[bouldercouncilhotline] Hotline: Question for 3-rd Party reviewer on Municipalization debt deferral

[cmosupport at bouldercolorado.gov]

Sender: Wilson, Ken



I believe it is well known that the City's municipalization model shows payment of interest and debt on bonds for municipalization being deferred for more than a year.  The city's 3rd party expert stated that this is common practice in the industry.  An
 expert who I generally rely on in this area (Kent Taylor of KTM Consulting in Boulder) says that it is not common practice for assets that are put into service and generating revenue on day one. 

 
Kent Taylor's general comment is as follows:
 
"Interest
 is the cost of using someone else’s money.  When the loan principal is related to assets that are providing the desired service to consumers, the interest should be acknowledged as a cost of providing the service and, in a utility setting, should be recovered
 from those receiving the service when the service is rendered.  Further, a portion of the loan principal (investment recovery) should also be recovered from those receiving the service.  That process aligns cost causation responsibility with those who are
 receiving the benefits.
 
Anything other than the process described above violates the matching principle."

 
 
My question for the consultant in this regard is as follows:
 
Please give six examples (three for Investor Owned Utilities and three for Municipal Utilities or REAs) where debt payment was delayed more than one month past the time the assets were put into service, where such assets were generating revenue for the utility
 on day one.  Please give the amount of the debt and the amount of time  that payment was delayed in each case.
 
Ken Wilson
Council Member