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<br />I <br />I <br />I <br />I <br />I <br />I <br />I <br />I <br />I <br />I <br />I <br />I <br />I <br />I <br />I <br />I <br />I <br />I <br />I <br /> <br />Qptional System Development and Construction <br />Financina..ARProach: Conceptual Hookup Fees, Rate <br />Schedule, and Payback Analysis <br /> <br />As an alternative approach to having development pay the initial system development <br />and construction costs, this section describes a conceptual approach that is based on <br />the Highland Ditch Company providing the initial funding and recuperating those costs <br />through hookup fees to each development. <br /> <br />A preliminary investigation of suitable initial hookup fees 1 and annual costs of water has <br />been completed based on shared costs experienced by canal companies in other states <br />and on the basis of what will work to make the investment costs suitable for all parties <br />that are involved in northeastern Colorado. Clearly, the initial capital investment by the <br />Highland Ditch Company must be paid off, along with interest on the construction loans, <br />and the annual operating costs of the secondary supply system. Costs have been <br />projected on the approximate basis that the hookup fee revenue would, over time, pay <br />off the principle and interest on the construction loans while the annual water revenues <br />would go primarily toward annual expenses associated with operating the secondary <br />supply system. <br /> <br />Table 11 indicates both hookup fees and annual water costs which vary with POC size. <br />These proposed costs are presented for discussion and further analysis should such be <br />requested or warranted. It should be noted that hookup fees are based on an <br />approximate direct relationship with available flow. This is how most water purveyors set <br />hookup fees. <br /> <br />The annual cost of water is intended to be a flat rate for an unmetered circumstance, but <br />a unit cost per 1,000 gallons could likewise be established to provide for a similar annual <br />cost. If water were metered at a single rate with no tiered rate, then the metered rate <br />would be approximately $1.40 per 1,000 gallons. <br /> <br />Table 12 shows the projected income, expenses, and Indicated Cash Balance for the <br />conceptual pressurized secondary supply system for the first 10 years. There are <br />several line items in this table that were included to try and provide a best estimate as to <br />the total expenses. Obviously, these estimates depend significantly on decisions made <br />by Highland Ditch. The concept was to look at the "bottom line" for the first 10 years and <br />use this projection as an indication as to the feasibility of the pressurized system. Based <br />on these estimates, within 10 years, approximately $8.7 million dollars might be <br />generated from hookup fees and raw water rates collected, This is about 27% of the total <br />estimated construction cost for all phases, which would likely carry a 30-year loan. In ten <br />years, the projected build-out was estimated to be about 50% for these calculations. <br /> <br />Additional tables related to the hookup fees, rate schedule, and payback analyses are <br />located in the Appendix of this report. <br /> <br />1 In some areas, hookup fees are also termed plant investment fees, The terms are synonymous. <br /> <br />Aqua Engineering, Inc. <br />November 8, 2004 <br /> <br />Canal Modernization Feasibility Study <br />- 36- <br /> <br />