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The resolution authorizing such additional bonds provides for payment to the Reserve
<br /> Account upon delivery of such additional bonds, from the proceeds thereof or any other
<br /> source, of an amount necessary to cause the aggregate balance in the Reserve Account to
<br /> equal the Reserve Requirement.
<br /> Debt Service Reserve Account: The Utility will maintain a Debt Service Reserve Account in
<br /> the amount of the Reserve Requirement. "Reserve Requirement" means, as of the date of
<br /> issuance of a series of bonds, an amount equal to the least of(i) 10%of the original principal
<br /> amount of the outstanding bonds and Additional Bonds, or (ii)the maximum amount of
<br /> principal and interest payable during the then current Fiscal Year or any future Fiscal Year on
<br /> all outstanding bonds and Additional Bonds as of the date of issuance of a series of bonds,or
<br /> (iii) 125%of the average annual principal and interest payable on all outstanding bonds and
<br /> Additional Bonds as of the date of issuance of a series of bonds.
<br /> With the issuance of the Bonds, the Reserve Requirement will be equal to 125%of average
<br /> annual debt service on the Bonds and the Series 2014A Bonds. The amount on deposit for
<br /> the Series 2007A Bonds is$287,500, of which $141,500 will be applied to the redemption of
<br /> the Series 2007A Bonds. It is anticipated that the total amount of the Debt Service Reserve
<br /> Account necessary on the Bonds and the Series 2014A Bonds will be $996,461. Funds are
<br /> on deposit for the Series 2014A Bonds in the amount of$203,000. Funds are on deposit for
<br /> the Series 2007A Bonds in the amount of$287,500 of which $146,000 will be retained with
<br /> regard to the Series 2016B Bonds. The $647,461 remainder of the $996,461 Reserve
<br /> Requirement of will be funded from the proceeds of the Series 2016A Bonds.
<br /> SECURITY AND The Bonds will be not be general obligations of the City but will be special limited obligations
<br /> SOURCE OF payable solely from net revenues of the City's Electric System.
<br /> PAYMENT:
<br /> The Bonds will be issued as Additional Bonds,on parity with the Series 2014A Bonds.
<br /> The table below demonstrates that the issuance of the Bonds satisfies the Additional Bonds
<br /> test described above.
<br /> Elk River Utilities Electric Revenue Fund
<br /> Net Revenues Available For Debt Service
<br /> Fiscal Years Ended December 31,2013 and 2014
<br /> December 31,2013 December 31,2014 December 31,2015
<br /> Operating Revenue $ 30,846,379 $ 31,366,685 $ 32,551,722
<br /> Operating Expense (28,127,892) (29,392,123) (29,896,154)
<br /> Net Operating Income(Loss) $ 2,718,487 $ 1,974,562 $ 2,655,568
<br /> Add Back Depreciation 2,029,496 1,914,062 1,922,359
<br /> Add Other Income 264,209 166,481 375,020
<br /> Available for Debt Service $ 5,012,192 $ 4,055,105 $ 4,952,947
<br /> Average Annual Debt Service* $ 796,837
<br /> Coverage 6.21x
<br /> *Includes average annual debt service for the Bonds and the Series 2014A Bonds.
<br /> Source:City of Elk River Comprehensive Annual Financial Reports,for the Years Ended December 31,2013
<br /> through 2015.
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