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7.1.F. - Page 18 <br /> those locations. The City has been proactively conducting closed-circuit television inspections of <br /> the wastewater collection system to assess the conditions to identify sources of infiltration and <br /> inflow into the City's sewer system. Reductions in infiltration and inflow could reduce the potential <br /> overflow conditions and may also reduce the need for the capital improvements identified in the <br /> updated master plan. <br /> The City currently anticipates funding its collection system capital needs on a pay-as-you- <br /> go, cash basis, and has increased its sewer rates accordingly. However, the City might consider <br /> the future use of debt financing if such financing was either needed to fund high-priority projects or <br /> if it made economic sense to construct a number of improvements in a given year rather than <br /> spread the capital improvement expenditures over a longer timeframe. <br /> Additionally, the City could be liable for funding some additional expenditures related to <br /> the monitoring or clean-up of soil with PCE contamination located under Sequoia Station, a retail <br /> shopping center located next to a Caltrain station. Through mediation, the City has received <br /> approximately $650,000 from the prior owner of a dry-cleaning business that used to be located <br /> near the site and was the source of the PCE. These funds are designated towards remedying the <br /> situation. The San Francisco Bay Area Regional Water Quality Control Board ("RWQCB") has <br /> jurisdiction over determining what actions need to be taken to remedy or monitor the situation. <br /> The RWQCB has determined that the City was partially responsible for the PCE contamination <br /> due to overflow/leaks from the City's sewer pipelines. The City anticipates that compliance with <br /> the potential RWQCB requirements could cost anywhere from a few hundred thousand dollars to <br /> potentially a few million dollars. The $650,000 received from the settlement may or may not be <br /> adequate. The RWQCB has not yet determined what action the City will need to take. <br /> In addition, the City anticipates financing its allocable share of costs for the Authority's <br /> CIP, equal to approximately $167 million over the next five years accounting for projected 3% <br /> annual construction cost inflation. The City anticipates financing these costs through long-term <br /> debt issued by the Authority and/or the City. <br /> Sewer Utility System Finances <br /> The City's water and sewer utilities are accounted for as separate enterprise funds. Sewer <br /> enterprise operations and capital improvements are funded predominantly by sewer service <br /> charges supplemented by interest earnings, capacity fees, and other miscellaneous revenues. <br /> Outstanding Sewer Utility Debt <br /> The City incurred the following obligations in connection with the issuance by the Authority <br /> of two previous series of bonds, as described in "THE AUTHORITY AND THE WASTEWATER <br /> SYSTEM —Outstanding Debt": <br /> 2008 Bonds: The City entered into a Financing Agreement with the Authority dated <br /> as of December 1, 2008. The City's allocable share of the $10,000,000 initial principal <br /> amount of the 2008 Bonds was $5,890,000, of which $5,285,000 remained outstanding as <br /> of June 30, 2013. <br /> A-10 <br />