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Section 2 <br /> - 4 - <br />Capital Improvements <br />ERMU makes annual normal capital investments in its water system. Annual water <br />capital improvements for the Study Period, as budgeted by ERMU, are shown in Table 2- <br />1 below. <br />Table 2-1 <br />Capital Improvements- Water Utility <br />Fiscal Year 2025 2026 2027 2028 2029 <br />Water capital $1,442,789 $3,399,500 $1,435,330 $9,938,650 $1,062,650 <br /> <br />Debt Service <br />ERMU currently has outstanding water debt pursuant to a 2021 water general obligation <br />bond issue. This bond issue matures in 2041. It is assumed the water utilities will issue <br />an additional $8.3 million bond issue in 2028 to provide $8 million for ongoing capital <br />improvements. <br />Interfund Borrowing <br />It is assumed that the water utility will make a $1.4 million loan to the electric department <br />in 2026 which will be repaid in 2028. <br />Transfer to City <br />It is assumed that ERMU will begin making an annual transfer to the City of Elk River in <br />2026 based on 2% of operating revenue for the water utility. <br />Projected Operating Results – Existing Rates <br />Based on the assumptions outlined above, the resulting projected operating results <br />assuming continued application of the existing retail rates are summarized below in Table <br />96