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7.1.F. - Page 29 <br /> costs. SCVW payments in future years are based on SCVW projections, which account for <br /> roughly 5% operating cost escalation per year on average <br /> 4. Debt service includes the City's projected share of payments due for outstanding <br /> and projected debt issued to fund SVCW's CIP. The City's share of future debt payments to <br /> SVCW is based on updated draft projections of SVCW CIP funding needs (as of November <br /> 2013). Debt service due on the SVCW bonds, which were issued as Build America Bonds, are <br /> offset by a federal reimbursement for 35% of the interest due on the bonds. This <br /> reimbursement is subject to impact from the federal budget sequester. <br /> 5. City capital expenditures are projected as shown on the table. Due to a <br /> temporary surplus of funds, the projections assume the City will designate additional funds for <br /> capital improvements including a second crossing of Highway 101, Master Plan projects, and <br /> addressing deferred maintenance. <br /> Debt Service Coverage <br /> 1. Debt service coverage is calculated based on net revenues (total revenues less <br /> operating expenses), divided by total debt service coming due each fiscal year (excluding the <br /> federal reimbursement for the 2009 Bonds). Projections also show debt service coverage with <br /> net revenues adjusted to include end-of-year fund reserves, reflecting the legal covenants <br /> securing the City's debt payments to SVCW. <br /> A-21 <br />