PROJ00283

• Contract/PO #: FS0009X
• Contractor Name: Swink, Town of
• Contract Type: Loan
• Water District: 0
• County: Otero
• Loan Projects - Doc Type: Feasibility Study

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9 - FINANCIAL PROGRAM

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9.1 FINANCIAL FEASIBILITY OF PROJECT-INCOME VS. EXPENSES

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A six-year cash flow schedule is developed and shown in Table 7. The schedule
shows the projected income, expenses, reserve funds, and cash balances for
five interest rates. Income is projected at the~corresponding rate structures as
shown previously in this report. In preparing the cash flow schedule, it is
assumed that a rate increase will be established early in 1977. This is to
generate the surplus funds needed for short-term interim financing prior to and
during construction. An interest allowance of approximately 2.5% of the con-
struction cost is included~in the total project cost. This is included to
provide an interest contingency in case the following occurs:

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1. The water rate increase is not established early in 1977;

2. The rate structure does not produce the required income during the
first three y~ars of the project;

3. Interest rates on interim financing during construction are higher
than the assumed rate;

4. Abnormal and excessive time delays occur between the completion of
design plans and specifications and the award of a construction contract.

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Operating, maintenance and replacement costs are taken from Table 5. A 10%
coverage on the loan payment is provided as a reserve fund. This would be
accumulated for the first ten years of the loan period and could be used both
as a loan reserve and an emergency operating fund.

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Debt service calculations shown below and utilized in the schedules of Table
7 are based on the following assumptions:

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1. Grant funds being available within a reasonable period of time be-
cause of current Federal agency requirements on eligibility.

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2. A low-interest rate loan being available through the State of Colorado,
Department of Natural Resources, Colorado Water Conservation Commission.
Interest rates are shown for 1 percent through 5 percent. Thesei'~
interest rates reflect a State loan.

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3. Total loan program in the amount of $417,000 to be authorized during
calendar year 1977 for project expenditures in 1977 and 1978. Loan
term to be 30 years with equal annual principal and interest payments.

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Principal Amount (P) == $417,000
Percent interest (i) == 1%, 2%, 3%, 4%, and 5%
Loan Term (n) == 30 years
Average Annual Payment (r) i(l+i)n
= P (l+i)n-l

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