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f) The current goal in the electric department is to retain approximately $2,000,000 <br /> in cash balance. Industry experts recommend adequate cash balance of 3 months <br /> operation expenses or approximately $3,000,000 in our case. The gross margin <br /> (line 36) has been declining the last number of years but will level off in the 6% <br /> area. Line 63, indicates the total cash balance. With no revenue bond in 2004, <br /> our cash reserves are well below $2,000,000 for years 2004, 2006 and 2007. <br /> Water <br /> a) Projected sales growth at 6%, may be conservative depending upon economy and <br /> weather. The WAC units are projected to remain relatively constant. <br /> b) Revenue from sales (line 13), reflect an approximate 3.5%rate increase annually <br /> along with a WAC fee increase in 2006 and 2010. <br /> c) Assumed expense increases shown in column Q. Capital expenses are reflected <br /> on lines 11 and 57 on second page. Debt service payments are shown on line 45 <br /> on second page. <br /> d) The goal in the water department is to retain approximately $2,000,000 in cash <br /> balance. Line 51, indicates the cash balance is approximately $1,400,000 to <br /> $2,300,000. <br /> In conclusion, these studies indicate both departments can accommodate the anticipated <br /> growth and maintain close to the desired cash balances. Due to the large capital projects, <br /> the electrical department will be doing the next couple of years, bonding in 2004, should <br /> be seriously considered. The expenditures to accommodate the Co. Rd. 39 and Co. Rd. <br /> 42 overpasses on Hwy 101 are not included in these studies due to the unknown extent of <br /> these projects. Bonding will be required to finance these projects. By utilizing peaking <br /> wells instead of a full water production facility, future cash requirements become less, <br /> and by 2009±we will be in a position to reduce our bonding needs and pay for part of our <br /> water production needs from cash reserves. In the interim, the water department <br /> continues to carry significant debt with annual principal and interest payments <br /> approaching $760,000. <br />