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8. FINANCIAL STRATEGY 8.4 Evaluation of Local Funding Resources MWMC will rely on monthly wastewater rates and SDCs for revenue. Financing for capital projects will most likely be provided by revenue bonds, although MWMC would like to retain the option to use the State Revolving Loan Fund (SRF) program administered by DEQ. As stated h~ section 8.2, MWMC is in a strong position with respect to its credit-worthiness. MWMC's sound financial management, long-term financial forecasting and planning, stable operations, and a host of other qualitative indicators all show that MWMC would perform extremely well in any assessment by a credit rating agency or other financial body. 8.5 Evaluation of Federal and State Funding Resources In previous financial evaluations, MWMC staff evaluated potential federal and state funding resources for which MWMC might qualify. The SRF program was identified as the only realistic alternative, but was determined to be less cost-effective than funding projects through revenue bonds. MWMC would like to retain the option of accessing the SRF program and has developed this comprehensive Facilities Plan to be eligible for SRF monies if that financing approach becomes more favorable than revenue bonds in the future. 8.6 Recommended Financing Strategy 8.6.1 System Development Charges A thorough revision of the SDC methodology was recently completed for the MWMC regional wastewater system and was adopted by the Commission on April 1, 2004. The methodology was developed in accordance with Oregon SDC legislation (ORS 223.297- 223.314), and with the guidance of a CAC appointed by MWMC. The MWMC SDC Methodology is based on a combined reimbursement and improvement fee structure. In order to calculate the improvement fee portion of the SDCs, it is necessary to allocate the costs of capital projects as follows: · Step 1: Allocate projects to facility process components (e.g., primary treatment, secondary treatment, etc.) · Step 2: Allocate costs by components to system capacity parameters (e.g., average flow, peak flow, etc.) · Step 3: Allocate project costs to improvement type (capacity improvement, performance upgrade, or rehabilitation) · Step 4: Allocate costs to user type (existing customers or projected growth) These steps are applied to the $144 million 20-year project list (Alternative 5 - Parallel Primary/Secondary Treatment). Steps 1 and 3 have to be developed on a case-by-case basis for the 20-year project list in question. Step 2 and 4 are inherent in the methodology and occur automatically once the allocations associated with Step 1 and 3 are determined. The basis for allocating projects in the proposed MWMC 20-year project list to the facility MWMC_8.0_REV5.DOC 8-7