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Preliminary Water Rate Structures for City of Davis – URAC Meeting June 5, 2014

Bartle Wells Associates, independent public finance advisors, present financing scenarios including market bond rates and SRF loans for water projects. Detailed interest rate assumptions and debt service estimates are provided. Various rate structure options and assumptions for single-family residential consumption are analyzed.

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Preliminary Water Rate Structures for City of Davis – URAC Meeting June 5, 2014

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  1. BARTLEWELLSASSOCIATES Independent Public Finance Advisors City of Davis PRELIMINARY water rate STRUCTURES URAC Meeting June 5, 2014

  2. Financing scenarios • Scenario 1: Market Bond Rates – Conservative Interest Rates • 30 year market rate bonds for the revised CIP, but at the same conservative interest rates we assumed one year ago. The combined total includes the CPG water purchases. • Scenario 2: Market Bond Rates – Current Market Interest Rates • 30 year market rate bonds for the revised CIP, but with the first 2015 market rate bond issuance at current market rates for an A+ water revenue bond. All other series are at the same conservative interest rates we used one year ago. The combined total includes the CPG water purchases. • Scenario 3: 20 year term SRF Loan • Includes accrued interest during the construction period. The combined total includes the CPG water purchases. • Scenario 4: 30 year term SRF Loan • Includes accrued interest during the construction period. The combined total includes the CPG water purchases.

  3. INTEREST RATE ASSUMPTIONS • The interest rate assumptions for the 2016, 2017, 2018 and 2019 bond issues are the same in all scenarios, as shown below: • 2016: 6% • 2017-2019: 6.25% • For the conservative scenarios (Scenario 1), 5.5% was used for the 2015 bond issue. • For the current bond market rate scenarios (Scenarios 1 & 2), a scale with an average weighted coupon of 4.42% was used. The only difference between the conservative and current rate scenarios is the interest rate assumed on the 2015 issue. • Under current market conditions, for an A-rated water credit, the average weighted coupon would not exceed 4.25%. • SRF Loans – Interest rate equal to ½ of State’s GO Bond Rate (~ 2%)

  4. DEBT SERVICE ESTIMATES

  5. 2011 Water consumption

  6. SINGLE FAMILY RESIDENTIAL – USE IN EACH TIER

  7. Rate structure options • RATE STRUCTURES • Conventional – SFR 3 Tiers with Tier 1: 0-10 ccf/month • Conventional – SFR 3 Tiers with Tier 1: 0-18 ccf/month • Conventional - Different Uniform Tiers by Customer Class • (Alternative: Single Uniform Tier for All Customers) • Conventional - Seasonal Tiers (Same for All Classes) • ASSUMPTIONS • All structures assume 40% fixed / 60% variable revenue recovery • All structures assume debt service for Scenario 2 (Market Rate Bonds at Current Market Rates) • Rates are preliminary for discussion purposes only. BWA will update revenue and expense projections, consumption data, and customer information.

  8. DRAFT RATES – CONVENTIONAL SFR 3 TIERS (TIER 1: 0-10 CCF)

  9. DRAFT RATES – CONVENTIONAL SFR 3 TIERS (TIER 1: 0-18 CCF)

  10. DRAFT RATES – CONVENTIONAL UNIFORM TIER

  11. DRAFT RATES – SEASONAL RATES

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