1. Middletown Water & Sewer Committee Recommendations for Future Financing of Improvements Water & Sewer Committee Members: Jennifer Falcinelli, Chairman Mark Carney Daphne Gabb David Lake Bob Smart Scott Bolcik Richard Gallagher

2. History of Improvements Funding Town established the Capital Improvements Program in 1996. Primary purpose was to plan for major infrastructure improvements and financing of those improvements. Prior to 1996, all improvement fees and operating fees were combined in the operations fund and expensed each year. The only source of funding in the early CIP’s was growth dollars (Tap fees). Starting in 1998, the Town began leasing space on the water tank to cell phone companies to provide an additional source of revenue. In 1999, the Town established the Debt Service Fee for new homes.

3. Future Grant & Loan Opportunities Grants Based on the criteria established by MDE for grant eligibility, i.e. 60% of State Median Income, Middletown will not likely received any substantial grants for future improvements and maintenance of the water and sewer system. Loans Town is eligible for numerous types of tax exempt loans. These loan are typically 2%- 3% below prime with fixed rates. Town has the ability to issue its own bonds for raising capital.

4. New Philosophy for the CIP Budget Growth will pay for growth projects System users will pay for system improvement projects

5. Goals of Water & Sewer Committee Short-term Goals Fund existing debt without dependence upon growth dollars (tap fees) Refinance an existing loan to a lower interest rate. New growth projects paid by growth dollars (tap fees) Amend Operating & CIP Budgets to move 2 system improvement loans from CIP to Operating Budget Establish a Capital Improvement Fee Long-term Goals Ensure funding is available for needed improvements without dependence upon growth dollars (tap fees) System improvement projects paid by system users via Capital Improvement Fee Replacement of waterline on Main Street

6. Short Term Goal: Fund existing debt without dependence upon growth dollars (tap fees) In a depressed economy, cannot depend upon new home sales (tap fees) to fund debt Limited water supply/allocation limits tap fees

7. Short Term Goal Refinance an existing loan to a lower interest rate.

8. Short Term Goal: New growth projects paid by growth dollars (tap fees) New growth projects must be developer funded and/or financed with tap fees.

9. Short Term Goal: Amend Operating & CIP Budgets to move 2 system improvement loans from CIP to Operating Budget The future goal for the Operating Fund will be a zero surplus due to the implementation of a Capital Improvement Fee. It is an industry standard that debt service is paid from the Operating Budget Recommending moving the I&I Loan and the MDE waterline improvement loan Our current Operating Fund surplus is $75,908.25. The payments for these loans are $80,876.06 The impact is minimal to the Operating Budget

13. Calculations for Capital Improvement Fee Changes to CIP Funding

14. Recommendation Refinance the FHA Loan for a Longer Term and lower interest rate to Lower Yearly Debt Service Move the MDE I&I Loan and FHA Loan back into the Operating Fund Establish a Capital Improvement Fee on all Accounts that are not currently paying a Debt Service Fee

15. Debt Service Fee In 2020 system users paying the Debt Service Fee will begin paying the prevailing Capital Improvement Fee.

16. Timeline for Implementation October 2009 - Presentation of issues to public November 2009 - Introduction of Ordinance to establish Capital Improvements Fee in December 2009 - Adoption of Ordinance for Capital Improvements Fee April 2010 – First Water & Sewer Bill which will include the Capital Improvement Fee