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Table 12 Redwood City Water Financing Plan Cash Flow Assumptions General Assumptions 1 Long-term financial projections are based on 2006/07 Adopted Budget and 2007/08 preliminary budget. with adjustments to better reflect actual year-to-date finances and future cost projections. 2 Growth in active service connections is estimated at 0.25% per year or about 1 % every four years. 3 Annual percentage change in water sales based or!Redwood City 2005 Urban Water Management Plan demand projections which include passive and active conservatio Revenue Assumptions Water meter charges based on 2006/07 budget and increase to account for projected growth and rate adjustments. 2 Water sales projections in 2006/07 estimated based on actual year-to-date sales revenues through March 2006, and assume normal spring water sales based on historical demand by month. 3 Revenue reduction due to recycled water discount estimated based on updated projections of recycled water use and account for projected rate adjustments. 4 Facilities fees. connection fees. and miscellaneous revenues projected to remain flat based on 2006/07 budget. 5 Interest income through 2008/09 is based on estimated developed by the City's Finance Department. Interest income beginning 2009/10 is projected at 3.5% of beginning fund balances and also accounts for estimated interest earnings on debt service reserves funds for each of the outstanding bond issues. Interest eamings bond reserve funds accrue to the recycled water project fund prior to 2009/10, Expense Assumptions 1 Expenses for employee costs, supplies & services, intemal services, and minor operating capital outlay based on 2006/07 and 2007/08 budgets for the following programs: 65142, 65144. 65145. 65146. 65147,61410, and 61710. (The only caveot being that the $100,000 in new recycled water operating costs is instead shown on a separate line item.) 2 The increase in employee costs and the decrease in supplies and services from 2006107 to 2007108 reftects an accounting change reclassifying retiree health care (OPES) funding. The increase in employee costs also reftects an increase due to staffing costs for positions that were vacant In 2006/07. 3 Internal services account for reimbursements to the Water Fund from the General Fund and Sewer Fund for garbage and sewer utility billing services. 4 SFPUC water purchases show budgeted expenses for 2006/07. Beginning 2007/08, these costs are based on water demand projections and latest wholesale SFPUC rate projections. 5 SBSA recycled water purchases based on projected fixed and variable SBSA recycled water production costs per contractual agreement. and City's updated recycled water sales projections. 6 Recycled water project operating costs for additional pumping, staffing. and other expenses. are projected to phase in from $100,000 in 2007/08 to $250.000 in 2010/11, at which point tf-tey escalate based on projected operating cost inflation. 7 Debt service includes outstanding Series 2005A and 2006A Bonds, plus projected debt service for 2007A Bonds that the City anticipates issuing in June 2007. 8 Capital expenditures include $2 million per year for potable water system upgrades and replacements and $250.000 per year for the water conservation program. The projections exclude funding for potential water tanks that the City anticipates will be needed to serve both existing customers and future development dUring emergency responses. The cost of the water tanks (through existing tank retrofit and/or installation of a new tank or tanks) for the City's portion is estimated to be approximately $4 mlllion, which the City has not yet determined how to finance. 9 The projections do not show a potential short-term loan from the water fund to the sewer fund. This loan we only result in a temporary impact on water fund finances and would have no effect on longer term financial projections. 10 Debt service coverage is calculated at total revenues less operating expenses. divided by total gross debt service on all outstanding and projected debt. BARTLE WELLS ASSOCIATES F:IJobs\Redwood Cityl' 921\ IWaler FInancial Plan Update 2007 FICash Flow Assumps,411612007, 11:29 AM 8e Page 117 Attachment 5