THREE VIABLE FINANCING OPTIONS FOR THE PROPOSED INDOOR TENNIS FACILITY (ITF) Presented to RA Board of Directors Shawn Endsley, Chair RA Fiscal Committee September 22,

THREE FINANCING OPTIONS REVIEWED Two Commercial Bank Loans (Options 1 and 2) Private Bond Financing (Option 3) Note: Information based upon current rates/terms/discussions. At the time a decision is made these will possibly change. 2

COMMONALITIES IN EACH OPTION Revenue and expense pro formas - including independent consultants’ and Fiscal Committee recommendations: –Revenues inflated at 2.5% per year years 1-10, 3% years –Expenses inflated 3.0% per year throughout Utilities at 5% Identical net income from operations R&R reserve funding (likely required) Debt not paid off early Working capital (financed) to offset operating shortfall in early years (1-7) Initial Interest Rate – 5.5% in all three options. 3

Key Elements in Financing Alternatives 4

OPTION 1 – COMMERCIAL BANK FINANCING Loan amount $4,400, % financing, including $550K working capital LTV ratio 80% - need to collateralize building/property Amortization – 20 years Requires refinancing in years 6 and 13 – initial loan rate 5.5% –Refinancing costs estimated and included in years 6 and 13 Total debt service over 20 year life of loan = $8,174,320 Positive cash flow occurs in year 21 under the above financing assumptions Average cost per member unit over first 20 years is $5.60 per year 5

OPTION 2 – COMMERCIAL BANK FINANCING Loan amount $4,400, % financing, including $550K working capital LTV ratio 75% - need to collateralize building/property –May need to collateralize the CSF building Amortization – 20 years Requires refinancing in year 10 – initial loan rate 5.5% –Refinancing costs estimated and included in year 10 Total debt service over 20 year life of loan = $7,702,663 Positive cash flow after in year 7 under the above financing assumptions Average cost per member unit over first 20 years is $4.59 per year 6

OPTION 3 – PRIVATE BOND FINANCING Loan amount $5,640, % financing, including $550K working capital Includes $465,300 of capitalized interest and a 10% reserve of $506,400 Requires a security interest in future assessment revenues of the association Amortization – 30 years Interest rate 5.5% over life of bonds Total debt service over 30 year life of bonding = $11,092,667 Positive cash flow occurs in years 3 through 30 Average cost per member unit over first 20 years is $2.94 per year 7

SUMMARY: DEBT SERVICE (P&I) BY OPTION Fixed Interest Rate 8

SUMMARY: DEBT SERVICE (P&I) BY OPTION Variable (Increasing) Interest Rate 9

Assessment Impacts Option 1 –$4.88 per year increase starting in year 1 Option 2 –$4.88 per year increases starting in year 1 Option 3 –$4.42 per year in Year 3 and decreases starting in year 4 10

Conclusion All three options highlight that financing for the ITF will be initially at 5.5% given current conditions. –Not likely that this interest rate would vary from other options. Up front costs will vary depending on the term and possibility of refinancing. –Refinancing injects the element of interest rate risk. Risk in waiting as interest rates at long time low –Interest rate variability issue gives bond issue option an edge Questions/Comments 11