a water & sewer revenue project has $15,000,000 in total revenues. the operating and maintenance expenses are $9,000,000 bond interest is $2,000,000, and principal repayment is $1,000,000. How much is available for debt service?
- revenue issues are referred to as being net revenue issues since expenses are deducted from income prior to paying debt service. (the one exception to this are hospital revenue issues which are gross revenue issues). the amount available to pay debt service (interest and principal due) is $6,000,000 ($15,000,000 gross income minus $9,000,000 operating and maintenance expenses)
if the question had asked for the coverage or debt service ratio, you would compare the amount available, $6,000,000, to the debt service of $3,000,000 ($2,000,000 interest + $1,000,000 principle)