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Costs are inflated 3%annually. Costs are inflated 3%annually. The The total in today's dollars for 2008 total in 2007 dollars from 2008 through 2023 is$1,068,500 through 2023 is$3,069,500 Allocation of Capital improvements needed to Capital improvements needed to Capital finance water system improvements expand the waste water treatment Expenses are paid by a combination of hook- plant are paid by a combination of Between up fees and user fees. Capital hook-up fees and user fees. equipment and maintenance of the Current and Capital equipment and maintenance Future Users existing system is paid by user of the existing system is paid by user charges. charges. After deducting the credit for the After deducting the credit for the developer,as described in#2 of the developer,as described in#2 of the Findings section below, Findings section below, approximately$12,990 in hook up approximately$274,000 in hook up fees are available to pay for fees are available to pay for $860,000 of costs of improvements $2,865,000 of costs of improvements to the water distribution system, to the sanitary sewer system,which which includes the improvements to includes the improvements to the the Industrial Park. Industrial Park and the waste water The study includes a special treatment facility. assessment component for the The study includes a special Industrial Park,which is consistent assessment component for the with the financing for phase I of the Industrial Park,which is consistent Park. with the financing for phase I of the Park. L See Exhibit C for the proposed See Exhibit C for the proposed schedule of capital projects schedule of capital projects Operating Expenses increase 5%annually. Expenses increase 5%annually. Expenses Water Utility and Sanitary Sewer Utility Funding Ideally, a City would fully fund depreciation in its utility funds. However, Replacement when a City is growing and investing in new infrastructure it can be cost Reserves prohibitive to customers to simultaneously expand the system and fund its replacement. The growth of 45 new homes represents a 20%increase in the number of residential users being served by the system. The replacement reserves have been calculated at 90 days of operating expenses,plus 100%of next year's debt service,plus 100%of the current year's equipment purchases,plus 50%of the current year's depreciation. If depreciation,which is a non cash expenditure,were removed from the calculation,the water fund would meet its..capital reserve. However,the 3060 Centre Pointe Drive (651)697-8500 Fax:(651)697-8555 Roseville,MN 55113-1105 http://www.ehlers-inc.com 2 I