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CliftonLarsonAllen LLP <br /> / www.cliftonlarsonallen.corn <br /> CliftonLarsonAllen <br /> July 9, 2014 <br /> Ms. Peg Mason <br /> Contract Manager <br /> Colorado Water Conservation Board <br /> 1313 Sherman Street, Suite 721 <br /> Denver, CO 80203 <br /> Re: Denver Southeast Suburban Water and Sanitation District- <br /> Parity Calculations in Relation to the 2014 CWCB Water Project <br /> Loan Program - $9,926,280 Loan—Parity Certificate <br /> Dear Ms. Mason: <br /> This report summarizes the results of procedures performed related to certain additional <br /> covenants and requirements related to the above referenced loan. In addition to the 2014 <br /> Colorado Water Conservation Board Loan (CWCB Loan), the District also has <br /> outstanding its 2002 and 2005 Colorado Water Resources and Power Development <br /> Authority Loans (CWRPD Loans) and its 2010 Wells Fargo Enterprise Revenue <br /> Refunding Note (Wells Fargo Note). <br /> The CWCB Loan requires that the District's net revenues for any 12 consecutive months <br /> out of the 18 months immediately preceding the date of issuance of any parity debt are <br /> sufficient to pay its annual operating and maintenance expenses, annual debt service on <br /> all outstanding indebtedness having a lien on pledged revenue, and all required deposits <br /> to any reserve funds required by any lenders of any indebtedness having a lien on <br /> pledged revenues. Additionally, no more than 10% of total revenues may originate from <br /> tap and/or connection fees. <br /> The CWRPD Loans require that no obligations on a parity with the CWRPD Loans may <br /> be issued unless the net revenues for any 12 consecutive months out of the 18 months <br /> preceding the month in which such obligations are to be issued are at least equal to the <br /> sum of 110% of the maximum annual debt service of the CWRPD Loans and 100% of <br /> the maximum annual debt service of all other indebtedness. Additionally, the 2005 <br /> CWRPDA loan requires that the amount available for debt service be reduced by one half <br /> of the average annual total tap fees, net of cost recovery payments, for the three prior <br /> years. <br /> The Wells Fargo Note requires that the District must meet a minimum pro fol.= debt <br /> service coverage ratio of 110% in each of the previous two fiscal years, calculated by <br /> using the new pro forma debt service (existing debt plus new debt) as the denominator <br /> and pledged revenues (net revenues—available for debt service) as the numerator. <br />