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Penrose Water District Agenda Item 10c November 13-15, 2006 The source of Enterprise funding for the CWCB loan payment will come from a combination of restructuring existing debt (discussed below in Creditworthiness), directing revenue from the voter- authorized Special Revenue Fund 3.00 mill levy toward debt service, and an increase in base water rate revenues accruing to the Enterprise. The Enterprise will pay off the existing DOLA loan and the existing USDA-RD loan, which will free up $21,689 of annual debt service. Also, a 2003 Revenue Bond Refunding issue will be retired by the District in 2012, freeing up $171,875 for the CWCB loan. That portion of the base rate revenue that historically covered this obligation will be re-allocated to the Enterprise. This will leave an additional $203,770 to be covered by the proposed base water rate increase of $9.25 per tap per month. Interim base rate increases will be used to pay Interest During Construction (IDC). Potential incremental increases over the existing $18 per tap base rate are: 2007 -+$3.00; 2008 -+$5.30; 2009 -+$7.50; and 2010 -+$9.25. Loan payments in 2011 and 2012 will be supplemented by cash on hand until the 2003 Bond is retired. A summary of sources of future Enterprise funding for the CWCB loan repayment, will be as follows: Enterprise savings from retirement of DOLA & RD loans $ 21,689 3.00 mill Special Revenue levy applied to debt service 64,000 Re-allocated savings from retirement of 2003 Bond $171,875 Increase in base water rate of $9.25 203 770 $461,334 Table 2 shows the Financial Ratios for the Enterprise and indicates overall average ability to repay the $8,757,000 CWCB loan, with the increased water rates and existing debt restructuring and retirement. No tap fee revenue is assumed in the calculations. Table 2. Financial Ratios Financial Ratio Without With project fhe project Future Years'' Aver. 2004-05 2013+ Operating Ratio (revenue/expense) weak: less than 100% N/A**' 1325% average: 100% - 120°� (strong) strong: greater than 120% 397K/30K Debt Service Coverage Ratio (revenues-expenses)/debt service 110% 101 % weak: less than 100% (average) (aver.) average: 100�0 - 125% strong: greaterthan 125% 24K-0/22K 497K 30/461 K Cash Reserves to Current Expense weak: less than 50�0 10% 10%""" average: 50% - 100% strong: greater than 100% (weak) (weak) 2w22K 50W491 K Debt per Tap (1,700 taps) (3,2oo�v��oo) (a,800�v��oo) weak: greater than $5000 average: $2500 - $5000 Enterprise $1,777 $5,151 strong: Iess than $2500 Total $2,397 $5,151 (strong) (weak) 4,OOOK/1700 8,800K/1700 � � � Page 6 of 8