MPRWA Attachment B

7/30/2019 MPRWA Attachment B

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Monterey Peninsula Water Supply Project

A.12-04-019

Evaluation of Capital Financing Alternatives

For a 5.4 MGD Desalination Plant


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IntroductionCalifornia

American

Water

Company

(Cal

Am)

has

filed

an

application

for

the

Monterey

Peninsula

WaterSupplyProject, A.1204019. Intheapplication,fouralternativeprojectscenariosareexamined:

(i)9.0MGDplantwithnoGroundwaterReplenishment(GWR)andnoStateRevolving

Fundloans(SRF)

(ii)9.0MGDplantwithnoGWRandusingSRF

(iii)5.4MGDplantwithGWRandnoSRF

(iv)5.4MGDplantwithGWRandusingSRF

InthetwoalternativesthatincludeSRFloans,theproposedcapitalfinancingstructureisasfollows:

9.0MGDplantw/oGWR w/ SRF 5.4MGDplantw/GWR w/ SRF

Surcharge2(PayasYouGo) $99.1million $99.1million

LongTermDebt $79.9 million $56.2million

Equity $90.4 million $63.6million

Bothscenarios

utilize

$20

million

of

low

cost

commercial

paper

for

additional

funding

in

the

early

phasesofconstruction,whichisultimatelytakenoutbypermanentlongtermfunding.

Thepurposeofthisreportisto:

IdentifymechanismsandapproachesthatcanimproveupontheproposedCalAmfinancing

plantothebenefitofratepayers,withoutjeopardizingtheprojectschedule.

Twokey

measures

are

used

to

compare

scenarios:

(i)

the

total

40

year

lifecycle

cost,

and

(ii)

the

discountednetpresentvalueoffuturecostsin2012dollars.


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Recommendations

In the event the project is not publicly-owned, the District will offer to be the Public Partner forfinancial issues. This means that the District will make the following commitments and request that the

CPUC final order direct Cal-Am to accept the Districts decision regarding these financing alternatives at

the time of the permanent project financing if doing so saves ratepayers money.

This includes six basic considerations:

1) If available, State Revolving Fund (SRF) loans should be maximized and considered for up to100% of the project funding to reduce costs to Peninsula ratepayers;

2) If SRF loans are not available for the entire project, then require Cal-Am to examine tax-exemptprivate activity debt as a funding source for both the debt component, but preferably

additionally in lieu of equity.

3) Consider a public agency (i.e. MPWMD) contribution in lieu of Cal-Am debt or equity to reducecosts to Peninsula ratepayers. The contribution would be made via public debt and the source

of repayment either a surcharge on the Cal-Am bill or direct fees and charges to propertyowners in the District established with a Proposition 218 process;

4) Even in the event of a Cal-Am borrowing, the District should offer and the CPUC should acceptthe Districts potential public credit backstop to enhance the Cal-Am borrowing credit rating

and reduce costs to Peninsula ratepayers. The District offers to substitute its public credit as a

backstop to Cal-Ams creditworthiness in order to reduce the cost of Cal-Ams debt. It is

anticipated that Cal-Ams parent obligation carries a credit rating of Baa2, but the District could

raise that to perhaps A1. This might require the use of a stand-by water purchase agreement,a rate covenant, and other standing commitments;

5) In all cases, the CPUC should require at that point in the future when permanent financing isconsidered that the then-current market conditions be considered and, if warranted, the

public participation in financing as outlined above be required.

6) If it turns out that State Revolving Funds require a public partner, as it normally would in mostcases, the District offers to serve in that role;


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Key Conclusions

Calibration of District Model to Cal-Am Model

The District model was calibrated against the four Cal-Am scenarios and it was determined that the

District model and the Cal-Am model produce sufficiently identical results to allow the District model to

be used for analysis of alternative scenarios and assessment of variations to Cal-Ams assumptions.

Making Cal-Ams Financing Plan Better

If SRF loans are not available, then in todays market the use of Cal-Am tax-exempt debt instead oftaxable corporate debt would reduce the cost to ratepayers. This advantage will improve in the future if

the tax-exempt marketplace returns to a more traditional relationship to the taxable marketplace (see

discussion below.) Hence, based on market conditions at the time, Cal-Am should consider the benefits

of tax-exempt debt.

Providing a public credit backstop to Cal-Ams credit rating would further reduce the cost to

ratepayers, for either taxable or tax-exempt debt.

The most significant savings to ratepayers occurs when debt is used in lieu of Cal-Am equity, either

through a public contribution, Cal-Am debt (tax-exempt or corporate), or additional SRF loans. A

comparison of results is included beginning page 7.

The conclusions would remain the same if a 9.0 MGD plant were evaluated.

Discussion: Debt to Equity Ratio

The concept of financing the desalination project entirely with debt, SRF loans or tax-exempt public

agency debt, clearly reduces the cost to the ratepayer. However, Cal-Am may be concerned about their

debt to equity ratio statewide being impacted solely by the Monterey County District. We do not

believe that this is a significant concern for three reasons:

First, the debt to equity ratio is already undergoing a significant swing as a result of A.11-05-003, which

signifies that shifts in the ratio due to exogenous factors are already familiar and acceptable to Cal-Am.

The current debt to equity ratio is 58% - 42%, but A.11-05-003 would change that to 47% - 53%, a largeinversion.

Second, Cal-Am intends to invest more than $400 million in infrastructure over the next five years

(Testimony of Bente Villadsen in A.11-05-003). According to Table A2 of the proposed decision in A.10-

07-007 Cal-Ams adopted rate base is$374.4 million. If it is assumed that existing rate base was financed


5/33

base that remains earning an authorized equity rate of return, rather than a return based on the debt to

equity ratio. The contribution repayment is done via a surcharge and the interest component is not

adjusted for taxes in the revenue requirement calculation, as traditional debt would. It is unclear if theSRF loan or contribution can even be considered a debt or how the treatment is consistent with

maintaining company-wide debt to equity ratios.

There may also be ways to isolate the financing of the desalination plant from the rest of Cal-Am

through accounting methods, special purpose corporation, or a financing subsidiary.

Uncertainties in Cal-Ams Proposed Financing Plan

By 2016 the market conditions for the permanent take-out financing will be different than today or even

a year from now when the CPUC renders its decision. For example, the charts below underscore how

the relationship between tax-exempt municipal debt and taxable corporate and US Treasury debt is

much different today than traditionally, represented by the year 2007. If the tax-exempt marketplace

returns to a more traditional relationship to the taxable marketplace, the advantages of public debt

presented herein would increase significantly. Therefore, financing decisions should be made in the

context of the then-prevailing market conditions.

2012 Yield Curve Relationships 2007 Yield Curve Relationships

Public Ownership v. Private Ownership

A public owned project using traditional public financing that borrows all interest during construction

(capitalized interest), even without the advantages of pay-as-you-go capital during the construction

period such as a Surcharge 2, still competes favorably with Cal-Ams financing proposal. This scenario

has not been included in this report.


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Assumptions

Cal-Am Debt: 47% debt ratio per A.11-05-003 (Stephenson A.11, A.51)

5.00% interest rate for Cal-Ams model and initial testimony(Linam A.13)

6.63% interest rate for Cal-Ams authorized debt cost(Stephenson A.11, A.51)

4.70% interest rate if using tax-exempt debt backed by AWW Capital Corp

3.70% interest rate if using tax-exempt debt with public credit backstop

Baa2 credit rating for American Water Works Capital Corp backed debt

(per Moodys 8/15/12 Credit Opinion)

Cal-Ams stand-alone credit rating would be below investment grade. On a

stand-alone basis, several key metrics are below those expected for aninvestment grade rating from Moodys (Testimony of Bente Villadsen in A.11-

05-003)

Cal-Am Equity: 53% equity ratio per A.11-05-003 (Stephenson A.11, A.51)

9.99% equity rate of return (Stephenson A.11, A.51)

State Revolving Funds: 2.50% interest rate (Linam A.13)

20 year term

It should be noted that typically the SRF moneys are limited by the State to $50

million annually to a recipient. Recipients may receive funds in multiple years.

This limitation may affect the ability to use SRF monies as proposed.

Public Debt: 3.70% (Based on actual market data 8/16/12)

30 year term

Effective Tax Rate: 40.75% (Linam A.12)


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Depreciation: 40 year plant life / 2.50% (Linam A.12)

25 year tax life / 4.00% (Linam A.12)

AFUDC Rate: 1.00% thru 2015 (approximation based on Stephenson Attachment 5)

3.20% - 3.60% in 2016 for 5.4 MGD (approximation based on Stephenson

Attachment 5)

O&M: Excluded Only capital costs of 5.4 MGD plant evaluated

Purchased Water: Excluded Only capital costs of 5.4 MGD plant evaluated

Surcharge 2: Year Amount

2013 $7,500,000

2014 $27,040,000

2015 $31,830,000

2016 $32,780,000

Construction Draws: 9.0 MGD 5.4 MGD

Year Amount Amount

2013 $13,110,000 $11,920,000

2014 $32,940,000 $27,460,000

2015 $61,470,000 $50,010,000

2016 $152,480,000 $123,610,000

$260,000,000 $213,000,000

Costs of Issuance: Where public debt is assumed, additional costs of debt equal to 1.0% of

borrowed amount

Tax Treatment on Contributions:

Contributions such as SRF loans or tax-exempt debt are treated as repaid through a surcharge, and that

portion is removed from rate base and not subject to a return. This model does not subject the interestcomponent to gross-up for taxes and does not treat the interest expense as a deductible expense item.

The debt is included in the revenue requirement for analytical purposes, but in the case of a

contribution repaid directly from public entity revenues, rather than a surcharge, it would not actually

be part of the Cal-Am revenue requirement for ratemaking purposes. Rather, is included here to gather

the overall cost to ratepayers.


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Summary of Financing Capital Costs


5.4 MGD Plant Size including Surcharge 2 Financing

Scenario A B C D D-2 E

Title Traditional Utility

Financing

Traditional Equity,

SRF Loans in Lieuof Debt

100% SRF Loans in

Lieu of Debt andEquity

Traditional Equity,

Cal-Am Tax-Exempt Debt

(Baa2 Rating)

Traditional Equity,

Cal-Am Tax-Exempt Debt

(Baa2 Rating)

100% Cal-Am

Tax-ExemptDebt (Baa2

Rating)

Debt Amount (see note 1) $56,587,000 $56,587,000 $120,397,000 $56,859,000 $56,859,000 $121,636,000

Debt Interest Rate 5.00% 2.50% 2.50% 4.70% 4.70% 4.70%

How Debt Paid (see note 2) ROR Surcharge Surcharge Surcharge ROR Surcharge

Debt Amortization Period (note 3) Depreciable Life 20 Year 20 Year 30 Year Depreciable Life 30 Year

Equity Amount $63,810,000 $63,810,000 $0 $64,117,000 $64,117,000 $0

Post-Tax Equity Return 9.99% 9.99% N/A 9.99% 9.99% N/A

Total 40-Yr Capital Cost Recovery $435,618,000 $387,426,000 $253,612,000 $423,184,000 $434,579,000 $328,472,000

Net Present Value of Capital Costs $245,057,000 $228,063,000 $165,316,000 $236,591,000 $244,473,000 $182,807,000

Notes: (1) Where tax exempt debt is assumed, issuance costs of 1% are added

(2) Debt can be repaid either as part of the rate of return on undepreciated rate base (ROR) or through the pass-thru of a surcharge (Surcharge)

(3) SRF loans are 20 year; Bonded debt is 30 year; In the rate of return is the tax-adjusted depreciable life

(4) AFUDC is the same in all scenarios, a simplification which does not alter relative results; Not all AFUDC is recoverable when SRF loans and

Public Contributions are used to finance.

Page 7


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Summary of Financing Capital Costs


5.4 MGD Plant Size including Surcharge 2 Financing

Scenario E-2 F F-2 G G-2 H

Title 100% Cal-Am

Tax-Exempt Debt(Baa2 Rating)

Traditional Equity,

Cal-Am Tax-Exempt Debt w/

Public Backstop

(A1 Rating)

or Public

Contribution

Traditional Equity,

Cal-Am Tax-Exempt Debt w/

Public Backstop

(A1 Rating)

100% Cal-Am Tax-

Exempt Debt w/Public Backstop

(A1 Rating)

or Public

Contribution

100%, Cal-Am Tax-

Exempt Debt w/Public Backstop

(A1 Rating)

Public

Contribution inLieu of Equity,

SRF Loans in

Lieu of Debt

Debt Amount (see note 1) $121,636,000 $56,859,000 $56,859,000 $121,636,000 $121,636,000 $56,894,000

Debt Interest Rate 4.70% 3.70% 3.70% 3.70% 3.70% 2.50%

How Debt Paid (see note 2) ROR Surcharge ROR Surcharge ROR Surcharge

Debt Amortization Period (note 3) Depreciable Life 30 Year Depreciable Life 30 Year Depreciable Life 20 Year SRF

30 Year Contrib.

Equity Amount $0 $64,117,000 $64,117,000 $0 $0 $64,157,000

Post-Tax Equity Return N/A 9.99% 9.99% N/A N/A 3.70% Debt

Cost

Total 40-Yr Capital Cost Recovery $311,433,000 $411,070,000 $425,512,000 $302,557,000 $292,032,000 $279,428,000

Net Present Value of Capital Costs $182,223,000 $231,484,000 $239,895,000 $171,882,000 $172,426,000 $168,779,000

Notes: (1) Where tax exempt debt is assumed, issuance costs of 1% are added

(2) Debt can be repaid either as part of the rate of return on undepreciated rate base (ROR) or through the pass-thru of a surcharge (Surcharge)

(3) SRF loans are 20 year; Bonded debt is 30 year; In the rate of return is the tax-adjusted depreciable life

(4) AFUDC is the same in all scenarios, a simplification which does not alter relative results; Not all AFUDC is recoverable when SRF loans and

Public Contributions are used to finance.

Page 8


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Screening Model - 5.4 MGD PlantScenario A: Traditional Financing / No SRF Financing / With Surcharge 2Capital Cost Recovery OnlyPrepared by David J. Stoldt for MPWMD

Revenue Requirements Calculation

2012 2013 2014 2015 2016 2017

Capital Costs $0 $11,920,000 $27,460,000 $50,010,000 $123,610,000

Surcharge #1

AFUDC Amount 0 59,899 258,391 650,284 5,578,298

AFUDC Excluded from ROR 0 37,688 254,439 413,888 1,479,303

Plant(Transfer to CWIP) 0 11,979,899 39,698,290 90,358,575 219,546,873 219,546,873

Accumulated AFUDC Excluded from ROR 0 37,688 292,127 706,016 2,185,318 2,185,318

Accumulated Depreciation 2,955,289

Cumulative Surcharge 2 0 7,500,000 34,540,000 66,370,000 99,150,000 99,150,000Cumulative Outside Contributions 0 0 0 0 0 0

Cumulative Deferred Taxes 758,189

Rate Base & Return 0 4,465,656 4,915,414 23,431,380 118,959,105 115,730,196

Average Rate Base 0 2,232,828 4,690,535 14,173,397 71,195,242 117,344,650

Equity Return Necessary 6,213,047Debt Return Necessary 2,757,599

Return Necessary, Gross-Up for Taxes 15,100,361Interest Income Tax Savings, Gross-Up for Taxes -1,891,570

Total Return Required (Pre-Tax) 13,208,791

Expenses

O&M Expense 0

Purchased Water Cost 0Ad Valorem Taxes 0 23,445 49,251 148,821 747,550 1,232,119

Depreciation & Amortization 2,955,289

Total Expense 4,187,408

Revenues from Expenses, Gross-Up for Uncollectibles 4,198,492

SRF Loan Repayment 0

Public Agency Contribution Repayment 0

Total Revenue Requirement (Lifecycle) $435,618,140 0 7,500,000 27,040,000 31,830,000 32,780,000 17,407,283

NPV of Revenue Requirement (2012 $) $245,057,294 0 7,142,857 24,526,077 27,495,951 26,968,187 13,639,062

Cost of Water ($/A-F) $1,934

Assumptions:Purchase Water Annual Cost $0 (per AF and escalation at 1/2 the O&M rate)

Reduction After Yr 30 $0 (assumes $76,288,000 at 3.70% for 30 years)

Purchased Water in AF 3,500 (GWR included or not)

Annual O&M Expense (2017) $0 (Capital Cost Recovery Only)

O & M Cost Inflation Index 3.0% (combination of labor @ 2.0% and non-labor @ 3.23%)

Annual Surcharge 2 Contribution $0 $7,500,000 $27,040,000 $31,830,000 $32,780,000

Outside Contribution for Debt? N Amount ---> $0 $0 $0 $0 $0

Contribution Principal Due $0

Contribution Interest Due $0

Contribution Length of Loan 20 years

Contribution Interest Cost 2.50% (SRF at 2.5% per Linam testimony A.13; 3.70% for municipal debt)

Outside Contribution for Equity? N Amount ---> $0 $0 $0 $0 $0Contribution 2 Principal Due $0Contribution 2 Interest Due $0

Contribution 2 Length of Loan 30 yearsContribution 2 Interest Cost 3.70% (SRF at 2.5% per Linam testimony A.13; 3.70% for municipal debt)

AFUDC Rate - 2016 3.60% (approximation based on Stephenson testimony, Attachement 5)

AFUDC Rate thru 2015 1.00% (approximation based on Stephenson testimony, Attachement 5)

Equity Ratio 53% (Stephenson testimony A.11, A.51; Assumes future capital structure per A.11-05-003)

Equity Rate of Return 9.99% (Stephenson testimony A.11, A.51; Assumes future capital structure per A.11-05-003)

Debt Ratio 47% (Stephenson testimony A.11, A.51; Assumes future capital structure per A.11-05-003)


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Screening Model - 5.4 MGD PlantScenario A: Traditional Financing / No SRF Financing / With Surcharge 2

Capital Cost Recovery OnlyPrepared by David J. Stoldt for MPWMD

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

18,000,000

20,000,000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

AdValoremTaxes

PurchasedWaterCost

O&MExpense

TotalReturnRequired(PreTax)

Depreciation&Amortization

SRFLoanRepayment

PublicAgencyContributionRepayment

Page 10


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Screening Model - 5.4 MGD PlantScenario B: Traditional Equity Portion with SRF Financing for Debt Portion / With Surcharge 2Capital Cost Recovery OnlyPrepared by David J. Stoldt for MPWMD


2012 2013 2014 2015 2016 2017

Capital Costs $0 $11,920,000 $27,460,000 $50,010,000 $123,610,000

Surcharge #1

AFUDC Amount 0 59,899 258,391 650,284 5,578,298





Cumulative Surcharge 2 0 7,500,000 34,540,000 66,370,000 99,150,000 99,150,000Cumulative Outside Contributions 0 0 0 0 56,586,530 56,586,530


Rate Base & Return 0 4,465,656 4,915,414 23,431,380 59,506,801 57,771,986


Equity Return Necessary 5,858,075Debt Return Necessary 0

Return Necessary, Gross-Up for Taxes 9,860,945Interest Income Tax Savings, Gross-Up for Taxes 0


Expenses

O&M Expense 0

Purchased Water Cost 0Ad Valorem Taxes 0 23,445 49,251 148,821 435,425 615,714




SRF Loan Repayment 3,629,863











Outside Contribution for Debt? Y Amount ---> $0 $0 $0 $0 $56,586,530

Contribution Principal Due $2,215,200

Contribution Interest Due $1,414,663



Outside Contribution for Equity? N Amount ---> $0 $0 $0 $0 $0

Contribution 2 Principal Due $0Contribution 2 Interest Due $0








13/33


Screening Model - 5.4 MGD PlantScenario B: Traditional Equity Portion with SRF Financing for Debt Portion / With Surcharge 2


0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

18,000,000

20,000,000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

AdValoremTaxes

PurchasedWaterCost

O&MExpense



SRFLoanRepayment


Page 12


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Screening Model - 5.4 MGD PlantScenario C: 100% with SRF Financing / With Surcharge 2Capital Cost Recovery OnlyPrepared by David J. Stoldt for MPWMD


2012 2013 2014 2015 2016 2017

Capital Costs $0 $11,920,000 $27,460,000 $50,010,000 $123,610,000

Surcharge #1

AFUDC Amount 0 59,899 258,391 650,284 5,578,298




Accumulated Depreciation 0


Cumulative Deferred Taxes 0

Rate Base & Return 0 4,465,656 4,915,414 23,431,380 0 0

Average Rate Base 0 2,232,828 4,690,535 14,173,397 11,715,690 0

Equity Return Necessary 0Debt Return Necessary 0

Return Necessary, Gross-Up for Taxes 0Interest Income Tax Savings, Gross-Up for Taxes 0

Total Return Required (Pre-Tax) 0

Expenses

O&M Expense 0

Purchased Water Cost 0Ad Valorem Taxes 0 23,445 49,251 148,821 123,015 0

Depreciation & Amortization 0

Total Expense 0

Revenues from Expenses, Gross-Up for Uncollectibles 0





Cost of Water ($/A-F) $858

















Equity Ratio 0% (Assumes no equity)


Debt Ratio 100% (Assumes 100% SRF Loans for debt component)


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Screening Model - 5.4 MGD PlantScenario C: 100% with SRF Financing / With Surcharge 2


0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

18,000,000

20,000,000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

AdValoremTaxes

PurchasedWaterCost

O&MExpense



SRFLoanRepayment


Page 14


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Screening Model - 5.4 MGD PlantScenario D: Traditional Equity Portion with Cal-Am Tax-Exempt Financing for Debt Portion (Repaid thru Surcharge) / With Surcharge 2Capital Cost Recovery OnlyPrepared by David J. Stoldt for MPWMD


2012 2013 2014 2015 2016 2017

Capital Costs $0 $11,920,000 $27,460,000 $50,010,000 $124,178,587

Surcharge #1

AFUDC Amount 0 59,899 258,391 650,284 5,588,720







Rate Base & Return 0 4,465,656 4,915,414 23,431,380 59,814,006 58,071,234





Expenses

O&M Expense 0

















Contribution Principal Due $900,865



Contribution Interest Cost 4.70% (AWW tax-exempt debt rate assumed 4.7%)










17/33


Screening Model - 5.4 MGD PlantScenario D: Traditional Equity Portion with Cal-Am Tax-Exempt Financing for Debt Portion (Repaid thru Surcharge) / With Surcharge 2


0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

18,000,000

20,000,000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

AdValoremTaxes

PurchasedWaterCost

O&MExpense



SRFLoanRepayment


Page 16


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Screening Model - 5.4 MGD PlantScenario D-2: Traditional Equity Portion with Cal-Am Tax-Exempt Financing for Debt Portion / With Surcharge 2Capital Cost Recovery OnlyPrepared by David J. Stoldt for MPWMD


2012 2013 2014 2015 2016 2017

Capital Costs $0 $11,920,000 $27,460,000 $50,010,000 $124,178,587

Surcharge #1

AFUDC Amount 0 59,899 258,391 650,284 5,588,720





Cumulative Surcharge 2 0 7,500,000 34,540,000 66,370,000 99,150,000 99,150,000

Cumulative Outside Contributions 0 0 0 0 0 0


Rate Base & Return 0 4,465,656 4,915,414 23,431,380 119,545,213 116,301,228





Expenses

O&M Expense 0






























19/33


Screening Model - 5.4 MGD PlantScenario D-2: Traditional Equity Portion with Cal-Am Tax-Exempt Financing for Debt Portion / With Surcharge 2


0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

18,000,000

20,000,000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

AdValoremTaxes

PurchasedWaterCost

O&MExpense



SRFLoanRepayment


Page 18


20/33


Screening Model - 5.4 MGD PlantScenario E: 100% with Cal-Am Tax-Exempt Debt Financing (repaid thru Surcharge)Capital Cost Recovery OnlyPrepared by David J. Stoldt for MPWMD


2012 2013 2014 2015 2016 2017

Capital Costs $0 $11,920,000 $27,460,000 $50,010,000 $124,826,355

Surcharge #1

AFUDC Amount 0 59,899 258,391 650,284 5,600,594






Cumulative Outside Contributions 0 0 0 0 121,635,524 121,635,524

Cumulative Deferred Taxes 0

Rate Base & Return 0 4,465,656 4,915,414 23,431,380 0 0





Expenses

O&M Expense 0

Purchased Water Cost 0Ad Valorem Taxes 0 23,445 49,251 148,821 123,015 0


Total Expense 0

















Contribution Interest Cost 4.70% (AWW tax-exempt debt rate assumed 4.7%)






Equity Ratio 0% (assume 100% debt financed)


Debt Ratio 100% (assume 100% debt financed)


21/33


Screening Model - 5.4 MGD PlantScenario E: 100% with Cal-Am Tax-Exempt Debt Financing (repaid thru Surcharge)


0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

18,000,000

20,000,000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

AdValoremTaxes

PurchasedWaterCost

O&MExpense



SRFLoanRepayment


Page 20


22/33


Screening Model - 5.4 MGD PlantScenario E-2: 100% with Cal-Am Tax-Exempt Debt Financing / With Surcharge 2Capital Cost Recovery OnlyPrepared by David J. Stoldt for MPWMD


2012 2013 2014 2015 2016 2017

Capital Costs $0 $11,920,000 $27,460,000 $50,010,000 $124,826,355

Surcharge #1

AFUDC Amount 0 59,899 258,391 650,284 5,600,594






Cumulative Outside Contributions 0 0 0 0 0 0


Rate Base & Return 0 4,465,656 4,915,414 23,431,380 120,212,898 116,951,738


Equity Return Necessary 0Debt Return Necessary 5,573,369



Expenses

O&M Expense 0






























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Screening Model - 5.4 MGD PlantScenario E-2: 100% with Cal-Am Tax-Exempt Debt Financing / With Surcharge 2


0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

18,000,000

20,000,000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

AdValoremTaxes

PurchasedWaterCost

O&MExpense



SRFLoanRepayment


Page 22


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Screening Model - 5.4 MGD PlantScenario F: Traditional Equity Portion with Cal-Am Tax-Exempt Financing w/ Public Backstop for Debt Portion (Repaid thru Surcharge) / With Surcharge 2Capital Cost Recovery OnlyPrepared by David J. Stoldt for MPWMD


2012 2013 2014 2015 2016 2017

Capital Costs $0 $11,920,000 $27,460,000 $50,010,000 $124,178,587

Surcharge #1

AFUDC Amount 0 59,899 258,391 650,284 5,588,720






Cumulative Outside Contributions 0 0 0 0 56,858,664 56,858,664Cumulative Deferred Taxes 440,208

Rate Base & Return 0 4,465,656 4,915,414 23,431,380 59,814,006 58,071,234





Expenses

O&M Expense 0




















Contribution Interest Cost 3.70% (assumes MPWMD public credit rated A1/A+)










25/33


Screening Model - 5.4 MGD PlantScenario F: Traditional Equity Portion with Cal-Am Tax-Exempt Financing w/ Public Backstop for Debt Portion (Repaid thru Surcharge) / With Surcharge 2


0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

18,000,000

20,000,000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

AdValoremTaxes

PurchasedWaterCost

O&MExpense



SRFLoanRepayment


Page 24


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Screening Model - 5.4 MGD PlantScenario F-2: Traditional Equity Portion with Cal-Am Tax-Exempt Financing w/ Public Backstop for Debt Portion / With Surcharge 2Capital Cost Recovery OnlyPrepared by David J. Stoldt for MPWMD


2012 2013 2014 2015 2016 2017

Capital Costs $0 $11,920,000 $27,460,000 $50,010,000 $124,178,587

Surcharge #1

AFUDC Amount 0 59,899 258,391 650,284 5,588,720






Cumulative Outside Contributions 0 0 0 0 0 0Cumulative Deferred Taxes 761,687

Rate Base & Return 0 4,465,656 4,915,414 23,431,380 119,545,213 116,301,228





Expenses

O&M Expense 0






























27/33


Screening Model - 5.4 MGD PlantScenario F-2: Traditional Equity Portion with Cal-Am Tax-Exempt Financing w/ Public Backstop for Debt Portion / With Surcharge 2


0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

18,000,000

20,000,000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

AdValoremTaxes

PurchasedWaterCost

O&MExpense



SRFLoanRepayment


Page 26

M t P i l W t S l P j t


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Screening Model - 5.4 MGD PlantScenario G: 100% with Cal-Am Tax-Exempt Debt Financing w/ Public Backstop (repaid thru Surcharge)Capital Cost Recovery OnlyPrepared by David J. Stoldt for MPWMD


2012 2013 2014 2015 2016 2017

Capital Costs $0 $11,920,000 $27,460,000 $50,010,000 $124,826,355

Surcharge #1

AFUDC Amount 0 59,899 258,391 650,284 5,600,594






Cumulative Outside Contributions 0 0 0 0 121,635,524 121,635,524Cumulative Deferred Taxes 0

Rate Base & Return 0 4,465,656 4,915,414 23,431,380 0 0





Expenses

O&M Expense 0

Purchased Water Cost 0

Ad Valorem Taxes 0 23,445 49,251 148,821 123,015 0


Total Expense 0

















Contribution Interest Cost 3.70% (assumes MPWMD public credit rated A1/A+)










29/33


Screening Model - 5.4 MGD PlantScenario G: 100% with Cal-Am Tax-Exempt Debt Financing w/ Public Backstop (repaid thru Surcharge)


0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

18,000,000

20,000,000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

AdValoremTaxes

PurchasedWaterCost

O&MExpense



SRFLoanRepayment


Page 28



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Screening Model - 5.4 MGD PlantScenario G-2: 100% with Cal-Am Tax-Exempt Debt Financing w/ Public Backstop / With Surcharge 2Capital Cost Recovery OnlyPrepared by David J. Stoldt for MPWMD


2012 2013 2014 2015 2016 2017

Capital Costs $0 $11,920,000 $27,460,000 $50,010,000 $124,826,355

Surcharge #1

AFUDC Amount 0 59,899 258,391 650,284 5,600,594






Cumulative Outside Contributions 0 0 0 0 0 0Cumulative Deferred Taxes 765,673

Rate Base & Return 0 4,465,656 4,915,414 23,431,380 120,212,898 116,951,738


Equity Return Necessary 0Debt Return Necessary 4,387,546



Expenses

O&M Expense 0


Ad Valorem Taxes 0 23,445 49,251 148,821 754,132 1,245,114





























31/33


Screening Model - 5.4 MGD PlantScenario G-2: 100% with Cal-Am Tax-Exempt Debt Financing w/ Public Backstop / With Surcharge 2


0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

18,000,000

20,000,000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

AdValoremTaxes

PurchasedWaterCost

O&MExpense



SRFLoanRepayment


Page 30



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y pp y j

Screening Model - 5.4 MGD PlantScenario H: Public Contribution for Equity Portion with SRF Financing for Debt Portion / With Surcharge 2Capital Cost Recovery OnlyPrepared by David J. Stoldt for MPWMD


2012 2013 2014 2015 2016 2017

Capital Costs $0 $11,920,000 $27,460,000 $50,010,000 $124,251,566

Surcharge #1

AFUDC Amount 0 59,899 258,391 650,284 5,590,058






Cumulative Outside Contributions 0 0 0 0 121,050,199 121,050,199Cumulative Deferred Taxes 0

Rate Base & Return 0 4,465,656 4,915,414 23,431,380 0 0





Expenses

O&M Expense 0


Ad Valorem Taxes 0 23,445 49,251 148,821 123,015 0


Total Expense 0



Public Agency Contribution Repayment 3,576,234















Outside Contribution for Equity? Y Amount ---> $0 $0 $0 $0 $64,156,605

Contribution 2 Principal Due $1,202,439Contribution 2 Interest Due $2,373,794

Contribution 2 Length of Loan 30 yearsContribution 2 Interest Cost 3.70% (assume MPWMD public credit rated A1/A+)







33/33


Screening Model - 5.4 MGD PlantScenario H: Public Contribution for Equity Portion with SRF Financing for Debt Portion / With Surcharge 2


0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

18,000,000

20,000,000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

AdValoremTaxes

PurchasedWaterCost

O&MExpense



SRFLoanRepayment


Page 31

MPRWA Attachment B

Documents

Transcript of MPRWA Attachment B