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PURPOSE: <br />Proceeds of the Bonds will be used to finance a portion of the costs associated with the <br />construction of a field house facility to accommodate service trucks, inventory, and offices. <br />The building will be shared with the Electric Utility also operated by the Elk River Municipal <br />Utilities (ERMU). The total estimated cost of the facility is $13,500,000 of which the Water <br />Utility will own 12.5% of. <br />AUTHORITY: <br />Statutory Authority:The Bonds are being issued pursuant toMinnesota Statutes, Chapters <br />444 and 475. <br />Statutory Requirements:Pursuant to Minnesota Statutes, Chapter 444 and the resolution <br />awarding theBonds, the City will covenant to maintain rates and charges in an amount <br />sufficient to generate revenues to support the operation of the City’s water utilityand to pay <br />debt service. The City is required to annually review the budget of the water utilityto <br />determine whether current rates and charges are sufficient and toadjust the rates, as <br />necessary. <br />In addition to the Bonds, the City currently has (2)other bond issues outstanding payable, <br />in part,from the City’s water utility. The table below shows net revenues available to pay <br />debt service from the water utility based on fiscal year ended December 31, 2020,including <br />the projected debt service payable from the Bonds: <br />City of Elk River, Minnesota <br />Net Revenues of Utility Funds <br />Utility Funds Net Revenues for Fiscal Year Ending December 31, 2020 <br />Water <br />Fund <br />Operating revenues$2,674,544 <br />Operating expenses2,673,985 <br />Net operating income$559 <br />Add back depreciation$1,133,179 <br />Add investment income33,454 <br />Net Utility Revenues Available for Debt Service$1,167,192 <br />Estimated maximum annual calendar year debt service <br /> including the 2021C Bonds <br />$715,133 <br />Coverage1.63 <br />**The 2020 results are preliminary and un-audited <br />The fiscal year 2020 financials that are being used for the above calculation are unaudited <br />as the final audited financials are not yet available. <br />SECURITY ANDThe Bonds will be a general obligation of the City, secured by its full faith and credit and <br />taxing power. Additionally, the City is pledging net revenues of the City’s water utility to pay <br />SOURCE OF <br />debt service on the Bonds as it comes due. <br />PAYMENT: <br />Page 2 <br />