Above the Line or Below the Line, Not All Expenses are Equal

摘要

The subject of this paper is the different treatment of direct and indirect operating expenses and the effect on bond security and credit quality. The concept of operating expenses and priority of payment are linked with full cost accounting techniques used by many systems. Also discussed will be the impact on solid waste systems of the new accounting and financial statement model finalized by the Governmental Accounting Standards Board (GASB), in June 1999. Bond security structures have demonstrated that not all expenses are created equal. There are some expenses that may be payable after debt service. There are expenses, such as debt service on vendor bonds, that are payable as an operating expense, and are senior to the payment of debt service on net revenue bonds. Some systems have recovered indirect costs ahead of debt repayment and others have recovered these costs after payment of debt service, increasing available funds for coverage of debt service. For some systems, this additional coverage has led to higher credit ratings when coupled with conservative financial projections and sound bond security covenants.