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<br />following conditions: <br /> <br />- the Borrower is in substantial compliance with the CWCB loan contract, including but not <br />limited to, being current on its annual payments to the CWCB and being current on its <br />deposits to its CWCB debt service reserve fund, and <br /> <br />- the Borrower meets the Parity Lien Test. <br /> <br />PARIIY LIEN TEST. The Parity Lien Test requires a certification from an independent certified <br />public accountant stating that, based on an analysis of the Borrower's net revenues, excluding <br />connection and tap fees, for 12 consecutive months out of the 18 preceding months, the <br />revenues are sufficient to pay the following: <br /> <br />- annual operating and maintenance expenses, <br /> <br />- deposits to any reserve funds required by the CWCB and other lenders, <br /> <br />- annual payments on all outstanding loan debt and the proposed loan debt. <br /> <br />The analysis of revenues shall be based on the Borrower's current rate structure. <br /> <br />RATE COVENANT CLAUSE. All CWCB loan contracts with borrowers that sell water, such as <br />municipalities (as opposed to borrowers that levy assessments for the delivery of water, such <br />as ditch companies), contain a rate covenant modeled on the rate covenants contained in bond <br />issues. The rate covenant requires the borrower to set and collect water rates in amounts <br />sufficient to pay all outstanding indebtedness payable from water revenues, to pay all operation .. <br />and maintenance expenses, and to maintain all reserve accounts required by the CWCB loan <br />contract and by any other issuers of debt payable from the water revenues. <br /> <br />STAFF RECOMMENDATION <br /> <br />The staff recommends: <br /> <br />1. That the Board adopt the revised guidelines, as applicable, for parity status and the revised <br />parity lien test, <br /> <br />2. That the Board authorize the staff to review the information required by the parity lien test <br />and authorize the director to approve or deny parity debt with other lenders, <br /> <br />3. That the Board authorize the staff to include in CWCB loan contracts (1) a parity debt <br />provision that sets forth the guidelines, (2) the parity lien test, and (3) the rate covenant as <br />recommended in this memorandum. <br /> <br />. <br /> <br />. <br />