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Elk.River -~ ~,,, <br />Municipal Utilities <br />13069 Orono Parkway <br />Elk River, MN 5533 <br />February 7, 2007 <br />To: Elk River Municipal Utilities Commission <br />Jerry Takle <br />Jim Tralle <br />Jerry Gumphrey <br />From: Bryan Adams <br />Subject: Electric Revenue Bonds <br />phone: 763.441.2020 <br />Fax: 763.44] .8099 <br />The 2007 budget makes provisions to construct a Waco Substation and underground <br />feeder for the United Health Group data center facility with bonds. Also if we proceed <br />with buying into the transmission system with MMTG/CMMPA group, we will need to <br />free up another $300,000 to be spent over three to five years to complete the necessary <br />agreements. The materials for the substation and underground feeders are already on <br />order. Staff is proposing the following bond amount. <br />Waco Substation $1,200,000 <br />UHG Underground Feeder $1,000,000 <br />Feeder on Co. Rd. 1 $ 300,000 <br />$2,500,000 + Issuance and Coverage costs <br />The total bond amount would be $2,875,000 per Ehlers & Associates analysis which is <br />attached. We are proposing a 12 year term with interest payments only for the first two <br />years. This will allow UHG load to ramp up to the estimated levels so sufficient <br />revenues are available to pay the bonds. From Ehlers & Associates, bond payments will <br />be in the $300,000/year range. <br />Also attached is a spread sheet reflecting UHG estimated initial and final loads and <br />associated marginal revenue. The initial marginal revenues are in the $200,000 to <br />$300,000 range annually. The final marginal revenue after approximately two to three <br />years operation is in the $400,000 to $600,000 range annually. The load assumptions are <br />from experience and talking with owners/contractors and no hard evidence. There is still <br />enough margin of error that the UGH revenue should cover the bond costs. <br />Staff recommends authorizing $2,875,000 of electric revenue bonds. <br />