CITY OF LOS ANGELES SEWER CONSTRUCTION AND MAINTENANCE FUND (An Enterprise Fund of the City of Los Angeles) Debt Service Compliance Report

Transcription

1 Debt Service Compliance Report (With Independent Auditor's Report Thereon)

2 3600 Wll.SHIRI: llolilevar.d, SUITE 1710 LOS ANGELf.S. CA (213) TELEPHONE (213) FAX SIMPSON & SIMPSON CERTJriED PUBLIC ACCOLINlANTS FOUNQING PARTNERS BR.t\INAR.D C. SIMPSON. CPA MELBA W. SIMPSON, CPA Honorable Members of the City Council City of Los Angeles, California INDEPENDENT AUDITOR'S REPORT We have audited, in accordance with auditing standards generally accepted in the United States of America, the statement of net assets of the Sewer Construction and Maintenance Fund (Fund) of the City of Los Angeles, California as of June 30, 2011, and the related statements of revenues, expenses and changes in net assets, and cash flows for the year then ended, and have issued our report thereon dated February 7, In connection with our audit, nothing came to our attention that caused us to believe that the Fund failed to comply with the terms, covenants, provisions, and conditions of Section 6.03(b) of the City of Los Angeles Wastewater System Revenue Bonds General Resolution of the City Council dated November 10, 1987, and Section 6.03(b) of the City of Los Angeles Wastewater System Subordinate Revenue Bonds General Resolution of the City Council dated March 26, 1991, insofar as such terms, covenants, provisions, or conditions relate to the ratios of net revenues to debt service for the fiscal year ended June 30, 2011 (see attached schedules). It should be noted, however, that our audit was not directed primarily toward obtaining knowledge of such noncompliance. This report is intended solely for the information and use of the City Council and other City management and is not intended to be and should not be used by anyone other than these specified parties. ~~~( ~~;. Los Angeles, California February 7, 2012 The CPA. Never Underestimate The Value~

3 Schedule of Ratios of Net Revenues to Debt Service for Revenue Bonds, Subordinate Revenue Bonds, and Commercial Paper Revenue Notes Issued Under Senior Lien and Subordinate Lien General Resolutions, and State Revolving Fund Loan of the Wastewater System (dollar amounts expressed in thousands) Ratio of Net Revenues to Debt Service for Wastewater System Revenue Bonds (Senior Lien Bonds): Net revenues of the Fund (as defined in Notes 1 and 2) 125% of the debt service for Senior Lien Bonds of the Fund (as defined in Notes 1 and 3) Excess of the net revenues over 125% of the debt service for Senior Lien Bonds Ratio of net revenues to actual debt service for Senior Lien Bonds (minimum requirement 1.25 to 1) $ 255, ,973 $ 122, to 1 Ratio of Net Revenues to Debt Service for Wastewater System Revenue Bonds (Senior Lien Bonds), Subordinate Revenue Bonds and Commercial Paper Revenue Notes (Subordinate Bonds), and State Revolving Fund Loan: Net revenues of the Fund (as defined in Notes 1 and 2) 110% of the debt service for Senior Lien Bonds, Subordinate Bonds, and State Revolving Fund Loan (as defined in Notes 3, 4, and 5) Excess of the net revenues over 11 0% of the debt service for Senior Lien Bonds, Subordinate Bonds, and State Revolving Fund Loan Ratio of net revenues to actual debt service for Senior Lien Bonds, Subordinate Bonds, and State Revolving Fund Loan (minimum requirement 1.10 to 1) $ 255, ,226 $ 58, to 1 See accompanying notes to the schedule. -2-

4 Notes to Schedule of Ratios of Net Revenues to Debt Service for Revenue Bonds, Subordinate Revenue Bonds, and Commercial Paper Revenue Notes Issued Under Senior Lien and Subordinate Lien General Resolutions, and State Revolving Fund Loan of the Wastewater System Note 1 Note2 Note 3 Note4 Note 5 The "Fund" represents the Sewer Construction and Maintenance Fund. "Net revenues" represent the change in net assets reflected in the financial statements reduced by amounts received under contracts or agreements with governmental or private entities and designated for capital costs, interest subsidy from U.S. Treasury, grants received from federal or state, and interest income on the bond construction funds. It is increased by depreciation, amortization of bond issuance costs and bond discounts/premiums, amortization of advance and current refunding charges, debt interest expenses, and other nonoperating expenses. Debt service for "Senior Lien Bonds" represents interest and principal, if any, becoming due during the year, on bonds issued under the Wastewater System Revenue Bonds General Resolution of the City of Los Angeles dated November 10, Debt service for "Subordinate Bonds" represents interest and principal, if any, becoming due during the year on subordinate revenue bonds and commercial paper revenue notes issued under the Wastewater System Subordinate Revenue Bonds General Resolution of the City of Los Angeles dated March 26, Debt service for "State Revolving Fund Loan" represents interest and principal becoming due during the year on the state revolving fund loan issued under the State Revolving Fund Loan agreement dated June 5,

5 {An Enterprise Fund of the City of Los Angeles) Supplementary Schedule for Calculation of Net Revenues and Debt Service for Senior Lien Bonds, Subordinate Bonds, and State Revolving Fund Loan {dollar amounts expressed in thousands) Calculation of Net Revenues as Defined by Senior Lien General Resolution Change in net assets as reflected in the audited financial statements Less: Amounts received under contracts or agreements with governmental or private entities and designated for capital costs Interest income on bond construction funds Grants received from federal or state Interest subsidy from U.S. Treasury Subtotal Add: Depreciation expense Interest on bonds, commercial paper revenue notes, and state revolving fund loan (including amortization of discounts, premiums, and advance and current refunding deferred charges) Amortization of bond issuance costs Other nonoperating expenses Subtotal Net revenues $ (29,642) (10,415) (1,252) (13) ~3,600~ (15,280) 167, , , ,605 (A) $ 255,683 Calculation of Debt Service for Senior Lien Bonds as Defined by Senior Lien General Resolution Principal maturities - Senior Lien Bonds Interest payments - Senior Lien Bonds Actual debt service X 125% Modified debt service Excess of net revenues over modified debt service Ratio of net revenues over actual debt service for Senior Lien Bonds Only $ 38,245 68,133 (B) 106, (C) $ 132,973 (A)-( C) $ 122,710 (A)/(B) 2.40 to 1 Continued

6 Supplementary Schedule for Calculation of Net Revenues and Debt Service for Senior Lien Bonds, Subordinate Bonds, and State Revolving Fund Loan (Continued) (dollar amounts expressed in thousands) Calculation of Debt Service for Senior Lien Bonds, Subordinate Bonds, and State Revolving Fund Loan as Defined by Senior Lien, Subordinate Lien General Resolutions, and State Revolving Fund Loan Agreement Principal maturities - Senior Lien and Subordinate Bonds Principal maturities - state revolving fund loan Interest payments - Senior Lien and Subordinate Bonds Interest payments - state revolving fund loan Interest payments - commercial paper revenue notes Actual debt service X 110% Modified debt service Excess of net revenues over modified debt service Ratio of net revenues over actual debt for Senior Lien Bonds, Subordinate Bonds, and State Revolving Fund Loan $ 55,485 10, ,904 3, (D) 179, (E) $ 197,226 (A)-(E) $ 58,457 (A)/(D) 1.43 to 1-5-