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<br />4930 <br />SOUTH METRO SUPPLY STUDY <br />MODELING ASSUMPTIONS <br /> <br />Prepared by: RGA <br />Date: 2/18/2004 <br /> <br />1. The financial model is comprehensive in that it includes user fees and impact fees as the two <br />financing/cost recovery tools. <br /> <br />2. Impact fees are developed based on the allocation of construction costs using the ratio of new <br />SFE accounts to existing SFE accounts. This results in 44% of the project being allocated to <br />future accounts (impact fees) and 56% to existing accounts (user fees). An average inflation rate <br />of 3.0% (shown in the table below) is used to adjust the irP.pact fees annually. <br /> <br />3. Ending Balance cash is used for construction costs to reduce the bond issue amount. Bonds are <br />issued every 3 years if needed. The cash balance earns interest income in years when the <br />baiance is positive. <br /> <br />4. Periodic Rehab & Repair costs begin 10 years after each construction phase ends. <br /> <br />5. Construction costs are escalated 3.0% annually to the y€a~ in which they are spent. <br /> <br />6. The initial (year 2010) volume rate is calculated to cover O&M and Rehab & Repair, and is <br />adjusted thereafter to ensure funds are sufficient to meet total expenditures, and debt service <br />coverage and operating reserve ratios. This includes any debt service not covered by impact <br />fees. <br /> <br />7. Other assumptions included in the model are shown in the table below. <br /> <br />". Description Data Units <br />., Bond Interest Rate 6.0D% % <br /> Bond Issuance Costs as % of Bond Issue 1.DO% % <br /> Years To Bond Maturity 20 years <br /> Debt Service Coverage Ratio 1.20 multiple of debt <br /> service <br /> Operating Reserve Ratio 150/, % <br /> Acre-feet per SFE 0.6 af <br /> People per SFE 2.8 population <br /> Average Inflation Rate for Impact Fees 3.()% % <br /> Interest Earned on Cash Balances 3.0% % <br /> <br />. / <br /> <br />Rick Giardina & Associates - South Metro Water Supply Planning Study <br /> <br />Page 7-1 <br />