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generate revenues to support the operation of the sewer utility and to pay debt service on <br /> the Bonds. The City is required to annually review the budget of the sewer utility to <br /> determine whether current rates and charges are sufficient and to adjust them as <br /> necessary. <br /> SECURITY AND The Bonds will be general obligations of the City, secured by its full faith and credit and <br /> SOURCE OF taxing power. The Bonds will be repaid from net revenues of the sewer utility. <br /> PAYMENT: <br /> Until recently, the City had one other outstanding bond issue, the Series 2005B Bonds, for <br /> which the net revenues of the sewer utility fund were pledged. However, the remaining <br /> principal maturities of that issue were called for early redemption on February 1, 2014. <br /> The table below shows the net revenues available for debt service based on 2013 audited <br /> financials for fiscal year ending December 31, 2013. The maximum annual debt service <br /> payment on the Bonds is estimated to be approximately$680,570. <br /> Elk River Sewer Revenue Fund <br /> Net Revenues Available For Debt Service <br /> Fiscal Year Ended December 31, 2013 <br /> 12/31/2013 <br /> Operating Revenue $ 1,613,276 <br /> Operating Expense (2,298,094) <br /> Net Operating Income(Loss) (684,818) <br /> Add Back Depreciation and amortization 977,931 <br /> Net-Other Income 396,121 <br /> Available for Debt Service 689,234 <br /> Maximum Annual Debt Service (est.) 680,570 <br /> Surplus $ 8,664 <br /> Source: City of Elk River Comprehensive Annual Financial Reports, for the Year Ended <br /> December 31,2013 <br /> The City commissioned a rate study completed by Bolten & Menk. In addition, the <br /> Springsted Management Consulting Group reviewed the study and concluded that the <br /> existing reserves along with projected revenues, including planned rate increases and <br /> estimated connection fees, would be sufficient to cover debt service related to this bond <br /> issue. The City commits, as part of the bond issuance to increase rates, as necessary, to <br /> cover the costs of operations plus debt service. On April 1, 2014 the City adopted a 3% <br /> sanitary sewer user fee increase. <br /> STRUCTURING At the direction of City staff, the Bonds have been structured over a term of 20 years with <br /> SUMMARY: level annual debt service requirements. <br /> SCHEDULES Schedules attached include a sources and uses of funds and estimated debt service <br /> Springsted Page <br />