KEEPING YOUR FINANCIAL

SCORECARD

Jenny Blankenship, CPA The PFM Group

Handouts and presentation are available online at www.iowaleague.org

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Session Description

Keeping Your Financial Scorecard

The council needs to do financial planning, but where do you start?

This session outlines some tools available to help councils better understand the city’s financial condition and how to plan for major projects.

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Outline

Understanding Your City’s Current Financial Condition

Capital Planning Considerations

Making the Decision to Borrow

Municipal Funding Sources (Internal and External)

Financing Infrastructure for Cities

Bonding Options

Post-Issuance Responsibilities

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Financial Planning at its Best…

UNDERSTANDING YOUR CITY’S CURRENT FINANCIAL CONDITION

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Financial Health Considerations

Stability of current tax base– Diverse larger taxpayers?– Stable home values?

General Fund – Revenues keeping pace with expenses– Operating surpluses or deficits– Current unreserved cash balance as a percentage of revenues

City’s Current Constitutional Debt Limit– State of Iowa: 5% of current fiscal year 100% Actual Valuation

Existing Debt– General Obligation Debt

• Current debt service levy tax rate

– Enterprise Fund Revenue Debt• Current revenue bond covenant requirements (debt service coverage ratios,

debt service reserve fund, improvement fund, etc.)

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Financial Health Considerations Cont’d

Tax Increment Financing Districts – District valuation growth– District sunset– Outstanding obligations (debt, rebate agreements, etc.)– Current cash balance

Enterprise Funds– Current unreserved cash balance as a percent of O & M

• 4-6 months of operating expenses or approximately 50% of O & M expenses

– Debt service coverage requirements• SRF loans (1.10x coverage)

• Varies for revenue bonds (1.10x - 1.30x coverage)

CAPITAL PLANNING CONSIDERATIONS

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Capital Planning Considerations

Identify the optimal match of revenue sources with

funding needs

Maximize the revenues available for funding capital

projects

Maximize the amount of projects which can be

funded

Provide the flexibility to accommodate changes in

the actual capital needs or funding sources

Preserve the capacity to fund additional capital

projects beyond the planning period

Achieve the lowest cost of capital

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Creating a Capital Improvement Plan

Use all information gathered (Road, Sewer, Water, Storm, etc)

Think about what is driving the timing of the improvements– Condition of the street?

– Condition of the underground utilities?

– Budget?

Use rankings to develop priorities

Evaluate annual budget based on priorities

Other Considerations– Public Input, Politics, Funding, Other…

Once created, the Capital Improvement Plan should:– Guide decisions for a minimum of 5 years

– Include long range needs - 20 years & out

– Be evaluated annually

MAKING THE DECISION TO BORROW

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Pay-As-You-Go vs. Debt Financing

Debt FinancingPay-As-You-Go

• Construction or acquisition as revenues become available

• Current users bear cost

• Construction/acquisition capacity limited to available revenues

• Lower total cost

• Political and economic climate considerations

• Construction or acquisition as needed

• Reduced current payments

• Current and future users bear cost

• Enhanced construction/ acquisition capacity

• Useful life of assets financed

MUNICIPAL FUNDING SOURCES

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Internal Municipal Funding Sources

Property Taxes– Debt Service Levy

Local Option Sales Tax Revenues Special Assessment Revenues Urban Renewal Revenues Utility Revenues

– Water, Sewer, Stormwater, Electric, Gas or Communications

Road Use Taxes

Franchise Fees

General Obligation Bonding– Bonding options will be discussed later in more detail

Revenue Bonding– Bonding options will be discussed later in more detail

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External Funding Sources

Iowa Finance Authority

Community Development Block

Grants (CDBG)

Federal earmarks

USDA Rural Development

– Grants and loans

Source for other grant opportunities

– Iowa Grants Enterprise Management System (GEMS) http://www.iagems.gov

FINANCING INFRASTRUCTURE FOR CITIES

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General Considerations for Issuing Debt

Start planning the financing early in the process– Leave time to set and hold public hearings and for other procedural steps

General Obligation Debt Capacity– 5% of the 100% Assessed Valuation– General obligation, TIF revenue, local bank loans, leases and rebate

agreements count against the debt limit– Revenue debt does not count against the debt limit– Annual appropriation debt

• Only current fiscal year debt service payments that have been appropriated count against the debt limit

Debt service levies are unlimited

May combine legal authorities– Larger bond issue may sell better– Consult with your Bond Counsel

Cumulative effect of debt– Look at long-term forecasting– Wrap proposed debt around outstanding debt

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General Considerations for Issuing Debt (Cont’d)

Term of debt– Shorter debt can result in a better interest rate and rating– Current outstanding debt– Future planned debt

Reimbursement resolutions– Do not need one to cover preliminary costs

• Preliminary costs incurred prior to the commencement of construction that do not require a reimbursement resolution include engineering, surveying, soil testing, reimbursement bond issuance and similar costs

• Land acquisition, site prep and similar costs incident to commencement of construction are excluded

– Limited to 20% of bond issue– Look back window is 60 days– Reimbursed within the later of 18 months after you expended or 18 months

after the construction is complete but no later 3 years

Do not begin spending money without consulting with your bond counsel and financial advisor first.

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General Considerations for Issuing Debt (Cont’d)

Bond ratings are important– Smaller communities are now being rated

– Pricing difference between non-rated and ‘A’ is, on average, around 25 bps

• 25 bps equals approximately $15,290 in savings on a $1 million bond over ten years

– Rating Criteria include:• Economic data; financial policies & practices; debt

management; and administration

Many issuers are obtaining ratings for the first time and are receiving pricing benefits that far outweigh the cost of

obtaining a rating.

-0.20%

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

A1 vs. Non Rated Credit Spread Over MMD Aaa

A1 Rated City (Priced June 6, 2011) Non Rated City (Priced May 3, 2011)

15 bps

54 bps21 bps

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Competitive vs. Negotiated Sale

Simple or well-known bond structure

Stable market conditions

Fixed Rate Debt

Typically has lower gross spread for underwriting costs

Prices obtained offer potential bidders equal opportunity and yields the lowest price for the Issuer

• Complex bond structure

• Volatile market conditions

• Variable rate debt

• Typically has higher gross spread for underwriting costs

• Leaves room for criticism as to not receiving the best available rates for the Issuer

Competitive Sale Negotiated Sale

BONDING OPTIONS

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General Obligation Bonds

Authority found in Division III of Chapter 384 of Code of Iowa

Backed by general credit and taxing powers of governmental entity

Counts against general obligation debt capacity

Must levy a debt service levy unless other abatements are available, for

example:

– Utility revenues; special assessments; local option sales tax revenues; road use tax fund revenues; or urban renewal revenues

• More secure credit structure

• Requires taxing authority

• 60% voter approval required (depending on the project)

• Property tax based

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Sample General Obligation Debt Capacity

Sample City, IowaProjection of G.O. Debt Capacity

Beginning 2012-13 3.50%

Legal Limit 5.00%

Effective Limit 90%

Proposed 2012-2025 Available Percent

Fiscal Actual Gross Effective G.O . G.O ./REV G.O . Equip Rebate Lease G.O . TIF G.O . Debt TO TAL Effective /Debt Gross Fiscal

Year Valuation Debt Limit Debt Limit - TAXES - TIF - ENT Notes Agrmt Purchase 11/2011 TAXES G.O . DEBT Capacity Debt Limit Year

FY 2007-08 703,735,086 35,186,754 31,668,079 13,215,000 10,205,000 2,070,177 83,926 457,632 0 26,031,734 5,636,345 73.98% FY 2007-08

FY 2008-09 869,228,079 43,461,404 39,115,264 12,420,000 11,705,000 1,871,333 84,008 853,530 71,066 0 27,004,937 12,110,326 62.14% FY 2008-09

FY 2009-10 957,165,252 47,858,263 43,072,436 13,012,000 13,493,000 3,405,323 44,973 879,016 81,716 0 30,916,028 12,156,408 64.60% FY 2009-10

FY 2010-11 1,012,290,926 50,614,546 45,553,092 11,870,000 12,470,000 3,201,246 10,845 859,806 67,523 0 28,479,420 16,033,672 58.32% FY 2010-11

FY 2011-12 1,047,721,446 52,386,072 47,147,465 10,426,000 11,334,000 2,883,770 712,825 53,310 10,425,000 1,040,000 36,874,905 9,232,560 72.38% FY 2011-12

FY 2012-13 1,084,391,697 54,219,585 48,797,626 8,904,000 10,161,000 2,559,686 212,139 39,097 9,470,000 2,080,000 33,425,923 14,406,704 63.43% FY 2012-13

FY 2013-14 1,122,345,406 56,117,270 50,505,543 7,319,000 8,951,000 2,223,934 90,950 24,883 8,500,000 3,045,000 30,154,767 19,465,776 55.31% FY 2013-14

FY 2014-15 1,161,627,495 58,081,375 52,273,237 5,704,000 7,691,000 1,876,450 7,515,000 3,930,000 26,716,450 24,751,787 47.38% FY 2014-15

FY 2015-16 1,202,284,458 60,114,223 54,102,801 4,584,000 6,386,000 1,636,450 6,510,000 4,735,000 23,851,450 29,526,351 40.88% FY 2015-16

FY 2016-17 1,244,364,414 62,218,221 55,996,399 3,420,000 5,035,000 1,391,450 5,485,000 5,460,000 20,791,450 34,564,949 34.45% FY 2016-17

FY 2017-18 1,287,917,168 64,395,858 57,956,273 2,470,000 3,815,000 1,136,450 4,440,000 6,100,000 17,961,450 40,479,823 27.14% FY 2017-18

FY 2018-19 1,332,994,269 66,649,713 59,984,742 1,755,000 2,905,000 871,450 3,375,000 6,655,000 15,561,450 46,033,292 20.93% FY 2018-19

FY 2019-20 1,379,649,068 68,982,453 62,084,208 1,015,000 1,950,000 826,450 2,280,000 7,125,000 13,196,450 51,552,758 15.27% FY 2019-20

FY 2020-21 1,427,936,786 71,396,839 64,257,155 395,000 950,000 781,450 1,155,000 7,505,000 10,786,450 57,110,705 10.01% FY 2020-21

FY 2021-22 1,477,914,573 73,895,729 66,506,156 140,000 215,000 736,450 7,795,000 8,886,450 62,159,706 5.88% FY 2021-22

FY 2022-23 1,529,641,583 76,482,079 68,833,871 0 0 691,450 7,990,000 8,681,450 65,512,421 4.34% FY 2022-23

FY 2023-24 1,583,179,039 79,158,952 71,243,057 0 0 646,450 8,090,000 8,736,450 68,606,607 3.33% FY 2023-24

FY 2024-25 1,638,590,305 81,929,515 73,736,564 601,450 8,090,000 8,691,450 71,700,114 2.49% FY 2024-25

Valuation Growth &

Debt Limit Assumptions

EXISTING DEBT ISSUES SUBJECT TO DEBT LIMIT *

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Sample Tax Analysis

Sample City, IowaDebt Service FundProjection of Debt Service Levy & Tax Rate Impact

Tax Valuation Growth Rate FY 09-10 11.25%

Tax Valuation Growth Rate FY 10-11 6.84% Tax Impact FY 07-08 $0.00000

Tax Valuation Growth Rate FY 11-12 6.21% Tax Impact FY 08-09 $0.00000

Tax Valuation Growth Rate starting FY 12-13 5.50% Tax Impact FY 09-10 ($0.00004)

Tax Impact FY 10-11 $0.00000

Current Road Golf G.O . O ther

Fiscal Total Tax Taxes Tax Rate/ Use O ther Course Total G.O . * Golf Fiscal Total Sources Surplus Beginning Ending

Year Payable Valuation Levied $1,000 Funds Moneys Abatement Resources Debt Service Course Fees Uses / (Uses) (Deficit) Balance Balance

2007 - 2008 383,146,177 1,272,061 3.32004 32,308 34,453 1,338,822 1,231,466 61,441 4,692 1,297,598 7,490 48,713 237,015 285,728

2008 - 2009 464,448,647 1,541,988 3.32004 13,429 49,375 1,604,792 1,511,729 61,441 3,900 1,577,070 (59,008) (31,286) 285,728 254,442

2009 - 2010 516,692,253 1,715,418 3.32000 0 93,701 34,985 1,844,104 1,536,971 61,441 2,800 1,601,212 45,207 288,100 254,442 542,542

2010 - 2011 552,050,508 1,832,808 3.32000 48,728 (12,179) 35,000 1,904,357 1,838,994 61,441 4,800 1,905,235 (878) 542,542 541,663

2011 - 2012 586,337,116 1,946,639 3.32000 23,700 12,700 35,000 2,018,039 1,876,710 61,441 4,800 2,045,461 (27,421) 541,663 514,242

2012 - 2013 618,585,657 2,053,704 3.32000 23,172 12,700 35,000 2,124,576 1,895,872 61,441 4,800 2,168,516 (43,940) 514,242 470,302

2013 - 2014 652,607,869 2,166,658 3.32000 23,644 12,700 35,000 2,238,002 1,878,551 61,441 4,800 2,253,488 (15,486) 470,302 454,816

2014 - 2015 688,501,301 1,760,057 2.55636 12,700 35,000 1,807,757 1,332,126 61,441 4,800 1,807,757 0 454,816 454,816

2015 - 2016 726,368,873 1,868,940 2.57299 12,700 35,000 1,916,640 1,336,916 61,441 4,800 1,916,640 0 454,816 454,816

2016 - 2017 766,319,161 1,714,873 2.23781 12,700 35,000 1,762,573 1,080,574 61,441 4,800 1,762,573 0 454,816 454,816

2017 - 2018 808,466,715 1,544,130 1.90995 12,700 35,000 1,591,830 809,614 61,441 4,800 1,591,830 0 454,816 454,816

2018 - 2019 852,932,384 1,644,838 1.92845 12,700 35,000 1,692,538 807,399 61,441 4,800 1,692,538 0 454,816 454,816

2019 - 2020 899,843,665 1,596,621 1.77433 12,700 35,000 1,644,321 658,905 61,441 4,800 1,644,321 0 454,816 454,816

2020 - 2021 949,335,067 1,309,662 1.37956 12,700 35,000 1,357,362 269,496 61,441 4,800 1,357,362 0 454,816 454,816

2021 - 2022 1,001,548,495 1,253,642 1.25170 12,700 35,000 1,301,342 144,900 30,721 4,800 1,301,342 0 454,816 454,816

2022 - 2023 1,056,633,663 1,179,022 1.11583 12,700 35,000 1,226,722 4,800 1,226,722 0 454,816 454,816

2023 - 2024 1,114,748,514 1,179,022 1.05766 12,700 35,000 1,226,722 4,800 1,226,722 0 454,816 454,816

2024 - 2025 1,176,059,682 1,179,022 1.00252 12,700 35,000 1,226,722 4,800 1,226,722 0 454,816 454,816

2025 - 2026 1,240,742,965 1,179,022 0.95025 12,700 35,000 1,226,722 4,800 1,226,722 0 454,816 454,816

Tax Rate Impact Summary

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Revenue Bonds

Authority found in the Code of Iowa

– Chapter depends on revenue source

Does NOT count against general obligation debt limit (with the exception of TIF

Revenue Bonds)

Debt to be paid solely by the revenues of the system or the source for which

the debt is being issued

– Utility revenues (water, sewer, storm water, etc.); Local Option Sales Tax revenues or urban renewal revenues

• Backed by specific revenue stream

• Matches sources of payment for bonds to the project financed

• Users pay cost of project and financing

• Variety of revenues could be pledged to pay debt service

• Covenants could limit bonding capacity

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Urban Renewal Bonds (TIF)

Authority found in Division III of Chapter 384 and Chapter

403 of Code of Iowa

– Must have an urban renewal area set up before project is started and project must be located within the area

– Must publish notice of proposed debt issuance and hold a meeting to take action

– Must receive any oral or written objections, after which the City may either proceed with debt issuance or abandon the proposal

– Decision may be appealed to local district court within 15 days

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Sample TIF CashflowSample City, IowaProjection of Tax Increment Revenues

Central TIF City 11.82106District No. 55555 County 4.70129

School District 11.35453Comm College 0.56008

Other 3.356120% Growth in Tax Increment Valuation Tax Rate 31.79308

Total Net City Proposed Total Annual EndingTaxable Change in Tax TIF Tax TIF Total Rebate Series Transfers TIF Surplus/ Cash

Valuation Valuation Increment Valuation Rate Revenue Revenues Agreements 2016 Out Expense (Deficit) Balance

2009 - 2010 1 0 0 0 32.21997 02010 - 2011 2 654,569 654,569 654,569 31.79308 20,811 20,811 20,811 20,8112011 - 2012 3 604,078 604,078 604,078 31.79308 19,206 19,206 18,960 18,960 246 21,0572012 - 2013 4 604,078 555,581 1,159,659 1,159,659 31.79308 36,869 36,869 39,768 39,768 (2,899) 18,1582013 - 2014 5 1,159,659 2,060,000 3,219,659 3,219,659 31.79308 102,363 102,363 32,747 80,000 112,747 (10,384) 7,7742014 - 2015 6 3,219,659 3,219,659 3,219,659 31.79308 102,363 102,363 32,747 30,000 62,747 39,616 47,3902015 - 2016 7 3,219,659 3,219,659 3,219,659 31.79308 102,363 102,363 32,747 32,747 69,616 117,0062016 - 2017 8 3,219,659 3,219,659 3,219,659 31.79308 102,363 102,363 98,276 98,276 4,087 121,0932017 - 2018 9 3,219,659 3,219,659 3,219,659 31.79308 102,363 102,363 108,564 108,564 (6,201) 114,8922018 - 2019 10 3,219,659 3,219,659 3,219,659 31.79308 102,363 102,363 107,064 107,064 (4,701) 110,1912019 - 2020 11 3,219,659 3,219,659 3,219,659 31.79308 102,363 102,363 110,377 110,377 (8,014) 102,1772020 - 2021 12 3,219,659 3,219,659 3,219,659 31.79308 102,363 102,363 108,377 108,377 (6,014) 96,1632021 - 2022 13 3,219,659 3,219,659 3,219,659 31.79308 102,363 102,363 111,145 111,145 (8,782) 87,3812022 - 2023 14 3,219,659 3,219,659 3,219,659 31.79308 102,363 102,363 108,476 108,476 (6,113) 81,2682023 - 2024 15 3,219,659 3,219,659 3,219,659 31.79308 102,363 102,363 110,484 110,484 (8,121) 73,1472024 - 2025 16 3,219,659 3,219,659 3,219,659 31.79308 102,363 102,363 107,019 107,019 (4,656) 68,4912025 - 2026 17 3,219,659 3,219,659 3,219,659 31.79308 102,363 102,363 108,338 108,338 (5,975) 62,5162026 - 2027 18 3,219,659 3,219,659 3,219,659 31.79308 102,363 102,363 109,291 109,291 (6,928) 55,5882027 - 2028 19 3,219,659 3,219,659 3,219,659 31.79308 102,363 102,363 109,841 109,841 (7,478) 48,1102028 - 2029 20 3,219,659 3,219,659 3,219,659 31.79308 102,363 102,363 102,363 150,473

Central TIF District Sunset: December 31, 2029 $1,714,694 $98,241 $1,297,248 $168,728 $1,564,216 $129,662

FiscalYear

Assumptions:

FY 10-11 Tax Rates

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Local Option Sales Tax Bonds

Authority found in Chapter 423B of

Code of Iowa

May be issued as General Obligation

or Revenue Bonds

– Bonds can only be issued for the purposes described in the ballot

– Bonds cannot be issued for the portion of tax revenues designated for property tax relief

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Sample Local Option Sales Tax Cashflow

Sample City, IowaSummary of Local Option Sales Tax Receipts Cashflow

0.0% Other $4.500 Mil Pay-as- Revenue Total

Calendar Tax Beginning Total Local Interest Revenue Total Revenue you-go G.O. Total Surplus/ Ending Coverage Coverage

Year Year Balance Option Tax Income or Proceeds Revenue Bonds Reserved Expenses Abatement Expenses (Deficit) Balance Ratio Ratio

2004 1 $0 $563,750 $0 $0 $563,750 ($64,295) $0 ($475,000) $0 ($539,295) $24,455 $24,455 8.77 8.77

2005 2 24,455 615,000 0 0 615,000 (584,435) 0 (25,000) 0 (609,435) 5,565 30,020 1.05 1.05

2006 3 30,020 615,000 0 0 615,000 (590,535) 0 0 0 (590,535) 24,465 54,485 1.04 1.04

2007 4 54,485 615,000 0 0 615,000 (590,185) 0 0 0 (590,185) 24,815 79,300 1.04 1.04

2008 5 79,300 615,000 0 0 615,000 (592,965) 0 0 0 (592,965) 22,035 101,335 1.04 1.04

2009 6 101,335 615,000 0 0 615,000 (589,385) 0 0 0 (589,385) 25,615 126,950 1.04 1.04

2010 7 126,950 615,000 0 0 615,000 (589,040) 0 0 0 (589,040) 25,960 152,910 1.04 1.04

2011 8 152,910 615,000 0 0 615,000 (587,210) 0 0 0 (587,210) 27,790 180,700 1.05 1.05

2012 9 180,700 615,000 0 0 615,000 (588,310) 0 0 0 (588,310) 26,690 207,390 1.05 1.05

2013 10 207,390 615,000 0 0 615,000 (587,600) 0 0 0 (587,600) 27,400 234,790 1.05 1.05

2014 11 234,790 0 0 0 0 0 0 0 0 0 0 234,790 n/a n/a

($5,363,960) $0 ($500,000)

** -Tax implemented on January 1, 2004 for ten years expiring December 31, 2013.

Capital Projects 75%

Property Tax Relief 25%

Resolution No. 0309

(Information below is presented on a calendar year basis given the City will be collecting January 1, 2004 through December 31, 2013)

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Utility Revenue Bonds

Authority found in Division IV of Chapter 384 of Code of Iowa

Repaid by revenues of utility– Water– Sewer– Stormwater– Electric– Gas– Communications

Utility revenue debt requires issuer to establish

covenants– Debt service reserve fund– User rates– Parity Test

Not general obligation debt and does not count against the general

obligation debt capacity

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Revenue & Rate Analysis

Considerations

Usage

Structure of rates– Base rates– Usage only

Growth of current expenses

Debt service coverage– 1.10x required for SRF– Minimum 1.30x recommended

for revenue bonds

Capital outlays – Pay-go– Bonding

Other transfers– General fund, etc.

Ending Cash– 50% of O & M– 4-6 months of reserves

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State Revolving Fund

Types of Loans:

Planning and Design Loans– 0% for up to 3 years– Can be rolled into SRF Loan or paid with

permanent financing

Construction Loans– 3% interest rate– Origination fee of 1% + 0.25% servicing fee

SRF Source Water (SWP) Protection– 0% interest rate– Up to 20 years– For purchase of land or easements, or to fund

SWP practices– Based on approved SWP plan

Types of projects for SRF Nonpoint Source Loans– Stormwater best management practices– Brownfield cleanup– Landfill closure– Others

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State Revolving Fund, Cont.

SRF Loan Programs:

Clean Water SRF– Loans for the following types of projects

• Publicly owned wastewater treatment facilities

• Sewer system rehabilitation• New systems for unsewered communities• Stormwater management for water quality

Drinking Water SRF– Loans for the following types of projects

• Improvements to public water supply systems• Consolidations and connections• Source water protection

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Sample Enterprise Fund CashflowSAMPLES CITY, IOWAWater Enterprise Fund

Growth Assumptions 1-Aug-04 2.50% 1-Aug-08 4.00% 1-Aug-12 4.00% 1-Aug-16 4.00%

Water Usage 0.00% 1-Aug-05 4.00% 1-Aug-09 6.00% 1-Aug-13 4.00% 1-Aug-17 -Operating Expenses 5.00% 1-Aug-06 4.00% 1-Aug-10 12.00% 1-Aug-14 4.00% 1-Aug-18 -Interest Rate 0.25% 1-Aug-07 3.00% 1-Aug-11 4.00% 1-Aug-15 4.00% 1-Aug-15 -

Budget Budget Projected Projected Projected Projected Projected

FY 2007-08 FY 2008-09 FY 2009-10 FY 2010-11 FY 2011-12 FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16 FY 2016-17

First 3,000 gallons 1 $4.93 $5.13 $5.44 $6.09 $6.33 $6.59 $6.85 $7.12 $7.41 $7.71Next 37,000 gallons 2 2.29 2.38 2.52 2.82 2.93 3.05 3.17 3.30 3.43 3.57Next 60,000 gallons 3 1.62 1.68 1.78 1.99 2.07 2.16 2.24 2.33 2.43 2.52

All over 100,000 gallons 4 0.82 0.85 0.90 1.01 1.05 1.09 1.14 1.18 1.23 1.28

Average Rate Per < 1,000 5 $2.75 $3.03 $3.45 $3.86 $4.02 $4.18 $4.35 $4.52 $4.70 $4.89

WATER (1,000 gallons) 6 -3.49% -11.02% -8.20% YTD usage is up 1.95%

Total Water Usage 7 87,058 77,465 71,115 72,502 72,502 72,502 72,502 72,502 72,502 72,502

OPERATING REVENUESUsage Fees 8 $239,520 $234,371 $245,283 $277,645 $290,418 $302,035 $314,117 $326,681 $339,749 $353,338

Surcharge Fees 9 40,810 40,762 40,786 40,750 40,750 40,750 40,750 40,750 40,750 40,750Miscellaneous Revenues 10 1,188 1,037 1,996 600 650 650 650 650 650 650

Total Operating Revenues 11 $281,518 $276,170 $288,065 $318,995 $331,818 $343,435 $355,517 $368,081 $381,149 $394,738

OPERATING EXPENSESPersonal Services 12 $112,691 $117,121 $146,495 $161,444 $168,946 $177,393 $186,263 $195,576 $205,355 $215,623

Repairs & Maintenance 13 40,380 8,598 9,375 15,500 16,000 16,800 17,640 18,522 19,448 20,421Materials & Supplies 14 19,946 32,191 19,106 9,850 10,850 11,393 11,962 12,560 13,188 13,848

Other Expenses 15 54,302 50,164 47,916 51,357 60,956 64,004 67,204 70,564 74,092 77,797Depreciation 16 56,425 72,767 88,296 88,296 88,296 88,296 88,296 88,296 88,296 88,296

Miscellaneous 17 927 852 887 1,300 1,300 1,365 1,433 1,505 1,580 1,659Total Operating Expense 18 $284,671 $281,693 $312,075 $327,747 $346,348 $359,251 $372,798 $387,023 $401,960 $417,643

NET OPERATING REV 19 ($3,153) ($5,523) ($24,010) ($8,752) ($14,530) ($15,815) ($17,282) ($18,942) ($20,811) ($22,905)Add: Depreciation 20 56,425 72,767 88,296 88,296 88,296 88,296 88,296 88,296 88,296 88,296

Interest on Reserves 21 49,043 15,803 4,422 1,321 1,398 1,457 1,512 1,564 1,611 1,655Revenue for Debt Service 22 $102,315 $83,047 $68,708 $80,865 $75,165 $73,938 $72,527 $70,917 $69,095 $67,047

Audited Financial Statements

WATER REVENUE ADJUSTMENTS

35

Sample Enterprise Fund CashflowSAMPLES CITY, IOWAWater Enterprise Fund

Budget Budget Projected Projected Projected Projected Projected

FY 2007-08 FY 2008-09 FY 2009-10 FY 2010-11 FY 2011-12 FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16 FY 2016-17

Revenue for Debt Service 23 $102,315 $83,047 $68,708 $80,865 $75,165 $73,938 $72,527 $70,917 $69,095 $67,047

Water Debt ServiceSRF Bonds, Series 2008 24 $0 $31,048 $39,471 $40,023 $40,243 $40,430 $40,585 $40,708 $39,798 $39,888

Total Revenue Debt 25 $0 $31,048 $39,471 $40,023 $40,243 $40,430 $40,585 $40,708 $39,798 $39,888

Debt Service Coverage Must at least be a 1.10x Coverage for SRF BondsNet Revenues/ Revenue Debt 26 N/A 2.67 1.74 2.02 1.87 1.83 1.79 1.74 1.74 1.68

CASHFLOW AFTER DEBT 27 $102,315 $51,999 $29,237 $40,842 $34,922 $33,508 $31,942 $30,210 $29,298 $27,159

Capital Outlays 28 ($81,382) ($1,498,058) ($2,223) ($10,000) ($11,400) ($11,400) ($11,400) ($11,400) ($11,400) ($11,400)Other cash (uses)/sources 29 3,816 19,938 (4,912) 0 0 0 0 0 0 0

Grant Monies 30 0 0 0 0 0 0 0 0 0 0Bond Proceeds 31 0 529,600 5,000 0 0 0 0 0 0 0

Transfers (to)/from Other Funds 32 0 0 0 0 0 0 0 0 0 0Transfers (to)/from TIF Fund 33 0 200,000 0 0 0 0 0 0 0 0

Annual Surplus/ (Deficit) 34 $24,749 ($696,521) $27,102 $30,842 $23,522 $22,108 $20,542 $18,810 $17,898 $15,759

Beginning Cash Balance 35 $1,173,102 $1,197,851 $501,330 $528,432 $559,274 $582,796 $604,903 $625,445 $644,255 $662,153Ending Cash Balance 36 $1,197,851 $501,330 $528,432 $559,274 $582,796 $604,903 $625,445 $644,255 $662,153 $677,912

Cash % of O&M (net of depr) 37 525% 240% 236% 234% 226% 223% 220% 216% 211% 206%

Restricted & DesignatedImprovement Fund 38 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Debt Service Reserve Fund 38 0 0 0 0 0 0 0 0 0 0

- Projects listed in City's Capital Improvement Program

Water Treatment Plant 2,223 0 0 0 0 0 0 0Paint Water Towers 0 0 0 0 0 0 0 0

Miscellaneous 0 10,000 11,400 11,400 11,400 11,400 11,400 11,400Total 2,223 10,000 11,400 11,400 11,400 11,400 11,400 11,400

Audited Financial Statements

ISSUER RESPONSIBILITIES

37

Issuer Responsibilities

Keep in mind that once debt is issued, you have certain

responsibilities for the life of the debt:

– Disclosure Requirements (All Debt Issued Over $1 million)• Final official statement

• Annual continuing disclosure filings via EMMA

• Material event notices via EMMA

– Bond Covenants (Revenue Debt Only)• Debt service reserve fund balances

• User rates and charges

• Debt service coverage ratios

• Parity test for new debt issuance

– Rating Agency Updates (Rated Debt Only)• Periodic credit reviews

QUESTIONS?For More Information, please contact:

Jenny Blankenship, CPAThe PFM GroupPhone: 515-724-5734E-mail: blankenshipj@pfm.com