Denver Water Contract Summary WWBD (What Would a Business Do?) Decision point: – Accept Revised Contract or, – Reject and retain Existing Contract. Key contract language comparison. Determine respective contract values. Other upside vs. downside. Make the call. WWBD (What Would a Business Do?) Decision point: – Accept Revised Contract or, – Reject and retain Existing Contract. Key contract language comparison. Determine respective contract values. Other upside vs. downside. Make the call. c\brs\ppt\littleton\water\11 devner h 2 o contract summary 1.2_

Denver Water Contract Summary WWBD (What Would a Business Do?) Decision point: – Accept Revised Contract or, – Reject and retain Existing Contract. Key contract language comparison. Determine respective contract values. Other upside vs. downside. Make the call. WWBD (What Would a Business Do?) Decision point: – Accept Revised Contract or, – Reject and retain Existing Contract. Key contract language comparison. Determine respective contract values. Other upside vs. downside. Make the call. 2

Denver Water Contract Summary 3 Existing Contract §A – Denver Charter controls contract. §1 – Water service furnished similar to that inside Denver. §4 – Service charges outside Denver may be applied uniformly among similar users. §5(c) – Outside Denver service charges may not exceed comparable inside Denver charges by more than 100%. §5(d) – Board has reasonable discretion to establish rates inside and outside Denver. §8 – Water may be curtailed provided restriction is applied uniformly inside and outside Denver. §10 – Board retains property rights to water. §13 – Areas annexed by Littleton are automatically part of the CSA. Existing Contract §A – Denver Charter controls contract. §1 – Water service furnished similar to that inside Denver. §4 – Service charges outside Denver may be applied uniformly among similar users. §5(c) – Outside Denver service charges may not exceed comparable inside Denver charges by more than 100%. §5(d) – Board has reasonable discretion to establish rates inside and outside Denver. §8 – Water may be curtailed provided restriction is applied uniformly inside and outside Denver. §10 – Board retains property rights to water. §13 – Areas annexed by Littleton are automatically part of the CSA. Revised Contract Recital A – Denver Charter controls contract. Recital D – No limitation on Littleton annexation activities. §2.1 – Board will furnish all water necessary to serve full development within Littleton CSA. §2.9 – Water may be curtailed provided restriction is applied uniformly inside and outside Denver. §3.1 – Service charges applied uniformly among similar users outside Denver. §3.3 – Rates will be assessed to reasonably recover service costs. §4.1 – Water shall be provided in the same manner as that provided to customers inside Denver. §4.6 – Water service governed by Charter provisions, operating rules and engineering standards so long as not inconsistent with contract terms. §4.8 – Littleton CSA expansion OK with consent of current water distributor. Revised Contract Recital A – Denver Charter controls contract. Recital D – No limitation on Littleton annexation activities. §2.1 – Board will furnish all water necessary to serve full development within Littleton CSA. §2.9 – Water may be curtailed provided restriction is applied uniformly inside and outside Denver. §3.1 – Service charges applied uniformly among similar users outside Denver. §3.3 – Rates will be assessed to reasonably recover service costs. §4.1 – Water shall be provided in the same manner as that provided to customers inside Denver. §4.6 – Water service governed by Charter provisions, operating rules and engineering standards so long as not inconsistent with contract terms. §4.8 – Littleton CSA expansion OK with consent of current water distributor. Key Contract Language Comparison

Denver Water Contract Summary WWBD (What Would a Business Do?) Decision point: – Accept Revised Contract or, – Reject and retain Existing Contract. Key contract language comparison. Determine respective contract values. Other upside vs. downside. Make the call. WWBD (What Would a Business Do?) Decision point: – Accept Revised Contract or, – Reject and retain Existing Contract. Key contract language comparison. Determine respective contract values. Other upside vs. downside. Make the call. 4

Denver Water Contract Summary 5 Existing Contract Littleton owns no water so nothing to sell; only a contractual right to consume and return. Unlimited supply clause value is chit for future annexation with sales, use, etc. tax revenue less police, fire, roads, etc. costs. Larger annexation more lucrative but less likely to occur and there are legal considerations (1/6 contiguity, owner consent). Annexation where and when? Not Sterling Ranch. Existing Contract Littleton owns no water so nothing to sell; only a contractual right to consume and return. Unlimited supply clause value is chit for future annexation with sales, use, etc. tax revenue less police, fire, roads, etc. costs. Larger annexation more lucrative but less likely to occur and there are legal considerations (1/6 contiguity, owner consent). Annexation where and when? Not Sterling Ranch. Revised Contract $2.1 million up front payment + $0.4 million for Geneva Park. Water Bank = 1,200 acre ft. available to sub-lease, five year increments, 20-year term, cost certainty, flow exchange point = sewer plant. Near-term enticement re: developer commitment to Sewer Plant. Existing Sewer Plant excess capacity = reduced treatment costs for incremental volumes (spread fixed costs over > volume). New tap fees = additional coverage for debt service obligation. Revised Contract $2.1 million up front payment + $0.4 million for Geneva Park. Water Bank = 1,200 acre ft. available to sub-lease, five year increments, 20-year term, cost certainty, flow exchange point = sewer plant. Near-term enticement re: developer commitment to Sewer Plant. Existing Sewer Plant excess capacity = reduced treatment costs for incremental volumes (spread fixed costs over > volume). New tap fees = additional coverage for debt service obligation. Respective Contract Values

Denver Water Contract Summary 6 Finance Dept., 2007 – 2015 Sewer Analysis Other Information Sewer Utility Fund 2010 Ending Balance = $13.6 million. Sewer Utility Fund 2015 Est. Ending Balance = $7.5 million (a). Includes assumed installation of UV disinfection $5.0 million. (a) Sewer Analysis balance +$2.4 million re: increase in 2010 actual vs. estimated balance. Other Information Sewer Utility Fund 2010 Ending Balance = $13.6 million. Sewer Utility Fund 2015 Est. Ending Balance = $7.5 million (a). Includes assumed installation of UV disinfection $5.0 million. (a) Sewer Analysis balance +$2.4 million re: increase in 2010 actual vs. estimated balance.

Denver Water Contract Summary 7 Existing Contract Valuation Analysis

Denver Water Contract Summary 8 Revised Contract Valuation Analysis

Denver Water Contract Summary Other Analysis Assumptions Cash flow model with 50 year projections. Net Present Value – Think green light / red light example. 6.0% cost of money. 10,000 simulation trails. Other Analysis Assumptions Cash flow model with 50 year projections. Net Present Value – Think green light / red light example. 6.0% cost of money. 10,000 simulation trails. 9 Results

Denver Water Contract Summary 10

Denver Water Contract Summary 11

Denver Water Contract Summary WWBD (What Would a Business Do?) Key contract language comparison. Decision point: – Accept Revised Contract or, – Reject and retain Existing Contract. Determine respective contract values. Other upside vs. downside. Make the call. WWBD (What Would a Business Do?) Key contract language comparison. Decision point: – Accept Revised Contract or, – Reject and retain Existing Contract. Determine respective contract values. Other upside vs. downside. Make the call. 12

Denver Water Contract Summary Other Upsides vs. Downsides Denver Water issues including volume / cost of available supplies, ability to reuse only a portion of flow due to downstream calls, drought, western state compact calls, potential litigation, conservation, infrastructure, density, etc. Timing, probability of future event (dry Highlands Ranch, Son of Two Forks) vs. near term sewer plant hard dollar obligations is a gamble. Revised Contract rate making consistency vs. Existing Contract rate making exposure. For example, suppose Denver Water supplies Existing Contract annexation supply with Wyoming water at +100% the inside Denver cost? Case law says Denver charter trumps contract re: rates, caps, commitments, etc. Littleton may be able to charge tap fees outside Combined Service Area for 350 acre ft. and 1,200 acre ft. Long standing (1970) partnering arrangement with Denver Water. What’s Existing Contract worth to Denver Water, how much will they pay to resolve? Other Upsides vs. Downsides Denver Water issues including volume / cost of available supplies, ability to reuse only a portion of flow due to downstream calls, drought, western state compact calls, potential litigation, conservation, infrastructure, density, etc. Timing, probability of future event (dry Highlands Ranch, Son of Two Forks) vs. near term sewer plant hard dollar obligations is a gamble. Revised Contract rate making consistency vs. Existing Contract rate making exposure. For example, suppose Denver Water supplies Existing Contract annexation supply with Wyoming water at +100% the inside Denver cost? Case law says Denver charter trumps contract re: rates, caps, commitments, etc. Littleton may be able to charge tap fees outside Combined Service Area for 350 acre ft. and 1,200 acre ft. Long standing (1970) partnering arrangement with Denver Water. What’s Existing Contract worth to Denver Water, how much will they pay to resolve? 13 Make the Call…

Denver Water Contract Summary WWBD (What Would a Business Do?) Decision point: – Accept Revised Contract or, – Reject and retain Existing Contract. Key contract language comparison. Determine respective contract values. Other upside vs. downside. Make the call. WWBD (What Would a Business Do?) Decision point: – Accept Revised Contract or, – Reject and retain Existing Contract. Key contract language comparison. Determine respective contract values. Other upside vs. downside. Make the call. 14