RES 2024025 - Laserfiche WebLink

39 BOND OWNERS’ RISKS The following describes certain special considerations and risk factors affecting the payment of and security for the 2024 Bonds. The following discussion is not meant to be an exhaustive list of the risks associated with the purchase of any 2024 Bonds and the order presented does not necessarily reflect the relative importance of the various risks. Potential investors in the 2024 Bonds are advised to consider the following special factors along with all other information in this Official Statement in evaluating the 2024 Bonds. There can be no assurance that other considerations will not materialize in the future. Revenues; Rate Covenant The Revenues securing the 2024 Bonds consist primarily of Installment Payments payable by the City, which, in turn, are secured by the Net Revenues of the Water System. Net Revenues are dependent upon the demand for water usage, which can be affected by population factors and climactic conditions such as droughts. There can be no assurance that demand for water usage will be consistent with the levels contemplated in this Official Statement. A decrease in the demand for water could require an increase in rates or charges in order to comply with the rate covenants contained in the Installment Sale Agreement. The City’s ability to meet its rate covenants is dependent upon its capacity to increase rates without driving down demand to a level insufficient to meet debt service on the Installment Payments and Parity Debt. No Debt Service Reserve Fund Neither the Authority nor the City will fund a debt service reserve fund for the 2024 Bonds. If Net Revenues are insufficient for the City to pay the Installment Payments when due, no debt service reserve account funds will be available under the Installment Sale Agreement or Indenture for the City to make such payments. Maintenance and Operation Costs; Third-Party Sources of Water Supply There can be no assurance that expenses of the Water System will be consistent with the levels contemplated in this Official Statement. In particular, the City currently obtains 100% of its potable water from Zone 7, and therefore the City may have less control over the expenses attributable to its water supply than if the City directly controlled its water. The cost of purchased water from Zone 7 is, by far, the largest line item for Maintenance and Operating Costs. For Fiscal Year 2023, the wholesale rates for water charged by Zone 7 are not passed- through to customers of the Water System, rather they are incorporated into the rates and charges that the City must establish in order to operate the Water System and to pay debt service on the Water System’s long-term obligations, including the 2024 Bonds. However, starting with January 1, 2024, the Zone 7 rates will be passed-through to customers of the water system. In addition to its purchased water expenses, changes in technology, changes in quality standards, and increases in the cost of operation or other expenses could require substantial increases in rates or charges in order to comply with the rate covenants in the Installment Sale Agreement. Changes in water quality included the changing regulations for PFAS. Until such rates can be implemented, Net Revenues may be reduced, increasing the possibility of nonpayment of the Installment Payments and, in turn, the 2024 Bonds.