HomeMy WebLinkAbout13 Construction Reserve Fund i
Agenda Item #
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TRUrkEED�JtyONNE
Public Utility istrict
Memorandum
To: Board of Directors
From: Peter Holzmeister
Date: March 26, 2002
Subject: Construction Reserve Revolving Fund
We have discussed in the past the possibility of selling surplus land owned by the
District and restricting the proceeds of the sale in a fund to help construct necessary
water and electric facilities. The procedure, as we have discussed it, would be as
follows:
1. Land is declared surplus and sold according to the procedures set forth in law.
2. The cash received from sale of land would be placed into a restricted fund to be
known as the Construction Reserve Revolving Fund. It would be invested at LAIF and
receive its own interest earned.
3. If the District plans to construct capital facilities it wold borrow from the Construction
Reserve Revolving Fund to pay for the construction of the facilities and a repayment
schedule would be formally set up such that the Construction Reserve Revolving Fund
wold be repaid. An interest rate would be established equal to the LAIF interest rate that
would have been earned by the funds had they remained on deposit.
4. The loan from the Construction Reserve Revolving Fund and its repayment would be
formally established by resolution of the Board, and wold be reflected on the District's
accounting records as debt.
The advantage to the District is we would avoid the costs of issuing traditional debt.
Debt from the Construction Reserve Revolving Fund would be quick to arrange. We
always have to opportunity to take out this internal debt with traditional outside debt if
there were advantages in doing so. This gives us a tool that we do not have now.
This is a workshop item so I do not have a formal recommendation and no action is
necessary.