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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 />payable solely from net revenues of the City's Electric System.
<br />SOURCE OF
<br />PAYMENT:
<br />
<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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