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4 <br /> TABLE 2.Water Enterprise Capital Plan Expenditures In 2007 Dollars($million) <br /> 2007-2011 2012-2016 2017-2021 2022-2030 Total <br /> Capital Plan Expenditures $1,173 $416 $535 $756 $2820 <br /> These expenditures include the current opinion of cost for completion of the Prairie Waters <br /> Project for water delivery in 2010 and provide for other important water,land and capital <br /> acquisitions and improvements.The planned capital spending beyond 2011 is included in <br /> the Cash Flow Model to indicate that the Financial Plan can be sustained under the assumed <br /> conditions over the long-term.The projected cash flow requirements for the capital plan will <br /> be updated as actual purchases of land and water rights occur and as construction cost <br /> estimates are refined. <br /> Water Demand and Sales <br /> The Cash Flow Model for revenue(as well as the capital infrastructure needs) assume a <br /> demand for water averaging 160 gallons per capita per day(gpcd) and associated sales of <br /> water,beginning in 2007.The City has observed average demand of 160 gpcd in recent <br /> years,with a peak of 188 gpcd in 2001 and a low of 123 gpcd when water restrictions were <br /> in place in 2003.Water demand increased in 2005 and 2006 and is expected to reach 160 <br /> gpcd in 2007.While it is recognized that future sales may be impacted by rate increases and <br /> customers'water usage responses, Aurora Water has determined that the overall projected <br /> water demand is reasonable based on historical usage and comparison with other <br /> jurisdictions. <br /> Population Growth and Tap Sales <br /> A population growth averaging 1.7 percent annually is assumed. It is also assumed that this <br /> population growth translates into a similar growth in water customers and tap sales. Aurora <br /> has grown at approximately this rate for many years. <br /> Debt Service Coverage Ratios <br /> Debt Service Coverage Ratios are a key parameter for the Cash Flow Model.The Model <br /> assumes compliance with required bond covenants at a 1.20 debt service coverage ratio. <br /> More importantly,the Cash Flow Model requires a target 1.00 nominal coverage ratio <br /> (without tap fees) and a higher than covenanted target coverage ratio of 1.50(including tap <br /> fees).The Cash Flow Model allows the coverage ratio without tap fees to drop as low as 0.90 <br /> for a few years as long as the target coverage ratio of 1.50 (with tap fees)is maintained. <br /> Debt <br /> The Model assumes the financing of capital projects using cash(as available)and debt with <br /> a term of 30 years at interest rates of 5.25% in 2007 and 5.50%from 2008 forward.Longer <br /> term debt financing (40 years)has been considered but is not recommended because of the <br /> lack of positive impacts on rate structures or cost allocation issues.The dates of issuance and <br /> the structure of the actual debt issued will depend on future commitments and can differ <br /> from the assumptions in the current version of the Cash Flow Model.The capacity to issue <br /> debt and request authorization from Council to enter future construction contracts will be <br /> preceded by a full review of the Utilities' ability to issue further debt and the effects on the <br /> cost of service. <br /> 27 <br />