PROJ00111

• Contract/PO #: C153694
• Contractor Name: Castle Pines North Metro District
• Contract Type: Loan
• Water District: 8
• County: Douglas
• Bill Number: HB 95-1155
• Loan Projects - Doc Type: Contract Documents

Castle Pines North Metro District
November 21, 1995
Page 6

for collection year 1994 will be the highest overlapping mill levy in Douglas County."

As Table 2 shows, long-term debt for bonds payable was $45,480,500 per the District's 1994
financial statement. For 479 taps, this amounts to about $95,000 per tap or, assuming a
population of 1,540 persons, $29,400 per capita. Information provided by the DLG indicates
that total average municipal debt per capita in Colorado (excluding Denver) amounts to
$1,159.

The Water and Sewer Funds of the District operate as an enterprise with all revenues received
from service charges. For the year ended December 31, 1994, combined Water and Sewer
Fund revenues from service charges amounted to $382,904. Combined expenses, not
including depreciation, were $320,090 for net (cash) revenue of $62,814. The Water and
Sewer Funds ended the year with a combined retained deficit of $1,836,877 due to unfunded
depreciation.

(In the District's 1994 fmancial statement, the Water and Sewer Funds are described as
"Proprietary Funds". Lorene Gruzdis, manager of the CPNMD, indicates that the two funds
are accounted for separately in the annual fmancial statement but that they operate as a single
enterprise. )

In May 1995, the District's Board of Directors adopted a new potable water rate structure as
shown in Attachment C. For the average water user (3/4" tap) in the District, I estimate that
water service charges would amount to about $600 per year under the new rate structure.

The District's financial consultant, using essentially the same estimate of revenue per tap, has
prepared a projection of Water and Sewer FUnd revenues over the next IS years, the period
of CWCB debt retirement as noted above and as shown in Attachment A. The projection
indicates that revenues will exceed operating expenses by a considerable margin in each year.
If net revenues for water.and sewer are combined for loan repayment, the debt service
coverage ratios for the Construction Fund loan over the next 15 years are very favorable.

Unfunded depreciation will continue to be substantial but, in the absence of a catastrophic
system failure, will probably not be a problem for loan repayment. Capital improvements
consisting of system extensions will be paid by developers, Other capital improvements might
be paid from a portion of tap fee revenues or from surplus revenues in the Water and Sewer
Funds.

Also, it should be noted that a Construction Fund loan of $301,500 at 5.0 percent for 15 years
would result in annual payments of about $29,000, or about $60 per residence per year with