BEFORE THE ILLINOIS POLLUTION CONTROL BOARD

IN THE MATTER OF:

WATER QUALITY STANDARDS AND

EFFLUENT LIMITATIONS FOR THE

CHICAGO AREA WATERWAY SYSTEM

AND

THE LOWER DES PLAINES RIVER:

PROPOSED AMENDMENTS TO 35 Ill.

Adm. Code Parts 301, 302, 303 and 304

)

)

)

)

)

)

)

)

R08-9

(Rulemaking - Water)

PRE-FILED TESTIMONY OF JOHN MASTRACCHIO

INTRODUCTION

My name

is John Mastracchio. I am a senior associate with Malcolm Pirnie and have

been a financial management, engineering, and rate consultant since 1994. My experience

includes completing studies involving municipal

utility economics and financial analysis. I hold

a Master

of Business Administration degree with a concentration in finance from Cornell

University, a Masters

of Engineering degree with a concentration in Civil and Environmental

Engineering from Clarkson University, and a Bachelor

of Arts degree from the State University

of New York. I am a Registered Professional Engineer and have received the Chartered

Financial Analyst designation from the Chartered Financial Analyst Institute. I am an active

member

of the American Water Works Association, the Water Environment Federation, and serve

on the Finance, Accounting, and Management Controls Committee

of the American Water Works

Association. A resume detailing my education and experience is presented in Attachment

6.

PURPOSE

The purpose

of my testimony is to explain the potential economic impacts of

implementing either chlorination/dechlorination or ultraviolet disinfection processes at the

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

Metropolitan Water Reclamation District of Greater Chicago (District) water reclamation plants

that would

be necessary to meet an effluent limitation for fecal coliform of 400 colony forming

units (CFU)/100 mL, which is the treatment standard proposed

by the Illinois Environmental

Protection Agency for discharges to the Chicago Area Waterway System. The results

of this

assessment are summarized in this testimony, and are documented in greater detail in the report

entitled Economic Assessment

of Infrastructure to Meet Proposed Water Quality Standards for

Dissolved Oxygen and Plant Effluent Standards for Bacteria (Attachment 7). The economic

impacts were assessed in terms

of the District's statutory taxing authority and financial

capabilities.

COST SUMMARY

The economic assessment of implementing chlorination/dechlorination processes at the

Stickney, Calumet and Northside water reclamation plants was based

on the District spending

approximately $419 million in capital infrastructure and annual maintenance and operations

(M&O) costs

of approximately $26.0 million (expressed in 2008 dollars). The economic

assessment

of implementing ultraviolet disinfection processes was based on the District spending

approximately $491 million in capital infrastructure and annual

M&O costs of approximately

$22.1 million (expressed in 2008 dollars). A summary

of these costs are provided as Attachment

1.

The basis for these costs is documented in ChlorinationlDechlorination Cost Study

(ChlorinationlDechlorination Disinfection Cost Study for Stickney, Calumet and North Side

Water Reclamation Plants,

May 2008) and Ultraviolet Disinfection Cost Study reports

(UV

Disinfection Cost Study

-

North Side Water Reclamation Plant,

January 2008; working results of

the

Draft Stickney Water Reclamation Plant UV Cost Study

and the

Draft Hydraulic Evaluation

Technical Memorandum,

June 2008) prepared by CTE and the testimony of David

R.

Zenz.

2

Electronic Filing - Received, Clerk's Office, August 4, 2008

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ECONOMIC

ASSESSMENT

The District generates revenue to fund its operations through an ad valorem property tax,

a personal property replacement tax, user charges, interest income, and other miscellaneous fees

and charges. The District'sprimary source

of operating revenue is the ad valorem property tax.

Personal property replacement tax

is primarily a tax on corporate income. User charge revenues

are collected from large commercial and industrial customers and tax-exempt customers. A

summary

of the District's revenues and expenditures for the period 2002 through 2006 is

provided as Attachment

2.

The District has several financial limitations and restrictions that directly impact its

ability to take on additional projects or programs. First, in 1995, the Property Tax Extension

Limitation Law was passed by the Illinois General Assembly, which limits the ability

of the

District to adopt future increases in the aggregate tax levy. In accordance with this Act,

increases to the District's property tax levy are limited to the lesser of: (1) five percent

or (2) the

change in the national consumer price index plus allowable increases for new property. The

aggregate levy

is the total levy of all funds except the Bond Redemption and Interest Fund and

the Stormwater Management Fund. In other words, debt service and stormwater management

costs are not included under this limitation.

Second, the District's initial Tax Cap legislation restricted the District's non-referendum

bond authority to only apply to projects initiated prior to October

1, 1991. There was a specific

exemption, essentialy to exclude Tunnel and Reservoir Plan projects from the more restrictive

provisions

of the Act which require referendum approval of all new debt. Public Act 89-385

provides the District with the authority to issue non-referendum "limited bonds" for capital

projects initiated after October

1, 1991 at the same debt service level as it did in 1994. Limited

bonds can

be issued to the extent that the total debt service requirements of any new debt, when

3

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

combined with existing debt service, does not exceed the 1994 debt service extension base of

$141,463,920. Public Act 90-485 has provided a further modification by authorizing the

exclusion

of debt for Tunnel and Reservoir Plan projects from this debt service extension base.

Third, in 2003, the District received authority under Public

Act 93-279 to issue $150

million (previously

$100 million) of non-referendum bonds during any budget year plus

authoritzed,

but unissued bonds, during the previous three budget years through 2016.

A baseline scenario was prepared, which includes the District's currently planned capital

projects that the District feels is necessary in order to maintain and upgrade its aging facilities

and infrastructure,

but excludes the costs associated with this proposed rulemaking. The

estimated cost of the District's planned capital improvement projects were provided to Malcolm

Pimie in February 2008, and a discussion of these projects is provided in the testimony of Mr.

Tom Kunetz of the District's Engineering Department. The baseline scenario indicates that the

District would

be able to generate sufficient revenues to satisfy the District'sprojected revenue

requirements within the constraints

of the legal limitations I just discussed. In addition, the

District's debt financing needs will not exceed the Tax

Cap legislation limits or the District's

non-referendum bonding authority through fiscal year 2015. A summary

of the District's

projected results compared to the financial limitations and restrictions are provided as

Attachment 3 (Figures 3-1, 3-2 and 3-3).

However, the District does not have sufficient financial resources to fund the capital

expenditures and operation and maintenance costs necessary to disinfect its discharges to meet

the IEPA proposed bacterial effluent standard, either through chlorination and dechlorination

or

through ultraviolet disinfection. The District cannot generate sufficient revenues within the

constraints

of the Property Tax Extension Limitation Act, and the remaining funds needed would

4

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

exceed the District'sTax Cap and non-referendum bonding authority. A summary of the

District's projected financial results as compared to the financial limitations and restrictions is

provided in Attachment 4 (Figures 4-1, 4-2 and 4-3) for the chlorination/dechlorination option

and in Attachment 5 (Figures 5-1, 5-2 and 5-3) for the ultraviolet disinfection option.

It should be noted that effluent limits for phosphorus and total nitrogen may be imposed

on the District's treatment plants in the future. The District'scurrently planned capital projects,

which were used in the baseline analysis, do not include the costs to implement nutrient removal

processes. As documented in a District cost summary table provided in Attachment

8, a

rudimentary, order-of-magnitude cost estimate prepared

by the District indicates that the capital

costs to construct nutrient removal processes could be approximately $2.8 billion dollars.

CONCLUSION

Full funding of the activities necessary to achieve compliance with IEPA's proposed rule

would require an act

of the state Legislature to amend the Property Tax Extension Limitation Act

and provide additional non-referendum bonding authority; a voter referendum in support

of

additional bonding authority; or drastic reductions in the funding of other District programs.

Furthermore,

if implemented, disinfection would leave no financial capacity to fund other

programs not currently included in the District'scapital plan. One such project not currently

included

in the District's capital plan is nutrient removal facilities at its treatment plants, which

could cost approximately $2.8 billion

if nutrient effluent limits are imposed in the future.

5

Electronic Filing - Received, Clerk's Office, August 4, 2008

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Respectfully submitted,

fld~

By:

John Mastracchio

Electronic Filing - Received, Clerk's Office, August 4, 2008

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Testimony Attachments

1.

Summary of Costs to Meet Newly Proposed Water Quality Standards in the Chicago

Area Waterways

2.

MWRD Summary of Financial Results

3.

Baseline Financial Results Compared to Financial Limitations and Restrictions

4.

Financial Results Including Chlorination/Dechlorination Disinfection Costs

Compared to Financial Limitations and Restrictions

5.

Financial Results Including Ultraviolet Disinfection Costs Compared to Financial

Limitations and Restrictions

6.

John Mastracchio Resume

7.

Report entitled Economic Assessment of Infrastructure to Meet Proposed Water

Quality Standards for Dissolved Oxygen and Plant Effluent Standards for Bacteria,

prepared by Malcolm Pimie, Inc.

8.

Rudimentary, Order-of-Magnitude Cost Estimates for Nutrient Removal at District

Water Reclamation Plants prepared

by the District

6

Electronic Filing - Received, Clerk's Office, August 4, 2008

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Summary

Waterways

AnnualO&M

Total Present

Project Description

Capital Cost

Cost

Value Cost

SWRP

ChlorinationlDechlorination Disinfection

$225,700,000

$15,900,000

$533,500,000

Ultraviolet Disinfection

267,200,000

12,600,000

511,200,000

CWRP

ChlorinationlDechlorination Disinfection

$79,100,000

$5,020,000

$176,500,000

Ultraviolet Disinfection

112,300,000

4,600,000

201,600,000

NSWRP

ChlorinationlDechlorination Disinfection

$114,200,000

$5,040,000

$212,000,000

Ultraviolet Disinfection

111,600,000

4,900,000

206,800,000

Total

ChlorinationlDechlorination Disinfection

Ultraviolet Disinfection

$419,000,000

491,100,000

$25,960,000

22,100,000

$922,000,000

919,600,000

All costs in 2008 dollars.

Source:

Chlorination/Dechlorination Disinfection Cost Study for Stickney, Calumet and North Side Water Reclamation Plants

(CTE,

May 2008);

UV Disinfection Cost Study

-

North Side Water Reclamation Plant

(CTE, January 2008); working results of the

Draft

Stickney Water Reclamation Plant

UV Cost Study

and the

Draft Hydraulic Evaluation Technical Memorandum

(CTE, June 2008).

Subsequently updated to June 2008 dollars. Present value costs over 20 years based on a 3.0% interest rate and a 3.0 percent inflation

rate.

7

Electronic Filing - Received, Clerk's Office, August 4, 2008

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Attachment 2

- MWRD Summary

of Financial Results

(in $ Thousands, Modified Accrual Basis)

2002

2003

2004

2005

2006

Revenues

Property Taxes

$

362,036

$

397,751

$

360,326

$ 423,941

$

380,675

Personal Property Replacement Tax

22,285

24,048

25,961

36,031

37,743

User Charges

48,890

50,222

47,757

45,983

52,504

Interest on Investments

15,693

13,163

9,943

19,693

43,659

Other Revenues

14,759

16,203

16,495

16,309

17,691

Total Revenues

$ 463,663 $

501,387

$

460,482 $ 541,957

$

532,272

Expenditures

General Administration

$

14,318

$

14,987

$

15,538

$

17,259

$

16,974

Personnel

27,610

30,916

35,877

32,900

35,162

Pension Costs

27,044

29,511

27,372

31,561

30,071

Research and Development

23,838

24,172

24,030

24,787

24,985

Information Technology

11,204

11,417

10,574

10,811

11,034

Maintenance and Operations

160,326

159,079

160,299

157,612

155,899

Other

32,843

22,563

27,637

31,522

26,931

Construction Costs

157,076

164,865

127,155

133,599

164,157

Debt Service

145,831

158,626

156,025

169,019

171,869

Total Expenditures

$

600,090

$

616,136

$

584,507 $ 609,070

$

637,082

Revenues Over (Under) Expenditures

$ (136,427) $ (114,749) $ (124,025)

$ (67,113) $ (104,810)

Other Financing Sources (Uses)

222,622

223,613

52,720

15,973

383,448

Net Change in Fund Balance

$

86,195 $ 108,864

$

(71,305) $ (51,140) $ 278,638

Source: Comprehensive Annual Financial Reports (2003-2006).

8

Electronic Filing - Received, Clerk's Office, August 4, 2008

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Attachment 3

Baseline Financial Results Compared to Financial Limitations

and Restrictions

Figure 3-1 - Capital Improvement Plan - Baseline

CAPITAL PROGRAM EXPENDITURES

_Sewer

$600,000

$500,000

$400,000

.fl

c

$300,000

..

"

0to

$200,000

.c

...

I-

$100,000

$0

~

0

5

'"

Plant

_TARP

-CIBFCash Balance

Figure 3-2

Forecasted Aggregate Tax Levy Requirement Compared to Tax

Cap Limitation - Baseline

$410,000 ..,------------------------------,

$390,000

+--------------------------::------j

'" $370,000

-t------------------------~"""F::....-_1

'I:l

I

$350,000

~

$330,000

+-----------------:::;_.-=~

~

$310,000

+--------------,,~....,

<it $290,000

t-----:=---'f'-r---l

$270,000 .<--...-1=---I

$250,000 +-J'--'--r-.L---'---.---'--'-.,..-L..-.1--,--I.--I.--r--l--l--.--.L-..I...-,---J........I-,-....L..-L.-,-..L--'---j

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

~

Projected Tax Levy Requiremenl(ExcludingSt:lrmwaterCostand DebtService)

-

Tax Levy extension Limitation (CPJ + New Property)

Figure 3-3

Forecasted Debt Service Compared to Debt Service Extension Base - Baseline

$160,000

$140,000

$120,000

",$100,000

'I:l

; $80,000

:>

,g

$60,000

~

$40,000

$20,000

$0

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

...Projected Amountof Limited Debt8ervlce

9

-

DebtService EXSEmsion limitation

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

Attachment 4

Financial Results Including ChlorinationJDechlorination Disinfection Costs Compared to

Financial Limitations

and Restrictions

Figure 4-1 - Capital Improvement Plan

ESTIMATED CAPITAL PROGRAM EXPENDITURES

-s..-

$600,000

Plant

_Tarp

,,',./'.Projects to Meel Proposed Standards

-CIBF Cash Balance

$500,000

$400,000

.fl

:

$300,000

:::l

..

~

$100,000

$200,000

$0_.-

Figure 4-2

Forecasted Aggregate Tax Levy Requirement Compared to Tax

Cap Limitation

$430,000 .,...------------------------------,

$410,000

+-------------------------~

$390,000

+-----------------------1

III

~

$370,000 +-------------------------:::::oo__'F--1

~

$350,000

+-----------------------::::;ortf/ll'r

l-

,g

$330,000 +-----------------=_rtf"2q

o

.E $310,000

+-------------=:::::;;;;1,.,....,.-

$290,000

+------::::::::~~"F_____l

$270,000 -1--"'-":::;'---1

$250,000 +-'--J..-,,---'-----L---,-...........-'----.--'---'-......-''-'--T-L.---L---,--'-

...........

,...-.L...-..L..-...........---'---,---'--'----l

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

c::::::::J

Projected Tax Levy Requirement(Excluding StonnwaterCostand Debt Service)

-

Tax Levy Extension

limitation (CPI + New Property)

Figure 4-3

Forecasted Debt Service Compared to Debt Service Extension Base

$200,000

$160,000

$160,000

$140,000

~$12O,000

=$100,000

5 $60,000

.c

~

$60,000

.E $40,000

$20,000

$0

2006

2009

2010

2011

2012

2013

2014

2015

2016

2017

Projected Amountof Limited DebtService

10

-

DebtService Extension Limitation

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

Attachment 5

Financial Results Including Ultraviolet Disinfection Costs Compared to Financial

Limitations

and Restrictions

Figure 5-1 - Capital Improvement Plan

ESTIMATED CAPITAL PROGRAM EXPENDITURES

-Se\YElr

$600,000

$500,000

$400,000

-B

..

III

c:

$300,000

::l

0

.c:

$200,000

I-

<It

$100,000

$0

CD

~

Plant

_Tarp

.~;._;

Projects to Meet Proposed Standards

-

aBF

Cash

Balance

:."':-:.:-:.:~~~

..'j, ••••••••••

"

~

",

",

..

..............•..........••

""

~~~~~~~~~~~~~~~~~~.

.

.

...

~

....:.:.l..

~':.~·;i;··~···

....

~~~~~S~~~~~~~~~~~~~~~~~~S~~~:

")T)······~

..

~··~··~··~$~$~m~:

Figure 5-2

Forecasted Aggregate Tax Levy Requirement

Compared to Tax Cap Limitation

$430,000 -r----------------------------,

$410,000 +---------------------------fr--1

$390,000 +--------------------------1

III

~

$370,000

+-------------------------=__

'F-----l

~

$350,000 +--------------------=.......

l-

~

$330,000

+------------------=:l_f"2~

.= $310,000 +--------------,=--....-

*

$290,000

+------=_-;~_1

$270,000 +--.....

-.=::.~

$250,000

+-'--.I-.,.................---,--'---'--,--'---'-,..-'--'-,----'---'----r-'--'--,--'---'-

..........

'---''--,---'----'---1

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

c::::==I

Projected Tax Levy Requirement(Excludlng StormwaterCostand Debt Service)

--Tax Levy Extension limitation (CPI + New Property)

Figure 5-3

Forecasted Debt Service Compared to Debt Service Extension Base

$250,000

$200,000

~$150,000

!I

5$100,000

.c

ti

.s $50,000

$0

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Projected Amountof Limited DebtService

11

-

DebtService Extension

Limita~on

Electronic Filing - Received, Clerk's Office, August 4, 2008

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ATTACHMENT 6

John

Mastracchio CV

Electronic Filing - Received, Clerk's Office, August 4, 2008

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John M. Mastracchio. P.E .. CF A

Mr. Mastracchio

is a senior financial analyst specializing in municipal

utility economics, financial analysis, capital and financial planning, cost of

service evaluation, the design of rates, fees, and charges, and utility

valuation. Mr. Mastracchio is a member of the Finance, Accounting &

Management Controls

committee of the American Water Works

Association where he participates on

the capital financing and valuation

subcomittees, and

is a member of the Water Environment Federation and

the Chartered Financial Analyst Institute.

He is a contributing author of

the utility Capital Financing Manual of Practice (M29) and routinely

speaks at national and regional conferences and meetings on the topics

of regionalization, financial planning, rate-setting, and valuation.

REPRESENTATIVE EXPERIENCE

• Confidential Client: Due Diligence Review for Water System

Acquisition

I

New York City NY.

Task Leader for the financial analysis

as part of a due diligence investigation for the acquisition of a Water

Company

in the eastern U.S. Services included assistance in developing a

long-term capital improvement plan, review and development

of financial

modeling assumptions regarding supply

and demand, operation and

maintenance costs, capital expenditures

and general rate setting

methodology

in accordance with each state's rate setting requirements.

Recommendations regarding the acquisition and future capital and

operating requirements including projections of revenues and rate

of

return for each of five regulated utilities were presented.

City of Columbus: Comprehensive Rate and Charge Study

I

Columbus

OH.

Completed a cost-of-service evaluation and rate, fee, and charge

assessment

to assist the City of Columbus generate sufficient revenues

to pay

for upcoming water and sewer capital improvement and operation

and maintenance programs.

The project included completing a cost-of-

service evaluation to determine the cost responsibility of the city's

customers, water and sewer asset valuations to support connection fee

development, and a rate structure evaluation to identify water and sewer

rate structures

that were closely aligned with the cost of providing

service and developing rate formulas

for the city's future use. Based on

the results of this study, the city changed its water rates from a declining

block structure to a "lifeline" rate and

an inclining block structure for

residential customers. The city also implemented a separate charge to

customers to pay

for its upcoming $2.5 billion wet weather capital

program. This charge recovers the cost of the program based upon the

impervious surface area of the city's customers. Presented study results

to city staff, city council, and other stakeholders using interactive

financial modeling tools that were developed

for the client.

• Credit Suisse First Boston: Columbia, SC.

Acting on behalf of several

investment banking firms, reviewed of the estimates of environmental

liability reported to the Securities and Exchange Commission by a publicly

John M. Mastracchio

Title/Firm:

Senior Associate

Red Oak Consulting, A Division of

Malcolm Pirnie, Inc.

Years of Experience

13

Education

BA State University of New York at

Geneseo 1993

MS Civil and Environmental Engineering

Clarkson University 1994

MBA Finance Cornell University 2001

Licenses and Certifications

Professional Engineer

Chartered Financial Analyst

Societies

American Water Works Association,

F;inance, Accounting

&

Management

Controls Committee

Chartered Financial Analyst Society

of

Rochester

Government Financial Officers

Association

Water Environment Federation

Employment History

Red Oak Consulting, a Division of Malcolm

Pirnie, Inc.

2002 to present

Arthur Andersen, LLP. 2001 to 2002

Parsons Engineering Science. Inc. 1994 to

2000

A282007

I

WHI

Pathways to Lasting Solutions

:.:::

RHIDA K

'. • ••.

CONSULTING

• ••

A DIVISION or MALCOLM

PIRr~lE

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

John M. Mastracchio, P.E., CF A

traded, national, environmental services company. This project

was

accomplished by reviewing pertinent SEC filings, environmental liability

reporting policies and procedures established

by the Company,

requirements of F

ASB Statement No.5 and SFAS Statement No. 143

related to reporting of environmental contingent liabilities and asset

retirement obligations, and information gathered through site visits,

interviews with regulators, site assessments, Superfund site reviews,

and

landfill useful life estimates provided by other Malcolm Pirnie team

members. This information

was assessed and used to form an opinion

about the reasonableness

of the estimates of environmental liability

prepared by the Company. Our clients, the investment banking firms,

relied

on our efforts as underwriters for the bonds to be issued by the

Company and

as agents and lenders with respect to a credit agreement

entered into

by the Company. In addition, other lenders participating in

the syndicate also relied on our report from a credit agreement

perspective.

• Countryside Village North. City of Anderson: Anderson utility

System Valuation

I

Anderson IN.

Completed a valuation of the

Countryside Village North sewer system to support the negotiated sale of

the system to the City of Anderson.

The sewer system consisted of

approximately

3,000 linear feet of sewer, one lift station, 4,000 linear

feet

of force main, and associated appurtenances.

•

City of

Delaware: Financial Services

I

Delaware OH.

Provided expert

advice to the city

in support of financing wastewater capital

infrastructure improvements

in anticipated future city growth. Reviewed

and evaluated wastewater impact fee methodologies and fee levels.

Recommended changes to the existing wastewater fee structure to

address the city's concerns about rate equitability

for multifamily and

single-family residential customers, and

to ensure that growth pays for

itself.

Erie County Dept. of Environment and Planning: utility Merger

Feasibility Study

and Asset Management Evaluation

I

Buffalo NY.

Managed the evaluation of the feasibility of consolidating three adjacent

wastewater systems into Erie County Sewer Districts. Managed the

financial evaluation of the impacts

of consolidating included potential

cost savings and impacts

on customer taxes and user fee rates. Managed

the completion of a financial impact analysis and sewer rate plan

as part

of an overall asset management program for the County. The project

included evaluation

of capital improvement program alternatives using an

interactive financial model that supported the creation of an asset

management plan.

• Erie County Dept. of Environment and Planning: ECDEP Asset/Finac

I

Buffalo NY.

Managed the completion of a financial impact analysis and

sewer rate plan

as part of an overall asset management program for the

County.

The project included evaluation of capital improvement program

alternatives using

an interactive financial model, supporting the creation

of

an asset management plan, developing a baseline condition

A282007 / WHI

Pathways to Lasting Solutions

..

:::

RElIDAK

....0

0

••

CONSULTING

• ••

'" DIVISION

or

MALCOLM PIRt41(

Electronic Filing - Received, Clerk's Office, August 4, 2008

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John M. Mastracchio, P.E., CF A

assessment

of major plant and buried assets, evaluation of strategic

business drivers, development of project prioritization methodologies,

and preparation

of the final CIP document, including a detailed financial

impact analysis and

utility rate plan.

• City of Fort Wayne: Valuation in Support of utility Acquisition! Fort

Wayne IN.

Completed a valuation of a private water and wastewater

utility regulated by the Indiana Utilities Regulatory Commission using

asset- and market-based valuation approaches. The valuation estimate

was provided to the City's attorney to support settlement negotiations

and condemnation.

• City of Grand Forks: Rate Study and Cost-of-Service Evaluation!

Grand Forks. NO.

Completed a financial evaluation of the city's water,

wastewater, solid waste, and stormwater utilities. The evaluations were

conducted

to ensure that the costs associated with planned capital

infrastructure investment and the operations of each utility were

allocated equitably

to each customer class based on its service

requirements. Evaluated the financial affordability of capital

improvement plans. Developed cost allocation methodologies using sound

engineering, financial, and rate-making practice. Developed

nonproprietary revenue adequacy models

to provide the city with a basis

for the evaluation of alternative rate structures and to ensure that all of

the appropriate costs

of operating the utility were reflected in the rates.

• Greene County: Capital Planning Study! Dayton OH.

Provided capital

investment decision-making support and planning assistance for county

municipality

in Dayton, Ohio. Developed an affordable financial plan for

paying for the capital infrastructure investments that were identified in

the study. Developed an interactive financial model that was used during

the project

to assess the impact various capital improvement programs

and financing alternatives on the County's wastewater rates. Conducted

an in-depth evaluation of the parameters that impacted affordability,

developed a financial plan that identified the most cost effective project

financing alternatives, and presented 20-year pro forma financial

projections

for the County under several different scenarios and

assumptions.

• Borough of Haledon: Valuation in Support of Utility Acquisition!

Haledon NJ.

Completed a valuation of a municipal water system in New

Jersey

to assist the client in making acquisition decisions. The valuation

was completed to establish a baseline for the utility system and its

negotiated sale.

• The Harrisburg Authority: Financial Capability Assessment!

Harrisburg PA.

Completed a Financial Capability Assessment to measure

the impact

that the Authority's Long-Term Control Plan will have on both

the current and

future financial health of the service area. Determined

the service area's average wastewater

treatment and CSO

implementation cost per household, and evaluated debt. socioeconomic,

and financial management indicators of financial capability,

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Recommended a capital improvement implementation schedule that

would minimize the financial impact

to customers, based on the results of

the assessment.

• Henrico County: Water and Sewer Rate Study / Richmond VA.

Completed a cost of service evaluation and rate, fee, and charge study to

assist Henrico County develop a sustainable financial management plan,

determine revenue requirements over the next ten years,

and ensure

equitable recovery of costs. The study also consisted of completing

an

asset valuation to support the development of impact fees to ensure that

growth pays

for itself over the planning period. The financial

management plan

was developed using an interactive forecast model that

allowed alternative scenarios to be easily evaluated. Connection fees, fire

protection charges, and local facility fees were established by

determining the costs of providing these services and developing fees

to

equitably recover these costs from customers utilizing the services. Rate,

fee, and charge formulas were developed

for the County's $80 million

operating budget.

•

City

of

Kingston: Wastewater Rate Study / Kingston, NY.

Completed a

wastewater rate study

to assist the City pay for its capital improvement

program, develop a sustainable financial management plan,

and

determine future revenue requirements. Developed an interactive rate

model

for forecasting revenue requirements and user rates. Presented

rate recommendations

to City officials.

• Kinderhook Industries, LLC: Environmental Liability Assessment /

Berwyn, PA.

Completed a financial evaluation in support of an

environmental compliance/liability assessment to support acquisition of a

firm

in the remedial construction and Resource Conservation and

Recovery Act

(RCRA) hazardous waste management business with three

RCRA treatment, storage, or disposal facilities (TSDFs). Financial

evaluation consisted of reviewing the reporting requirements of F

ASS 5

and

SFAS 143 to ensure environmental liability estimates prepared by

Malcolm Pirnie satisfied accounting and reporting requirements. Utilized

the expected cash flow approach

for calculating environmental liabilities,

compared liability estimates with those reported

on the company's

financial statements, and prepared cost and cash flow estimates.

• City of Lorain: Wastewater Regionalization Study / Lorain, OH

Managed the completion of a wastewater regionalization study to

evaluate the feasibility of constructing a regional wastewater treatment

plant and conveyance system to serve customers throughout Lorain

County. Assessed the capital and

O&M costs associated with the regional

entity, developed financial models

to project revenue requirements and

rates under the regional approach and under status quo. Facilitated

discussions with stakeholders pertaining

to the costs and benefits of

regionalization.

• LS Power, LLC: Economic Impact Assessment / West Deptford, NJ.

Assessed the potential economic impact of the construction and

operation

of a modern coal-fired power plant in West Deptford Township,

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New Jersey. Utilized IMPLAN® software to assess the economic impacts

of a

500 MW coal fired power plant on an 11 county region. Examined the

direct and indirect economic benefits

to the region, effects of the project

on local employment and economic output. during construction and post

construction, and evaluated the potential peak economic stimulus.

Prepared report that provided information

to elected officials and other

stakeholders

to support a decision to proceed with the project.

• City of Lancaster: Engineer's Feasibility Report

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Lancaster OH.

Completed an Engineer's Feasibility Report to support the

release of bond disclosure documentation

for the issuance of $8 million

waterworks revenue bonds. Subsequently completed a sewer rate study

consisting of projections of rate revenue requirements considering

various capital improvement programs, and growth scenarios,

development

of sewer rate and connection fee recommendations,

evaluation of customer affordability, and comparison of sewer rates

in

nearby communities.

Completed a comprehensive water rate and charge study

to support the

client's capital investment planning process. The project included

assessing alternatives

for financing water system capital investments and

completing a cost-of-service evaluation

to equitably recover utility costs

from rate payers.

In addition, a nonproprietary financial planning and rate

design model

was developed to assist in the pricing of utility services.

Detailed analyses of customer costs, usage characteristics, capital

improvement program costs,

and neighboring utility rate comparisons

were conducted

to support the design of the rate components.

• Macomb County: Wastewater Treatment Plant Acquisition Evaluation

I

Mt Clemens, MI

Managed the completion of a preliminary evaluation of

wastewater treatment plant ownership and

joint use options for Macomb

County. Completed a financial evaluation of alternatives that provided a

projection of future capital and

O&M costs, and assessed the future rate

implications

of each option. Estimated the value of wastewater system

assets and evaluated asset transfer pricing

that would result in a win-win

for all involved parties. Served as a financial and technical resource for

assessing asset transfer and deal structure alternatives.

• Maricopa Water District: Wholesale Water Service Agreement

Development

I

Phoenix AZ.

Assisted in the development and

negotiation of a water treatment plant financing agreement with

an

investor-owned water company. Developed water and water rate and

pricing formulas

for inclusion into the capital lease and other supporting

documentation. The capital lease agreement provided the client with a

reasonable rate of return and ensured

that financing requirements, such

as legal debt service coverage and capital reserve requirements would be

met under many foreseeable future scenarios. Developed and provided

an interactive rate-setting and financial planning model for use during the

development and negotiation of the agreements. Worked with the client's

legal council

in developing the terms and conditions of the agreement.

Provided expert testimony before the Arizona Corporation Commission

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regarding the financial impact of the District constructing

and operating

its own water treatment plant.

• Milwaukee Metropolitan Sewerage District: MMSD O&M Options

Analysis

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Milwaukee WI. Assisted MMSD in evaluating the feasibility of

continued contract operations or the feasibility of District operation of

their wastewater

treatment facilities. Assisted in the evaluation of

alternative forms of privatization as applied to a number of its service

areas including wastewater treatment and sludge disposal. Assisted

in

the efforts to establish submittal requirements relating to financial

capability and cost bids and participated

in the review and evaluation of

these areas

for the submitted proposals.

• City of Marysville: Wastewater Master Study

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Marysville OH.

Completed financial planning studies in support of the development of

water and wastewater capital investment plans and the issuance of

revenue bonds. Analyzed the affordability of recommended capital

investment alternatives and associated impacts

to the city's long-term

financial position. Developed

an interactive financial planning model to

guide the planning process and assist the city in making capital

investment decisions. Completed a wastewater pricing evaluation

to

develop wastewater rates for the city that reflected the cost of providing

service and ensured adequate funding

for the city's upcoming $200

million capital improvement program. Prepared a bond feasibility report

supporting the issuance

of approximately $150 million in revenue bonds

and bond anticipation notes.

• Metropolitan Distrct Commission: Valuation Assessments

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Hartford

CT. Completed valuations of publicly-owned and investor-owned water

utilities regulated by the Connecticut Department

of Public Utility Control

to assist our client

in making utility acquisition decisions. The target

utilities provide water service to more than

200,000 people in the

northeastern

US. The estimates of value were determined utilizing

different valuation techniques

to estimate the potential value of the

water systems, including the asset and income approaches. Mr.

Mastracchio's efforts and experience

in valuating public utilities

supported the client's strategic expansion objectives.

• Metropolitan District Commission: Financial Analysis and Pricing for

the Development of Inter-jurisdictional Agreements

I

Hartford CT.

Completed financial analyses and pricing of water service for

intergovernmental water service agreements to allow the Metropolitan

District Commission

to maximize its utilization of its excess water supply

capacity and generate additional revenues by selling this capacity

to

neighboring private water companies. The project involved developing

terms and conditions of the agreement.

as well as developing and

recommending a wholesale water rate and capacity charge structure. The

wholesale rate

was developed by evaluating the costs of operating the

water utility using a financial model. The capacity charge

was based on

the net value

of the Commissions fixed assets and available water supply

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capacity and

was designed to recognize the value of the additional water

supply capacity, which would

be dedicated to the private water company.

City of Miamisburg: Bond Engineering Report and Rate study!

Miamisburg OH. Completed a bond feasibility report to support the

issuance of

$2 million in 2004 waterworks revenue bonds. Bond

feasibility analysis included a description of the system and the

improvements, summary of historic and projected system demands, a

cash flow analysis, a comparison of water rates with those of other cities,

and

an opinion of the adequacy of the rates and cash flows of the city.

Completed a water and sewer rate study

for the City consisting of

projecting revenue requirements over a five year period, assessing the

impact

of various capital improvement program scenarios, developing

cost justified water and sewer rates, and completing a survey of water

and sewer rates

of nearby communities.

• Nassau County: Water

Utility Consolidation Study! Mineola, NY.

Evaluated the feasibility

of consolidating 46 water systems within Nassau

County into one or more management organizations. Assessed the

potential

for cost savings and the impact on residential ad valorem taxes

and user fees. Assessed the environmental benefits of a regional

approach to water resources. Prepared reports and presented findings to

the County Executive of

Nassau County.

•

state of New Jersey, Department of the Public Advocate: Water

Utility Valuation / Newark, NJ. Served as a valuation expert and

provided testimony

in the matter of the Joint Petition of the City Trenton,

New Jersey and New Jersey American Water Company, Inc. for

authorization of the purchase and sale of the assets of the outside water

utility system of the City of Trenton,

New Jersey.

• Newark Watershed Conservation and Development Corporation:

Wasewater

Asset Condition Assessment and Valuation! Newark, NJ.

Supported efforts to complete an asset condition assessment and

valuation of the City

of Newark's wastewater system to assist the Newark

Watershed Conservation

and Development Corporation (NWCDC) and the

City of Newark

in their consideration of the formation of a Municipal

Utilities Authority.

City of Newark: Wastewater Rate Study! Newark, OH. Project

Manager

for a wastewater rate and charge study. The project included an

evaluation of the City's rate structure, development of a nonproprietary

rate model, detailed analyses of customer costs, usage characteristics,

and capital improvement program costs, and presentation

of rate

recommendations to City Council.

In addition, neighboring utility rate

comparisons were completed to support the design of the rate

components.

•

City of Norwalk: Financial Planning and Rate Study! Norwalk CT.

Completed a financial planning study in support of a long-term

wastewater master plan. Analyzed capital investment alternatives and

associated impacts to City wastewater rates. Developed

an interactive

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financial planning model

to utilize throughout the planning process and

assisted the City

in making capital investment decisions. Completed

system asset valuation estimates

to support connection fee development.

Presented rate recommendations at budget hearings with the City

Commission.

• City of Painesville: Pricing of Utility Services

I

Painesville OH.

Developed an intergovernmental wastewater service agreement to allow

the City of Painesville

to maximize its utilization of its excess wastewater

treatment capacity

to neighboring county customers. The project

involved developing terms and conditions of the agreement.

as well as

developing and recommending a wholesale rate and capacity charge

structure. The wholesale rate

was developed by evaluating the costs of

operating the city's wastewater

utility using a financial model. The

capacity charge

was based on the net value of the city's fixed assets and

available wastewater treatment capacity and

was designed to recognize

the value of the city's additional system capacity, which will

be sold to the

county.

• City of Reno: Wastewater Cost of Service Evaluation and Rate Study

I

Reno, NV. Developed a financial plan and wastewater utility pricing

schedules

for the City of Reno. Project helped to ensure the funding and

financing of the City's wastewater

utility capital investment needs.

Developed

an interactive financial model that was used to evaluate future

rate revenue requirements, determine the cost

of providing wastewater

service, and determine equitable connection fees based on the estimated

value of fixed assets and the cost of wastewater system expansion.

Advised the City

in the design a rate structure that was aligned with the

City's needs and financial objectives. Presented study results

to City staff,

city council and other stakeholders using interactive financial modeling

tools that were developed

for the client.

• Saratoga County Water Authority: Water Bond Feasibility Report

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Saratoga, NY. Prepared an engineering and financial feasibility report for

the issuance of $40 million in water system revenue bonds to finance the

construction of water treatment plant. raw water pipeline, pump station,

and distribution mains.

• Summit County: Comprehensive Rate and Charge Study

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Akron OH.

Completed a cost of service evaluation and rate, fee, and charge

assessment

to assist the County to generate sufficient revenues to pay

for upcoming sewer capital improvement and operation and maintenance

programs. The project included completing a cost

of service evaluation to

determine the cost responsibility of the County customers, wastewater

asset valuation estimates

to support capacity fee development, and a

rate structure evaluation

to identify sewer rate structures that were

closely aligned with the cost of providing service, and developing rate

formulas

for the County's future use.

• U.S. Air Force Material Command: Hill AFB EUL

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Ogden UT. Senior

Analyst

for the valuation and financial analysis of a proposed Enhanced

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Use Lease (EUL) at Hill Air Force Base. The analysis included evaluating

real estate market conditions and land sales data, completing a life cycle

cost analysis of Air Force office space procurement options and

developing valuation models

for potential site development scenarios.

Other activities included developing the financial portion of the Business

Case analysis, supporting presentations to leadership, responding to

technical questions and developing potential site development scenarios.

• Utilities Inc: Strategic Financial Consulting

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Northbrook, IL.

Managed

the completion of financial assessments, and projections of performance

and value

for more than 90 operating companies of an investor-owned

utility located in Arizona, Florida, Georgia, Illinois, Indiana, Kentucky,

Louisiana, Maryland, North Carolina, New Jersey, Nevada, Pennsylvania,

South Carolina, Tennessee, and Virginia. Provided analysis results to the

senior leadership team of Utilities, Inc.

• City of Virginia Beach: Financial Services

I

Virginia Beach VA.

Served

as project manager for a multi-year financial services contract for the

City of Virginia Beach that included true-up evaluation, developing

an

interactive financial planning model, and completing a cost of service

evaluation.

The true-up evaluation consisted of reviewing the City of

Norfolk's cost allocation model

for allocating operation and maintenance

expenses, reviewing the rate model

for allocation of fixed assets, and the

rate

of return on rate base for reasonableness. The cost of service

evaluation consisted of assessing

future capital funding needs for the

water and sewer utilities due

to aging infrastructure, system expansion,

and new regulations, determining revenue requirements over a five

to ten

year period, and developing rates, fees and charges to meet revenue

requirements and other City rate-setting goals and objectives.

• Virgin Islands Public Services Commission: Expert Testimony

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St

Thomas, VI.

Served as financial and rate expert for the U.S Virgin Islands

Public Services Commission regarding Waste Management Authority's

solid waste and wastewater

utility rate cases. Reviewed financial and rate

aspects

of the Authority's filings, prepared written testimony, and

presented oral testimony before the Public Services Commission.

Application involved establishment of new Authority Environmental User

Fees and Wastewater User Fees. Technical issues reviewed involved

reasonableness of the rate revenue requirements, fairness and

equitability of the rate structure, and affordability issues.

• Westchester Joint Water Works: Water Rate Study

I

Westchester,

NY.

Completed a comprehensive rate study for Westchester Joint Water

Works and its member municipalities. Evaluated revenue requirements

and the cost

to serve wholesale and retail customers, developed rate

models, and worked with Client and member municipalities

to evaluate

water rate structure alternatives.

Wayne County, Department of Environment: Comprehensive

Assessment

and Master Plan

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Detroit MI,

Completed a financial

evaluation

in support of a comprehensive utility assessment and master

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plan. Assessed the client's level of competitiveness, vulnerability

to

privatization, and degree of organizational alignment from a financial

perspective. Developed a cost allocation model that

was used throughout

the project. Evaluated many aspects of the client's financial operations

including a detailed evaluation of

DOE's rate and fee structure, as well as

a critical review of administration, finance, accounting, and general

management policies and procedures. Based on the evaluation,

recommended revising and consolidating

DOE's fee structure.

EXPERT TESTIMONY

Valuation Expert in the Matter of the Joint Petition of the City Trenton, New

Jersey and New Jersey American Water Company, Inc. for Authorization of

the Purchase and Sale

of the Assets of the Outside Water utility System of

the City

of Trenton, New Jersey,BPU Docket No. WM08010063.

Municipal Utility Rate Expert

in the Application for Approval of

Environmental User

Fee and Wastewater User Fee in the United States Virgin

Islands by the Virgin Island Waste Management Authority, Docket Number

554, before the Governement

of the Virgin Islands Public Services

Commission.

Rate Expert

In the Matter of the Application of Arizona-American Water

Company,

Inc. for Approvals Associated with a Proposed Transaction with

Maricopa Water Conservation District Number

One To Allow the Construction

of a Surface Water Treatment Facility Known

as the White Tanks Project,

Docket

No. W-01303A-05-0718, before the Arizona Corporation Commission.

PUBLICATIONS AND PRESENTATIONS

Mastracchio, J.M..

Capital Project Funding, Improving Your Success Rate,

presented at the Greater Buffalo Environmental Conference, Buffalo, NY, March 18, 2008.

Mastracchio, J.M., et. al.

Water Capital Financing, Manual of Practice M29,

contributing author and workshop presenter at the American Water Works Association

Annual Conference and Exposition, Toronto, Canada. June 23, 2007.

Mastracchio, J.M.,

"Economic and Financial Elements of Water utility

Facilities Master Planning,"

presented at the Spring Meeting of the American Water

Works Association, New York Section, Saratoga Springs

NY, April 24-27, 2007.

Mastracchio, J.M.,

"Budget Forecasting in the New Construction Cost Era -

It's Not as Simple

as the ENR Anymore,"

presented at the Conference of the

United States Society

of Dams, Pittsburgh PA, March 7, 2007.

Gangemi,

A.N, Mastracchio, J.M.,

"Dynamic utility Financial Modeling - A Utility

Manager's Crystal Ball,"

presented at the Annual Conference of the New England

Water Works Association, Danvers

MA, September 17-20,2006.

Mastracchio, J.M.,

"The Next Challenge in Eliminating Sewer Overflows: Who

Pays?,"

C1earwaters,

Vol. 35, p. 26-27, Winter 2005. New York Water Environment

Association, Inc.

Lockridge,

R.L., Mastracchio, J.M.,

"Dynamic Financial Modeling for Local

Governments,"

Proceedings,

91st Annual Conference of the International City/County

Management Association (ICMA), Minneapolis

MN, September 25-28, 2005.

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Mastracchio, J.M.,

"Interactive Financial Modeling: An Effective Tool for

utility Management and Planning,"

Proceedings,

68th Annual Conference of the

Indiana Water Environment Association, Indianapolis

IN, November 15-17, 2004.

Mastracchio, J.M.,

"The Use of Financial Modeling to Support Utility

Management

and Planning,"

presented at the 78th Annual Conference of the Ohio

Water Environment Association, Columbus

OH, June 21-24, 2004.

Mastracchio, J.M.,

"Using Financial Models to Establish and Update Water

and Sewer Rates,"

presented at the Winter Conference of the County Commissioners

Association of Ohio, Columbus

OH, December 1,2003.

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ATTACHMENT 7

Economic Assessment of

Infrastructure to Meet Proposed Water Quality

Standards for Dissolved Oxygen and Plant Emuent Standards for Bacteria

(Malcolm Pirnie, Inc.,

July 2008)

Electronic Filing - Received, Clerk's Office, August 4, 2008

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METROPOLITAN WATER RECLAMATION DISTRICT OF GREATER CHICAGO

ECONOMIC ASSESSMENT OF INFRASTRUCTURE TO MEET PROPOSED WATER

QUALITY STANDARDS FOR DISSOLVED OXYGEN AND PLANT EFFLUENT

STANDARDS FOR BACTERIA

Economic Assessment

Introduction

The purpose of this study is to examine the potential economic impacts of implementing

processes at the Metropolitan Water Reclamation District of Greater Chicago (District)

facilities and in the waterways necessary to meet the proposed water quality and plant

effluent standards as proposed by the Illinois Environmental Protection Agency (IEPA)

under R08-9. The assessment

is composed of two sections; environmental and economic.

This report presents the economic portion of the assessment. The environmental portion

is provided under a separate cover.

The District's approach is to take a "holistic" view

of the environmental impacts of the

alternatives, including the potential economic impacts in terms

of the District's statutory

taxing authority and financial capability. A summary of the infrastructure costs, financial

condition and limitations

of the District, and financial forecast results under several

alternatives is provided below. These alternatives consist of:

•

Disinfection (Ultraviolet and ChlorinationlDechlorination) technology;

•

Dissolved Oxygen technology;

• A combination

of disinfection and dissolved oxygen technology.

Infrastructure Cost Summary

This study evaluates the costs and overall environmental impacts of potentially

implementing processes to disinfect plant effluent and increase dissolved oxygen in the

Chicago Area Waterway System (CAWS). Costs associated with several alternatives,

including implementing chlorination/dechlorination disinfection, and ultraviolet

disinfection at the three water reclamation plants is summarized in Table 1 below.

1

Economic Assessment Report 8-1-08

Electronic Filing - Received, Clerk's Office, August 4, 2008

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Table 1 - Summary of Costs to Meet Newly Proposed Water Quality and Emuent Standards in the

Chicago Area Waterway System

Project Description

Capital Cost

AnnualO&M

Cost

Total Present

Value Cost

SWRP

ChlorinationlDechlorination Disinfection

$225,700,000

$15,900,000

$533,500,000

Ultraviolet Disinfection

267,200,000

12,600,000

511,200,000

CWRP

ChlorinationlDechlorination Disinfection

$79, I00,000

$5,020,000

$176,500,000

Ultraviolet Disinfection

112,300,000

4,600,000

20 1,600,000

NSWRP

ChlorinationlDechlorination Disinfection

$114,200,000

$5,040,000

$212,000,000

Ultraviolet Disinfection

111,600,000

4,900,000

206,800,000

Total

ChlorinationlDechlorination Disinfection

$419,000,000

$25,960,000

$922,000,000

Ultraviolet Disinfection

491,100,000

22,100,000

919,600,000

Dissolved Oxygen Infrastructure

$524,800,000

$6,870,000

$656,600,000

All costs in 2008 dollars. Present value costs based on a 3.0% interest rate, and a 3% inflation rate for 20 years.

Sources:

Report entitled ChlorinationlDechlorination Disinfection Cost Study for Stickney, Calumet, and North Side Water Reclamation

Plants" prepared by CTE and dated May 12,2008. Costs subsequently updated to 2008 dollars.

Report entitled

UV Disinfection Cost Study - Northside Water Reclamation Plantprepared by CTE and dated January 31, 2008. Costs

subsequently updated to 2008 dollars.

Dissolved Oxygen Infrastructure costs provided by CTE.

Financial Summary

The District generates revenue to fund its operations from ad valorem property taxes,

personal property replacement tax (PPRT), user charge revenue, interest income, and

other revenues. The District's primary source

of operating revenue is ad valorem

property taxes. PPRT revenue is primarily a tax on corporate income. The PPRT

revenue

is first distributed to fully fund the District'sRetirement Fund, and subsequent

receipts are distributed to other non-debt funds. User charge revenues are collected from

large commercial and industrial classes, and tax-exempt customers. A summary

of the

District's revenues and expenditures for the period 2002 through 2006 is provided in

Table 2 below.

2

Economic Assessment

Report

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Table 2 - MWRD Summary of Financial Results - All Governmental Funds

(in $ Thousands, Modified Accrual Basis)

2002

2003

2004

2005

2006

Revenues

Property Taxes

$ 362,036 $ 397,751 $ 360,326 $ 423,941 $ 380,675

Personal Property Replacement Tax

22,285

24,048

25,961

36,031

37,743

User Charges

48,890

50,222

47,757

45,983

52,504

Interest on Investments

15,693

13,163

9,943

19,693

43,659

Other Revenues

14,759

16,203

16,495

16,309

17,691

Total Revenues

$ 463,663 $ 501,387

$ 460,482 $ 541,957 $ 532,272

Expenditures

General Administration

$ 14,318

$ 14,987

$ 15,538 $ 17,259 $ 16,974

Personnel

27,610

30,916

35,877

32,900

35,162

Pension Costs

27,044

29,511

27,372

31,561

30,071

Research and Development

23,838

24,172

24,030

24,787

24,985

Information Technology

11,204

11,417

10,574

10,811

11,034

Maintenance and Operations

160,326

159,079

160,299

157,612

155,899

Other

32,843

22,563

27,637

31,522

26,931

Construction Costs

157,076

164,865

127,155

133,599

164,157

Debt Service

145,831

158,626

156,025

169,019

171,869

Total Expenditures

$ 600,090 $ 616,136 $ 584,507 $609,070 $

637,082

Revenues Over (Under) Expenditures $ (136,427) $(114,749) $ (124,025)

$ (67,113) $ (104,810)

Other Financing Sources (Uses)

222,622

223,613

52,720

15,973

383,448

Net Change in Fund Balance

$ 86,195 $ 108,864 $ (71,305) $ (51,140)

$ 278,638

Source: Comprehensive Annual Financial Reports (2003-2006).

The expenditures shown in Table 2 were appropriated to the Corporate Fund,

Construction Fund, Stormwater Fund, Capital Improvement Bond Fund, Bond

Redemption and Interest Fund, Retirement Fund, and the Reserve Claim Fund. These

funds are briefly summarized below:

•

The Corporate Fund is the District's General Fund and includes appropriation

requests for all day-to-day operational costs.

•

The Construction Fund

is utilized as a pay-as-you-go capital rehabilitation and

modernization program, and to fund operations-related projects, where the useful

life

of the improvement is less than 20 years or when the values are less than $1

million. Capital projects are financed by a tax levy sufficient to pay for project

costs as they are constructed.

•

The Stormwater Management Fund is used to minimize flooding damage by

coordinating, planning, implementing, financing, and operating regional

stormwater management projects, to foster stormwater improvements, and to

educate the public with respect to sustainable growth concepts.

•

The Capital Improvement Bond Fund includes major capital infrastructure

projects whose useful lives extend beyond 20 years, and which will be financed

by long-term debt, Federal and State grants, and State Revolving Fund loans.

3

Economic Assessment Report 8-1.08

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

•

The Bond Redemption and Interest Fund is the District's debt service fund.

Principal and interest payments on District general obligation bonds and SRF

loans require an annual levy and appropriation.

•

The Retirement Fund

is used to account for pension costs as provided by

specifically levied annual property taxes. The taxes are collected and recorded in

this fund prior to their payment to the MWRD Retirement Fund.

•

The Reserve Claim Fund acts as the District's Insurance Fund. The District

is

primarily self-insured and utilizes this fund for repair or replacement of damaged

District property and claims implied against the District.

Financial Limitations

The District has several financial limitations and restrictions that directly impact its

ability to take on additional projects or programs. When considering the potential

economic impacts that the projected water quality improvement costs will have on the

District's funding and bonding authority, several financial limitations were considered.

First, in 1995, the Property Tax Extension Limitation Law (PTELL) was passed by the

Illinois General Assembly, which limits the ability

of the District to adopt future

increases in the aggregate tax levy. In accordance with this Act, increases to the

District's aggregate tax levy are limited to the lesser of: (1) five percent or (2) the change

in the national consumer price index (CPI) plus allowable increases for new property.

The aggregate levy is the total

of all funds except the Bond Redemption and Interest and

the Stormwater Management Funds.

Second, the District's initial Tax Cap legislation restricted the District's non-referendum

bond authority to only apply to projects initiated prior to October

1, 1991. There was a

specific exemption, essentially to exclude TARP projects from the more restrictive

provisions

of the Act which require referendum approval of all new debt. Public Act 89-

385 provides the District with the authority to issue non-referendum "limited bonds" for

capital projects initiated after October

1, 1991 at the same level as it did in 1994. Limited

bonds can be issued to the extent that the total debt service requirements of any new debt

when combined with existing debt service does not exceed the 1994 debt service

extension base

of $141,463,920. Public Act 90-485 has provided a further modification

by authorizing the exclusion

of debt for Tunnel and Reservoir Plan (TARP) projects from

this debt service extension base.

Third, in 2003, the District received authority under Public Act 93-279 to issue $150

million (previously $100 million)

of non-referendum bonds during any budget year plus

authorized but unissued bonds during the previous three budget years through 2016.

These financial limitations and restrictions directly impact the District's ability to take on

additional projects and/or programs, and the District is currently very near these limits

without considering the implementation

of disinfection or dissolved oxygen processes.

4

Economic Assessment Report 8-1-08

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

Baseline Financial Forecast

A baseline long-term financial forecast was prepared for the District based on its current

estimated requirements to be used as a comparison with financial forecasts associated

with meeting the proposed water quality and effluent standards. Revenue and

expenditure projections were made based on the five-year forecast information contained

within the 2008 budget, the capital improvement program information provided by the

District, and discussions with the District's Administrative Services Manager. A

summary

of the current capital improvement plan, which does not include a disinfection

program or projects needed to meet the newly proposed water quality standards,

is

provided in Table 3 below. The estimated cost of the District's planned capital

improvement projects were provided to Malcolm Pimie in February 2008.

Table 3 - Capital Improvement Plan (Other Projects)

Yearly Dlspersement Projection (In $ Thousands)->

Description

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Corporate Fund Program

$

In

$

329

$

189

$

206

$

219

$

386

$

399

$

413

$

427

$

441

Construction Fund Program

14,651

14,547

11,818

6,720

4,927

5,949

6,849

7,796

9,249

10,512

Limited Bond Fund Projects

Plant

158,023

161,419

247,995

287,760

242,858

205,403

134,662

133,876

120,859

76,173

Sewer

23,668

53,703

73,934

61,605

2,618

7,979

TARP

1,016

3,668

10,822

8,524

4,838

Unspecnied

25,000

Unlimited Bond Fund Projects (TARP)

10,355

67,535

61,816

50,972

46,709

15,898

35,425

24,053

10,619

Limited SRF Projects

Plant

29,453

24,654

29,049

Sewer

28,680

2,125

1,831

1,705

Unlimited SRF Projects (TARP)

1,553

Stormwater Fund Projects

10,008

2,490

Future Sewer Rehab Projects

9,229

22,511

36,503

37,489

38,501

39,541

40,608

Future Plant Rehab Projects

27,072

Total

$2n,584

$ 330,470 $ 437,454 $ 426,721 $ 324,680 $ 272,119 $ 214,824

$

204,638

$180,695 $ 179,807

Source: The estimated cost of the District's planed capital improvement projects were provided to Malcolm

Pirnie in February 2008.

It

is important to note that the current CIP does not include future Stormwater

Management fund projects as Detail Watershed Plans (DWPs) are not expected to be

completed until 2010.

In

addition, the District's currently planned projects do not include

the costs of implementing nutrient removal processes. As documented in a District

summary cost table (provided as Table 4 below), a rudimentary order-of-magnitude cost

estimate prepared

by the District indicates that the capital costs to construct nutrient

removal processes could be approximately $2.8 billion.

5

Economic Assessment Report 8-1.08

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

Table 4 - Rudimentary, Order-of-Magnitude Cost Estimates for Nutrient Removal

at District Water Reclamation Plants

PLANT

CAPITAL COST

ANNUALM&O

Stickney

$1,666,000,000

$100,000,000

Calumet

$605,000,000

$29,000,000

North Side

$408,000,000

$4,700,000

Kirie

$83,000,000

$1,000,000

Egan

$38,000,000

$2,500,000

Hanover Park

$17,000,000

$1,000,000

Total

$2,817,000,000

$138,200,000

NOTES:

I. Cost Estimate prepared by engineering department

of MWRDGC.

2. Under the Master Plans for the Calumet and North Side WRPs, conceptual level cost estimates

were performed for various nutrient removal processes. The purpose

of the cost estimates was to

compare various nutrient removal processes relative to each other. These estimates were used to

generate a rudimentary, order-of-magnitude cost estimate for all seven WRPs. In short, North Side

and Calumet estimates were used

to arrive at capital and annual operating costs on a flow basis

(Le. dollars per million gallons

of sewage treated). These ratios were used to extrapolate costs for

the other four WRPs. The cost estimates that were derived assumed hypothetical effluent limits

of

0.5 mg/L for total phosphorus and between 6 to 8 mg/L for total nitrogen.

3. All costs are given in 2008 dollars.

4. Lemont Water Reclamation Plant

is not included as it is planned to be converted to a sewage

pumping station.

The baseline capital improvement plan and projected cash balance in the Capital

Improvement Bond Fund is shown graphically in Figure 1 below. As shown in this

figure, the cash balance in the Capital Improvement Bond Fund

is expected to gradually

decrease as a result of funding these capital projects until 2016 when the District's

authority to issue non-referendum bonds expires.

6

Economic Assessment Report 8.1.08

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

Figure 1

Capital Improvement Plan - Baseline

ESTIMATED CAPITAL PROGRAM EXPENDITURES

-Sewer

Plant -

Tarp -

CIBF Cash Balance

$600,000

$500,000

'C

..

$400,000

..

:::I

c

to

$300,000

0

.r:.

$200,000

...

t-

$100,000

$0

~

0

C\l

'<t

co

0

C\l

0

C\l

0

C\l

0

C\l

0

C\l

to

o

C\l

In

addition to these planned capital expenditures, maintenance and operations (M&O)

costs were projected over the forecast period. The projection was based on historical

results, the District's existing five-year forecast projections, and discussions with District

staff. The projections

of M&O costs are included in the forecasted property tax levy

increases summarized below. Additional details are provided in the tables and

calculations provided in Appendix

A.

A ten-year projection of funding and tax levy requirements (for the years 2008 through

2017) was developed to provide a baseline scenario of current estimated requirements in

which to compare scenarios incorporating capital and M&O costs that would be

necessary to meet proposed water quality standards. The baseline financial projection

results are summarized in Figures 2 and 3 below and detailed in Appendix A. Figure 2

shows the annual increase in the property tax levy necessary to fund projected capital and

M&O costs, excluding those costs necessary to meet the proposed water quality

standards, as compared to the property tax levy limitation. The property tax limitation

limits the property tax levy increase to the lessor

of (1) five percent or (2) the change in

CPI plus the increase in new property. The baseline scenario results indicate that the

District will stay at or below the tax levy limitation over the forecast period.

Figure 3 shows the projected annual "limited" debt service associated with existing and

proposed District debt, excluding debt that would be necessary to fund capital projects

associated with the proposed water quality standards, as compared to the debt service

limitation. The baseline analysis indicates that the District will stay at or below the debt

service extention base limitation through fiscal year 2015 and exceed the limitation

slightly in fiscal years 2016 and 2017. This means that in 2016, the District'snon-

referendum bond authority, which expires at the end

of 2016, will be further limited so as

not to exceed the debt service extension base.

7

Economic Assessment Report 8.1.08

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

Figure 2

Forecasted Aggregate Tax Levy Requirement Compared to Tax

Cap Limitation - Baseline

$410,000 ,------------------------------,

$390,000 +----------------------------::::------i

$370,000

+---------------------------:::;,.,.-;;----;1

~

lij $350,000 +-------------------------::::;..,,1IIi"

!l

o

$330,000

+----------------......

---=---j

~

l-

e

$310,000 +------------=-"".,q'

0-

$290,000

+-------::::;o~_r-_j

$270,000 -1-r-"'I:------J

$250,000

+-L=L-,..-I~~--....k~___r_-L---L-.---..L--l-,--L-..L...-,___.L----lL.,---L--L___._--L.=L-r--'--...L.......j

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

=

ProjeetedTax Levy Requirement(Excluding StormwaterCostand Debt Service)

--Tax Levy Extension Limitation (CPI+ New Property)

Figure 3

Forecasted Debt Service Compared to Debt Service Extension Base

$160,000

$140,000

$120,000

III $100,000

'C

m

$80,000

::::l

,g

$60,000

l-

E

$40,000

$20,000

$0

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

_

ProjeetedAmountof

Lim~ed

Debt Service

--Debt Service Extension Lim itation

8

Economic Assessment Report 871-08

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

Scenario 1 (Chlorination/Dechlorination Disinfection)

Scenario 1 consists of adding the capital and annual M&O costs associated with

chlorination / dechlorination disinfection (as shown in Table 1) to the baseline financial

forecast. For the purposes

of this scenario, it was assumed that design of the disinfection

processes would occur in 2011 through 2013 and construction would occur in 2014

through 2016.

The capital improvement plan and projected cash balance in the Capital Improvement

Bond Fund for Scenario 1

is shown graphically in Figure 4 below. As shown in this

figure, additional capital costs would be incurred to meet the proposed water quality

standards, and the cash balance in the Capital Improvement Bond Fund would decrease

more rapidly than the baseline forecast

as a result of funding these capital projects until

2016 when the District's authority to issue non-referendum bonds expires. The analysis

indicates that the projected cash balance in the Capital Improvement Bond Fund would

be insufficient to fund current projects and the projects associated with the proposed

water quality standards due to the District's current authority and limitation

of issuing no

more than $150 million of non-referendum bonds during any budget year. Furthermore,

in order to fund the capital projects, the District would have to receive additional non-

referendum bonding authority

or issue a voter referendum.

Figure 4

Capital Improvement Plan - Scenario 1

ESTIMATED CAPITAL PROGRAM EXPENDITURES

-Sewer

$600,000

$500,000

$400,000

~

....

c:

::l

$300,000

0

.c

$200,000

I-

CIt

$100,000

$0

ClJ

8

C\l

Plant

-

Tarp

......" Projects to Meet Proposed Standards

-

CIBF Cash Balance

In addition to the capital expenditures associated with Scenario 1, M&O costs associated

with this scenario were projected over the forecast period. The projections of M&O costs

associated with implementing the chlorination / dechlorination disinfection processes are

included in the forecasted property tax levy increases summarized below. Additional

details are provided in the tables and calculations provided in Appendix

A.

A ten-year projection of funding and tax levy requirements necessary to meet proposed

plant effluent standards was developed for Scenario

1. The results are summarized in

9

Economic Assessment Report 8.1-08

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

Figures 5 and 6 below and detailed in Appendix

A.

Figure 5 shows the annual aggregate

property tax levy requirement necessary to fund projected capital and M&O costs,

including those costs necessary to meet the proposed plant effluent standards,

as

compared to the aggregate tax levy limitation. The Scenario 1 results indicate that the

District will exceed the aggregate tax levy limitation once the disinfection processes have

been constructed and operations commence in 2016. Furthermore, in order to fund the

improvements, the District would have to request an amendment to the Property Tax

Extension Limitation Law or obtain voter approval via referendum to increase the

aggregate extension limitation and/or the limiting rate.

Figure 5

Forecasted Aggregate Tax Levy Requirement Compared to Tax Cap Limitation - Scenario 1

$430,000 .,..------------------------------,

$410,000 +-----------------------------1

$390,000 +-------------------------1

~

$370,000

!!l

$350,000 +-------------------==-........-

r=

o

$330,000 +------------------:-".,.",.=:........j

.5 $310,000 +-----------::::;;;00",...,

0-

$290,000 +-----=::;;;;0""",-,:'------1

$270,000

4--...-=.----1

$250,000

+-~"'--.--l-..JL......,---l.:"-""-__._.....l.-....L--r--'--....l-...,.-.L.-.l-r---..l-L_,.--L.

.......__._-k......L--r-....i=::..I.-l

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

=

Projected Tax Levy Requirement(Excluding Storm water Cost and Debt Service)

-

Tax Levy Extension

Limitation (CPI + New Properly)

Figure 6 shows the projected annual "limited" debt service associated with existing and

proposed District debt, including debt service that would be necessary to fund capital

projects associated with the proposed plant effluent standards, as compared to the debt

service extension base. The Scenario 1 analysis indicates that the District would

significantly exceed the debt service extension base beginning in fiscal year 2014 if the

Scenario 1 projects associated with meeting the proposed plant effluent standards were

implemented.

Figure 6

Forecasted Debt Service Compared to Debt Service Extension Base - Scenario 1

$200,000 .,..-------------------------,

$180,000 +---------------------

$160,000 +------------------

{j$120,ooO$140,000

-t------------------

+----------------

Ii

OJ

$100,000 +------

5 $BO,OOO

+---

.s::.

t;

$60,000

+---

.=

$40,000

$20,000

$0

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Projected Amountof limited DebtService

-

DebtServlce extension Limitation

L..---------------~_------------~........I1ic

Assessment Report

8-1-08

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

Scenario 2 (Ultraviolet Disinfection)

Scenario 2 consists of adding the capital and annual M&O costs associated with

ultraviolet disinfection (as shown in Table

1) to the baseline financial forecast. For the

purposes of this scenario, it was assumed that design of the disinfection processes would

occur in 2011 through 2013 and construction would occur in 2014 through 2016.

The capital improvement plan and projected cash balance in the Capital Improvement

Bond Fund for Scenario 2

is shown graphically in Figure 7 below. As shown in this

figure, additional capital costs would be incurred to meet the proposed water quality

standards, and the cash balance in the Capital Improvement Bond Fund would decrease

more rapidly than the baseline forecast as a result

of funding these capital projects until

2016 when the District's authority to issue non-referendum bonds expires. The analysis

indicates that the projected cash balance in the Capital Improvement Bond Fund would

be insufficient to fund current projected projects and the projects associated with the

proposed water quality standards due to the District's current authority and limitation

of

issuing no more than $150 million of non-referendum bonds during any budget year.

Furthermore, in order to fund the capital projects, the District would have to receive

additional non-referendum bonding authority or issue a voter referendum.

Figure 7

Capital Improvement

Plan - Scenario 2

ESTIMATED CAPITAL PROGRAM EXPENDITURES

-Sewer

$600,000

$500,000

$400,000

~

..

III

c

0

,.

$300,000

.c

$200,000

...

I-

$100,000

$0

<Xl

8

C\I

Plant

-

Tarp

••-.••-". Projects to Meet Proposed Standards

-

CIBF Cash Balance

In addition to the capital expenditures associated with Scenario 2, M&O costs associated

with this scenario were projected over the forecast period. The projections of M&O costs

associated with implementing the ultraviolet disinfection processes are included in the

forecasted property tax levy increases summarized below. Additional details are

provided in the tables and calculations provided in Appendix

A.

A ten-year projection of funding and tax levy requirements necessary to meet proposed

plant effluent standards was developed for Scenario 2. The results are summarized in

Figures 8 and 9 below and detailed in Appendix

A.

Figure 8 shows the annual aggregate

property tax levy requirement necessary to fund projected capital and M&O costs,

11

Economic Assessment Report 8-1-08

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

including those costs necessary to meet the proposed plant effluent standards, as

compared to the aggregate property tax levy limitation. The Scenario 2 results indicate

that the District will exceed the aggregate tax levy limitation once the disinfection

processes have been constructed and operations commence in 2016. Furthermore, in

order to fund the improvements, the District would have to request an amendment to the

Property Tax Extension Limitation Law or obtain voter approval via referendum to

increase the aggregate extension limitation and/or the limiting rate.

Figure 8

Forecasted Aggregate Tax Levy Requirement Compared to Tax Cap Limitation - Scenario 2

$430,000 .,------------------------------,

$410,000 +-----------------------------1--.---l

$390,000 +-------------------------1;

III

'g $370,000

+-------------------------,~III"""F=----r

~

$350,000

+-------------------~........._

I-

,g

$330,000

+---------------,...",..~

fI)

c:: $310,000 +------------:::;;o",,_.I"f'

$290,000 +------:::::;;;o.....-J=---1

$270,000

-l--"'-'I==--l

$250,000

+-"--.L-.--'-"--T--'-"""--l---.,-~--'-___,_-'--'-_r_

........

""'---.,_"--.L-.__"---'~--'--.L__r

.........--'---l

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

=

Projected Tax Levy Requirement(Excluding StormwaterCostand Debt Service)

-

Tax Levy Extension Umitation (CPI

+ New Property)

Figure 9 shows the projected annual "limited" debt service associated with existing and

proposed District debt, including debt service that would be necessary to fund capital

projects associated with the proposed plant effluent standards, compared to the debt

service extension base. The Scenario 2 analysis indicates that the District would

significantly exceed the debt service extension base beginning in fiscal year 2014 if the

Scenario 2 projects associated with meeting the proposed plant effluent standards were

implemented.

Figure 9

Forecasted Debt Service Compared to Debt Service Extension Base - Scenario 2

$250,000

$200,000

~$150,000

I:

III

III

5$100,000

..c::

~

.5 $50,000

$0

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

_

Projected Amountof Limned DeblServlce

12

-

DebtService Extension Limitation

&onomic Assessmenl Report 8-1-08

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

Scenario 3 (Dissolved Oxygen)

Scenario 3 consists of adding the capital and annual M&O costs that are anticipated to be

required to meet the proposed Dissolved Oxygen Water Quality Standards in the CAWS

(as shown in Table 1) to the baseline financial forecast. While it is possible that the

dissolved oxygen enhancement facilities would be required in addition to either the

ultraviolet

or chlorination/dechlorination disinfection processes, the costs associated with

the dissolved oxygen processes are shown herein as a stand alone scenario in order to

demonstrate its financial impact separately from the other scenarios. For the purposes

of

this scenario, it was assumed that design of the dissolved oxygen enhancement facilities

would occur in 2010 through 2012 and construction would occur in 2013 through 2015.

The capital improvement plan and projected cash balance in the Capital Improvement

Bond Fund for Scenario 3 is shown graphically in Figure 10 below. As shown in this

figure, additional capital costs would

be incurred to implement the processes, and the

cash balance in the Capital Improvement Bond Fund would decrease more rapidly than

the baseline forecast as a result

of funding these capital projects until 2016 when the

District's authority

to issue non-referendum bonds expires. The analysis indicates that

the projected cash balance in the Capital Improvement Bond Fund would

be insufficient

to fund current projects and the projects associated with the proposed water quality

standards due to the District's current authority and limitation

of issuing no more than

$150 million

of non-referendum bonds during any budget year. Furthermore, in order to

fund the capital projects, the District would have to receive additional non-referendum

bonding authority

or issue a voter referendum.

Figure 10

Capital Improvement Plan - Scenario 3

ESTIMATED CAPITAL PROGRAM EXPENDITURES

-Sewer

$600,000

$500,000

$400,000

-ll

c

01

$300,000

III

::s

0

s::.

$200,000

I-

0

$100,000

$0

8

C\I

Plant

-

Tarp

r..;..;;" Projects to Meet Proposed Standards

-

CIBF Cash Balance

In

addition to the capital expenditures associated with Scenario 3, M&O costs associated

with this scenario were projected over the forecast period. The projections

of M&O costs

associated with implementing the dissolved oxygen processes are included in the

13

Economic Assessment Repon 8-1.08

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

forecasted property tax levy increases summarized below. Additional details are

provided in the tables and calculations provided in Appendix

A.

A ten-year projection of funding and tax levy requirements necessary to meet proposed

water quality standards was developed for Scenario 3. The results are summarized in

Figures

11 and 12 below and detailed in Appendix

A.

Figure 11 shows the annual

property tax levy requirement necessary to fund projected capital and M&O costs,

including those costs necessary to meet the proposed water quality standards,

as

compared to the aggregate property tax levy limitation. The Scenario 3 results indicate

that the District will exceed the tax levy limitation once the dissolved oxygen

enhancement facilities have been constructed and operations commence in 2016.

Furthermore, in order to fund the improvements, the District would have to request an

amendment to the Property Tax Extension Limitation Law or obtain voter approval via

referendum to increase the aggregate extension limitation and/or the limiting rate.

Figure 11

Forecasted Aggregate Tax Levy Requirement Compared to Tax Cap Limitation - Scenario 3

$410,000 .------------------------------.,

$390,000

i---------------------------r~____i

$370,000 i-------------------------::::ol!......,F----f

~

Ii

$350,000

,g

::J

$330,000 i---------------...,.,.",.=--t

~

$310,000

+-----------="",-Ef

(b

$290,000

-t------=...-t!-J----i

$270,000

.L.-r-~--1

$250,000

i-~J..-...---J-L.....,----I==1____r---L-~-,--'---'-_,_..L.-.....l-..,.----.L-...L.-.__L..-.-'--..---J""""-olL.....,---'==1____i

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

=

Projected Tax Levy Requirement(Exciuding StormwaterCostand Debt Service)

-

Tax Levy Extension Lim ilalion (CPI

+ New Property)

Figure 12 shows the projected annual "limited" debt service associated with existing and

proposed District debt, including debt service that would be necessary to fund current

projected projects and capital projects associated with the proposed water quality

standards, compared to the debt service extension base. The Scenario 3 analysis indicates

that the District would significantly exceed the debt service extension base beginning in

fiscal year 2014 if the Scenario 3 projects associated with the proposed water quality

improvements were implemented.

14

Economic Assessment Report 8-1-08

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

Figure 12

Forecasted Debt Service Compared to Debt Service Extension Base - Scenario 3

$250,000

$200,000

~$150,000

c:

III

5$100,000

.s::

~

c: $50,000

$0

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

.-Projected Amount of

Lim~ed

Debt Service

-

Debt Service Extension LimitatiCll

Scenario 4 (Chlorination

I

Dechlorination and Dissolved Oxygen)

Scenario 4 consists of adding the capital and annual M&O costs associated with both

chlorination

I

dechlorination and dissolved oxygen (as shown in Table 1) to the baseline

financial forecast.

The capital improvement plan and projected cash balance in the Capital Improvement

Bond Fund for Scenario 4 is shown graphically in Figure

13 below. As shown in this

figure, additional capital costs would be incurred to implement the processes, and the

cash balance in the Capital Improvement Bond Fund would decrease more rapidly than

the baseline forecast and the scenarios showing either disinfection or dissolved oxygen

processes, as a result

of funding these capital projects until 2016 when the District's

authority to issue non-referendum bonds expires. The analysis indicates that the

projected cash balance in the Capital Improvement Bond Fund would be insufficient to

fund the current projected projects and projects associated with the proposed plant

effluent and water quality standards due to the District'scurrent authority and limitation

of issuing no more than $150 million of non-referendum bonds during any budget year.

Furthermore, in order to fund the capital projects, the District would have to receive

additional non-referendum bonding authority or issue a voter referendum.

15

Economic Assessment Report 8.1.08

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

Figure 13

Capital Improvement Plan - Scenario 4

ESTIMATED CAPITAL PROGRAM EXPENDITURES

_Sewer

$700,000

$600,000

$500,000

-tl

$400,000

CIl

..

:>

c

$300,000

0

s::

...

I-

$200,000

$100,000

$0

co

8

(\J

Plant

-

Tarp

:'.'.~:,

Projects to Meet Proposed Standards

-

CIBF Cash Balance

.............

........................

....................................................

..Jmm~mmmmn

"' ;>

"'."'•••• ,

iiI

.-

"' "' "' "'

"'..

~~iiiIii~~~···~···~·~~·~~···:·

~

~~~~~~~~~~~~~mmmmmmmnmmi

......

·········:S5S~$~~~~5~~~5~~~~~~~:.~5~~:::.)~:·::

......"'...."'.................

rrrrr

t;"y'y';"y':mmim

(\J

o

(\J

In addition to the capital expenditures associated with Scenario 4, M&O costs associated

with this scenario were projected over the forecast period. The projections

of M&O costs

associated with implementing the dissolved oxygen and chlorination/dechlorination

disinfection processes are included in the forecasted property tax levy increases

summarized below. Additional details are provided in the tables and calculations

provided in Appendix

A.

A ten-year projection of funding and tax levy requirements necessary to meet proposed

plant effluent and water quality standards was developed for Scenario 4. The results are

summarized in Figures 14 and

15 below and detailed in Appendix

A.

Figure 14 shows

the annual aggregate property tax levy requirement necessary to fund projected capital

and M&O costs, including those costs necessary to meet the proposed standards, as

compared to the aggregate property tax levy limitation. The Scenario 4 results indicate

that the District will exceed the tax levy limitation once the dissolved oxygen processes

and chlorination / dechlorination disinfection improvements have been constructed and

operations commence in 2016. Furthermore, in order to fund the projects, the District

would have to request an amendment to the Property Tax Extension Limitation Law

or

obtain voter approval via referendum to increase the aggregate extension limitation

and/or the limiting rate.

16

Economic Assessment Repon 8-1-08

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

Figure 14

Forecasted Aggregate Tax Levy Requirement Compared to Tax

Cap Limitation - Scenario 4

$450,000 .,.-----------------------------,

$430,000

+-------------------------------==---1

$410,000 +--------------------------i-r----l

~

$390,000

~

$370,000 +-----------------------=::ooIIIII'""F=------l

.2 $350,000

+---------------------=-.,.,.~

I- $330,000

+-----------------=:;;0...,..,,::...;,

fit

.=

$310,000

+--------------=._-r-

$290,000 +---------:::::;;;;;;II."",,-,=-----j

$270,000

.).......;....-~~-

$250,000 +-.......

..&...-...--'........:::'__r---'-..........

--,---"---'---.--'---'-...,..--"-""'----~'--..&...-

..........

-'__r----l:.---"----.----"----.L~

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

=

Projected Tax Levy Requirement(Excluding StormwaterCostand Debt Service)

-

Tax Levy Extension Limitation (CPI

+ New Property)

Figure 15 shows the projected annual "limited" debt service associated with existing and

proposed District debt, including debt service that would be necessary to fund current

projected projects and capital projects associated with the proposed plant effluent and

water quality standards, compared to the debt service extension base. The Scenario 4

analysis indicates that the District would significantly exceed the debt service extension

base beginning in fiscal year 2014

if the Scenario 4 projects associated with meeting the

proposed standards were implemented.

Figure 15

Forecasted Debt Service Compared to Debt Service Extension Base - Scenario 4

$250,000

$200,000

~$150,000

c

III

5$100,000

.c

th

.= $50,000

$0

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

-

Projected

Am

ount of Lim

~ed

Debt Service

17

-

Debt Service Extension Limitation

Economic Assessment Report 8-1-08

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

Scenario 5 (UV Disinfection and Dissolved Oxygen)

Scenario 5 consists of adding the capital and annual M&O costs associated with both UV

disinfection and dissolved oxygen (as shown in Table 1) to the baseline financial forecast.

The capital improvement plan and projected cash balance in the Capital Improvement

Bond Fund for Scenario 5

is shown graphically in Figure 16 below. As shown in this

figure, additional capital costs would be incurred to implement the processes, and the

cash balance in the Capital Improvement Bond Fund would decrease more rapidly than

the baseline forecast and the scenarios showing either disinfection or dissolved oxygen

processes, as a result

of funding these capital projects until 2016 when the District's

authority to issue non-referendum bonds expires. The analysis indicates that the

projected cash balance in the Capital Improvement Bond Fund would be insufficient to

fund current projected projects and the projects associated with the proposed water

quality standards due to the District's current authority and limitation

of issuing no more

than $150 million of non-referendum bonds during any budget year. Furthermore, in

order to fund the capital projects, the District would have to receive additional non-

referendum bonding authority or issue a voter referendum.

Figure 16

Capital Improvement Plan - Scenario 5

ESTIMATED CAPITAL PROGRAM EXPENDITURES

-Sewer

$700,000

$600,000

$500,000

~

$400,000

c

'"'"

:::I

$300,000

0

.c

<It

I-

$200,000

$100,000

$0

8

C\I

Plant

-

Tarp

':.':;. Projects to Meet Proposed Standards

-

CIBF Cash Balance

In

addition to the capital expenditures associated with Scenario 5, M&O costs associated

with this scenario were projected over the forecast period. The projections

of M&O costs

associated with implementing the dissolved oxygen and ultraviolet disinfection processes

are included in the forecasted property tax levy increases summarized below. Additional

details are provided in the tables and calculations provided in Appendix

A.

A ten-year projection of funding and tax levy requirements necessary to meet proposed

plant efluent and water quality standards was developed for Scenario

5. The results are

summarized in Figures 17 and 18 below and detailed in Appendix A. Figure 17 shows

the annual aggregate property tax levy requirement necessary to fund projected capital

18

Economic Assessment Report 8-1-08

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

and M&O costs, including those costs necessary to meet the proposed standards, as

compared to the aggregate property tax levy limitation. The Scenario 5 results indicate

that the District will exceed the tax levy limitation once the dissolved oxygen processes

and ultraviolet disinfection improvements have been constructed and operations

commence in 2016. Furthermore, in order to fund the projects, the District would have

to request an amendment to the Property Tax Extension Limitation Law

or obtain voter

approval via referendum to increase the aggregate extension limitation and/or the limiting

rate.

Figure 17

Forecasted Aggregate Tax Levy Requirement Compared to Tax Cap Limitation - Scenario 5

$450,000 .,.--------------------------------,

$430,000 +-------------------------------j

$410,000 +------------------------=------j

~

$390,000 +---------------------------i

c::

~

$370,000

o $350,000 +----------------------=.--r

..c::

~

$330,000

+-----------------=:;_~~

o

$310,000

+--------------::=---,.....-

$290,000 +---------:==-....

-,=-.----l

$270,000

~"""'~~I

$250,000

+-.L.-..L.-.......-JL.-.L.......,,......-L---"-'L......,.----II.=--r......L----L----r--'-......L-,---4--'--r-..L.-.....L-....---.L.-..L.-...--l"'=oL.......j

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

c:::::I

Projected Tax Levy Requirement (Exduding Storm waterCostand Debt Service)

-

Tax Levy Extension Limitation (CPl. New Property)

Figure 18 shows the projected annual "limited" debt service associated with existing and

proposed District debt, including debt service that would be necessary to fund current

projected projects and capital projects associated with the proposed plant effluent and

water quality standards, compared to the debt service extension base. The Scenario 5

analysis indicates that the District would significantly exceed the debt service extension

base beginning in fiscal year 2014

if the Scenario 5 projects associated with meeting the

proposed standards were implemented.

19

Economic Assessment Report 8.1.08

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

Figure 18

Forecasted Debt Service Compared to Debt Service Extension Base - Scenario 5

$300,000

$250,000

$200,000

III

'C

m$150,000

:::s

o

t: $100,000

CIt

.E

$50,000

$0

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Projected Amounlof

Lim~ed

Debt Service

20

--DeblService Extension Limitation

Economic Assessment

Report

8.1-08

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

Backup Tables and Calculations

21

Economic Assessment

Report

8.1.08

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

Table A-I

Tax Levy Requirement Forecast Summary - Baseline Scenario

Projection (in

$

Thousands)-->

Description

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Projected Levy:

Corporate Fund

$

239,262

$

243,031

$

251,304

$

268,826

$

278,106

$

286,957

$

297,344

$

309,412

$

321,991

$

334,848

Construction Fund

1

5,523

8,385

1,272

2,830

5,213

6,561

7,635

8,747

10,090

Stormwater Fund

15,211

18,802

12,443

15,878

17,023

18,145

18,387

19,123

20,126

20,410

Debt Service - Existing

141,601

122,409

119,829

116,727

121,793

123,152

109,793

108,674

101,013

99,594

Debt Service - Proposed

31,204

55,313

79,422

92,888

106,555

120,223

133,890

147,558

150,583

Retirement Fund

25,665

26,450

26,023

26,726

27,447

28,188

28,949

29,818

30,712

31,634

Reserve Claim Fund

7,073

7,062

7,345

7,639

7,944

8,262

8,593

8,936

9,294

9,666

Total Projected Gross Levy (in

$

thousands)

$

428,814

$

454,481

$

480,642

$

516,489

$

548,031

$

576,473

$

589,851

$

617,489

$

639,442

$

656,823

Table A-2

Property Tax Extension Limitation - Baseline Scenario

Projection (in

$

Thousands)-->

Description

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Property Tax Levy Constraint (Property Tax Extension Limitation Law)':

Adjusted Aggregate Gross Property Tax Levy

272,001

282,066

293,057

304,462

316,327

328,620

341,447

355,801

370,744

386,237

(Excluding Debt Service and Stormwater)

Projected Increase in Aggregate Tax Levy

0%

3.70%

3.90%

3.89%

3.90%

3.89%

3.90%

4.20%

4.20%

4.18%

Estimated Change in Consumer Price Index

3.00%

2.80%

2.70%

2.70%

2.70%

2.70%

2.70%

3.00%

3.00%

3.00%

Estimated New Property (Growth)

0.80%

~

~

1.20%

1.20%

1.20%

1.20%

1.20%

~

1.20%

Total Allowable Increase in Adjusted Tax Levy

3.80%

3.70%

3.90%

3.90%

3.90%

3.90%

3.90%

4.20%

4.20%

4.20%

Total Allowable Aggregate Tax Levy

272,001

282,065

293,066

304,495

316,370

328,709

341,529

355,873

370,819

386,394

Gap between Allowable and Projected Tax levy Increase

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

'The Property Tax Extension Limitation Act, Tax Cap limits future increases in property tax levies, except debt service to the lesser of 5 percent or the change in the national consumer price

index plus allowable increases for new property.

22

Economic Assessment Report K. J.08

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

Table A-3 - Debt Service Projection and Debt Service Extention Limitation - Baseline Scenario

Historical

Projection (in

$

Thousands)-->

Description

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Capital Improvement Bond Fund Program Expenditures

Limited Bond Funds

8,862

31,250

$

183,040 $ 220,164 $ 337,931

$ 369,596

$ 260,514

$ 223,362

$

148,729

$

146,689

$

135,726

$ 106,446

Unlimited Bond Funds

51,066

22,712

10,355

67,535

61,816

50,972

46,709

15,898

35,425

24,053

10,619

Limited Bond and SRF

15,276

8,357

58,133

26,779

30,881

1,705

Unlimited Bond and SRF

1,201

1,553

Future sewer Rehab Projects

9,229

22,511

36,503

37,489

38,501

39,541

40,608

Future Plant Rehab

Projects

27,072

CIBF

Compliance

Program

with

Expenditures

Proposed Water Quality Standards

---

75,204

63,520

$

253,081

$ 314,478

---

$ 430,627

---

$ 431,501

---

$ 329,734 $ 275,764

$ 221,642

$

209,243

$

185,886

$

174,127

Bond Fund Revenues (Debt Sizing)

Proposed limited Bonds

300,000

150,000

$

$

150,000 $ 300,000

$ 150,000

$ 150,000

$

100,000

$

150,000

$

150,000

$

150,000

Proposed unlimited

250,000

150,000

50,000

Proposed SRF

40,000

42,000

42,000

42,000

42,000

42,000

45,000

45,000

45,000

45,000

45,000

40,000

Investment income

--....1&1!!.

14,297

27,767

18,602

25,908

22,772

19,436

13,671

10,316

9,500

9,262

10,181

Bond Fund Revenues

344,618

206,297

$

69,767

$ 460,602 $ 367,908

$ 364,772

$ 214,436

$ 208,671 $ 205,316 $ 204,500 $ 204,262

$

50,181

CIBF Cash Balance

285,935

555,349

372,035

518,159

455,440

388,711

273,412

206,318

189,992

185,249

203,625

79,680

Debt Service

Existing limited

31,632

46,800

51,228

$

66,463 $ 63,894 $ 60,792 $ 38,331

$

26,574

$

37,302

$

36,183

$

33,219

$

31,450

Existing unlimited

(wI

SRF)

101,795

88,930.

90,373

55,946

55,935

55,935

83,462

96,577

72,491

72,491

67,794

68,143

Proposed Limited Bond Funds

10,643

31,929

42,571

53,214

60,310

70,952

81,595

92,238

92,238

Proposed Unlimited Bond Funds

17,738

17,738

28,381

28,381

31,929

31,929

31,929

31,929

31,929

Proposed Limited Bond and SRF

2,823

5,646

8,469

11,292

14,317

17,342

20,366

23,391

26,416

Proposed Limited Bond DS for Water Quality Projects

Proposed Unlimited Bond and SRF

Debt service

133,427

135,730

141,601

153,613

175,142

196,149

214,681

229,707

230,016

242,565

248,571

250,176

Debt issuance capacity unissued

600,000

400,000

550,000

300,000

150,000

Debt Service Extension Limitation

Total Limited Bond Debt Service

31,632

46,800

51,228

79,929

101,469

111,833

102,838

101,201

125,596

138,145

148,849

150,104

Debt service Extension Base

141,464

141,464

141,464

141,464

141,464

141,464

141,464

141,464

141,464

141,464

141,464

141,464

23

Economic Assessment ReJX>rt 8.1.08

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

Table A-4

Tax Revenue Requirement Forecast Summary - Scenario 1

Projection (in

$

Thousands)-->

Description

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Projected Levy:

Corporate Fund

$

239,262

$

243,031

$

251,304

$

268,826

$

278,106

$

286,957

$

297,344

$

309,412

$

355,511

$

366,886

Construction Fund

1

5,523

8,385

1,272

2,830

5,213

6,561

7,635

8,747

10,090

Stormwater Fund

15,211

18,802

12,443

15,878

17,023

18,145

18,387

19,123

20,126

20,410

Debt Service - Existing

141,601

122,409

119,829

116,727

121,793

123,152

109,793

108,674

101,013

99,594

Debt Service - Proposed

31,204

55,313

80,141

95,045

110,152

138,205

166,258

187,118

190,143

Retirement Fund

25,665

26,450

26,023

26,726

27,447

28,188

28,949

29,818

30,712

31,634

Reserve Claim Fund

7,073

7,062

7,345

7,639

7,944

8,262

8,593

8,936

9,294

9,666

Total Projected Gross Levy (in

$

thousands)

$

428,814

$

454,481

$

480,642

$

517,208

$

550,189

$

580,069

$

607,832

$

649,856

$

712,521

$

728,421

Table A-5

Property Tax Extension Limitation - Scenario 1

Projection (in

$

Thousands)-->

Description

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Property Tax Levy Constraint (Property Tax Extension Limitation Law)':

Adjusted Aggregate Gross Property Tax Levy

272,001

282,066

293,057

304,462

316,327

328,620

341,447

355,801

404,264

418,275

(Excluding Debt Service and Stormwater)

Projected Increase

in Aggregate Tax Levy

0%

3.70%

3.90%

3.89%

3.90%

3.89%

3.90%

4.20%

13.62%

3.47%

Estimated Change

in Consumer Price Index

3.00%

2.80%

2.70%

2.70%

2.70%

2.70%

2.70%

3.00%

3.00%

3.00%

Estimated New Property (Growth)

0.80%

0.90%

1.20%

1.20%

~

1.20%

1.20%

1.20%

1.20%

1.20%

Total Allowable Increase

in Adjusted Tax Levy

3.80%

3.70%

3.90%

3.90%

3.90%

3.90%

3.90%

4.20%

4.20%

4.20%

Total Allowable Aggregate Tax Levy

272,001

282,065

293,066

304,495

316,370

328,709

341,529

355,873

370,819

386,394

Gap between Allowable and Projected Tax levy Increase

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

9.02%

8.25%

--

'The Property Tax Extension Limitation Act, Tax Cap limits future increases in property tax levies, except debt service to the lesser of 5 percent or the change in the national consumer price

index plus allowable increases for new property.

24

Economic A"essment Report H-I-OH

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

Table A-6 - Debt Service Projection and Non-Referendum Bonding Authority Limitation - Scenario 1

Historical

Projection (In

$

Thousands)-->

Description

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Capital Improvement Bond Fund Program Expenditures

Lim~ed

Bond Funds

8,862

31,250

$

183,040 $ 220,164 $ 337,931 $ 369,596 $ 260,514 $ 223,362

$

148,729

$

146,689

$

135,726

$ 106,446

Unlimited Bond Funds

51,066

22,712

10,355

67,535

61,816

50,972

46,709

15,898

35,425

24,053

10,619

Limited Bond and SRF

15,276

8,357

58,133

26,n9

30,881

1,705

Unlimited Bond and SRF

1,201

1,553

Future Sewer Rehab Projects

9,229

22,511

36,503

37,489

38,501

39,541

40,608

Future Plant Rehab Projects

27,072

Compliance with Proposed Water Quality Standards

-

___ --.1Q.!R

20,275

20,275

202,748

CIBF Program Expenditures

---

75,204

202,748

101,374

63,520

$

253,081 $ 314,478 $ 430,627 $ 441,639 $ 350,009 $ 296,039

$ 424,390

$ 411,991 $ 287,260

$ 174,127

Bond Fund Revenues (Debt Sizing)

Proposed limited Bonds

300,000

150,000

$

$

150,000

$ 300,000

$ 150,000

$ 150,000

$

100,000

$ 150,000

$

150,000

$ 150,000

Proposed unlimited

250,000

150,000

50,000

Proposed SRF

40,000

42,000

42,000

42,000

42,000

42,000

45,000

45,000

45,000

45,000

45,000

40,000

Investment Income

~

14,297

27,767

18,602

25,908

22,n2

18,929

12,125

7,679

(3,407)

(14,427)

(19,761)

Bond Fund Revenues

344,618

206,297

$

69,767 $ 460,602 $ 367,908

$ 364,n2

$ 213,929 $ 207,125 $ 202,679

$

191,593

$

180,573

$

20,239

CIBF Cash Balance

285,935

555,349

372,035

518,159

455,440

378,573

242,493

153,579

(68,133)

(288,530)

(395,217)

(549,104)

Debt Service

Existing limited

31,632

46,800

51,228

$

66,463 $ 63,894 $ 60,792 $ 38,331 $

26,574

$

37,302 $

36,183 $

33,219

$

31,450

Existing unlimited

(wI

SRF)

101,795

88,930

90,373

55,946

55,935

55,935

83,462

96,5n

72,491

72,491

67,794

68,143

Proposed Limited Bond Funds

10,643

31,929

42,571

53,214

60,310

70,952

81,595

92,238

92,238

Proposed Unlimited Bond Funds

17,738

17,738

28,381

28,381

31,929

31,929

31,929

31,929

31,929

Proposed Limited Bond and SRF

2,823

5,646

8,469

11,292

14,317

17,342

20,366

23,391

26,416

Proposed Limited Bond DS for Water Quality Projects

719

2,158

3,596

17,982

32,367

39,560

39,560

Proposed Unlimited Bond and SRF

---

---

---

---

-

Debt service

133,427

135,730

141,601

153,613

175,142

196,868

216,839

233,303

247,998

274,932

288,131

289,736

Debt Issuance capacity unissued

600,000

400,000

550,000

300,000

150,000

Debt Service Extension Limitation

Total Limited Bond Debt Service

31,632

46,800

51,228

79,929

101,469

112,552

104,996

104,797

143,578

170,512

188,409

189,664

Debt Service Extension Base

141,464

141,464

141,464

141,464

141,464

141,464

141,464

141,464

141,464

141,464

141,464

141,464

25

Economic Assessment Repon 8-1-08

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

Table A-7

Tax Revenue Requirement Forecast Summary - Scenario 2

Projection (in

$

Thousands)-->

Description

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Projected Levy:

Corporate Fund

$ 239,262

$

243,031 $ 251,304 $ 268,826 $ 278,106 $ 286,957

$ 297,344 $ 309,412 $ 350,527 $ 362,122

Construction Fund

1

5,523

8,385

1,272

2,830

5,213

6,561

7,635

8,747

10,090

Stormwater Fund

15,211

18,802

12,443

15,878

17,023

18,145

18,387

19,123

20,126

20,410

Debt Service - Existing

141,601

122,409

119,829

116,727

121,793

123,152

109,793

108,674

101,013

99,594

Debt Service - Proposed

-

31,204

55,313

80,265

95,417

110,770

141,299

171,827

193,925

196,950

Retirement Fund

25,665

26,450

26,023

26,726

27,447

28,188

28,949

29,818

30,712

31,634

Reserve Claim Fund

7,073

7,062

7,345

7,639

7,944

8,262

8,593

8,936

9,294

9,666

Total Projected Gross Levy (in

$

thousands)

$ 428,814

$

454,481 $ 480,642

$ 517,332

$ 550,560 $ 580,688

$ 610,927 $ 655,426 $ 714,344 $ 730,464

Table A-8

Property Tax Extension Limitation - Scenario 2

Projection (in

$

Thousands)-->

Description

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Property Tax Levy Constraint (Property Tax Extension Limitation Law)l:

Adjusted Aggregate Gross Property Tax Levy

272,001

282,066

293,057

304,462

316,327

328,620

341,447

355,801

399,280

413,511

(Excluding Debt Service and Stormwater)

Projected Increase

in Aggregate Tax Levy

0%

3.70%

3.90%

3.89%

3.90%

3.89%

3.90%

4.20%

12.22%

3.56%

Estimated Change in Consumer Price Index

3.00%

2.80%

2.70%

2.70%

2.70%

2.70%

2.70%

3.00%

3.00%

3.00%

Estimated New Property (Growth)

0.80%

0,90%

1.20%

1.20%

~

1.20%

1.20%

1.20%

1.20%

~

Total Allowable Increase in Adjusted Tax Levy

3.80%

3.70%

3.90%

3.90%

3.90%

3.90%

3.90%

4.20%

4.20%

4.20%

Total Allowable Aggregate Tax Levy

272,001

282,065

293,066

304,495

316,370

328,709

341,529

355,873

370,819

386,394

Gap between Allowable and Projected Tax levy Increase

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

7.68%

7.02%

'The Property Tax Extension Limitation Act, Tax Cap limits future increases in property tax levies, except debt service to the lesser of 5 percent or the change in the national consumer price

index plus allowable increases for new property.

26

Economic Assessment Report 8-1-08

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

Historical

Projection (In $ Thousands)-->

Description

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Capital Improvement Bond Fund Program Expenditures

Limited Bond Funds

8,862

31,250

$

183,040

$ 220,164 $ 337,931

$ 369,596

$ 260,514 $ 223,362

$ 148,729

$

146,689

$

135,726

$

106,446

Unlim~ed

Bond Funds

51,066

22,712

10,355

67,535

61,816

50,972

46,709

15,898

35,425

24,053

10,619

Limited Bond and SRF

15,276

8,357

58,133

26,779

30,881

1,705

Unlimited Bond and SRF

1,201

1,553

Future Sewer Rehab Projects

9,229

22,511

36,503

37,489

38,501

39,541

40,608

Future Plant Rehab Projects

27,072

Compliance with Proposed Water Quality Standards

---

---

11.882

23,764

23,764

237,636

237,636

118,818

CIBF Program Expenditures

75,204

63,520 $

253,081

$ 314,478 $ 430,627 $ 443,383 $ 353,498 $ 299,528

$ 459,279 $ 446,879 $ 304,704 $ 174,127

Bond Fund Revenues (Debt Sizing)

Proposed limited Bonds

300,000

150,000

$

$ 150,000 $ 300,000 $ 150,000

$ 150,000

$

100,000

$

150,000 $ 150,000

$

150,000

Proposed unlimited

250,000

150,000

50,000

Proposed SRF

40,000

42,000

42,000

42,000

42,000

42,000

45,000

45,000

45,000

45,000

45,000

40,000

Investment income

~

14,297

27,767

18,602

25,908

22,772

~

11,859

7,225

(5,628)

(18,503)

(24,913)

Bond Fund Revenues

344,618

206,297

$

69,767 $ 460,602 $ 367,908 $ 364,772

$213,841 $ 206,859

$ 202,225

$

189,372

$

176,497 $

15,087

CIBF Cash Balance

285,935

555,349

372,035

518,159

455,440

376,829

237,172

144,503

(112,550)

(370,057)

(498,263)

(657,303)

Debt Service

Existing limited

31,632

46,800

51,228

$

66,463

$ 63,894 $ 60,792

$

38,331

$

26,574

$

37,302

$

36,183

$

33,219

$

31,450

Existing unlimited

(wI

SRF)

101,795

88,930

90,373

55,946

55,935

55,935

83,462

96,577

72,491

72,491

67,794

68,143

Proposed Limited Bond Funds

10,643

31,929

42,571

53,214

60,310

70,952

81,595

92,238

92,238

Proposed Unlimited Bond Funds

17,738

17,738

28,381

28,381

31,929

31,929

31,929

31,929

31,929

Proposed Limited Bond and SRF

2,823

5,646

8,469

11,292

14,317

17,342

20,366

23,391

26,416

Proposed Limited Bond

OS for Water Quality Projects

843

2,529

4,215

21,076

37,937

46,367

46,367

DebtProposedserviceUnlimited

Bond and SRF

---

133,427

135,730

141,601

153,613

--- ---

-

---

175,142

196,992

217,210

233,922

251,092

280,502

294,938

296,544

Debt issuance capacity unissued

600,000

400,000

550,000

300,000

150,000

Debt Service Extension Limitation

Total

Lim~ed

Bond Debt Service

31,632

46,800

51,228

79,929

101,469

112,676

105,367

105,416

146,672

176,082

195,216

196,472

Debt Service Exlenslon Base

141,464

141,464

141,464

141,464

141,464

141,464

141,464

141,464

141,464

141,464

141,464

141,464

Table A-9 - Debt Service Projection and Non-Referendum Bonding Authority Limitation - Scenario 2

27

Economic Assessment Report K.!.OK

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

Table A-tO

Tax Revenue Requirement Forecast Summary - Scenario 3

Projection (in

$

Thousands)-->

Description

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Projected Levy:

Corporate Fund

$

239,262

$

243,031

$

251,304

$

268,826

$

278,106

$

286,957

$

297,344

$

309,412

$

330,862

$

343.326

Construction Fund

1

5,523

8,385

1,272

2,830

5,213

6,561

7,635

8,747

10,090

Stormwater Fund

15,211

18,802

12,443

15,878

17,023

18,145

18,387

19,123

20,126

20,410

Debt Service - Existing

141,601

122,409

119,829

116,727

121,793

123,152

109,793

108,674

101,013

99,594

Debt Service - Proposed

-

31,204

56,771

82,337

97,261

125,506

153,751

181,996

195,664

198,689

Retirement Fund

25,665

26,450

26,023

26,726

27,447

28,188

28,949

29,818

30,712

31,634

Reserve Claim Fund

7,073

7,062

7,345

7,639

7,944

8,262

8,593

8,936

9,294

9,666

Total Projected Gross Levy (in

$

thousands)

$

428,814

$

454,481

$

482,100

$

519,405

$

552,404

$

595,423

$

623,379

$

665,595

$

696,418

$

713,407

Property Tax Extension Limitation - Scenario 3

Projection (in

$

Thousands)-->

Description

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Property Tax Levy Constraint (Property Tax Extension Limitation

Law)1:

Adjusted Aggregate Gross Property Tax Levy

272,001

282,066

293,057

304,462

316,327

328,620

341,447

355,801

379,615

394,715

(Excluding Debt Service and Stormwater)

Projected Increase

in Aggregate Tax Levy

0%

3.70%

3.90%

3.89%

3.90%

3.89%

3.90%

4.20%

6.69%

3.98%

Estimated Change in Consumer Price Index

3.00%

2.80%

2.70%

2.70%

2.70%

2.70%

2.70%

3.00%

3.00%

3.00%

Estimated New Property (Growth)

0.80%

~

~

1.20%

1.20%

1.20%

1.20%

1.20%

~

1.20%

Total Allowable Increase in Adjusted Tax Levy

3.80%

3.70%

3.90%

3.90%

3.90%

3.90%

3.90%

4.20%

4.20%

4.20%

Total Allowable Aggregate Tax Levy

272,001

282,065

293,066

304,495

316,370

328,709

341,529

355,873

370,819

386,394

Gap between Allowable and Projected Tax levy Increase

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

2.37%

2.15%

'The Property Tax Extension Limitation Act, Tax Cap limits future increases in property tax levies, except debt service to the lesser of 5 percent or the change in the national consumer price

index plus allowable increases for

new property.

28

Economic

A~sessment

Report 8-1-0K

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

Table A-12 - Debt Service Projection and Non-Referendum Bonding Authority Limitation - Scenario 3

Historical

Projection (in

$

Thousands)-->

Description

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Capital Improvement Bond Fund Program Expenditures

Limited Bond Funds

8,862

31,250

$

183,040

$ 220,164

$ 337,931 $ 369,596 $ 260,514 $ 223,362

$

148,729

$

146,689

$

135,726

$

106,446

Unlimited Bond Funds

51,066

22,712

10,355

67,535

61,816

50,972

46,709

15,898

35,425

24,053

10,619

Lim~ed

Bond and SRF

15,276

8,357

58,133

26.779

30.881

1.705

Unlim~ed

Bond and SRF

1,201

1,553

Future Sewer Rehab Projects

9.229

22,511

36,503

37,489

38,501

39,541

40.608

Future Plant Rehab Projects

27,072

Compliance with Proposed Water Quality Standards

---

20.546

20,546

20,546

205,456

205,456

205,456

CIBF Program Expenditures

75.204

63.520 $

253.081

$ 314,478 $ 451,173 $ 452,047

$ 350.280 $ 481,220 $ 427,098 $ 414,698

$ 185.886

$

174,127

Bond Fund Revenues (Debt Sizing)

Proposed limited Bonds

300,000

150.000

$

$

150,000 $ 300,000 $ 150,000 $ 150,000

$

100,000

$

150,000 $ 150.000

$

150,000

Proposed unlimited

250,000

150.000

50.000

Proposed SRF

40,000

42,000

42.000

42,000

42,000

42.000

45,000

45,000

45.000

45,000

45,000

40,000

Investment Income

~

14.297

27.767

18,602

25.908

21,745

17.330

10.432

(3.357)

(15.130)

(26.871)

(27,759)

Bond Fund Revenues

344.618

206.297 $

69.767

$ 460,602 $ 367,908

$ 363.745

$ 212,330 $ 205,432

$ 191.643 $ 179,870 $ 168,129

$

12,241

CIBF Cash Balance

285,935

555,349

372,035

518.159

434,894

346,592

208,642

(67,146)

(302.601)

(537,429)

(555,186)

(717,073)

Debt Service

Existing

Iim~ed

31.632

46,800

51,228

$

66,463 $ 63,894 $ 60,792 $ 38,331

$

26,574

$

37,302

$

36,183 $

33,219

$

31,450

Existing unlimited

(wI

SRF)

101,795

88,930

90,373

55,946

55,935

55,935

83,462

96,577

72,491

72,491

67,794

68,143

Proposed

Lim~ed

Bond Funds

10,643

31,929

42,571

53,214

60,310

70,952

81,595

92,238

92,238

Proposed

Unlim~ed

Bond Funds

17.738

17,738

28,381

28,381

31,929

31,929

31,929

31,929

31,929

Proposed

Lim~ed

Bond and SRF

2,823

5,646

8,469

11,292

14,317

17,342

20,366

23,391

26,416

Proposed Limited Bond OS for Water Quality Projects

1,458

2,916

4,373

18,951

33,528

48,106

48,106

48,106

Proposed Unlimited Bond and SRF

---

---

---

Debt service

133,427

135,730

141,601

153,613

176,600

199,065

219,054

248,658

263.544

290,671

296,677

298,282

Debt issuance capacity unissued

600,000

400,000

550,000

300.000

150.000

Debt Service Extension Limitation

Total Limited Bond Debt Service

31,632

46,800

51,228

79,929

102.926

114,748

107,211

120.152

159,125

186,251

196.955

198.210

Debt Service Extension Base

141,464

141,464

141,464

141,464

141,464

141,464

141,464

141,464

141,464

141,464

141.464

141,464

29

Economic Assessment Report 8-1-08

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

Table A-13

Tax Revenue Requirement Forecast Summary - Scenario 4

Projection (in

$

Thousands)-->

Description

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Projected Levy:

Corporate Fund

$

239,262

$

243,031

$

251,304

$

268,826

$

278,106

$

286,957

$

297,344

$

309,412

$

364,381

$

375,364

Construction Fund

1

5,523

8,385

1,272

2,830

5,213

6,561

7,635

8,747

10,090

Stormwater Fund

15,211

18,802

12,443

15,878

17,023

18,145

18,387

19,123

20,126

20,410

Debt

Service. Existing

141,601

122,409

119,829

116,727

121,793

123,152

109,793

108,674

101,013

99,594

Debt Service - Proposed

-

31,204

56,771

83,056

99,419

129,102

171,733

214,364

235,224

238,249

Retirement Fund

25,665

26,450

26,023

26,726

27,447

28,188

28,949

29,818

30,712

31,634

Reserve Claim Fund

7,073

7,062

7,345

7,639

7,944

8,262

8,593

8,936

9,294

9,666

Total Projected Gross Levy (in

$

thousands)

$

428,814

$

454,481

$

482,100

$

520,124

$

554,562

$

599,020

$

641,361

$

697,962

$

769,498

$

785,005

Table A-14

Property Tax Extension Limitation - Scenario 4

Projection (in

$

Thousands)-->

Description

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Property Tax Levy Constraint (Property Tax Extension Limitation Law)':

Adjusted Aggregate Gross Property Tax Levy

272,001

282,066

293,057

304,462

316,327

328,620

341,447

355,801

413,134

426,753

(Excluding Debt Service and 8tormwater)

Projected Increase

in Aggregate Tax Levy

0%

3.70%

3.90%

3.89%

3.90%

3.89%

3.90%

4.20%

16.11%

3.30%

Estimated Change

in Consumer Price Index

3.00%

2.80%

2.70%

2.70%

2.70%

2.70%

2.70%

3.00%

3.00%

3.00%

Estimated New Property (Growth)

0.80%

~

1.20%

1.20%

1.20%

1.20%

1.20%

1.20%

1.20%

1.20%

Total Allowable Increase in Adjusted Tax Levy

3.80%

3.70%

3.90%

3.90%

3.90%

3.90%

3.90%

4.20%

4.20%

4.20%

Total Allowable Aggregate Tax Levy

272,001

282,065

293,066

304,495

316,370

328,709

341,529

355,873

370,819

386,394

Gap between Allowable and Projected Tax levy Increase

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

11.41%

10.45%

'The Property Tax Extension Limitation Act, Tax Cap limits future increases in property tax levies, except debt service to the lesser of 5 percent or the change in the national consumer price

index plus allowable increases for new property.

30

Economic Assessment Report 8.1.08

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

Table A-IS - Debt Service Projection and Non-Referendum Bonding Authority Limitation - Scenario 4

Historical

Projection (in

$

Thousands)-->

Description

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Capital Improvement Bond Fund Program Expenditures

Limited Bond Funds

8,862

31,250

$

183,040

$

220,164

$

337,931

$

369,596

$

260,514

$ 223,362

$

148,729

$

146,689

$

135,726

$

106,446

Unlim~ed

Bond Funds

51,066

22,712

10,355

67,535

61,816

50,972

46,709

15,898

35,425

24,053

10,619

Lim~ed

Bond and SRF

15,276

8,357

58,133

26,779

30,881

1,705

Unlim~ed

Bond and SRF

1,201

1,553

Future Sewer Rehab Projects

9,229

22,511

36,503

37,489

38,501

39,541

40,608

Future Plant Rehab Projects

27,072

Compliance with Proposed Water Quality Standards

---

20,546

30,683

40,820

225,730

408,204

408,204

lOt ,374

CIBF Program Expenditures

75,204

63,520

$

253,081

$

314,478 $451,173

$

462,184

$

370,555

$

501,494

$

629,846

$

617,446

$

287,260

$

174,127

Bond Fund Revenues (Debt Sizing)

Proposed

lim~ed

Bonds

300,000

150,000

$

$

150,000

$ 300,000 $ 150,000

$

150,000

$

100,000

$ 150,000

$

150,000

$

150,000

Proposed

unlim~ed

250,000

150,000

50,000

Proposed SRF

40,000

42,000

42,000

42,000

42,000

42,000

45,000

45,000

45,000

45,000

45,000

40,000

Investment income

~

14,297

27,767

18,602

25,908

21,745

~

8,886

(5,994)

(28,036)

(50,560)

(57,701)

Bond Fund Revenues

344,618

206,297

$

69,767

$

460,602

$

367,908

$

363,745 $ 211,823

$

203,886

$

189,006

$

166,964

$

144,440

$

(17,701)

CIBF Cash Balance

285,935

555,349

372,035

518,159

434,894

336,455

177,723

(119,885)

(560,726) (1,011,208)

(1,154,028) (1,345,857)

Debt Service

Existing limited

31,632

46,800

51,228

$

66,463

$

63,894

$

60,792

$

38,331

$

26,574

$

37,302

$

36,183

$

33,219

$

3t,450

Existing unlimited

(wI

SRF)

101,795

88,930

90,373

55,946

55,935

55,935

83,462

96,577

72,491

72,491

67,794

68,143

Proposed Limited Bond Funds

10,643

31,929

42,571

53,2t4

60,310

70,952

81,595

92,238

92,238

Proposed Unlimited Bond Funds

17,738

17,738

28,381

28,381

31,929

31,929

31,929

31,929

31,929

Proposed Limited Bond and SRF

2,823

5,646

8,469

11,292

14,3t7

17,342

20,366

23,39t

26,416

Proposed Limited Bond

OS for Water Quality Projects

1,458

3,635

6,531

22,547

51,510

80,473

87,666

87,666

Proposed Unlimited Bond and SRF

Debt service

133,427

135,730

141,601

153,613

176,600

199,784

221,212

252,254

281,526

323,038

336,237

337,842

Debt issuance capacity unissued

600,000

400,000

550,000

300,000

150,000

Debt Service Extension Limitation

Total Limited Bond Debt Service

31,632

46,800

51,228

79,929

102,926

115,468

109,369

123,748

177,106

218,618

236,515

237,770

Debt Service Extension Base

141,464

141,464

141,464

141,464

141,464

141,464

141,464

141,464

141,464

141,464

141,464

141,464

31

Economic Assessment Repon 8.1.08

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

Table A-16

Tax Revenue Requirement Forecast Summary - Scenario 5

Projection (in

$

Thousands)-->

Description

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Projected Levy:

Corporate Fund

$ 239,262

$

243,031 $ 251,304 $ 268,826 $ 278,106 $ 286,957

$ 297,344 $ 309,412

$ 359,397 $ 370,600

Construction Fund

1

5,523

8,385

1,272

2,830

5,213

6,561

7,635

8,747

10,090

Stormwater Fund

15,211

18,802

12,443

15,878

17,023

18,145

18,387

19,123

20,126

20,410

Debt Service - Existing

141,601

122,409

119,829

116,727

121,793

123,152

109,793

108,674

101,013

99,594

Debt Service - Proposed

31,204

56,771

83,180

99,790

129,721

174,827

219,933

242,031

245,056

Retirement Fund

25,665

26,450

26,023

26,726

27,447

28,188

28,949

29,818

30,712

31,634

Reserve Claim Fund

7,073

7,062

7,345

7,639

7,944

8,262

8,593

8,936

9,294

9,666

Total Projected Gross Levy (in

$

thousands)

$ 428,814 $

454,481

$ 482,100 $ 520,248 $ 554,934 $ 599,639

$ 644,455 $ 703,532 $ 771,321 $ 787,049

Table A-17

Property Tax Extension Limitation - Scenario 5

Projection (in

$

Thousands)-->

Description

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Property Tax Levy Constraint (Property Tax Extension Limitation Law)1:

Adjusted Aggregate Gross Property Tax Levy

272,001

282,066

293,057

304,462

316,327

328,620

341,447

355,801

408,150

421,989

(Excluding Debt Service and Stormwater)

Projected Increase

in Aggregate Tax Levy

0%

3.70%

3.90%

3.89%

3.90%

3.89%

3.90%

4.20%

14.71%

3.39%

Estimated Change in Consumer Price Index

3.00%

2.80%

2.70%

2.70%

2.70%

2.70%

2.70%

3.00%

3.00%

3.00%

Estimated New Property (Growth)

0.80%

M!lli

1.20%

1.20%

~

1.20%

1.20%

1.20%

1.20%

1.20%

Total Allowable Increase in Adjusted Tax Levy

3.80%

3.70%

3.90%

3.90%

3.90%

3.90%

3.90%

4.20%

4.20%

4.20%

Total Allowable Aggregate Tax Levy

272,001

282,065

293,066

304,495

316,370

328,709

341,529

355,873

370,819

386,394

Gap between Allowable and Projected Tax levy Increase

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

10.07%

9.21%

'The Property Tax Extension Limitation Act, Tax Cap limits future increases in property tax levies, except debt service to the lesser of 5 percent or the change in the national consumer price

index plus allowable increases for new property.

32

Economic Assessment Report M-I-0H

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

Table A-IS - Debt Service Projection and Non-Referendum Bonding Authority Limitation - Scenario 5

Historical

Projection (in

$

Thousands)-->

Description

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Capital Improvement Bond Fund Program Expenditures

Limited Bond Funds

8,862

31,250

$

183,040

$ 220,164 $ 337,931

$ 369,596

$ 260,514 $ 223,362

$

148,729 $ 146,689

$

135,726

$ 106,446

Unlimited Bond Funds

51,066

22,712

10,355

67,535

61,816

50,972

46,709

15,898

35,425

24,053

10,619

Limited Bond and SRF

15,276

8,357

58,133

26,779

30,881

1,705

Unlimited Bond and SRF

1,201

1,553

Future Sewer Rehab Projects

9,229

22,511

36,503

37,489

38,501

39,541

40,608

Future Plant Rehab Projects

27,072

Compliance with Proposed Water Quality Standards

---

20,546

32,427

44,309

229,219

443,092

443,092

118,818

CIBF Program Expenditures

75,204

63,520

$

253,081 $ 314,478 $451,173 $ 463,929 $ 374,044 $ 504,983

$ 664,734

$ 652,335 $ 304,704

$

174,127

Bond Fund Revenues (Debt Sizing)

Proposed limited Bonds

300,000

150,000 $

$ 150,000

$ 300,000 $ 150,000

$ 150,000

$

100,000

$

150,000

$

150,000

$

150,000

Proposed unlimited

250,000

150,000

50,000

Proposed SRF

40,000

42,000

42,000

42,000

42,000

42,000

45,000

45,000

45,000

45,000

45,000

40,000

Investment income

~

14,297

27,767

18,602

25,908

21,745

16,736

8,620

(6,448)

(30,257)

(54,637)

(62,854)

Bond Fund Revenues

344,618

206,297

$

69,767

$ 460,602

$ 367,908 $ 363,745

$ 211,736

$ 203,620

$

188,552

$

164,743

$

140,363

$

(22,854)

CIBF Cash Balance

285,935

555,349

372,035

518,159

434,894

334,710

172,402

(128,961)

(605,143) (1,092,735) (1,257,075)

(1,454,056)

Debt Service

Existing limited

31,632

46,800

51,228

$

66,463 $ 63,894

$ 60,792

$ 38,331

$

26,574

$

37,302

$

36,183

$

33,219

$

31,450

Existing unlimited

(wI

SRF)

101,795

88,930

90,373

55,946

55,935

55,935

83,462

96,577

72,491

72,491

67,794

68,143

Proposed Limited Bond Funds

10,643

31,929

42,571

53,214

60,310

70,952

81,595

92,238

92,238

Proposed Unlimited Bond Funds

17,738

17,738

28,381

28,381

31,929

31,929

31,929

31,929

31,929

Proposed Limited Bond and SRF

2,823

5,646

8,469

11,292

14,317

17,342

20,366

23,391

26,416

Proposed Limited Bond DS for Water Quality Projects

1,458

3,759

6,902

23,166

54,605

86,043

94,473

94,473

DebtProposedserviceUnlimited

Bond and SRF

---

133,427

--- ---

135,730

141,601

153,613

176,600

199,908

221,583

252,873

284,620

328,608

343,044

344,650

Debt issuance capacity unissued

600,000

400,000

550,000

300,000

150,000

Debt Service Extension Limitation

Total Limited Bond Debt Service

31,632

46,800

51,228

79,929

102,926

115,591

109,740

124,367

180,201

224,188

243,322

244,578

Debt Service Extension Base

141,464

141,464

141,464

141,464

141,464

141,464

141,464

141,464

141,464

141,464

141,464

141,464

33

Economic Assessment Report 8.1.08

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

Attachment 8

Rudimentary, Order-of-Magnitude Cost Estimates for Nutrient Removal

at District Water

Reclamation Plants

Rudimentary, Order-at-Magnitude Cost

Estimates

tor Nutrient Removal at District

Water Reclamation Plants

PLANT

CAPITAL COST

ANNUAL M&O

Stickney

$1,666,000,000

$100,000,000

Calumet

$605,000,000

$29,000,000

North Side

$408,000,000

$4,700,000

Kirie

$83,000,000

$1,000,000

Egan

$38,000,000

$2,500,000

Hanover Park

$17,000,000

$1,000,000

Total

$2,817,000,000

$138,200,000

NOTES:

1. Cost Estimate prepared by engineering department of MWRDGC.

2. Under the Master Plans for the Calumet and North Side WRPs, conceptual level cost estimates

were performed for various nutrient removal processes. The purpose of the cost estimates was to

compare various nutrient removal processes relative to each other. These estimates were used to

generate a rudimentary, order-of-magnitude cost estimate for all seven WRPs.

In short, North

Side and Calumet estimates were used to arrive at capital and annual operating costs

on a flow

basis

(Le. dollars per million gallons of sewage treated). These ratios were used to extrapolate

costs for the other four WRPs. The cost estimates that were derived assumed hypothetical

effluent limits of 0.5

mg/L

for total phosphorus and between 6 to 8

mg/L

for total nitrogen.

3. All costs are given in 2008 dollars.

4. Lemont Water Reclamation Plant is not included as it is planned to be converted to a sewage

pumping station.

12

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

BEFORE THE ILLINOIS POLLUTION CONTROL BOARD

IN THE MATTER OF:

WATER QUALITY STANDARDS AND

EFFLUENT LIMITATIONS FOR THE

CHICAGO AREA WATERWAY SYSTEM

AND THE LOWER DES PLAINES RIVER:

PROPOSED AMENDMENTS TO 35 Ill.

Adm. Code Parts 301, 302, 303 and 304

)

)

)

)

)

)

)

)

R08-9

(Rulemaking - Water)

PRE-FILED TESTIMONY OF JOHN MASTRACCHIO

INTRODUCTION

My name

is John Mastracchio. I am a senior associate with Malcolm Pirnie and have

been a financial management, engineering, and rate consultant since 1994. My experience

includes completing studies involving municipal utility economics and financial analysis. I hold

a Master

of Business Administration degree with a concentration in finance from Cornell

University, a Masters

of Engineering degree with a concentration in Civil and Environmental

Engineering from Clarkson University, and a Bachelor

of Arts degree from the State University

of New York. I am a Registered Professional Engineer and have received the Chartered

Financial Analyst designation from the Chartered Financial Analyst Institute. I am an active

member

of the American Water Works Association, the Water Environment Federation, and serve

on the Finance, Accounting, and Management Controls Committee

of the American Water Works

Association. A resume detailing my education and experience is presented in Attachment 7.

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

PURPOSE

I was asked to examine the potential economic impacts of constructing and operating

dissolved oxygen enhancement facilities that would be necessary to meet the Illinois

Environmental Protection Agency'sproposed water quality standards in the Chicago Area

Waterway System. The results

of this assessment are summarized in this testimony and are

documented in greater detail in the report entitled Economic Assessment

of Infrastructure to

Meet Proposed Water Quality Standards for Dissolved Oxygen and Plant Effluent Standards for

Bacteria (Attachment 6). The economic impacts were assessed in terms

of the District's

statutory taxing authority and financial capability.

COST

SUMMARY

The economic assessment of implementing dissolved oxygen enhancement processes was

based on the District spending approximately $525 million in capital infrastructure and annual

maintenance and operations (M&O) costs

of approximately $6.9 million (expressed in 2008

dollars) to construct and implement dissolved oxygen enhancement facilities that would increase

the dissolved oxygen levels in the Chicago Area Waterway System (CAWS) in order to achieve

compliance with the IEPA proposed standards. The basis for these costs

is documented in the

testimony

of David R. Zenz. As discussed in his testimony, these are rough, order-of-magnitude

cost estimates that are based upon a variety

of assumptions, and there are still concerns and

unknowns with respect to the facilities that would be required to meet the proposed standards.

2

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

ECONOMIC ASSESSMENT

The District generates revenue to fund its operations through an ad valorem property tax,

a personal property replacement tax, user charges, interest income, and other miscellaneous fees

and charges. The District's primary source

of operating revenue is the ad valorem property tax.

The personal property replacement tax

is primarily a tax on corporate income. User charge

revenues are collected from large commercial and industrial customers and tax-exempt

customers. A summary

of the District's revenues and expenditures for the period 2002 through

2006

is provided as Attachment 1.

The District has several financial limitations and restrictions that directly impact its

ability to take on additional projects or programs. First, in 1995, the Property Tax Extension

Limitation Law was passed by the Illinois General Assembly, which limits the ability

of the

District to adopt future increases in the aggregate tax levy. In accordance with this Act,

increases to the District's property tax levy are limited to the lesser of:

(1) five percent or (2) the

change in the national consumer price index plus allowable increases for new property. The

aggregate levy is the total levy

of all funds except the Bond Redemption and Interest Fund and

the Stormwater Management Fund. In other words, debt service and stormwater management

costs are not included under this limitation.

Second, the District's initial Tax Cap legislation restricted the District'snon-referendum

bond authority to only apply to projects initiated prior to October

1, 1991. There was a specific

exemption, essentially to exclude Tunnel and Reservoir Plan projects, from the more restrictive

provisions

of the Act which require referendum approval of all new debt. Public Act 89-385

provides the District with the authority to issue non-referendum "limited bonds" for capital

projects initiated after October

1, 1991 at the same debt service level as it did in 1994. Limited

bonds can be issued to the extent that the total debt service requirements of any new debt, when

3

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

combined with existing debt service, does not exceed the 1994 debt service extension base of

$141,463,920. Public Act 90-485 has provided a further modification by authorizing the

exclusion

of debt for Tunnel and Reservoir Plan projects from this debt service extension base.

Third, in 2003, the District received authority under Public Act 93-279 to issue $150

million (previously $100 million)

of non-referendum bonds during any budget year, plus

authorized, but unissued bonds, during the previous three budget years through 2016.

A baseline scenario was prepared, which includes the District's currently planned capital

projects that the District feels is necessary in order to maintain and upgrade its aging facilities

and infrastructure, but excludes the costs associated with this proposed rulemaking. The

estimated cost

of the District's planned capital improvement projects were provided to Malcolm

Pirnie in February 2008, and a discussion

of these projects is provided in the testimony of Mr.

Tom Kunetz

of the District's Engineering Department. The baseline scenario indicates that the

District would be able to generate sufficient revenues to satisfy the District's projected revenue

requirements within the constraints

of the legal limitations r just discussed.

In

addition, the

District's debt financing needs will not exceed the Tax Cap legislation limits or the District's

non-referendum bonding authority through fiscal year 2015. A summary

of the District's

projected results compared to the financial limitations and restrictions are provided

as

Attachment 2 (Figures 2-1, 2-2 and 2-3).

However, the District does not have sufficient financial resources to fund the capital

expenditures and operation and maintenance costs necessary to meet the rEPA proposed

dissolved oxygen standards. The District cannot generate sufficient revenues within the

constraints

of the Property Tax Extension Limitation Act, and the remaining funds needed would

exceed the District'sTax Cap and non-referendum bonding authority. A summary of the

4

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

District's projected financial results under this scenario, as compared to the financial limitations

and restrictions,

is provided in Attachment 3 (Figures 3-1, 3-2 and 3-3).

I also completed an evaluation

of the economic impact of the combined costs of the IEPA

proposed dissolved oxygen standards and disinfection requirements (chlorination/dechlorination

or ultraviolet disinfection). Disinfection costs were summarized in Attachment 1

of my previous

testimony.

If the District is required to move forward with both processes, it is anticipated that

the Property Tax Extension Limitation Act, the District'sTax Cap, and the non-referendum

bonding authority would be greatly exceeded. A summary

of the District's projected financial

results, including the dissolved oxygen enhancement and chlorination / dechlorination

disinfection processes, as compared to the financial limitation and restrictions

is provided in

Attachment 4 (Figures 4-1, 4-2 and 4-3). Similarly, a summary

of the District's projected

financial results, including the dissolved oxygen and ultraviolet disinfection processes, as

compared to the financial limitation and restrictions is provided in Attachment 5 (Figures 5-1, 5-

2, and 5-3).

It

should be noted that effluent limits for phosphorus and total nitrogen may be imposed

on the District's treatment plants in the future. The District's currently planned capital projects,

which were used in the baseline analysis, do not include the costs to implement nutrient removal

processes. As documented in a District cost summary table provided in Attachment 8, a

rudimentary, order-of-magnitude cost estimate prepared by the District indicates that the capital

costs to construct nutrient removal processes could be approximately $2.8 billion dollars.

CONCLUSION

Fully funding the activities necessary to achieve compliance with IEPA's proposed rule

would require an act

of the state Legislature to amend the Property Tax Extension Limitation Act

5

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

and provide additional non-referendum bonding authority; a voter referendum in support of

additional bonding authority; or drastic reductions in the funding of other District programs.

Furthermore, adding the combined costs of implementing both the dissolved oxygen and

disinfection processes that would be required by this rulemaking to the wastewater system costs

currently planned by the District would result in the District'sfinancial limitations and

restrictions to

be greatly exceeded.

In

addition, if implemented, these processes would leave no

financial capacity to fund other programs not currently included in the Distrct's capital plan.

One such project, not currently included in the District'scapital plan, is nutrient removal

facilities at its treatment plants, which

couldcost approximately $2.8 billion if nutrient effluent

limits are imposed in the future.

6

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

Respectfully submitted,

fld~

By:

John Mastracchio

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

Testimony Attachments

1.

MWRD Summary of Financial Results

2.

Baseline Financial Results Compared to Financial Limitations and Restrictions

3.

Projection of Financial Results Including Cost of Dissolved Oxygen Processes

Compared to Financial Limitations and Restrictions

4.

Financial Results Including Dissolved Oxygen and ChlorinationlDechlorination

Disinfection Costs Compared to Financial Limitations and Restrictions

5.

Results Including Dissolved Oxygen and Ultraviolet Disinfection Costs Compared to

Financial Limitations and Restrictions

6.

Report entitled Economic Assessment of Infrastructure to Meet Proposed Water

Quality Standards for Dissolved Oxygen and Plant Effluent Standards for Bacteria,

prepared by Malcolm Pirnie, Inc.

7.

John Mastracchio Resume

8.

Rudimentary, Order-of-Magnitude Cost Estimates for Nutrient Removal at District

Water Reclamation Plants prepared by the District

7

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

Attachment 1

-

MWRD Summary of Financial Results

(in $ Thousands, Modified Accrual Basis)

2002

2003

2004

2005

2006

Revenues

Property Taxes

$

362,036

$

397,751

$

360,326 $ 423,941

$

380,675

Personal Property Replacement Tax

22,285

24,048

25,961

36,031

37,743

User Charges

48,890

50,222

47,757

45,983

52,504

Interest on Investments

15,693

13,163

9,943

19,693

43,659

Other Revenues

14,759

16,203

16,495

16,309

17,691

Total Revenues

$

463,663

$

501,387

$

460,482 $ 541,957

$

532,272

Expenditures

General Administration

$

14,318

$

14,987

$

15,538

$

17,259

$

16,974

Personnel

27,610

30,916

35,877

32,900

35,162

Pension Costs

27,044

29,511

27,372

31,561

30,071

Research and Development

23,838

24,172

24,030

24,787

24,985

Information Technology

11,204

11,417

10,574

10,811

11,034

Maintenance and Operations

160,326

159,079

160,299

157,612

155,899

Other

32,843

22,563

27,637

31,522

26,931

Construction Costs

157,076

164,865

127,155

133,599

164,157

Debt Service

145,831

158,626

156,025

169,019

171,869

Total Expenditures

$

600,090 $

616,136

$

584,507 $ 609,070

$

637,082

Revenues Over (Under) Expenditures

$ (136,427)

$ (114,749)

$ (124,025) $ (67,113) $ (104,810)

Other Financing Sources (Uses)

222,622

223,613

52,720

15,973

383,448

Net Change in Fund Balance

$

86,195 $ 108,864

$

(71,305) $ (51,140) $ 278,638

Source: Comprehensive Annual Financial Reports (2003-2006).

8

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

Baseline Financial Results Compared to Financial Limitations and Restrictions

Figure 2-1 - Capital Improvement Plan - Baseline

ESTIMATED CAPITAL PROGRAM EXPENDITURES

-Sewer

Plant _

Tarp -

CIBF Cash Balance

$600,000

$500,000

$400,000

.fl

....

"

c

0

$300,000

.c

$200,000

..

l-

$100,000

$0

co

0

C\l

.q-

<0

co

8

C\l

5

C\l

5

C\l

~

5

C\l

~

Figure 2-2

Forecasted Aggregate Tax Levy Requirement Compared to Tax Cap Limitation - Baseline

$410,000 r------------------------------,

$390,000 +--------------------------==---1

$370,000 +-------------------------==--""'f-----1

-ll

m $350,000

6

$330,000

+-----------------=:;_"r.:=.....j

~

l-

.5 $310,000

+----------~"",."1

<It

$290,000

+-------=_~l_____l

$270,000

.J.-~=-----l

$250,000

+-""""--,r--"""""...,............

"-'-...,--"--"'----,---'----'---,---'--'--,--'--...L..-,....-I.........'---r---'-.........-,-...L..-""---j

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

c:::=:J

Projected Tax

Levy Requirement(Excluding SkmnwaterCostand Debt Service)

-

Tax Levy Extension limitation (CPI+ New Property)

Figure 2-3

Forecasted Debt Service Compared to Debt Service Extension Base - Baseline

$160,000

$140,000

$120,000

CIl$100,000

'0

m$80,000

::J

,g $60,000

tit

.5

$40,000

$20,000

$0

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

_

Projected Amountof Limited DebtService

9

-

DebtService Extension Limitation

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

Attachment 3

Projection

of Financial Results Including Cost of Dissolved Oxygen Processes

Compared to Financial Limitations and Restrictions

Figure 3-1 - Capital Improvement Plan

ESTIMATED CAPITAL PROGRAM EXPENDITURES

-Sewer

$600,000

$500,000

$400,000

-8

II

c

$300,000

II

"

0

..

...

z:

$100,000$200,000

$0

~

Plant

_Tarp

;~;~.

ProJoctsto Meet Proposed Standards

-CIBF Cash Balance

Figure 3-2

Forecasted Aggregate Levy Requirement

Compared to Tax Cap Limitation

$410,000 ,..--------------------------------,

$390,000

+--------------------------~t----l

III $370,000 +-------------------------c:::oII.....,'------j

'C

c

$350,000

+--------------------~

........

III

.t::

g $330,000 -1----------------=-"""""""...,

I-

.5 $310,000

+------------=_-r

... $290,000 +--------::::;;;;01""",-,.-..,

$270,000

-1--'--'1'----1

$250,000

+-J'-=-L.,----'---'-__._--'--'--,..-'-~----'--J..__._--'-....I-..,.-'-~----'---'-___._--'--'--_,__""""y

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

~

Projected Tax levy Requirement(Excluding StmnwaterCostand DebtSerYlce)

-

Tax Levy Extension Limitation (CPI + New Property)

Figure 3-3

Forecasted Debt Service Compared to Debt Service Extension Base

$250,000

$200,000

~$150,OOO

c

III

g$100,000

.t::

~

.5

$50,000

$0

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Projected Amountof Limited DebtSelVlce

10

-

Debt Service Extension Limitation

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

Disinfection Costs Compared to Financial Limitations and Restrictions

Figure 4-1 - Capital Improvement Plan

ESTIMATED CAPITAL PROGRAM EXPENDITURES

-Sewer

Plant

-Tarp

••••••• Projects to Meet Proposed Standards

-

aBF cash Balance

~

c

:I

"

o

.c

I-

lit

$700,000

$600,000

$500,000

$400,000

$300,000

$200,000

$100,000

$O-~.

o

@

CD

@

Figure 4-2

Forecasted Aggregate Levy Requirement Compared to Tax Cap Limitation

$450,000

$430,000

$410,000

-a $390,000

!

c

$370,000

,g $350,000

I- $330,000

.!:

... $310,000

$290,000

$270,000

$250,000

-

I........

,..-

....

"",-

-

-"..,.

r--

-

-

-

-~

f-- -

-

-

-

f-- f-----

f--

-

f-----

-

9:RF

----

-

f--

f-----

f--

-

f-----

-

II

-

f--

f-----

f--

-

f-

-

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

$250,000

$200,000

-a $150,000

c

III

5$100,000

.c

~

.5

$5O,OCK>

$0

c:::::::l Projected Tax Levy Requirement(ExCluding

StmnwaterCostand

Debt Service)

--

Tax Levy Extension Limitation (CPI + New Property)

Figure 4-3

Forecasted Debt Service Compared to Debt Service Extension Base

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

....Projected Amountof Limited DebtService

11

-

DebtService Extension Umitatial

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

Attachment 5

Financial Results Including Dissolved Oxygen

and Ultraviolet Disinfection Costs

Compared to Financial Limitations

and Restrictions

Figure 5-1 - Capital Improvement Plan

ESTIMATED CAPITAL PROGRAM EXPENDITURES

-Sewer

$700,000

$600,000

$500,000

{!j

$400,000

.,

..

l:

$300,000

"

0

...

...

.l:

$200,000

$100,000

$0

8

C\I

Plant

-

Tarp

.,-,. Projects to Meet Proposed Standards

-

CIBF Gash Balance

o

@

Figure 5-2

Forecasted Aggregate Levy Requirement

Compared to Tax Cap Limitation

$450,000

$430,000

$410,000

Ul

$390,000

i

$370,000

.2

$350,000

I-

$330,000

.!:

o $310,000

$290,000

$270,000

$250,000

r--

I-

~

~

I-

-~

I-

.-.-,.".

~

t---

I-- I-

--~

t-- t--

I-- l-

I--

t-- t---

I-- I-

----

,...

1--rlf1.

F

I-- I-- I--

t-- t--

t--- l-

t--- t--- t---

t-- t--

I-- I-

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

~

Projected Tax Levy Requirement(Excluding StormwaterCostand Debt Service)

--Tax Levy Extension Limitation (CPI + New Property)

Figure 5-3

Forecasted Debt Service Compared to Debt Service Extension Base

$300,000

$250,000

$200,000

~

:$150,000

~

o

~$1oo,000

c

.- $50,000

$0

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Projected Am Duntof Lim iled Debt Service

12

--DebtService Extension Limitation

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

ATTACHMENT 6

Economic Assessment of Infrastructure to Meet Proposed

Water Quality

Standards for Dissolved Oxygen

and Plant Effluent Standards for Bacteria

(Malcolm Pirnie, Inc.,

July 2008)

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

METROPOLITAN WATER RECLAMATION DISTRICT OF GREATER CHICAGO

ECONOMIC ASSESSMENT OF INFRASTRUCTURE TO MEET PROPOSED WATER

QUALITY STANDARDS FOR DISSOLVED OXYGEN AND PLANT EFFLUENT

Introduction

The purpose of this study is to examine the potential economic impacts of implementing

processes at the Metropolitan Water Reclamation District of Greater Chicago (District)

facilities and in the waterways necessary to meet the proposed water quality and plant

effluent standards as proposed by the Illinois Environmental Protection Agency (IEPA)

under R08-9. The assessment

is composed of two sections; environmental and economic.

This report presents the economic portion of the assessment. The environmental portion

is provided under a separate cover.

The District's approach is to take a "holistic" view of the environmental impacts of the

alternatives, including the potential economic impacts in terms

of the District's statutory

taxing authority and financial capability. A summary of the infrastructure costs, financial

condition and limitations

of the District, and financial forecast results under several

alternatives is provided below. These alternatives consist of:

•

Disinfection (Ultraviolet and ChlorinationlDechlorination) technology;

•

Dissolved Oxygen technology;

• A combination

of disinfection and dissolved oxygen technology.

Infrastructure Cost Summary

This study evaluates the costs and overall environmental impacts of potentially

implementing processes to disinfect plant effluent and increase dissolved oxygen in the

Chicago Area Waterway System (CAWS). Costs associated with several alternatives,

including implementing chlorination/dechlorination disinfection, and ultraviolet

disinfection at the three water reclamation plants is summarized in Table 1 below.

1

Economic Assessment ReJXlft 8-1-08

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

Table 1 - Summary of Costs to Meet Newly Proposed Water Quality and Effiuent Standards in the

Chicago Area Waterway System

Project Description

Capital Cost

AnnualO&M

Cost

Total Present

Value Cost

SWRP

ChlorinationlDechlorination Disinfection

$225,700,000

$15,900,000

$533,500,000

Ultraviolet Disinfection

267,200,000

12,600,000

511,200,000

CWRP

ChlorinationlDechlorination Disinfection

$79, 100,000

$5,020,000

$176,500,000

Ultraviolet Disinfection

112,300,000

4,600,000

201,600,000

NSWRP

ChlorinationlDechlorination Disinfection

$114,200,000

$5,040,000

$212,000,000

Ultraviolet Disinfection

111,600,000

4,900,000

206,800,000

Total

ChlorinationlDechlorination Disinfection

$419,000,000

$25,960,000

$922,000,000

Ultraviolet Disinfection

491,100,000

22,100,000

919,600,000

Dissolved Oxygen Infrastructure

$524,800,000

$6,870,000

$656,600,000

All costs in 2008 dollars. Present value costs based on a 3.0% interest rate, and a 3% inflation rate for 20 years.

Sources:

Report entitled ChlorinationlDechlorination Disinfection Cost Study for Stickney, Calumet, and North Side Water Reclamation

Plants" prepared by CTE and dated May 12, 2008. Costs subsequently updated to 2008 dollars.

Report entitled UV Disinfection Cost Study - Northside Water Reclamation Plantprepared by

CfE and dated January 31, 2008. Costs

subsequently updated to 2008 dollars.

Dissolved Oxygen Infrastructure costs provided by erE.

Financial Summary

The District generates revenue to fund its operations from ad valorem property taxes,

personal property replacement tax (PPRT), user charge revenue, interest income, and

other revenues. The District's primary source of operating revenue is ad valorem

property taxes.

PPRT revenue is primarily a tax on corporate income. The PPRT

revenue is first distributed to fully fund the District'sRetirement Fund, and subsequent

receipts are distributed to other non-debt funds. User charge revenues are collected from

large commercial and industrial classes, and tax-exempt customers. A summary

of the

District's revenues and expenditures for the period 2002 through 2006

is provided in

Table 2 below.

2

Economic Assessment

Report

8-1.08

Electronic Filing - Received, Clerk's Office, August 4, 2008

---

Table 2 - MWRD Summary of Financial Results - All Governmental Funds

(in $ Thousands, Modified Accrual Basis)

2002

2003

2004

2005

2006

Revenues

Property Taxes

$

362,036

$

397,751 $ 360,326

$ 423,941

$

380,675

Personal Property Replacement Tax

22,285

24,048

25,961

36,031

37,743