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<br />Table A-2 <br />Redwood City Water Financing Plan <br />Recycled Water Project Financing Assumptions <br /> <br />Financing Assumptions <br />1 Based on updated and refined recycled water project construction cost estimates by <br />Kennedy/Jenks, total costs adjusted for cost inflation to construction date are estimated at <br />$84 million over a 10-year period. <br /> <br />2 The project costs are front-loaded, with almost $50 million in expenditures anticipated over <br />the first two years. However, the City will phase-in required rate adjustments in a steady <br />and predictable manner, to the extent possible, in order to minimize the annual impact on <br />ratepayers. <br /> <br />3 Financial projections assume that recycled water capital projects will be funded by a series <br />of water revenue bonds aligned with the project funding requirements. Project financing <br />will need to be secured prior to award of each construction contract. <br /> <br />4 Debt service estimates are based on slightly conservative future interest rate estimates, <br />30-year bond terms, equal annual debt service payments, and cash-funded debt service <br />reserve funds. Interest earnings on debt service reserve funds assume investment in a <br />long-term investment contract at the estimated bond rate. <br /> <br />To secure bond financing, City Council will need to adopt legally-binding pledges to <br />increase water rates as needed to fund annual operating and maintenance expenses and <br />achieve a 120% debt service coverage ratio (this is standard security for water revenue <br />bonds) . <br /> <br />5 <br /> <br />7 <br /> <br />Redwood City will pursue funding from grants and subsidized loans to the extent possible; <br />funding received from these sources will offset the amount of bonds issued. <br /> <br />For planning purposes, the financial projections assume Facilities Fees revenues will <br />remain flat at the 2004/05 budgeted level of $250,000 per year. Facilities Fees have not <br />been adjusted since 1994 and should be updated by City Council to recover costs of the <br />recycled water project and capital improvements completed over the past 10 years. <br /> <br />Future annual revenues and/or fund reserves may be used to offset future bond amounts if <br />feasible and financially prudent. <br /> <br />6 <br /> <br />8 <br /> <br />BARTLE WELLS ASSOCIA TES <br />F:\Jobs\Redwood City\1921\ \Redwood City Tables 12-20-04\Assumptions 2,12/21/2004,5:50 PM <br />