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PWB Financial Calculators

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					FINANCIAL CALCULATORS:
QUESTION. Can you afford to finance this project and take on this loan?
Use the following calculators to quickly see your estimated annual payment, impact of this loan to your current rate, and the overall picture of your system's
financial health.
Table 1. Loan Information                                                            The "Est. Annual PWTF Loan Payment" on the left is based on a straight line
                                                                                     amortization. Please note that the Public Works Board (the Board) uses the
PWTF Loan Request:
                                                                                     declining balance amortization. As payments are made, the principal balance
Term:
                                                                                     will decline. This, in turn, means that the interest payment will be lower, and
Interest Rate:                                                                       the principal payment will be higher (because the principal payment amount
Est. Annual PWTF Loan Payment:                                       #DIV/0!         is constant), for each successive payment. In short, PWTF amortization
Est. Total Interest Payment:                                         #NUM!           schedules will have higher payments in the first year and lower payments in
                                                                                     last year.

Table 2. Rate Information                                                                  Board staff recommends using the number of ERUs and not connections,
2012 Number of ERUs:                                                                       unless all current connections are residentials. An ERU is a unit of measure
2012 Current Monthly Average Utility Rate per ERU:                                         used to equate non-residential or multi-family residential utility usage to a
Est. Monthly PWTF Loan Service per ERU:                                  #DIV/0!           specific number of single-family residences.
Est. Monthly Ave. Rate After PWTF Loan per ERU:                          #DIV/0!           At a minimum, a financially healthy utility system needs to increase its utility
Est. Rate of Increase:                                                   #DIV/0!           rates to cover inflation.



Table 3. Affordability                                                                     The affordability index (AI) is defined by the Board as the annual average
2012 Number of ERUs:                                                               -       utility rate as a percentage of the median household income (MHI) for the
Est. Monthly Ave. Utility Rate After PWTF Loan:                          #DIV/0!           area. A typical affordability range utilized by the Board to assess the burden
2011 Median Household Income:                                                              of utility costs on residents is from 2.0% to 2.5% of MHI. An AI of of 2.0% or
Affordability Index:                                                     #DIV/0!           less is deemed to be affordable and an AI of greater than 2% of MHI should
                                                                                           be investigated further - especially if the residents are paying additional user
                                                                                           charges for the wastewater, solid waste and other utility services. An AI of 2%
                                                                                           or more may qualify for lower interest rate and longer terms under the
                                                                                           Board's policy.

Table 4. Operating Ratio                                                                   Source of data: Profit and Loss or Income Statement. The Operating Ratio
2011 Operating Income of the System:                                                       measures the amount of operating expense as a percentage of operating
2011 O & M Expense of the System:                                                          revenue. The minimum standard for a operating ratio for a utility system is
Operating Ratio:                                                         #DIV/0!           1.0, meaning there is enough operating revenue to cover operating expenses.
                                                                                           A financially healthy jurisdiction or system should have an ongoing operating
                                                                                           ratio of greater than 1. A ratio of less than 1 indicates there is insufficient
                                                                                           revenue to meet current expenses. For example, if you had an operating ratio
                                                                                           of .80, this means your revenue is 80% of expenses, which means you can
                                                                                           only cover 4/5 of expenses.


Table 5. Debt Ratio                                                                        Source of data: Balance Sheet. The debt ratio measures the amount of debt
2011 Total Debt:                                                                           being utilized by a jurisdiction or system. A higher ratio indicates that
2011 Total Assets                                                                          operations and assets are financed mainly with debt. For eaxample, a ratio of
Debt Ratio:                                                              #DIV/0!           0.7 means that 70% of assets have been financed with debt and the
                                                                                           remaining 30% has been financed by equity.

Table 6. Current Ratio                                                                     Source of data: Balance Sheet. Current Ratio (CR), is a measure of short-term
2011 Current Assets (Cash & Cash Equivalents):                                             liquidity, or the ability of a jurisdiction or system to pay short term
2011 Current Liabilities (debt, etc. to be paid w/in 1 yr):                                obligations in a timely manner. A ratio under 1 suggests that a jurisdiction or
Current Ratio:                                                           #DIV/0!           system would be unable to pay off its obligations if they came due at that
                                                                                           point. The higher the CR, the better.

Table 7. Debt Service Coverage Ratio:                                                      Source of data: 2012 Adopted budget or Profit and Loss/Income Statement
2012 Total Operating Revenue:                                                              and Balance Sheet. The Public Works Board pays close attention to debt
2012 Total Operating Expenses:                                                             service capacity of a loan applicant. A Debt Service Coverage Ratio (DSCR) of
2012 Net Operating Income:                                          $              -       less than 1 would mean a negative cash flow. A DSCR of .95, would mean
2012 Short Term Debt, Est. 2012 PWTF and Oth. Loan Pmt:                  #DIV/0!           that there is only enough net operating income to cover 95% of annual debt
Debt Service Coverage Ratio:                                             #DIV/0!           payments. This could also mean that the borrower would have to delve into
                                                                                           its reserves every month to keep the system afloat unless the borrower has
                                                                                           strong other income. A DSCR should be 1.0 at a minimum, with a
                                                                                           recommended ratio of 1.26.



In addition to above rate review, affordability indicator and ratios, operating reserves, capital reserves and emergency reserves are important aspects for financial
sustainability. Emergency reserves are intended to help rate based and non-rate based systems alike deal with short term emergencies which arise from time to time.
The appropriate amount of emergency reserves will vary greatly with the size of the system and should depend on major infrastructure assets. For example, given
that the largest single asset for a small rural utility may be the primary pump, the cost of replacing that pump in the case of a failure would be a good amount to save
in emergency reserves.
The Public Works Board expressly disclaims any warranty related to the information provided by the jurisdiction and will accept no responsibility for any
consequences arising from use or reliance on this tool. Qualified professional advice should be sought when making financial decisions.
If you have any questions, please contact Myra Baldini, Public Works Board Staff @ (360) 725-3152 or E-mail :                  Myra.Baldini@commerce.wa.gov
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