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.", " .. .. CWCB Parity Debt Policv Introduction Currently, CWCB loan contracts include an additional debts provision that sets forth the conditions a borrower must meet to obtain the CWCB's consent to additional parity debt. (parity debt means that the CWCB and a subsequent lender would share claims to the borrower's assets. In the event of default, the two lenders would divide the available assets on a pro-rata basis.) At its November 1996 meeting, the CWCB adopted a parity debt policy, which did not exclude connection and tap fees in calculating net water system revenues. At its January 1998 meeting, the CWCB amended its parity debt policy and revised the parity lien test to exclude connection and tap fees from a borrower's net revenues. Staff had recommended the revision due to concerns about basing consent to additional parity debt on a fluctuating source ofincome (tap fees) rather than on the more stable income produced by the sale of water to existing customers. Parity Debt Policv The CWCB will consent to parity status for a subsequent loan only if the borrower meets the following conditions: . · The borrower is currently and at the time of the issuance of the parity debt in substantial compliance with all of its obligations to the CWCB, including, but not limited to, being current on the annual payments due under all loan contracts and in the accumulation of all amounts then required to be accumulated in the borrower's debt service reserve fund(s); and · The borrower provides to the CWCB a Parity Certificate from an independent certified public accountant certifying that, based on an analysis of the borrower's revenues, _'.':F~'J1t1Llp ~lI1d':'r CTIlI12l-:iL1:1 1"'2:-. for 12 consecutive months out of the 18 months immediately preceding the date of issuance of such parity debt, the borrower's revenues are sufficient to pay its annual operating and maintenance expenses, annual debt service on all outstanding indebtedness having a lien on the pledged revenues, the annual debt service on the proposed indebtedness to be issued, and all required deposits to any reserve funds required by all CWCB loan contracts or by the lender( s) of any indebtedness having a lien on the pledged revenues. The analysis ofrevenues shall be based on the borrower's current rate structure or the rale Slructure most recently adollled by the borrower's !2lwcrnill!2 bod v authnrizcd tn l'st<lhlish rates or ICes. No more [h~1ll tCIl nCITl'l11 of'\ol;d rl'\'l'lltll'S 1l1~1\' ol"i~ill~lll' rroll1 lan and 'or COlllk'Ctiol1 ICes. .