Utility Committee Agenda and Packet 2021 02 09

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VI. Windy Gap Firming Project WGF Project Financing Alternatives Memo — Page 13-16, Mr. Kowar gave an overview of the memo and explained the follow up with various questions/scenarios that were requested by the Committee from the last meeting. Mr. Kowar summarized the project has 12 participants in the project, 10 of which are tentatively planning to be in the Group Financing and two are not part of it. One being Longmont due to some charter restrictions and Weld where they are paying cash. Northern provided some updated terms for the Allotment Contract that provides an exit clause where there is a certain period of time to give everybody notice. There will be a three month window to make that decision. If the City selects individual financing on the Allotment Contract today we won't have a future opportunity to participate in the continued discussions for Group Financing. Mr. Kowar continued explaining the 8 Financing Scenarios and the color coding on page 15. He shared a graph with the Committee so they have a better understanding and explained the two categories being a zero down payment and a $2.5M down payment. Then he said they looked at 20 and 30 year terms along with a standard loan payment over 20-30 years or a payment where it was 5 year interest only and then principal & interest paid after that. Staff used the guiding principles to optimize the rate model and give the community the best rates over time using the smoothing. Then staff combined that process with finding the financing structure that minimizes the total the City will pay over the course of the loan. Emphasis was placed on the desire to maintain future flexibility for the utility and staff's capacity it takes to administrate the different options, staff impacts and the ability to leverage our own staff to have the time it deserves. He continued briefly describing the Group Financing and said staff is recommending to move forward with the Allotment Contract. Councilmember Lipton asked Mr. Kowar for a better understanding of the interest rates where the assumption is on a 2.5% rate listed on page 15. Councilmember Lipton asked if it doesn't matter whether it's a 20 or 30 year loan it's the same interest rate. Mr. Manire joined in and said that our assumptions in the Pool Financing and the City Stand Alone Financing would have the same bond rating so that means the interest rate assumptions are the same. Neither entity has a rating yet today and is an uncertainty until they approach the market. Committee discussed the graph and Mr. Kowar continued with saying any percentage on the graph is a rate increase not loan interest rates. Councilmember Lipton and Mayor Pro Tern Councilmember Maloney suggested if this is brought to Council that labeling should include Interest Rates, Overall Principle and Interest and the Increase in Water Rates. Mayor Pro Tern Councilmember Maloney asked Mr. Manire's opinion on the 20-30 year and 5 year interest. Mr. Manire said the 20-30 year resemble structures for our long term utility financing and we have better information since our September meeting where both are useful. He said that he was leaning toward the 20 year term as long as it matches up with the rate modeling and fund balance projections. Continued saying the 51