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<br />The feasibility report should describe each method of fmancing to be utilized such as a <br />CWCB loan, loans from other agencies, bond issues or bank notes. Repayment <br />periods and interest rates associated with each type of financing should be described. <br /> <br />The ultimate sources of funds for repayment of costs should also be described in the <br />study report. These may include assessments, water sales, ad valorem taxes and grants. <br /> <br />Each fmancial feasibility analysis should include a detailed schedule of estimated annual <br />revenues and annual expenditures for the entire period of debt retirement Annual <br />revenues should be estimated and displayed for each source of funds (assessments, water <br />sales, ad valorem taxes, etc.). Annual expenditures should be displayed for debt <br />retirement payments to each category of debt, for operation and maintenance costs, and <br />for payments to reserve funds. An example of a schedule of annual revenues and <br />expenditures is shown in Table B-1. <br /> <br />The example in Table B-1 is based on a hypothetical water district which derives <br />revenues from irrigation assessments (75%) and from municipal and industrial (M&I) <br />water sales (25%). The district proposes to undertake a project with a total capital cost <br />of $1,500,000. Initial annual operation, maintenance, insurance, replacement, and <br />administration costs are estimated at 1.15% of the total project cost. Inflation is assumed <br />at 3% per year. <br /> <br />Sixty percent of the capital costs are assumed to be fmanced by a 30-year CWCB loan <br />at an interest rate of 5 percent while the remaining forty percent are assumed to be <br />fmanced by a 25-year bond issue at an 8 percent interest rate. Reserve funds would be <br />accumulated over ten years in three reserve accounts. The emergency operating reserve <br />fund would accumulate 10% of operation, maintenance, insurance, replacement, and <br />administration expenses. The CWCB loan reserve fund would accumulate the equivalent <br />of one annual loan payment A similar bond reserve fund would also be established. <br />Interest on these reserve funds in the example is estimated to be earned at 6%. <br /> <br />In addition to the preceding analysis, the fmancial feasibility evaluation should provide <br />an estimate of the potential impact of the project on the project sponsor's revenue sources <br />such as water rates, assessments and ad valorem taxes. <br /> <br />For a new irrigation project or for a major expansion of an existing irrigation project, a <br />payment capacity analysis is recommended as part of the fmancial feasibility evaluation. <br />The payment capacity analysis should compare the total annual project costs with <br />expected annual net revenues from the new or expanded irrigation system. <br /> <br />Feasibility studies for projects with a hydropower component should include an <br />assessment of the potential market for the hydropower. As a miniolum, the study should <br />identify the utility (or utilities) which are potentially willing to purchase the power and <br />the rates at which the power might be sold. <br /> <br />B-5 <br />