COT Consultant Supports 2010 Reserve Level, Questions Are Raised About $54 Million!

The debate about the COT electric utilities reserves is beginning to provide answers, though questions remain.

Last Wednesday the COT brought in consultants to provide more information about the appropriate level of the electric reserve. City staff is seeking a reserve level between $119 million and $185 million. The reserve is currently at $105 million.

The lengthy presentation included various slide shows and talks from two consultants and Reese Goad of the COT. The presentations by the consultants were not provided to the public before the meeting and copies were not available at the meeting.

After reviewing the video of the meeting and analyzing the presentation by Virginia Rutledge of Public Finance Management Inc., Tallahassee Reports has determined that the presentation supported the 2010 reserve level of approximately $95 million.

Ms. Virginia Rutledge of Public Finance Management Inc. showed a chart that indicated the median level of cash on hand for an AA- rated utility, like the COT, was 113 days. She stated that a day of cash for COT was “roughly equal to $800,000.”

Based on the information provided by Ms. Rutledge, for the COT to be in the middle of the pack of the rating group, the reserve level would be equal to $800,000 multiplied by 113, which is approximately $90 million.

Before the $8 million transfer of last year’s surplus, Ms. Rutledge pointed out that Standard & Poors upgraded COT’s bond rating based on the reserve level of approximately $95 million.

Also, Ms. Virginia Rutledge of Public Finance Management Inc. did not offer an endorsement of the $185 million target level. Surprisingly, no Commissioner asked her if the $185 million target level was appropriate. Her presentation would seem to indicate that the $185 million target level is significantly higher than would be required by the rating agencies.

Commissioners and city staff were asked by Tallahassee Reports if the information provided at the meeting would result in a change to the target level of $185 million. There was no comment.

Another interesting development during the meeting was a question about the $159 million of unrestricted cash that is listed in the 2009 audited financial statements and referenced by a Fitch ratings report. Why is the COT talking about $105 million in cash reserves when these documents indicate that COT has $159 million?

City staff acknowledged the $54 million discrepancy and is working to provide an answer.

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