. This means that the City was increasing the current fuel cost as an adjustment for prior fuel cost. In the long run, the City’s costs for Electric and Gas fuel are passed on to the customers and have no effect on the City’s finances. In the short run, however, the City can be either recovering costs or rebating costs depending on which way fuel prices are going. These fluctuations in revenue can cause significant differences in the short term.
Individual Fund Analysis
We will briefly analyze the activity and fund balances of the major funds of the Governmental Funds category and the Business (Proprietary) Funds category, beginning with the General Fund. Differences are rounded to the nearest tenth of $1 million for ease of discussion.
Governmental Funds
General Fund
The General Fund ended Fiscal 2013 with an increase in Unassigned Fund Balance of nearly $1.6 million. In short, the General Fund took in more than it spent by this amount. In order to see the change, a comparison of revenues and expenditures of Fiscal 2013 and 2012 is needed.
9 See independent auditor’s report. City of Alexandria, Louisiana Management's Discussion and Analysis Year ended April 30, 2013
Revenues and Transfers In increased by roughly $1.1 million. Significant changes include increase in combined Sales Taxes of roughly $.5 million, while Licenses and Permits, Charges for Services, Fines and Fees, are all up around $.1 million. An increase of nearly $.2 in the other category concludes the major differences in Revenues and Transfers In. A notable change in accounting method occurred in the General Fund for Fiscal 2013. In compliance with GASB 54, the City is deleting the City Sales Tax Fund. This fund sent the majority of its revenue to the General Fund in compliance with the voter referendums that created the Fund. The deletion of this fund means the General Fund will record these receipts as revenue instead of Transfer In from the City Sales Tax Fund. This change has no effect on the inflows to the General Fund, merely the way those inflows are recorded.
Expenditures and Transfers Out increased roughly $1.7 million when compared to the previous year. This is due to a variety of factors. General Government reflects decrease of $.5 million; while Public Safety shows an increase of $.7 million, and Public Works an increase of $.6 million. Operating Capital (purchases of vehicles, equipment, etc.) is up by $1.3 million in Fiscal 2013 reflecting the greatest change as the City increased purchases of needed items. Transfers Out are down about $.1 million from the previous year.
Overall, the increases in General Fund expenditures were nearly matched by increases in revenues, and Fund Balance increased, although not as much as in the prior year. As Sales Taxes are relatively flat, diligence is needed regarding the local and national economy in order to ensure the General Fund’s continued financial health.
General Fund Budgetary Highlights
The original budget of the General Fund reflects the City’s plan and financial intent at the beginning of the fiscal year. This is routinely adjusted during the year to better reflect actual revenues available and actual expenditures incurred. The City does its most comprehensive adjustment at Major Budget Amendment (MBA). Revenues and Transfers In were adjusted resulting in a net increase of slightly more than $1.9 million (3.69%). The category of Intergovernmental Revenue had an increase of $.7 million consisting primarily in recognition of grant funds. Taxes were another major factor with increases for Property and Franchise taxes totaling $.3 million. Transfers In were decreased by $.2 million reflecting adjustments in Cost Allocation and City Sales Taxes. Other minor changes in Revenues and Transfers In account for the remaining difference. The City originally budgeted $3.6 million in use of fund balance for Fiscal 2013, and finished the year with a budgeted use of $4.5 million.
Budgeted Expenditures and Transfers Out were adjusted up during the year by $2.9 million due to a variety of factors. Overtime in the various departments was increased $.7 million; Capital Outlay was increased $.8 million, Professional Fees and Storm Preparedness were increased by $.5 million each. The greatest change was in the addition of a One Time Pay Adjustment for qualified employees budgeted at $1.2 million.
Fortunately, the City did not use the $4.5 in fund balance budgeted for Fiscal 2013 but, as previously noted, actually increased fund balance by nearly $1.6 million. Actual revenues and transfers in exceeded budgeted figures by nearly $11.6 million, and actual expenditures and transfers out were about $5.5 million more than budgeted expenditures. There were various offsets in the revenues, but the greatest factor was the combined Sales Taxes coming in nearly $1.2 million above the budgeted figures, while Charges for Services were $.1 million above budget. Omitting the effects of the bond defeasance, the greatest factor in the expenditures coming in so much lower than budgeted is attrition; i.e., vacant employee positions during the year that were budgeted but had no employees to be paid from them. The combined salary and fringes for these vacancies translated to roughly $2.0 million in reduced expenditures, even after adjusting budgets down at Major Budget Amendment. Along with this factor, the budgeted One Time Pay Adjustment although budgeted in Fiscal 2013 was not paid out until Fiscal 2014 due to legal issues, resulting in another $1.2 million budgeted but not expended in Fiscal 2013. Reductions in discretionary spending by the departments account for the remainder of the difference in General Fund Expenditures. 10 See independent auditor’s report. City of Alexandria, Louisiana Management's Discussion and Analysis Year ended April 30, 2013
The following charts represent the actual sources and uses of General Fund monies for Fiscal 2013:
General Fund Sources
oTaxes
• Licenses and permits o Intergovernmental
DCharges for services
• Fines and fees
General Fund Uses
o General government
• Public safety
D Public works
DPrincipal
11 See independent auditor’s report. City of Alexandria, Louisiana Management's Discussion and Analysis Year ended April 30, 2013
General Capital Projects Fund
Revenues and Transfers In are up in this fund by over $3.3 million, mostly due to increased Intergovernmental Revenues as other sources like the State and Federal governments increase their participation in funding the City’s capital projects. As was the case in General Fund, the deletion of the City Sales Tax Fund means that this fund will report its collections of Sales Taxes as revenues instead of Transfers In.
Expenditures and Transfers Out for Fiscal 2013 are $3.8 million greater than the previous year. Expenditures can vary greatly over two consecutive years in a capital projects fund depending on how far along individual large projects are. Once a project is designed and construction begins, funds can be expended in a relatively short time. Significant progress was achieved in multiple projects in Fiscal 2013, including MPO Street Overlays, Sugarhouse Road, and the Zoo South America Exhibit.
Overall fund balance decreased $.5 million.
Utilities System Fund
The Utilities System Fund is the largest of the City’s proprietary funds, dwarfing the Sanitation Fund, Municipal Transit Fund, Zoo Fund and Golf Course Fund. Revenues in the Utilities System are based primarily on the sales of electricity, water, natural gas, and wastewater service to customers. These revenues, charges for services, are down $4.7 million in 2013 compared to the prior year. This is partially due to fuel cost recovery. The City does not benefit from fuel cost because that is simply the passing on of costs incurred by the City to its customers, but the incurring and subsequent recovery of these costs can cause considerable fluctuations in the revenue and expense of the System. Electric and Gas fuel recovery accounts are down a combined $4.2 million in Fiscal 2013 compared to the prior year.
Operating expenses are down $5.0 million in Fiscal 2013 compared to the previous year. The biggest factor here is the expense side of fuel cost, which is down $6.2 million compared to prior year. It should be noted that whereas the revenue and expense of fuel cost are both down, they are not equal due to timing differences and fluctuations in consumption. This condition can significantly influence the net income or net loss of a given year in the Utilities System Fund. The reduction in Fuel Cost is joined by decreases in Personnel Costs of $.6 million and in Utilities of $.3 million. Payments in Lieu of Insurance are up $1.6 million, Repairs and Maintenance is up $.3 million, while Contracted Services and Supplies are up nearly $.2 million each, partially offsetting the reductions. Other relatively minor changes in items such as Depreciation account for the remaining changes in expenses.
The results of the above were net income to the Utilities System Fund of almost $5.2 million for Fiscal 2013. This is reflected as an increase in total net position.
The following charts show the breakdown of revenues and expenses of the Utilities System Fund for Fiscal 2013:
12 See independent auditor’s report. City of Alexandria, Louisiana Management's Discussion and Analysis Year ended April 30, 2013
Utilities System Revenues
DCharges for sales and services • Other o Investment revenue oSpecial ltem-Perfomance Bond • Gain (Loss) on sale of assets o Capital Contributions • Transfers in
Utilities System Expenses
o Electricity and natural gas purchased for resale • Employee Costs
o Contracted services
oSupplies
• Vehicle expenses
olnsurance
• Utilities
o Transfers (out)
• Repairs and maintenance • Depreciation
o Interest on Debt
13 See independent auditor’s report. City of Alexandria, Louisiana Management's Discussion and Analysis Year ended April 30, 2013
Capital Asset and Debt Administration
Capital Assets
Governmental Funds
The City had a net increase of $.8 million in capital assets this year in governmental activities. These capital assets would include vehicles, equipment, as well as infrastructure, net of depreciation.
Business-Type Funds
The Business-type funds showed a net increase of about $7.8 million in capital assets this year. These would include vehicles and equipment as well as infrastructure assets. Infrastructure in the Utilities System consists of electrical substations, gas mains, wastewater lift stations, water tanks and other assets that enable the System to deliver service to its customers. These assets are listed net of depreciation. Depreciation is deducted from original cost to indicate the degree that the assets are “used up”. Further information on Fixed Assets and Depreciation can be found in Note 6 of the financial statements.
Capital Assets (Net of Depreciation)
Governmental Business 2013 2012 2013 2012
Land 14.3 14.3 2.8 2.8 Construction in Progress 14.9 11.8 11.8 5.6 Buildings 59.7 62.2 3.1 3.2 Furniture & Fixtures 0.0 0.0 .1 .1 Equipment 3.1 3.5 0.0 0.0 Vehicles 2.7 2.1 4.9 4.0 Infrastructure 77.4 77.4 108.6 107.8
Net Capital Assets 172.1 171.3 131.3 123.5
In governmental activities, we see that Construction in Progress increased $3.1 million as work continues on projects such as Bolton Avenue Traffic Softening, Green Oak Street and Lincoln Road. Buildings decreased $2.5 million; while Equipment decreased $.4 million as retirements and depreciation exceeded any additions. Vehicles increased $.6 million.
In business activities, Construction in Progress is up by $6.2 million as work continues on projects such as Martin Park Gas and Water Replacement. Vehicles are up $.9 million; while Buildings are down $.1 million. Infrastructure increased $.8 million as work continues on projects such as Water Main Replacements.
14 See independent auditor’s report. City of Alexandria, Louisiana Management's Discussion and Analysis Year ended April 30, 2013
Debt Administration
Governmental Funds
The City issued no new debt in Governmental Funds during Fiscal 2013, but did refund (refinance) an existing certificate of indebtedness at a more favorable interest rate. The reduction in debt balance of $4.0 million reflects the refinancing along with scheduled payments made on the principal.
Enterprise Funds
The City issued $3.7 million in new debt for the Utilities System in 2013. This is in the form of a revolving loan from the State of Louisiana for water and wastewater improvements, secured by Utility Revenue Bonds. This debt will rise as work is done on the related projects. Other changes in debt balance merely reflect payments made on the principal. For further information on debt, please see Note 10 to the financial statements.
Bonded Long-Term Debt
Governmental Business 2013 2012 2013 2012
Sales Tax Revenue Bonds 32.2 33.8 0.0 0.0 Ad Valorem Tax Bonds 11.6 2.3 0.0 0.0 Limited Tax Bonds 8.6 10.2 0.0 0.0 Certificates of Indebtedness 1.0 11.1 .2 .3 Utility Revenue Bonds 0.0 0.0 35.7 34.7
Total Outstanding Debt 53.4 57.4 35.9 35.0
Future Outlook
Economic conditions deteriorated during Fiscals 2009-2011. There were some signs of improvement in Fiscal 2012, and while some say the national economy is improving, others say it is not. Most seem to be of the opinion that even if it is improving, it is a slow and weak recovery. This could adversely affect the City in a multitude of ways. Sales taxes accounted for nearly 2/3 of General Fund Revenue sources in 2013. As previously noted, City Sales Taxes were up in Fiscal 2013 after being down for 2 of the last 3 years; and Parish Sales Taxes were slightly down in Fiscal 2013 compared to the prior year. In the first 4 months of Fiscal 2014, the roles are reversed with the Parish Sales Tax being slightly up and the City Sales Taxes being slightly down. These taxes are very elastic, meaning they rise and fall quickly with changes in the economy. Typically, economic downturns as we have seen cause rapid decreases in Sales tax collections in State and local government as people have less to spend. Sales taxes are expected to remain flat in the near future at best, with the distinct possibility of a decrease. Falling earnings in investments also translate to less interest revenue in all of the City’s funds, and can mean less earnings for the pension systems that the City contributes to on the behalf of its employees. Reduced earnings for the pension systems could raise the City’s contribution rate to these systems. The City belongs to State run pension systems for Police and Fire employees, and the indication from the State is that those will rise in each of the next 3 years, 15 See independent auditor’s report. City of Alexandria, Louisiana Management's Discussion and Analysis Year ended April 30, 2013
possibly up to 35% of salaries. Health care rates continue to rise for the City as well as most other employers, leading the City to the unpleasant option of either absorbing the additional cost or passing it on to the employees. The long term effects of the Affordable Healthcare Act are not known at present, and this could certainly affect the sustainability of the City’s health care. The General Fund by its nature is very labor intensive with salaries and fringes amounting to 61% of total expenditures for Fiscal 2013. Any increases in these costs could become extremely burdensome to the General Fund.
In business-type activities, the Utilities System Fund shows a net income in Fiscal 2013, although it is down around $1.0 million from the prior year. As noted previously, this is largely due to the “swings” in timing of the fuel cost expense and the subsequent recovery. The fuel cost revenue was down $4.2 million while the expense was down $6.2 million. As previously noted, this difference should even out in the long run, but can cause fluctuations in net income and cash flow in the short run. The combined fuel cost for electricity and gas amounted to 48.9% of expenses and transfers out for Fiscal 2013.
A final note involves the future effect of new accounting principles that will change accounting and reporting for pensions. These new principles, when they become effective, will require systems to record obligations earned by employees sooner than previously required. This is not expected to significantly affect the City of Alexandria Employees Retirement System, but the City will be required to recognize its pro rata share of the unfunded pension liabilities of the two systems for Police and Fire employees run by the State. Although it will not impose additional costs on the City, the recording of unfunded pension liabilities may make the City appear to be not as financially sound. The full effects will have to be examined in subsequent years.
Contacting the Finance Division of the City
This report is intended as a brief overview of the City’s financial condition. Any questions should be directed to the Director of Finance, PO Box 71, Alexandria, LA 71301.
David L. Johnson, CPA Interim Director of Finance
City of Alexandria, Louisiana
16 See independent auditor’s report.
Basic Financial Statements
17
Government-Wide Financial Statements (GWFS)
18 City of Alexandria Alexandria, Louisiana Statement of Net Position April 30, 2013 Exhibit A
Primary Government
Governmental Business-Type Activities Activities Total Assets Cash and cash equivalents $ 6,272,286 $ 4,676,938 $ 10,949,224 Investments 4,085,139 3,000,000 7,085,139 Equity in pooled cash and investments 52,988,397 9,468,114 62,456,511 Receivables 5,142,848 12,822,594 17,965,442 Internal balances 4,210,776 (4,210,776) - Inventories 256,201 3,529,658 3,785,859 Restricted equity in pooled cash and investments - 20,423,300 20,423,300 Prepaid expenses/other assets 113,180 - 113,180 Capital assets, net of depreciation Nondepreciable Land and improvements 14,261,292 2,789,049 17,050,341 Construction in progress 4,275,272 11,823,423 16,098,695 Infrastructure in progress 10,581,870 - 10,581,870 Depreciable Infrastructure 77,375,829 - 77,375,829 Other capital assets 65,600,976 116,658,501 182,259,477 Total Assets 245,164,066 180,980,801 426,144,867
Deferred Outflows of Resources Unamortized bond refunding charges - 36,401 36,401
Liabilities Bank overdraft 417,303 48,614 465,917 Accounts and contracts payable 2,812,699 6,308,972 9,121,671 Accrued interest 487,337 618,199 1,105,536 Salaries payable 1,719,930 805,566 2,525,496 Long-term liabilities Due within one year Bonds and other 5,145,000 3,472,000 8,617,000 Compensated absences 564,643 276,810 841,453 Claims and judgments 3,019,988 - 3,019,988 Due in more than one year Bonds and other 48,205,000 32,310,070 80,515,070 Customer guaranteed deposits - 4,774,180 4,774,180 Compensated absences 3,199,644 1,568,587 4,768,231 Claims and judgments 3,365,371 - 3,365,371 Other noncurent liability - net Post employment benefit obligation 1,321,860 - 1,321,860 Total Liabilities 70,258,775 50,182,998 120,441,773
Net Position Net investment in capital assets 138,805,917 95,488,903 234,294,820 Restricted for Capital projects, net of related debt 18,001,846 - 18,001,846 Debt service 6,022,966 1,311,285 7,334,251 Capital additions and contingencies - 1,000,000 1,000,000 Unrestricted 12,074,562 33,034,016 45,108,578 Total Net Position $ 174,905,291 $ 130,834,204 $ 305,739,495
The accompanying notes are an integral part of the financial statements.
19 City of Alexandria Alexandria, Louisiana Statement of Activities For the Year Ended April 30, 2013
Exhibit B
Net (Expense) Revenue and Changes in Net Assets Program Revenue Primary Government Operating Capital Grants Charges for Grants and and Governmental Business-Type Functions/Programs Expenses Services Contributions Contributions Activities Activities Total Primary Government Governmental activities General government $ 13,936,121 $ 4,182,515 $ 340,058 $ $ (9,413,548) $ $ (9,413,548) Public safety 27,905,386 20,916 1,888,886 (25,995,584) (25,995,584) Public works 26,405,211 236,048 201,588 4,059,558 (21 ,908,017) (21 ,908,017) Community and economic development 1,033,801 6,265 763,031 288,164 23,659 23,659 Interest on long-term debt 2,872,564 (2,872,564) (2,872,564) Total Governmental Activities 72,153,083 4,445,744 3,193,563 4,347,722 (60, 166,054) (60, 166,054) Business-type activities Electricity 49,087,277 71,110,615 370,104 22,393,442 22,393,442 Natural gas 12,654,932 9,847,755 (2,807,177) (2,807,177) Water 6,753,168 7,084,370 331,202 331,202 N Waste water 8,259,930 4,967,886 (3,292,044) (3,292,044) 0 Municipal transit 2,904,082 498,157 834,007 761,807 (810,111) (810,111) Sanitation 3,865,606 4,873,039 1,007,433 1,007,433 Zoological park 1,972,729 543,516 2,944,186 1,514,973 1,514,973 Golf course 988,441 631 ,611 17,135 (339,695) (339,695) Interest on long-term debt 1,558,637 (1 ,558,637) (1 ,558,637) Total Business-Type Activities 88,044,802 99,556,949 834,007 4,093,232 16,439,386 16,439,386 Total Primary Government $ 160,197,885 $ 104,002,693 $ 4,027,570 r-tl,44"""0;954 (60, 166,054) 16,439,386 (43,726,668) General Revenues Taxes Property taxes 7,471,768 7,471,768 Sales tax 43,049,307 43,049,307 Hotel occupancy taxes 564,425 564,425 Franchise and miscellaneous taxes 729,071 729,071 Entitlements and shared revenues 83,455 83,455 Investment earnings 185,191 111,817 297,008 Miscellaneous 345,570 6,292 351,862 Gain (loss) on sale of assets 82,684 18,798 101,482 Bond refinancing - net 224,995 224,995 Transfers 7,275,231 (7,275,231) Total General Revenues and Transfers 60,011,697 (7,138,324) 52,873,373
Change in Net Position (154,357) 9,301,062 9,146,705
Net Position, Beginning of Year, As Restated 175,059,648 121 ,533,142 296,592,790 Net Position, End of Year $ 174,905,291 $ 130,834,204 $ 305,739,495 The accompanying notes are an integral part of the financial statements.
Fund Financial Statements
21 City of Alexandria Alexandria, Louisiana Balance Sheet Governmental Funds April 30, 2013
Exhibit C
Other Total General Capital Governmental Governmental General Fund Projects Fund Funds Funds Assets Cash and cash equivalents $ 2,823,552 $ 897,551 $ 2,504,767 $ 6,225,870 Investments - - 4,085,139 4,085,139 Equity in pooled cash and investments 11,467,992 13,506,021 19,451,967 44,425,980 Receivables 3,404,615 301,613 614,967 4,321,195 Due from other governments 71,314 399,762 307,834 778,910 Due from other funds 5,597,489 - 70,727 5,668,216 Inventories 256,201 - - 256,201
Total Assets $ 23,621,163 $ 15,104,947 $ 27,035,401 $ 65,761,511
Liabilities and Fund Balances Liabilities Bank overdraft $ - $ - $ 424,865 $ 424,865 Accounts payable 809,633 765,779 1,215,960 2,791,372 Accrued expense/other payables 1,692,754 - 4,935 1,697,689 Due to other funds 486,302 193,000 778,051 1,457,353 Unearned revenue - - 556,801 556,801 Total Liabilities 2,988,689 958,779 2,980,612 6,928,080
Fund Balances Nonspendable Inventories 256,201 - - 256,201 Restricted Debt service - - 6,022,966 6,022,966 Capital projects - 14,146,168 16,796,356 30,942,524 Committed Economic development - - 1,235,467 1,235,467 Unassigned 20,376,273 - - 20,376,273 Total Fund Balances 20,632,474 14,146,168 24,054,789 58,833,431
Total Liabilities and Fund Balances $ 23,621,163 $ 15,104,947 $ 27,035,401 $ 65,761,511
The accompanying notes are an integral part of the financial statements.
22 City of Alexandria Alexandria, Louisiana Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position April 30, 2013 Exhibit D
Total Fund Balance - Governmental Funds $ 58,833,431
Amounts reported for governmental activities in the Statement of Net Position is different because:
Capital assets used in governmental activities are not current financial resources and, therefore, are not reported in the fund financial statement but are reported in the governmental activities of the Statement of Net Position. 172,095,239
Some liabilities (such as compensated absences and bonds payable) are not due and payable in the current period and are not included in the fund financial statement but are included in the governmental activities of the Statement of Net Position. Bonds payable (53,350,000) Compensated absences (3,764,289)
Interest on long-term debt is accrued in the Statement of Net Position, but not in the governmental funds. (487,337)
Unearned revenue is reported in governmental funds but not in the Statement of Net Position. 556,801
The assets and liabilities of certain internal service funds are not included in the fund financial statement, but are included in the governmental activities of the Statement of Net Position. 1,021,446
Net Position of Governmental Activities in the Statement of Net Position $ 174,905,291
The accompanying notes are an integral part of the financial statements.
23 City of Alexandria Alexandria, Louisiana Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds For the Year Ended April 30, 2013
Exhibit E
Other Total General Capital Governmental Governmental General Fund Projects Fund Funds Funds Revenues Taxes Property taxes $ 2,561,952 $ - $ 4,909,817 $ 7,471,769 Sales taxes 35,975,300 4,009,149 3,064,859 43,049,308 Other 729,071 - 564,425 1,293,496 Intergovernmental 2,488,987 3,843,920 1,051,195 7,384,102 Fees, commissions, and fines 657,044 - - 657,044 Licenses and permits 2,875,496 - - 2,875,496 Charges for services 358,420 - 147,204 505,624 Investment earnings 20,525 50,858 88,050 159,433 Miscellaneous 844,822 25,000 229,587 1,099,409 Total Revenues 46,511,617 7,928,927 10,055,137 64,495,681
Expenditures Current General government 11,108,624 - 552,651 11,661,275 Public safety 27,795,475 - - 27,795,475 Public works 10,225,473 - - 10,225,473 Community and economic development - - 781,468 781,468 Capital outlay 2,296,446 8,039,072 9,691,560 20,027,078 Debt service Principal 1,165,001 - 3,655,000 4,820,001 Interest and other charges 416,319 - 1,901,972 2,318,291 Total Expenditures 53,007,338 8,039,072 16,582,651 77,629,061 Excess (Deficiency) of Revenues over Expenditures (6,495,721) (110,145) (6,527,514) (13,133,380)
Other Financing Sources (Uses) Transfers in 10,431,246 100,000 1,928,063 12,459,309 Transfers out (2,476,954) (508,375) (2,668,891) (5,654,220) Proceeds from sale of bonds 9,750,000 - - 9,750,000 Bond issue costs (230,993) - - (230,993) Payment to escrow agent to defease bonds (9,525,005) - - (9,525,005) Proceeds from sale of assets 105,540 - - 105,540 Total Other Financing Sources (Uses) 8,053,834 (408,375) (740,828) 6,904,631
Net Change in Fund Balances 1,558,113 (518,520) (7,268,342) (6,228,749)
Fund Balances, Beginning of Year, as Restated 19,074,361 14,664,688 31,323,131 65,062,180
Fund Balances, End of Year $ 20,632,474 $ 14,146,168 $ 24,054,789 $ 58,833,431
The accompanying notes are an integral part of the financial statements.
24 City of Alexandria Alexandria, Louisiana Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities For the Year Ended April 30, 2013
Exhibit F Reference Columns Net Change in Fund Balances - Total Governmental Funds $ (6,228,749)
Amounts reported for governmental activities in the Statement of Activities are different because:
Governmental funds report outlays for capital assets as expenditures because such outlays use current financial resources. In contrast, the Statement of Activities reports only a portion of the outlay as expense. The outlay is allocated over the assets' estimated useful lives as depreciation expense for the period. Capital outlays meeting the capitalization threshold 8,580,841 Depreciation included in the Statement of Activities (7,735,542)
Governmental funds report proceeds from the disposition of capital assets as revenue. The Statement of Activities reports the gain or loss from the disposition of capital assets (proceeds less basis). (22,857)
Governmental funds report repayment of bond principal as an expenditure. In contrast, the Statement of Activities treats such repayments as a reduction in long-term liabilities. Principal Payments 4,820,000 Redemption of Certificate of Indebtedness, Series 1998C 8,945,000
The issuance of long-term debt provides current financial resources to governmental funds and does not have any effect on net position. (9,750,000)
Some revenues reported in the Statement of Activities do not provide current financial resources and these are not reported as revenues in governmental funds. Some expenses reported in the Statement of Activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. These timing differences are summarized below: Interest expense 250,727 Unearned revenue (130,618) Compensated absences 52,505
Internal service funds are used by management to charge the costs of certain activities to individual funds. The net revenue (expense) of certain internal service funds is reported with governmental activities. 1,064,336
Change in Net Position of Governmental Activities $ (154,357)
The accompanying notes are an integral part of the financial statements.
25 City of Alexandria Alexandria, Louisiana Statement of Net Position Proprietary Funds April 30, 2013
Exhibit G Enterprise Funds Other Enterprise Internal Service Utilities System Funds Total Funds Assets Current Assets Cash and cash equivalents $ 4,509,104 $ 167,834 $ 4,676,938 $ 53,980 Equity in pooled cash and investments 10,093,950 2,374,164 12,468,114 8,562,419 Receivables (net of allowances for uncollectible) 12,260,536 242,534 12,503,070 42,742 Due from other funds 810,551 1,324,240 2,134,791 - Due from other governments 134,721 184,803 319,524 - Inventories 3,529,658 - 3,529,658 - Prepaid expenses/other assets - - - 113,180 Total Current Assets 31,338,520 4,293,575 35,632,095 8,772,321
Non-Current Assets Restricted equity in pooled cash and investments 20,423,300 - 20,423,300 - Capital assets Land and improvements 1,698,084 1,090,965 2,789,049 - Construction in progress 8,336,252 3,487,171 11,823,423 - Property, plant and equipment 253,165,545 23,638,659 276,804,204 12,041 Less accumulated depreciation (149,293,388) (10,852,315) (160,145,703) (12,041) Total Non-Current Assets 134,329,793 17,364,480 151,694,273 - Total Assets 165,668,313 21,658,055 187,326,368 8,772,321
Deferred Outflows of Resources Unamortized bond refunding charges 36,401 - 36,401 -
Liabilities Current Liabilities Bank overdraft - 48,614 48,614 - Accounts payable 3,256,283 312,168 3,568,451 17,245 Salaries payable 602,400 203,166 805,566 2,977 Due to other funds 5,775,692 569,874 6,345,566 89 Compensated absences 222,223 54,587 276,810 - Certificates of indebtedness 170,000 - 170,000 - Estimated liability for claims incurred - - - 3,019,988 Liabilities payable from restricted assets: Accounts and contracts payable 2,740,522 - 2,740,522 - Interest 618,199 - 618,199 - Revenue bonds 3,302,000 - 3,302,000 - Total Current Liabilities 16,687,319 - 1,188,409 - 17,875,728 - 3,040,299
Non-Current Liabilities Compensated absences 1,259,263 309,324 1,568,587 23,345 Certificates of indebtedness - - - - Customer guaranteed deposits 4,774,180 - 4,774,180 - Estimated liability for claims incurred - - - 3,365,371 Post employment benefit obligation - - - 1,321,860 Revenue Bonds 32,310,070 - 32,310,070 - Total Non-Current Liabilities 38,343,513 309,324 38,652,837 4,710,576 Total Liabilities 55,030,832 1,497,733 56,528,565 7,750,875
Net Position Net investment in capital assets 78,124,423 17,364,480 95,488,903 - Restricted for debt service 1,311,285 - 1,311,285 - Restricted for capital additions and contingencies 1,000,000 - 1,000,000 - Unrestricted 30,238,174 2,795,842 33,034,016 1,021,446
Total Net Position $ 110,673,882 $ 20,160,322 $ 130,834,204 $ 1,021,446
The accompanying notes are an integral part of the financial statements.
26 City of Alexandria Alexandria, Louisiana Statement of Revenues, Expenses, and Changes in Fund Net Position Proprietary Funds For the Year Ended April 30, 2013 Exhibit H Enterprise Funds Other Utilities Enterprise Internal Service System Funds Total Funds Operating Revenues Charges for services $ 92,718,677 $ 6,546,321 $ 99,264,998 $ 12,886,695 Miscellaneous 291,949 6,294 298,243 103,168 Total Operating Revenues 93,010,626 6,552,615 99,563,241 12,989,863 Operating Expenses Electricity and natural gas purchases 43,600,716 - 43,600,716 - Personnel costs 12,521,878 4,502,649 17,024,527 66,535 Contractual and professional services 1,396,417 142,579 1,538,996 1,222,174 Disposal costs - 1,126,774 1,126,774 - Utilities 1,368,991 792,234 2,161,225 - Repairs and maintenance 5,112,206 191,196 5,303,402 - Vehicle expense 693,646 1,381,173 2,074,819 - Other supplies and expenses 1,766,025 409,894 2,175,919 728 Miscellaneous expenses 9,297 191,648 200,945 2,280 Payments in lieu of insurance 3,180,999 303,271 3,484,270 - Insurance, claims, and related expenses - - - 10,659,566 Depreciation 7,202,610 1,062,104 8,264,714 - Total Operating Expenses 76,852,785 10,103,522 86,956,307 11,951,283 Operating Income (Loss) 16,157,841 (3,550,907) 12,606,934 1,038,580 Nonoperating Revenues (Expenses) Investment earnings 105,143 6,674 111,817 25,756 Operating grants and contributions - 834,007 834,007 - Interest expense (1,558,637) - (1,558,637) - Gain (loss) on sale of assets (4,373) 23,171 18,798 - Total Nonoperating Revenues (Expenses) (1,457,867) 863,852 (594,015) 25,756 Income (Loss) Before Contributions and Transfers 14,699,974 (2,687,055) 12,012,919 1,064,336 Transfers in 886,553 4,367,329 5,253,882 - Transfers out (10,732,207) (1,326,764) (12,058,971) - Capital contributions 370,104 3,723,128 4,093,232 - Change in Net Position 5,224,424 4,076,638 9,301,062 1,064,336 Total Net Position - Beginning of Year, As Restated 105,449,458 16,083,684 121,533,142 (42,890) Total Net Position - End of Year $ 110,673,882 $ 20,160,322 $ 130,834,204 $ 1,021,446
The accompanying notes are an integral part of the financial statements.
27 City of Alexandria, Louisiana Reconciliation of Change in Net Position for Enterprises Funds to the Statement of Activities For the Year Ended April 30, 2013
Exhibit I
Change in Net Position - Enterprise Funds $ 9,301,062
The Change in Net Position reported for Business-Type Activities in the Statement of Activities are different because:
-
Change in Net Position of Business-Type Activities $ 9,301,062
The accompanying notes are an integral part of the financial statements.
28 City of Alexandria Alexandria, Louisiana Statement of Cash Flows Proprietary Funds For the Year Ended April 30, 2013
Exhibit J (Continued)
Enterprise Funds Other Total Internal Utilities Enterprise Enterprise Service System Funds Funds Funds Cash Flows from Operating Activities Receipts from customers $ 93,032,268 $ 6,655,464 $ 99,687,732 $ 2,392,612 Internal activity - receipts from other funds 1,648,852 - 1,648,852 10,597,251 Other receipts 157,137 - 157,137 - Payments for personnel costs (12,724,911) (4,154,055) (16,878,966) (63,898) Payments to vendors and others (50,527,116) (1,917,290) (52,444,406) (12,723,747) Internal activity - payments to other funds (5,270,507) (2,643,290) (7,913,797) (2,253) Net Cash Provided (Used) by Operating Activities 26,315,723 (2,059,171) 24,256,552 199,965
Cash Flows from Noncapital Financing Activities Bank overdraft 3,584,519 2,158 3,586,677 (69,126) Operating grants and subsidies - 978,636 978,636 - Transfers between funds (9,592,339) 2,073,726 (7,518,613) (282) Net Cash Provided (Used) by Noncapital Financing Activities (6,007,820) 3,054,520 (2,953,300) (69,408)
Cash Flows from Capital and Related Financing Activities Capital grants 303,143 3,563,642 3,866,785 - Interest received on construction funds 24,339 - 24,339 - Proceeds from sale of capital assets 132 23,171 23,303 - Acquisition or construction of capital assets (9,586,915) (4,635,429) (14,222,344) - Principal paid on capital debt (2,825,000) - (2,825,000) - Interest paid on capital debt (1,545,270) - (1,545,270) - Net Cash Provided (Used) by Capital and Related Financing Activities (13,629,571) (1,048,616) (14,678,187) -
Cash Flows from Investing Activities Net change in equity in pooled cash and investments (4,059,487) (33,548) (4,093,035) (188,069) Interest received on operating funds 80,806 6,679 87,485 25,756 Net Cash Provided (Used) by Investing Activities (3,978,681) (26,869) (4,005,550) (162,313)
Net Increase (Decrease) in Cash and Cash Equivalents 2,699,651 (80,136) 2,619,515 (31,756)
Cash and Cash Equivalents, Beginning of Year 1,809,453 247,970 2,057,423 85,736
Cash and Cash Equivalents, End of Year $ 4,509,104 $ 167,834 $ 4,676,938 $ 53,980
The accompanying notes are an integral part of the financial statements.
29 City of Alexandria Alexandria, Louisiana Statement of Cash Flows Proprietary Funds For the Year Ended April 30, 2013
Exhibit J (Concluded)
Enterprise Funds Other Total Internal Utilities Enterprise Enterprise Service System Funds Funds Funds Reconciliation of Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities Operating income (loss) $ 16,157,841 $ (3,550,907) $ 12,606,934 $ 1,038,580 Adjustments to Reconcile Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities Depreciation 7,202,610 1,062,104 8,264,714 - Changes in assets and liabilities Receivables 1,670,494 102,848 1,773,342 - Due from other funds - - - - Inventories (324,759) - (324,759) - Accounts payable 1,655,445 316,324 1,971,769 (32,499) Accrued expenses and other current liabilities (10,343) 23,696 13,353 273 Estimated liability for claims incurred - - - (1,020,081) Post employment benefit obligation - - - 211,328 Compensated absences (192,702) (13,236) (205,938) 2,364 Customer guaranteed deposits 157,137 - 157,137 -
Net Cash Provided (Used) by Operating Activities $ 26,315,723 $ (2,059,171) $ 24,256,552 $ 199,965
Additional required disclosure: There were no material noncash operating, noncapital financing, or capital and related financing activities.
The accompanying notes are an integral part of the financial statements.
30 City of Alexandria Alexandria, Louisiana Statement of Fiduciary Net Position Fiduciary Funds April 30, 2013
Exhibit K
Pension Trust Funds
City Employees' Retirement Firemen's System Pension and (12/31/12) Relief Fund Total Assets Cash and cash equivalents $ 6,557,987 $ 9,839 $ 6,567,826 Receivables Interest and dividends 632,560 - 632,560 Investments, at fair value Corporate bonds 37,594,524 - 37,594,524 Corporate stocks 73,099,246 - 73,099,246 Zero coupon treasury receipts 2,984,743 - 2,984,743 GNMA notes 17,670 - 17,670 Certificate of deposit - 97,702 97,702 Total Investments 113,696,183 97,702 113,793,885
Capital assets Furniture, fixtures and equipment-net 1,148 - 1,148 Total Capital Assets 1,148 - 1,148 Total Assets 120,887,878 107,541 120,995,419
Liabilities Payroll taxes withheld 600 - 600 Total Liabilities 600 - 600
Net Position Held in trust for pension benefits $ 120,887,278 $ 107,541 $ 120,994,819
The accompanying notes are an integral part of the financial statements.
31 City of Alexandria Alexandria, Louisiana Statement of Changes in Fiduciary Net Position Fiduciary Funds For the Year Ended April 30, 2013
Exhibit L
Pension Trust Funds
City Employees' Retirement Firemen's System Pension and (12/31/12) Relief Fund Total Additions Contributions Employer $ 4,683,190 $ 21,500 $ 4,704,690 Plan members 1,674,470 - 1,674,470 Total Contributions 6,357,660 21,500 6,379,160
Investment earnings Net appreciation (depreciation) in fair value of investments 8,081,120 - 8,081,120 Interest 1,882,745 1,125 1,883,870 Dividends 1,778,224 - 1,778,224 Total Investment Earnings 11,742,089 1,125 11,743,214 Total Additions 18,099,749 22,625 18,122,374
Deductions Plan benefits 7,002,906 21,374 7,024,280 DROP benefits 506,548 - 506,548 Refunds/transfers of contributions 487,190 - 487,190 Administrative 133,392 - 133,392 Total Deductions 8,130,036 21,374 8,151,410
Change in Net Position 9,969,713 1,251 9,970,964
Net Position, Beginning of Year 110,917,565 106,290 111,023,855
Net Position, End of Year $ 120,887,278 $ 107,541 $ 120,994,819
The accompanying notes are an integral part of the financial statements.
32
Notes to Financial Statements
33 City of Alexandria, Louisiana April 30, 2013
Notes to Financial Statements
1. Organization and Significant Accounting Policies
The City of Alexandria, Louisiana (City) is governed under the provisions of the Home Rule Charter adopted June 7, 1977. The City operates under a Mayor - City Council form of government.
The accompanying financial statements of the City have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. GAAP includes all relevant GASB pronouncements as set forth in the Codification for Governmental Accounting and Financial Reporting.
The accounting and reporting framework and the more significant of the City's accounting policies are described below.
A. The Financial Reporting Entity
As the municipal governing authority, for reporting purposes, the City is considered a separate financial reporting entity. The financial reporting entity consists of the primary government (the City), organizations for which the primary government is financially accountable, and other organizations for which the nature and significance of their relationship with the City are such that exclusion would cause the City’s financial statements to be misleading or incomplete.
Effective May 1, 2012, the City adopted the provisions of Statement No. 61 (GASBS 61), The Financial Reporting Entity: Omnibus, of the Governmental Accounting Standards Board. GASBS 61 amends the criteria for determining which component units should be considered part of the City for financial reporting purposes. The basic criterion for including a potential component unit within the reporting entity is financial accountability. The GASB has established criteria to be considered in determining financial accountability, which includes:
1. Appointing a voting majority of an organization’s governing body, and a. The ability of the City to impose its will on that organization and/or b. The potential for the organization to provide specific financial benefits to the City or to impose specific financial burdens on the City.
2. Organizations for which the City does not appoint a voting majority but are fiscally dependent on the City.
3. Organizations for which the reporting entity financial statements would be misleading if data of the organization is not included because of the nature or significance of the relationship.
Based on the above criteria, the City has no component units. In reaching this conclusion, the operations of the City Court System (Alexandria City Court and Alexandria City Marshall) were considered. However, it was determined that the City Court System did not meet the necessary criteria for classification as a component unit. Component unit status does not apply because the City Court System is managed by elected officials and functions in a fiscally independent manner.
34 City of Alexandria, Louisiana April 30, 2013
Notes to Financial Statements
B. Basis of Presentation and Accounting
The accounting system is organized and operated on the basis of funds. A fund is defined as a fiscal and accounting entity with a self-balancing set of accounts, which are segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions or limitations.
The City’s funds are grouped into two broad fund categories and six generic fund types for financial statement presentation purposes. Governmental funds include the general, special revenue, debt service, and capital projects. Proprietary funds include enterprise funds and internal service funds. The City has two pension trust funds.
Government-Wide Financial Statements (GWFS)
The government-wide financial statements, “Statement of Net Positions” and “Statement of Activities”, report information on all of the non-fiduciary activities of the primary government. Government activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which primarily rely on fees and charges for support. Internal service fund activity is eliminated to avoid “doubling up” revenues and expenses. Pension trust funds are excluded from the government-wide financial statements.
The government-wide statements are prepared using the economic resources measurement focus and the accrual basis of accounting. This is the same approach used in the preparation of the proprietary fund financial statements but differs from the manner in which governmental fund financial statements are prepared. Therefore, governmental fund financial statements include reconciliations with brief explanations to better identify the relationship between the government-wide statements and the statements for governmental funds. The primary effect of internal activity has been eliminated from the government-wide financial statements.
The government-wide Statement of Activities presents a comparison between expenses (both direct and indirect) and program revenues for each segment of the business-type activities of the City and for each governmental program. Direct expenses are those that are specifically associated with a service, program, or department and are therefore clearly identifiable to a particular function. Indirect expenses are not allocated to governmental activities functions in the Statement of Activities but are allocated to business-type functions. Program revenues include (a) fees, fines, and charges paid by the recipients if goods or services are offered by the program, and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues not classified as program revenue are presented as general revenues. The comparison of program revenues and expenses identifies the extent to which each program or business segment is self-financing or draws from the general revenues of the City.
Net position is reported as restricted when constraints placed on net position are either externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments or imposed by law through constitutional provisions or enabling legislation. The net position restricted for other purposes result from special revenue funds, debt service funds, and capital project funds with their respective net position use.
35 City of Alexandria, Louisiana April 30, 2013
Notes to Financial Statements
Fund Financial Statements
Fund financial statements report detailed information about the City. The focus of governmental and enterprise fund financial statements is on major funds rather than reporting by fund type. Each major fund is presented in a separate column. Nonmajor funds are aggregated and presented in a single column. The internal service funds are presented in a single column on the face of the proprietary fund statements. Therefore, separate financial statements are provided for governmental funds, propriety funds, and fiduciary funds, even though the latter are excluded from the government-wide financial statements.
Nonspendable fund balances include amounts that cannot be spent because they are either not in a spendable form or legally or contractually required to be maintained intact. Restricted fund balances represent those portions of fund balance that are restricted to specific purposes by external parties, such as creditors, grantors, contributors, or laws or regulations of other governments or by law through constitutional provisions or enabling legislation. Committed fund balances are amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the government’s highest level of decision-making authority, which is the City Council. Formal action of the City to establish or rescind committed funds is by adopting a resolution in a public meeting. Amounts that are constrained by the government’s intent to be used for specific purposes, but are neither restricted nor committed, are reported as assigned fund balances. In cases where restricted and unrestricted monies are received by the City for the same function or purpose, the restricted monies are used first. Unrestricted monies are then spent in the following order: committed, assigned, and unassigned.
Governmental Funds
All governmental funds are accounted for using the modified accrual basis of accounting and the current financial resources measurement focus. Under this basis, revenues are recognized in the accounting period in which they become measurable and available. Expenditures are recognized in the accounting period in which the fund liability is incurred, if measurable.
The major governmental funds are:
General Fund – This is the City’s primary operating fund. This fund accounts for all financial resources except those required to be accounted for in another fund.
General Capital Projects Fund – This fund accounts for various capital projects. Funding is provided by intergovernmental grants and sales taxes dedicated to capital improvements.
Revenue Recognition
In applying the susceptible to accrual concept under the modified accrual basis, the following revenue sources are deemed to be measurable and available (i.e., collectible with the current period or within 60 days after year end and available to pay obligations in the current period). This includes property taxes, franchise taxes, sales taxes, grants, interest revenue, and charges for services. Fines, permits, and license revenues are not susceptible to accrual because generally they are not measurable until received in cash. Reimbursements due for federal and state funded projects are accrued as revenue at the time the expenditures are made, or when received in advance, are deferred until expenditures are made.
36 City of Alexandria, Louisiana April 30, 2013
Notes to Financial Statements
Expenditure Recognition
The measurement focus on governmental fund accounting is on decreases in net financial resources (expenditures) rather than expenses. Most expenditures are measurable and are recorded when the related fund liability is incurred. However, principal and interest on general long-term debt, which has not matured, are recognized when paid. Allocations of costs, such as depreciation and amortization, are not recognized in the governmental funds.
Proprietary Funds
All proprietary funds are accounted for using the accrual basis of accounting. These funds account for operations that are primarily financed by user charges. The economic resource focus concerns determining costs as a means of maintaining the capital investment and management control. Revenues are recognized when earned and expenses when incurred. Allocations of costs, such as depreciation, are recorded in proprietary funds. Unbilled service receivables are recorded at each year-end.
Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the City’s enterprise funds and internal service funds include charges to customers for sales and services, transit fees, and employer and employee insurance premiums. All revenues not meeting this definition are reported as non-operating revenues. Operating expenses for enterprise funds and internal service funds include the costs of sales and services, administrative expenses, benefits paid, and depreciation on capital assets.
The major proprietary fund of the City is the Utilities System Fund, which accounts for electricity, natural gas, water and wastewater services provided to residents of the City and general surrounding areas.
The City maintains three internal service funds as follows:
Risk Management Fund is used to account for the provision of various insurance coverage to the other funds of the City through incorporation of self insurance and premiums paid for third party coverage for certain stop loss levels.
Employee Benefits Insurance Fund is used to account for the provision of hospitalization/health insurance to employees of the City. A defined amount is self insured and provision is made for excess coverage through premiums paid to a third party. In addition, certain life insurance is provided for employees through premiums paid to a third party insurance carrier.
Unemployment Benefits Fund is used to account for the provision of unemployment benefits to the other funds of the City through self-insurance coverage.
Fiduciary Funds
The City currently has two pension trust fiduciary funds as follows:
City Employees' Retirement System Fund is used to accumulate resources for retirement benefits for City employees covered under the plan.
37 City of Alexandria, Louisiana April 30, 2013
Notes to Financial Statements
Firemen's Pension and Relief Fund is used to account for benefits paid to members of this plan. The City is required to contribute an amount sufficient to meet any deficit of the Fund without regard for reserve requirements accruing on an actuarial basis.
Fiduciary funds are used to account for assets held on behalf of outside parties, including other governments, or on behalf of other funds within the City. The City maintains the above pension trust funds to account for the City's employee pension funds. Trust funds are used to account for assets held by the government in a trustee capacity.
The accrual basis of accounting is utilized by proprietary fund types and pension trust funds. Under this method, revenues are recorded when earned and expenses are recorded at the time liabilities are incurred.
C. Budgets and Budgetary Accounting
Annual appropriated operating budgets of proposed expenditures and the means of financing them are adopted for the general, special revenue, and debt service funds. Budgeted amounts are as originally adopted, or as amended from time to time by the Council. Budgets are adopted consistent with accounting principles generally accepted in the United States of America.
Budgets are adopted on a line item basis. Administrative amendments can be made on a departmental basis between line item accounts only. Interdepartmental amendments, interfund amendments, and additional appropriations from one fund to another are subject to Council approval. The overall level of control is on an interdepartmental basis.
Annual operating budget appropriations expire at the close of the fiscal year to the extent not expended.
D. Cash and Cash Equivalents; Investments
Cash - Cash includes amounts on hand and in demand deposits. For the purpose of the statement of cash flows, management considers all highly liquid investments, excluding restricted assets, with a maturity of three months or less when purchased to be cash equivalents.
Investments - Investments are reported at fair value. Fair value is the amount at which an investment could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Certificates of deposit classified as investments are valued at cost, which equals fair value. U.S. Treasury Notes are valued based on quoted market prices. Corporate bonds are valued based on yields currently available on comparable securities of issuers with similar credit ratings. Securities traded on national securities exchanges are valued at the last reported sales price on the last business day of the plan year. Investments traded in the over-the-counter market are valued at the average of the last reported bid and asked prices. Mortgages have been valued on the basis of their future principal and interest payments discounted at prevailing interest rates for similar investments.
38 City of Alexandria, Louisiana April 30, 2013
Notes to Financial Statements
E. Internal Balances (Due from/to Other Funds)
During the course of operations, numerous transactions occur between individual funds for goods provided or services rendered. These receivables and payables are classified as internal balances on the statement of net position and as due from/to other funds in the fund financial statements.
Amounts reported in the fund financial statements as interfund receivables and payables are eliminated in the government-wide governmental and business-type activities columns of the statement of net position, except for the net residual amounts due between governmental and business-type activities, which are presented as internal balances.
F. Inventories
Inventories are valued at the lower of cost (first-in, first-out) or market, with the exception of central warehouse inventory and fuel, which are valued at average cost. Inventories are accounted for in the funds using the consumption method, whereby expenditures are recognized as inventory is used.
G. Restricted Assets
Certain Enterprise Fund assets are classified as restricted assets because their use is restricted to certain activities by law or bond covenants. "Revenue Bond Current Debt Service accounts" are used to report resources accumulated for May 1st maturities of revenue bonds principal and interest. "Customers' Deposit accounts" are used to account for funds received from customers for utilities deposits. "Revenue Bond Reserve accounts" are used to report resources set aside for potential future deficiencies in the Revenue Bond Current Debt Service accounts. "Revenue Bond Capital Additions and Contingencies accounts" are used to report resources set aside to meet unexpected contingencies or to fund asset renewals and replacements. "Utilities Capital Projects accounts" are used to account for funds set aside for capital additions, renewals, and replacements.
H. Capital Assets and Depreciation
The accounting and reporting treatment applied to the capital assets associated with a fund are determined by its measurement focus. General capital assets are long-lived assets of the City as a whole. When purchased, such assets are recorded as expenditures in the governmental funds.
In the Government-Wide Financial Statements, capital assets, including general capital assets are capitalized and depreciated on a straight-line basis over their estimated useful lives. Public domain ("infrastructure") capital assets consisting of roads, bridges, curbs and gutters, streets and sidewalks, drainage systems, and lighting systems are capitalized. The valuation basis for capital assets is historical cost, or when historical cost is not available, estimated historical cost. Donated capital assets are valued at estimated fair value on date of donation. The minimum capitalization threshold is as follows:
Land All costs Buildings and building improvements Greater than $ 50,000 Machinery and equipment Greater than $ 5,000 Furniture and fixtures Greater than $ 5,000 Vehicles Greater than $ 5,000 Infrastructure Greater than $250,000
39 City of Alexandria, Louisiana April 30, 2013
Notes to Financial Statements
Capital assets in the proprietary funds are capitalized in the fund in which they are utilized. The valuation basis for proprietary fund capital assets are the same as those used for general capital assets. Donated assets are capitalized at estimated fair market value on the date donated.
Interest is capitalized on proprietary fund assets acquired with tax-exempt debt. The amount of interest to be capitalized is calculated by offsetting interest expense incurred from the date of the borrowing until completion of the project with interest earned on invested proceeds over the same period. No interest was capitalized during the current period.
I. Bond Issuance Costs
In governmental funds, bond issuance costs are recognized in the current period. In accordance with GASB Statement No. 65, Items Previously Reported as Assets and Liabilities, bond issuance costs for proprietary fund types are recognized in the current period.
J. Compensated Absences
Vested or accumulated leave is accrued in the period the liability is incurred. Compensated absences expected to be financed from governmental funds are not reported in the Balance Sheet of the Fund Financial Statements; however, compensated absences are reported in the statement of Net Position in the Government-Wide Financial Statements. Vested or accumulated leave of proprietary funds is recorded as an expense and liability of those funds as the benefits accrue to employees. No liability is recorded for compensated absences that relate to future services or that are contingent on a specific event that is outside the control of the employer and employee.
K. Long-term Liabilities
Long-term liabilities expected to be financed from governmental funds are not reported in the Balance Sheet for the Fund Financial Statements; however, such long-term obligations are reported in the Statement of Net Position in the Government-Wide Financial Statements. Interest expense on long-term debt is recognized in the Government-Wide Financial Statements as the interest accrues, regardless of when it is due. Long-term liabilities expected to be financed from proprietary fund operations are accounted for in those funds.
L. Supplemental Wages
Certain employees of the police and fire departments receive supplemental wages from the State of Louisiana. These supplemental wages are recognized as intergovernmental revenue and public safety expenditures in the General Fund.
M. Interfund Transactions
Quasi-external transactions, if any, are accounted for as revenues or expenditures. Transactions that constitute reimbursements to a fund for expenditures, initially made from it that are properly applicable to another fund, are recorded as expenditures in the reimbursing fund and as reductions of expenditures in the fund that is reimbursed. All other interfund transactions are reported as transfers.
40 City of Alexandria, Louisiana April 30, 2013
Notes to Financial Statements
N. Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
O. Impact of Recently Issued Pronouncements
Effective for the year ending April 30, 2013, the City implemented GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position and GASB Statement No. 65, Items Previously Reported as Assets and Liabilities. GASB Statement No. 63 provides financial reporting guidance for deferred outflows of resources and deferred inflows of resources, introduced and defined in GASB Concepts Statement No. 4. This Statement amends the net asset reporting requirements in Statement No. 34, Basic Financial Statements-and Management’s Discussion and Analysis-for State and Local Governments, and other pronouncements by incorporating deferred outflows of resources and deferred inflows of resources into the definitions of the required components of the residual measure and by renaming that measure as net position, rather than net assets. GASB Statement No. 65 clarifies which financial statement items should reclassified as deferred outflows and deferred inflows, and which items should be treated as current period expenditures (outflows) or current period inflows.
In June 2012, the GASB approved a pair of related Statements that change the accounting and financial reporting of pensions by state and local governments and pension plans. Statement No. 67, Financial Reporting for Pension Plans, addresses financial reporting for state and local government pension plans. Statement No. 67 is effective for financial statements for fiscal years beginning after June 15, 2013. Statement No. 68, Accounting and Financial Reporting for Pensions, establishes new accounting and financial reporting requirements for governments that provide their employees with pensions. This Statement is effective for fiscal years beginning after June 15, 2014. The guidance contained in these Statements will change how governments calculate and report the costs and obligations associated with pensions in important ways. It is designed to improve the usefulness of reported pension information and to increase the transparency, consistency, and comparability of pension information across governments.
State and local government employees often earn two types of compensation in return for their efforts—current compensation and deferred compensation. The deferred compensation, including pension benefits, is not received until after the employee’s tenure with the government has concluded and vesting and age requirements have been met. A government has an obligation to pay these deferred benefits in the future—a total pension liability—once they have been earned. When the total pension liability exceeds the pension plan’s net assets (now referred to as plan net position) available for paying benefits, there is a net pension liability. Governments will be required to report that amount as a liability in their accrual-based financial statements (for example, the government-wide statement of net position). This is an important change that will more clearly depict the government’s financial position. While this information will, in some cases, give the appearance that a government is financially weaker than it was previously, the financial reality of the government’s situation will not have changed. Reporting the net pension liability on the face of the financial statements will more clearly portray the government’s financial status because the pension liability will be placed on an equal footing with other long-term obligations.
Management is currently evaluating the impact of the adoption of GASB 67 and 68 on the City's financial statements.
41 City of Alexandria, Louisiana April 30, 2013
Notes to Financial Statements
2. Cash and Cash Equivalents, Equity in Pooled Cash and Investments, and Investments
Cash and cash equivalents – governmental and business-type activities
At year-end, the City’s deposits were covered by depository insurance or collateral held by the City or its agent in the City’s name.
Equity in pooled cash and investments – governmental and business-type activities
The City maintains separate cash and investment pools that are available for use by all funds not required to maintain separate accounts in accordance with state law or bond indentures. At year-end, equity in pooled cash and equivalents consisted of the following:
Cash in interest-bearing demand deposits $ 55,307,326 Certificates of deposit with maturities of less than one year- Business-type 3,064,047 Certificates of deposit with maturities of less than one year- Governmental 4,085,138 $ 62,456,511
At year-end, the City’s pooled cash and investments were covered by depository insurance or collateral held by the City or its agent in the City’s name.
Investments – governmental and business-type activities
The City may invest in United States bonds, treasury notes, or time certificates of deposit of any bank domiciled or having a branch office in the State of Louisiana, investments as stipulated in state law, or any other federally insured investment. At year-end, the City’s investments in governmental and business- type activities consisted of certificates of deposit with maturities of less than one year. These investments were covered by depository insurance or collateral held by the City or its agent in the City’s name.
Cash and equivalents – employee retirement plans
At year-end, the City’s deposits were covered by depository insurance or collateral held by the City or its agent in the City’s name.
Investments – City of Alexandria Employees’ Retirement System
At December 31, 2012, the City of Alexandria Employees’ Retirement System had the following investments and maturities:
Investment Maturities (In Years) Investment Type Fair Value Less than 1 1 – 5 6 – 10 More than 10 Corporate bonds $ 37,594,524 $ - $ 585,697 $ 3,137,886 $ 33,870,941 Zero coupon treasury receipts 2,984,743 - - 2,984,743 - GMNA mortgage notes 17,670 97 5,838 11,735 - Total interest-bearing $ 40,596,937 $ 97 $ 591,535 $ 6,134,364 $ 33,870,941
Common stocks 69,984,569 Preferred stocks 3,114,677 $ 113,696,183 42 City of Alexandria, Louisiana April 30, 2013
Notes to Financial Statements
Interest Rate Risk: The employee retirement system does not have a formal investment policy that limits investment maturities as a means of managing their exposure to fair value losses arising from rising interest rates.
Credit Risk: The employee retirement system may invest in United States bonds, treasury notes, or time certificates of deposit of any bank domiciled or having a branch office in the State of Louisiana, investments as stipulated in state law, or any other federally insured investment. In addition, the City of Alexandria Employees' Retirement System may invest in corporate stocks and bonds. The City of Alexandria Employees’ Retirement System’s investment policies limit its corporate debt investments to bonds rated at least BBB by Standards and Poor’s or Baa by Moody’s Investors Service. Due to the extraordinary market conditions experienced during 2010, 2011 and 2012 management determined that it would be detrimental to the System to sell the bonds whose credit ratings dropped below Baa.
Moody’s Investor Services Credit Rating
Fair Value A or better $ 35,897,994 Baa 3,631,590 Less than Baa 1,067,353 $ 40,596,937
Custodial Credit Risk: The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, a government will not be able to recover the value of investment or collateral securities that are in the possession of an outside party. All other investments are held by the plan or its agents in the system’s name.
3. Receivables
Receivables as shown in the Fund Financial Statements, at April 30, 2013, consist of the following:
Governmental Proprietary Internal Service Funds Funds Funds Totals Receivables Taxes - sales $ 3,107,838 $ - $ - $ 3,107,838 Accounts Uncollected cycle billings - 8,349,448 - 8,349,448 Estimated unbilled services - 5,263,657 - 5,263,657 Interest 241 41 - 282 Performance bonds - 48,286 - 48,286 Other 1,149,308 41,640 42,742 1,233,690 Gross receivables 4,257,387 13,703,072 42,742 18,003,201 Allowance for uncollectibles - (1,200,000) - (1,200,000) Net receivables 4,257,387 12,503,072 42,742 16,803,201 Intergovernmental Federal 292,461 156,742 - 449,203 State 486,449 162,781 - 649,230 Local 63,808 - - 63,808 Total Intergovernmental 842,718 319,523 - 1,162,241 Total Receivables $ 5,100,105 $ 12,822,595 $ 42,742 $ 17,965,442
43 City of Alexandria, Louisiana April 30, 2013
Notes to Financial Statements
Ad valorem taxes attach as an enforceable lien on property as of January 1st of each year. Taxes are levied by the City normally in October and are actually billed to the taxpayers in November. Billed taxes become delinquent on January 1st of the following year. Revenues from ad valorem taxes are budgeted in the year billed. The City bills and collects its own property taxes using the assessed values determined by the tax assessor of Rapides Parish. For the year ended April 30, 2013, taxes of 20.23 mills were levied on property with assessed values totaling $366,401,651 and were dedicated as follows:
Streets and drainage 11.25 mills Debt service 2.15 mills General purpose 6.83 mills
Total taxes levied were $7,412,346 of which a balance of $-0- representing current taxes, (net of allowance for uncollectibles) remained uncollected at April 30, 2013.
Receivables arising from utility services provided to customers consist of uncollected billings rendered customers on monthly cycle billings and estimated services provided customers between billing cycles. The allowance for uncollectible accounts includes $1,200,000, which represents the projected uncollectible utility accounts at April 30, 2013.
4. Due From/To Other Funds and Transfers
Amounts due from and to other funds as reported in the fund financial statements, at April 30, 2013, consist of the following:
Receivable Fund Payable Fund Amount General Home Investment Partnership Program $ 84 Community Development Block General 36,600 General Neighborhood Stabilization 4,417 General Utilities System 4,890,576 General Municipal Bus Line 509,323 General Risk Management 89 General General Capital Projects 193,000 Home Investment Partnership Program Community Development Block 18,897 ARRA Fund General Fund 10,577 HUD Emergency Shelter Fund ARRA Fund 4,653 Total Governmental Funds 5,668,216
Zoological Park General Fund 49,135 Municipal Bus Line Utilities System 792,558 Sanitation General 269,588 Sanitation Utilities System 92,558 Golf Course General 120,401 Utilities System General Capital Projects 750,000 Utilities System Golf Course 2,322 Utilities System Zoological Park 58,229 Total Enterprise Funds 2,134,791
Total Due From/To Other Funds $ 7,803,007
44 City of Alexandria, Louisiana April 30, 2013
Notes to Financial Statements
The balances reflected in interfunds represent either routine charges for goods and services or permanent (non-loan) transfers from one fund to another. These balances are settled periodically. The amounts here represent activity since the last settlement.
Transfers, for the year ending April 30, 2013, shown in the fund financial statements were as follows:
Transfers in Transfers out Amount General General Capital Projects $ 411,000 General Utilities System 8,836,159 General Sanitation 522,431 General Municipal Bus Line 372,341 General Zoological Park 240,990 General Golf Course 48,325 HUD Emergency Shelter Fund ARRA Fund 4,653 General Capital Projects Utilities System 100,000 Debt Service General Capital Projects '08 ST Bonds 1,914,238 Community Development Block General Fund 9,172 Total Governmental Funds 12,459,309
Utilities System Sanitation 105,984 Utilities System Municipal Bus Line 30,569 Utilities System General Capital Projects '08 ST Bonds 750,000 Hotel Operating Fund General Fund 113,065 Hotel Operating Fund Utilities System 2,925 Hotel Operating Fund Golf Course Fund 6,124 Municipal Bus Line General Capital Projects 97,375 Municipal Bus Line Utilities System 1,793,123 Sanitation General 169,525 Golf Course General 217,837 Zoological Park General 1,967,355 Total Enterprise Funds 5,253,882
Total Transfers $ 17,713,191
The transfers are movements of money from one fund to another. These can be required by law or merely serve as a means to finance activities in the receiving fund (Utility transfers to General Fund and Transit Fund). As in the interfunds above, these are not loans, i.e., the receiving fund does not pay it back.
5. Restricted Assets
At April 30, 2013, restricted assets of the Utility System Enterprise Fund consist of equity in pooled cash and investments totaling $20,423,300 as follows:
Revenue bond current debt service $ 3,368,199 Customers’ deposits 4,774,180 Special projects 150,000 Revenue bond reserve 64,047 Revenue bond reserve 1,311,285 Revenue bond capital additions and contingencies 1,000,000
45 City of Alexandria, Louisiana April 30, 2013
Notes to Financial Statements
Utilities capital projects - unexpended bond funds 36,151 Utilities capital projects - other 9,719,438 $ 20,423,300
6. Capital Assets and Depreciation
Capital asset activity for the year ended April 30, 2013, was as follows:
Balance Balance May 1, 2012 Increases Decreases April 30, 2013 Governmental Activities Capital Assets not Being Depreciated Land and land improvements $ 14,261,292 $ - $ - $ 14,261,292 Construction and Infrastructure in progress 11,777,369 6,919,862 (3,840,089) 14,857,142 Total Capital Assets not Being Depreciated 26,038,661 6,919,862 (3,840,089) 29,118,434 Other Capital Assets Buildings and improvements 95,923,535 34,121 - 95,957,656 Furniture and fixtures 839,748 - (27,897) 811,851 Equipment 15,401,563 580,516 (2,893,170) 13,088,909 Vehicles 11,630,670 1,496,927 (598,526) 12,529,071 Infrastructure 115,275,776 3,389,506 - 118,665,282 Total Other Capital Assets 239,071,292 5,501,070 (3,519,593) 241,052,769
Accumulated Depreciation Buildings and improvements (33,708,030) (2,536,203) - (36,244,233) Furniture and fixtures (804,460) (4,760) 3,316 (805,904) Equipment (11,935,803) (952,033) 2,914,344 (9,973,492) Vehicles (9,548,980) (792,978) 579,076 (9,762,882) Infrastructure (37,839,885) (3,449,568) - (41,289,453) Total Accumulated Depreciation (93,837,158) (7,735,542) 3,496,736 (98,075,964) Other Capital Assets, Net 145,234,134 (2,234,472) (22,857) 142,976,805
Net Capital Assets $ 171,272,795 $ 4,685,390 $(3,862,946) $ 172,095,239
Depreciation was charged to functions as follows:
Governmental Activities General government $ 1,716,257 Public safety 942,274 Public works 5,077,011 Total Depreciation Expense for Governmental Activities $ 7,735,542
46 City of Alexandria, Louisiana April 30, 2013
Notes to Financial Statements
Capital assets are depreciated using the straight-line method over the following estimated useful lives:
Buildings and improvements 10 - 40 years Furniture and fixtures 3 - 10 years Equipment 3 - 50 years Vehicles 3 - 10 years Infrastructure 25 - 40 years
The City considers individual projects in determining when to capitalize infrastructure. To be capitalized, the project cost must be $250,000 or greater. Donated assets, such as by developers, are subject to the threshold. Actual cost is used when available, estimated cost is used otherwise.
Estimations of useful lives are as follows: Streets 40 years Drainage 25 years Traffic signals 25 years
Balance Balance May 1, 2012 Increases Decreases April 30, 2013 Business-Type Activities Capital Assets not Being Depreciated Land $ 2,789,049 $ - $ - $ 2,789,049 Construction in progress 5,585,816 12,342,886 (6,105,279) 11,823,423 Total Capital Assets not Being Depreciated 8,374,865 12,342,886 (6,105,279) 14,612,472 Other Capital Assets Plant and equipment 248,646,342 7,700,145 (911,789) 255,434,698 Buildings and improvements 6,230,215 23,432 (21,800) 6,231,847 Vehicles and buses 12,641,065 1,985,725 (1,098,654) 13,528,136 Furniture, fixtures and equipment 1,705,687 74,045 (170,209) 1,609,523 Total Other Capital Assets 269,223,309 9,783,347 (2,202,452) 276,804,204 Accumulated Depreciation Plant and equipment (140,805,635) (6,956,207) 907,284 (146,854,558) Buildings and improvements (3,022,932) (175,272) 21,800 (3,176,404) Vehicles and buses (8,644,971) (1,084,201) 1,098,653 (8,630,519) Furniture, fixtures and equipment (1,605,397) (49,033) 170,208 (1,484,222) Total Accumulated Depreciation (154,078,935) (8,264,713) 2,197,945 (160,145,703) Other Capital Assets, Net 115,144,374 1,518,634 (4,507) 116,658,501
Net Capital Assets $ 123,519,239 $ 13,861,520 $ (6,109,786) $ 131,270,973
Depreciation was charged to functions as follows:
Business-Type Activities Electricity $ 2,799,434 Natural gas 1,434,786 Water 1,134,181 Wastewater 1,834,208 Municipal bus line 490,572 Sanitation 183,611 Municipal zoo 152,737 Municipal golf course 235,184 Total Depreciation Expense for Business-Type Activities $ 8,264,713 47 City of Alexandria, Louisiana April 30, 2013
Notes to Financial Statements
Capital assets are depreciated using the straight-line method over the following estimated useful lives:
Buildings and improvements 10 - 40 years Furniture and fixtures 3 - 10 years Plant and equipment 3 - 50 years Vehicles 3 - 10 years
A summary of significant budgeted construction or renovation projects is presented below:
Required Project Expended Further Authorization to Date Commitment Financing Utilities System Enterprise Fund Electric $ 12,212,077 $ 4,535,374 $ 1,132,356 None Water 14,936,512 6,384,997 1,790,979 None Gas 2,608,963 1,218,379 125,909 None Wastewater 10,048,097 2,098,659 1,169,950 None General and administrative 1,054,830 204,122 40,406 None $ 40,860,479 $ 14,441,531 $ 4,259,600
7. Risk Management
The City is exposed to various risks of loss related to torts; theft or damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The City employs a Risk Management Fund (an internal service fund) to account for and finance its uninsured risks of loss. Under this program, the Risk Management Fund provides coverage up to the maximum amounts indicated in the following table. The City purchases commercial insurance for claims in excess of coverage provided by the Fund and for all other risks of loss. Settled claims did not exceed this commercial coverage for the fiscal year ended April 30, 2013. During a previous year, management of the City decided not to renew coverage for automobile liability. All claims are now handled by the City Attorney's office with the City primarily liable for any and all claim settlements.
Loss Retained Each In Occurrence Aggregate General liability/Law enforcement liability $500,000 $ 3,000,000 Workers' compensation 500,000 Statutory Public officials and employees liability 500,000 3,000,000 Property damage 100,000 (*)
(*) $300,000,000 per occurrence with specified sub-limits
All funds of the City participate in the program and make payments to the Risk Management Fund based upon actuarial estimates of the amounts needed to pay prior and current year claims. The claims liability of $5,966,371 as of April 30, 2013, is based on the requirements of GASB Statement No. 10, which requires that a liability for claims be reported if information prior to the issuance of the financial statements indicates that it is probable that a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. The City has elected to record the liability on the discounted basis.
48 City of Alexandria, Louisiana April 30, 2013
Notes to Financial Statements
Changes in the City's claims liability amount in the fiscal year ending April 30, 2013, were as follows:
Balance, beginning of the year $ 6,869,865 Current year claims and changes in estimates 2,914,919 Claims payments (3,818,413) Balance, end of the year $ 5,966,371
8. Employee Benefits Insurance
The City employs an Employee Benefits Insurance Fund (an internal service fund) to account for and finance employee hospitalization/health insurance and certain employee life insurance. Under this program, the Employee Benefits Insurance Fund normally provides coverage for a maximum of $125,000 per plan year for each covered employee's (and dependent's, if applicable) qualifying health claims. Commercial insurance is purchased for health claims in excess of self-insured maximum of $125,000 for each covered employee's (and dependent's, if applicable) qualifying health claims. The Fund does not have a maximum aggregate retained loss. The Employee Benefits Insurance Fund also purchases certain employee life insurance from employee contributions.
Applicable funds of the City and covered employees participate in the program and make payments to the Employee Benefits Insurance Fund based on estimates of the amount needed to pay current year claims. The claims liability of $418,988 reported in the Fund at April 30, 2013, is based upon the requirements of GASB Statement No. 10, which requires that a liability for claims be reported if information prior to the issuance of the financial statements indicates that it is probable that a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. Changes in the Fund's claims liability amount in the fiscal year ending April 30, 2013, were as follows:
Balance, beginning of the year $ 535,575 Current year claims and changes in estimates 5,795,202 Claims payments (5,911,789) Balance, end of the year $ 418,988
9. Unemployment Benefits
The City employs an Unemployment Benefits Fund (an internal service fund) to pay self-insured unemployment claims under state statutes. All claims are administered by the state unemployment office. Approved claims are paid by the state, which invoices the City for reimbursement. All funds of the City participate in the program.
During the year ended April 30, 2013, claim payments of $2,650 were paid by the Unemployment Benefits Fund. Management believes that sufficient investments are available in the Unemployment Benefits Fund to pay claims from investment earnings. Claims incurred as of April 30, 2013, are considered immaterial and are not included in this report.
10. Long-Term Liabilities
Governmental activities long-term liabilities are direct obligations and pledge the full faith and credit of the City. The City has incurred these liabilities to provide funds for the acquisition and construction of major capital additions, to provide funds for major capital projects, and to provide funds in connection with
49 City of Alexandria, Louisiana April 30, 2013
Notes to Financial Statements
the merger of the City's Police Pension and Relief Fund into the statewide Municipal Police Employees' Retirement System and the City's Firemen Pension and Relief Fund into the statewide Firefighters’ Retirement System. In addition, the City's obligation relative to the governmental funds' liability for compensated absences and extended risk management claims is reported as a governmental activities long-term liability.
The City has issued two types of revenue bonds. The first type is utility revenue bonds whereby the City pledges income derived from the acquired or constructed assets to pay debt service. This long-term debt is reported in the business-type activities. The second type is sales tax revenue bonds whereby the City has pledged revenue from specifically dedicated sales tax collections to pay debt service and is reported as governmental activities long-term liabilities.
A summary of long-term debt, as of April 30, 2013, follows:
Maturity Interest Business-type Governmental Dates Rates Activities Activities Governmental activities General Obligation Sales tax revenue bonds 2004 Issue 2013 - 2024 2.75 - 4.20 $ $ 10,510,000 2008 Series 2013 - 2028 3.50 - 5.00 21,665,000 Ad valorem tax bonds Series 2004-Refunded G.O. Bonds 2013 - 2016 2.00 - 3.75 1,775,000 Series 2012 – Refunded 1998 C 2013 - 2021 .75 - 2.52 9,750,000 Limited Tax bonds - series 2008 2013 - 2018 3.50 - 4.00 8,625,000 Certificates of indebtedness Series 1998 A & B - refunding 2013 5.00 - 5.10 200,000 Series 1998 C - refunding 2013 5.75 - 6.58 825,000 Compensated absences 3,764,287 Risk Management Claims 6,385,359
Business-type activities Enterprise Funds Utilities System revenue bonds 2003 refunding 2013 3.625 1,010,000 2004 A capital additions 2013 - 2034 3.00 - 5.00 13,885,000 2004 B refunding 2013 - 2021 3.00 - 5.00 12,145,000 State Revolving loan funds 2013 - 2031 8,572,070 Certificates of indebtedness Series 2003 - capital additions 2013 - 2014 4.15 170,000 Customer guaranteed deposits 4,774,180 Compensated absences 1,845,397 Totals 42,401,647 63,499,646 Current portion (3,748,810) (8,729,631) Totals $ 38,652,837 $ 54,770,015
50 City of Alexandria, Louisiana April 30, 2013
Notes to Financial Statements
During the year ended April 30, 2013, the following changes occurred in governmental activities long-term liabilities:
Balance Balance 05/01/12 Additions (Reductions) 04/30/13 Governmental Activities Long-Term Debt Sales tax bonds $ 33,770,000 $ - $ (1,595,000) $ 32,175,000 Ad valorem tax bonds 12,460,000 9,750,000 (2,060,000) 20,150,000 Certificates of indebtedness 11,135,000 - (10,110,000) 1,025,000 Compensated absences - net 3,816,791 - (52,504) 3,764,287 Risk management claims - net 7,405,440 - (1,020,081) 6,385,359 Totals $ 68,587,231 $ 9,750,000 $(14,837,585) $ 63,499,646
Balance Due within Due in more 04/30/13 one year than one year Governmental Activities Long-Term Debt Sales tax bonds $ 32,175,000 $ 1,675,000 $ 30,500,000 Ad valorem tax bonds 10,400,000 2,150,000 8,250,000 Certificates of indebtedness 10,775,000 1,320,000 9,455,000 Compensated absences - net 3,764,287 564,643 3,199,644 Risk management claims - net 6,385,359 3,019,988 3,365,371 Totals $ 63,499,646 $ 8,729,631 $ 54,770,015
The annual requirements to amortize outstanding governmental activities long-term debt excluding compensated absences and risk management claims are as follows:
Principal Interest Year ended April 30, Payments Payments Total 2014 $ 5,145,000 $ 1,936,471 $ 7,081,471 2015 5,115,000 1,797,226 6,912,226 2016 5,310,000 1,626,969 6,936,969 2017 4,870,000 1,440,665 6,310,665 2018 5,060,000 1,265,936 6,325,936 2019-2023 16,600,000 4,247,970 20,847,970 2024-2028 9,375,000 1,530,908 10,905,908 2029-2033 1,875,000 46,875 1,921,875 $ 53,350,000 $ 13,893,020 $ 67,243,020
On October 3, 2012, the City issued $9,750,000 in Taxable Limited Tax Bonds, Series 2012, with an average interest rate of 0.91% to advance refund $8,945,000 of outstanding Certificates of Indebtedness, Series 1998C, with an average interest rate of 6.40%. The net proceeds of $9,525,005 (after payment of $224,995 in underwriting fees, and other issuance costs) were deposited in an irrevocable trust with an escrow agent to provide for redemption of $8,945,000 of outstanding Certificates of Indebtedness, Series 1998C, on June 1, 2013. As a result, $8,945,000 of the Certificates of Indebtedness, Series 1998C, are considered to be defeased and the liability for those bonds has been removed from the government-wide statement of net position.
51 City of Alexandria, Louisiana April 30, 2013
Notes to Financial Statements
The City completed the advance refunding to reduce its total debt service payments over the next 9 years by $1,655,172 and to obtain an economic gain (difference between the present values of the old and new debt service payments) of $1,508,355.
During the year ended April 30, 2013, the following changes occurred in business-type activities long-term liabilities: Balance Balance 05/01/12 Additions (Reductions) 04/30/13 Business-Type Activities Long-Term Debt Revenue bonds $ 34,687,551 $ 3,674,519 $ (2,750,000) $ 35,612,070 Certificates of indebtedness 335,000 - (165,000) 170,000 Compensated absences - net 2,051,335 - (205,938) 1,845,397 Customer guaranteed deposits - net 4,617,043 157,137 - 4,774,180 Totals $ 41,690,929 $ 3,831,656 $ (3,120,938) $ 42,401,647
Balance Due within Due in more 04/30/13 one year than one year Business-Type Activities Long-Term Debt Revenue bonds $ 35,612,070 $ 3,302,000 $ 32,310,070 Certificates of indebtedness 170,000 170,000 Compensated absences - net 1,845,397 276,810 1,568,587 Customer guaranteed deposits - net 4,774,180 4,774,180 Totals $ 42,401,647 $ 3,748,810 $ 38,652,837
The annual requirements to amortize outstanding business-type activities long-term debt excluding customer guaranteed deposits and compensated absences are as follows:
Principal Interest Year ended April 30, Payments Payments Total 2014 3,472,000 1,449,566 4,921,566 2015 2,374,000 1,338,238 3,712,238 2016 2,454,000 1,231,880 3,685,880 2017 2,545,000 1,121,477 3,666,477 2018 2,640,000 1,016,845 3,656,845 2019-2023 10,293,572 3,527,585 13,821,157 2024-2028 5,683,000 2,068,781 7,751,781 2029+ 6,320,498 838,540 7,159,038
$ 35,782,070 $ 12,592,912 $ 48,374,982
11. Supplemental Pay
Certain employees meeting statutory qualifications in the fire and police departments receive supplemental pay directly from the State of Louisiana. This supplemental pay in the amount of $1,612,303 is recognized as intergovernmental revenue in the General Fund and as expenditures in the following public safety departments:
Police $ 927,116 Fire 685,187 $ 1,612,303
52 City of Alexandria, Louisiana April 30, 2013
Notes to Financial Statements
12. Enterprise Funds – Segment Information
The City operates a utilities system consisting of an electric generation and distribution system, a natural gas distribution system, a water production and distribution system, and a sewerage transmission and treatment plant. The City issued revenue bonds for capital improvements of the utilities system. These revenue bonds rely on revenues generated by the utilities system as a whole for repayment. The following is a condensed summary of this fund: Utilities System Condensed Statement of Net Position Assets Current assets Due from other funds $ 810,551 Other current assets 30,527,969 Noncurrent assets Restricted equity in pooled cash and investments 20,423,300 Capital assets 113,906,493 Total Assets 165,668,313
Deferred Outflow of Resources Unamortized bond refunding charges 36,401
Liabilities Current liabilities Due to other funds 5,775,692 Other current liabilities 4,250,907 Liabilities payable from restricted assets 6,660,721 Noncurrent liabilities 38,343,512 Total Liabilities 55,030,832
Net Position Invested in capital assets, net of related debt 78,124,423 Restricted 2,311,285 Unrestricted 30,238,174 Total Net Position $ 110,673,882
Condensed Statement of Revenues, Expenses and Changes in Net Position Operating revenues (operating revenues are pledged against revenue bonds) $ 93,010,626 Operating expenses Depreciation (7,202,610) Other (69,650,175) Operating income (loss) 16,157,841
53 City of Alexandria, Louisiana April 30, 2013
Notes to Financial Statements
Utilities System Nonoperating revenues (expenses) Investment income 105,143 Gain (loss) on sale of assets (4,373) Interest expense and fiscal charges (1,558,637) Capital contributions 370,104 Transfers in (out) (9,845,654) Change in Net Position 5,224,424 Net Position, beginning, as restated 105,449,458 Net Position, ending $ 110,673,882
Condensed Statement of Cash Flows Net cash provided (used) by Operating activities $ 26,315,723 Noncapital financing activities (6,007,820) Capital and related financing activities (13,629,571) Investing activities (3,978,681) Net increase $ 2,699,651 Cash and cash equivalents, beginning 1,809,453 Cash and cash equivalents, ending $ 4,509,104
Segment information for the Utilities System Enterprise Fund for the fiscal year ended April 30, 2013, follows:
Total Electric Gas Water Wastewater Operating revenues $ 93,010,626 $ 71,110,615 $ 9,847,755 $ 7,084,370 $ 4,967,886 Operating expenses Depreciation (7,202,610) (2,799,434) (1,434,786) (1,134,181) (1,834,209) Other (69,650,175) (46,393,372) (11,217,926) (5,603,783) (6,435,094) Operating income (loss) $ 16,157,841 $ 21,917,809 $ (2,804,957) $ 346,406 $ (3,301,417)
13. Dedication of Proceeds - Flow of Funds - City Sales and Use Tax
Proceeds of the 1976 one percent (1%) City Sales and Use Tax are dedicated to the following purposes:
a. One-half is to be used for maintenance and operating expenses of the City.
b. The other one-half is to be used in the following order of priority:
1. On or before the 20th day of each month, they should transfer to a Sales Tax Bond Sinking Account in the Debt Service Fund, an amount equal to 1/6th of the interest falling due on the next interest payment date and 1/12th of the principal falling due on the next principal payment date of all sales tax bond issues outstanding.
54 City of Alexandria, Louisiana April 30, 2013
Notes to Financial Statements
2. Any funds remaining after the above transfers will be considered surplus and may be used for constructing, acquiring, extending, and/or improving capital improvements for the City (including, but not limited to, major thoroughfares and arterial streets with related improvements, major drainage systems, a civic convention center complex, parks, and parking facilities).
Proceeds of the 2008 one-percent (1%) City Sales and Use Tax are dedicated to fund General Fund operations including:
a. No less than one-third the tax collected is dedicated to fire, police, and General Fund classified employees’ salaries.
b. Replace General Fund revenues lost from Federal and State government funding cuts from previous years.
c. Street repair; street cleaning; maintenance of city drainage systems; grass cutting; maintenance of parks and recreational facilities; police and fire services and programs; general building maintenance; demolition of condemned structures; and city planning.
Proceeds of the 2005 one-half percent (½%) City Sales and Use Tax are dedicated to paying salaries and related benefits for police, fire and other City employees funded through the City’s General Fund.
14. Flow of Funds - Restrictions on Use - Utilities System Enterprise Fund
The utility revenue bonds were issued pursuant to bond ordinances, which provide substantially the following terms:
The City, through its governing authority, has covenanted to fix, establish, maintain and collect such rates, fees, rents or other charges for the services and facilities of the Utilities System, and all parts thereof, and to revise the same from time to time whenever necessary, as will always provide revenues in each year sufficient to pay the necessary expenses of administering, operating, and maintaining the Utilities System in each year, 120% of the principal and interest maturing on the bonds or other obligations payable there from as the same shall become due and payable in each year, all reserves or sinking funds or other payments required for such year by the Bond Ordinance, and all other obligations or indebtedness payable out of the revenues of the Utilities System for such year, and that such rates, fees, rents or other charges shall not at any time be reduced so as to be insufficient to provide adequate revenues for such purposes.
The City has further covenanted that all of said income and revenues earned or derived from the operation of the Utilities System shall be deposited daily as the same may be collected in the Utilities System Fund heretofore established with the regularly designated fiscal agent of the City pursuant to the Bond Resolutions; that said fund shall be maintained and administered in the following order of priority and for the following express purposes:
(a) The payment of all reasonable expenses of administration, operation, and maintenance of the Utilities System.
55 City of Alexandria, Louisiana April 30, 2013
Notes to Financial Statements
(b) The maintenance of the Sinking Funds established pursuant to the bond resolutions sufficient in amount to pay promptly and fully the principal of and the interest on the Bonds and any additional pari passu bonds issued hereafter in the manner provided by the bond ordinance, as they severally become due and payable, by transferring from the Utilities System Fund to the Sinking Funds established pursuant to the bond resolutions, monthly in advance on or before the 20th day of each month of each year, a sum equal to 1/6th of the interest falling due on the next interest payment date, and a sum equal to 1/12th of principal falling due on the next principal payment date, together with such additional proportionate sum as may be required to pay said principal and interest as the same respectively becomes due. The depository for the Sinking Funds shall transfer from said Sinking Funds to the paying agent bank or banks for all bonds payable from said Fund at least one day in advance of the date on which each payment of principal or interest falls due, funds fully sufficient to pay promptly the principal and interest so falling due on such date.
(c) The maintenance of the Reserve Funds established pursuant to the bond resolutions by transferring from the proceeds of the bonds a sum equal to the lesser of (i) ten percent (10%) of the proceeds of the bonds or (ii) an amount which, together with monies on deposit in the Reserve Funds, will equal the highest combined principal and interest requirements for any succeeding fiscal year (ending 4/30) on the bonds (the "Reserve Funds Requirement"), (iii) or 125% of the aggregate amount of principal installments and interest becoming due in any fiscal year on the bonds (ending 04/30). If such monies do not cause the balance in the Reserve Funds to equal the Reserve Funds Requirement, by transferring from said Utilities System Fund to the Reserve Funds established pursuant to the bond resolutions, monthly in advance on or before the 20th day of each month of each year, a sum at least equal to twenty percent (20%) of the amount required to be paid into the aforesaid Sinking Fund specified in paragraph (b) above, the payments into said Reserve Funds to continue until such time as there has been accumulated therein a sum equal to the Reserve Funds Requirement. The money in the Reserve Funds shall be retained solely for the purpose of paying the principal and interest on Bonds payable from the aforesaid Sinking Fund specified in paragraph (b) above as to which there would otherwise be default. In the event that additional pari passu bonds are issued hereafter in the manner provided by the bond ordinance, the payments into said Reserve Fund shall continue, or if the said payments have ceased because of the accumulation of the maximum amount provided above, then such payments shall be resumed, until such time as there has been accumulated in said Reserve Funds an amount of money equal to the highest combined principal and interest requirements in any succeeding fiscal year on all outstanding bonds, including such additional pari passu bonds.
The indentures for Utilities Revenue Bonds, Series 2004 provided for the establishment and maintenance of a “Reserve Fund - 2004”. The City had the option of funding the Reserve Fund - 2004 by (i) depositing a sum equal to the reserve fund requirement into the Reserve Fund - 2004, or (ii) depositing to the credit of the Reserve Fund - 2004 a surety bond, letter of credit or insurance policy equal to the reserve fund requirement. The City satisfied the reserve fund requirement by depositing to the credit of the Reserve Fund - 2004 the surety bond issued by the reserve insurer.
(d) The maintenance of the Capital Additions and Contingencies Fund established pursuant to the bond resolutions to care for extensions, additions, improvements, renewals, and replacements necessary to properly operate the Utilities System by transferring from said Utilities System Fund to the Capital Additions and Contingencies Fund established by the
56 City of Alexandria, Louisiana April 30, 2013
Notes to Financial Statements
bond resolutions, monthly on or before the 20th day of each month of each year, a sum equal to nine percent (9%) of the gross revenues of the Utilities System for the preceding month, provided that such sum is available after provision is made for the payments required under paragraphs (a), (b), and (c) above. Such payments into the Capital Additions and Contingencies Fund shall continue until such time as there has been accumulated in said Fund the sum of one million dollars ($1,000,000), whereupon such payments may cease and need be resumed thereafter only if the total amount of money on deposit in said fund is reduced below the sum of one million dollars ($1,000,000), in which event such payments shall be resumed and continue until said maximum of one million dollars ($1,000,000) is again accumulated. In addition to caring for extensions, additions, improvements, renewals, and replacements necessary to properly operate the Utilities System, the money in the Capital Additions and Contingencies Fund shall also be used to pay the principal of and the interest on the bonds, including any additional pari passu bonds issued hereafter in the manner provided by the bond ordinance, for the payment of which there is not sufficient money in the Sinking Fund and Reserve Fund described in paragraphs (b) and (c) above, but the money in said Capital Additions and Contingencies Fund shall never be used for the making of improvements and extensions to the Utilities System or for payment of principal or interest on Bonds, if the use of said money will leave in said Capital Additions and Contingencies Fund for the making of emergency repairs or replacements less than the sum of twenty-five thousand dollars ($25,000).
Any monies remaining in said Utilities System Fund after making the above required payments may be used by the City for the purpose of calling and/or purchasing and paying any bonds payable from the revenues of the Utilities System, or for such other lawful corporate purposes as the governing authority may determine, whether such purposes are or are not in relation to the Utilities System.
If at any time it shall be necessary to use monies in the Reserve Fund or the Capital Additions and Contingencies Fund above provided for the purpose of paying principal of or interest on bonds payable from the aforesaid Sinking Fund as to which there would otherwise be default, then the monies so used shall be replaced from the revenues first thereafter received, not herein above required to be used for administration, operation, and maintenance or for current principal, interest, and reserve requirements. If at any time there are sufficient monies on deposit in the Reserve Fund and Capital Additions and Contingencies Fund to retire all outstanding bonds payable from the Sinking Fund by exercising the redemption option provided by such bonds or by purchase on the open market, the City may utilize such funds for such purpose.
All or any part of the monies in the Reserve Fund and the Capital Additions and Contingencies Fund shall, at the written request of the City, be invested in one or both of the following if and to the extent that the same are legal for the investment of funds of the City: (a) direct obligations of the United States of America, or (b) negotiable or non-negotiable certificates of deposit issued by any bank, trust company, or national banking association provided (i) such certificates of deposit are continuously and at all times secured by direct obligations of the United States of America having a market value (exclusive of accrued interest) at all times at least equal to the principal amount of such certificates of deposit, and (ii) interest is paid thereon to the extent of one hundred percent (100%). All income derived from such investments shall be added to the money in said respective funds or to the Utilities System Fund, and such investments shall, to the extent at any time necessary, be liquidated and the proceeds thereof applied to the purpose for which the respective funds are created.
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Notes to Financial Statements
15. Utilities System Fund Power Purchase Contract Commitment
On November 15, 1982, the City entered into an electric power purchase contract with Louisiana Energy and Power Authority (LEPA), a political subdivision of the State of Louisiana, which acquired an interest in the Rodemacher Unit Number 2, a low sulfur-coal burning power plant. The City is obligated to pay 52.83% of the fixed project costs allocated to LEPA plus energy related costs when the unit is operable. This contract expires at the later of (1) the date all outstanding bonds of LEPA have been paid, (2) the date the joint operating agreement entered into by LEPA is terminated and settlement of all costs are completed, or (3) July 1, 2032.
As part of the contract, the City agreed not to issue bonds, notes, or other evidences of indebtedness or enter into any contract to incur any expenses payable from or secured by revenues of the combined utilities system superior to or having a priority over the obligation to pay for the costs incurred under this contract.
16. Defined Benefit Pension Plans
The City contributes to two single-employer defined benefit pension plans. The City also contributes to two statewide cost-sharing, multiple-employer, defined benefit public employee retirement systems.
Information relative to the two statewide cost-sharing, multiple-employer, defined benefit public employee retirement systems is presented below:
Municipal Police Employees’ Retirement System of Louisiana (MPERS)
Plan Description. Membership is mandatory for all full-time police officers employed by the City, provided they meet statutory criteria. Any member is eligible for normal retirement benefits after participant has been a member of the System for one (1) year, if participant has twenty-five (25) years of creditable service at any age, or if participant has twenty (20) years of creditable service and is age fifty (50), or has twelve (12) years of creditable service and is age fifty-five (55). Benefit rates are three and one-third percent (3⅓%) of final compensation per number of years of creditable service not to exceed one hundred percent (100%). Benefit and contribution requirements are established by state law. MPERS issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained by writing to Municipal Police Employees' Retirement System, P. O. Box 94095, Baton Rouge, LA 70804-9095.
Funding Policy and Annual Pension Costs. Members are currently required to contribute ten percent (10.00%) of their annual salary to the system, including supplemental pay. The City contributes an actuarially determined rate, presently set at thirty-one percent (31.00%) of the member's salary, including supplemental pay. The City’s contributions to MPERS, for the fiscal years ended April 30, 2013, 2012, and 2011, were $2,705,994, $2,176,798 and $2,128,329 respectively.
Firefighters’ Retirement System of Louisiana (FRS)
Plan Description. This Plan is a defined benefit pension plan covering firemen employed by a municipality, parish, or fire protection district of the State hired after December 31, 1979. Employees with twenty (20) or more years of service who have attained age fifty (50), employees who have twelve (12) years of service who have attained age fifty-five (55), or employees who have twenty-five (25) years of
58 City of Alexandria, Louisiana April 30, 2013
Notes to Financial Statements
service at any age are entitled to annual pension benefits equal to three and one-third percent (3⅓%) of their average final compensation based on the thirty-six (36) consecutive months of highest pay multiplied by their total years of service, not to exceed one hundred percent (100%). Employees may elect to receive their pension benefits in the form of a joint and/or survivor annuity. If employees terminate before rendering twelve (12) years of service, they forfeit the right to receive the portion of their accumulated plan benefits attributable to their employer's contributions. Benefits are payable over the employees' lives in the form of a monthly annuity. Benefit and contribution requirements are established by state law. FRS issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained by writing to Firefighters' Retirement System, 3100 Brentwood Drive, Baton Rouge, LA 70809.
Funding Policy and Annual Pension Costs. Members are currently required to contribute ten (10%) of their annual salary, including supplemental pay to the Plan. The City contributes an actuarially determined rate, presently at twenty-four percent (24%) of the member's salary, including supplemental pay. The City’s contributions to FRS, for the fiscal years ended April 30, 2013, 2012, and 2011, were $1,385,096, $1,404,511 and $1,284,842, respectively.
Information relative to the two single-employer defined benefit pension plans is presented below:
City of Alexandria Employees’ Retirement System (COAERS)
Plan Description. Substantially all employees of the City, except firemen and policemen, become members of the COAERS as a condition of employment. The System provides retirement benefits, disability benefits, and survivors’ benefits.
Members with 10 years of creditable service may retire at age 62; members with at least 20 years of creditable service may retire at age 60; members with twenty-five years of service may retire at age fifty- five; members with 30 years of service may retire regardless of age. The retirement allowance is equal to 3% of the member's average compensation multiplied by their number of years of creditable service, not to exceed 100% of their average compensation. Average compensation is defined as the highest 3 year average annual compensation.
Benefit and contribution provisions are established by state statute and may be amended only by the Louisiana Legislature. COAERS issues a publicly available financial report that may be obtained by writing to the City of Alexandria Employees' Retirement System, P.O. Box 71, Alexandria, Louisiana 71309- 0071.
Funding Policy and Annual Pension Cost. Covered employees are required by statute to contribute 10% of their salary to the System. The City is required by statute to contribute remaining amounts necessary to finance the System at an actuarially determined rate currently set at 25.97%. The City’s contributions to COAERS, for the fiscal years ended April 30, 2013, 2012, and 2011 were $4,584,161, $5,033,392 and $5,134,545 respectively.
Firemen’s Pension and Relief Fund (FPARF)
Plan Description. Effective May 1, 1993, the Fund merged into the statewide Firefighters' Retirement System (FRS). On this date, all retirees and survivors receiving benefits at April 30, 1993, transferred to the FRS.
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Notes to Financial Statements
In the event that a firefighter, hired prior to January 1, 1980, exercises their right to a 20 year retirement any time under the age of 50 and is not eligible to receive benefits from the state FRS, then the Fund shall provide benefits until that person is eligible for benefits under the FRS. In addition, the City of Alexandria and the Fund guaranteed that if a firefighter dies, retires, or becomes disabled subsequent to the merger, then the Fund shall pay to the firefighter, or the firefighter's survivors and/or beneficiaries, the difference, if any, where those benefits payable under the Fund prior to the merger exceed those benefits payable under the FRS.
Benefits and contribution provisions are established by state statute and may be amended only by the Louisiana Legislature. FPARF issues a publicly available financial report that may be obtained by writing to the Firemen’s Pension and Relief Fund of the City of Alexandria, P. O. Box 71, Alexandria, Louisiana 71309-0071.
Funding Policy and Annual Pension Cost. Covered members are not required to contribute to the Fund. The City is required to contribute an amount sufficient to meet any deficit of the Fund without regard for reserve requirements accruing or having accrued on an actuarial basis. The City’s contributions to FPARF for the years fiscal ended April 30, 2013, 2012, and 2011 were $21,500, $21,500 and $25,000 respectively.
For the two single-employer defined benefit pension plans of the City, benefit and contribution provisions are established by state law and may be amended only by the Louisiana Legislature.
The City’s annual pension cost for the current year and related information for each of the City’s single-employer plans is as follows:
COAERS FPARF Contribution rate City 25.97% n/a Plan members 10.00% n/a Annual pension cost $ 4,584,161 $ 21,500 Contributions made $ 4,584,161 $ 21,500 Actuarial valuation date 12/31/12 n/a Actuarial cost method Frozen Entry n/a Age Normal Remaining amortization period 7 years n/a
Asset valuation method Five year n/a smoothing for stocks. Other assets at amortized cost.
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Notes to Financial Statements
COAERS FPARF Actuarial assumptions Investment rate of return 7.75% n/a Projected salary increases 5.50% n/a Includes inflation rate of 3.00% n/a Includes merit raises at 2.50% n/a Cost of living adjustments None n/a
Three Year Trend Information City of Alexandria Employees’ Retirement System
Annual Percentage Net Year Pension of APC Pension Ending Cost (APC) Contributed Obligation 04/30/13 $4,584,161 100% $ - 04/30/12 4,915,468 100 - 04/30/11 5,382,069 100 -
Firemen’s Pension and Relief Fund
Annual Percentage Net Year Pension of APC Pension Ending Cost (APC) Contributed Obligation 04/30/13 $ 21,500 100% $ - 04/30/12 21,500 100 - 04/30/11 21,500 100 -
17. Defined Contribution Pension Plan
The City sponsors a defined contribution plan (the Plan) available to unclassified employees who elect to participate. The Plan is administered by a third party administrator. The City's covered payroll for employees participating in the Plan for the current year was $1,099,624. Employer contributions for the fiscal year were $152,971 or approximately thirteen and ninety-one hundredths percent (13.91%). Employees do not contribute to the plan.
Under the provisions of the Plan, City contributions are determined annually and contributions are allocated to participants based on participant's compensation. All monies in the employee's accounts, including the City's contributions, are immediately vested.
18. Post-employment benefits
Plan Description. The City of Alexandria’s medical benefits are provided through a comprehensive medical plan and are made available to employees upon actual retirement.
The employees are covered by a retirement system whose retirement eligibility provisions are as follows: 30 years of service at any age; age 55 and 25 years of service; age 60 and 20 years of service; or, age 62 and 10 years of service. Complete plan provisions are included in the official plan documents.
Contribution Rates. Employees do not contribute to their post employment benefits costs until they become retirees and begin receiving those benefits. The plan provisions and contribution rates are contained in the official plan documents.
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Notes to Financial Statements
Fund Policy. Until 2008, the City of Alexandria recognized the cost of providing post-employment medical benefits (the City of Alexandria’s portion of the retiree medical benefit premiums) as an expense when the benefit premiums were due and thus financed the cost of the post-employment benefits on a pay- as-you-go basis. In 2013 and 2012, the City of Alexandria’s portion of health care funding cost for retired employees totaled $319,119 and $276,872, respectively.
Effective May 1, 2008, the City of Alexandria implemented Government Accounting Standards Board Statement Number 45, Accounting and Financial Reporting by Employers for Post employment Benefits Other than Pensions (GASB 45). This amount was applied toward the Net OPEB Benefit Obligation as shown in the following table.
Annual Required Contribution. The City of Alexandria’s Annual Required Contribution (ARC) is an amount actuarially determined in accordance with GASB 45. The ARC is the sum of the Normal Cost plus the contribution to amortize the Unfunded Actuarial Accrued Liability (UAAL). A level dollar, open amortization period of 30 years (the maximum amortization period allowed by GASB 43/45) has been used for the post-employment benefits. The actuarially computed ARC is as follows: 2013 2012 Normal cost $ 188,676 $ 229,511 30 year UAL amortization amount 361,572 360,057 Annual required contribution (ARC) $ 550,248 $ 589,568
Net Post-employment Benefit Obligation (Asset). The table below shows the City of Alexandria’s Net Other Post-employment Benefit (OPEB) Obligation for fiscal years ending April 30:
2013 2012 Beginning Net OPEB Obligation $ 1,110,532 $ 812,320
Annual required contribution 550,248 589,568 Interest on Net OPEB Obligation 44,421 32,493 ARC Adjustment (64,222) (46,977) OPEB Cost 530,447 575,084 Contribution - - Current year retiree premium (319,119) (276,872) Change in Net OPEB Obligation 211,328 298,212 Ending Net OPEB Obligation $ 1,321,860 $ 1,110,532
The following table shows the City of Alexandria’s annual other post employment benefits (OPEB) cost, percentage of the cost contributed, and the net unfunded other post employment benefits (OPEB) liability for last year and this year: Percentage of Net OPEB Annual OPEB Annual Cost Liability Fiscal Year Ended Cost Contributed (Asset) April 30, 2013 $ 530,447 60.16% $ 1,321,860 April 30, 2012 $ 575,084 48.14% $ 1,110,532
62 City of Alexandria, Louisiana April 30, 2013
Notes to Financial Statements
Funded Status and Funding Progress. In 2013 and 2012, the City of Alexandria made no contributions to its post employment benefits plan. The plan is not funded, has no assets, and hence has a funded ratio of zero. Based on the May 1, 2012 actuarial valuation, the most recent valuation, the Actuarial Accrued Liability (AAL) at the end of the year April 30, 2013 was $6,252,400 which is defined as that portion, as determined by a particular actuarial cost method (the City of Alexandria uses the Projected Unit Credit Cost Method), of the actuarial present value of post employment plan benefits and expenses which is not provided by normal cost.
2013 2012 Actuarial Accrued Liability (AAL) $ 6,252,400 $ 6,225,952 Actuarial Value of Plan Assets (AVP) - - Unfunded Actuarial Accrued Liability (UAAL) $ 6,252,400 $ 6,225,952
Funded Ratio (AVP/AAL) 0.00% 0.00%
Covered Payroll (active plan members) $ 32,860,687 $ 33,197,812
UAAL as a percentage of covered payroll 19.03% 18.75%
Actuarial Methods and Assumptions. Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of events far into the future. The actuarial valuation for post employment benefits includes estimates and assumptions regarding (1) turnover rate; (2) retirement rate; (3) health care cost trend rate; (4) mortality rate; (5) discount rate (investment return assumption); and (6) the period to which the costs apply (past, current, or future years of service by employees). Actuarially determined amounts are subject to continual revision as actual results are compared to past expectations and new estimates are made about the future.
The actuarial calculations are based on the types of benefits provided under the terms of the substantive plan (the plan as understood by the City of Alexandria and its employee plan members) at the time of the valuation and on the pattern of sharing costs between the City of Alexandria and its plan members to that point. The projection of benefits for financial reporting purposes does not explicitly incorporate the potential effects of legal or contractual funding limitations on the pattern of cost sharing between the City of Alexandria and plan members in the future. Consistent with the long-term perspective of actuarial calculations, the actuarial methods and assumptions used include techniques that are designed to reduce short-term volatility in actuarial liabilities and the actuarial value of assets.
Actuarial Cost Method. The ARC is determined using the Projected Unit Credit Cost Method. The employer portion of the cost for retiree medical care in each future year is determined by projecting the current cost levels using the healthcare cost trend rate and discounting this projected amount to the valuation date using the other described pertinent actuarial assumptions, including the investment return assumption (discount rate), mortality and turnover.
Actuarial Value of Plan Assets. There are not any plan assets. It is anticipated that in future valuations, should funding take place, a smoothed market value will result consistent with Actuarial Standards Board ASOP 6, as provided in paragraph number 125 of GASB Statement 45.
Turnover Rate. An age-related turnover scale based on actual experience has been used. The rates, when applied to the active employee census, produce a composite average annual turnover of approximately 10%. It has also been assumed that 40% of future eligible retirees will decline coverage because of the high retiree contributions required.
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Notes to Financial Statements
Post employment Benefit Plan Eligibility Requirements. Based on past experience, it has been assumed that entitlement to benefits will commence three years after the earliest retirement eligibility. Medical benefits are provided to employees upon actual retirement. The employees are covered by a retirement system whose retirement eligibility provisions are as follows: 30 years of service at any age; age 55 and 25 years of service; age 60 and 20 years of service; or, age 62 and 10 years of service.
Investment Return Assumption (Discount Rate). GASB Statement 45 states that the investment return assumption should be the estimated long-term investment yield on the investments that are expected to be used to finance the payment of benefits (that is, for a plan which is funded). Based on the assumption that the ARC will not be funded, a 4% annual investment return has been used in this valuation.
Health Care Cost Trend Rate. The expected rate of increase in medical cost is based on a graded schedule beginning with 8% annually, down to an ultimate annual rate of 5.0% for ten years out and later.
Mortality Rate. The 1994 Group Annuity Reserving (94GAR) table, projected to 2002, based on a fixed blend of 50% of the unloaded male mortality rate and 50% of the unloaded female mortality rates, was used. This is a recently published mortality table which was designed to be used in determining the value of accrued benefits in defined benefit pension plans. Projected future mortality improvement has not been used since it is our opinion that this table contains sufficiently conservative margin for the population involved in this valuation.
Method of Determining Value of Benefits. The "value of benefits" has been assumed to be the portion of the premium after retirement date expected to be paid by the employer for each retiree and has been used as the basis for calculating the actuarial present value of OPEB benefits to be paid. The City pays a portion of the retiree premium (based on the blended active/retired rate) before Medicare eligibility, but does not pay any portion of the premium after the retiree's eligibility for Medicare (age 65). Since GASB 45 mandates that "unblended" rates applicable to the coverage provided to retirees be used, we have estimated the "unblended" rates for retirees before Medicare eligibility. It has been assumed that the total retiree rate before Medicare eligibility is 130% of the total blended active/retired rate.
Inflation Rate. Included in both the Investment Return Assumption and the Healthcare Cost Trend rates above are an implicit inflation assumption of 2.50% annually.
Projected Salary Increases. This assumption is not applicable since neither the benefit structure nor the valuation methodology involves salary.
Post-retirement Benefit Increases. The plan benefit provisions in effect for retirees as of the valuation date have been used and it has been assumed for valuation purposes that there will not be any changes in the future.
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Notes to Financial Statements
Below is a summary of OPEB cost and contributions for the last three fiscal calendar years.
OPEB Cost and Contributions
FY 2011 FY 2012 FY 2013
OPEB Cost $ 557,783 $ 575,084 $ 530,447
Contribution - - - Retiree Premium 256,363 276,872 319,119 Total contribution and premium 256,363 276,872 319,119
Change in net OPEB obligation $ 301,420 $ 298,212 $ 211,328
% of contribution to cost 0.00% 0.00% 0.00% % of contribution plus premium to cost 45.96% 48.14% 60.16%
19. Leases
City as Lessee
On March 29, 1995, the City entered into a lease agreement with the England Economic and Industrial Development District (EEIDD) to lease the natural gas, water, and wastewater systems located within the England Airpark. The term of the lease is for twenty (20) years beginning March 29, 1995 and ending March 28, 2015. The lease agreement provides that the City shall pay the EEIDD as rent under the lease five percent (5%) of gross charges for services billed to customers located within the Airpark boundaries including gross charges billed to the EEIDD. Lease payments are due to the EEIDD on May 15th and November 15th. It is not possible to determine the future minimum rental payments due under this lease. During the current period, the City paid EEIDD $24,395, under the terms of the lease representing fiscal year ended April 30, 2013 obligations.
On February 24, 2012, the City of Alexandria agreed to lease equipment from Wells Fargo Financial Leasing, Inc., for the sum of $11,373 payable on the 30th day of each month for 49 consecutive months. The lease term will end on April 30, 2016.
On July 7, 2012, the City of Alexandria agreed to lease from the Community Receiving Home, Inc. 74.92 acres for the sum of $125 per acre or $9,365 payable on the 15th day of May annually. The rent will increase by 2.75% annually for the term of the lease which will expire on September 31, 2031. The term commenced on September 15, 2011.
Annual lease payments total $134,721 for the current fiscal year.
Year ending April 30, 2014 $ 146,358 2015 146,630 2016 146,909 2017 10,725 2018 11,020 2019-2023 59,818 2024-2028 68,508 2029-2032 45,794 $ 635,762
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Notes to Financial Statements
City as Lessor
On April 6, 2012, the City of Alexandria entered into a formal lease agreement with Sutherland Global Services, Inc. to lease 41,293 square feet of the building located at Power Center Mall, Alexandria, Louisiana. This lease shall be for a term of seven years commencing on April 13, 2012 and ending on April 12, 2019, subject, however, to earlier termination as provided in this lease. The carrying amount of the leased space is approximately $2,730,040. Total income from this lease totaled $144,523 for the current fiscal year.
Future minimum rentals to be received in the future under non-cancelable leases are:
2014 $ 144,526 2015 144,526 2016 144,526 2017 144,526 2018 144,526 2019 144,526 $ 867,156 20. Compensation Paid to Members of the City Council
In accordance with the requirements of the Office of the Legislative Auditor, State of Louisiana, the following report reflects compensation paid to members of the City Council, City of Alexandria, for the fiscal year ended April 30, 2013.
Charles L. Fowler, Jr. $ 18,000 Harry Silver 18,000 Edward Larvadain, III 18,000 Mitzi LaSalle 18,000 James A. Villard 18,000 Lee Rubin 5,677 Jules R. Green 5,677
21. Deficit Balance - Non-Major Individual Funds
The following non-major funds had deficit balances at April 30, 2013:
Self Insurance Risk Management Fund $ 176,430
The Self Insurance Risk Management Fund deficit was primarily due to the actuarial accrual for claims incurred but not paid at year end. Management intends to provide additional funding from other various funds in the future to offset the deficit.
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Notes to Financial Statements
22. Contingencies
Management has not calculated the possible rebate of arbitrage interest, as of April 30, 2013, on each of the recent tax exempt bond issues. The contingent liability, stated simply, is the interest earned from the investment of unspent bond proceeds that is in excess of the amount of earnings that would have been obtained had the investment rate been equal to the yield on the bonds. Since the rebate calculation is a cumulative calculation performed until all proceeds have been expended, management believes that the amount of the contingent liability for arbitrage interest, if any, will be eliminated in future years. In the event that the contingent liability for arbitrage interest is not eliminated, the City will be liable for remittance of the rebate amount, as subsequently calculated, to the federal government.
On August 19, 1983, the City of Alexandria entered into a merger contract with the Municipal Police Employees’ Retirement System (MPERS). The purpose of the merger was to transfer all active policemen who were then participating in the City’s Policemen’s Pension and Relief Fund into the statewide retirement system. In conjunction with the merger of active policemen with MPERS, the City entered into a private agreement, “No Loss of Benefit Guarantee,” with the local policemen which guaranteed that no member would lose any rights or benefits that the member would have been entitled to under the Policemen’s Pension and Relief Fund. There are potential claims where certain retired employees may file an action against the City as a result of this merger. The essence of the unasserted claims is the position of certain retired police officers that some have a significant difference in benefits received from MPERS and the benefits that would have been received under the old Policemen’s Pension and Relief Fund due to the fact that under MPERS overtime is not considered in computing retirement benefits. There are significant questions as to whether there is an actual obligation that the City would owe. If there is no obligation, then the City would be prohibited by the state constitution from responding to the unasserted claims.
The City is a defendant in a suit entitled “Charles W. Armand, et al vs. City of Alexandria” referred to as the “dual pay plan”. Nothing is currently set or pending but the claim is viable. No class has been certified and the plaintiff’s counsel must attempt to define the class. In the opinion of legal counsel, some contingent exposure for possible payment of wages and other considerations may be considered. Management and legal counsel for the City are unable to provide reasonable estimates of the claims amount, if any, and it is not practical to calculate such amounts under current known facts and conditions.
The City is a defendant in a suit entitled “Armested Franklin, et al vs. City of Alexandria”. This is a petition for damages filed originally by eight named claimants who are residential, rental, and commercial rate payers who received electric services from the City. The claims assert legal conclusions that the City for a period of time from 1997 to the present incorrectly calculated fuel adjustment cost for electricity and engaged “incorrect application of the monthly fuel adjustment rates”. In the opinion of legal counsel, the claim does not lead to any belief that a material adverse impact on the City’s financial condition, calculation of fuel cost adjustments or application of fuel cost adjustment will occur or result there from.
The City is also a defendant in other suits as a result of recent litigation with CLECO. Matters are pending with attorney whom signed contingency contract with the City to receive a percentage of any judgment the City may receive incident to the CLECO matter. While the ultimate outcome of this suit cannot be determined at the present time, the City has a potential liability exposure of up to $1,300,000. Constitutionally, the City is not obligated to pay this judgement.
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Notes to Financial Statements
23. Compliance With Bond Ordinance No. 56-2003
Section 8.5 of Bond Ordinance No. 56-2003, Utilities Revenue Refunding Bonds, Series 2003, provides the following: “Each such audit, in addition to whatever matters may be thought proper by the accountant to be included therein, shall include the following.”
1. A statement in detail of the income and expenditures of the Utilities System for such fiscal year. See Exhibit H, Page 27.
2. A balance sheet as of the end of such fiscal year. See Exhibit G, Page 26.
3. The accountant’s comments regarding the manner in which the Issuer has carried out the requirements of this Bond Ordinance, and the accountant’s recommendations for any changes or improvements in the operation of the Utilities System or the method of keeping the records related thereto. See Special Letter, Page 92-93.
4. A list of the insurance policies in force at the end of the Fiscal year, setting out as to each policy the amount of the policy, the risks covered, the name of the insurer and the expiration date of the policy. See Schedule 5, Pages 77-78.
5. The number of metered water, gas, electric and sewerage customers and the number of unmetered water, gas, electric, and sewerage customers, if any. See Schedule 4, Page 76
6. Description of the withdrawal of any Utilities System user comprising 4% or more of Utilities System sales measured in terms of revenue dollars, since the last audit. None.
7. An analysis of additions, replacements, and improvements to the physical properties of the Utilities System, including a description of any significant facility retirements or expansions planned or undertaken since the last audit. See Note 6 to Financial Statements, Pages 46- 48.
24. Net Position and Fund Balances
Govermental
Nonspendable Fund Balances
The City has recorded a nonspendable fund balance of $256,201 for unused inventory in the Fund Financial Statements. This amount is recorded as unrestricted net position in the Government-Wide Financial Statements.
Restricted Fund Balances and Net Position
The City has restricted the fund balance and restricted net position in the amount of $6,022,966 for debt service.
68 City of Alexandria, Louisiana April 30, 2013
Notes to Financial Statements
The City also has restricted the fund balance for capital projects in the amount of $30,942,524. This amount of $30,942,524 is shown net of $12,940,678 unexpended related debt totaling $18,001,846 in the government-wide financial statements.
Committed Fund Balances
The City has formally designated the use of $1,235,467 for community and economic development by recording it as committed fund balances. This amount is shown as unrestricted net position in the Government-Wide Financial Statements.
Business-Type
Restricted Net Position
In accordance with revenue bond indebtures, the City has restricted the net position balances in the amount of $1,311,285 for debt service and $1,000,000 for capital additions and contingencies.
25. Effect of New Accounting Standards
Implementation of GASB Statement No. 65, Items Previously Reported as Assets and Liabilities, resulted in the restatement of beginning total net position of the Utilities System Enterprise Fund as follows:
Total net position as previously reported $ 105,700,765 Restatement in accordance with GASB Statement No. 65 (251,307) Total Net Position – beginning of year, as restated $ 105,449,458
During the current year, management determined that, for reporting purposes, the Sales Tax Special Revenue Fund no longer met the definition of a special revenue fund in accordance with GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. Accordingly, the ending fund balance previously reported for the Sales Tax Special Revenue Fund was moved to the General Capital Projects Fund. The fund balance previously reported in the Sales Tax Special Revenue Fund was restricted to capital projects.
General Sales Capital Tax Projects Fund balance as previously reported $ 507,351 $ 14,157,337 Restatement in accordance with GASB Statement No. 54 (507,351) 507,351 Total Fund Balance – beginning of year, as restated $ - $ 14,664,688
69
Required Supplemental Information - Part II
70 City of Alexandria, Louisiana General Fund Budgetary Comparison Schedule For the Year Ended April 30, 2013
Schedule 1
Variance with Final Budget - Positive Budgeted Amounts (Negative) Original Final Actual Revenues Taxes Property taxes $ 2,477,000 2,548,000 $ 2,561,952 $ 13,952 Sales taxes 33,800,000 34,710,000 35,975,300 1,265,300 Other 470,000 700,000 729,071 29,071 Intergovernmental 2,005,290 2,723,797 2,488,987 (234,810) Fees, commissions, and fines 658,200 634,200 657,044 22,844 Licenses and permits 2,755,200 2,820,200 2,875,496 55,296 Charges for services 229,430 236,430 358,420 121,990 Investment earnings - 15,000 20,525 5,525 Miscellaneous 168,500 381,500 844,822 463,322 Total Revenues 42,563,620 44,769,127 46,511,617 1,742,490
Expenditures Current General government 16,819,757 13,769,224 11,108,624 2,660,600 Public safety 26,803,400 28,740,804 27,795,475 945,329 Public works 9,474,206 10,457,296 10,225,473 231,823 Capital outlay 1,832,972 2,663,154 2,296,446 366,708 Debt service Principal 1,165,000 1,165,000 1,165,001 (1) Interest and other charges 683,534 416,030 416,319 (289) Total Expenditures 56,778,869 57,211,508 53,007,338 4,204,170
Deficiency of Revenues over Expenditures (14,215,249) (12,442,381) (6,495,721) 5,946,660
Other Financing Sources (Uses) Transfers in 10,613,452 10,371,461 10,431,246 59,785 Transfers out (2,496,992) (2,476,954) 20,038 Proceeds from sale of bonds - - 9,750,000 9,750,000 Bond issue costs - - (230,993) (230,993) Payment to escrow agent to defease bonds - - (9,525,005) (9,525,005) Proceeds from sale capital assets - 65,000 105,540 40,540 Total Other Financing Sources (Uses) 10,613,452 7,939,469 8,053,834 114,365
Net Change in Fund Balances (3,601,797) (4,502,912) 1,558,113 6,061,025
Fund Balances, Beginning of Year 19,074,361 19,074,361 19,074,361 -
Fund Balances, End of Year $ 15,472,564 $ 14,571,449 $ 20,632,474 $ 6,061,025
See independent auditor's report.
71 City of Alexandria, Louisiana Schedule of Funding Progress
Schedule 2
Postemployment Health Care and Life Insurance Benefits
Actuarial Valuation Date 4/30/2010 4/30/2011 4/30/2012 4/30/2013 Actuarial Value of Assets (a) $ - $ - $ - $ Actuarial Accrued Liability (AAL) (b)-- Medical* 4,883,089 5,986,492 6,225,952 6,252,400 Unfunded AAL (UAAL) (b-a) $ 4,883,089 $ 5,986,492 $ 6,225,952 $ 6,252,400 Funded Ratio (a/b) 0.00% 0.00% 0.00% 0.00% Covered Payroll (c) $ 39,116,116 $ 37,015,424 $ 33,197,812 $ 32,860,687 Unfunded AAL (Funding Excess) as a Percentage of Covered Payroll ((b-a)/c) 12.48% 16.17% 18.75% 19.03%
* The unit credit cost method is used for funding purposes.
See independent auditor's report.
-....I N
Supplemental Information
73 City of Alexandria, Louisiana Schedule of Expenditures of Federal Awards For the Year Ended April 30, 2013
Schedule 3 (Continued)
Federal Grantor/ Federal Amount Pass Through Grantor/ CFDA Pass-through Award Amount Provided Program Title Number Grant Number Amount Expended Subrecipients U.S. Department of Housing and Urban Development Community Planning and Development Direct Community Development Block Grants/Entitlement Grants 14.218 $ 1,795,860 $ 269,628 $ - Direct Home Investment Partnership Program 14.239 1,916,361 496,953 485,561 Passed-through the State of Louisiana Community Development Block Grants/State's Program Comprehensive Resiliency Program 14.228 567,000 289,552 Emergency Shelter Grants Program 14.231 CFMS # 702579 38,000 17,237 17,237 Agency Totals 4,317,221 1,073,370 502,798
U.S. Department of Justice Bureau of Justice Assistance Direct Bulletproof Vest Partnership Program 16.607 6,580 6,452 Passed-through the Rapides Parish, Louisiana Sherriff ARRA - Recovery Act: Edward Bryne Memorial Justice Assistance Program / Grants to Units of Local Governments16.804 2010-DJ-BX-1611 66,794 7,756 2011-DJ-BX-3078 48,744 44,813 - Total CFDA 16.804 115,538 52,569 - Agency Totals 122,118 59,021
U.S. Environmental Protection Agency Passed-through the State of Louisiana ARRA - Capitalization Grants for Clear Water State Revolving Funds Loan 66.458 3,500,000 1,581,651 ARRA - Capitalization Grants for Drinking Water State Revolving Funds Grant 66.468 1079001 2,060,000 370,134 State Revolving Funds Loan 66.468 1079002 7,940,000 2,392,231 - Total - CFDA 66.468 10,000,000 2,762,365 - Agency Totals 13,500,000 4,344,016 -
U.S. Department of Transportation Federal Transit Administration Direct Federal Transit Formula Grants 20.507 4,538,373 945,429 ARRA - Federal Transit Formula Grants 20.507 LA-96-X006-00 1,183,712 507,469 - Total - CFDA 20.507 5,722,085 1,452,898 -
National Highway Traffic Safety Administration Passed-through the State of Louisiana Department of Transportation State and Community Highway Safety 20.600 2012-30-14 126,000 70,731 Total - CFDA 20.600 126,000 70,731 - Agency Totals 5,848,085 1,523,629 -
U.S. Department of Energy Passed-through the State of Louisiana Department of Natural Resources ARRA - State Energy Program 81.041 TR-18 132,800 14,900 - Agency Totals 132,800 14,900 -
74 City of Alexandria, Louisiana Schedule of Expenditures of Federal Awards For the Year Ended April 30, 2013
Schedule 3 (Concluded)
Federal Grantor/ Federal Amount Pass Through Grantor/ CFDA Pass-through Award Amount Provided Program Title Number Grant Number Amount Expended Subrecipients U.S. Department of Homeland Security Passed-through the Rapides Parish Police Jury Homeland Security Grant Program 97.067 2010-SS-T0-0043 72,226 62,027 - Agency Totals 72,226 62,027 -
TOTALS $ 23,992,450 $ 7,076,963 $ 502,798
Note:
Expenditures for CFDA #20.507 are reported on the accrual basis of accounting. All other expenditures on the Schedule of Expenditures of Federal Awards are reported on the modified accrual basis of accounting. Note 1 to the financial statements provides additional information relative to the City's accounting policies.
See independent auditor's report.
75 City of Alexandria, Louisiana Utilities System Enterprise Fund Unaudited Summary of Utility Service Customers April 30, 2013
Schedule 4
Number of Customers Type of Service April 30, 2013 Electricity 24,605 Water 21,783 Gas 16,181 Wastewater 17,336
See independent auditor's report.
76 City of Alexandria, Louisiana Unaudited Listing of Insurance in Force April 30, 2013
Schedule 5 (Continued)
Property Insurer: The Travelers Insurance Companies Expiration date: May 6, 2013 Coverage: Real property, comprising buildings, and personal property Self-insured retention: $100,000 per occurrence deductible Policy limits of liability: $300,000,000 per occurrence with specified sublimits
Boiler and Machinery Insurer: The Travelers Insurance Companies Expiration date: May 6, 2013 Coverage: Comprehensive boiler and machinery coverage including production machines Loss retention: Varies with a minimum of $50,000 per occurrence Policy limits of liability: $50,000,000 per accident with specified sublimits
General Liability/Law Enforcement Insurer: Ace American Insurance Company Expiration date: May 6, 2013 Coverage: Bodily injury and property damage, personal and advertising injury, and law enforcement liability Self-insured retention: $500,000 each and every loss and/or claim and/or occurrence Policy limits of liability: $2,000,000 each and every loss and/or occurrence Combined Single Limit $4,000,000 in the aggregate annually as respects products/completed operations Public Officials Errors and Omissions Coverage: Any actual or alleged error or misstatement, omission, act of neglect or breach of duty including misfeasance, malfeasance and non-feasance by the Insured; includes actual or alleged violations of US or state constitutions or any law affording protection for civil rights
See independent auditor's report.
77 City of Alexandria, Louisiana Unaudited Listing of Insurance in Force April 30, 2013
Schedule 5 (Concluded)
Employee Benefits Liability Insurer: Ace American Insurance Company Expiration date: May 6, 2013 Coverage: Any negligent act, error or omission in the administration of the Insured's employee benefits programs Self-insured retention: $500,000 each and every loss and/or claim and/or occurrence Policy limits of liability: $2,000,000 each and every loss and/or occurrence Combined Single Limit $4,000,000 in the aggregate annually as respects products/completed operations
Specific Excess Workers' Compensation and Employers Liability Indemnity Insurer: Safety National Casualty Company Expiration date: May 6, 2013 Coverage: Workers' compensation - statutory Employers' liability - any cause of action by an employee against the City for bodily injury or disease in the course of employment Loss retention: $500,000 per occurrence Policy limits of liability: Workers' compensation - statutory Employers' liability - $1,000,000 per occurrence
Fidelity Bond Insurer: Ohio Casualty Insurance Company Expiration date: May 21, 2013 Coverage: Tax Collector Policy limits of liability: $10,000
Public Employees Honesty Bond Insurer: Fidelity and Deposit Company of Maryland Expiration date: September 1, 2013 Coverage: Employees in the Divisions of Finance, Public Works, Planning and CADS Loss retention: $10,000 per occurrence Policy limits of liability: $100,000 per employee
See independent auditor's report.
78
Other Reports Required by Government Auditing Standards and OMB Circular A-133
79
Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards
80 PAYNE, MOORE & HERRINGTON, LLP
C[Rllfi[O PUBliC ACCOUNTANTS Established 194.5
Independent Auditor's Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards
The Honorable Mayor and City Council City of Alexandria, Louisiana
We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Alexandria, Louisiana (the City), as of and for the year ended April 30, 2013, and the related notes to the financial statements, which collectively comprise the City of Alexandria, Louisiana's basic financial statements, and have issued our report thereon dated October 24, 2013.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the City's internal control over financial reporting (internal control) to determine. the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, we do not express an opinion on the effectiveness of the City of Alexandria, Louisiana's internal control.
Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and, therefore, material weaknesses or significant deficiencies may exist that were not identified. However, as described in the accompanying schedule of findings and questioned costs, we identified one deficiency in internal controls that we consider to be a material weakness.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. We consider the deficiency described in Finding 2013-01 in the accompanying schedule of findings and questioned costs to be a material weakness.
81 Room W. DVORAK. [ PJ [INDY l. HUMPHRIES. [ PA RmmH.MDRRIS.[PA. DEBORAH R. DUNN. LPJ 1m Mmo DRIH • Po nux moo MI[HAH A. JUNHU. [pJ Rmm 6. NAil ON. [.PJ AlEXANDRIA. lA 11315·3200 [VHYH RENfROW. [PJ PH: (310) 443-lOB • fAX: (318) 443·2515 PAYNE, MOORE& HERRINGTON, LLP
The Honorable Mayor and City Council City of Alexandria, Louisiana
A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. There were no significant deficiences notes.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the City of Alexandria, Louisiana's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed one instance of noncompliance or other matters that is required to be reported under Government Auditing Standards and which is described in the accompanying schedule of findings and questioned costs as Finding 2013-02 through Finding 2013-03.
City of Alexandria, Louisiana's Response to Findings
The City's response to the finding identified in our audit is described in the accompanying schedule of findings and questioned costs. City of Alexandria, Louisiana's response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. ~~~e_, \vt00v-e. +\.bv-ti ~, L~ Certified Public Accountants Alexandria, Louisiana
October 24, 2013
82
Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by OMB Circular A-133
83 PAYNE, MOORE & HERRINGTON, LLP
URTiflfO PUDUC AtCOUNTANTS Established 1945
Independent Auditor's Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by OMB Circular A-133
The Honorable Mayor and City Council City of Alexandria, Louisiana
Report on Compliance for Each Major Federal Program
We have audited the City of Alexandria, Louisiana's (the City) compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of the City's major federal programs for the year ended April 30, 2013. The City's major federal programs are identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs.
Management's Responsibility
Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs.
Auditor's Responsibility
Our responsibility is to express an opinion on compliance for each of the City of Alexandria, Louisiana's major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the City's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determ ination of the City's compliance.
Opinion on Each Major Federal Program
In our opinion, the City of Alexandria, Louisiana, complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended April 30, 2013.
ROBIRI W. DVORAK. [.P.A. [INDY HUMPHRIES, l. [.P.A. 84 Rmm B. MORRIS, [.P.A. DEBORAH R. DUNN. [.P.A. 1419 METRO DRIVE • P.O. DUX 13200 MI[HAEl A. JUNEAU. [.P.A. Rmm 6. NATION. [.P.A. AlEXANDRIA. lA 71315·3100 A fVElYN RENfROW. LP.A. ~·=·~.... PH: (318) 443-1893 • fAX: (318) 443-2515 PAYNE, MOORE& HERRINGTON, LLP
The Honorable Mayor and City Council City of Alexandria, Louisiana
Report on Internal Control Over Compliance
Management of the City of Alexandria, Louisiana, is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the City's internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the City of Alexandria, Louisiana's internal control over compliance.
A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.
Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.
The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of OMB Circular A-133. Accordingly, this report is not suitable for any other purpose.
~:;u~~~n:~n~ 1U:P Alexandria, Louisiana
October 24, 2013
85
City of Alexandria, Louisiana Schedule of Findings and Questioned Costs For the Year Ended April 30, 2013
Part I - Summary of Auditor's Results
Financial Statements
Type of auditor’s report issued: Unmodified
Internal control over financial reporting: Material weakness(es) identified? X Yes No Significant deficiency(ies) identified not considered to be material weaknesses? Yes X None reported
Noncompliance material to the financial statements? X Yes No
Federal Awards
Internal control over major programs: Material weakness(es) identified? Yes X No Significant deficiency(ies) identified not considered to be material weaknesses? Yes X None reported
Type of auditor’s report issued on compliance for major programs: Unmodified
Any audit findings disclosed that are required to be reported in accordance with Circular A-133, Section 510(a)? Yes X No
Identification of major programs: CFDA # 14.228 Community Development Block Grants/State’s Program CFDA # 20.507 Federal Transit Formula Grants CFDA # 66.458 Capitalization Grants for Clear Water State Revolving Funds CFDA # 66.468 Capitalization Grants for Drinking Water State Revolving Funds
Dollar threshold used to distinguish between Type A and Type B programs $300,000
Auditee qualified as a low-risk auditee? X Yes No
86
City of Alexandria, Louisiana Schedule of Findings and Questioned Costs For the Year Ended April 30, 2013
Part II - Findings Relating to the Financial Statements which are Required to be Reported Under Government Auditing Standards
Finding 2013-01 Timely Revenue Collection
Criteria: The objectives of internal controls are to provide management with reasonable assurance that assets are safeguarded against loss and that transactions are executed in accordance with management’s authorization and recorded properly to permit the preparation of financial statements in accordance with accounting principles generally accepted in the United States of America.
Condition: We noted two instances for which signed lease agreements were not furnished by the legal department to the accounting department. Since the accounting department was unaware of these lease agreements, the tenants were not invoiced timely for the rental income due to the City. In one instance, the tenant was not invoiced for the entire fiscal year. The accounting department only learned of this lease agreement when the tenant called the City to inquire about the lease.
Cause: There is no established system to ensure that the legal department furnishes the accounting department with the information necessary to invoice or collect amounts due to the City.
Effect: Failure to timely invoice and collect amounts due to the City delays cash flows and increases the chance that the amount will not be collectable. The lack of an established system of communication between the two departments creates the potential of a material amount not being received timely or at all.
Recommendations: We recommend that the City develop and implement controls to ensure that the accounting department receives timely lease agreements and similar documents from the legal department. One possible solution would be for the legal department to develop a distributions list for all legal documents that indicate those departments or individuals to receive a copy of the document. Delivery could be documented on this list.
Management’s Response: See Management’s Corrective Action Plan.
Finding 2013-02 Bond Commission Approval
Criteria: The State Bond Commission must give its consent and approval when any public body incurs debt that exceeds 90 days. The State Bond Commission does not consider a lease of a movable to be “debt” if the following conditions listed in RS 39:1410.60 are met:
The lease agreement contains a non-appropriation clause; and The lease agreement does not contain a penalty clause. A penalty clause is a clause by which the lease payments would be accelerated and the total amount of rent for the remainder of the term would become due upon the uncured failure to make timely rent payments.
Condition: The City entered into a lease for certain parks and recreation equipment. This lease does not contain a non-appropriation clause and does contain a penalty clause; the lease would be considered to be “debt” under State Bond Commission rules. As such, the lease should have been submitted to the State Bond Commission for approval. The lease was not submitted to the State Bond Commission for approval.
87
City of Alexandria, Louisiana Schedule of Findings and Questioned Costs For the Year Ended April 30, 2013
Cause: Unknown
Effect: The City did not comply with State Bond Commission requirements.
Recommendations: We recommend that future leases be reviewed by the legal department for compliance with the State Bond Commission requirements.
Management’s Response: See Management’s Corrective Action Plan.
Finding 2013-03 Compliance with Louisiana Government Budget Act
Criteria: The Louisiana Local Government Budget Act requires adoption of a budget amendment when actual total revenues and other sources within a fund are failing to meet total budgeted revenues and other sources by five percent or more or when total actual expenditures and other uses within a fund are failing to meet total budgeted expenditures and other uses by five percent or more.
Condition: For the year ended April 30, 2013, the City’s actual General Fund expenditures and other uses exceeded budgeted expenditures and other uses by more than five percent.
Cause: The City did an in substance defeasance of the Certificates of Indebtedness, Series 1998C by issuing the Taxable Limited Tax Bonds, Series 2012. Neither the revenue from the new bonds nor the payment made to the escrow agent to defease the old bonds was budgeted because the related revenues and expenditures were netted in the general fund. Because the revised statute does not allow netting of other sources and uses, the payment made to defease the bonds created this unfavorable budget variance of more than 5%.
Effect: Violation of the Louisiana Local Government Budget Act.
Recommendations: We recommend that the City comply with the Louisiana Local Government Budget Act.
Management’s Response: See Management’s Corrective Action Plan.
Part III - Findings and Questioned Costs for Federal Awards
None reported
88
Other Comments and Recommendations
89 PAYNE, MOORE & HERRINGTON, LLP
CfRTiflfD PUBliC ACCOUNTANTS Established 1945
Other Comments and Recommendations
The Mayor and City Council City of Alexandria, Louisiana
In planning and performing our audit of the basic financial statements of the City of Alexandria, Louisiana, as of and for the year ended April 30, 2013, we considered the City's internal controls to determine our auditing procedures for the purpose of expressing an opinion on the financial statements and not to provide assurance on the internal controls.
However, during our audit we became aware of a matter that is an opportunity for strengthening internal controls, operating efficiency, and compliance. The memorandum that accompanies this letter summarizes our comment and suggestion regarding this matter. A separate report, dated October 24, 2013 contains our report on the City's internal control deficiencies. This letter does not affect our report, dated October 24, 2013 on the basic financial statements of the City of Alexandria, Louisiana.
We will review the status of this comment during our next audit engagement. We have already discussed this comment and suggestion with management personnel, and we will be pleased to discuss it in detail at your convenience.
~~ ~~~V'e. +-\b-r,~ .._LL"P Certified Public Accountants Alexandria, Louisiana
October 24, 2013
ROBERT W. DVORAK. LPJ [INDY l. HUMPHRIES, LP.A. 90 Rmm H. MORRIS. C.P.A. DEBORAH R. DUNN. CPJ 1419 Mmo ORIH • P0 DUX 13200 MICHAH A. JUNfiU, LPJ Rmm 6. NATION. LPJ AlHANORIA. lA 11315·3200 A [VHYN RENfROW. [ PA. ~·=·~.... PH: (310) 443·1B93 • fAX: (318) 443·2515
Memorandum of Other Comments and Recommendations
Finding 2013-04 Advanced Payment
Criteria: According to our understanding of Article 7, Section 14, the Louisiana Constitution provides, in part, that things of value may not be loaned, pledged or donated to or for any person, association, or corporation, public or private.
Condition: We noted one instance in which the City paid approximately $31,000 to a contractor early. Although the payment was made to the contractor early, the inspection reports indicate that the project was, in fact, subsequently completed.
Recommendation: We recommend that all authorized personnel review the final inspection report prior to approval of the invoice for payment.
Management’s Response: See Management’s Corrective Action Plan.
91
Special Letter Re: Resolution Number 2341-1982 Requirement of Specific Recommendations
92 PAYNE, MOORE & HERRINGTON, LLP
Cmlflm PUDUC ACCOUNTANTS Established 1945
The Honorable Mayor and City Council City of Alexandria, Louisiana RE: Resolution Number 2341-1982 Requirement of specific recommendations
In accordance with Resolution Number 2341-1982, "a resolution relative to the fulfillment of commitments of the City of Alexandria relative to the Combined Utilities System", as engaged independent certified public accountants, we were requested to include specific recommendations to ensure that the City and the Combined Utilities System generate sufficient revenues to pay operation and maintenance expenses of the Combined Utilities System and debt service on outstanding revenue bonds payable from such revenue, and to make all budgeted transfers to other funds of the City. During the current year, the City fulfilled each of these commitments. For future periods, the City should continue to accomplish the following steps: 1) Prepare and approve an annual operating budget of the Combined Utilities System based upon the best criteria of revenue and expense estimates that can be reasonably developed. 2) Provide for budgetary control on a line item basis and monitor budget variances on a current basis. Amendments should be addressed for any unusual exceptions as they are encountered. 3) Provide projected monthly cash flow schedules with comparisons to actual, prior, and current amounts. Any unusual variances should be investigated. 4) Maintain current and accurate accounting records relative to f inancial activity of the system. 5) Reconcile subsidiary ledgers to appropriate general ledger control accounts on a current basis. 6) Provide for a complete review of the accounting trial balance and underlying transactions on a current basis for obvious posting errors. Investigate and/or correct unusual item s as needed. 7) Update utility rate studies as practical and adjust rates as necessary to provide adequate revenues to meet budgeted needs. 8) Implement other recommendations, if any, relative to the Combined Utilities System as noted in our accompanying schedule of findings and questioned costs.
~~d~P~~u:a~ri~ 1LLf' Alexandria, LA
October 24, 2013
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Management’s Corrective Action Plan
94 City of Alexandria, Louisiana Management’s Corrective Action Plan Year Ended April 30, 2013
The City of Alexandria, Louisiana respectfully submits the following corrective action plan for the year ended April 30, 2013.
Independent Public Accounting Firm: Payne, Moore & Herrington, LLP P. O. Box 13200 Alexandria, Louisiana 71315-3200
Auditee Contact Person: Mr. David Johnson Director of Finance City of Alexandria, Louisiana (318) 449-5034
Audit Period: May 1, 2012 through April 30, 2013
The findings from the Schedule of Findings and Questioned Costs are discussed below. The findings are numbered consistently with the numbers assigned in the Schedule.
Section II: Findings Relating to the Financial Statements Which are Required to be Reported Under Government Auditing Standards Finding 2013-01 Timely Revenue Recognition
Response The City engages in incentive activity at its incubator building, which is atypical activity for normative city operations. Generally, the City does not lease property outside of incubator activity to private parties. The 2 instances cited represent a departure from historical operations and were implemented to promote economic development and avoid waste of a City purchased large-scale commercial building. A new procedure will be established in which the Legal Division will inform the Finance Division of pending contractual arrangements in which the City will be leasing its property so that the Finance Division will know when to expect payments.
Finding 2013-02 Bond Commission Approval
Response The City usually includes standard language to include a non-appropriation clause in its contracts to lease equipment. Penalty clauses are also typically excluded from City lease contracts. In the instance cited, both of these steps were omitted. Additional efforts will be made in the future to see that all City lease contracts contain the non- appropriation clause and do not contain a penalty clause. Notably, the Alexandria Charter provides sufficient third-party warning of non-appropriation consequences in 5- 04 and elsewhere. Thus, a non-appropriation clause is not necessary but will be done in any event. The value of this equipment is such that it is consumed over the lease.
95 City of Alexandria, Louisiana Management’s Corrective Action Plan Year Ended April 30, 2013
Finding 2013-03 Compliance with Louisiana Local Government Budget Act
Response In this case, two related transactions occurred on the same day. The refinancing of existing debt involves the receipt of the proceeds of the new debt and the virtually simultaneous extinguishment of the old debt. The net difference between the 2 transactions was roughly $5,000. Management’s interpretation of the 2 transactions was to net them together, as one could not exist without the other. The auditor’s technical, non-legal interpretation of Louisiana Revised Statute 39:1311 is that the 2 transactions should be treated separately. Under this interpretation, the $9.7 million outflow of funds would certainly be over 5% of the other outflows in General Fund. It should be noted that the net savings in debt service for the City of Alexandria as a result of this opportunity identified by the Administration exceeded $1.6 million over the life of the bonds. For any future refundings in the General Fund, the City will treat the transactions as separate and amend the General Fund budget if indicated. The City notes that the auditor’s view and that of the Legal Division differ on this issue.
Section III: Findings and Questioned Costs for Federal Awards None reported
Other Comments and Recommendations Finding 2013-04 Advanced Payment
Response City personnel with the ability to authorize payments will review inspection reports to guard against advanced payments. The activity was completed as contracted.
96
Management’s Schedule of Prior Year Findings
97
City of Alexandria, Louisiana Management’s Schedule of Prior Year Findings For the Year Ended April 30, 2013
Part II: Internal Control And Compliance Material to the Financial Statements Finding Centralized Recordkeeping for Grant Awards Resolved. 2012-01
Section II: Other Comments and Recommendations (Management Letter) None reported
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APPENDIX “D”
BUDGET SUMMARY
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APPENDIX “E”
DEBT STATEMENT STATEMENT OF DIRECT AND OVERLAPPING BONDED DEBT AS OF JANUARY 2, 2014 (The accompanying notes are an integral part of this statement)
Principal Final Amount Interest Dated Maturity Principal Due Within Notes Name of Issuer & Issue Rates (%) Date Date Outstanding One Year
(1) Direct Debt of City of Alexandria, State of Louisiana (2) General Obligation Refunding Bonds, Series 2004 3.55-3.75 9/01/04 3/01/16 $ 1,775,000 $ 565,000 (3) Utilities Revenue Bonds, Series 2004 5.0 1/01/04 5/01/14 1,810,000* 1,810,000 (3) Utilities Revenue Bonds, Series 2010B 3.45 1/22/10 5/01/30 2,979,000 144,000 (3) Utilities Revenue Bond (DHH), Series 2011 3.45 10/11/11 5/01/32 4,326,000 165,000 (3) Utilities Revenue Bond (DHH), Series 2012A 3.45 2/13/12 5/01/32 1,929,000 74,000 (3) Utilities Revenue Bond (DEQ), Series 2012B 0.95 2/13/12 5/01/32 4,342,000 210,000 (3) Utilities Revenue Refunding Bonds, Series 2013A 2.0-5.0 10/01/13 5/01/24 9,420,000 35,000 (3) Taxable Utilities Revenue Refudning Bonds, Series 2013B 0.945-3.496 10/01/13 5/01/24 13,720,000 130,000 (3) Utilities Revenue Bonds, Series 2013A 4.0-5.0 11/20/13 5/01/43 96,150,000 0 (4) Sales Tax Bonds, Series 2004 3.3-4.2 3/01/04 8/01/23 9,770,000 775,000 (5) Sales Tax Bonds, Series 2008 4.0-5.0 9/01/08 8/01/28 20,730,000 980,000 (6) Limited Tax Revenue Bonds, Series 2008 3.75-4.0 9/01/08 3/01/18 8,625,000 1,585,000 (7) Taxable Limited Tax Bonds, Series 2012 0.951-2.518 10/03/12 6/01/21 9,455,000 1,120,000
* As of February 20, 2014, the remaining maturities will be defeased.
(8) Overlapping Debt of the Parish of Rapides, State of Louisiana (2) General Obligation Bonds, Series 2013 3.0-5.0 5/21/13 3/01/33 23,000,000 400,000 (9) Public Improvement Sales Tax Bonds, Series 2012 2.18 3/27/12 12/01/21 710,000 80,000 (10) Limited Tax Certificates, Series 2007 3.83 3/28/07 3/01/14 407,000 407,000
(11) Overlapping Debt of the Parish School Board of the Parish of Rapides, State of Louisiana (12) Certificates of Indebtedness, Series 2004 0.0-4.78 10/20/04 5/01/21 1,300,000 140,000 (12) Certificates of Indebtedness, Series 2005 5.0 6/30/05 5/01/14 100,000 100,000 (12) Certificates of Indebtedness, Series 2006 6.0 9/22/06 5/01/16 610,000 190,000 (12) Certificates of Indebtedness, Series 2011 2.7 7/15/11 5/01/21 3,165,000 250,000 (12) Certificates of Indebtedness, Series 2013 2.25 11/22/13 5/01/23 3,500,000 0 (13) Revenue Bonds (Taxable QSCB), Series 2009 1.0 10/26/09 10/15/24 3,000,000 (a) (13) Revenue Bonds (Taxable QSCB), Series 2011 0.30 4/19/11 3/15/26 7,000,000 (a)
(a) Various amounts are required to be deposited annually into a sinking fund.
(14) Overlapping Debt of Consolidated School District No. 62 of Rapides Parish, Louisiana (2) General Obligation School Refunding Bonds, Series 2005 3.75-5.0 5/01/05 3/01/19 8,525,000 1,280,000 (2) General Obligation School Refunding Bonds, Series 2006 3.75-5.0 3/02/06 3/01/19 7,145,000 25,000 (2) General Obligation School Refunding Bonds, Series 2009 3.75-4.0 5/12/09 3/01/16 3,650,000 1,565,000
NOTES
(1) The 2013 total assessed valuation of the City of Alexandria is approximately $372,299,033, all of which is taxable for municipal purposes. (2) Secured by unlimited ad valorem taxation. (3) Payable solely from the income and revenues to be derived from the operation of the combined electric power and light plant and system, waterworks plant and system, natural gas system and sewer system of the City (the “Utilities System”), after provisions have been made for payment therefrom of the reasonable expenses of administering, operating and maintaining the Utilities System, and after provision has been made for the payments of any outstanding prior lien bonds.
E-1 (4) Payable from an irrevocable pledge and dedication of the avails or proceeds of the one-half of the avails or proceeds of the City's special 1% sales and use tax now being levied pursuant to an election held by the City on July 27, 1976, subject to the prior payment of the reasonable and necessary costs and expenses of collecting and administering the tax. (5) Payable from an irrevocable pledge and dedication of the avails or proceeds of (i) one-half of the avails or proceeds of the issuer's special 1% sales and use tax now being levied pursuant to an election held by the City on July 27, 1976, and (ii) two-thirds of the net avails or proceeds of the issuer’s special 1% sales and use tax now being levied and collected pursuant to a continuation and rededication election held on July 21, 2007, subject to the prior payment of the reasonable and necessary costs and expenses of collecting and administering the tax, and with respect to the 1976 tax, after provision has been made for the payments required by the outstanding Sales Tax Bonds, Series 2004 of the City. (6) Secured by and payable from an irrevocable pledge and dedication of the funds to be derived by the issuer from the levy and collection of a special tax of 11.25 mills (such rate being subject to adjustment from time to time due to reassessment) which the issuer is authorized to impose and collect in each year through the year 2017, on all the property subject to taxation within the corporate boundaries of the issuer pursuant to an election held on July 21, 2007. (7) Secured by and payable from an irrevocable pledge and dedication of the funds to be derived by the issuer from the levy and collection of a special tax of 6.83 mills (such rate being subject to adjustment from time to time due to reassessment) within the issuer, authorized to be levied and collected by the issuer in each year. (8) The total 2013 assessed valuation of the Parish of Rapides, State of Louisiana is approximately $902,687,032, of which approximately $725,142,906 is taxable. (9) Secured by and payable solely from an irrevocable pledge and dedication of the issuer’s 9% allocation of the avails or proceeds of the special 1% sales and use tax now being levied and collected by the issuer, pursuant to elections held on September 19, 1967 and April 4, 2009, subject only to the prior payment of the reasonable and necessary costs and expenses of collecting and administering the tax. (10) Secured by and payable from an irrevocable pledge and dedication of the funds to be derived by the issuer from the levy and collection of a special tax of 6.08 mills authorized at an election held on May 3, 2003 and a 1 mill tax authorized at an election held on September 30, 2006 (such rates being subject to adjustment from time to time due to reassessment) within the issuer, authorized to be levied each year through the year 2013, on all property subject to taxation within the corporate boundaries of the issuer. (11) The total 2013 assessed valuation of the Parish School Board of the Parish of Rapides, Louisiana is approximately $902,687,032, of which approximately $725,142,906 is taxable. (12) Secured by and payable solely from a pledge and dedication of the excess of annual revenue of the issuer above statutory, necessary and usual charges in each of the fiscal years during which the certificates are outstanding. In addition, the Certificates of Indebtedness, Series 2004 of the Parish School Board are payable from the energy cost savings resulting from the energy retrofit project. (13) Secured by and payable from an irrevocable pledge and dedication of the funds to be derived by the issuer from the levy and collection of a special tax of 4.79 mills (such rate being subject to adjustment from time to time due to reassessment) within the issuer, authorized to be levied each year on all the property subject to taxation within the corporate boundaries of the issuer. (14) The 2013 total assessed valuation of Consolidated School District No. 62 is approximately $460,397,420, of which approximately $387,204,115 is taxable.
(NOTE. The above debt statement excludes the outstanding indebtedness of the Rapides Finance Authority, the Rapides Parish Housing and Mortgage Finance Authority, The Industrial Development Board of the Parish of Rapides, Inc, the England Economic and Industrial Development District, and all operating and capital leases.)
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APPENDIX “F”
ANNUAL DEBT SERVICE REQUIREMENTS
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ANNUAL DEBT SERVICE REQUIREMENTS ON OUTSTANDING DEBT AND UTILITIES REVENUE BONDS, SERIES 2014, OF CITY OF ALEXANDRIA, STATE OF LOUISIANA
OUTSTANDING BONDS (a) SERIES 2014 BONDS TOTAL REQUIREMENTS
SERIES 2013 FISCAL (5/1) (5/1; 11/1) CAPITALIZED (5/1) (5/1; 11/1) CAPITALIZED CAPITALIZED YEAR PRINCIPAL INTEREST INTEREST TOTAL PRINCIPAL INTEREST INTEREST TOTAL PRINCIPAL INTEREST INTEREST TOTAL (ending 4/30)
2015 758,000.00 5,583,031.59 (4,416,180.89) 1,924,850.70 0.00 873,137.71 (553,697.09) 319,440.62 758,000.00 6,456,169.30 (4,969,877.98) 2,244,291.32 2016 2,746,000.00 5,796,794.46 (3,108,162.51) 5,434,631.95 0.00 1,277,762.50 1,277,762.50 2,746,000.00 7,074,556.96 (3,108,162.51) 6,712,394.45 2017 2,780,000.00 5,741,227.91 8,521,227.91 325,000.00 1,274,512.50 1,599,512.50 3,105,000.00 7,015,740.41 10,120,740.41 2018 2,824,000.00 5,672,648.36 8,496,648.36 355,000.00 1,267,712.50 1,622,712.50 3,179,000.00 6,940,360.86 10,119,360.86 2019 2,904,000.00 5,590,765.81 8,494,765.81 365,000.00 1,259,600.00 1,624,600.00 3,269,000.00 6,850,365.81 10,119,365.81 2020 2,994,000.00 5,495,469.81 8,489,469.81 380,000.00 1,249,337.50 1,629,337.50 3,374,000.00 6,744,807.31 10,118,807.31 2021 3,090,000.00 5,386,747.66 8,476,747.66 405,000.00 1,237,562.50 1,642,562.50 3,495,000.00 6,624,310.16 10,119,310.16 2022 3,206,000.00 5,264,453.44 8,470,453.44 425,000.00 1,224,050.00 1,649,050.00 3,631,000.00 6,488,503.44 10,119,503.44 2023 3,333,000.00 5,132,787.04 8,465,787.04 445,000.00 1,205,487.50 1,650,487.50 3,778,000.00 6,338,274.54 10,116,274.54 2024 3,470,000.00 4,992,356.01 8,462,356.01 470,000.00 1,184,962.50 1,654,962.50 3,940,000.00 6,177,318.51 10,117,318.51 2025 3,323,000.00 4,855,619.31 8,178,619.31 780,000.00 1,159,962.50 1,939,962.50 4,103,000.00 6,015,581.81 10,118,581.81 2026 3,450,000.00 4,727,381.01 8,177,381.01 815,000.00 1,128,062.50 1,943,062.50 4,265,000.00 5,855,443.51 10,120,443.51 2027 3,595,000.00 4,582,531.01 8,177,531.01 845,000.00 1,094,862.50 1,939,862.50 4,440,000.00 5,677,393.51 10,117,393.51 2028 3,758,000.00 4,416,913.01 8,174,913.01 885,000.00 1,060,262.50 1,945,262.50 4,643,000.00 5,477,175.51 10,120,175.51 2029 3,933,000.00 4,243,189.51 8,176,189.51 920,000.00 1,024,162.50 1,944,162.50 4,853,000.00 5,267,352.01 10,120,352.01 2030 4,104,000.00 4,073,408.76 8,177,408.76 955,000.00 986,662.50 1,941,662.50 5,059,000.00 5,060,071.26 10,119,071.26 2031 4,270,000.00 3,908,359.76 8,178,359.76 995,000.00 942,687.50 1,937,687.50 5,265,000.00 4,851,047.26 10,116,047.26 2032 4,446,000.00 3,733,054.38 8,179,054.38 1,050,000.00 891,562.50 1,941,562.50 5,496,000.00 4,624,616.88 10,120,616.88 2033 4,632,000.00 3,544,463.25 8,176,463.25 1,105,000.00 837,687.50 1,942,687.50 5,737,000.00 4,382,150.75 10,119,150.75 2034 4,850,000.00 3,325,700.00 8,175,700.00 1,160,000.00 781,062.50 1,941,062.50 6,010,000.00 4,106,762.50 10,116,762.50 2035 5,100,000.00 3,078,312.50 8,178,312.50 1,220,000.00 721,562.50 1,941,562.50 6,320,000.00 3,799,875.00 10,119,875.00 2036 5,360,000.00 2,819,656.25 8,179,656.25 1,280,000.00 659,062.50 1,939,062.50 6,640,000.00 3,478,718.75 10,118,718.75 2037 5,630,000.00 2,547,943.75 8,177,943.75 1,345,000.00 593,437.50 1,938,437.50 6,975,000.00 3,141,381.25 10,116,381.25 2038 5,915,000.00 2,262,518.75 8,177,518.75 1,415,000.00 524,437.50 1,939,437.50 7,330,000.00 2,786,956.25 10,116,956.25 2039 6,215,000.00 1,962,643.75 8,177,643.75 1,490,000.00 451,812.50 1,941,812.50 7,705,000.00 2,414,456.25 10,119,456.25 2040 6,530,000.00 1,645,750.00 8,175,750.00 1,570,000.00 375,312.50 1,945,312.50 8,100,000.00 2,021,062.50 10,121,062.50 2041 6,865,000.00 1,310,875.00 8,175,875.00 1,645,000.00 296,993.75 1,941,993.75 8,510,000.00 1,607,868.75 10,117,868.75 2042 7,220,000.00 958,750.00 8,178,750.00 1,725,000.00 216,956.25 1,941,956.25 8,945,000.00 1,175,706.25 10,120,706.25 2043 7,590,000.00 588,500.00 8,178,500.00 1,805,000.00 133,118.75 1,938,118.75 9,395,000.00 721,618.75 10,116,618.75 2044 7,975,000.00 199,375.00 8,174,375.00 1,900,000.00 45,125.00 1,945,125.00 9,875,000.00 244,500.00 10,119,500.00
TOTALS 132,866,000.00 113,441,227.09 (7,524,343.40) 238,782,883.69 28,075,000.00 25,978,918.96 (553,697.09) 53,500,221.87 160,941,000.00 139,420,146.05 (8,078,040.49) 292,283,105.56
(a) Outstanding: Series 2010B, Series 2011, Series 2012A, Series 2012B, Refunding Series 2013A, Taxable Refunding Series 2013B and Series 2013.
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APPENDIX “G”
FORM OF LEGAL OPINION
OF
CO-BOND COUNSEL
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[FORM OF LEGAL OPINION]
Honorable City Council City of Alexandria, State of Louisiana Alexandria, Louisiana
$28,075,000 UTILITIES REVENUE BONDS, SERIES 2014 CITY OF ALEXANDRIA, STATE OF LOUISIANA
We have acted as [bond counsel/co-bond counsel] to the City of Alexandria, State of Louisiana (the "Issuer"), in connection with the issuance of the captioned bonds (the "Bonds"). The Bonds are in fully registered form, are dated, bear interest at the rates, are subject to redemption, and mature on the dates and in the principal amounts as set forth in the Ordinance (hereinafter defined).
The Bonds have been issued by the Issuer pursuant to an ordinance adopted by its governing authority on January 21, 2014 (the "Ordinance"), for the purpose of constructing, acquiring, extending and/or improving the combined electric power and light plant system, waterworks plant system, natural gas system and sewer system (collectively, the "System") and paying the costs of issuance of the Bonds, under the authority of Section 1430 of Title 39 of the Louisiana Revised Statutes of 1950, as amended (the "Act"), and other constitutional and statutory authority.
The Issuer, in and by the Ordinance, has also entered into certain covenants and agreements with the owners of the Bonds with respect to the security and payment of the Bonds, including a provisions for the issuance of pari passu additional obligations hereafter under certain conditions and restrictions, for the terms or which reference is made to the Ordinance.
We have examined the provisions of the Constitution and statutes of the State of Louisiana, a certified transcript of the proceedings of the governing authority of the Issuer relating to the issuance of the Bonds, and such other documents, proofs and matters of law as we deemed necessary to render this opinion.
As to questions of fact material to our opinion, we have relied upon the certified proceedings and other certifications of public officials and others furnished to us without undertaking to verify the same by independent investigation.
On the basis of the foregoing examinations, we are of the opinion, as of the date hereof and under existing law, that:
1. Said proceedings, documents and proofs show lawful authority for the issuance of the Bonds pursuant to said Constitution and statutes and the Ordinance.
2. The Issuer is a validly existing political subdivision of the State of Louisiana with the corporate power to adopt the Ordinance and to authorize and issue the Bonds.
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3. The Ordinance creates a valid pledge of the Net Revenues (hereinafter defined) for the payment of the Bonds.
4. The Ordinance has been duly adopted by the Issuer and constitutes a valid, binding and enforceable obligation of the Issuer.
5. The Bonds have been duly authorized, executed and delivered, and constitute legally binding special and limited obligations of the Issuer and are payable, equally with the Outstanding Parity Bonds (hereinafter defined), solely from the income and revenues to be derived from the operation of the System subject only to the prior payment of the reasonable expenses of administration, operation and maintenance of the Utilities System (the "Net Revenues").
6. The Bonds have been issued on a parity, except with respect to certain reserve funds, with the Issuer’s outstanding (i) Utilities Revenue Bonds, Series 2010B, (ii) Utilities Revenue Bonds (DHH), Series 2011, (iii) Utilities Revenue Bond (DHH), Series 2012A (iv) Utilities Revenue Bond (DEQ), Series 2012B, (v) Utilities Revenue Refunding Bonds, Series 2013A, (vi) Taxable Utilities Revenue Refunding Bonds, Series 2013B and (vii) Utilities Revenue Bonds, Series 2013A (collectively, the "Outstanding Parity Bonds"), and rank equally with and enjoy complete parity of lien with the Outstanding Parity Bonds on the Net Revenues, and the lien of the owner of the Bonds and the owners of the Outstanding Parity Bonds and any pari passu additional obligations hereafter issued within the terms, limitations and restrictions contained in the Ordinance will be prior and superior to the lien on the Net Revenues of any obligation hereafter issued and payable therefrom.
7. Interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; it should be noted, however, that for the purpose of computing the alternative minimum tax imposed on certain corporations, such interest is taken into account in determining adjusted current earnings.
8. Under the provisions of Chapter 1 of Title 47 of the Louisiana Revised Statutes of 1950, as amended, interest on the Bonds owned by corporations or residents of the State of Louisiana is exempt from Louisiana state income taxation to the extent such interest is exempt from federal income taxation.
In rendering the opinion expressed in numbered paragraph 7 above, we have relied on representations of the Issuer with respect to questions of fact material to our opinion without undertaking to verify the same by independent investigation, and have assumed continuing compliance with covenants in the Ordinance pertaining to those sections of the Internal Revenue Code of 1986, as amended, which affect the exclusion from gross income of interest on the Bonds for federal income tax purposes. In the event that such representations are determined to be inaccurate or incomplete or the Issuer fails to comply with the foregoing covenants in the Ordinance, interest on the Bonds could become included in gross income from the date of original delivery, regardless of the date on which the event causing such inclusion occurs.
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Except as stated above, we express no opinion as to any federal, state or local tax consequences resulting from the ownership of, receipt of interest on, or disposition of the Bonds. We further express no opinion with respect to the acquisition or operation of the System by the Issuer.
It is to be understood that the rights of the owners of the Bonds and the enforceability of the Bonds and the Ordinance may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted to the extent constitutionally applicable, and that their enforceability may also be subject to the exercise of the sovereign police powers of the State, or its governmental bodies, and the exercise of judicial discretion in appropriate cases.
Respectfully submitted,
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APPENDIX “H”
FORM OF CONTINUING DISCLOSURE CERTIFICATE
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(FORM OF CONTINUING DISCLOSURE CERTIFICATE)
$28,075,000 UTILITIES REVENUE BONDS, SERIES 2014 CITY OF ALEXANDRIA, STATE OF LOUISIANA
This Continuing Disclosure Certificate (the "Disclosure Certificate") is executed and delivered by the City of Alexandria, State of Louisiana (the "Issuer"), acting through its governing authority, the City Council of the City of Alexandria, State of Louisiana (the "Governing Authority"), in connection with the issuance of the above captioned issue of $28,075,000 Utilities Revenue Bonds, Series 2014 (the "Bonds"). The Bonds are being issued pursuant to an ordinance adopted by the governing authority of the Issuer on January 21, 2014 (the "Ordinance"), and are described in that certain Official Statement dated January 15, 2014 (the "Official Statement") which contains certain information concerning the Issuer, the Bonds and certain financial and other information relating thereto. The Issuer covenants and agrees as follows:
SECTION 1. Definitions. In addition to the definitions set forth in the preceding paragraph and the Ordinance, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:
"Annual Report" shall mean any Annual Report provided by the Issuer pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate.
"Dissemination Agent" shall mean the City Clerk of the Governing Authority, or any successor Dissemination Agent designated by the Issuer, whose mailing address is City of Alexandria, 915 Third Street, Alexandria, Louisiana 71301.
"Governing Authority" shall mean the City Council of the City of Alexandria, State of Louisiana.
"Listed Events" shall mean any of the events listed in Section 5(a) of this Disclosure Certificate.
"MSRB" shall mean the Municipal Securities Rulemaking Board, which has been designated by the Securities and Exchange Commission as the single centralized repository for the collection and availability of continuing disclosure documents for purposes of the Rule. The continuing disclosure documents must be provided to the MSRB in portable document format (PDF) to the following:
Municipal Securities Rulemaking Board Electronic Municipal Market Access Center http://emma.msrb.org
"Participating Underwriter" shall mean Stephens Inc., the original purchaser of the Bonds, who is required to comply with the Rule in connection with an offering of the Bonds.
"Repositories" shall mean the MSRB and the State Information Depository, if any.
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"Rule" shall mean Rule 15c2-12 (b) (5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time.
"State Information Depository" shall mean any public or private depository or entity designated by the State of Louisiana as a state depository for the purpose of the Rule. As of the date of this Disclosure Certificate, there is no State Information Depository.
SECTION 2. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the Issuer for the benefit of the owners of the Bonds, including owners of beneficial interests in the Bonds, and the Participating Underwriter, and in order to assist the Participating Underwriter in complying with the Rule.
SECTION 3. Provision of Annual Reports.
(a) The Issuer shall, or shall cause the Dissemination Agent to, in each year no later than six (6) months from the end of the Issuer's first fiscal year ending after issuance of the Bonds, with the first such report to be due not later than October 31, 2014, provide to the Repositories an Annual Report which is consistent with the requirements set forth below. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as set forth below; provided that the audited financial statements of the Issuer and the Board may be submitted separately from the balance of the Annual Report.
(b) If the Dissemination Agent is unable to provide to the Repositories an Annual Report by the date required in (a) above, the Issuer shall send a Notice of Failure to File Annual Report to each of the Repositories, in substantially the form attached as Exhibit A.
(c) The Dissemination Agent shall determine each year prior to the date for providing the Annual Report the name and address of each of the Repositories.
SECTION 4. Content of Annual Reports. The Annual Report shall contain or incorporate by reference the following:
1. Audited financial statements for the preceding fiscal year. If the Issuer's audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available.
2. Basis of accounting used by the Issuer in reporting their financial statements. The Issuer follows GAAP principles and mandated Louisiana statutory accounting requirements as in effect from time to time. In the event of any material change in
H-2 such requirements the impact of such changes will be described in the Annual Report of the year such change occurs.
3. Updates of tables appearing in the Official Statement in the section entitled "THE UTILITIES SYSTEM" under the headings "Largest Customers of the Utilities System" and "Schedule of Current Utilities Rates."
Any or all of the items listed above may be incorporated by reference from other documents, including official statements of debt issues of the Issuer or related public entities, which have been submitted to each of the Repositories or the Securities and Exchange Commission. If the document incorporated by reference is a deemed final official statement, it shall be available from the MSRB. The Issuer shall clearly identify each such other document so incorporated by reference.
SECTION 5. Reporting of Listed Events. (a) This section shall govern the giving of notices of the occurrence of any of the following Listed Events with respect to the Bonds:
(i) Principal and interest payment delinquencies; (ii) Non-payment related defaults, if material; (iii) Unscheduled draws on debt service reserves reflecting financial difficulties; (iv) Unscheduled draws on credit enhancements reflecting financial difficulties; (v) Substitution of credit or liquidity providers, or their failure to perform; (vi) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds; (vii) Modifications to rights of Bondholders, if material; (viii) Bond calls, if material, and tender offers; (ix) Defeasances; (x) Release, substitution, or sale of property securing repayment of the Bonds, if material; (xi) Rating changes; (xii) Bankruptcy, insolvency, receivership or similar event of the Issuer; (xiii) The consummation of a merger, consolidation, or acquisition involving an Issuer or the sale of all or substantially all of the assets of the Issuer, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; or (xiv) Appointment of a successor or additional trustee or the change of name of a trustee, if material.
(b) Whenever the Issuer obtains knowledge of the occurrence of a Listed Event, the Issuer shall direct the Dissemination Agent as soon as possible, but in no event more than ten business days after the occurrence of the event, to file a notice of such occurrence with the MSRB and with any State Information Depository.
H-3 SECTION 6. Management Discussion of Items Disclosed. If an item required to be disclosed as part of the Annual Report or the Listed Events would be misleading without discussion, the Issuer shall additionally provide a statement clarifying the disclosure in order that the statement made will not be misleading in light of the circumstances in which it is made.
SECTION 7. Termination of Reporting Obligation. The obligations of the Issuer under this Disclosure Certificate shall terminate upon the defeasance, prior redemption or payment in full of all of the Bonds.
SECTION 8. Dissemination Agent. The Issuer may, from time to time, appoint or engage a successor Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent.
SECTION 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the Issuer may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, if:
(a) The amendment or waiver is made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of the Issuer, or type of business conducted;
(b) This Disclosure Certificate, as amended, or the provision, as waived, would have complied with the requirements of the Rule at the time of the primary offering, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and
(c) The amendment or waiver does not materially impair the interests of the beneficial owners of the Bonds, as determined either by an opinion of a nationally recognized bond counsel or by approving vote of the holders of the Bonds pursuant to the terms of the Ordinance at the time of the amendment.
In the event of any such amendment or waiver of a provision of this Disclosure Certificate, the Issuer shall describe such amendment in the next Annual Report relating to the Issuer and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or in the case of change of accounting principles, on the presentation) of financial information or operating data being presented by or in respect of the Issuer.
SECTION 10. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the Issuer from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the Issuer chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the Issuer shall not have any obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.
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SECTION 11. Default. In the event of a failure of the Issuer to comply with any provision of this Disclosure Certificate any Bond owner (including any owner of a beneficial interest in the Bonds) or the Participating Underwriter may take such actions as may be necessary and appropriate, to cause the Issuer to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an event of default under the Ordinance, and the sole remedy under this Disclosure Certificate in the event of any failure of the Issuer to comply with this Disclosure Certificate shall be an action to compel performance.
SECTION 12. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the Issuer, the Dissemination Agent, the Participating Underwriter and owners (including any owner of a beneficial interest in the Bonds) from time to time of the Bonds, and shall create no rights in any other person or entity.
SECTION 13. Other Stipulations. Any document submitted to the MSRB pursuant to this Disclosure Certificate shall be accompanied by identifying information as prescribed by the MSRB. Any document submitted to the MSRB pursuant to this Disclosure Certificate shall be word-searchable (without regard to diagrams, images and other non-textual elements).
SECTION 14. Additional Disclosure Obligations. The Issuer acknowledges and understands that other State of Louisiana and federal laws, including, without limitation, the Securities Act of 1933, as amended, and Rule 10b-5 promulgated by the Securities and Exchange Commission pursuant to the Securities and Exchange Act of 1934, may apply to the Issuer, and that under some circumstances, compliance with this Continuing Disclosure Certificate, without additional disclosures or other action, may not fully discharge all duties and obligations of the Issuer under such laws.
H-5 IN FAITH WHEREOF, the undersigned has executed this Continuing Disclosure Certificate on this, the ____ day of ______, 2014.
CITY OF ALEXANDRIA, STATE OF LOUISIANA
By: Mayor
H-6 EXHIBIT A to Continuing Disclosure Certificate
NOTICE TO REPOSITORIES OF FAILURE TO FILE ANNUAL REPORT
Name of Issuer: City of Alexandria, State of Louisiana
Name of Bond Issues: $28,075,000 Utilities Revenue Bonds, Series 2014
Date of Issuance: February 25, 2014
NOTICE IS HEREBY GIVEN that the Issuer has not provided an Annual Report as required by the resolution authorizing the above-described bonds. The Issuer anticipates that its Annual Report will be filed by ______.
Date: ______.
CITY OF ALEXANDRIA, STATE OF LOUISIANA
By: Title:
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