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Home My WebLink AboutAggregate Principal Amounts and Rates of Interest Augusta Richmond GA DOCUMENT NAME: ~ '( e...CjCl..-te..- ? '( \ DO ?Q\ 0 mOlJlY\-\-~ c\- YO tc: s eft \r\~\2--eS\' DOCUMENT TYPE: yeso\G\-non YEAR: Or-a BOX NUMBER: \S RLENUMBER: \~\q\ NUMBER OF PAGES: ~ y~ it /6/9/ ~ THE AUGUSTA COMMISSION AGENDA SPECIAL CALLED MEETING COMMISSION CHAMBER 10:00 A.M. June 18.2002 REVISED A RESOLUTION TO SPECIFY THE AGGREGATE PRINCIPAL AMOUNTS OF AND RATES OF INTEREST THE AUGUSTA, GEORGIA WATER AND SEWERAGE REVENUE BONDS, SERIES 2002 SHALL BEAR; TO SPECIFY THE PRINCIPAL AMOUNT TO MATURE IN EACH YEAR, THE OPTIONAL REDEMPTION PROVISIONS AND THE MATURITIES OF THE SERIES 2002 BONDS, IF ANY, WHICH SHALL BE TERM BONDS SUBJECT TO MANDATORY REDEMPTION AND TO STATE THE PROVISIONS APPLICABLE THERETO; TO APPROVE CERTAIN CORRECTIONS TO THE ENGINEERING REPORT RELATING THERETO; TO AUTHORIZE THE EXECUTION AND DELIVERY OF A BOND PURCHASE AGREEMENT RELATING TO THE SERIES 2002 BONDS; TO PROVIDE FOR BOND INSURANCE AND DEBT SERVICE RESERVE INSURANCE; TO DESIGNATE THE REPRESENTATIVE OF THE ORIGINAL PURCHASER OF THE SERIES 2002 BONDS; TO PROVIDE FOR THE ISSUANCE AND DELIVERY OF THE SERIES 2002 BONDS; TO PROVIDE FOR THE USE OF PROCEEDS OF THE SERIES 2002 BONDS; TO RATIFY, REAFFIRM, AMEND AND SUPPLEMENT THE PARITY BOND RESOLUTION ADOPTED MAY 30, 2002, AUTHORIZING THE ISSUANCE OF SAID SERIES 2002 BONDS; AND FOR OTHER PURPOSES .................... tt tt t. tt 4~ 4. 4. ~ 4 ~ 4 ~ 4 . 4 . 4 $149,400,000 Augusta, Georgia Water and Sewerage Revenue Bonds, Series 2002 Pricing Book June 21, 2002 /l. G. Edwards ~. ~. 4. 4~ 4~ 4t . . ~t . . . . . . . . . . . . . fi.~fJ&~ 4 . ~ . 4.4.4.4.4.4.4.4. .. .~ . 0 . . . . . . . . . . . . . . . . . . . . $149,400,000 AUGUSTA, GEORGIA Water and Sewerage Revenue Bonds, Series 2002 Table of Contents 4t Cover Statement Preliminary Official Section I. Pricing & Financing Summary Section II Bond Market Conditions 1. Revenue Bond Index - 25 Year 2 Bond Buyer Industry News I\1unicipal Section III Comparable Pricings Section IV. A. Marketing I\1aterials B. Rating Agency Reports Appendices ~.G.Edwards ................................. ~.~~~ l I ~ ~. 0 O~. 4. 4. 4. tt .... . . .. ..... .. . Preliminary Official Statement Cover Section I J1.GEdwards 4. . 4. 4. 4. t~ 4. t~ . . . . . . . . . . . . . . . . Preliminary Official Statement Cover B~' i : i NEW ISSUE IlA'I1I'\GS ; 'jl (Book-Enll)' Only Moody'.., A.. ~ II Standnnl & r...." AM Ii'il &< ",\IISC~:U""NEOUS - R.nnR," hcn:Jn. l'II 'i ~ 1" IJw Dj7frdon "18aJki CnlJlJrrl ~nM7' t"riJltltJ II/'M:J. I'ttu{OltCAU. flnJ jUl/k(ol dC'd:o.Junr. wtd anI/mil<< nJnfllluer1 wmp./laflCr! lr/lht .B ~ ~ ~~';L~~~':f'f:::t(:':~~/~1:d~Zo~;;:;f~~~f:::J~;::;ii:;:~: c~r;r;:::;;;:;{i~~:':!/IIr::::; t~ ~1I':Zr::;.r:;:U;~t~':t~! .i ~... f~dl"lTJt mrt;:f1lQtl'ft D1iJJt1t1um I~), impQuJ tiff h.1lvltlloGM and ,urtwaliwu: provid(l/. b.:n-.'n"CT, ....'itlt rv.tptYllII "'VI'OFotLl (ffJ d~1 fill" fr!dnal s.s "S ir:rolH" lor PJI"[1MNJ. 11Ii* [tI{l'fal is laJ.rN into aat,.1UItI in c<<mr-lnbtg cdjtLstrtJ ~"Wrrn' ,trntJ~ for tlU! ptJrpt'JU ol rompuJJ~ 1M frdunJ I!! B; oJMfWlt..., milJI/t1ffM ia.' ;nlpYStJ (,off JllC'h c:vrpvrotlUlU. Th~ upiJJit~ ClAltalfU i:r~r dl'1ail. QItJ /, n,;f,J(cr co ~<<tplio1'fJ, as nofm in "U"GAL ~ b oS ,\1ArrHHS-OpJt:kn f'/ ll"ni Cl>RlJr('l" "~,dn. ill -""," "$149,820,000* g 'O!i ,I':"',; AllGUSTA, GEORGIA ~ j,ll . i" Watcr and Scwc.rage RCt'enue Bonds, .!i'i - ..,.";,, Scncs 2002 ~ i i Dated: JW1e I, 2002 Du.: (1e1oM I, as showo below i a! CO\.~~~~) r: 3:~~\~w(I~%~~.~O:n (l~~'~ ~G=~-~=~d~~l~:~A~t~~i~o{lt~"~-=i~:~ :;: ! ~ Gavcmmrnl..1lft(! {ii} ftr.ncd:te_ lite: oms of moJki18 olddltiot'.t. CxtCflS~U. ibId illlpron-n!'l:11U lu l~ Coruulid:alcd OuYCtl1f1ll:rJl', "'fJlCi..oo scv.c:t ~ B = s}-ncm. Sco -P1.Al\ (n: n:'\(^~Cl~G" hc-n;in. e ~ fj. IDletes1. on Ilk: St:ri.c:s 2002 BDtKh: is puy:iblc ~mi<H'lC\lllny 00 ();;1:Gbcr I and 1\pnl I of eaal r=r curnmoncing on Oc:::Jbc.r I, 20)2 ~ ~ t~li~ fmu mtctm' DIC~). All Scnc...< 2002 1:Iood$ ~f 1I1tcn:"lot flOln June 1.2002. See "J~T~ODU("'ftOS _ ImcrlprJon n( 1M : c a Sui" 2002 Rcmcb" huw.. a .8 t The &-tkJ; 2002 Boodi-lll'C: subject WI m1l1d:u(ll'Y llnd optin1la1 n:aiemptlon priot to matUfiIY ~ dCll:ribtd bc.lcin See "TIn: S,F..RJE.'i 2001 0: B . BONDS - Rtdclllption" haem. :8 i . The SerIes 2001 BQnd>> llrO ~ Jimift'd t!bJiJ:atiu~ 0( thfl Cont.Otidatel:i Oo'\"crnmcnt jXI tile SlJlcly (rom. U:Dd i~ur.:d by il pl~ of and g 8 J~n un roalltl:J dl:riV\:d b) the C~lid:llc.l GattmmCnt rrom the O9I'l'lCn;hlp ,nd OJ'1CH\11''n C)~J .';]tet i100 $C~r ~Icm, rl:m:iining ana tbe :; - J)il)UY.:Ol cf ~ (l[ opa-ulins. maint::i=lin.g. aM n:pa~ t~ S)'51.:..m... The !krie.. 'lOO1. ~ will be iwIcd ..lId ~w~d Url . J>>nilj" ..ilh the 2 ~.9: Pilot Bontb (;n ddined hercin) lIod IlL:" cddlri.:xoaJ Rl~'cnuc OOod.t of the (A:nolJd;!tcd Gol'Cr!UncDII1<:~.aftC1lSS~cd un. p:1I'ity ~;(}, che Prior i i - BoodJ:wi ilit: Snin 1002 Bn:td\. See ''SF.CI;Nlll' ^:'\I) SOl!R('CS 01' P,\\'i\tENT f'OR TilE SERIES 2002 bONUS" hcn:ln, - :! { 1'be Serit-s 1002 Booch do IllOt coDJilJlatc a debt or jtCMul cbfiptioa or the: f:Qlnf)lkbled G~mC'nt or. pk1l~c__or the Cdtb .04 cmfil 01 5 ~ 'S rU11tJ poWo'tl' of tbe Com.oHd:alcd Gom-o!D1.'Dt. No r;:onruUJCllbl ~tity, IlKludlol t:tw (:':'.soJld:2U41 Go'-tmmtDt. ts ~;lLtd 10 ~'U)' tax for ~ .a 'i (J1t. P*.fmtat or the Sc-rin 2002 Iknuh. ~o rrt'IJUBtl mal be bad .It:;sln~ tbel (;cntttlliuod or.htl COIlJ;OUlfjttd Gtnrtnmca:f for lbl' pI.!'la('I1l- of Ii ~.. the s.:m. 2002 IIaads. E 1 Tbc Idtedlllt;d p:I.~' of p:;inciptl of and intl.'tl.."lIit on 1M- Scrit:1 2002 hnnlh when d~ lOt'ln be ~teed unc1ct au ~ P'Jl:icr to \:c ; f! LsJUOO (;O;IClu'renll)' ."..ilh Lbo de-li\lU)' uf Ihc.Scrio. 2Cf.}2 Bond1 by t:INANCIAL SIK.'tJRITY AS:iURA;-.ICE 11\'C. I- ... W' FSA. i! MATURITIES, I'RINClI'AL AMOL'NTS, INTEREST RATES, AND I'RICt:s OR YIELDS ,,! -a 557,660,000' Serial Bonds ::: i s I-'rlndp:21 Intt'~ Price PriacipaI lnfcteSf Price t 5" ~"!!~ ~. Rare ~ fo,.hturil) ~. ~ ~ R E 2002 S l.lO,OO) ~J) 5).245.000 .. !:i! 200) 890.000 20" 3.)$0,000 Ii j; '8 lOO4 905,000 201 5 3.510.000 ~ e to 200.5 92S,OOO 2016 3,i6:5.ooo ~ 1> ~ ~ ~:~ i:m ;:r~~ 1 ~ 'g;!OO$ IJ85.ooo 2019 _.420.000 .- t '" 2009 1,670.000 2020 '.WJ.OOO l! 1i! ~ 2010 1J35.ooo lO'l '.915,000 8::> 2011 2,m.OOJ lOn S. I 65.000 c 121i lOIZ 3,115.000 1.S! I $1CJ'.96ij,()l)I~ .. T'm Bond~ dut Odo~r 1,1027*, l'ria:d lit '"{ to Yield 'it ~..E $62.20(1,000-" ~ Ttm BoOth.~ October I, 2031". Prlccd at =~ to \'If'fd ~ .:s ~ 8 (t'lu.'1l'<Wffi1 (t1I~1 frvlD JUftC J, 2001) Jill! 1.! TIllS COVER PAG~ CO~T.":oIS CERTAI~ f>lFOR,\lATION FOR OI"CK R~FER~NCE on y, IT IS NOT A SU!>4MARY 'll ~ Jl or TIllS ISSl:C I,.,VrSTORS MI:ST Rrc~"l'HE E:oITIRF. OFFiCIAl. :rrATh~ENT TO OBTAI>I II'FORMATIOK ESSENTIAL ~ i], TO ~.\KIN(j ^~ INFOH.MlIl) I:'iV~.ST:\.1ENT 1lI~{"ISt()N, 5.!l~ -_ ..____~ S ~ 5 Tbc &rks 1001 D:J:l~ ~ af!'ernd ~,?tt":1, ~ 3nd If...uc-d b:-- tile Coowli-d:ned (J,,-wcrnmcnl :1nd noxpted ,,, th,; lIodc!"'-nWN. St1b;~1 10 E ~.5 peUJ' 5..lk ilml t.... ';\11htl,....:J~-.J! or r::.cdifKalkm 0;' lb: ulTer wdhlml n.....Ii..::C' and ;Ire o;ubject hI (he ilPPro"illi opTIuun of Su;:herl:md As!:iU h- en S IJ Drcnr.:Jn LLIJ AlI::..:J;l.1. GeotF-:J.. 1:l000d t.o=:::tn:1 (Cr1hlt. !~:d rnllt:e~ ~II] be p1.<-...ed 0' fOJ Il'lc Coo-,ulid<lh;d GU'rCmmcnl br ii' C\lUmd ! B 'Z:I J.1J1~CS B W~n. Au,trur.:l (,.enrp:l:i, :\':Id :'nr Ihl: t:"de;...nt;:~ ~.lb~lf ....lunw. Kllp::mtcl: SlOl:\:tQH LLJ', AUi:uwa. G~I:.I C<<uil"llCf'U1 fmlller.. i! (j) 1! ""ill be ~L1 on 1ry lloll(TU.-dI, fM!-er& U=r:p. J.' (' ~ Alloll!J, <icofttl1. S~.:l.d t:a-.f!l.cl T~c Serit~ 2002 BaOlh In dt:fi:l.ltl,,~ fonn z:re expl."~cl. to o i! be do1i,,'l.":'C'd 10 The 0-.:.~:'1:1' 1 r.ul Comf'lt\O) In I'\c" Y<l:1r:, N(\!t ,'(rfk (1"\ O~ '.JOOtit _' ~. n~ fi.G.Edwards&Sons,lnc SunTrust Capital Markets 1 ~ 'l5 Ik:oO: , '.002 ~ ~ '! · - rrC:i~lC;,~l II.) \:h.n;;~. 2002 13. JUNE STATE:\fENT DATED PRELJMIN.~RY OFFICIAL ~.G.Edwards ................................. J.G ~ INVESTMENT ~ ~ ~. 4. 4. t ~ tt 4t t~ 4t . . . . . . . . . . . . . . . . Series 2002 Pricing & Financing Summary Section II ~.G.Edwards ~ 4~ 4~ .. 4t . 4. . . . . ..... . . . . . . . . nary Slummary Of 2002 Financing $152,345,000 4. 4 t ~ reliml 4 ~ I.- wi to meet earnings Capitalized Interest will allow revenues to grow debt service requirements in early years Project Fund, when combined with interest fund projects totaling $130 million o o GEFA refinancing will provide savings of approx. $547,000 on a net present value basis, or nearly $50,000 per year; o 2002 Financing is phase two of the master plan approved in 2000; Given the projects covered by this borrowing, one less issue is required in future years than anticipated; o o Project Fund o Capitalized Interest o GEFA Refunding . Original Issue Discount o Costs of Issuance . Bond Insurance & Surety Bond Uses of Funds 1% 1% Average rate IS expected to be approx. 5.21 % Aggregate Debt Service and Expected Coverage o f / /' f ~ - I 45,cro,cro 4Q,cro,OOJ 35,cro,cro 3Q,cro,cro 25.cro,cro 2O.00J.00J 15.00J,OOJ 1O,cro,OOJ 5,cro,cro Rates Bonds due October "1 st Yield nntv Yield 1 .67 201:3 4.50 1 .85 2014- 4.61 2.45 2015 4.71 2.92 2016 4.81 3.21 2017 4.88 3.48 2018 4.95 3.76 2019 5.02 3.95 2020 5.08 4.15 2021 5.13 4.26 2022 5.17 4.37 Anticipated Interest Serial nntv 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 _ Series 1997 c=::J Series 2002 J.GEdwards / ~ INVESTMENT BANKING __ Series 1996 B _ Series 2002 - GEFA _ Series 1996 A ~ Series 2000 = Revenues Term Bonds due October "1 st Mtv Yield 2027 5.26 2032 5.30 ........... Pricing Summary - Sources and Uses - Series 2002 tt t~ t . . 4 . 4 . 149,400,000,00 807,701.39 (360,999,60) 149,846,701.79 8,815,000,00 30,673,75 30,942.35 8,876,616,10 Accrued Interest Premium / OlD Par Amount Plus Net 391,941 140,970,085,69 $ $ $ Other Sources of Funds: Funds Held bv GEFA $ 258,997.85 150,105,699.64 $ - 140,970,085.69 $ 258,997,85 9,135,613.95 125,691,319,86 258,997.85 125,691,319,86 Fund Deposits (@2,25%) (GEFA Repayment) Fund Fund Project Project Project 258,997.85 Refunding Escrow Deposits 8,692,367,85 807,701.39 11,753,672.40 12,561,373.79 777,027,64 11,753,672.40 12,530,700,04 8,692,367,85 30,673,75 30,673,75 Cash Deposit Other Accrued Interest Caoitalized Interest Fund Deposits: (@2,25%) Fund ,907,780,00 765,758,24 223,928,51 2,897,466,75 1 ,795,215,89 740,433,06 210,716,13 2,746,365,08 1 112,564,11 25,325,18 13,212,38 151.101.67 Delivery Date Expenses: Cost of Issuance FSA Bond Insurance (0,245%) FSA Reserve Sure Bond (2,25%) of Funds: Other Uses Cantin 4,173,54 150,105,699.64 1,700,71 140,970,085.69 2,472,83 9,135,613.95 enc $ $ $ ~.G.Edwards 4. 4. 4. ~. ~. tt . . . . . . . . . . . . . . . . Financing Summary - Aggregate Debt Service C UII IIlg Seril:s 1996 A Series 199(, B Scril's 1997 Series 2000 Sl'r\"iel' 10/1/02 S 2,331,082,92 S 327,021.25 S 1,993,577.50 S 685,781.25 S 290,941.25 S 2,503,717,50 S 8,132,121.67 10/1/03 6,993,248.76 1,175,188,76 4,249,525,00 . 425,002,50 5,007,435.00 S 17,850,400,02 10/1/04 6,993,248.76 1,172,563,76 4,256,125.00 . 422,522,50 5,007,435,00 S 17,851,895.02 10/1/05 6,993,248,76 1,174,438,76 4,254,150.00 - 424,647,50 5,007,435,00 S 17,853,920,02 10/1/06 6,993,248.76 1,175,938,76 4,253,720,00 - 421,137,50 5,362,435,00 S 18,206,480,02 10/1/07 6,993,248.76 1,176,538,76 4,253,120.00 - 422,207,50 6,396,815,00 S 19,241,930.02 10/1/08 7,378,248.76 1,176,238,76 4,253,020,00 - 422,607.50 6,703,590,00 S 19,933,705,02 10/1/09 7,610,543,76 1,176,918,76 4,253,685.00 - 422,317,50 7,012,827,50 S 20,476,292,52 10/1/10 8,213,493,76 1,174,293,76 4,254,435,00 - 421,317,50 7,013,237,50 S 21,076,777.52 10/1/11 9,341,431.26 607,668,76 4,249,875,00 - 424,587,50 7,017,915,00 S 21,641,477.52 10/1/12 9,952,268.76 - 4,253,125,00 - 422,337,50 7,013.915,00 S 21,641,646,26 10/1/13 9,951,868,76 - 4,252,125,00 - 424,587,50 7,012,150,00 S 21,640,731.26 10/1/14 9,950,718.76 - 4,249,618,76 - 425,750,00 7,016,900,00 S 21,642,987,52 10/1/15 9,955,643,76 - 4,252,500.00 - 421,143,76 7,014,900,00 S 21,644,187.52 10/1/16 9,954,893.76 - 4,255,256,26 - 421,025,00 7,011,837.50 S 21,643,012,52 10/1/17 9,950,143.76 - 4,252,631.26 - 425,137,50 7,013,287,50 S 21,641,200,02 10/1/18 9,951,143,76 . 4,254,625,00 - 423,225,00 7,011,337.50 S 21,640,331.26 10/1/19 9,953,043.76 - 4,252,825,00 . 425,112,50 7,010,725,00 S 21,641,706,26 10/1/20 9,953,156,26 . 4,254,725,00 - 420,950,00 7,015,925,00 S 21,644,756.26 10/1/21 9,950,637,50 - 4,254,800,00 - 421,000,00 7,016,150,00 S 21,642,587.50 10/1/22 9,951,012,50 - 4,677,787,50 - - 7,011,137,50 S 21,639,937,50 10/1/23 9,948,000.00 . 4,676,112,50 - - 7,015,625.00 S 21,639,737,50 10/1/24 9,954,500,00 - 4,675,512.50 - - 7,013,562.50 S 21,643,575,00 10/1/25 9,952,250,00 - 4,675,462.50 - - 7,014,687,50 S 21,642,400,00 10/1/26 9,951,000,00 - 4,675,437.50 - - 7,013,212,50 S 21,639,650,00 10/1/27 9,955,000,00 - 4,674,912,50 - - 7,013,612,50 S 21,643,525.00 10/1/28 9,953,250,00 - 4,678,362.50 - - 7,010,100.00 S 21,641,712.50 10/1/29 9,950,250,00 - - - - 1 1,692,150,00 S 21,642,400.00 10/1/30 9,955,250,00 - - - - 11,688,012.50 S 21,643,262,50 10/1/31 21,642,000,00 - - - - - S 21,642,000,00 10/1/32 21,640,500.00 - - - - . S 21,640,500,00 Totals: $ 302,217,575.60 $ 10,336,810"09 $ 115,537,051.28 $ 685,781,25 $ 8,327,557.51 $ 199,642,070.00 $ 636,746,845.73 ~.G.Edwards ................ 8,815,000 5.500/0 11,012,550 Financing Summary - Summary of Refunding Results $ ~t to be refunded ~. ~. ~ . ~ ~ . of GEF A bonds Rate 4 Par Amount Average Interest Net Debt Service 8,640,291 3.390/0 10,336,810 $ of Refunded Bonds Rate Par Amount Average Interest Net Debt Service ~.G.Edwards ................................. ~.fL~~ ................... ~. Municipal Bond Market Conditions Section III ~. ~~ ~ ~ ~ . ~ . ~.G.Edwards 4 . ~ . 4 ~ ................... Municipal Bond Market Conditions Bond Buyer 25 Revenue Bond Index January 1982 - June 2002 .~ .~ . 4~ 4~ . ~ ~ . 4 . . 4 . t . 4 4 . 4 ~ Index at 6/13/0" (5.45%) ~ Histor 6/13/02 Recent 1/4/01 - 5.65% at 5/24/01 (2001 High) ~ ~ 14.32 % at 1/14/82 (All Time High) 5,0 4,5 4,0 3,5 5,8 5.6 5.4 5,2 5 ~~~~~~~~~~~~~~~~~~ ~~####~~#~~#~~#### - c: Q.I l:: Q.I ~ 10 yrallg = 5.87% 5 yr allg = 5.59% 1 yr allg = 5.46% 7,5 7,0 6,5 6,0 5,5 5,0 4,5 4,0 ~'Y \'t!-~ \(\, \'t!-~ ~ \'t!-~ ~ 0,0, \'b' ~o,'b \'b' (\ ~o, \'b' b ~q \'b' ~o,'" \'b' ~o,b<. \'b' ~o,'" \'b' 9lf'\1 \'t!-~ 9l' \'t!-~ ~ 9l~ \'t!-~ \'t!-~ q,'b \'t!-~ q,'Y q,'" ~ q,'" 'b'o ~ \'t!-~ \'t!-~ \'t!-~ \'t!-~ \'t!-~ \'t!-~ ~.G.Edwards ~ ~ 4. 4. 4. .. . . .~ . . . . . . . . . . . . . . . . . Municipal Bond Market Conditions (Continued) flush with cash from seasonal bond payments, Still, yields have dropped to levels on an absolute basis where retail investors typically balk, sometimes causing new-issue indigestion or a wholesale backup in yield. Nevertheless, the extraordinary circumstances that continue to punish stocks and bless the government market translate into favorable near-term price prospects for municipals, "It's not going to run out of gas now, but once we get through with all of the reinvestment you have to start to wonder if these rates are going to still hold retail attention," a trader in New York said, "But if stocks continue to go south we will continue to prosper," In the primary market, UBS PaineWebber Inc, tentatively priced $1.77 billion of Massachusetts general obligation bonds with a top yield of 5,27% in 2030. The size of the loan was boosted from an originally scheduled $1.5 billion with serial bonds priced to yield from 3,85% in 2010 to 5% in 2021. A 2030 term containing $354 million was priced as 5 1/4s to yield 5.27%, Bonds due 2012 yielded 6 basis points more than Municipal Market Data's Tuesday triple-A scale, bonds due 2017 yielded 2 basis points more and maximum term bonds due 2030 yielded 16 basis points more. Bonds due from 2010 through 2017 are noncallable. Bonds due from 2010 through 2014 are insured by either Financial Security Assurance or Financial Guaranty Insurance Co. The issue carries an underlying rating of Aa2 from Moody's Investors Service, The managers said Standard & Poor's and Fitch Ratings were expected to rate the bonds AA- minus, Meanwhile, market participants said A.G. Edwards & Sons Inc, tentatively priced $300 million of top-rated Michigan GOs with a top yield of 4.41 % in 2016 with a coupon of 5.50%, UBS PaineWebber priced $150 million of New York State Mortgage Agency homeowner mortgage revenue bonds with a top AMT yield of 5.40% in 2032 and a top non-AMT yield of 4.80% in 2017, The issue is rated Aa1 by Moody's. In the short-term note market, Merrill Lynch & Co. priced $167 million of noncallable Kentucky Interlocal School June 20, 2002 . A $1,77 billion Massachusetts loan led a new-issue wave yesterday, while secondary market prices climbed as Treasury bonds continued to gain at the stock market's expense, Government bonds posted their biggest climb in months, hitting their apex in late trading, as stocks continued their struggle with a weak economic recovery, poor corporate earnings, and increasingly bellicose tension in the Middle East. In the municipal market, new issuance once again held the market's focus, although the underlying tone remained firm, Gains were estimated at 1/8 to 1/4 of a point by mid- afternoon, but the late government surge sparked some municipal trading, which reflected gains of 3/8 to 1/2 of a point on the long end, Reflecting the strength, traders quoted Metropolitan Pier and Exposition Authority, III., insured 5s of 2028 5,23% bid, 5.22% versus a 5.28% bid, 5,26% quote posted late Tuesday, Metropolitan Pier insured 5 1/4s of 2042 were quoted 5.36% bid, 5,35% offered versus a Tuesday market of 5.41 % bid, 5,39% offered, Meanwhile, the components of The Bond Buyer's futures indexes reflected scattered gains ranging from 1/4 point to as much as 13/8 point. In the debt futures market, the September municipal contract rose 11/32 to 104-23, while the September Treasury contract shot up 1 4/32 to 104-11 and the MOB spread gapped to positive 12 from positive 37 posted at Tuesday's close. Looking ahead, current market wisdom calls for continuing demand from investors seeking safety from ailing stocks and from buyers .n Wire 1 Municipals. Treasuries Mark Gains Billion in Mass. GOs Priced The Bond Buyer By Sean Monsarrat, ~.GEdwards ..................... 41~ 4 ~ 41~ . . ~ ~ . 4 . 4 . Conditions (Continued) Municipal Bond Market June 20, 2002 By Sean Monsarrat . Transportation Association tax and revenue anticipation notes and lowered the yield 3 basis points at a repricing to 1.64% from 1,67% due June 30, 2003. The managers said they expected the issue to be rated MIG-1 by Moody's and SP-1-plus by Standard & Poor's, In addition, the assets of the 526 tax-free money funds tracked by iMoneyNet decreased by $1,05 billion to $268.82 billion for the week ended June 17, Assets of the 130 national retail funds increased $14,2 million, while state-specific retail funds decreased by $386.2 million, Assets of the 117 national institutional funds lost $667.4 million, while assets of 83 state-specific institutional funds lost $10,2 million AI Wire The Bond Buyer Rights Reserved Copyright@1997-2002 The Bond Buyer ~.G.Edwards .................... fi.fik~~ t. t. ~~ t~ 4 . t . t~ t~ 4 ~ 4 ~ 4 ~ 41. 4 . 4 I 4 ~ ~ ~ ~ ~ ~ ~ ~. 4. 4. t. t. . . . . . . . . . . . . '. . Comparable Pricings Section IV ~.GEdwards Augusta, Georgia ater and Sewer Revenue Bonds Series 2002 .l'))~~n.il ~ .~(,:).! :-'(1',,1, ;:;11,11 llf:II";l.l. (;.\ I.H.I\~llll\.dh I. ( ,...~.( I d,l (.lIIlIlIY. j'l. \X' I H ~\\I( ;U.'I,l11ln..d 1".nllllt'l1llIl1 Illlr.b.(rU(IUft.. :'.111" :--'llfl I(l ,- I{I,."'" I{l\" \:1.1. \ \ \ \.1.1 \ \ \ \ \ \ \.1.1 \ \ \ ..\.(;.I:d\\"~ll'd... &. ~llll~ !\llIlIi!\larht Da ~.d"lI1"ll ~lI1ilh H:lrlH.' '11'~1 SClullI\\ l":-.l (~oml I' ~ \ (Yields 011 Hole .\ In b.IL ~1I1 ~ (f.1 1111 I" ~"I ~ ((I 11111" ~I' I ~ (c"t I" 2" H::! 6/19/02 (, Ir; il.:2 (, Ii'{ 112 'u Id (' ^^^ Ins (', 111 Ylllll {"""J )""., P.uAmOIlI I S~ lIl~: Sl.:curily: Raling: UfHIl'rwriu: Insurer: Call Pro\ i~inns Il:u(' of Pricing 1\1;.1IurilY ~. ~. 4 ~ 4 ~ tt 4. . . . . . . . . . fi.~l}!Jr~ ..................... fi.~~!!ffS t~ t~ ~. 4~ t~ t~ 4t 4 ~ 4 . 4 . 4 . . 4~ 4. 4.0.. .~ 4~ 4t . . . . . . . . . . . . . . . . . Marketing Materials Appendix A ~.G.Edwards . . . . . . . . . . . . . . . . New-Issue Municipal Offering Available the Week of June 17. 2002* $153,000,000* Augusta, Georgia Water and Sewerage Revenue Bonds, Series 2002 The bonds are expected to be available from A,G, Edwards. Call today for more information" fiG.Edwards 1237 Augusta West Parkway Augusta, GA (706) 869-1061 · (800) 955-1061 Preliminary Pricing Information * Expected Ratings Aaa by Moody's Investors Service MA by Standard & Poor's (Insurance Expected) Expected Maturities · Serial bonds from 2002 to 2022 · Term bonds in 2027 and 2032 This advertisement is neither an offer to sell nor a solicitation ot an offer to buy any of these seaIltlies, The offering is made only by official statement. Interest is free, in the opinion of counsel. from all present federal and Georgia stale income taxes. . Subj~t to change www.4Igcdwards.com Member SIPC 2002 A.G, Edwards & Sons, Inc. .. .. .. .. ... .... ... ... - .... - - - - . . . . . . . . . . . . . . . . . . . . . New-Issue Municipal Offering $153,000,000* Augusta, Georgia Water and Sewerage Revenue Series 2002 A.G. Edwards' Role Senior Manager Pricing* Week of June 17,2002 Ratings* Moody's: Aaa (A2 underlying) S&P: AAA (A underlying) (FSA Insured) Structure* · Exempt from federal and Georgia state income taxes · Book-entry · Subject to redemption prior to maturity · Expected Maturities: Serial bonds from 2002 to 2022; term bonds due 2027 and 2032 · Dated Date: June 1, 2002 . Due: Oct. I · First Interest Payment: Oct. I, 2002 - .... Purpose Proceeds from the Series 2002 bonds will be used, together with other funds, to finance the costs to improve the consolidated government's water and sewer system, refund a loan made by the Georgia Environmental Facilities Authority and fund interest on the bond issue. Improvements will be made to the water and sewer treatment plants, distribution and collection systems, the billing system and include construction of a new administrative/maintenance facility. The consolidated government expects to complete construction of the capital improvements by December 2003 and expects them to be operational by January 2004. - - - .... Security and Credit The Series 2002 bonds are special, limited obligations of the consolidated government, payable solely from and secured by a pledge of and lien on the revenues of the water and sewerage system. The bonds will be further secured by a debt service reserve account and FSA bond insurance. - - - ..... - - - ..... The Issuer The consolidated government of Augusta-Richmond County was created in 1996 to provide, with one management, public services to the city and county more economically than separately. The consolidated government is located in the central eastern portion of the state on the south bank of the Savannah River, approximately 155 miles east of - - - - -- - - - . . . . . . . . . . . . . Atlanta. It has a land area of 326 square miles. The governing authority is the board of commissioners, consisting of a mayor and 10 commissioners elected from each commission district. The consolidated government owns and operates a water supply, treatment and distribution system and a sanitary sewer treatment and collection system. The water system has a service area of 210 square miles, which contains a population of approximately 180,000. The system consists of storage facilities, five pumping stations, 26 active wells, four treatment plants, a rural chlorination system and a distribution network of 1,010 miles of pipelines. The primary source of raw water is the Augusta Canal, which is fed by the Savannah River, and the secondary source is the Tuscaloosa Formation aquifer. The sewer system's service area is 106 square miles in size and has a population of 150,683. It consists of two wastewater treatment plants, a collection system that includes 28 wastewater pumping stations and 640 miles of collection sewers. The water system has 65,833 connections, and the sewer system has 49,707 connections. .... .. The largest water and sewer customers include Nutra Sweet, MCG Complex, Castleberry Food Co., Monsanto Dairy, Searle and Kendall. The 10 largest water customers account for 14.28% of total water revenues, and the 10 largest sewer customers account for 23.56% of total sewer revenues. . . A.G. Edwards .... .... . As of June 13, 2002 (subject to change) .-.. .... Additional information is available upon request. This information is obtained from sources and data considered to be reliable, but its accuracy and completeness is not guaranteed by A,G, Edwards & Sons, Inc, Any opinions expressed are subject to change without notice, Neither the information nor any opinions expressed constitutes a solicitation for the purchase or sale of any security referred to herein, A.G, Edwards & Sons, Inc, may make markets or have positions in the securities mentioned herein and may have also performed investment banking services for the issuers of such securities, Investments can fluctuate in price, value and/or income and may retum less than the original investment. Investments or investment services mentioned may not be suitable for all, and investors in doubt should seek advice from their financial consultant. The levels and basis of taxation can change, Intemational investing involves special risks, including those tied to currency fluctuations and foreign economic and political risks, Past performance is not necessarily a guide to future performance, The offering is made only by the official statement. These bonds are offered when, as and if issued and received by us and subject to the approving legal opinion, which will be printed on each bond, A discussion of interest exemption from specific taxes is the Opinion of Counsel. For insured bonds, no representation is made to the insurer's ability to meet its commitments; the insurance does not remove the market risk of the bonds, This document has been approved by A,G, Edwards & Sons (U,K.) Limited, regulated by FSA, . a .. - - - - .- - ..... - .- . . . . . . . . . . . . . . . . . . . . .G.Edwards Bondline A WEEKLY FIXED INCOME NEWSLETTER, JUNE 13, 2002 A Spotty Rally The strength/weakness of equities and data measuring the pace of the U.S. recovery were the driving factors in the bond market U.s. Treasuries rose when stocks declined, which increased demand for bonds. Conversely, when equities strengthened, bonds suffered. Global tensions had less of an impact, although 'freasuries gained in flight-to-safety buying on news that the government had disrupted a plan to detonate a radioactive bomb. The yield on the 'freasury 1o-year note, which moves inversely to bond prices, fell below the psychological 5% level to a low of 4.9QO/o on June 13, from 5.05% on June 10. Data released this week affinned a moderate pace of economic growth and suggested there was no pressing need for the Federal Reserve to raise rates in the near tenn. May's retail sales fell more than expected, driven by a drop in gasoline prices and auto sales. TIlls munber was extremely important since consluner spending accounts for two-thirds of the gross domestic product The Fed's beige book, a report on economic activity in the 12 Fed districts, indicated there was "little upward pressure" on wages, helping to keep inflation in check. May's producer price index, a measure of inflation at the wholesale leve~ declined for the second consecutive month, a sign that companies must charge less to attract customers. The inflation news and weak retail sales were positives for fixed-income products. Most market participants think the Fed will tighten short-tenn rates later than sooner, with the odds increasing that the rate hike will come at the Sept 24 decision-making meeting and not at the June 25-26 or Aug. 13 meetings. - - - - - ... - - - - Kentucky on Negative Watch Moody's and ~p have placed the issuer ratings (Aa2/ AA, respectively) on the commonwealth of Kentucky and various state entities' -- - -- - appropriation-backed debt (Aa3/ AA -) on their ' watch lists with negative implications. . Approximately $3.76 billion in debt is affected. The rating actions resulted from the "state's failure to enact its fiscal 2003-2004 biennial budget" and "the uncertainty regarding its legal authority to meet its ongoing expenditure requirements, including lease payments that service appropriation bonds after June 30:' Diminished reserves and ongoing weak economic conditions have limited the options available to address further budget shortfalls. Kentucky does not issue general obligation debt but instead issues debt secured by state appropriations that are approved on a biennial basis. ~p believes that the state's ability to pay debt service on outstanding debt will not be hindered, but issuance of additional tax-supported debt could be affected unless a budget is approved. BAI\IlAI\A J. SULLIVAN Employment Data (June 2001 - May 2002) May's employment report suggested a modest improvement in the labor market. For the bond market, the drop in unemployment was a surprise and kept the door open for a rate hike by the Federal Reserve. May 5,8% 6,00% 5,50 5,00 4,50 4,00 3,50 JJASONOJFMAM 2001 2002 NONFARM PAYROll 300 200 _100 i 0 ~ ,100 ~ -200 g-300 -400 -500 JJASOIlOJFMAM 2001 2002 Source: U.S, Department of Law T()I'IC~ 2 Cash on the Sidelines 3 Tyeo International and CIT Group (Including AT&T Capital Corporation) 4 J.C. Penney Company, Inc. ECONOMIC RESEARCH. JUNE 13, 2002 Cash on the Sidelines During times of turmoil, investors often hold more cash on the sidelines. That is true today. The economy is getting better, but slowly. In addition, many companies are still reporting problems. Therefore, investors lack conviction and are reluctant to commit as much money to the equity market When the stock market is weak, many people find it hard to imagine where the fuel for a recovery could come from. Fortunately, the percentage of money in money market funds is quite high relative to market (capitalization) cap, suggesting the fuel is available for a market recovery if only investors would start to put it to use. The combined amonnt of money in retail and institutional money market funds was $2.153 trillion as of May en, 2002. This was more than 18.7010 of the market cap of the New York Stock Exchange (NYSE) during May. Prior to this year, there were two other times since 1982 when sideline cash was a similar percentage ofNYSE market cap. These other periods were also difficult periods for the economy and the market The big question is how quickly the cash may come off the sidelines. Many people worry that the weakening I I r I I I I I I I I dollar represents foreign money leaving U.S. markets. That may be true. However, ifU.S. investors turn positive on U.S. economic prospects, there is a great deal of cash on the sidelines that could replace foreign funds. GARY TJ'AYlm, CtIlEF EcONOMI~T NYSE PERCENT CHANGE VS. SIDELINE CASH 60% Vear.to-Vear Porcent CIl~ :-VSE Index (Right Scale 25% -40 40 20 l} =r o ~ '" .20 20 ~ 15 ~ 10 5 Updeted Through May 'Z7, 2002 ~ ~ ~ U ~ ~ ~ ~ ~ W ~ Data Source: Haver Analytics 2 BONDLINE A.G. EDWARDS & SONS, lNC, . . . . . . . . . . . . TAXABLE RESEARCH REPORT, JUNE 13, 2002 Tyco International and elT Group (Including AT&T Capital Corporation) The Company 'Jyco International (lYC) is a conglomerate that has expanded rapidly through acquisitions. As such, it operates in a nmnber of different industries, including: finance (through CIT Group), plastics, electronics, fire control and medical products. Ratings: Tyco International Senior unsecured: Outlook: ~ ~ Bal Under Review For Downgrade BBB- CredltWatch - Negative CIT Group, Inc.* Senior unsecured: Outlook: A2 Negative BBB+ CredltWatch - Developing . cn Group includes: AT&T Capital Corporation and Newcourt .... .. . . HIGHUGHTED SECURITIES · Tyco International Group 6,375% senior global notes due on Feb, 15, 2006, (Baa3I8BB-) were recently offered at +950 basis poi nts over the comparable Treasury. This issue is callable at the greater of par or a make-whole proyision of +20 basis points, · AT& T Capital Corporation (Cn Group) $25 par value 8.25% senior public interest notes (PINES) due on Noy, 15,2028, (A2IBB8+) recently traded on the NYSE at $21,06 per share (ticker symbol CIP), This issue is callable at par beginning Nov, 15,2003, a - . ... ., A.G. Edwards' Credit Opinion In our opinion, the bonds of'Jyco are suitable holdings only in more aggressiveJspeculative accOlmts. All other investors should consider reducing their exposure to 'Jyco at tlns time. Alternatively, we continue to believe that the fixed-income securities ofCIT Group (which includes the bonds of AT&T Capital Corporation and Newcourt Credit Group) are suitable holdings in aggressive fixed- income accounts. Our hold recommendation for the debt of CIT is based on our belief that CIT will achieve full separation from 'Jyco in the very near term. We would, however, recommend that conservative investors, especially those investors with a large exposure to CIT, consider reducing positions at this time, as both Moody's and S&P have made it clear that CIT could face additional rating downgrades unless 'Jyco completes the sale of that subsidiary before early-to-mid July at the latest From oill' perspective, 'Jyco faces several major near-term challenges that will essentially define its future credit trend. The company's most daunting challenge is its near-term debt maturity schedule. Without any access to commercial bank lines (and few viable borrowing alternatives given - .... - - - .- - - its declining credit ratings), 'Jyco must increasingly focus on the sale of non core subsidiaries (such as CIT) in order to raise cash to meet its maturing debt obligations. At MarCh 31,2002, 'Jyco reported $27.38 billion in total debt outstanding, approximately 500/0 of which will mature before year-end 2003. 'Jyco's largest debt maturities are scheduled for Febmary 2003 when its $4.0 billion in bank debt and $2.3 billion in a convertible debt issue are scheduled to mature. Even asswning the successful sale of CIT, 'Jyco will still be dependent on either access to the capital markets or other asset sales in order to meet its maturing debt obligations. It should be noted that 1Yco's $27.38 billion in debt specifically excludes the debtofCIT, which it does not guarantee. As 'Jyco's management prepares to address the company's debt maturity schedule, it must also deal with the loss of investor and creditor confidence (as measured by the sharp drop in common stock price and rising yield spreads on its debt) and increased scrutiny by regulatory agencies, including the Securities and Exchange Commission. Ultimately, the degree of investor confidence (or lack of same) will determine whether 'Jyco is granted access to the capital markets or not Both Moody's and S&P have made it clear that they would downgrade the debt of 1Yco to speculative- grade status ifit cannot complete the sale ofCIT by mid-July at the latest CIT: Too Close to Tyeo for Comfort Over the past several months, CIT has not been successfitl in gaining access to the commercial paper market As a result, it had to place longer-term paper (which is much more costly) to refund maturing short-term commercial paper obligations. To us, this is an lmfortunate indication of CIT's increasing inability to compete for attractive funding alternatives. Over time, we believe that CIT will lose its ability to compete for top-tier financing opportunities by the larger, better-capitalized and better- rated companies. Under such a scenario, we wOltld expect the ratings and longer-term business position of CIT to languish. This is why we also believe that 'Jyco's only strategic alternative is to speed up its proposed divestiture of CIT so that cn does not suffer permanent damage to its fund-raising ability and franchise. We believe that the debt of CIT might get a credit rating upgrade (to the single-A area), assuming a timely separation from 'Jyco. Alternatively, the inability to sell CIT would resltlt in the debt of'Jyco getting downgraded to speculative grade, and additional rating downgrades for CIT as well, pemaps to the lower-BBB ratings category. PA"l1\ICK ML'CI.lJSK~:Y, FIX~;D lNCOMI': RESI.;Al\CH A.G. EDWARDS & SONS, INC. HaNDLINE 3 TAXABLE RESEARCH REPORT . JUNE 13, 2002 J.e. Penney Company, Inc. Company Overview J.C. Penney (JCP) operates more than 1,000 department stores in all 50 states, Puerto Rico and Mexico. In addition, JCP operates 50 Rennar department stores in Brazil. JCP also operates approximately 2,600 Eckerd drugstores throughout the Southeast, Sun Belt and Northeast regions of the United States. JCPenney Catalog is the nation's largest catalog merchant of general merchandise. A,G, EDWARDS' CREDIT ASSESSMENT: NEGATIVE MQQQis ~ Ratings: Ba3 BBB- Outlook: Stable Negative SuitabilitylRecommendation:. The bonds of JCP are only suitable for speculative accounts, Conservative investors who hold longer maturities should sell their positions. Financial consultants should review client accounts for continued suitability and risk tolerance, We do not recommend new purchases of long-maturity JCP debt issues, . Suitability is indicated for the senior unsecured level. In addition to other factors. the credit risk of a specific fixed-income security is also affected by the specific security's seniority. Generally. secured debt may be somewhat less risky depending on anticipated collateral value and subordinated issues riskier than the respective senior unsecured level. I I r r I I I r I I I I I I I I Credit Positives . Revamped and experienced management team . Operational and financial overhaul underway . Near-term liquidity bolstered by sale of direct marketing unit for $1.3 billion Credit Concerns . Difficult economic and retail conditions . Department stores losing market share . Weak financial performance and results that materially lag competitors A.G. Edwards' Credit Opinion During the late 19908, JCP experienced signillcant erosion in profitability at both its department store and drug store operations. In 1999, JCP was rated A3/ A. JCP has rebounded recently due to a complete overhaul of senior management Under the direction of Allen Questrom, former chairman and CEO of Federated Department Stores, the company has revamped operational strategies at both the department stores and the drug stores. While near-term liquidity is adequate, we remain concerned about the long-tenn competitive position of JCP's stores. Is there a compelling need for a low- to middle-market mall-based department store chain in an already overstored retail environment dominated by Wal-Mart, Target and Kohl's? Second, if JCP does not improve profitability, we believe its capital expenditure budget will suffer, leaving the company further behind better-capitalized competitors. While Eckerd's positioning may not be as troubling, Eckerd also trails the performance and capabilities of the larger, single-focus finns such as Walgreens and CVS. Recent Events On June 7, Moody's lowered JCP's senior lmseclU'ed rating to Ba3 and changed the outlook to stable. The downgrade reflects the fact that asset coverage for senior lillSecured note holders is diminished by the granting of secwity to the banks in conjunction with a new $1.5 billion senior secured credit facility. First-Quarter Results JCP climbed a step forward with earnings improvement in the first quarter. Net income for the quarter doubled to $86 million from $41 million in the year-ago quarter. Total sales were up 2.7% to $7.7 billion. A 25% decline in catalog sales pushed department store and catalog sales down 1.4.0;0 in total to $4 billion. Comparable-store sales at department stores alone rose 7.9%. At Eckerd, total and comparable-store sales were up 7.6% to $3.7 billion. Department store operating earnings benefited from a 180 basis-point (bps) increase in gross margin to 37.8%, the fifth consecutive quarter of improvement in gross margin. However, sales, general and administrative (SG&A) expenses rose by 120 bps to 33.!1lfo, and segment operating profit is still a weak 3.9%. At Eckerd, gross margin improved a modest 20 bps to 23% while SG&A expenses improved to 19.8% from 20.7%. Segment operating profit nearly doubled to $100 million driven by a 110 bps improvement in the expense rate; however, segment profit margin is still only 2.7%. 4 HaNDLINE A.G. EDWARDS & SONS, INC. . . . . . . . . . . . . . . . . . . . TAXABLE RESEARCH REPORT. JUNE 13, 2002 FIRST.QUARTER OPERATING PROFIT (Dollars in Millions) 2QQ2 $157 profit $100 profit 2Q01 $133 profit $56 profit Department Stores/Catalog: Eckerd Drug: vs. vs, J CP has made significant progress oflate, albeit against dismal comparisons. Looking ahead, we believe JCP's financial trajectory will likely flatten out as most of the easy lifting has been done. Overall returns versus key peers are still subpar and Eckerd's sales performance materially lags Walgreens. Fourth-Quarter and Yea....End Results Once again, given easy comparables from a year ago, J CP posted improved segment operating profit for the fourth quarter. Driven by comparable-store sales increases of 4.00/0 at the department stores and 5.70/0 at Eckerd, JCP succeeded in improving margins and SG&A expenses, which in turn led to a $342 million segment operating profit versus a $58 million loss in the year- earlier period. However, a 4.4010 quarterly retm'll at the department stores and a 2.4010 return at Eckerd are still below competitive performance. We are encouraged with JCP's profitability and liquidity improvement, but we will remain cautious lmtil JCP strings several quarters of progress together against solid comparables before revising our long-term negative outlook. For the year, revenues inched up 0.5% to $32 billion. Department store and catalog revenue declined 3.20/0 to $18.2 billion. Eckerd's revenues rose 5.8% to $13.8 billion. Comparable-store sales at the department store division were 3.3% compared to a negative 2.4% in the prior year. Eckerd's comparable-store sales were up 7.8%. Improvements in the department stores' gross margin and Eck.erd's SG&A expenses contributed to the turnaround in operating profit For the year, department store operating profit margin improved to 3.00/0 from 1.8%, and Eck.erd's profit margin improved to 1.5% from 0.3010. Net income from continuing operations totaled $114 million this year versus a $568 million loss last year. . ... .. - - - ,., - - - - - - J CP annOlmced that it expects to double its earnings in 2002, but that was short of analysts' estimates due to lower income from its pension fund. In addition, JCP is lmder investigation by the Florida Attorney General's office into whether Eckerd overcharged customers for medicine. Finally, J.C. Penney reorganized into a holding company to make it easier to spin off Eckerd. FOURTH.QUARTER OPERATING PROFIT, EXCLUDING ONE-TIME CHARGES IN BOTH PERIODS (Dollars in Millions) 2ilill $256 profit $86 profit Department Stores/Catalog: Eckerd Drug: 2QQ2 $68 loss $10 profit vs. vs, YEAR.ENo SEGMENT OPERATING PROFIT, EXCLUDING CHARGES IN BOTH PERIODS (Dollars in Millions) Department Stores/Catalog: Eckerd Drug: 2.Qll1 $548 profit $208 profit 2QQ2 vs, $254 profit vs, $76 loss HIGHLIGHTED ISSUES (Spreads as of June 10, 2002) eJCP 7.375% notes rated Ba2/BBB-, due Aug, 15,2008, were recently quoted at +260-245 to the comparable Treasury, This issue is not callable. eJCP 7.125% notes rated Ba2IBBB-, due Nov. 15,2023, were recently quoted at +300 to the comparable Treasury. This issue is not callable. FINANCIAL HIGHLIGHTS (Dollars in Millions) .1L3.OL9.9 1L29LQQ Total Revenues $30,678 $32,510 Operating Profit Margin 4.8% 3.0% EBITDA* $2.122 $1,681 EBITDA Margin 6,9% 5.2% Lease-Adjusted EBITDA/lnt. Exp. 3.6X 3.7X Lease-Adjusted DebVEBITDA 4.8X 4.5X Lease-Adjusted Debt/Capital 64% 58% . EBITDA ~ Operating profit before interest, taxes, depreciation and amortization Sources: Company reports: AG. Edwards' calculations and estimates 2LQ3LQ1 $31,846 0.1% $724 2.3% 1.7X 7.0X 60% ROIlElrI' E. M^JEC~:K, FlXlm INCOME RK"EAI\CII - A.G. EDWARDS & SONS, INC. BONDLINE 5 AMOUNT (In Thousands) MONDAY, JUNE 17 $ 3,725 $ 4,995 $ 8.600 $ 8,745 $ 4,500 $ 22,000 $ 2,225 $ 3,000 $ 2,770 TUESDAY, JUNE 18 $ 40,210 $ 44,000 $ 12,610 $ 10,000 $ 4,070 $ 17,010 $ 31,855 $ 2,425 $ 307,395 $ 13,039 $ 29,857 $ 9,260 $ 23,610 $ 14,070 $ 8,965 $ 4,500 $ 5,770 $ 3,105 WEDNESDAY, JUNE 19 $ 22,000 $ 30,000 $ 4,458 $ 900 $ 5,521 $ 3,950 $ 4,342 $ 12,881 $ 38,239 $ 30,000 THURSDAY, JUNE 20 $ 13,580 $ 14,075 $ 200,000 $ 5,000 $ 15,000 $ 11,935 $ 22,700 I ! r r I I I r I I I I I I I I EXPECTED RATING(S)* A2 TBD TBD TBD IBBB+ 180 TBD Al TBD TBD TBD TBD TBD fA TBD TBD TBD Aaa/ AM TBD AaaI AM Al TBD A2/fA+ A2/fA+ TBD TBD TBD TBD TBD TBD TBD TBD TBD TBD 180 TBD AalIBBB+ A3 TBD Aaa TBD TBD AaalAM TBD MUNICIPAL CALENDAR, JUNE 13. 2002 ISSUER New Lenox Township, illinois G,O,1 Livingston County, Michigan CapitallmprovemenP Littlestown Area School District, Pennsylvania G,O,1 Apollo-Ridge School District, Pennsylvania G,O,l Forest Hill, Texas Certificates of Obligation G.O.' Kaufman County. Texas Certificates of Obligation G.O. Waunakee, Wisconsin Corporate Purpose G,O,1 New Holstein, Wisconsin School Improvement G,O,l Menomonie, Wisconsin G.O.' Glendale, Arizona Refunding G.O. Fremont, California Union High School District G.O, Contra Costa, California Public Finance Authority Revenue Ventura, California Unified School District G.O. Batavia Park District, Illinois G,O.1 Nineveh Building Corp" Indiana First Mortgage Revenue Bowling Green, Kentucky Revenue and G.O, (Partly Taxable) West Boylston, Massachusetts G,O,1 Minnesota G,O, Middle Township Board of Educafion, New Jersey G,O. Morris County, New Jersey G,O, Tinton Falls Borough, New Jersey General Improvement Revenue1 Rutherford County. Tennessee G,O. Texas Public Finance Authority Revenue TPFA - Stephen F. Austin Texas Public Finance Authorily Revenue TPFA - Midwestern State Terrell. Texas Certificates of Obligation G,O,l Western Wisconsin Tech Refunding G,O.' Weyauwega-Fremont, Wisconsin School District Refunding G.O,! Huntington Beach, California RDA G.O. East Side, California Union High School District G.O, Attleboro. Massachusetts G.O. Farmington, Maine G.O.1 Medford Township. New Jersey G,O.' Sayreville, New Jersey G.O.! Teterboro Borough, New Jersey General Improvement Revenue1 West New York. New Jersey G.O. Eastport Central High School District, New York G,O, Chesterfield County, South Carolina School District G.O, San Francisco, California Downtown Parking Revenue San Jose, California Refunding Baltimore County, Maryland Public Improvement Van Buren County, Michigan G,O,l Francis Howell School District. Missouri G.O. Middlesex County, New Jersey G,O, Temple, Texas Waterworks and Sewer Revenue 1 Bank-Qualified TBD - To Be Determined 'Ratings: Moody's Investors Service/Standard & Poo(s/Fitch Ratings 6 BON DLINE A,G, EDWARDS & SONS, JNC, . . MUNICIPAL CALENDAR, JUNE 13, 2002 . . AMOUNT EXPECTED AGE MANAGER (In Thousands) RATlNG(S) ISSUER ROLE . EXPECTED SALE DATE WEEK OF JUNE 17 $ 69.805 A1/M- Colorado Educational and Cultural Facilities Authority Co-Manager . Student Housing Revenue (University of Colorado Foundation Williams Village Student Housing Expansion Project, Phase I) . Retail Order Period June 19 $ 16.710 IMNAAA (MBIA) Hernando County, Florida School District General Obligation Refunding Sole . $ 153,000 Aaa/AAA (FSA) Augusta. Georgia Water and Sewerage Revenue Senior $ 31,000 lAAA Prince George's County, Maryland Housing Authority Co-Senior . Collateralized Single-Family Mortgage Revenue (AMT) $ 48,255 A21A+ Michigan State Hospital Finance Authority Co-Manager . (Crittenton Hospital Medical Center) Revenue Refunding Series A $ 302,595 Aaa/MNM+ State of Michigan General Obligation Refunding Senior . $ 7.000 lAAA Affton Fire Protection District, Missouri Sole . (XL Capital) Certificates of Participation Revenue (Bank-Qualified) $ 742,440 Aa2lANM New York City Municipal Water Finance Authority Co-Manager ... Water and Sewerage System Revenue .. Retail Order Period June 14 and 17 $ 75.000 Aaa Ohio Housing Finance Agency Residential Mortgage Revenue Co-Manager . $ 3.700 Aaa (FSA) Mantua-Shalersville, Ohio Fire District Sole - Unlimited Tax General Obligation (Bank-Qualified) .. $ 20,000 IMNAAA (FSA) Parma City Ohio School District Tax Anticipation Notes Sole .... EXPECTED SALE DATE WEEK OF JUNE 24 - $ 300.000 Aaa/MNAAA California Infrastructure and Economic Development Bank Co-Manager .... Clean Waler State Revolving Fund Revenue - Retail Order Period June 24 - $ 75,000 Class 1: Aaa/AAA Colorado Housing and Finance Authority Co-Manager .... Class 2: AalM Single-Family Program Senior and Subordinate Revenue (Partly AMT) - $ 15,600 lAANAAA Sumter County, Florida School Board Certificates of Participation Sole - (Insurance Expected) - $ 9,000 Aaa City of LaFoltette, Tennessee Sole - (Insurance Expected) Electric Revenue Refunding and Improvement (Bank-Qualified) $ 22,000 Aaa (FSA) White House Utility District of Robertson and Sumner Counties, Tennessee Sole - Water and Sewer Revenue $ 9.700 Aaa/AAA Utah Housing Corp, Multifamily Housing Revenue Senior (FNMA) (City Front Apartments Project) (Party AMT, Partly Taxable) - EXPECTED SALE DATE WEEK OF JULY 1 $ 67,000 AaalAAA (Ambac) Lake County, Florida School District Certificates of Participation Co-Manager $ 5,000 A3 City of O'Fallon, Missouri Certificates of Participation Revenue Sole EXPECTED SALE DATE WEEK OF JULY 8 $ 43.530 IIA- Cape Girardeau County, Missouri Industrial Development Authority Sole Health Facilities Revenue (Southeast Missouri Hospital Association) $ 9,000 Aaa/AAA University of North Dakota Foundation Lease Revenue Sole (Insurance Expected) $ 8,180 Aa3 Medina City, Ohio Recreation Center General Obligation Sole A.G. EDWARDS & SONS, INC. HONDLINE 7 $20,000,000 Expected Ratings: S&P: ...............,AAA Fitch: ................AAA (FSA) A.G. Edwards, Sole Manager Dated: June 15. 2002 Due: Dec, 1 First Interest Payment: June 1, 2003 Noncallable HIGHLIGHTED NEW ISSUES - MUNICIPALS, JUNE 13, 2002 Parma City School District, Ohio Tax Anticipation Notes structure: Serial notes from 2003 to 2012 Purpose: Proceeds from the Series 2002 notes will be used for general permanent improvements throughout the district Security: The Series 2002 notes are special obligations of the distric4 payable from a special continuing 2.0 mill ad valorem tax, approved by voters of the district on March 7, 2000. The notes will be further secured by FSA insurance. Additional Facts: Panna City School Dishict is located in Cuyahoga County in northeastem Ohio, 8 miles southwest of downtown Cleveland. The district is part of the Cleveland-Akron Consolidated Metropolitan Statistical Are.a The district is one of612 public school districts in the state and 31 in Cuyahoga County. The district has a land area of29.16 square miles and a population exceeding 119,300. It encompasses the cities of Parma, Panna Heights and Seven Hills. The district's facilities include 15 elementary schools, three middle schools, three high schools, an administration center, transportation center and a stadium. The district also owns 12 acres of undeveloped land to meet future needs. Enrollment for the 2002-2003 school year is projected to be 13,544 snIdents, The district employs 1,746 staJfmembers, of which 962 are certificated. The economy in the district is based on manufacturing, health care and retail establishments. The largest employer is the Cadillac Luxury Car Division of General Motors, which employs more than 3,000. Other major employers include Parma O:>mmunity General Hospita~ Kaiser Permanente Medical Center and the Pannatown Mall, which has nearly 200 stores and has 50 other businesses adjacent to the mall Major taxpayers include Albert B. Ratner TIust (commercial real estate), General Motors Corp., Cleveland Electric Illuminating Co. and Ameritech. DebtRatiosperCapim School Nonexempt Debt: ................................ $30 Highest Overlapping Debt: .....................,.'... $368 $742,440,000 New York City Municipal Water Finance Authority Water and Sewer System Revenue r r I r I r I I I I I I I I Expected Ratings: Moody's: ......,..,Aa2 S&P: ,....,..........AA Fitch: ......,........,AA A.G. Edwards, Co-Manager Dated: Date of Delivery Due: June 15 First Interest Payment: Dee, 15,2002 Subject to redemption prior to maturity structure: Serial bonds from 2003 to 2020; term bond in 2034 Purpose: Proceeds from the Fiscal 2003 Series A bonds will be used to reimburse banks for amOlmts drawn for conunercial paper notes used for the system's capital improvements, fund certain reseIVes and to refi.md certain outstanding debt. Security: The F1scal 2003 Serit's A bonds are special obligations of the New York City Municipal Water FInance Authority, payable solely from and secured by a pledge of and first lien on the gross revenues of the system. The authority has pledged to charge and collect fees in an amOlillt sufficient to cover 115% of the debt service required. The bonds will be backed by a debt service reseIVe fund that will be fi.mded in an amowlt equal to the maximum adjusted aggregate debt service on the bonds. Additional Fads: The New York City Municipal Water Finance Authority is a public benefit corporation, established in 1984, The authority is authorized to provide fimding to finance the Note: Details of the above new issues are subject to change, capital projects required to ensure the supply and quality of the city's dJinking water and for safe wastewater collection and treatment. A seven- member board of directors administers the authority, New York City's water system has a storage capacity of 550 billion gallons and provides high- quality drinking water to more than 8 million city residents and another 1 million users in nine upstate cOlUIties bordering on the water collection system. The disuibution system is made of an extensive grid of water mains stretching 6,600 miles. Sewage is collected through an equally extensive grid of SffiVer pipes of various sizes and stretching more than 6,600 miles. Vn'lllally all of the city's dry weather sewage is collected through this system and is processed by one of 14 sewage treatment plants. The plants cmrently in operation treat approximately 1,200 million gallons of sewage pel' day. The opera tion of these plants ensmes that New York City's slUTOlmding wateIways are clean and safe for transportation, shipping and recreation. 8 BONDLINE A.G. EDWARDS & SONS, INC. . . . . . . . . . . . . . . . . . . . HIGHLIGHTED NEW ISSUES - MUNICIPALS. JUNE 13, 2002 $153,000,000 Augusta, Georgia Water and Sewerage Revenue Expected Ratings: Moody's: ..........Aaa S&P: ,....,..........AAA (FSA) A.G. Edwards, Senior Manager Dated: June 1,2002 Due: DeLl First Interest Payment: Oct. 1, 2002 Subject to redemption prior to maturity $16,710,000 Expected Ratings: S&P: ,....,..........AAA Fitch: ................AAA (MBIA) A.G. Edwards, SoJe Manager Dated: June 15, 2002 Due: Aug. 1 First Interest Payment: Feb,1,2003 .. - - - - - .... - - Noncallable Structure: Serial bonds from 2002 to 2022; term bonds in 2027 and 2032 Purpose: Proceeds from the Series 2002 bonds will be used, together with other funds, to finance the costs to improve the cousolidated government's water and sewer system, refimd a loan made by the Georgia Environmental Facilities Authority and fund interest on the bond issue. Improvements will be made to the water and sewer treatment plants, distribution and collection systems, the billing system and includes construction ofa new administrative/maintenance fucility. Security: The Series 2002 bonds are special, limited obligations of the consolidated government, payable solely from and secured by a pledge of and lien on the revenues of the water and sewerage system. The bonds will be further secured by a debt service reserve acconnt and FSA insurance. Additional Facts: The consolidated government of Augusta-Richmond County was created in 1996 to provide, with one management, public services to the city and connty more economically than separately. The consolidated govemment is located in the central eastern portion of the state, approximately 155 miles east of Atlanta It has a land area of 326 square miles. The governing authority is the board of commissioners, consisting of a mayor and 10 commissioners, elected from each commission district The consolidated government owns and operates a water supply, treatment and distribution system mId a sanitary sewer treatment and collection system. The water system has a service area of21O square miles, which contains a population of approximately 180,(XXl The system consists of storage fucilities, five pumping stations, 26 active wells, four b-eabnent plants, a rural chlorination system and a distribution network of 1,010 miles of pipelines. The primary source of raw water is the Augusta Canal, which is fed by the Savmmah River, and the secondary source is the 1I1Scaloosa FOl1uation aquifer. The sewer system's service area is 106 square miles i.n size and has a population of 150,683. It consists of two wastewater treatment plants, a colle('.tion system that includes 28 wastewater pumping stations and 640 miles of collection sewers. The water system has 65,833 COlUIectiOns, and the sewer system has 49,707 cormections. The largest customers include Nutra Sweet, MCG Complex, Castleberry Food Co., Monsanto Dairy, Searle and Kendall. The 10 largest water customers accountfor 14.280/0 oftotal water revenues, and the 10 largest sewer customers account for 23.56% of total sewer revenues. Hernando County School District, Florida G.O. Refunding Structure: Serial bonds from 2003 to 2008 Purpose: Proceeds from the Series 2002 bonds will be used, together with other available funds, to refund tlle district's outstanding SeIies 1992 general obligation refimding bonds. Security: The Series 2002 bonds are general obligations ofHeruando COlmty School Di.strict, payable from ad valorem taxes without limit as to rate or amonnt MBIA is expected to insure this issue. Additional Facts: Hernando County School District is located on the west coast in the central region of Florida. The district's boundaries are coterminous with the colmty. The dishict offers a complete range of instructional services ranging from basic and standard instructional programs to special programs for gifted children, a full complement of vocational educational programs at high schools and exceptional education for children with learning disabilities. Nole: Details of the above new issues are subject to ctlange, The district's fucilities include 10 elementary schools, fom middle schools and three senior high schools. Enrollment as of JlUW 30, 2001, averaged 16,803. The dislIict has 2,302 employees, which includes 1,080 teachers. Hernando County has a land area of 500 square miles and a population of 135,423. Major industries in the county include limestone mining and cement production, tolUism, dairy products, cattle production, dlI'uS products, forest l'esOlU'Ces, conslIuction and some nonpollutant manufuctlUing and distJibution. Largest taxpayers include Withlacoochee River Electric Co-Op, Wal-Mart Stores, Ine. mId BellSouth Telecommunications. County's Debt Ratios per Capita (2001) Direct and Overlapping G.O. Debt: .............. $239 Non-SelfSupporting Revenue mId DirectG.O.Debt: ................................... $534 Direct and Overlapping G.O. and Non-SelfSupporting Revenue Debt: .......... $310 County's Taxable Valuation 2001: .... $4,741,311,198 A.G. EDWARDS & SONS, INC. BONDLINE 9 I I I I I I I I I I I I I I I I I I I BONDLlNE BOND MARKET STATISTICS. JUNE 13, 2002 Taxable Yields as of June 11, 2002 YIELD OVER TREASURY Agency and Investment-Grade Corporate Securities 2,0 1,8 Additional stalistical information is available in our weekly publication Quant News. Ask your AG, Edwards financial consultant for a copy of the research report, GENERAL MARKET RATE INDICATORS Current Last Week 1.75% 1.75% 1.25 1.25 4.75 4.75 Fed Funds Target Rate Discount Rate Prime Rate Yields 91-Day T-Bills 1.74% Hear Treasury 2,13 2- Year Treasury 3,04 5- Year Treasury 4.24 10- Year Treasury 4,97 30- Year Treasury 5.55 One-Year CD Index 2.75 Five-Year CD Index 4.85 3D-Day Municipal Visible Supply Competitive $2,771,1 Negotiated 7,217.9 Six Months Ago 1.75% 1.25 4.75 ;R 1,6 o ~1.4 en III Q) .= 1,2 Q; > o 1,0 ..... "0 a; >= 0,8 0,6 0.4 6/11/01 9/11/01 12/11/01 3/11/02 6/11/02 1.74% 1,66% 2,16 2,03 3.10 2,98 4.29 4,32 5,01 5,07 5.61 5,55 2,80 3,05 4,95 5,15 $2,724.8 $1,695.2 5,641,5 12,559,8 Nole: Indexes are based on estimates of general market levels. not specific seaJrities. and are lor illUSllative purposes only. It is not possible to invest in an index. Call your AG. Edwards financial consultant for specific securities and yields, Data Sources: AG. Edwards and Bloomberg TAXABLE BOND YIELDS 2-Year 5-Year 1D-Year 3D-Year 2-Week 2-Week 2-Week 2-Week Yield Change Yield Change Yield Change Yield Change AAA Agency 3.22% -24 4.61% -20 5.54% -14 6,25% -12 Taxable Munis 3.60 -5 4,85 -25 5.80 -5 6,50 -5 AA Industrial 3.49 -21 4.79 -16 5,62 -21 6.40 -12 Financial 3.69 -21 5.09 -16 6.12 -21 6.77 -15 Utility 3,69 -21 5.04 -26 5.87 -36 6.65 -17 A Industrial 3.59 -21 4,89 -16 5.77 -21 6.65 -12 Financial 3.84 -21 5.29 -16 6.37 -21 7.00 -17 Utility 3,89 -21 5.24 -36 6.12 -31 6.75 -17 BBB Industrial 3.74 -21 5.19 -16 6,12 -41 7.00 -12 Financial 4,04 -21 5,64 -16 6.47 -21 7.35 -22 Utility 4,24 -21 5.84 -26 6.77 -21 7.50 -12 Note: T~ dlange is in basis points. Data Source: AG. Edwards KEY ECONOMIC NUMBERS Consensus Indicator Actual Forecast Date ISM' 55.7% 54.7% May Unemployment Rate 5,8% 6,1% May PPI -0.4% 0,1% May Advance Retail Sales -0.9% -0.3% May CPI Due 6/18 0.2% May GDpt 5,6% 6.0% First Quarter Existing Home Salest 5.79M 5.35M April 30 . Institute for Supply Management's (ISM) index of manufacturing activily was formerly known as NAPM, A reading above 50% implies an expansion in activity; a reading below 50%. a contraction. t Annualized rate Data Source: Bloomberg Note: The indexes contain an equal weighting of two-.live-, lG- and 3(}-year maturities. The corporate indexes also include an equal weighting 01 industrials, linancials and utilities. Data Source: AG, Edwards TREASURY YIELD CURVE Versus Six Months Ago 6.5 5,5 ~ 4.5 C "C a; >= 3,5 2.5 5 10 15 20 Maturity In Years 10 BONDLINE A.G. EDWARDS & SONS, INC, 25 Data Source: Bloomberg . . MAJOR CORPORATE RATING REVISIONS. JUNE 13, 2002 . . Upgrades Agency New Old . SunTrust Banks Inc. Senior obligations and issuer rating Moody's Aa3 A1 Subordinated debt A1 A2 . Downgrades . Adelphia Communlcallons Corp. Senior unsecured notes and debentures Moody's Caa2 Caa1 Convertible subordinated notes Ca Caa2 Convertible and exchangeable preferred stock C Ca . AES Corp, subsidiaries: . (PALCO Enterprises Corporate credit rating S&P BBB- BBB Senior unsecured debt BB+ BBB- Indianapolis Power & Light Co. Senior secured debt BBB. BBB . Senior unsecured debt BB+ BBB- Preferred stock BB BB+ . Aon Corp. (A3) Long-term ratings under review Moody's Possible downgrade . CIT Group Inc. and related entities Senior debt S&P BBB+ A- Subordinated debt BBB+ BBB+ Long-term counterparty credit ratings BBB+ A- . Energy East Corp, Senior unsecured debt Fitch BBB BBB+ New York State Electric & Gas First mortgage bond BBB+ A . Senior unsecured debt BBB A- Preferred stock BBB. A- . Central Maine Power Co. Senior unsecured notes A- A Preferred stock BBB+ A- Connecticut Natural Gas Senior unsecured debt A- A . J.C. Penney Co, Senior unsecured debt Moody's Ba3 Ba2 .... Convertible subordinated notes B1 Ba3 ., Kern River Funding Corp, Senior notes Moody's A3 A2 - NUl Ulllilles Inc. Ratings on review Moody's Possible downgrade .... - Parker Drilling Co. (B+) Ratings on CreditWatch S&P Negallve implicallons .... Southern Union Co. Senior unsecured debt Moody's Baa3 - Senior secured debt Baa2 - Southern Union Financing I Backed preferred securities Bal - Sprint Corp. Senior unsecured debt Moody's Baa3 Baa2 - - The Tribune Co. Ratings on review Moody's Possible downgrade - Tyco International LId. and industrial subsidiaries Ratings on CredilWatch S&P Negative Implications Tyco International LId, Convertible debentures Moody's Ba3 Ba1 - ADT Operations Inc, LYONS Ba2 Baa3 Raychem Corp, Senior unsecured notes Ba3 Ba1 Malllnckrodtlnc. Senior unsecured notes Ba3 Ba1 and industrial revenue bonds UnumProvldent Corp. Senior unsecured debt Moody's Baa2 Baa1 Xerox Corp, Corporate credit rating S&P BB- BB A,G. EDWARDS & SONS, INC. BONDLINE 11 I ! I I I r I I I I I I I I I I I r MAJOR MUNICIPAL RATING REVISIONS. JUNE 13, 2002 Upgrades Agency New Old Moody's A2 A3 S&P AA- A+ Moody's A2 A3 S&P At A Moody's Aa2 Aa3 Moody's Aa2 Aa3 Moody's A2 A3 Moody's Aa2 Aa3 Moody's Aa2 Aa3 Moody's Aa3 A1 Moody's Aa3 A1 Moody's Baa2 Baa3 S&P AAA AM Moody's Aa2 Aa3 Moody's Aa3 A1 Moody's A2 A3 Moody's Aa3 A1 Bridgewater & Raynham School District, Massachuse"s Clackamas County, Oregon Service District No,1 Grandbury Independent School District, Texas Maricopa County, Arizona Certificates of Participation Series 1993 Metropolitan Government Nashville and Davidson County Health and Educational Facilities Board, Tennessee (Vanderbilt University) New HampShire Municipal Bond Bank New Jersey Health Care (Hackensack University Medical Center) Newtown, Connecticut Plymouth, Massachuse"s River Vale,'New Jersey South Kingstown, Rhode Island Spring Valley, Minnesota Troy, Michigan University of Pittsburgh, Pennsylvania Western Iowa, Technical Community College Merged Area XII Taxable-Industrial New Job Ctfs-1A White House Utility District, Tennessee WOburn, Massachuse"s Downgrades Cranston, Rhode Island Easton, Massachusetts Franklin, Ohio Housing Development Corp. Lake County Resource Recovery Industrial Development, Florida Mad River Housing Development Corp" Ohio (Harding House) Michigan State Hospital Finance Authority (Pontiac Osteopathic Hospital) New York State Energy (New York State Electric and Gas) New York State Medical Care (Huntington Hospital) Moody's Ba1 Baa2 Moody's A2 A1 S&P CCC B Moody's Ba3 Baa2 S&P CCC BB+ S&P BBB- BBB Fitch BBB A- S&P BBB BBB+ ~G.Edwards WNW.agedwards.com Bondllne Is prOduced by A,G. Edwards Fixed Income Research Derartment. All questions or comments on this publlcallon should be directed to Barflara Sullivan. Addlllona Information Is available upon request. This information is obtained from sources and data considered to be reliable, but its accuracy and completeness are not guaranteed by A.G. Edwards & Sons, Inc. Any opinions expressed are subject to change without notice. Neither the information nor any opinions expressed constitutes a solicitation for the purchase or sale of any security referred to herein. A.G. Edwards & Sons, Inc. may make marl<els or have positions in the securities roontioned herein and may have also performed investment banking services for the issuers of such securities. Investments can fluctuate in price, value and/or income and may return less than the original investment. Investments or investment services mentioned may not be suitable for all, and investors in doubt should seek advice from their financial consultant. The levels and basis of taxation can change. International investing involves special risks. including those tied to currency fluctuations and foreign economic and political risks. Past performance is nol necessarily a guide to future performance. The offering is made only by the official statement. These bonds are offered when. as and if issued and received by us and subject to the approving legal opinion, which will be printed on each bond. A discussion of interest exemption from specific taxes is the opinion of counsel. For insured bonds, no representation is made to tOO insurer's ability to meet its commitments: the insurance does not remove the market risk 01 the bonds. This document has been approved by A.G. Edwards & Sons (U,K.) Limited, regulated by FSA Indicated market prices or spreads do not include transaction fees or other expenses. 12 BONDLINE A.G. EDWARDS & SONS, INC. .................. ~.fk~~ .t . tt .. . ~ 4. 4 ~ ~ ~ 4 ~ 4 . ~ ~ 4 . . ~ l ll. ~ I. ~. 4. 4 ~ 4 ~ 4 ~ 4 ~ tt . . . . . . . . . . . . . . . . Rating Agency Reports Appendix B ~.G.Edwards . . . . . . . . . . . . . .- - .- ... . .- ... - "- - - ... - - - - ~ - STANDARD & POOR'S Publication date: 13-Jun-2002 Reprinted from RatlngsDirect '~-~' .~: "':"_~~-..li:"";'; ~" '....- '_~~::'::(~,:~I";'~"'r..;:::t:;-:..t..lJ~t..:1:..'" ~~'4_~.'::.....': ~-_....;'~,_',l -4-",..:. . I . !'~.\..;...l ',. . j,:-!..,~ .;..;.~... _' ..' 1Cc-i:=t"!i":J::~~" ".i:\"," "-'--"~- '-'e~?t'm"; .~~' f' """-.J.."" "-'""':'ll:,."" ;;'-'l'3t,'V.'='...;;"-'J!,:J,..:;'....~l.,:...C. ~-: ~ ,j" ,~?~rj~,,:" rt~Ff~ .--~~:.:~ . - ~; .. .., t;." ~.1..' ;'f~}-i-:tl~ .:..'1-:~ :~~:":"t( f-' .{~1~' .~- '~~i..'.:":~':-f.~:f ~ ~-~...-\ ::::..,t~_: t ',' t...~.~...1..I'"'1t'_ riJF~e-"_~~ .r - [:iW-lt-1L:-,..t....:;.... ''':-::1"1-' '14'n--"t:. "'h...-__Lt - ....~..,.:J"_.~~ ~.. ~: g~-~~-Ft,}?:~':.~gS~f(i~~~~::~:::~;':"--'~::~~:';;.;~;t~t~.: ".':~::' ::~?\"~;",i":'". :~"r.h '~"~~': ~~': ~ Augusta, Georgia Analyst: Danielle Leonardis. New York (1) 212-438-2053; Richard J Marino, New York (1) 212-438-2058 Credit Proflle .~ ~ Rationale The 'A+' rating on Augusta, Ga.'s water and sewer revenue bonds reflects: I $150 mil wtr & swr rev boos .' I I due 2032' . A+ . Sale date: 30,.JUN-2002 : AFFIRMED' . swg rev bnds , i , A+ (SPUR) 'I " .." ""j : OU~~~OK:. STABLE ~.~.,' .'1 . Sufficient long-term water supply and diversity of supply sources; . Competitive rates on a regional scale, although these rates are projected to increase 11 % annually for the next five years followed by increases of 3% annually for the following four years; . Sound legal provisions that no longer allow excess funds generated by the system to be utilized for anything other than system-related needs; and . Sound financial performance with good debt service coverage levels and good liquidity, which have declined over the most recent year due to increased debt service payments despite rate increases. These factors are offset by: . An aggressive, 10-year, $344 million capital improvement program (CIP)-a result of years of deferred maintenance-that is expected to be almost totally debt-financed; . A variety of consent orders under which the wastewater system is currently operating, although the utility has taken steps to comply with the orders by outsourcing the operations and management of the wastewater system; and . Low wealth and income indicators. The bonds are secured by net revenues of the system. Proceeds will be used to finance improvements to the water and sewer system, refund a loan made by the Georgia Environmental Facilities Authority, and fund 12 months of interest on the series 2002 bonds. Augusta Utilities is a combination of the utility systems of the city of Augusta and the county of Richmond, which were consolidated in 1996. The system serves a mostly residential base comprising 65,863 water connections and 49,875 sewer connections throughout Richmond County. The system does not provide service to two small cities that did not participate in the city-county consolidation, nor does it provide service to Fort Gordon, an army base and major employer in the county. The system, which derives its water from both the Savannah River and wells from the Tuscaloosa Aquifer, has adequate long-term water supply to meet future needs. Residential customers currently pay a competitive $41.22 for 9,000 gallons of usage for both water and sewer service; however, significant planned rate hikes, which have already begun, and are expected to extend into the future may be burdensome to residents, especially given the low wealth and income indicators. Financial performance of the system has been sound in recent years and debt service coverage levels have been strong. Historically, the system has made significant transfers to Augusta's general fund. With the consolidation of the city and the county, as well as the issuance in 1996 of water and sewer bonds, transfers to the general fund have slowly been phased out. Amendments to the legal provisions allow that all surpluses of the system . . . . . . . . . . . . . . . . . have to be used for system-related issues. Debt service coverage levels in fiscals 2000 and 2001 were 3.5 times (x) and 1,8x, respectively. Unrestricted cash in the system at fiscal 2001 was 286 days' worth of operating expenses- evidence of the system's good liquidity. Augusta is pledging the net revenues of the system as security for the bonds and has represented and warranted that the bonds have a first, priority- perfected security interest in the net revenues. Bond counsel has advised that the pledge is perfected automatically under Georgia law. Outlook The stable outlook reflects the expectation that the system will be able to sustain sound financial performance while maintaining the significant capital improvement plan. Legal Provisions The legal provisions for the Augusta Utilities are satisfactory. The security for these bonds is a first-lien on net operating revenues of the system. While this is the norm for most utility systems, in this case, because operations, maintenance, and management of the wastewater system is being outsourced, it means that an outside party, albeit for operations and maintenance, is being paid prior to debt service. The rate covenant requires that rates are set to result in net revenues of at least 1.1 x annual debt service requirements. The additional bonds test (ABT) mandates that net operating revenues for the past 12 consecutive months of the past 18 consecutive months be equal to at least 1.25x maximum annual debt service (MADS) requirements on outstanding and proposed debt. .- .., The ABT allows for adjustments in rates. The debt service reserve fund requirement is standard, requiring the lesser of 125% of average annual debt service, MADS, or 10% of bond proceeds. The utilities plan on utilizing a surety bond in lieu of a cash-funded debt service reserve fund. In addition to the debt service reserve fund, the utility has also created a utility general fund, which it has covenanted to fund at the lesser of $2.5 million or 5% of operating revenues, Previous legal covenants for parity issues allowed for transfers to the general fund. Now, the flow of funds allows for surplus funds to be used only for system-related issues. Operating transfers from the system to the consolidated government's general fund are not permitted in future years while the bonds remain outstanding. . - ... - - Service Area Economy Located approximately 155 miles east of Atlanta and 75 miles southwest of Columbia, S.C., the consolidated government of the city of Augusta and the county of Richmond, formally known as Augusta, is the home of The Masters- -the professional golf tournament. The city and the county decided to consolidate in 1996 after years of poor financial performance on the part of the city. Population in the county has remained stable over time and grew 5.3% since 1990 to 199,775 in 2000. Fort Gordon, a U.S. Army base, is the county's leading employer, with 16,987 employees, and is a significant source of economic stability within the county. Fort Gordon is a telecommunications training facility and trains virtually all of the Army's Signal Corps personnel. Other leading employers include the Medical College of Georgia (7,170 employees) and Richmond County School System (4,418). The county's economy is anchored with trade (20% of employment), services (28.6%), and government (20.4%). Wealth and income levels in the county are below average, with median household effective buying income at 72% of the nation's level. Wealth and income levels in the city are similar to those of the county. The unemployment rate is a high 5.5%, well above the state's level of 3.8% and the nation's level of 4.5%. - - ~ - - - Customer Profile Augusta Utilities serves almost all of the population in the county with the exception of two cities-Blythe and Hephzipah-which were not part of the . . . . . . . . . . . . . . . . consolidation, and the army base Fort Gordon. The system serves a mostly residential base of 65,863 water connections and 49,875 sewer connections. In addition, the utility also provides water and sewer services on a wholesale basis to Columbia County as needed. Due to limited growth in the county, the customer base has been relatively stable, averaging between 600-800 new customers annually, The 10 leading water customers account for 14% of water revenues, while the 10 leading sewer customers account for 23.5% of sewer revenues. NutraSweet is the leading water and sewer customer, accounting for 5.2% of water revenues and 7.9% of sewer revenues, Operations Augusta Utilities derives its water supply from two sources: the Augusta Canal, which has several intakes on the Savannah River, and wells in the Tuscaloosa Aquifer, Although the Georgia Environmental Protection Division has recommended, and the utility system is planning to, ultimately lessen its dependence on well water, the diversity of supply sources is beneficial to the utility in an emergency. The system has adequate supply capacity over the long-term. The utility has four water treatment plants and a rural chlorination system with a combined capacity of 83.7 million gallons per day (mgd). The average daily demand for treated water is 42.23 mgd while the maximum daily demand is 63,9 mgd. ... - The county's wastewater system has two wastewater treatment plants, with a combined treatment capacity of 48.34 mgd. Average wastewater flow and maximum wastewater flow treated in 2001 was 30.93 mgd and 57.7 mgd, respectively. Flows in excess of the wastewater system's treated capacity result primarily from the infiltration and inflow of storm water into the wastewater collection and conveyance system subsequent to heavy rainfall. This problem, among others, has resulted in violations under Georgia Dept. of Natural Resources Environmental Protection Division. Augusta Utilities is now under several consent orders with fines, although to date such fines have had no material effect on the system. To help address these issues, the utility has entered into a contract with Operations Management International Inc. to operate, maintain, and manage the two wastewater treatment plants. The contract, which expires Dec. 31, 2004, may be renewed for another five-year term at the discretion of the utility. Operations Management Internationallnc.'s annual fee is composed of three parts: - - - - - - . A base fee for actual cost of services performed during period; . An administrative fee equaling 10.5% of the base fee; and . A management fee, which totaled $5.7 million for 2002. - - Many projects included in the utility's CIP are also expected to address deficiencies and increase reliability within the system. Rates/Collections The utility's rates are currently very competitive at $41.22 monthly for combined water and sewer service with usage of 9,000 gallons each. In order to fund the large CIP, which will primarily be debt-financed, the utility plans to increase rates by 11% per annum from 2002-2007. It is also anticipated that rates will be increased by 3% per annum from 2008 through 2011. While rates are very competitive at the present time, thus affording some rate flexibility, there is some concern that the significant rate hikes could be burdensome to some users of the system, particularly in areas where the wealth and income levels are far below those of the county. Finances Financial performance of the utility is sound, with debt service coverage levels a strong 3.5x in fiscal 2000. In fiscal 2001, with a growing debt service payment, coverage fell to 1,8x annual debt service. Liquidity is good, with the system having 283 days' worth of unrestricted cash at fiscal year-end 2001, Due to the significant CIP, which requires additional bonds, debt service coverage levels are projected to decline and range between 1.34x and 1.70x . . . . . . . . . . . . . from 2002 through 2011, with the least amount of projected coverage occurring in 2009 at 1.34x despite the planned rate increases, Historically, the utility system has made significant transfers of more than $5 million annually to the city's or city/county's general fund, This has resulted in underfunding of maintenance and capital improvements to the system. With the city and county consolidation in 1996, management agreed that these transfers would be reduced over time and were eliminated in fiscal 2000, Still, the system now has years of deferred maintenance, an infrastructure that is very aged, and is currently operating under a variety of consent orders-due at least partially to poor financial management in the past and a lack of reinvestment in the system. CIP The utility's 10-year (through 2010), $344 million CIP is focused on the improvement of the water treatment facilities, the water distribution system, the wastewater treatment plants, and the wastewater conveyance system. Projects in the CIP include, but are not limited to, preparation for a new water treatment plant including site evaluation, intake permit, and design as well as design of the facility, construction of transmission lines, improvements to the, primary and secondary treatment systems at a wastewater treatment plant, and infiltration and inflow reduction. The CIP is expected to be funded primarily from additional bond issuances. This is the second issuance of the utility's CIP, The utility plans to issue additional bonds in fiscals 2005 totaling $120 million. After this issuance, net debt to net assets will be a high 74%, ... - i This report was reproduced from Standard & Poor's Rating~Direct,the ' : i premier.source'of real-time, Web~based'creditratings and research from an j lorganizationthat-has tl~n,al~ader in objective credit analysis for more ," ;J I than ',140 years. Toprevlewthisdynamic'9n-line,product,:Vislt our "'iJ"'... ,:, ,'RatingsDlrect ~e~ site atW'NW;standardCln~pqor~:com/~atingsdlrect.' : "; ,', r .~~~~;~t~~,~f~~~~~,:,::;,r:!~,';':~';;)'::'J':;;,:~ i..";:::~"",':~,:, ': ,,;, .;, ',j,",';,' ll':~':{:;"" ..,.':: ~.'-wi:, ,'.::~r; :';': . . ... - - - Standard & Poor's 'EZ A DivUi.cm o{TMAIi:GrvIHIill~ - - - Published by Standard & Poor's, a Division of The McGraw-Hili Companies, Inc, Executive offices: 1221 Avenue of the Americas, New York, NY 10020, Editorial offices: 55 Water Street, New York, NY 10041, Subscriber services: (1) 212-438-7280, Copyright 2002 by The McGraw-Hili Companies, Inc, Reproduction in whole or in part prohibited except by permission, All rights reserved, Information has been obtained by Standard & Poor's from sources believed to be reliable, However, because of the possibility of human or mechanical error by our sources, Standard & Poor's or others, Standard & Poor's does not guarantee the accuracy, adequacy, or completeness of any information and is not responSible for any errors or omissions or the result obtained from the use of such information, Ratings are statements of opinion, not statements of fact or recommendations to buy, hold, or sell any securilles. ... - - - - ~ - - . . . . . . . . . . . Ubj14j2002 17:19 ET REF: ATTN: MARK WIDENER A. G. EDWARDS NOOD4923.0000 FR:MOODYS TO: 4042649408 Page 1 of 4 MOODY'S ASSIGNS AN A2 RATING TO $151,575,000 AUGUSTA (GA) WATER & SEWERAGE REVENUE BONDS, SERIES 2002. $325 MILLION OF DEBT AFFECTED. Augusta (City of) GA Water/Sewer Georgia Moody'S Rating Issue Rating Water & Sewer Improvement Revenue Bonds Sale Amount $151,575,000 Expected Sale Date 06/20/02 Rating Description REVENUE BONDS A2 a ... NEW YORK, June 14, 2002 -- Moody'S Investors Service has assigned an A2 rating to $151,575,000 Augusta (GA) Water and Sewerage Revenue Bonds, Series 2002. At this time Moody'S has also affirmed the A2 rating on $174 million in parity obligations. The bonds are secured by net revenues of the water and sewer system. The A2 rating is based on the system's significant additional borrowing over the next several years, its satisfactory financial operations which are supported by substantial rate increases, as well as its growing regional economy. Proceeds of this issue will be used for water system improvements ($72.5 million), primarily water treatment and distribution ~ system; sewer system improvements ($50 million), primarily for the conveyance .. system; and, $7.3 million in other system improvements. Proceeds will also be - used to fully refund the $8.7 million outstanding portion of a 1996 GEFA loan .. with net present value savings of 6% within the same overall maturity ~ schedule. The current issue also includes $11.9 million (18 months) of .. capitalized interest. . .- ... .- ... ~ ... ~ .. DEBT LOAD CONTINUES TO INCREASE; RATES RISING SUBSTANTIALLY FROM A LOW BASE ~ Moody'S believes that the county's significant water and sewer capita~ program addresses past deficiencies in the system and positions the system to meet _ demands of a slow~y growing popu~ace and meet regulatory requirements. The city-county is in the middle of a $344 million borrowing program that includes upgrades, improvements and extensions to the consolidated government's water and sewer system. The capital program will also address infiltration/inflow problems, eliminating fines while remaining on target with the terms of a ~ consent order by 2005. The ,capital program is funded exclusively with bonds and interest earnings on construction funds. System officials plan to issue the remaining $120 million'of the capital program in 2005. In conjunction with these offerings debt service wil~ increase from it's current level of about $11 million to over $30 million in 2011. This large increase in debt-related costs will be supported by annual system rate increases. Two 11% rate increases have alre~dy been adopted in 2001 and 2002, with 11% increases scheduled from 2003 through 2007 followed by 3% increases in 2008 through 2011. During that period modest residential monthly bills increased from $33.46 (9,000 gpm) in 2000 to $41.22 in 2002, and are projected to increase to approximately $60 in 2011. Despite this significant increase, rates will not be excessive in relation to other in-state jurisdictions, especially within the metro Atlanta region. With the current issue, the system's debt ratio increases from the fiscal 2001 level of 39.9% to 64.9%. 06/14/2002 17:19 ET REF: NOOD4923.0000 FR:KOODYS TO: 4042649408 Page 2 of 4 . . . . . . . . . . . . . GOOD HISTORICAL FINANCIAL PERFORMANCE; FORECAST INCLUDE REASONABLE ASSUMPTIONS Moody'S expects that the system will maintain adequate financial operations which will provide for satisfactory debt service coverage, albeit at lower levels than historically, and investment for maintenance needs. The system has performed well financially maintaining debt service coverage levels between 1.7 times and 4.3 times over the past five years. Coverage levels are anticipated to drop to about 1.34 times as new bond issues are layered in over the next several years. Retained earnings have also increased from about $50 million to nearly $91 million during the seven previous years. System revenues, predicated on anticipated rates increases and reasonable assumption of customer growth, are expected to increase about 114% from 2000 through 2009, while expenses are projected to increase by 39.2% during the same period. System officials plan to utilize $2 million annually for on-going maintenance needs. Previous transfers out of the system have been discontinued and the flow of funds has been closed, effective with the Series 2000 issue. SYSTEM CHARACTERIZED BY ADEQUATE WATER SUPPLY, AND FACILITIES IN NEED OF IMPROVEMENTS AND EXTENSIONS Moody'S believes official's development of a master plan for the water and sewer system and formulation of a long-term capital plan designed to meet critical needs of the combined system quickly and aggressively will allow for the reversal of what was previously a largely neglected system, and will foster economic expansion. The combining of the former city and county utility .. systems in 1996 has created a fundamentally different service provider. ... .- ... - The water system serves a population in excess of 180,000 in a 210 square - mile area. The system's primary water supply is, and is projected to remain, - the Savannah River with a permitted withdrawal of 75 MGD, with a groundwater .w back-up source of 18 MGD. While the supply is adequate, the need to upgrade ~ water treatment plants to improve operations, reliability, and pressure is ~ critical to the system's long term viability. In addition, several ~ distribution system improvements are also needed. As such, the proceeds of the ~ current issue will be used to expand and modify the Highland Avenue water ~ treatment plant to improve reliability and efficiency and sustain operating - capacity at 60 MGD. Coupled with the construction of a new 15 MGD water treatment facility, the improvements to the Highland Avenue facility will help ~ meet future demand until 2020 and minimize the reliance on their groundwater supply, using that source to meet peak demand. The sewer system serves a population in excess of 150,000 in a 135 square mile area. The system's primary treatment plant, J.B. Messerly, needs significant upgrades for regulatory and operational purposes, and the conveyance system is old and in critical need of replacement given a high incidence of infiltration/inflow. The system is operating under several consent orders primarily related to system overflows and by-pass. To date all prescribed deadlines have been met or renegotiated and officials are confident the capital program will make them fully compliant by 2005. Officials have privatized wastewater treatment operations for efficiencies. - The capital program is nearly equally divided between water and sewer needs. The proceeds of the current issue will finance improvements to both the water and sewer systems in the amounts of $72 million and $50 million, respectively. The bond issue planned for 2005 ($120 million) will be equally divided between water and sewer improvements but will be more weighted towards new facilities, to meet the needs of a shift in the service area population, and for new customers. Ub/1Qj2002 17:19 ET REF: NOOD4923.0000 FR:MOODYS TO: 4042649408 Page 3 of 4 . . . . . . . . . . . . . . . . STABILITY AND STEADY EXPANSION OF LOCAL ECONOMY Moody'S expeets the metro Augusta (City rated A2; County rated AI) economy to continue to .~xperience slow, steady growth and remain a regional retail, education and health care center. The economy of the consolidated government of Augusta-Richmond County, while still largely manufacturing-based, is transitioning to more retail and service-related jobs. In addition to manufacturing, the economy continues to diversify with growth in tourism, health care, arts and entertainment, and education sectors. Another significant €lconomic force is Fort Gordon, a 55,000-acre military installation that houses t:he u.S. Army Signal Corp. and employs nearly 17,000 people. KEY STATISTICS: Type System: Pledge: System Net Revenues (excluding certain interest earnings) Service Area: City of Augusta and surrounding Richmond County System Connections, Water: 65,833 Sewer: 49,707 FY 2001 Operat:ing Ratio: 57.3% Debt Ratio, .. FY 2001: 39.9% ... .- ... Pro Forma (incl. this issue): 64.9% - .... Debt Service Coverage, _ FY 2001: 1.65 .times ... _ Maximum Annual: 1.36 times (upon completion of construction period in 2006) ....' _ Expected Borrowing, 20051 $120 million -- ~ Rate increases, - 2000 to 2007: 11.0% - 2008 to 2009: 3.0% Monthly Residential Water & Sewer Bill (9,000 gpm), 2000: $33.46 2002: $41.22 2011: $59.95 ANALYSTS: ~ James Edward Bodley, Jr., Analyst, Public Finance Group, Moody'S Investors Service John Incorvaia, Backup Analyst, Public Finance Group, Moody'S Investors UO/!Qj2U02 17:19 ET REF: NOOD4923.0000 FR:MOODYS TO:4042649408 Page 4 of 4 '" Service . . . . . CONTACTS: Journalists: (212) 553-0376 Research Clients: (212) 553-1625 . .... ., - .... - - - - - - - - - -. .,.... t~ tl) ~ ~ ~ }~ lUO' ~~, f.", - .:>- 0 J PARITY BOND RESOLUTION A RESOLUTION TO PROVIDE FOR THE ISSUANCE OF WATER AND SEWERAGE REVENUE BONDS, SERIES 2002, PURSUANT TO AND IN CONFORMITY WITH A BOND RESOLUTION ADOPTED OCTOBER 21, 1996, AS SUPPLEMENTED DECEMBER 3 AND 17, 1996, AND AS RATIFIED, REAFFIRMED, BROADENED AND EXTENDED BY A RESOLUTION ADOPTED AUGUST 22, 2000, AS SUPPLEMENTED SEPTEMBER 15,2000, TO' PROVIDE FUNDS TO FINANCE, IN WHOLE OR IN PART, THE COST OF ADDING TO, EXTENDING, IMPROVING AND EQUIPPING THE WATER AND SEWERAGE SYSTEM OF AUGUSTA, GEORGIA, TO PROVIDE FOR THE PREPAYMENT IN FULL OF A LOAN FROM THE GEORGIA ENVIRONMENTAL FACILITIES AUTHORITY, AND TO PAY EXPENSES NECESSARY TO ACCOMPLISH THE FOREGOING; TO RATIFY, REAFFIRM AND ADOPT ALL APPLICABLE TERMS, PROVISIONS, COVENANTS AND CONDITIONS OF THE BOND RESOLUTION OF OCTOBER 21, 1996, AS SUPPLEMENTED DECEMBER 3 AND 17, 1996, AND THE BOND RESOLUTION OF AUGUST 22, 2000, AS SUPPLEMENTED SEPTEMBER 15, 2000; TO PROVIDE FOR THE ADOPTION OF RATES AND THE COLLECTION OF FEES AND CHARGES FOR THE SERVICES, FACILITIES AND COMMODITIES TO BE FURNISHED BY THE WATER AND SEWERAGE SYSTEM; TO PROVIDE FOR THE ISSUANCE UNDER CERTAIN TERMS AND CONDITIONS OF ADDITIONAL PARITY BONDS; TO PROVIDE FOR THE CREATION AND MAINTENANCE OF CERTAIN FUNDS; TO PROVIDE REMEDIES IN THE EVENT OF DEFAULT FOR THE OWNERS OF SAID BONDS; TO RATIFY AND AUTHORIZE THE PREPARATION, USE AND DISTRIBUTION OF A PRELIMINARY OFFICIAL STATEMENT AND A FINAL OFFICIAL STATEMENT IN CONNECTION WITH THE OFFER AND SALE OF THE SERIES 2002 BONDS; TO PROVIDE FOR THE ANNUAL SUBMISSION OF CERTAIN FINANCIAL INFORMATION AND OPERATING DATA PURSUANT TO RULE 15c2-12 OF THE SECURITIES AND EXCHANGE COMMISSION; TO PROVIDE FOR THE ADOPTION OF A SUPPLEMENTAL RESOLUTION FINALIZING THE TERMS OF THE SERIES 2002 BONDS; AND FOR OTHER PURPOSES: ;j ~ -# /6/ 9- i~~~-- WHEREAS, under the provisions of Article IX, Section III, Paragraph II(a) of the Constitution of the State of Georgia and an act of the General Assembly of the State of Georgia (Georgia Laws 1995, p. 3648 et seq.), and pursuant to referenda, as authorized and required by said act, which were held within the City of Augusta (the "City") and Richmond County (the "County"), the City and the County were consolidated; and WHEREAS, the referenda held with respect to consolidation within the City of Hephzibah, a municipality located within the County, failed; and WHEREAS, said consolidation does not include the Town of Blythe, Georgia, a municipality located within the County; and WHEREAS, said act has been amended by subsequent acts, including Georgia Laws 1997, p. 4024 et seq., which amendment is, as follows: AO 708654,) Said county-wide government shall be a new political entity, a body politic and corporate, and a political subdivision of the state to be known as "Augusta, Georgia," at times in this Act called the "consolidated government" or "Augusta-Richmond County," having all the governmental and corporate powers, duties, and functions heretofore held by and vested in the City of Augusta and Richmond County, and also the powers, duties, and functions provided in this charter; and WHEREAS, said act, as amended is hereinafter referred to as the "Act" and Augusta, Georgia, consolidated government and Augusta-Richmond County, as referred to in the Act, are hereinafter referred to as the "Consolidated Government"; and WHEREAS, pursuant to the Act, the Consolidated Government now constitutes a county and a municipality under the laws and the Constitution of the State of Georgia, and is a political subdivision of the State of Georgia in the exercise of the respective powers of a municipality and a county; and WHEREAS, pursuant to Article IX, Section II, Paragraph II of the Constitution of the State of Georgia, the Municipal Home Rule Act of 1965 (codified, as amended, at O.C,G.A S 36- 35-1 et seq,) and an ordinance adopted by the Augusta-Richmond County Commission-Council of the Consolidated Government on October 1,1996 (Georgia Laws 1997, p. 4690 et seq.), the Commission-Council amended the designation of its governing body from the "Augusta- Richmond County Commission-Council" to the "Augusta-Richmond County Commission" (the "Commission"); and WHEREAS, prior to the consolidation of the City and the County, the City and the County each owned, operated and maintained their own respective water and sewerage systems, and pursuant to the Act, the water and sewerage systems of the City and the County are now owned and operated by the Consolidated Government and pursuant to the 1996 Resolution (hereinafter defmed) have been combined into one revenue producing undertaking, hereinafter referred to as the "System," which definition shall also include such water and sewerage system, as now existent and as hereafter added to, extended, improved and equipped; and WHEREAS, the Consolidated Government acting by and through the Commission, by virtue of the authority of the Constitution of the State of Georgia, the Act and Title 36, Chapter 82, Article 3 of the Official Code of Georgia Annotated, as amended (the "Revenue Bond Law"), is authorized to issue revenue bonds, to fund in part a reasonably required debt service reserve and to acquire additional water and sewerage facilities by the addition thereto of improvements to the System, and to construct such additions, and to operate and maintain the System, as added to, extended, improved and equipped, for its own use, and for the use of the public and to prescribe and revise rates, and to collect fees and charges for the services, facilities and commodities furnished by the System, as now existent and as same is hereafter added to, extended, improved and equipped, and in anticipation of the collection of revenues from the System, to issue revenue bonds to fund in part a reasonably required debt service reserve and -2- AO 708654,) -,. -'-----.:.-.:..- --~- ......~.~--.. finance the cost of such additions, extensions and improvements to the System and to pay all expenses necessary to accomplish the foregoing; and WHEREAS, pursuant to a resolution adopted on October 21, 1996, as supplemented on December 3 and 17, 1996 (the "1996 Resolution"), the Consolidated Government issued $62,880,000 aggregate principal amount of Richmond County Water and Sewerage Revenue Refunding and Improvement Bonds, Series 1996A (the "Series 1996A Bonds"), dated December 1, 1996, bearing interest from date at the rates per annum set forth below, all interest payable semiannually on April 1 and October 1 in each year, commencing on April 1, 1997, and maturing on October 1 in the following years and principal amounts: Year Amount Rate Year Amount Rate 1997 $ 265,000 3.60% 2006 $ 1,260,000 6.00% 1998 350,000 3.80 2007 1,335,000 6.00 1999 365,000 4.00 2008 1,415,000 4.90 2000 375,000 4.10 2009 1,485,000 5.00 2001 395,000 4.20 2010 1,560,000 5.10 2002 410,000 4.30 2012 3,355,000 5.00 2003 1,100,000 4.40 2017 10,000,000 5.125 2004 1,155,000 4.50 2022 13,305,000 5.25 2005 1,205,000 4.60 2028 23,545,000 5.25 and of the Series 1996A Bonds there is now outstanding $61,130,000 aggregate principal amount thereof, being bonds maturing in the years 2002 through 2010, 2012, 2017, 2022 and 2028 and the Series 1996A Bonds are secured by a lien on the Pledged Revenues (as defined in the 1996 Resolution) in accordance with the 1996 Resolution; and WHEREAS, pursuant to the 1996 Resolution, the Consolidated Government also issued $3,760,000 aggregate principal amount of Richmond County Taxable Water and Sewerage Revenue Refunding Bonds, Series 1996B (the "Series 1996B Bonds"), dated December 1, 1996, bearing interest from date at the rates per annum set forth below, all interest payable semiannually on April 1 and October 1 in each year, commencing on April 1, 1997, and maturing on October 1 in the following years and principal amounts: Year 1997 1998 1999 2000 2001 2002 Amount $655,000 585,000 605,000 610,000 640,000 665,000 Rate 5.60% 5.80 5,90 6.10 6.20 6.25 and of the Series 1996B Bonds there is now outstanding $665,000 aggregate principal amount thereof, being bonds maturing in the year 2002 and the Series 1996B Bonds are secured on a -3- AO 708654.3 parity with the Series 1996A Bonds as to lien on the Pledged Revenues in accordance with the 1996 Resolution; and WHEREAS, pursuant to the 1996 Resolution, the Consolidated Government also issued $5,910,000 aggregate principal amount of Richmond County Water and Sewerage Revenue Refunding Bonds, Series 1997 (the "Series 1997 Bonds"), dated January 1, 1997, bearing interest from date at the rates per annum set forth below, all interest payable semiannually on April 1 and October 1 in each year, commencing on April 1, 1997, and maturing on October 1 in the following years and principal amounts: Year Amount Rate Year Amount Rate 1997 $100,000 3,60% 2006 $ 190,000 4.70% 1998 140,000 3,80 2007 200,000 4.80 1999 145,000 4.00 2008 210,000 4.90 2000 150,000 4.10 2009 220,000 5.00 2001 155,000 4.20 2010 230,000 5.10 2002 160,000 4.30 2012 500,000 5.00 2003 170,000 4.40 2017 1,490,000 5.125 2004 175,000 4.50 2021 1,490,000 5.25 2005 185,000 4.60 and of the Series 1997 Bonds there is now outstanding $5,220,000 aggregate principal amount thereof, being bonds maturing in the years 2002 through 2010, 2012, 2017 and 2021 and the Series 1997 Bonds are secured on a parity with the Series 1996A Bonds and the Series 1996B Bonds (collectively, the "Series 1996 Bonds") as to lien on the Pledged Revenues in accordance with the 1996 Resolution; and WHEREAS, in accordance with the provisions of the Act pertaining to the consolidation of Richmond County and the municipalities of Augusta and Hephzibah and the referenda held pursuant thereto, the certificates pertaining to such referenda and other information and documents are set forth in the validation proceeding pertaining to the Series 1996/1997 Bonds in the case of State of Georgia vs, Richmond County, same being Civil Action File No. 96-RCCV- 960, which validation proceeding in its entirety, by this reference thereto, is incorporated herein and made a part hereof; and WHEREAS, pursuant to a resolution adopted on August 22, 2000, as supplemented on September 15, 2000 (the "2000 Resolution"), the Consolidated Government issued $97,080,000 aggregate principal amount of Augusta, Georgia Water and Sewerage Revenue Bonds, Series 2000 (the "Series 2000 Bonds"), dated September 1,2000, bearing interest from date at the rates per annum set forth below, all interest payable semiannually on April 1 and October 1 in each year, commencing on April 1, 2000, and maturing on October 1 in the following years and principal amounts: -4- AO 708654.3 Year Amount Rate Year Amount Rate 2006 $ 355,000 4.40% 2014 $ 2,740,000 5.00% 2007 1,405,000 4.50 2015 2,875,000 5.15 2008 1,775,000 4.55 2016 3,020,000 5.25 2009 2,165,000 4.60 2017 3,180,000 5.25 2010 2,265,000 4,65 2018 3,345,000 5.25 2011 2,375,000 4.80 2022 15,240,000 5.25 2012 2,485,000 4.90 2026 18,705,000 5.25 2013 2,605,000 5.00 2030 32,545,000 5.25 and the entire $97,080,000 aggregate principal amount of the Series 2002 Bonds is now outstanding and the Series 2002 Bonds are secured on a parity with the Series 1996 Bonds and the Series 1997 Bonds (collectively, the "Series 1996/1997 Bonds") as to lien on the Pledged Revenues; and WHEREAS, the Consolidated Government has determined that it is necessary and essential to add to, extend, improve and equip the System and has further determined that by the expenditure on its part of approximately $130,000,000, the System can be added to, extended, improved and equipped in accordance with, or substantially in accordance with, the "Engineer's Report, Water and Sewerage Revenue Bonds, Series 2002," dated May 2002 (the "Engineering Report") and prepared by CH2M Hill (the "Consulting Engineers"); and WHEREAS, the Consolidated Government has received a recommendation from A.G. Edwards & Sons, Inc. and SunTrust Capital Markets, Inc. (collectively, the "Underwriter") that, due to present market conditions, it is advisable, feasible and in the best interest of the Consolidated Government to prepay that certain GEFA Loan, Contract/Project No. SRF95-001, incurred by the Consolidated Government on June 1, 1996 (the "Refunded GEFA Obligation"), at this time in order to effect a savings in the debt service requirements on the Consolidated Government's now outstanding water revenue obligations and the Consolidated Government has determined, after its own independent study and investigation, that it is in the best interest of the Consolidated Government and its citizens and taxpayers to prepay the Refunded GEF A Obligation as aforesaid; and WHEREAS, it has been determined that the most feasible method of raising the funds required to finance the capital improvements to the System now contemplated as well as in the future is for the Consolidated Government to issue the Augusta, Georgia Water and Sewerage Revenue Bonds, Series 2002 (the "Series 2002 Bonds") hereinafter authorized as additional parity bonds under the 1996 Resolution, as ratified, reaffirmed, broadened and extended by the 2000 Resolution (collectively, the "Prior Resolutions") and this 2002 Resolution; and WHEREAS, the Consolidated Government has received a recommendation from the Purchaser, and the Consolidated Government has after careful study and investigation determined, that the prepayment of the Refunded GEF A Obligation should be made by the prepayment in full of the Refunded GEF A Obligation within 90 days of the date of the issuance and delivery ofthe Series 2002 Bonds; and -5- AD 708654,3 WHEREAS, upon the recommendation of the Underwriter, with which recommendation the Consolidated Government concurs, it has been determined that the Consolidated Government should make due and legal provision to fund a reasonably required debt service reserve for the Series 2002 Bonds; and WHEREAS, the Consolidated Government has applied to Credit Issuers (as defined in the 1996 Resolution) for the issuance of a Credit Facility (as defmed in the 1996 Resolution) to enhance the Consolidated Government's credit by assuring owners of the Series 2002 Bonds that the principal of and interest on the Series 2002 Bonds will be paid promptly when due; and WHEREAS, it is contemplated that the Series 2002 Bonds will be sold in the near future and in finalizing the terms of the Series 2002 Bonds and to accept the offer of the Underwriter to purchase the Series 2002 Bonds, the Consolidated Government will adopt a resolution supplementing this 2002 Resolution and said supplemental resolution will set forth, among other things, the aggregate principal amount of the Series 2002 Bonds to be issued, the interest rate or rates that the Series 2002 Bonds hereinafter authorized to be issued will bear, the principal amount to mature in each year and the maturities of the Series 2002 Bonds which will be designated as term bonds and subject to mandatory redemption and the terms of any Credit Facility (as so described, the "2002 Supplemental Resolution"); and WHEREAS, it was provided in Section 9 of Article V of the 1996 Resolution, as ratified, reaffirmed, broadened and extended in Section 25 of the 2000 Resolution, that additional revenue bonds or obligations could be issued, from time to time, payable from the Pledged Revenues of the System on a parity with the outstanding Series 1996/1997 Bonds and Series 2000 Bonds (the "Outstanding Prior Bonds"), upon meeting certain terms and conditions, as set forth therein, which are as follows: (a) The payments covenanted to be made into the Sinking Fund, as the same may have been enlarged and extended in any proceedings authorizing the issuance of any Additional Bonds, must be currently being made in full amount as required and the Debt Service Account and Reserve Account held within the Sinking Fund must be at their proper respective balances. (b) Except in the case of Additional Bonds issued for refunding purposes pursuant to Article V, Section 8 of the 1996 Resolution, there shall have been procured and filed with the Consolidated Government (i) a report by Independent Certified Public Accountants to the effect that the Pledged Revenues (excluding Investment Earnings, if any, on construction funds) for a period of 12 consecutive months out of the most recent 18 consecutive months preceding the month of adoption of the proceedings authorizing the issuance of such Additional Bonds must have been equal to at least 1.25 times the maximum Debt Service Requirement for any succeeding Sinking Fund Year on the [Outstanding] Prior Bonds and any other issue or issues of Additional Bonds therewith then outstanding and on the proposed Additional Bonds to be issued, or in lieu of the foregoing formula, if a new schedule of rates and charges for the services, facilities and commodities furnished by the System shall have been adopted and shall be in effect and Independent Certified Public Accountants shall certify that -6- AO 708654,3 -- ------.--.- ..-----.--.:.....~ l....-..____--..:.._~,_..:...._ _ had this new rate schedule been in effect during the period described above, the Pledged Revenues of the System would have equaled the requirements of the above formula; or (ii) (x) a report by Independent Certified Public Accountants to the effect that the historical Pledged Revenues (excluding Investment Earnings, if any, on construction funds) for a period of 12 consecutive months out ofthe most recent 18 consecutive months preceding the month of adoption of the proceedings authorizing the issuance of the proposed Additional Bonds were equal to at least 1.10 times the historical Debt Service Requirement on all Bonds (other than [Subordinate Bonds]) which were outstanding during such 12-month period, and (y) a report by the Consulting Engineers to the effect that the forecasted Pledged Revenues (excluding Investment Earnings, if any, on construction funds) for each Fiscal Year in the Forecast Period are expected to equal at least 1.25 times the maximum annual Debt Service Requirement on all Bonds (other than [Subordinate Bonds]) which will be outstanding immediately after the issuance of the proposed Additional Bonds, in the then current or any succeeding Sinking Fund Year. The reports by the Independent Certified Public Accountant that are required by this paragraph (b) may contain pro forma adjustments to historical Pledged Revenues equal to 100 percent of the increased annual amount attributable to any revision in the schedule of rates, fees and charges for the services, facilities and commodities furnished by the System, imposed prior to the date of delivery of the proposed Additional Bonds and not fully reflected in the historical Pledged Revenues actually received during such 12-month period. Such pro forma adjustments shall be based upon a report of the Consulting Engineers as to the amount of Operating Revenues which would have been received during such 12-month period had the new rate schedule been in effect throughout such 12-month period. For the purpose of calculating the maximum Debt Service Requirements under this subparagraph (b), the maximum annual Debt Service Requirements shall be reduced by an amount equal to any capitalized interest funded from the proceeds of the Additional Bonds proposed to be issued in each succeeding Sinking Fund Year for the period for which said interest has been capitalized. (c) An Independent Certified Public Accountant shall certify in triplicate to the Consolidated Government that the requirements of subparagraph (a) above are being complied with and that the requirements of subparagraph (b) above have been met. A copy of such certificate shall be furnished to the Designated Representative ofthe original purchasers of the [Outstanding] Prior Bonds. (d) Except when Bonds are being issued solely for the purpose of refunding outstanding Bonds, the Consulting Engineers for the Consolidated Government shall provide the Consolidated Government with a written report recommending the additions, extensions and improvements to be made to the System and stating that same are feasible, designating in reasonable detail the work and installation proposed to be done and the estimated cost of -7- AO 708654.3 accomplishing the undertaking. The Consulting Engineers shall set forth in said report the forecasted Pledged Revenues to be derived from the System which will be available for debt service payments in each of the next 10 years and shall indicate the projected coverage of such debt service payments in each succeeding Sinking Fund Year. An executed duplicate original of such report of the Consulting Engineers as required by this provision shall be furnished to the Designated Representative of the original purchasers of the [Outstanding ]Prior Bonds issued hereunder not less than 10 days before any proceedings are taken to actually issue such Additional Bonds. (e) The Consolidated Government shall pass proper proceedings reciting that all of the above requirements have been met, shall authorize the issuance of the Additional Bonds and shall provide in such proceedings, among other things, the date such Additional Bonds shall bear, the rate or rates of interest and maturity dates, as well as the registration and redemption provisions. Except for Additional Bonds that bear interest at a Variable Rate, the interest on the Additional Bonds of any such issue shall fall due on April 1 and October 1 of each year, and the Additional Bonds shall mature in installments on October 1, but, as to principal, not necessarily in each year or in equal installments. Any such proceeding or proceedings shall require the Consolidated Government to increase the monthly payments then being made into the Sinking Fund to the extent necessary to pay the principal of and the interest on the [Outstanding] Prior Bonds and on all such Additional Bonds therewith then outstanding and on the proposed Additional Bonds to be issued as same become due and payable, either at maturity or by proceedings for mandatory redemption, in the then current Sinking Fund Year, and to create upon the issuance of the proposed Additional Bonds to be issued a reserve in the Reserve Account at least equal to the Reserve Requirement on the [Outstanding] Prior Bonds and any Additional Bonds therewith then outstanding and on the proposed Additional Bonds to be issued and to maintain said reserve in an amount sufficient for that purpose; provided, however, the Consolidated Government may satisfy funding of the required reserve through the purchase of a Reserve Account Surety Bond meeting the requirements of the Resolutions. Any such proceeding or proceedings shall restate and reaffirm, by reference, all of the applicable terms, conditions and provisions of the Resolutions. If any Additional Bonds would bear interest at a Variable Rate, the resolution under which such Additional Bonds are issued shall provide a maximum rate of interest per annum which such Additional Bonds may bear. In connection with the issuance of any Additional Bonds under the Resolutions, the Consolidated Government may obtain or cause to be obtained one or more Credit Facilities providing for payment of all or a portion of the principal of, premium, if any, or interest due or to become due on such Additional Bonds, providing for the purchase of such Additional Bonds by the Credit Issuer, or providing funds for the purchase of such Additional Bonds by the Consolidated Government. In connection therewith the Consolidated Government shall enter into Credit Facility Agreements with such Credit Issuers providing for, among -8- AO 708654,3 .--~-""""""'--..";'--:"" - .--.......- other things, (i) the payment of fees and expenses to such Credit Issuer for the issuance of such Credit Facility; (ii) the terms and conditions of such Credit Facility and the Additional Bonds affected thereby; and (iii) the security, if any, to be provided for the issuance of such Credit Facility. The Consolidated Government may in a Credit Facility Agreement agree to directly reimburse such Credit Issuer for amounts paid under the terms of such Credit Facility, together with interest thereon; provided, however, that no Reimbursement Obligation shall be created, for purposes of the Resolutions, until amounts are paid under such Credit Facility. Any such Reimbursement Obligation shall be deemed to be a part of the Additional Bonds to which the Credit Facility relates which gave rise to such Reimbursement Obligation, and references to principal and interest payments with respect to such Additional Bonds shall include principal and interest (except, for Additional Interest) due on the Reimbursement Obligation incurred as a result of payment of such Additional Bonds with the Credit Facility. All other amounts payable under the Credit Facility Agreement (including any Additional Interest) shall be fully subordinate to the payment of debt service on Bonds (other than [Subordinate Bonds D. Any such Credit Facility shall be for the benefit of and secure such Additional Bonds or portion thereof as specified in the applicable bond resolution authorizing such Additional Bonds. (f) Such Additional Bonds or obligations and all proceedings relative thereto, and the security therefor, shall be validated as prescribed by law. WHEREAS, as required by the Prior Resolutions, attached hereto as Exhibit A is a certificate of an Independent Certified Public Accountant (as defined in the 1996 Resolution) certifying to the Commission that the Consolidated Government has complied and is now complying with the requirements of Paragraph (a) and that the Consolidated Government has met the requirements of Paragraph (b )(ii)(x) as set forth above and a copy of said certificate has been furnished to the Designated Representative of the original purchasers of the Outstanding Prior Bonds; and WHEREAS, as required by the 1996 Resolution, attached hereto as Exhibit B is the Engineering Report recommending the additions, extensions and improvements to be made to the System and that same are feasible, describing in reasonable detail the undertaking and the estimated cost thereof, setting forth the forecasted Pledged Revenues to be derived from the System which will be available for debt service payments on the Outstanding Prior Bonds and the proposed Additional Bonds hereinafter authorized to be issued in each of the next 10 years and the projected coverage of such debt service payments in each succeeding Sinking Fund Year and that the requirements of Paragraph (b)(ii)(y) as set forth above have been met. WHEREAS, prior to the actual issuance and delivery of the Series 2002 Bonds, the Consolidated Government will enter into a contract with SunTrust Bank (the "Paying Agent"), pursuant to which the Paying Agent will agree to act as Paying Agent and as Bond Registrar for the Series 2002 Bonds and to perform various functions with respect to the Series 2002 Bonds, including, but not limited to, the authentication of the Series 2002 Bonds by the manual signature of a duly authorized officer of the Paying Agent, as Bond Registrar, the registration, transfer, exchange and related mechanical and clerical functions, as well as the preparation, signing and -9- AO 708654.3 issuance of checks and drafts in payment of the principal of and interest on the Series 2002 Bonds as same become due and payable; and WHEREAS, the Consolidated Government has obtained certain loans from the Georgia Environmental Facilities Authority ("GEF A"), and prior to the issuance of the Series 2002 Bonds GEF A will consent to the issuance of the Outstanding Prior Bonds and any additional revenue bonds secured by a lien on the Pledged Revenues of the System ranking on a parity as to lien on the Pledged Revenues with the Outstanding Prior Bonds, and that the lien on the Pledged Revenues of the System securing the payment of said loans is in all respects junior and subordinate to the lien on the Pledged Revenues securing the payment of the Outstanding Prior Bonds and any parity bonds therewith; and WHEREAS, the Outstanding Prior Bonds are the only revenue obligations of the Consolidated Government now outstanding having as security for the payment thereof and interest thereon a fIrst or prior lien on the Pledged Revenues of the System and the Consolidated Government has been and is now complying and will continue to comply in all respects with the applicable terms, covenants and provisions of the Prior Resolutions. NOW, THEREFORE, BE IT RESOL VED by the Augusta-Richmond County Commission and it is hereby resolved by the authority of same, as follows: Section 1. Definitions. Capitalized terms used herein and not defIned shall have the meanings set forth in the Prior Resolutions. For the purpose of this 2002 Resolution the definitions set forth in the Prior Resolutions shall be and are hereby amended and added to, effective as of the date of the issuance and delivery of the Series 2002 Bonds herein authorized to be issued, as follows: "Additional Bonds" shall mean any revenue bonds of the Consolidated Government ranking on a parity with the Outstanding Prior Bonds and the Series 2002 Bonds which may hereafter be issued pursuant to Article V, Section 8 of the 1996 Resolution, Section 25 of the 2000 Resolution and Section 25 of this 2002 Resolution. "Beneficial Owner" shall mean, with respect to the Series 2002 Bonds, the owners of a benefIcial interest in the Series 2002 Bonds registered in Book-Entry Form, "Bond Registrar," when used with respect to the Series 2002 Bonds, means SunTrust Bank, its successors and assigns or any successor commercial bank or trust company appointed by the Consolidated Government to maintain, in accordance with the provisions of the Resolutions, the registration books of the Consolidated Government for any series of Bonds secured by the Resolutions. "Book-Entry Form" or "Book-Entry System" shall mean, with respect to the Series 2002 Bonds, a form or system, as applicable, under which (i) the ownership of beneficial interests in the Series 2002 Bonds and bond service charges may be transferred only through book-entry and (ii) physical Series 2002 Bonds in fully registered, certifIcated form are registered only in the name of a Securities Depository or its nominee as holder, with physical Series 2002 Bond certificates immobilized in the custody of a Securities Depository. -10- AO 708654,3 ~~ -. --. -.~- ----- - - ~_.~...- "Consulting Engineer," when used with respect to the Series 2002 Bonds, shall mean CH2M Hill, Atlanta, Georgia, or its successors or such other engineer, engineers or engineering firm that might hereafter be employed in relation to the supervision of the additions, extensions and improvements to be made to the System and in relation to the services to be rendered as contemplated by this 2002 Resolution. "Debt Service Requirement" means the amounts required in each Sinking Fund Year to pay the principal of and interest on the Outstanding Prior Bonds, the Series 2002 Bonds and any Additional Bonds as same become due and payable; provided, however, with respect to any term obligation which is required to be repaid prior to its stated maturity through the operation of a mandatory sinking fund, the amount of principal coming due in any Sinking Fund Year with respect to such obligation shall be the amount required to be deposited into the sinking fund for the retirement of the principal amount of such obligation rather than the entire principal amount of such debt coming due at the stated maturity. If any Bonds outstanding or proposed to be issued bear interest at a Variable Rate, the interest rate per annum on such Bonds for purposes of calculating the Debt Service Requirement shall be the lesser of (a) the 30-year Revenue Bond Index, (b) the maximum interest rate for such Bonds permitted by the supplemental bond resolution authorizing the issuance thereof or (c) the "cap" rate, if any, established with respect to such bonds in a related Hedge Agreement. With respect to any Bonds secured by a Credit Facility, Debt Service Requirement shall include (a) any commission or commitment fee obligations with respect to such Credit Facility, (b) the outstanding amount of any Reimbursement Obligation owed to the relevant Credit Issuer and the interest thereon, (c) any Additional Interest owned on Bank Bonds to a Credit Issuer and (d) any remarketing agent fees. With respect to Bonds for which there exists a related Hedge Agreement, Debt Service Requirement shall include the net amounts paid with respect to such Hedge Agreement. "Designated Representative of the original purchasers" or "Representative of the original purchaser," when used with respect to the Series 2002 Bonds, shall be construed to mean A.G. Edwards & Sons, Inc., Atlanta, Georgia, its successors or assigns. "Engineering Report," when used with respect to the Series 2002 Bonds, shall mean the report entitled "Engineer's Report, Water and Sewerage Revenue Bonds, Series 2002," dated May 2002, and prepared by the Consulting Engineer. "Investment Earnings" means all interest received on and profits derived from investments made with Pledged Revenues or any moneys in the funds and accounts established under Article IV and Article V of the 1996 Resolution, as such accounts may be redesignated under this 2002 Resolution. "Outstanding Prior Bonds" shall mean the outstanding Series 1996/1997 Bonds and Series 2000 Bonds. "Paying Agent," when used with respect to the Series 2002 Bonds, means SunTrust Bank, Atlanta, Georgia, its successors and assigns or any successor commercial bank or trust company appointed by the Consolidated Government to serve as paying agent, in accordance with the terms of the Resolutions and any supplemental resolution, for any series of Bonds secured by the Resolutions. -11- AO 708654.3 "Prior Resolutions" means collectively the 1996 Resolution and the 2000 Resolution. "Reserve Requirement" means the least of (i) the highest Debt Service Requirement in the then current or any succeeding Sinking Fund Year, (ii) 10 percent of the aggregate principal amount of the Prior Bonds, the Series 2002 Bonds and Additional Bonds outstanding, or (iii) 125 percent of the average annual Debt Service Requirement in the current or any succeeding Sinking Fund Year. "Resolutions" means collectively the 1996 Resolution, the 2000 Resolution and this 2002 Resolution, and as same may be supplemented from time to time. "Series 2002 Bonds" means the Consolidated Government's Water and Sewerage Revenue Bonds, Series 2002 in the aggregate principal amount not to exceed $154,070,000 and authorized to be issued pursuant to Section 2 of this 2002 Resolution. "Sinking Fund Custodian," when used with respect to the Series 2002 Bonds, means SunTrust Bank, Atlanta, Georgia, its successors and assigns, or any successor custodian for the Sinking Fund hereafter appointed by the Consolidated Government; provided, however, the Sinking Fund Custodian shall at all times be a conunercial bank or trust company. "Subordinate Bonds" shall mean additional bonds or obligations issued form time to time payable from the Pledged Revenues and secured by a lien on the Pledged Revenues junior and subordinate to the lien created by the Resolutions. "2002 Capitalized Interest Fund" shall mean the "Augusta, Georgia Water and Sewerage System Capitalized Interest Fund-2002" created in Section 18 of this 2002 Resolution. "2002 Construction Fund" shall mean the "Augusta, Georgia Water and Sewerage System Construction Fund-2002" created in Section 17 of this 2002 Resolution. "2002 Construction Fund Depository" means SunTrust Bank, its successors and assigns, or any successor custodian for the 2002 Construction Fund hereafter appointed by the Consolidated Government; provided, however, the 2002 Construction Fund Depository shall at all times be a conunercial bank or trust company. "2002 Resolution" means this resolution of the Augusta-Richmond County Commission of Augusta, Georgia adopted May 30, 2002, ratifying, reaffIrming, broadening and extending the Prior Resolutions and authorizing the issuance of the Series 2002 Bonds, as same may be supplemented from time to time, including by the 2002 Supplemental Resolution. Whenever used in this 2002 Resolution, the singular shall include the plural and the plural shall include the singular, unless the context otherwise indicates. Section 2. Authorization. All the terms, provisions and conditions contained in Section 9 of Article V of the 1996 Resolution, as ratified, reaffirmed, broadened and extended in Section 25 of the 2000 Resolution, having been met and complied with, there be and there is hereby authorized to be issued, pursuant to and in conformity with the Prior Resolutions, the -12- AO 708654,3 -, ~- ...-- ~.,- - - ~- ~- ~ Constitution of the State of Georgia, the Revenue Bond Law and the Act, revenue bonds in the aggregate principal amount not to exceed $154,070,000 for the purpose of providing funds to fmance, in whole or in part, the cost of adding to, extending, improving and equipping the System, acquiring the necessary property or rights in property therefor, both real and personal, to pay a portion of the interest accruing on the Series 2002 Bonds during the estimated period of construction of additions, extensions and improvements to the System, to prepay in full the Refunded GEF A Obligation, to fund a reasonably required debt service reserve and to pay all expenses necessary to accomplish the foregoing. The revenue bonds shall be designated "Augusta, Georgia Water and Sewerage Revenue Bonds, Series 2002," shall be dated June 1,2002, or the first day of the month in which issued or delivered, or the fust day of the month preceding the month of issuance and delivery, all being at the option of the Commission, shall be initially issued as book-entry only bonds in fully registered form without coupons, shall be in the denomination of $5,000 or any integral multiple thereof, shall be numbered R-l upward, shall be transferable to subsequent owners as hereinafter provided, shall bear interest from date at such rate or rates per annum not exceeding 6.0 percent in any year, all interest payable semiannually on April 1 and October 1 in each year, commencing on October 1,2002, and the principal shall mature on October 1 in the years 2002 through 2032, in such principal amounts so that the maturing annual debt service in any calendar year on the Series 2002 Bonds will not exceed $23,001,205 and the maturing annual debt service in any calendar year on the Outstanding Prior Bonds and the Series 2002 Bonds will not exceed $23,001,470. The principal amount of the Series 2002 Bonds shall be payable at maturity, unless redeemed prior thereto as hereinafter provided, upon presentation and surrender thereof at the principal corporate trust office of the Paying Agent in Atlanta, Georgia, and payments of interest on the Series 2002 Bonds shall be made by check or draft payable to the registered owner as shown on the bond registration book kept by the Bond Registrar at the close of business on the fifteenth day of the calendar month next preceding the April 1 and October 1 interest payment dates and such payments of interest shall be mailed to the registered owner at the address shown on the bond registration book. Notwithstanding the foregoing, so long as the Series 2002 Bonds are in Book-Entry Form, principal and interest shall be payable to the Securities Depository or its nominee, all as set forth in Section 7 hereof. Both the principal of and interest on the Series 2002 Bonds shall be payable in lawful money of the United States of America. Section 3. Execution: Form of Series 2002 Bonds. The Series 2002 Bonds shall be executed on behalf of the Consolidated Government by use of the manual or facsimile signature of the Mayor of the Commission and attested by the manual or facsimile signature of the Clerk of the Commission and the official seal of the Consolidated Government shall be impressed thereon or a facsimile thereof imprinted thereon, and the Series 2002 Bonds shall be authenticated by the manual signature of a duly authorized signatory of the Bond Registrar. The validation certificate to be printed on the Series 2002 Bonds shall be executed by use of the manual or facsimile signature of the Clerk of the Superior Court of Richmond County and the official seal of said Court shall be impressed thereon or a facsimile thereof shall be imprinted thereon. If there is a municipal bond insurance policy insuring payment of the Series 2002 Bonds when due, there shall be printed on the Series 2002 Bonds a Statement of Insurance prepared by the Credit Issuer. In case any officer whose signature shall appear on the Series 2002 Bonds shall cease to be such officer before delivery of such Series 2002 Bonds, such signature shall nevertheless be valid and sufficient for all purposes the same as if such officer -13- AO 708654,) had remained in office until such delivery. The Series 2002 Bonds, the certificate of authentication and registration, form of assignment and the certificate of validation to be endorsed upon the Series 2002 Bonds shall be in substantially the following form, with such variations, omissions and insertions as are required or permitted by this 2002 Resolution, to wit: -14- AO 708654,) - -.- _.-'-~ -- ....._:;....... - No.R- $ UNITED STATES OF AMERICA STATE OF GEORGIA AUGUSTA, GEORGIA WATERANDSE~RAGEREVENUEBOND SERIES 2002 BOND DATE: INTEREST RATE: MATURITY DATE: CUSIP: FOR VALUE RECEIVED, AUGUSTA, GEORGIA (the "Consolidated Government"), a political subdivision of the State of Georgia, hereby promises to pay solely from the special fund provided therefor, as hereinafter set forth, to CEDE & CO., or registered assigns, the principal sum of DOLLARS in lawful money of the United States of America on the maturity date specified above, unless redeemed prior thereto as hereinafter provided, upon presentation and surrender hereof at the principal corporate trust office of SunTrust Bank, Atlanta, Georgia, Paying Agent and Bond Registrar, and to pay to the registered owner hereof, solely from said special fund, interest on said principal amount from the date hereof or from the most recent interest payment date to which interest has been paid, at the rate per annum specified above, semiannually on April 1 and October 1 in each year (each an "Interest Payment Date"), commencing October 1, 2002, until payment of the principal amount hereof. Payments of interest on this Bond shall be made by check or draft payable to the registered owner as shown on the bond registration book kept by the Bond Registrar at the close of business on the fifteenth day of the calendar month next preceding each Interest Payment Date and such interest payments shall be mailed to the registered owner at the address shown on the bond registration book. This Bond is one of a duly authorized issue in the aggregate principal amount of $154,070,000 (the "Series 2002 Bonds") of like tenor, except as to numbers, denominations, interest rates and dates of maturity and redemption provisions, issued by the Consolidated Government for the purpose of providing funds to [mance, in whole or in part, the cost of adding to, extending, improving and equipping the water and sewerage system (the "System"), acquiring the necessary property or rights in property therefor, both real and personal, to pay a portion of the interest accruing on the Series 2002 Bonds during the estimated period of construction of additions, extensions and improvements to the System, to prepay in full a loan from the Georgia Environmental Facilities Authority, to fund a reasonably required debt service reserve and to pay all expenses necessary to accomplish the foregoing. The Series 2002 Bonds are issued under authority of the Revenue Bond Law of the State of Georgia (Title 36, Chapter 82, Article 3 of the Official Code of Georgia Annotated, as amended), and an act of the General Assembly of the State of Georgia (Georgia Laws 1995, p. 3648 et seq" as amended), and were duly authorized by the Augusta-Richmond County Commission (the "Commission") by a resolution adopted on October 21, 1996, as supplemented on December 3 and 17, 1996 (the "1996 Resolution"), a resolution adopted on August 22, 2000, as supplemented September 15, 2000 (the "2000 Resolution") and a resolution adopted on May _, 2002, as supplemented on _, 2002 -15- AO 708654,3 (the "2002 Resolution" and together with the 1996 Resolution and the 2000 Resolution, the "Resolutions"). The Series 2002 Bonds rank on a parity as to lien on the Pledged Revenues (as hereinafter defined) of the System with the Consolidated Government's outstanding Water and Sewerage Revenue Refunding and Improvement Bonds, Series 1996A, Taxable Water and Sewerage Revenue Refunding Bonds, Series 1996B, Water and Sewerage Revenue Refunding Bonds, Series 1997 and Water and Sewerage Revenue Bonds, Series 2000 (collectively, the "Outstanding Prior Bonds"). In addition to the Outstanding Prior Bonds and the Series 2002 Bonds (collectively, the "Bonds"), the Consolidated Government may issue, under certain terms and conditions as provided in the Resolutions, additional revenue bonds, and if issued, such bonds will rank on a parity as to lien on the Pledged Revenues of the System with the Bonds. Reference to the Resolutions is hereby made for a complete description of the funds charged with, and pledged to, the payment of the principal of and the interest on the Bonds or any other issue of bonds issued on a parity therewith, the nature and extent of the security, a statement of rights, duties and obligations of the Consolidated Government, the rights of the owners of the Series 2002 Bonds and the terms and conditions under which additional bonds may be issued, to all the provisions of which the owner hereof, by the acceptance of this Bond, assents. The person in whose name this Bond is registered on the registration books kept by the Bond Registrar shall be deemed to be the owner of this Bond for all purposes. The Series 2002 Bonds are being issued by means of a book-entry system, with actual Series 2002 Bonds immobilized at The Depository Trust Company, New York, New York (the "Securities Depository"), or its successor as Securities Depository, evidencing ownership of the Series 2002 Bonds in principal amounts of $5,000 or integral multiples thereof, and with transfers of beneficial ownership effected on the records of the Securities Depository and its participants pursuant to the rules and procedures established by the Securities Depository. Actual Series 2002 Bonds are not available for distribution to the owners of beneficial interests in the Series 2002 Bonds registered in book-entry form (the "Beneficial Owners"), except under the limited circumstances set forth in the 2002 Resolution, The principal, redemption premium (if any) and interest on the Series 2002 Bonds are payable by the Paying Agent to Cede & Co" as nominee of the Securities Depository. Transfers of principal, redemption premium (if any) and interest payments to participants of the Securities Depository is the responsibility of the Securities Depository; transfers of principal, redemption premium (if any) and interest to Beneficial Owners of the Series 2002 Bonds by participants of the Securities Depository will be the responsibility of such participants and other nominees of Beneficial Owners. Neither the Consolidated Government nor the Paying Agent is responsible or liable for maintaining, supervising or reviewing the records maintained by the Securities Depository, its participants or persons acting through such participants. If the Series 2002 Bonds are no longer registered to a Securities Depository or its nominee, this Bond may be registered as transferred only upon the registration books kept for that purpose at the principal corporate trust office of the Bond Registrar by the registered owner hereof in person, or by his or her attorney duly authorized in writing, upon presentation and surrender to the Bond Registrar of this Bond duly endorsed for registration of transfer or accompanied by an assignment duly executed by the registered owner or his or her attorney duly authorized in writing, and thereupon a new registered bond certificate, in the same aggregate principal amount and of the same maturity shall be issued to the transferee in exchange therefor. In addition, if the Series 2002 Bonds are no longer registered to a Securities Depository, this Bond may be exchanged by the registered owner hereof or his or her duly authorized attorney upon presentation at the principal corporate trust office of the Bond -16- AO 708654,} -.-.- -,,~ ~ --------.. Registrar for an equal aggregate principal amount of Series 2002 Bonds of the same maturity and in any authorized denominations in the manner, subject to the conditions and upon payment of charges, if any, provided in the Resolutions. This Bond is transferable only upon the bond registration book kept for that purpose at the principal corporate trust office of the Bond Registrar by the registered owner hereof in person, or by attorney duly authorized in writing, upon the surrender and presentation to the Bond Registrar of this Bond duly endorsed for transfer or accompanied by an assignment duly executed by the registered owner or attorney duly authorized in writing, and thereupon a new registered bond, in the same aggregate principal amount and of the same maturity shall be issued to the transferee in exchange therefor. The Series 2002 Bonds are issuable in the form of registered bonds in the denomination of $5,000 or any integral multiple thereof and are exchangeable at the principal corporate trust office of the Bond Registrar in the manner, subject to the conditions and upon payment of charges, if any, provided in the Resolutions. The Bonds and such revenue bonds of the Consolidated Government as may in the future be issued on a parity therewith, are equally and ratably secured by a pledge of and a lien on the "Pledged Revenues," which are defmed in the Resolutions to include net operating revenues of the System (gross operating revenues of the System after provision for payment of all reasonable expenses of operation and maintenance) and earnings on investments made with moneys and securities from time to time on deposit in the funds and accounts established in the Resolutions. The Resolutions provide, among other things, for prescribing and revising rates and collecting fees and charges for the services, facilities and commodities furnished by the System, as now existent and as hereinafter added to, extended, improved and equipped to the extent necessary to produce revenues sufficient (i) to pay the reasonable and necessary costs of operating and maintaining the System, including any contractual obligations incurred pertaining to the operation of the System, (ii) to produce Pledged Revenues (excluding earnings on investments made with moneys and securities from time to time on deposit in the construction funds) in each Fiscal Year (as defined in the 1996 Resolution) equal to at last 110 percent of the amount required to discharge the payment of the Bonds and any bonds issued on a parity therewith then outstanding as the same become due and payable, (iii) to pay into the special fund designated "Augusta, Georgia Water and Sewerage System Sinking Fund" the amounts required to pay the principal of and the interest on the Bonds and any other bonds hereafter issued on a parity therewith as the same become due payable, either at maturity or by proceedings for mandatory redemption, and to create and maintain a reserve therein for that purpose, and (iv) to create and maintain a reserve for extensions and improvements to the System. This Bond shall not be deemed to constitute a debt of the State of Georgia or the Consolidated Government nor a pledge of the faith and credit of said State or Consolidated Government, nor shall the State or Consolidated Government be subject to any pecuniary liability hereon. This Bond shall not be payable from, nor be a charge upon, any funds other than the Pledged Revenues, and is payable solely from the special fund provided therefor from the Pledged Revenues, including all future additions thereto and any other moneys deposited therein. No owner of this Bond shall ever have the right to enforce payment hereof against any -17- AO 708654.3 other property of the State of Georgia or the Consolidated Government, nor shall this Bond constitute a charge, lien or encumbrance, legal or equitable, upon any other property of the Consolidated Government other than the Pledged Revenues pledged to the payment hereof. The issuance of this Bond shall not directly, indirectly or contingently obligate the State or the Consolidated Government to levy or to pledge any form of taxation whatever therefor or to make any appropriation for its payment. The Series 2002 Bonds may be redeemed prior to their respective maturities, either in whole at any time or in part on any date not earlier than October 1, _ from any moneys available for such purpose as provided in the 2002 Resolution by payment of the principal amount thereof and accrued interest thereon to date of redemption, together with a premium of _ percent of such principal amount if redeemed on or prior to September 30, _, _ percent of such principal amount if redeemed thereafter and on or prior to September 30, _, and at par without a premium if redeemed thereafter and before maturity. In addition, the Series 2002 Bonds maturing October 1, _ are subject to mandatory redemption prior to maturity in accordance with the provisions of the 2002 Resolution, in part, by lot in such manner as may be designated by the Bond Registrar at par plus accrued interest to the redemption date, in the following principal amounts on October 1 in the following years: Year Amount $ maturity. principal amount of Bonds maturing October 1, shall be paid at Notice designating the Bonds (or the portion of the principal amount of the Series 2002 Bonds in multiples of $5,000) to be acquired by redemption, as aforesaid, shall be mailed, postage prepaid, not less than 30 days nor more than 60 days prior to the redemption date to all registered owners of Series 2002 Bonds to be redeemed in whole or in part at the addresses which appear in the bond registration book, but failure so to mail any such notice shall not affect the validity of the proceedings for such redemption or cause the interest to accrue on the principal amount of the Series 2002 Bonds so designated for redemption after the redemption date. To the extent and in the manner permitted by the Resolutions, modifications, alterations, amendments, additions and recisions of the provisions of the Resolutions, or of any resolution supplemental thereto or of the Series 2002 Bonds, may be made by the Consolidated Government with the consent of the owners of at least 65 percent in aggregate principal amount of the Series 2002 Bonds then outstanding, including any parity obligations therewith then outstanding, and without the necessity for notation hereon of reference thereto. -18- AO 708654,3 ----..-. .-- .....---~~---_._- --~- - - ~-- ----;....... -"'"~.. This Bond is issued with the intent that the laws of the State of Georgia shall govern its constructi on. In case of default, the owner of this Bond shall be entitled to the remedies provided in the Resolutions authorizing its issuance and in said Revenue Bond Law and any amendments thereto. It is hereby recited and certified that all acts, conditions and things required to be done precedent to and in the issuance of this Bond have been done, have happened and have been performed in due and legal form as required by law, and that provision has been made for the allocation from the anticipated revenues of the System, as now existent and as hereafter added to, extended, improved and equipped, of amounts sufficient to pay the principal of and the interest on the Series 2002 Bonds as the same mature, or are acquired by mandatory redemption, and to create and maintain a reserve for that purpose, and that said revenues are irrevocably allocated and pledged to the payment of the Series 2002 Bonds and the interest thereon. This Bond shall not be valid or become obligatory for any purpose or be entitled to any security or benefit under the Resolutions until this Bond shall have been authenticated and registered upon the bond registration book kept for that purpose by the Bond Registrar, which authentication and registration shall be evidenced by the execution by the manual signature of a duly authorized signatory of the Bond Registrar of the certificate hereon. IN WITNESS WHEREOF, Augusta, Georgia has caused this Bond to be executed by use of the [manual][facsimile] signature of the Mayor of the Commission of the Consolidated Government and [its official seal to be impressed hereon] [a facsimile of its official seal to be imprinted hereon] and attested by use of the [manual][facsimile] signature of the Clerk of the Commission of the Consolidated Government, as of 1,2002. AUGUSTA, GEORGIA (S E A L) By: Mayor, Augusta-Richmond County Commission Attest: Clerk -19- AO 708654.3 Date of Authentication and Registration: CERTIFICATE OF AUTHENTICATION AND REGISTRATION This Bond is one of the Series 2002 Bonds described in the resolutions of _, 2002 and ,2002. SUNTRUST BANK, as Bond Registrar By: Authorized Signatory ********** VALIDATION CERTIFICATE STATE OF GEORGIA ) ) COUNTY OF RICHMOND) The undersigned Clerk of the Superior Court of Richmond County, State of Georgia, HEREBY CERTIFIES that this Bond was validated and confirmed by judgment of the Superior Court of Richmond County, Georgia, on _, 2002 and that no intervention or objection was filed in the proceedings validating same and that no appeal from said judgment of validation has been taken. .. WITNESS my [facsimile] signature and seal of the Superior Court of Richmond County, Georgia. (S E A L) Clerk, Superior Court, Richmond County, Georgia * * * * * * * * * * -20- AO 708654.3 ASSIGNMENT FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto [please print or typewrite name and address including postal zip code of assignee.] [please insert Social Security or Tax Identification Number.] the within bond and all rights thereunder, hereby constituting and appomtmg attorney to transfer this Bond on the bond registration book kept for such purpose by the Bond Registrar, with full power of substitution in the premises. DATED (Signature Guaranteed) Registered Owner Notice: Signature(s) must be guaranteed by an eligible guarantor institution (such as banks, stockbrokers, savings and loan associations and credit unions) with membership in an approved Signature Guarantee Medallion Program pursuant to S.E.C. Rule 17Ad-IS. Notice: The signature(s) on this assignment must correspond with the name as it appears on the face of the within bond in every particular without alterations, enlargement or any change whatsoever. ********** STATEMENT OF INSURANCE ********** -21- AO 708654.3 Section 4. Required Authentication; Proof of Ownership. Only those Series 2002 Bonds which shall have endorsed thereon a certificate of authentication and registration substantially in the form hereinbefore set forth, duly executed by the manual signature of an authorized signatory of the Bond Registrar shall be entitled to any benefit or security under this 2002 Resolution and such certificate upon any of the Series 2002 Bonds when duly executed shall be conclusive evidence that such Series 2002 Bond has been duly authenticated, registered and delivered. It shall not be necessary that the same signatory of the Bond Registrar sign the certificate of authentication and registration on all of the Series 2002 Bonds that may be issued hereunder at anyone time. The person in whose name any Series 2002 Bond shall be registered shall be deemed and regarded as the absolute owner thereof for all purposes and the payment of the principal amount, interest and premium, if any, shall be made only to or upon the order of the registered owner thereof. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Series 2002 Bond, including redemption premium, if any, and the interest thereon to the extent of the sums so paid. Section 5. Bond Registrar; Transfer and Exchanee. The Bond Registrar shall keep the bond registration book for the registration of the Series 2002 Bonds and for the registration of transfers of the Series 2002 Bonds as herein provided. The transfer of any Series 2002 Bond shall be registered upon the bond registration book upon the surrender and presentation of the Series 2002 Bond to the Bond Registrar duly endorsed for transfer or accompanied by an assignment duly executed by the registered owner or attorney authorized in writing in such form as shall be satisfactory to the Bond Registrar. Upon any such registration of transfer, the Bond Registrar shall authenticate and deliver in exchange for such Series 2002 Bond or Series 2002 Bonds so surrendered, a new Series 2002 Bond or Series 2002 Bonds registered in the name of the transferee, of the same series and maturity, in any denomination or denominations authorized by this 2002 Resolution, and in an aggregate principal amount equal to the aggregate principal amount of the Series 2002 Bonds so surrendered. Any Series 2002 Bond, upon presentation and surrender thereof to the Bond Registrar, together with an assignment duly executed by the registered owner or duly authorized attorney, in such form as may be satisfactory to the Bond Registrar, may be exchanged, at the option of the registered owner, for an aggregate principal amount of Series 2002 Bonds of the same series and maturity equal to the principal amount of the Series 2002 Bond so surrendered and of any authorized denomination or denominations. The Bond Registrar may make a charge for every exchange or registration of transfer of the Series 2002 Bonds sufficient to reimburse it for any tax or other governmental charge required to be paid with respect to such exchange or registration of transfer, but no other charge shall be made to the owner for the privilege of transferring or exchanging the Series 2002 Bonds under this 2002 Resolution, Section 6. Lost. Destroved. Mutilated Bonds. If any Series 2002 Bond shall become mutilated, the Bond Registrar in its discretion and at the expense of the owner of such Series 2002 Bond shall authenticate and deliver a new Series 2002 Bond of like tenor and series registered in the name of the owner in exchange and substitution for such mutilated Series 2002 Bond, If any Series 2002 Bond shall become lost, destroyed or wrongfully taken, evidence of such loss, destruction or wrongful taking within a reasonable time thereafter may be submitted to the Consolidated Government and if such evidence shall be satisfactory and indemnity of a character and in an amount satisfactory shall be given, then the Consolidated Government at the expense of the owner shall cause a new Series 2002 Bond of like tenor and series registered in -22- AO 708654.3 . .~-~._~--,-- --.----....--~-,........~--..-~ ___:.__-.4._......--"__ the name of the owner to be authenticated by the Bond Registrar and delivered to the registered owner. Section 7. Global Form; Securities Deoository; Ownership of Series 2002 Bonds. (a) Upon the initial issuance, the ownership of each Series 2002 Bond shall be registered in the name of the Securities Depository or the Securities Depository Nominee, and ownership thereof shall be maintained in Book-Entry Form by the Securities Depository for the account of the Agent Members thereof. Initially, each maturity of the Series 2002 Bonds shall be registered in the name of Cede & Co., as the nominee of The Depository Trust Company. Beneficial Owners will not receive Series 2002 Bonds from the Bond Registrar evidencing their ownership interests. Except as provided in subsection (c) of this Section 7, the Series 2002 Bonds may be transferred, in whole but not in part, only to the Securities Depository or the Securities Depository Nominee, or to a successor Securities Depository selected or approved by the Consolidated Government or to a nominee of such successor Securities Depository. (b) With respect to Series 2002 Bonds registered in the name of the Securities Depository or the Securities Depository Nominee, neither the Consolidated Government, the Bond Registrar nor the Paying Agent shall have any responsibility or obligation to any Agent Member or Beneficial Owner. Without limiting the foregoing, neither the Consolidated Government, the Bond Registrar nor the Paying Agent shall have any responsibility ~r:'obligation with respect to: (i) the accuracy of the records of the Securities Depository, the Securities Depository NO}TIinee or any Agent Member with respect..to any Beneficial Ownership interest in the Series 2002 Bonds; (ii) ,;the delivery to any Agent Member, any Beneficial Owner or any other person, other than the Securities Depository or the Securities Depository Nominee, of any notice with respect to the Series 2002 Bonds; or (iii) the payment to any Agent Member, any Beneficial Owner or any other person, other than the Securities Depository or the Securities Depository Nominee, of any amount with respect to the principal, premium, if any, or interest on the Series 2002 Bonds. So long as any Series 2002 Bonds are registered in Book-Entry Form, the Consolidated Government, the Bond Registrar and the Paying Agent may treat the Securities Depository as, and deem the Securities Depository to be, the absolute owner of such Series 2002 Bonds for all purposes whatsoever, including without limitation: (iv) the payment of principal, premium, ifany, and interest on such series of Series 2002 Bonds; (v) giving notices of redemption and other matters with respect to such Series 2002 Bonds; -23- AO 708654,3 (vi) registering transfers with respect to such Series 2002 Bonds; (vii) the selection of Series 2002 Bonds for redemption; and (viii) voting and obtaining consents under the 2002 Resolution. So long as any Series 2002 Bonds are registered in Book-Entry Form, the Paying Agent shall pay all principal of, premium, if any, and interest on the Series 2002 Bonds only to the Securities Depository or the Securities Depository Nominee as shown in the Bond Register, and all such payments shall be valid and effective to fully discharge the Consolidated Government's obligations with respect to payment of principal of, premium, if any, and interest on the Series 2002 Bonds to the extent so paid. (c) If at any time (i) the Consolidated Government determines that the Securities Depository is incapable of discharging its responsibilities described herein, (ii) the Securities Depository notifies the Consolidated Government or the Paying Agent that it is unwilling or unable to continue as Securities Depository with respect to the Series 2002 Bonds, or (iii) the Securities Depository shall no longer be registered or in good standing under the Securities Exchange Act of 1934, as amended, or other applicable statute or regulation and a successor Securities Depository is not appointed by the Consolidated Government within 90 days after the Consolidated Government receives notice or becomes aware of such condition, as the case may be, then this Section 7 shall no longer be applicable and the Consolidated Government shall execute and the Bond Registrar shall authenticate and deliver Series 2002 Bond certificates representing the Series 2002 Bonds to the bondholders. Series 2002 Bonds issued pursuant to this subsection (c) shall be registered in such names and authorized denominations as the Securities Depository, pursuant to instructions from the Agent Member or otherwise, shall instruct the Bond Registrar. Upon exchange, the Bond Registrar shall authenticate and deliver such Series 2002 Bond certificates representing the Series 2002 Bonds to the persons in whose names such Series 2002 Bonds are so registered on the Business Day immediately preceding the date of such exchange. Section 8. Optional Redemvtion of Series 2002 Bonds. The Series 2002 Bonds shall be subject to redemption on the dates and at the prices set forth in the 2002 Supplemental Resolution. Section 9. Procedure for and Notice of Redemption. The Consolidated Government shall select the maturities of Series 2002 Bonds to be optionally redeemed in part. If less than all of the Series 2002 Bonds of a single maturity are to be redeemed, the Bond Registrar shall treat any Series 2002 Bond of such maturity outstanding in a denomination of greater than $5,000 as two or more separate Series 2002 Bonds in the denomination of $5,000 each and shall assign separate numbers to each for the purpose of determining the Series 2002 Bonds or the principal amount of such Series 2002 Bonds in a denomination greater than $5,000 to be redeemed by lot. With respect to any Series 2002 Bond called for partial redemption, the registered owner thereof shall surrender such Series 2002 Bond to the Bond Registrar in exchange for one or more Series 2002 Bonds in any authorized denomination in the aggregate principal amount equal to the unredeemed principal amount of such Series 2002 Bond so surrendered. -24- AO 708654,3 . . - . -~-........__..-.-40-~~_ . The Bond Registrar shall furnish the Consolidated Government on or before the 45th day next preceding each mandatory redemption date (or optional redemption date if such option is exercised) with its certificate setting forth the Series 2002 Bonds that have been selected for mandatory redemption (or optional redemption) either in whole or in part on such date. Not less than 30 days nor more than 60 days before any date upon which any such optional redemption or mandatory redemption is to be made a notice of such redemption signed by a duly authorized signatory of the Bond Registrar designating the Series 2002 Bonds to be redeemed (in whole or in part) shall be filed at the place at which the principal of and interest on the Series 2002 Bonds shall be payable and shall be mailed, postage prepaid, to all registered owners of Series 2002 Bonds to be redeemed (in whole or in part) at addresses which appear upon the bond registration book. It is expressly provided, however, that the failure so to mail any such notice of the optional redemption or mandatory redemption of the Series 2002 Bonds shall not affect the validity of the proceedings for such redemption or cause the interest to continue to accrue on the principal amount of such Series 2002 Bonds so designated for redemption after the redemption date. However, it is expressly understood and agreed that should the Consolidated Government hereafter elect to issue any Additional Bonds, as herein authorized, it shall have the right to exercise any optional redemption provision to redeem the Bonds of any such future issue or issues before it redeems the Series 2002 Bonds, or it may redeem the Series 2002 Bonds before it redeems the Bonds of any such future issue or issues, or it may redeem some of the Series 2002 Bonds and some of the Bonds of any such future issue or issues at the same time. If less than a full maturity within an issue of Bonds is redeemed, then such redemption shall be by lot in such manner as may be designated by the Bond Registrar. Section 10. Purchase in Open Market. Nothing herein contained shall be construed to limit the right of the Consolidated Government to purchase with any excess moneys, as hereinabove defined, in the Sinking Fund and for sinking fund purposes, the Series 2002 Bonds in the open market at a price not exceeding the callable price hereinabove set forth. Any such Series 2002 Bonds so purchased cannot be reissued and same shall be disposed of as is hereinafter provided in this 2002 Resolution. Section 11. Effect of Call for Redemption. Notice having been given in the manner and under the conditions hereinabove provided, the Series 2002 Bonds so designated for redemption or the portion of the Series 2002 Bonds so designated for partial redemption shall, on the redemption date designated in such notice, become and be due and payable at the redemption price hereinabove specified, and from and after the date of redemption so designated, unless default shall be made in the payment of the Series 2002 Bonds so designated for redemption or the portion of the Series 2002 Bonds so designated for partial redemption, interest on the principal amount of said Series 2002 Bonds so designated for redemption shall cease to accrue on the redemption date. Section 12. Cancellation of Bonds. All Bonds paid, purchased or redeemed shall be canceled or otherwise destroyed upon their payment and a record of such destruction shall be -25- AO 708654,3 made and preserved in the permanent records of the Consolidated Government and in the records of the Bond Registrar pertaining to the Series 2002 Bonds. Section 13. Pled2e of Revenues; Parity Bonds. The Series 2002 Bonds shall stand on a parity and shall be of equal dignity with the Outstanding Prior Bonds and shall be secured by the lien created pursuant to the provisions of the Prior Resolutions, as the same is ratified, reaffirmed, broadened and extended by this 2002 Resolution, just as if the Outstanding Prior Bonds and the Series 2002 Bonds had been issued simultaneously under the same resolution. Section 14. A{lproval of System Improvements. The additions, extensions and improvements to the System and equipment therefor shall be accomplished substantially in accordance with the Engineering Report. The Engineering Report and the additions, extensions and improvements set forth therein are hereby authorized and approved and the Engine~ring Report, by this reference thereto, is incorporated herein and made a part hereof. . Section 15. Application of the Series 2002 Bond Proceeds. The estimated application of the proceeds of the sale of the Series 2002 Bonds shall be set forth in the 2002 Supplemental Resolution. Such application will provide for, among other things, the application of accrued interest, the amount of proceeds allocable to capitalized interest, the deposit to the 2002 Construction Fund, the prepayment in full of the Refunded GEF A Obligation, the required deposit to the Debt Service Reserve Account and the payment of the costs and expenses of the undertaking contemplated hereby. Section 16. En2ineerin2: Re{lort. The additions, extensions and improvements to the System now contemplated shall be accomplished in accordance, or substantially in accordance, with the Engineering Report, attached hereto as Exhibit B. Section 17. Construction Fund. There is hereby created a special fund designated the "Augusta, Georgia Water and Sewerage System Constmction Fund-2002" (the "2002 Construction Fund"). The moneys so deposited into the 2002 Constmction Fund as aforesaid and as more specifically set forth in the 2002 Supplemental Resolution, and any other funds acquired for this purpose by gift, donation, grant or otherwise, shall be held by the 2002 Constmction Fund Depository in trust for the owners of the Series 2002 Bonds and shall be applied toward the payment of the cost of adding to, extending, improving and equipping the System, in accordance, or substantially in accordance, with the Engineering Report and in accordance with and subject to the provisions and restrictions set forth in this 2002 Resolution and the applicable provisions and restrictions set forth in the Prior Resolutions, and the Consolidated Government covenants that it will not cause or permit to be paid from the 2002 Construction Fund any sums represented as aforesaid, except in accordance, or substantially in accordance, with the Engineering Report and the provisions and restrictions set forth in the Prior Resolutions and in this 2002 Resolution. The moneys so deposited into the 2002 Construction Fund shall be used for the purposes herein and for the applicable purposes provided in Section 3 of Article IV of the 1996 Resolution and moneys therein shall be held, invested and expended in the manner and by the procedure established under the provisions of said Article IV, Section 3 of the 1996 Resolution. Said Article and each and every appropriate provision thereof be and they are hereby declared -26- AO 708654,3 applicable to the Series 2002 Bonds, the 2002 Construction Fund and the 2002 Construction Fund Depository and for the purpose of making same applicable to the Series 2002 Bonds, the 2002 Construction Fund and the 2002 Construction Fund Depository, the Consolidated Government does hereby reaffirm and adopt the same verbatim herein, except that said Article is broadened and extended to provide for the additions, extensions and improvements to the System in accordance with the Engineering Report as herein contemplated. When the additions and improvements to the System shall have been completed, such fact shall be evidenced by a certificate from the Consulting Engineers stating the date of completion, and should there then be any balance in the 2002 Construction Fund, such balance, unless otherwise provided, shall be paid into the special account designated as the Debt Service Account held within the Sinking Fund. In the event of a default in payment of the Series 2002 Bonds, the Paying Agent shall notify the 2002 Construction Fund Depository thereof and the 2002 Construction Fund Depository shall, without further authorization or direction, transfer the remaining funds in the 2002 Construction Fund to the Paying Agent or Sinking Fund Custodian to be used to pay principal and interest on the Series 2002 Bonds. Section 18. Creation of 2002 Capitalized Interest Fund~ Use of Monevs in 2002 Capitalized Interest Fund. There is hereby created by the Consolidated Government a fund designated "Augusta, Georgia Water and Sewerage System Capitalized Interest Fund-2002." There shall be paid into the 2002 Capitalized Interest Fund such amount from the proceeds of the sale of the Series 2002 Bonds allocable to capitalized interest. Such moneys shall be transferred to the Debt Service Account held within the Sinking Fund on each Interest Payment Date until the balance in the 2002 Capitalized Interest Fund has been reduced to zero. The amounts so transferred shall be used to pay interest coming due on the Series 2002 Bonds. Section 19. Flow of Funds~ Sinkine Fund. The Consolidated Government is now operating and will continue to operate the System on a fiscal year basis commencing on January 1 in each year and extending through December 31 in such year, but it reserves the right by the adoption of proper proceedings to change its fiscal year as provided in the 1996 Resolution. The Consolidated Government covenants that all revenues arising from the ownership or operation of the System and properties in connection therewith as now existent and as hereafter added to, extended and improved shall be collected by the Consolidated Government or by its agents or employees and deposited promptly with the depository to the credit of a special fund heretofore created and designated in Section 2 of Article III of the 1996 Resolution as the "Richmond County Water and Sewerage System Revenue Fund-1996" and redesignated pursuant to the 2000 Resolution as the "Augusta, Georgia Water and Sewerage System Revenue Fund" (the "Revenue Fund"). The moneys deposited into the Revenue Fund shall be used and disbursed from the Revenue Fund as hereinafter provided. There shall first be paid from the Revenue Fund the Expenses of Operation and Maintenance. The Consolidated Government covenants that it will continue to maintain the sinking fund created and designated in Article V, Section 2, Paragraphs 2 and 4 of the 1996 Resolution as the "Richmond County Water and Sewerage System Sinking Fund" and redesignated pursuant to the 2002 Resolution as the "Augusta, Georgia Water and Sewerage System Sinking Fund" -27- AO 708654,) (the "Sinking Fund"), which Sinking Fund now consists of two accounts which are to be held therein, created and designated as "Debt Service Account" and "Debt Service Reserve Account." The payments to be made into the Sinking Fund must be adjusted so as to provide sufficient moneys with which to pay the principal of and the interest on the Outstanding Prior Bonds and the Series 2002 Bonds as the same become due and payable, either at maturity or by proceedings for mandatory redemption, in the then current Sinking Fund Year and to create and maintain a reserve in the Sinking Fund equal to the Reserve Requirement on the Outstanding Prior Bonds and the Series 2002 Bonds. After there have been paid from the Revenue Fund the sums required or permitted to be paid for Expenses of Operation and Maintenance pursuant to the provisions of this Section 19, there shall next be paid from the Revenue Fund into the Sinking Fund the following amounts: (a) Taking into consideration the moneys then on hand and the moneys to be deposited therein and in the 2002 Capitalized Interest Fund simultaneously with the issuance and delivery of the Series 2002 Bonds, there shall be deposited into the Debt Service Account for the purpose of paying the principal of and interest on the Outstanding Prior Bonds and the Series 2002 Bonds as same become due and payable, either at maturity or by proceedings for mandatory redemption, in the then current Sinking Fund Year, (i) an amount sufficient to pay the interest on the Series 2002 Bonds and the principal of and interest on the Outstanding Prior Bonds coming due on October 1, 2002, and (ii) commencing with the month of October 2002 from month to month thereafter an amount equal to one-sixth of the interest on the Outstanding Prior Bonds and Series 2002 Bonds coming due on the next ensuing Interest Payment Date and one- twelfth of the principal on the Outstanding Prior Bonds and Series 2002 Bonds coming due on the next ensuing October 1, such aggregate monthly payments to continue from month to month until sufficient funds are on hand in the Sinking Fund to pay all of the Outstanding Prior Bonds and Series 2002 Bonds as same mature or are acquired by mandatory redemption and the interest which will become due and payable thereon. (b) Upon the issuance of the Series 2002 Bonds, the Reserve Account shall be funded by a combination of cash and one or more Reserve Account Surety Bonds held for the credit of the Reserve Account. Simultaneously with the issuance of the Series 2002 Bonds, there shall be on deposit in the Reserve Account, taking into account moneys on deposit therein and amounts being provided by the Consolidated Government from lawfully available funds, such amount, if any, as may be required to create in the Reserve Account a reserve equal to the Reserve Requirement upon the date of issuance of the Series 2002 Bonds. The Reserve Account shall be maintained for the purpose of paying the principal of and interest on the Outstanding Prior Bonds and the Series 2002 Bonds falling due in any year as to which there would otherwise be a default and if money is taken from the Reserve Account for the payment of such principal and interest, the money so taken shall be replaced in the Reserve Account from the first moneys in the Revenue Fund thereafter available and not required to be used for Expenses of Operation and Maintenance of the System and not required to be paid into the Debt Service Account as provided in subparagraph 19(a) above. (c) All sums required to be paid to comply with the provisions of subparagraphs (a) and (b) above shall be paid on or before the 25th day of the month in which the -28- AO 708654,) payment is due, and if, in any month, for any reason, the full amount herein required to be paid in such month shall not be paid into the Sinking Fund, any deficiency shall be added to and shall become a part of the amount required to be paid into the Sinking Fund in the next succeeding month; provided, however, the Consolidated Government covenants and agrees that in the event it hereafter elects to issue Additional Bonds, pursuant to the provisions of this 2002 Resolution, the above stated payments into the Sinking Fund will be increased to the extent necessary to pay the principal of and interest on the Outstanding Prior Bonds, the Series 2002 Bonds and on any Additional Bonds therewith then outstanding and on the proposed Additional Bonds to be issued coming due, either at maturity or by proceedings for mandatory redemption, in the then current Sinking Fund Year and to create upon the issuance of the bonds to be issued and thereafter maintain a reserve for that purpose in an amount at least equal to the Reserve Requirement on the Outstanding Prior Bonds, the Series 2002 Bonds, the Additional Bonds therewith then outstanding and on the proposed Additional Bonds to be issued. Section 20. Debt Service Reserve Account. In the event a withdrawal of moneys is made from the Reserve Account or any draw is made upon any Reserve Account Surety Bond held within the Reserve Account for the payment of principal of or interest on the Outstanding Prior Bonds or the Series 2002 Bonds, the first moneys available in the Revenue Fund and not required to pay Expe~~es of Operation and Maintenance or to make the monthly payments into the Debt Service Account as hereinabove provided, shall be immediately paid into the Reserve Account or paid to the, Reserve Account Surety Bond Providers as hereinafter described until the amount on deposit in, ' the Reserve Account after payments of any anlounts payable under the succeeding sentence equals the Reserve Requirement; provided, however, such payments will in any event be at least sufficient to restore the Reserve Account to its proper balance within 12 months after the date ,upon which money is taken from the Reserve Account or the date upon which a draw on any Reserve Account Surety Bond is made. In the event of a drawdown on any Reserve Account Surety Bond, the Consolidated Government shall on a pro rata basis make (1) all payments (if any) into the Reserve Account necessary to restore the amount of cash or securities, if any, on deposit, therein immediately prior to such draw and (2) make all payments to any Reserve Account Surety Bond Providers as a repayment of such drawdown (such payments to be made on a pro rata basis to each Reserve Account Surety Bond Provider based upon the amount drawn and not reimbursed under each Reserve Account Surety Bond), and (3) upon making full repayment to any Reserve Account Surety Bond Provider, shall thereafter make payments into the Reserve Account, to the extent that the then applicable Reserve Requirement exceeds the aggregate of the amount available to be drawn on a Reserve Account Surety Bond and the amount of cash or securities, if any, on deposit therein immediately prior to such draw. Repayment or any drawdown on the Reserve Account Surety Bond (other than repayments which reinstate the Reserve Account Surety Bond) and any interest or fees due the Reserve Account Surety Bond Provider under such Reserve Account Surety Bond shall be secured by a lien on the Pledged Revenues subordinate to payments into the Debt Service Account, the Reserve Account and payments to any Credit Issuer securing the Outstanding Prior Bonds, the Series 2002 Bonds and any Additional Bonds. Any such Reserve Account Surety Bond shall be pledged to the benefit of the owners of all of the Outstanding Prior Bonds, the Series 2002 Bonds and any Additional Bonds. The Consolidated Government reserves the right, if it deems it necessary in order to acquire such a -29- AD 708654.3 Reserve Account Surety Bond, to amend the Resolutions without the consent of any of the owners of the Outstanding Prior Bonds, the Series 2002 Bonds and any Additional Bonds in order to grant the Reserve Account Surety Bond Provider such additional rights as it may demand, provided that such amendment shall not, in the written opinion of Bond Counsel filed with the Consolidated Government, impair or reduce the security granted to the owners of the Outstanding Prior Bonds, the Series 2002 Bonds and any Additional Bonds or any of them. It is expressly provided, however, that if on October 2 in any year there are on deposit in the Debt Service Account of the Sinking Fund any money and securities, same shall be withdrawn therefrom and immediately deposited into the Revenue Fund: It is expressly provided further, however, that if on October 2 in any year there are on deposit in the Reserve Account of the Sinking Fund moneys and securities (such securities to be valued at their market value plus accrued interest thereon to October 2) the aggregate amount of which, together with the amounts available under any Reserve Account Surety Bond, is in excess of the then required Reserve Requirement, such excess moneys shall be withdrawn from the Sinking Fund and immediately deposited into the Revenue Fund. The calculation and determination of such excess amount in accordance with this provision shall be the responsibility of the chief financial officer of the utilities department of the Consolidated Government and such financial officer shall notify the Sinking Fund Custodian and make or cause to be made any transfer of funds required pursuant to the provisions of this subparagraph. The Consolidated Government may at any time fulfill any portion of its obligation to fund the Reserve Account by depositing in the Reserve Account a Reserve Account Surety Bond payable on any interest and/or principal payment date in an amount equal to any portion of the reserve requirement then required to be maintained within the Reserve Account. Before any such Reserve Account Surety Bond is substituted for cash or deposited in lieu of cash within the Reserve Account, (A) there shall be filed with the Consolidated Government and the Sinking Fund Custodian (i) an opinion of nationally recognized bond counsel to the effect that such substitution will not adversely affect the exclusion of interest on the Bonds from gross income for federal income tax purposes; (ii) a certificate of Moody's or Standard & Poor's, whichever rating agency maintains a rating on the outstanding Bonds, to the effect that (a) if the issuer(s) of the Reserve Account Surety Bond were insuring payment of principal and interest on the Bonds to which the Reserve Account relates, such Bonds would receive the highest rating available from such rating agency (or any similar rating agency then in existence) and (b) that the substitution of such Reserve Account Surety Bond for cash within the Reserve Account will not, in and of itself, result in a reduction of the ratings issued for the Bonds outstanding, and (iii) a copy of the Reserve Account Surety Bond issued to fulfill the Consolidated Government's obligation to fund the Reserve Account together with an opinion of counsel satisfactory to the Sinking Fund Custodian to the effect that the Reserve Account Surety Bond is valid and enforceable in accordance with its terms, (B) the Consolidated Government shall not secure any obligation to the Reserve Account Surety Bond Provider by a lien equal to or superior to the lien granted to the Bonds; (C) the Reserve Account Surety Bond shall permit a drawing by the Consolidated Government for the full stated amount in the event (i) the Reserve Account Surety Bond expires or terminates for any reason prior to the final maturity of the Bonds, and (ii) the Consolidated Government fails to satisfy the Reserve Requirement by the deposit to the Reserve Account of cash, obligations, a substitute Reserve Account Surety Bond, or any combination thereof, on or before the date of such expiration or termination; (D) if the rating issued by the -30- AO 708654.3 , , ---_......_-~ Rating Agency to the Reserve Account Surety Bond Provider is withdrawn or reduced below the rating assigned to that of the Bonds immediately prior to such action by the Rating Agency, the Consolidated Government shall provide a substitute Reserve Account Surety Bond within 60 days after such rating change, and, if no substitute Reserve Account Surety Bond is obtained by such date, shall fund the Reserve Requirement in not more than 24 equal monthly payments commencing not later than the first day of the month immediately succeeding the date representing the end of such 60 day period; and (E) if the Reserve Account Surety Bond Provider commences any insolvency proceedings or is determined to be insolvent or fails to make payments when due on its obligations, the Consolidated Government shall provide a substitute Reserve Account Surety Bond within 60 days thereafter, and, if no substitute Reserve Account Surety Bond is obtained by such date, shall fund the Reserve Requirement in not more than 24 equal monthly payments commencing not later than the first day of the month immediately succeeding the date representing the end of such 60 day period. If the events described in either clauses (D) or (E) above occur, the Consolidated Government shall not relinquish the Reserve Account Surety Bond at issue until after the Reserve Requirement is fully satisfied by the provision of cash, obligations, or a substitute Reserve Account Surety Bond or any combination thereof. Each such Reserve Account Surety Bond shall be unconditional and irrevocable and shall provide liquidity for the life of the Bonds with respect to which the Reserve Account Surety Bond is purchased and, if the Reserve Account Surety Bond is purchased with respect to more than one issue of Bonds hereunder, then for the life of the issue with the longest term. So long as the balance of the Reserve Account equals the Reserve Account Requirement on the Outstanding Prior Bonds, the Series 2002 Bonds and any Additional Bonds, any reimbursement agreement entered into between the Consolidated Government and any such Reserve Account Surety Bond Provider may provide that the Consolidated Government will be obligated to repay such provider an amount equal to any drawdown on the Reserve Account Surety Bond plus a market rate of interest over a specified period of time not to exceed three years but such obligation shall be junior and subordinate in right of payment to all outstanding Bonds. Section 21. Utility General Fund. After there have been paid from the Revenue Fund in each month all amounts required or permitted to be paid as provided herein, all moneys remaining in the Revenue Fund shall be paid at the end of each month into the special fund created and designated in Article V, Section 2, Paragraph 6 of the 1996 Resolution as the "Richmond County Water and Sewerage System Utility General Fund" and redesignated pursuant to the 2002 Resolution as the "Augusta, Georgia Water and Sewerage System Utility General Fund" (the "Utility General Fund"). Except as set forth below, expenditures shall be made from the Utility General Fund only for the purpose of: (a) paying principal of and/or interest on the Outstanding Prior Bonds, the Series 2002 Bonds and any Additional Bonds then outstanding and falling due at any time for the payment of which money is not available in the Sinking Fund securing the payment of same; (b) making payments into the Sinking Fund in the amounts required in order to accumulate and maintain the Reserve Account created therein at its proper balance; (c) paying such expenses as may be necessary to alleviate or remove the effects of an emergency having a major impact on the System caused by some extraordinary occurrence which makes it necessary to use the funds of the System, to the extent that moneys on deposit in the Revenue Fund are insufficient to meet such emergencies; (d) paying Expenses of Operation and Maintenance for which moneys are not available in the Revenue Fund; (e) making replacements, additions, extensions and improvements and acquiring equipment and paying the cost of any engineering studies, surveys or plans and specifications pertaining to the future -31- AO 708654,3 development or expansion of the System deemed to be reasonable and in the best interest of the Consolidated Government and the holders of the Bonds; (f) payment of the charges of the Utility General Fund Depository for investment services; and (g) paying to any Reserve Account Surety Bond Provider interest on amounts drawn under such Reserve Account Surety Bond. The Consolidated Government shall maintain at all times a minimum balance in the Utility General Fund equal to the lesser of $2,500,000 or 5 percent of the Operating Revenues of the System for the immediately preceding Fiscal Year. It is expressly provided, however, that should bonds be hereafter issued ranking as to lien on the Pledged Revenues junior and subordinate to the lien securing the payment of the Outstanding Prior Bonds and the Series 2002 Bonds authorized to be issued hereunder, including any issue or issues of Additional Bonds hereafter issued, then such payments into the Utility General Fund as provided in this Section may be suspended and such moneys shall be available to the extent necessary to pay the principal of and interest on such junior lien bonds and to create and maintain a reasonable reserve therefor and such moneys may be allocated and pledged for that purpose. Section 22. Pledged Revenues. As provided in the Prior Resolution and as hereby ratified and reaffirmed, all Pledged Revenues immediately shall become subject to a lien to secure the payment by the Consolidated Government of the amounts therein agreed to be paid. The Consolidated Government hereby pledges such Pledged Revenues and hereby covenants and agrees that the Pledged Revenues are hereby pledged to the extent necessary to secure the payment by the Consolidated Government of the amounts herein agreed to be paid with respect to the Outstanding Prior Bonds, the Series 2002 Bonds and any Additional Bonds and such pledge shall be valid and binding against the Consolidated Government and against all other parties and against all claims of any kind against the Consolidated Government, whether arising in tort, contract or otherwise, irrespective of whether or not such parties have notice thereof. Section 23. Rate Covenant. The Consolidated Government covenants and agrees that it has heretofore placed into effect a schedule of rates, fees and charges for the services, facilities and commodities furnished by the System and as often as it shall appear necessary the Consolidated Government shall revise and adjust such schedule of rates, fees and charges for either water or sewerage services and facilities, or both, to the extent necessary to produce funds sufficient to operate and maintain the System on a sound business-like basis and to create and maintain the Sinking Fund created by the 1996 Resolution, as same has been enlarged and extended by the 2000 Resolution and this 2002 Resolution, in accordance with and in compliance with the terms, covenants and provisions of the Resolutions and to create and maintain a reserve therefor in the amount as required by the Resolutions or such larger amounts as may be required in any proceedings authorizing any such issue or issues of Additional Bonds, as well as to create and maintain a reserve for extensions and improvements to the System. Such rates, fees and charges, in addition to the foregoing requirements, shall be maintained at such level so as to produce Pledged Revenues (excluding Investment Earnings, if any, on the Construction Fund created under this 2002 Resolution) equal to 1.1 times the amount required to discharge the payment of the principal of and the interest on the Outstanding Prior Bonds, the Series 2002 Bonds and any future parity issues, either at maturity or by proceedings for mandatory redemption, but in no event, however, will said amount be less than that required -32- AO 708654.3 - --~-~.~---- ~.~~_._--- to create and maintain the Debt Service Account and the Reserve Account as required by the Resolutions. Without limiting the foregoing, the Consolidated Government hereby covenants to take such action as may be necessary to cause the revenues of the System to equal or exceed the forecasted revenues of the System set forth on Table 6-8 of the Engineering Report for the period set forth therein. The rates, fees and charges shall be classified in a reasonable manner to cover users of the services and facilities furnished by the System so that as near as practicable such rates, fees and charges shall be uniform in application to all users falling within any reasonable class. No free services shall at any time be furnished from the System and it will undertake within its health powers or such other applicable powers now or hereafter provided by law, to require the owners of all improved property abutting any water line or sewerage line to connect with the System. No customer shall be connected to the System or served by the Consolidated Government without a proper meter having been first installed. All services shall be furnished in accordance with rates now or hereafter established, including services furnished to any county, municipal corporation or other public board or body. In the event the Consolidated Government shall fail to adopt a schedule or schedules of rates, fees and charges, or to revise its schedule or schedules of rates, fees and charges, in accordance with the provisions of this Section, any Bondholder without regard to whether any Event of Default, as defined in Article VIII of the 1996 Resolution, shall have occurred, may institute and prosecute in any court of competent jurisdiction, an appropriate action to compel the Consolidated Government to adopt a schedule or schedules of rates, fees and charges, or to revise its schedule or schedules of rates, fees and charges in accordance with the requirements of this Section and the applicable requirements of Section 3 of Article V of the 1996 Resolution. Section 24. Sinkin2: Fund Disbursements. Subject to the terms and conditions set forth in the Resolutions, moneys in the Sinking Fund shall be disbursed for (a) the payment of the interest on the Outstanding Prior Bonds and the Series 2002 Bonds as such interest becomes due and payable; (b) the payment of the principal of the Outstanding Prior Bonds and the Series 2002 Bonds as same becomes due and payable, either at maturity or by proceedings for mandatory redemption; (c) the optional redemption of the Outstanding Prior Bonds and the Series 2002 Bonds before maturity at the price and under the conditions provided therefor in the Resolutions; (d) the purchase of the Outstanding Prior Bonds and the Series 2002 Bonds in the open market; provided, however, the price paid shall not exceed the authorized call price; (e) the transfer of excess moneys, if any, in the Sinking Fund (as described in Section 5 of Article V of the 1996 Resolution, Section 20 of the 2000 Resolution and Section 20 of this 2002 Resolution) to the Revenue Fund; (f) the payment of charges for paying the Outstanding Prior Bonds and the Series 2002 Bonds and interest thereon and the charges for the registration of the Outstanding Prior Bonds and the Series 2002 Bonds and their transfer or exchange in accordance with the terms thereof; and (g) the payment of any charges for investment services. Section 25. Additional Bonds. The Consolidated Government further covenants and agrees that it will not exercise the privilege as provided in Section 9 of Article V of the 1996 Resolution, as ratified, reaffirmed, broadened and extended in Section 25 of the 2000 Resolution, of issuing additional bonds or obligations ranking as to lien on the Pledged Revenues of the -33- AO 708654.3 System on a parity with the Outstanding Prior Bonds and the Series 2002 Bonds, unless or until all the following conditions are met: (a) The payments covenanted to be made into the Sinking Fund, as the same may have been enlarged and extended in any proceedings authorizing the issuance of any Additional Bonds, must be currently being made in the full amount as required and the Debt Service Account and Reserve Account held within the Sinking Fund must be at their proper respective balances. (b) Except in the case of Additional Bonds issued for refunding purposes pursuant to Article V, Section 8 of the 1996 Resolution, there shall have been procured and filed with the Consolidated Government (i) a report by Independent Certified Public Accountants to the effect that the Pledged Revenues (excluding Investment Earnings, if any, on construction funds) for a period of 12 consecutive months out of the most recent 18 consecutive months preceding the month of adoption of the proceedings authorizing the issuance of such Additional Bonds must have been equal to at least 1.25 times the maximum Debt Service Requirement for any succeeding Sinking Fund Year on the Outstanding Prior Bonds, the Series 2002 Bonds and any other issue or issues of Additional Bonds therewith then outstanding and on the proposed Additional Bonds to be issued, or in lieu of the foregoing formula, if a new schedule of rates and charges for the services, facilities and commodities furnished by the System shall have been adopted and shall be in effect and Independent Certified Public Accountants shall certify that had this new rate schedule been in effect during the period described above, the Pledged Revenues of the System would have equaled the requirements of the above formula; or (ii) (x) a report by Independent Certified Public Accountants to the effect that the historical Pledged Revenues (excluding Investment Earnings, if any, on construction funds) for a period of 12 consecutive months out of the most recent 18 consecutive months preceding the month of adoption of the proceedings authorizing the issuance of the proposed Additional Bonds were equal to at least 1.10 times the historical Debt Service Requirement on all Bonds (other than Subordinate Bonds) which were outstanding during such 12-month period, and (y) a report by the Consulting Engineers to the effect that the forecasted Pledged Revenues (excluding Investment Earnings, if any, on construction funds) for each Fiscal Year in the Forecast Period are expected to equal at least 1.25 times the maximum annual Debt Service Requirement on all Bonds (other than Subordinate Bonds) which will be outstanding immediately after the issuance of the proposed Additional Bonds, in the then current or any succeeding Sinking Fund Year. The reports by the Independent Certified Public Accountant that are required by this paragraph (b) may contain pro forma adjustments to historical Pledged Revenues equal to 100 percent of the increased annual amount attributable to any revision in the schedule of rates, fees and charges for the services, facilities and commodities furnished by the System, imposed prior to the date of delivery of the proposed Additional Bonds and not fully reflected in the historical Pledged Revenues actually received during such 12-month period. Such pro forma adjustments shall be based upon a report of the Consulting Engineers as to the amount of Operating Revenues which would have been received during such 12-month period had the new rate schedule been in effect throughout such 12-month period. -34- AO 708654,) For the purpose of calculating the maximum Debt Service Requirements under this subparagraph (b), the maximum annual Debt Service Requirements shall be reduced by an amount equal to any capitalized interest funded from the proceeds of the Additional Bonds proposed to be issued in each succeeding Sinking Fund Year for the period for which said interest has been capitalized. (c) An Independent Certified Public Accountant shall certify in triplicate to the Consolidated Government that the requirements of subparagraph (a) above are being complied with and that the requirements of subparagraph (b) above have been met. A copy of such certificate shall be furnished to the Designated Representative of the original purchasers of the Prior Bonds and the Series 2002 Bonds. (d) Except when Bonds are being issued solely for the purpose of refunding outstanding Bonds, the Consulting Engineers for the Consolidated Government shall provide the Consolidated Government with a written report recommending the additions, extensions and improvements to be made to the System and stating that same are feasible, designating in reasonable detail the work and installation proposed to be done and the estimated cost of accomplishing the undertaking. The Consulting Engineers shall set forth in said report the forecasted Pledged Revenues to be derived from the System which will be available for debt service payments in each of the next 10 years and shall indicate the projected coverage of such debt service payments in each succeeding Sinking Fund Year. An executed duplicate original of such report of the Consulting Engineers as required by this provision shall be furnished to the Designated Representative of the original purchasers of the Prior Bonds and the ~eries 2002 Bonds issued hereunder not less than 10 days before any proceedings are taken to actually issue such Additional Bonds. (e) The Consolidated Government shall pass proper proceedings reciting that all of the above requirements have been met, shall authorize the issuance of the Additional Bonds and shall provide in such proceedings, among other things, the date such Additional Bonds shall bear, the rate or rates of interest and maturity dates, as well as the registration and redemption provisions. Except for Additional Bonds that bear interest at a Variable Rate, the interest on the Additional Bonds of any such issue shall fall due on April 1 and October 1 of each year, and the Additional Bonds shall mature in installments on October 1, but, as to principal, not necessarily in each year or in equal installments. Any such proceeding or proceedings shall require the Consolidated Government to increase the monthly payments then being made into the Sinking Fund to the extent necessary to pay the principal of and the interest on the Prior Bonds, the Series 2002 Bonds and on all such Additional Bonds therewith then outstanding and on the proposed Additional Bonds to be issued as same become due and payable, either at maturity or by proceedings for mandatory redemption, in the then current Sinking Fund Year, and to create upon the issuance of the proposed Additional Bonds to be issued a reserve in the Reserve Account at least equal to the Reserve Requirement on the Prior Bonds, the Series 2002 Bonds and any Additional Bonds therewith then outstanding and on the proposed Additional Bonds to be issued and to maintain said reserve in an amount sufficient for that purpose; provided, however, the Consolidated Government may satisfy funding of -35- AO 7086543 -~ 1 ! I the required reserve through the purchase of a Reserve Account Surety Bond meeting the requirements of the Resolutions. Any such proceeding or proceedings shall restate and reaffirm, by reference, all of the applicable terms, conditions and provisions of the Resolutions, If any Additional Bonds would bear interest at a Variable Rate, the resolution under which such Additional Bonds are issued shall provide a maximum rate of interest per annum which such Additional Bonds may bear. In connection with the issuance of any Additional Bonds under the Resolutions, the Consolidated Government may obtain or cause to be obtained one or more Credit Facilities providing for payment of all or a portion of the principal of, premium, if any, or interest due or to become due on such Additional Bonds, providing for the purchase of such Additional Bonds by the Credit Issuer, or providing funds for the purchase of such Additional Bonds by the Consolidated Government. In connection therewith the Consolidated Government shall enter into Credit Facility Agreements with such Credit Issuers providing for, among other things, (i) the payment of fees and expenses to such Credit Issuer for the issuance of such Credit Facility; (ii) the terms and conditions of such Credit Facility and the Additional Bonds affected thereby; and (iii) the security, if any, to be provided for the issuance of such Credit Facility. The Consolidated Government may in a Credit Facility Agreement agree to directly reimburse such Credit Issuer for amounts paid under the terms of such Credit Facility, together with interest thereon; provided, however, that no Reimbursement Obligation shall be created, for purposes of the Resolutions, until amounts are paid under such Credit Facility. Any such Reimbursement Obligation shall be deemed to be a part of the Additional Bonds to which the Credit Facility relates which gave rise to such Reimbursement Obligation, and references to principal and interest payments with respect to such Additional Bonds shall include principal and interest (except for Additional Interest) due on the Reimbursement Obligation incurred as a result of payment of such Additional Bonds with the Credit Facility, All other amounts payable under the Credit Facility Agreement (including any Additional Interest) shall be fully subordinate to the payment of debt service on Bonds (other than Subordinate Bonds). Any such Credit Facility shall be for the benefit of and secure such Additional Bonds or portion thereof as specified in the applicable bond resolution authorizing such Additional Bonds. (f) Such Additional Bonds or obligations and all proceedings relative thereto, and the security therefor, shall be validated as prescribed by law. It is expressly provided that nothing contained herein, however, restricts the issuance of Subordinate Bonds. Section 26. Ratification of 1996 Resolution. All of the applicable terms, covenants, conditions and provisions of Article V, Article VI, Article VII, Article VIII, Article IX and Article X and each Section thereof of the 1996 Resolution not herein specifically referred to are hereby declared applicable and are broadened and extended so as to cover the bonds issued hereunder and hereby ratified and reaffirmed as so extended and said terms, covenants, conditions and provisions shall apply for all purposes to the Series 2002 Bonds. Section 27. Arbitrage Covenants. The Consolidated Government hereby covenants and agrees that it will not, subsequent to the date of the issuance and delivery of the Series 2002 Bonds, intentionally use any portion of the proceeds of the Series 2002 Bonds to acquire higher -36- AO 708654.3 --~~-..._- -~-...~ .........~- yielding investments, or to replace funds which were used directly or indirectly to acquire higher yielding investments, except as may otherwise be permitted by the Internal Revenue Code of 1986, as amended (the "Code") or the regulations promulgated thereunder, including, but not limited to, complying with the requirements of Section 148(f) of the Code and the regulations promulgated thereunder and the payment of rebate, if any, required to be made, and that it will expend the proceeds of the Series 2002 Bonds in compliance with the applicable provisions of Sections 141 to 150, inclusive, of the Code. Anything herein or in the Prior Resolutions notwithstanding, earnings on amounts in any fund or account may, and shall to the extent necessary, be used to make the payments required under this Section 27. Section 28. Certification. The Mayor and Clerk of the Commission are hereby authorized and directed to execute, for and on behalf of the Consolidated Government, a certification, based upon facts, estimates and circumstances, as to the reasonable expectations regarding the amount, expenditure and use of the proceeds of the Series 2002 Bonds, as well as such other documents (including, without limitation, elections under Section 148 of the Code) as may be necessary or advisable in connection with the issuance and delivery of the Series 2002 Bonds, Section 29. Use of Proceeds and Tax Covenant. The Series 2002 Bonds are being issued by the Consolidated Government in compliance with the conditions necessary for interest income on' the Series 2002 Bonds to be excluded from gross income for federal income tax purposes pursuant to the provisions of Section 103(a) of the Code relating to obligations of the State or any political subdivision thereof. It is the intention of the Consolidated Government that the interest on the Series 2002 Bonds be and remain excludable from gross income for federal income tax purposes, and, to that end, the Consolidated Government hereby covenants with the holders of the Series 2002 Bonds as follows: (a) It will not take any action, or fail to take any action, if any such action or failure to take action would adversely affect the tax exempt status of interest on the Series 2002 Bonds under Section 103 of the Code. (b) It will not directly or indirectly use or permit the use of any proceeds of the Series 2002 Bonds or any other funds of the Consolidated Government or take or omit to take any action that would cause the Series 2002 Bonds to be "arbitrage bonds" within the meaning of Section 148 of the Code. To that end, the Consolidated Government will comply with all requirements of Section 148 of the Code to the extent applicable to the Series 2002 Bonds. (c) It will not permit any use of the facilities fmanced or refinanced by the Series 2002 Bonds which would cause the Series 2002 Bonds to be "private activity bonds" within the meaning of Section 141 of the Code. In the event that at any time the Consolidated Government is of the opinion that for purposes of this Section it is necessary to restrict or limit the yield on the investment of any moneys held under this 2002 Resolution, the Consolidated Government shall take such action as may be necessary. -37- AO 708654.3 Any subsequent proceeding or proceedings authorizing the issuance of Additional Bonds or obligations as permitted under the Resolutions shall in nowise conflict with the terms, covenants and conditions of the Resolutions but shall for all legal purposes contain all of the applicable covenants, agreements and provisions of said Resolutions for the equal protection and benefit of all bondholders. Section 30. Severability. In case anyone or more of the provisions of this 2002 Resolution, or the Series 2002 Bonds issued hereunder, shall for any reason be held illegal or invalid, such illegality or invalidity shall not affect any other provisions of this 2002 Resolution or the Series 2002 Bonds, but this 2002 Resolution and the Series 2002 Bonds shall be construed and enforced as if such illegal or invalid provisions had not been contained therein. Section 31. Contract. The provisions, terms and conditions of tins 2002 Resolution shall constitute a contract by and between the Consolidated Government and the owners of the Outstanding Prior Bonds and the owners of the Series 2002 Bonds authorized to be issued hereunder, and after the issuance of the Series 2002 Bonds this 2002 Resolution shall not be repealed or amended in any respect which will adversely affect the rights and interests of the owners of the bonds of said issues, nor shall the governing body of the Consolidated Government pass any proceedings in any way adversely affecting the rights of such owners so long as any of the Bonds authorized by the Resolutions, or the interest thereon, shall remain unpaid or until provision shall have been duly made therefor, provided, however, that this covenant shall not be construed as prohibiting modifications hereof or amendments hereto to the extent and in the manner as provided in Article IX of the 1996 Resolution, as ratified, reaffmned, broadened and extended by the 2000 Resolution and this 2002 Resolution. Any subsequent proceeding or proceedings authorizing the issuance of Additional Bonds or obligations with the Outstanding Prior Bonds and the Series 2002 Bonds as permitted under Section 9 of Article V of the 1996 Resolution, as ratified, reaffirmed, broadened and extended in Section 25 of the 2000 Resolution and Section 25 of this 2002 Resolution, shall in nowise conflict with the terms, covenants and conditions of the Resolutions, but shall for all legal purposes contain all the applicable covenants, agreements and provisions of the Resolutions for the equal protection and benefit of all owners of the Outstanding Prior Bonds, Series 2002 Bonds and such Additional Bonds. Section 32. Authorization of Preliminary Official Statement. The use of a Preliminary Official Statement with respect to the Series 2002 Bonds is hereby ratified and approved and the preparation and use of a final Official Statement, to be dated the date of adoption of the 2002 Supplemental Resolution, in substantially the form as the Preliminary Official Statement but containing the information included in this 2002 Resolution, as supplemented, is hereby authorized and approved. Section 33. Continuine: Disclosure. The Consolidated Government hereby covenants and agrees that it will, to the extent allowed by applicable law, comply with and carry out all of the provisions of the Continuing Disclosure Certificate to be executed by the Consolidated Government and dated as of the date of the issuance and delivery of the Series 2002 Bonds, as originally executed and as it may be amended from time to time in accordance with its terms (the "Disclosure Certificate"). Notwithstanding any other provision of this 2002 Resolution or the -38- AO 708654,3 -- ... .>..... ~_.____+...........-....L--"-__----"---_____...+~_....-...-_ ___~ ........""'"---'-_. Prior Resolutions, failure of the Consolidated Government to comply with the Continuing Disclosure Certificate shall not be considered a default under the Resolutions, and under no circumstances shall such failure affect the validity or the security for the payment of the Series 2002 Bonds or the Outstanding Prior Bonds. It is expressly provided, however, that any beneficial owner of the Series 2002 Bonds may take such action, to the extent and in such manner as may be allowed by applicable law, as may be necessary and appropriate, including seeking mandamus or specific performance by court order, to cause the Consolidated Government to comply with its obligations under this Section. The cost to the Consolidated Government of performing its obligations set forth in this Section shall be paid solely from funds lawfully available for such purpose and nothing set forth herein or in the Disclosure Certificate shall obligate the levy of any tax to comply with the Consolidated Government's obligations under this Section. Section 34. Supplemental Resolution. The Commission, after the Series 2002 Bonds have actually been sold, shall adopt a resolution supplementing this resolution and among other things will specify in said supplemental resolution the interest rate or rates per annum which the Series 2002 Bonds shall bear, the principal amount of Series 2002 Bonds, the maturities of the Series 2002 Bonds which shall be designated as term bonds subject to mandatory redemption, will provide for the optional redemption provisions applicable to the Series 2002 Bonds, will authorize and approve the execution and delivery of a bond purchase agreement, will provide for the terms of any Credit Facility and will provide for the actual issuance and delivery of the Series 2002 Bonds upon payment therefor by the purchaser thereof. Section 35. Validation. The Series 2002 Bonds herein authorized to be issued shall be validated in the manner provided by law, and to that end notice of the adoption of this 2002 Resolution and a copy thereof shall be served on the District Attorney of the Augusta Judicial Circuit, in order that proceedings for the above purpose be instituted in the Superior Court of Richmond County. Section 36. Repealer. Any and all resolutions, or parts of resolutions, in conflict with this 2002 Resolution this day passed be and are hereby repealed, and this 2002 Resolution shall be in full force and effect from and after its adoption. APPROVED on May 30, 2002. By: Bob Young, Mayor Attest: Lena J. Bonner, Clerk of Commission [SEAL ] -39- AD 708654,3 Exhibit A Certificate ofIndependent Certified Public Accountants t. A-I AO 708654,3 Exhibit B En!!ineering Report B-1 AO 708654,3 CLERK'S CERTIFICATE GEORGIA, RICHMOND COUNTY I, Lena 1. Bonner, Clerk of the Augusta-Richmond County Commission (the "Commission"), DO HEREBY CERTIFY that the foregoing pages constitute a true and correct copy of the resolution adopted by the Commission at an open public meeting duly called and lawfully assembled on May 30, 2002, authorizing the issuance of not to exceed $154,070,000 August, Georgia Water and Sewerage Revenue Bonds, Series 2002, the original of said resolution being duly recorded in the Minute Book of said Commission, which Minute Book is in my custody and control. I do hereby further certify that the following members of said Commission were present at said meeting: and that the following members were absent: and that said resolution was duly adopted by a vote of: Aye_ Nay_ Abstain WITNESS my hand and the official seal of Augusta, Georgia this _, 2002. Clerk (SEAL) AO 708654,3 \. SUPPLEMENTAL RESOLUTION A RESOLUTION TO SPECIFY THE AGGREGATE PRINCIPAL AMOUNTS OF AND RATES OF INTEREST THE AUGUSTA, GEORGIA WATER AND SEWERAGE REVENUE BONDS, SERIES 2002 SHALL BEAR; TO SPECIFY THE PRINCIPAL AMOUNT TO MA TURE IN EACH YEAR, THE OPTIONAL REDEMPTION PROVISIONS AND THE MATURITIES OF THE SERIES 2002 BONDS, IF ANY, WmCH SHALL BE TERM BONDS SUBJECT TO MANDATORY REDEMPTION AND TO STATE THE PROVISIONS APPLICABLE THERETO; TO APPROVE CERTAIN CORRECTIONS TO THE ENGINEERING REPORT RELATING THERETO; TO AUTHORIZE THE EXECUTION AND DELIVERY OF A BOND PURCHASE AGREEMENT RELATING TO THE SERIES 2002 BONDS; TO PROVIDE FOR BOND INSURANCE AND DEBT SERVICE RESERVE INSURANCE; TO DESIGNATE THE REPRESENTATIVE OF THE ORIGINAL PURCHASER OF THE SERIES 2002 BONDS; TO PROVIDE FOR THE ISSUANCE AND DELIVERY OF THE SERIES 2002 BONDS; TO PROVIDE FOR THE USE OF PROCEEDS OF THE SERIES 2002 BONDS; TO RA TIFY, REAFFIRM, AMEND AND SUPPLEMENT THE PARITY BOND RESOLUTION ADOPTED MAY 30,2002, AUTHORIZING THE ISSUANCE OF SAID SERIES 2002 BONDS; AND FOR OTHER PURPOSES WHEREAS, Augusta, Georgia (the "Consolidated Government"), pursuant to that certain resolution adopted May 30, 2002 (the "2002 Resolution"), has authorized the issuance of not to exceed $154,070,000 aggregate principal amount of its Water and Sewerage Revenue Bonds, Series 2002 (the "Series 2002 Bonds"), to be dated June 1, 2002, or the first day of the month in which issued or delivered, or the first day of the month preceding the month of issuance and delivery, in the fornl of book-entry only bonds in fully registered fornl without coupons, transferable to subsequent owners as therein provided, in the denomination of $5,000 or any integral multiple thereof, numbered from R-l upwards, bearing interest from date at such rate or rates not exceeding 6 percent in any year, all interest payable semimIDually on April 1 and October 1 in each year, commencing on October 1, 2002, and the principal maturing on October 1 in the years 2002 to 2032, inclusive, in such principal amounts such that the maturing annual debt service on the Series 2002 Bonds in any calendar year will not exceed $23,001,205 and the maturing annual debt service on all Bonds outstanding in any calendar year will not exceed $23,001,470; and WHEREAS, pursuant to the Revenue Bond Law, O.C.G.A. S36-82-63, the Consolidated Government may authorize the terms of the Series 2002 Bonds by resolution; and WHEREAS, A.G. Edwards & Sons, Inc., Atlanta, Georgia (the "Representative") and SunTrust Capital Markets, Inc. (collectively with the Representative, the "Underwriter") have offered to purchase the Series 2002 Bonds in the aggregate principal amount of $149,400,000 pursuant to a Bond Purchase Agreement, dated the date hereof, by and between the Consolidated Government and the Underwriter (the "Purchase Agreement") at a purchase price of $148,172,480.40, which is equal to par less underwriter's discount of $866,520 and less original issue discount of $360,999.60, plus accrued interest to date of delivery ($807,701.39), and the rates of interest set by the Underwriter do not exceed the maximum rate of interest for any year AO 742313,2 over the life of the Series 2002 Bonds, as set forth in the 2002 Resolution and the Series 2002 Bonds shall bear interest from date at the rates per annum hereinafter set forth, and the sale of the Series 2002 Bonds at such prices will provide the Consolidated Government with sufficient funds to finance the cost of the overall undertaking now contemplated by the Consolidated Government as set forth in the 2002 Resolution; and WHEREAS, it was provided in the 2002 Resolution authorizing the issuance of the Series 2002 Bonds that, subsequent to the sale of the Series 2002 Bonds, the Consolidated Government would adopt a supplemental resolution specifying, among other things, the aggregate principal amount of the Series 2002 Bonds to be issued, the interest rate or rates per annum which the Series 2002 Bonds would bear, the principal amount of Series 2002 Bonds to mature in each year, the maturities of the Series 2002 Bonds which shall be designated as term bonds subject to mandatory redemption and the optional redemption provisions applicable to the Series 2002 Bonds, would authorize and approve the execution and delivery of the Purchase Agreement, would set forth the terms of any bond insurance policy and debt service reserve insurance policy to be issued in connection with the issuance of the Series 2002 Bonds and would provide for the actual issuance and delivery of the Series 2002 Bonds upon payment therefor by the purchaser thereof; and WHEREAS, the Series 2002 Bonds should now be executed, issued and delivered; and WHEREAS, in order to enhance the Consolidated Government's credit by assuring owners of the Series 2002 Bonds that the principal of and interest on the Series 2002 Bonds will be paid promptly when due, the Consolidated Government will obtain a municipal bond insurance policy for the Series 2002 Bonds from Financial Security Assurance Inc., a New York stock insurance company (the "2002 Bond Insurer"); and WHEREAS, the Consolidated Govenunent has determined to purchase a debt service reserve surety bond from the 2002 Bond Insurer in order to satisfy a portion of the debt service reserve requirement applicable to the Series 2002 Bonds and the Consolidated Government's outstanding water and sewerage revenue bonds; and WHEREAS, in order to correct certain clerical errors contained in Section 1 of the Engineering Report, dated May 30, 2002, attached as Exhibit A to the 2002 Resolution, the Consulting Engineers for the System have presented the Conunission with a revised Engineering Report, dated June 13, 2002, and in order to correct certain clerical errors it is necessary and desirable that the Commission approve the June 13,2002 Engineering Report; NOW, THEREFORE, BE IT RESOLVED by the Augusta-Richmond County Commission and it is hereby resolved by authority of same, that $149,400,000 aggregate principal amount of Augusta, Georgia Water and Sewerage Revenue Bonds, Series 2002, shall be issued. The Series 2002 Bonds shall be dated June 1, 2002, shall bear interest from date at the rate per annum set forth below opposite each principal maturity, payable semiannually on April 1 and October 1 in each year, commencing on October 1, 2002, and shall mature on October 1 in the following years and principal amounts: -2- AO 742313,2 Year Amount Rate Year Amount Rate 2002 $ 235,000 2.50 % 2014 $ 3,430,000 5.25 % 2003 905,000 2.50 2015 3,615,000 5.00 2004 925,000 2.50 2016 3,795,000 5.00 2005 950,000 3.00 2017 3,980,000 5.00 2006 980,000 3.00 2018 4,180,000 4.50 2007 1,010,000 3.00 2019 4,370,000 5.375 2008 1,425,000 3.30 2020 4,605,000 5.375 2009 1,705,000 3.50 2021 4,850,000 5.25 2010 2,365,000 3.75 2022 5,105,000 5.25 2011 3,015,000 3.875 2027 29,695,000 5.00 2012 3,135,000 4.00 2032 61,865,000 5.00 2013 3,260,000 5.25 BE IT FURTHER RESOLVED by the authority aforesaid, and it is hereby resolved by authority of same, that the $29,695,000 aggregate principal amount of the Series 2002 Bonds maturing October 1, 2027 are hereby made subject to mandatory redemption prior to maturity on October 1, 2023 and on each succeeding October 1 to and including October 1, 2026, in part, by lot in such manner as may be designated by the Bond Registrar, at par plus accrued interest to the redemption date, in the following years and principal amounts: Year Amount 2023 2024 2025 2026 $5,370,000 5,645,000 5,925,000 6,220,000 (Leaving $6,535,000 to mature October 1,2027) BE IT FURTHER RESOLVED by the authority aforesaid, and it is hereby resolved by authority of same, that the $61,865,000 aggregate principal amount of the Series 2002 Bonds maturing October 1, 2032 are hereby made subject to mandatory redemption prior to maturity on October 1,2028 and on each succeeding October 1 to and including October 1, 2031, in part, by lot in such malU1er as may be designated by the Bond Registrar, at par plus accrued interest to the redemption date, in the following years and principal amounts: Year Amount 2028 2029 2030 2031 $ 6,860,000 7,200,000 7,565,000 19,630,000 (Leaving $20,610,000 to mature October 1,2032) -3- AO 742313,2 The Series 2002 Bonds subject to mandatory redemption as aforesaid shall be redeemed in the same manner and procedure as set forth in Section 9 of the 2002 Resolution, BE IT FURTHER RESOLVED by the authority aforesaid, and it is hereby resolved by authority of same, that the form of the Series 2002 Bonds as set forth in the 2002 Resolution shall be amended so as to set forth the Series 2002 Bonds which are term bonds subject to mandatory redemption and the principal amounts to be redeemed in each year. BE IT FURTHER RESOLVED by the authority aforesaid, and it is hereby resolved by authority of same, that the Series 2002 Bonds issued under the 2002 Resolution and maturing on and after October 1, 2013 may be redeemed prior to their respective maturities at the option of the Consolidated Government either in whole at any time or in part on any Interest Payment Date (as defined in the 2002 Resolution), at par without a premium, in any year not earlier than October 1, 2012 from any moneys available for such purpose and deposited with the Paying Agent (as defined in the 2002 Resolution) on or before the date fixed for redemption by payment of the principal amount thereof and accrued interest thereon to date of redemption. BE IT FURTHER RESOLVED by the authority aforesaid, and it is hereby resolved by authority of same, that the form of the Series 2002 Bonds as set forth in the 2002 Resolution shall be amended by amending the optional redemption provisions thereof in accordance with the foregoing. BE IT FURTHER RESOLVED by the authority aforesaid, and it is hereby resolved by authority of same, that the Consolidated Government hereby represents, warrants and covenants in favor of the owners of the Prior Bonds and the Series 2002 Bonds that the 2002 Resolution, as supplemented by this Supplemental Resolution and the Prior Resolutions (collectively, the "Resolutions"), create a valid and binding pledge of and lien on the Pledged Revenues as security for the payment of the Prior Bonds and the Series 2002 Bonds, enforceable in accordance with the terms of the Resolutions and the terms of the Prior Bonds and the Series 2002 Bonds. Such pledge and lien shall be a first or prior lien, superior to any that may ever hereafter be made, including judicial liens, and subject only to the right of the Consolidated Government to issue Additional Parity Bonds in accordance with the provisions of the Resolutions. No filing or recording of the Resolutions or of any other document or instrument (including financing statements under the Uniform Commercial Code) is necessary or required in connection with the creation, enforceability or priority of the lien and pledge of the Resolutions. The Consolidated Government shall not hereafter make or suffer to exist any pledge or assignnlent of or lien on the Pledged Revenues ranking prior to or on a parity with the Prior Bonds and the Series 2002 Bonds; provided, however, the Consolidated Government reserves the right to issue Additional Parity Bonds and subordinate bonds in accordance with the terms and subject to the conditions contained in the Resolutions. BE IT FURTHER RESOLVED by the authority aforesaid, and it is hereby resolved by authority of same, that the report entitled "Engineer's Report, Water and Sewerage Revenue Bonds, Series 2002," prepared by CH2M HILL, dated Jlme 13, 2002, and attached hereto as Exhibit A, is hereby approved. -4- AO 742313,2 BE IT FURTHER RESOLVED by the authority aforesaid, and it is hereby resolved by authority of same, that the Consolidated Government hereby accepts and approves the offer of the Underwriter to purchase the Series 2002 Bonds pursuant to the terms and conditions set forth in the Purchase Agreement in the form presented at this meeting and hereby authorizes and directs the Mayor of the Consolidated Government to execute and deliver such Purchase Agreement for and on behalf of the Consolidated Government with such changes as the Mayor deems necessary and the Clerk to the Conm1ission be and is hereby authorized and directed to attest the same. BE IT FURTHER RESOLVED by the authority aforesaid, and it is hereby resolved by authority of same, that for the purpose of this resolution and the 2002 Resolution authorizing the issuance of the Series 2002 Bonds, the term "original purchaser" shall mean the Underwriter and their successors or assigns, and the terms "representative of the original purchaser" and "designated representative of the original purchaser" of the Series 2002 Bonds shall be construed to mean A.G. Edwards & Sons, Inc., its successors or assigns. BE IT FURTHER RESOLVED by the authority aforesaid, and it is hereby resolved by authority of san1e, that all of the Series 2002 Bonds be delivered against payment to the Underwriter on the date and at the place as may be mutually agreed upon by the designated representative of the original purchaser and the Consolidated Government. BE IT FURTHER RESOLVED by the authority aforesaid, and it is hereby resolved by authority of same, that capitalized terms used herein and not otherwise defined shall have the meanings set forth in the 2002 Resolution and that Section 1 of the 2002 Resolution is hereby amended to provide for the following definitions: "Series 2002 Bond Insurance Policy" shall mean the insurance policy issued by the Series 2002 Bond Insurer guaranteeing the scheduled payment of principal of and interest on the Series 2002 Bonds when due. "Series 2002 Bond Insurer" shall mean Financial Security Assurance Inc., a New York stock insurance company, or any successor thereto or assignee thereof. "Series 2002 Reserve Account Surety Bond" shall mean the municipal bond debt service reserve insurance policy issued by the Series 2002 Reserve Account Surety Bond Provider in connection with funding the Reserve Requirement in connection with the issuance of the Series 2002 Bonds. "Series 2002 Reserve Account Surety Bond Provider" shall mean Financial Security Assurance Inc., a New York stock insurance company, or any successor thereto or assignee thereof. BE IT FURTHER RESOLVED by the authority aforesaid, and it is hereby resolved by authority of same, that the following provisions shall apply with respect to the Series 2002 -5- AO 742313.2 Bonds so long as the Series 2002 Bond Insurance Policy is in effect, notwithstanding anything in the 2002 Resolution or herein to the contrary as follows: (a) The Series 2002 Bond Insurer shall be deemed to be the sole holder of the Series 2002 Bonds for the purpose of exercising any voting right or privilege or giving any consent or direction or taking any other action that the holders of the Series 2002 Bonds insured by it are entitled to take pursuant to the 2002 Resolution. (b) The Series 2002 Bond Insurer shall be a third party beneficiary to the 2002 Resolution. (c) No modification, amendment or supplement to the 2002 Resolution may become effective except upon obtaining the prior written consent of the Series 2002 Bond Insurer. (d) Copies of any modification or amendment to the 2002 Resolution shall be sent to the Rating Agencies at least 10 days prior to the effective date thereof. (e) Unless otherwise prohibited by law, upon the occurrence of an Event of Default, amounts on deposit in the 2002 Construction Fund created pursuant to the 2002 Resolution will not be disbursed but will be used to pay debt service on the Prior Bonds, the 2002 Bonds and any Additional Parity Bonds therewith hereafter issued. (f) The rights granted to the Series 2002 Bond Insurer under the 2002 Resolution to request, consent to or direct any action are rights granted to the Series 2002 Bond Insurer in consideration of its issuance of the Series 2002 Bond Insurance Policy. Any exercise by the Series 2002 Bond Insurer of such rights is merely an exercise of the Series 2002 Bond Insurer's contractual rights and shall not be construed or deemed to be taken for the benefit or on behalf of the holders of the Series 2002 Bonds nor does such action evidence any position of the Series 2002 Bond Insurer, positive or negative, as to whether the consent of any holder of the Series 2002 Bonds is required in addition to consent of the Series 2002 Bond Insurer. (g) Amounts paid by the Series 2002 Bond Insurer under the Series 2002 Bond Insurance Policy shall not be deemed paid for purposes of the 2002 Resolution and shall remain Outstanding (as defined in the Series 2002 Bond Insurance Policy) and continue to be due and owing until paid by the Consolidated Government in accordance with the 2002 Resolution. (h) If on the third business day prior to the related scheduled Interest Payment Date or principal payment date or the date to which maturity of the Series 2002 Bonds has been accelerated (any such day, a "Payment Date") there is not on deposit with the Paying Agent, after making all transfers and deposits required under the 2002 Resolution, moneys sufficient to pay the principal of and interest on the Series 2002 Bonds due on such Payment Date, the Paying Agent shall give notice to the Series 2002 Bond Insurer and to its designated agent (if any) (the "Series 2002 Bond Insurer's Fiscal Agent") by telephone or telecopy of the amount of such deficiency by 12 noon, New York City time, on such business day. If on the second business day prior to the related Payment Date there continues to be a deficiency in the amount available to pay the principal of and interest on the Series 2002 Bonds due on such Payment Date, the -6- AO 742313,2 Paying Agent shall make a claim under the Series 2002 Bond Insurance Policy and give notice to the Series 2002 Bond Insurer and the Series 2002 Bond Insurer's Fiscal Agent (if any) by telephone of the amount of such deficiency, and the allocation of such deficiency between the amount required to pay interest on the Series 2002 Bonds and the amount required to pay principal of the Series 2002 Bonds, confirmed in writing to the Series 2002 Bond Insurer and the Series 2002 Bond Insurer's Fiscal Agent by 12 noon, New York City time, on such second business day by filling in the form of Notice of Claim and Certificate (as such term is defined in the Series 2002 Bond Insurance Policy) delivered with the Series 2002 Bond Insurance Policy. In the event the claim to be made is for a mandatory sinking fund redemption installment, upon receipt of the moneys due, the Paying Agent shall authenticate and deliver to affected holders of the Series 2002 Bonds who surrender their Series 2002 Bonds a new Series 2002 Bond or Series 2002 Bonds in an aggregate principal amount equal to the unredeemed portion of the Series 2002 Bond surrendered. The Paying Agent shall designate any portion of payment of principal on the Series 2002 Bonds paid by the Series 2002 Bond Insurer, whether by virtue of mandatory sinking fund redemption, maturity or other advancement of maturity, on its books as a reduction in the principal amount of Series 2002 Bonds registered to the then current holder of such Series 2002 Bond, whether the Securities Depository or the Securities Depository Nominee or otherwise, and shall issue a replacement Series 2002 Bond to the Series 2002 Bond Insurer, registered in the name of Financial Security Assurance Inc., in a principal amount equal to the amount of principal so paid (without regard to authorized denominations); provided that the Paying Agent's failure to so designate any payment or issue any replacement Series 2002 Bond shall have no effect on the amount of principal or interest payable by the Consolidated Government on any Series 2002 Bond or the subrogation rights of the Series 2002 Bond Insurer. The Paying Agent shall keep a complete and accurate record of all funds deposited by the Series 2002 Bond Insurer into the Policy Payments Account (hereinafter described) and the allocation of such funds to payment of interest on and principal paid in respect of any Series 2002 Bond. The Series 2002 Bond Insurer shall have the right to inspect such records at reasonable times upon reasonable notice to the Paying Agent. Upon payment ofa claim under the Series 2002 Bond Insurance Policy, the Paying Agent shall establish a separate special purpose trust account for the benefit of holders of the Series 2002 Bonds referred to herein as the "Policy Payments Account" and over which the Paying Agent shall have exclusive control and sole right of withdrawal. The Paying Agent shall receive any amount paid under the Series 2002 Bond Insurance Policy in trust on behalf of the holders of the Series 2002 Bonds and shall deposit any such amount in the Policy Payments Account and distribute such amount only for purposes of making the payments for which a claim was made. Such amounts shall be disbursed by the Paying Agent to the holders of the Series 2002 Bonds in the same manner as principal and interest payments are to be made with respect to the Series 2002 Bonds under the sections hereof and in the 2002 Resolution regarding payment of the Series 2002 Bonds. It shall not be necessary for such payments to be made by checks or wire transfers separate from the check or wire transfer used to pay debt service with other funds available to make such payments. -7- AO 742313,2 Funds held in the Policy Payments ACCOWlt shall not be invested by the Paying Agent and may not be applied to satisfy any costs, expenses or liabilities of the Paying Agent. Any funds remaining in the Policy Payments Account following a Series 2002 Bond Payment Date shall promptly be remitted to the Series 2002 Bond Insurer. (i) The Series 2002 Bond Insurer shall, to the extent it makes any payment of principal of or interest on the Series 2002 Boilds, become subrogated to the rights of the recipients of such payments in accordance with the terms of the Series 2002 Bond Insurance Policy. CD The Consolidated Government shall payor reimburse the Series 2002 Bond Insurer for any and all charges, fees, costs and expenses which the Series 2002 Bond Insurer may reasonably payor incur in connection with (i) the administration, enforcement, defense or preservation of any rights or security in the 2002 Resolution; (ii) the pursuit of any remedies under the 2002 Resolution or otherwise afforded by law or equity, (iii) any amendment, waiver or other action with respect to, or related to, the 2002 Resolution whether or not executed or completed, (iv) the violation by the Consolidated Government or the Obligor (as defined in the Series 2002 Bond Insurance Policy) of any law, rule or regulation, or any judgment, order or decree applicable to it or (v) any litigation or other dispute in connection with the 2002 Resolution or the transactions contemplated thereby, other than amounts resulting from the failure of the Series 2002 Bond Insurer to honor its obligations under the Series 2002 Bond Insurance Policy. The Series 2002 Bond Insurer reserves the right to charge a reasonable fee as a condition to executing any amendment, waiver or consent proposed in respect of the 2002 Resolution. The amounts payable pursuant to this subparagraph shall only be payable from the Pledged Revenues or from other lawfully available flmds. (k) The Series 2002 Bond Insurer shall be entitled to pay principal or interest on the Series 2002 Bonds that shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Consolidated Government (as such terms are defined in the Series 2002 Bond Insurance Policy) and any amounts due on the Series 2002 Bonds as a result of acceleration of the maturity thereof in accordance with the 2002 Resolution, whether or not the Series 2002 Bond Insurer has received a Notice of Nonpayment (as such term is defined in the Series 2002 Bond Insurance Policy) or a claim upon the Series 2002 Bond Insurance Policy. (l) The notice address of the Series 2002 Bond Insurer is: Financial Security Assurance Inc., 350 Park Avenue, New York, New York 10022-6022, Attention: Managing Director-Surveillance; Telephone: (212) 826-0100; Telecopier: (212) 339-3529. All notices shall reference the Policy Number. In each case in which notice or other communication refers to an Event of Default, then a copy of such notice or other communication shall also be sent to the attention of General Counsel and shall be marked to indicate "URGENT MATERIAL ENCLOSED." (m) The Series 2002 Bond Insurer shall be provided with the following information: -8- AO 742313,2 (i) (A) Annual audited [mancial statements, if available, within 180 days after the end of the Consolidated Government's fiscal year and in any event as soon as practicable after the same becomes available, and (B) the Consolidated Government's annual budget for the System within 30 days after the approval thereof; (ii) Notice of any draw upon the Debt Service Reserve Account within two Business Days after knowledge thereof other than (i) withdrawals of amounts in excess of the Reserve Requirement and (ii) withdrawals in connection with a refunding of the Series 2002 Bonds; (iii) Notice of any default known to the Paying Agent within five business days after knowledge thereof; (iv) Prior notice of the advance refunding or redemption of any of the Series 2002 Bonds, including the principal amount, maturities and CUSIP numbers thereof; (v) Notice of the resignation or removal of the Paying Agent and Bond Registrar and the appointment of, and acceptance of duties by, any successor thereto; (vi) Notice of the commencement of any proceeding by or against the Consolidated Governn1ent or the Obligor commenced under the United States Bankruptcy Code or any other applicable bankruptcy, insolvency, receivership, rehabilitation or similar law (an "Insolvency Proceeding"); (vii) Notice of the making of any claim in connection with any Insolvency Proceeding seeking the avoidance as a preferential transfer of any payment of principal of, or interest on, the Series 2002 Bonds; (viii) A full original transcript of all proceedings relating to the execution of any amendment or supplement to the Series 2002 Resolution; and (ix) All reports, notices and correspondence to be delivered under the tem1S of the 2002 Resolution. BE IT FURTHER RESOL YED by the authority aforesaid, and it is hereby resolved by authority of same, that the following provisions shall apply with respect to the Series 2002 Reserve Account Surety Bond Provider so long as the Series 2002 Reserve Account Surety Bond is in effect as follows: (a) The Consolidated Government shall repay any draws under the Series 2002 Reserve Account Surety Bond and pay all related reasonable expenses incurred by the Series 2002 Reserve Account Surety Bond Provider. Interest shall accrue and be payable on such draws and expenses from the date of payment by the Series 2002 Reserve Account Surety Bond Provider at the Late Payment Rate. "Late Payment Rate" means the lesser of (a) the greater of (i) the per annum rate of interest, publicly announced from time to time by lP Morgan Chase Bank at its principal office in the City of New York, as it prime or base lending rate ("Prime -9- AO 742313,2 Rate") (any change in such Prime Rate to be effective on the date such change is announced by JP Morgan Chase Bank) plus 3 percent, and (ii) the then applicable highest rate of interest on the Series 2002 Bonds and (b) the maximum rate permissible under applicable usury or similar laws limiting interest rates. The Late Payment Rate shall be computed on the basis of the actual number of days elapsed over the year of 365 days. In the event lP Morgan Chase Bank ceases to announce its Prime Rate publicly, Prime Rate shall be the publicly announced prime or base lending rate of such national bank as the Series 2002 Reserve Account Surety Bond Provider shall specify. Repayment of draws and payment of expenses and accrued interest thereon at the Late Payment Rate (collectively, "Policy Costs") shall commence in the first month following each draw, and each such monthly payment shall be in an amount at least equal to one-twelfth of the aggregate of Policy Costs related to such draw. Amounts in respect of Policy Costs paid to the Series 2002 Reserve Account Surety Bond Provider shall be credited first to interest due, then to the expenses due and then to principal due. As and to the extent that payments are made to the Series 2002 Reserve Account Surety Bond Provider on account of principal due, the coverage under the Series 2002 Reserve Account Surety Bond will be increased by a like amount, subject to the terms of the Series 2002 Reserve Account Surety Bond. If and to the extent cash or other investments have also been deposited therein, all cash and investments in the Debt Service Reserve Account shall be transferred to the Debt Service Account and such investments liquidated for payment of debt service on the Bonds before any drawing may be made on the Series 2002 Reserve Account Surety Bond or any other Reserve Account Surety Bond. Payment of any Policy Costs shall be made prior to replenishment of any such cash amounts. Draws on all Reserve Account Surety Bonds (including the Series 2002 Reserve Account Surety Bond) on which there is available coverage shall be made on a pro rata basis (calculated by reference to the coverage then available thereunder) after applying all available cash and investments in the Debt Service Reserve Account. Payment of Policy Costs and reimbursement of amounts with respect to other Reserve Account Surety Bonds shall be made on a pro rata basis prior to replenishment of any cash drawn from the Debt Service Reserve Account. (b) If the Consolidated Government shall fail to pay any Policy Costs in accordance with the requirements of Paragraph (a) hereof, the Selies 2002 Reserve Account Surety Bond Provider shall be entitled to exercise any and all legal and equitable remedies available to it, including those provided under the Resolutions other than (i) acceleration of the maturity of the Series 2002 Bonds and any Additional Bonds or (ii) remedies which would adversely affect owners of the Series 2002 Bonds and any Additional Bonds. (c) The Resolutions shall not be discharged until all Policy Costs owing to the Series 2002 Reserve Account Surety Bond Provider shall have been paid in full. The Consolidated Government's obligation to pay such amounts shall expressly survive payment in full of the Bonds. -10- AO 742313.2 (d) In order to secure the Consolidated Government's payment obligations with respect to the Policy Costs there shall be granted and perfected in favor of a security interest (subordinate only to that of the owners of the Series 2002 Bonds and any Additional Bonds) in all revenues and collateral pledged as security for the Bonds. (e) The Consolidated Government shall place into effect a schedule of rates, fees and charges sufficient to repay all Policy Costs then due and owing. The Consolidated Government shall not issue Additional Bonds unless the test provided in Section 25 of the 2002 Resolution provides, in addition to any other requirement therein, at least 1.0 times coverage of all Policy Costs then due and owing. (f) The Paying Agent shall ascertain the necessity for a claim upon the Series 2002 Reserve Account Surety Bond and to provide notice to the Series 2002 Reserve Account Surety Bond Provider in accordance with the terms of the Series 2002 Reserve Account Surety Bond at least five business days prior to each date upon which interest or principal is due on the Series 2002 Bonds. The Paying Agent shall give notice to the Series 2002 Reserve Account Surety Bond Provider of any failure of the Consolidated Government to make timely payment in full of any deposit required to be made to the Debt Service Account within two Business Days of the date due. BE IT FURTHER RESOLVED by the authority aforesaid, and it is hereby resolved by authority of same, that the Mayor and Clerk to the Commission are hereby authorized and directed to purchase the Series 2002 Bond Insurance Policy and the Series 2002 Reserve Account Surety Bond and such Series 2002 Reserve Account Surety Bond shall be held for the credit of the Debt Service Reserve Account. In cOlmection with the purchase of the Series 2002 Reserve Account Surety Bond, the Mayor and Clerk to the Commission are hereby authorized and directed to execute, for and on behalf of the Consolidated Government, the Insurance Agreement relating to the Series 2002 Bonds, which Insurance Agreement shall be in substantially the form attached as Exhibit B hereto and incorporated herein, with such changes as may be authorized by the Mayor. The execution and delivery of the Insurance Agreement shall be conclusive evidence of the approval of any such changes. BE IT FURTHER RESOLVED by the authority aforesaid, and it is hereby resolved by authority of same, that from the proceeds from the sale of the Series 2002 Bonds, including accrued interest to date of delivery, the following payments shall be made, simultaneously with the issuance and delivery of the Series 2002 Bonds, to the extent and in the manner set forth herein and in the 2002 Resolution: (a) The sum of $807,701.39 shall be deposited into the Sinking Fund and credited to the Debt Service Account to be used and applied toward the payment of the interest on the Series 2002 Bonds coming due on October 1, 2002; (b) The sum of $765,758.24, representing the premium on the Series 2002 Bond Insurance Policy insuring the Series 2002 Bonds, and the sum of $223,928.51, representing the premium on the Series 2002 Reserve Account Surety Bond, shall be paid to the Series 2002 Bond Insurer and Series 2002 Reserve Account Surety Bond Provider, respectively; -11- AO 742313,2 (c) The sum of $8,692,367.85, or such other amount as may be necessary, shall be paid on the date of issuance to the Georgia Environmental Facilities Authority to prepay in full the Refunded GEFA Obligation (as defined in the 2002 Resolution); (d) The sum of $11,753,672.40, representing capitalized interest, shall be deposited into the 2002 Capitalized Interest Fund and used and applied toward the payment of the interest on the Series 2002 Bonds coming due; (e) The sum of $125,691,319.86 shall be deposited into the 2002 Construction Fund and used and applied toward the cost of the additions, extensions and improvements to the System now contemplated; and (f) The sum of $1,045,433.54 shall be used and applied by the Consolidated Government to the payment of the costs and expenses incurred in connection with the issuance and delivery of the Series 2002 Bonds. BE IT FURTHER RESOLVED by the authority aforesaid, and it is hereby resolved by authority of same, that amounts on deposit in the 2002 Construction Fund and the 2002 Capitalized Interest Fund (as defined in the 2002 Resolution) shall be invested pending their use to pay the costs of the Project as provided in Article IV, Section 3( c) of the 1996 Resolution (as defined in the 2002 Resolution) and to pay capitalized interest as provided in Section 18 of the 2002 Resolution. The appropriate financial officers of the Consolidated Govenmlent and of the System, in consultation with the Administrator of the Consolidated Government, are hereby authorized and directed, if they deem the same to be economical and in the best interest of the System, to solicit bids for an investment agreement pertaining to the 2002 Construction Fund and the 2002 Capitalized Interest Fund, in the form of a flexible repurchase agreement or otherwise, and to select the best bid. The Mayor of the Consolidated Government is hereby authorized and directed to execute and deliver such repurchase agreement in the nanle of and on behalf of the Consolidated Government, with such execution by the Mayor to be conclusive evidence that such agreement has been approved by the Commission pursuant to this Resolution. The Administrator shall deliver a copy of this Resolution to the Custodian of the Construction Fund as evidence of the approval of the Commission required by Article IV, Section 3(c) of the 1996 Resolution. BE IT FURTHER RESOLVED by the authority aforesaid, and it is hereby resolved by authority of same, that the Mayor and Clerk to the Commission are hereby authorized and directed to execute, for and on behalf of the Consolidated Government, any and all agreements, certificates and other documents relating to the Series 2002 Bonds as approved herein, including any agreement for the investment of proceeds of the Series 2002 Bonds, with such changes as may be authorized by the Mayor. BE IT FURTHER RESOLVED by the authority aforesaid, and it is hereby resolved by authority of same, that all of the terms, conditions, provisions and covenants of the Resolutions authorizing the issuance of the Series 2002 Bonds are hereby ratified and reaffirmed and the Resolutions are hereby amended and supplemented as herein provided. -12- AO 742313.2 BE IT FURTHER RESOLVED by the authority aforesaid, and it is hereby resolved by authority of same, that any and all resolutions or parts of resolutions in conflict with this resolution this day adopted be and the same are hereby repealed, APPROVED on June 21, 2002. By: ~ ~j , At "'" ' , .c>-<>--Q\136'l5 1a(.W ner, Clerk of Commission ;t7 OOoOOloOC't.I." l....\?,~. JZ7 00 0,.. .-f i!^ p e."., G ~J', ,re;~'A 0,,_ '.;\ ~~ t1 . :1.,~:~':'.;.:,J) ~.....,:" ~ ~ C) [SE ~':i!",":". " (. ~~ ~ ~lr. II ~:" :of 0 -'" 'i,.p>- " ~,,~ I-:l \ '!l'. 1,;,:"'(. c ,..., p. ~ " .,-; i'\Nft~~i".." ,~o jrJ ~ "'" .=r, "..I ,"' . ".;.J ~ ~ 0 ~~~~':-;JiJ' ':>'':;;'< ~ _ 0 .'1 ""', ,'" j1 v."~ I' .. pi QII .e \ .c... 0" f~ v~ ..e.o....o". ,~C).# ~tl.~ 'Hi' P'..:-" il~~,'-,~,,'l>---- -13- A0742313,2 EXHIBIT A Engineer's Report, Water and Sewerage Revenue Bonds, Series 2002, dated June 13,2002 AD 742313,2 EXHIBIT B Form oflnsurance Agreement AO 742313,2 JUI\, 20, 2CC2 6: 38PM SUTHERlA~D AS81LL NU, i 60 r, L INSURANCE AGREEMENT INSURANCE AGREEMENT, dated as of I by and between Augusta, Georgia (the "Issuer') and Financial Security Assurance Inc, (the "Insurer") (the "Agreement"). In consideration of the issuance by the Insurer of its Municipal Sond Debt Service Reserve Insurance Policy (the "Reserve Policy") wrth r~pect to the Issuer's Water and Sewerage Revenue Bonds, Series 2002 (the "Bonds") issued under the Resolution dated (the "Resolution") and the Issuer's payment to the Insurer of the insurance premium for the Reserve Policy, the Insurer and the Issuer hereby covenant and agree as follows: 1, Upon any payment by the Insurer under the Reserve Policy, the: Insurer shall furnish to the Issuer written instructions as to the manner in which payment of amounts owed to the Insurer as a result of such payment under the Reserve Policy shall be made. 2, The Issuer shall pay the Insurer the principal amount of any draws under the Reserve Policy and pay all related reasonable expenses incurred by the Insurer and shall pay interest thereon from the date of payment by Financial Security at the Late Payment Ra~e, "Late Payment Rate" means the lesser of (a) the greater of (i) the per annum rate of interest, publicly announced from time to time by JPMorgan Chase Bank at its principal oHice in the City of New Yorl<, as its prime or base lending rate ("Prime Rata") (any change in such Prime Rate to be effective on the date such change is announced by JPMorgan Chase Bank) plus 3%, and (ii) the then applicable highest rate of interest on the Bonds and (b) the maximum rate permissible under applicable usury or similar laws limiting interest rates, The Late Payment Rate shall be computed on the basis of the actual number of days elapsed over a year of 360 days, In the event JPMorgan Chase Bank ceases to announce its Pri;ne Rate, the Prime Rate shall be the prime or base lending rate of such national bank as the Insurer shall designate. 3, Repaymsnt of draws and payment of expenses and the interest accrued thereon at the Late Payment Rate (collectively, "Policy Costs") shall commence in the first month following each draw, and each such monthly payment shall be in an amount at least equal to 1 /12th of the aggregate of Policy CoS'.s related to such draw, 4, Amounts in respect of Policy Costs paid to the Insurer shall be credited first to interest due, then to the expenses due and then to principal dUel, 5. As and to the extent that payments are made to the Insurer on account of principal due, the coverage under the Reserve Polley will be increased by a like amount, subject to the terms of the Reserve Policy, 6, All cash and investments in the Reserve Fund shall be transferred to the debt seNiee Iwnd for }.JaY[II~rl.. ui ueu\ ~~,\til.,t; llll t~18 D;jllJ:;; ~~;..:.':~ u.,iY c.:~':~",';;;'If.J rli::/ b::: rnZ',2~: 0:-1 t;-j~' nC'~0r\/~ r~liC'y or on any alternative credit instrument. psymont of any Policy Co~s shall bs made prior to replenishment of any such cash amounts, Draws on all alternative credit instruments (including the ReseNe Policy) on which there is available coverage shall be made on a pro rata basis (calculated by reference to coverage then available under each such alternative credit instrument) after applying available cash and investments in the Reserve Fund, Payment of Policy Costs and reimbursement of amounts with respect to alternative credit instruments shall be made on a pro- rata basis prior to re~lenlshment of any cash drawn from the Reserve Fund, Pa;)e i of 2. 11'\ ^,I 2!1.I' ,,-,I,Lv,IJ')L 6:39PM SUTHERLAND ASSiLl I~U, i bo r, j 7, If the Issuer shall fail to pay any Policy Costs in accordance with the requirements of the Resolution and .this Agreement. the Insurer shall be entitled to exercise any and all legal and equitable remedies available to it, including those provided under the Resolution, other than (i) acceleration of the maturity of the Bonds or (ii) remedies which would adversely affect owners of the Bonds, 8. The Resolution shall not be discharged until ail Policy Costs owing to the Insurer shall have been paid in full. The Issuer's obligation to pay such amounts shall expressly survivs payment in full of the Bonds. 9, In order to secure the Issuer's payment obligations with respect to the Policy Costs, there is hereby granted and perfected in favor of the Insurer a security Interest (subordinate only to that of the owners of the Bonds) In all revenues and collateral pledged as security for the Bonds, 10. Policy Costs due and owing shall be included in debt seNice requirements for purposes of calculation of the additional bonds test and the rate covenant In the Resolution. , 1. The Paying Agent shall as:::ertain the necessity for a claim upon the Reserve Policy and provide notice to the Insurer in accordance with the terms of the Reserve Policy at least five business days prior to each date upon which Interest or principal is due on the Bonds. Where deposits are required to be made by the Issuer with the Paying Agent to the debt service fund lor the Bonds more often than semi-annually. the Paying Agent shall give notice to the Insurer of any failure of the Issuer to make timely payment in full or such deposits within t\yO business days of the date due, 12, Notices to the Insurer shall be sent to the fol/owing address (or such other address as the Insurer may designate in writing): Financial Security Assurance Inc" 350 Park Avenue, New York, New York 1 0022-6022 Attention: Managing Director. Surveillance. 13, This Agreemen: may be executed in counterparts. each of which alone and all of which together shall be deemed one original Agreement. 14, If anyone or more of the agreements, provisions or terms of this Agreement shall be for any reason whatsoever held invalid, then such agreements, provisions or terms shall be deemed sSlJerable from the remaining agreements, provisions or terms of this Agrsement and shall in no way affect t:18 validity or enfo~eab;!ity of the other provisions of this Agreement. , 5, All capita:ized terms used herein and net o~herwise defined shall have the meanings ascribed to them in the Resolution, 16, This Agreement and the rights and obligations of the parties of the Agreement shall be governed. by and construed and interpreted in accordsnce with the laws of the State of Neyy York. IN WITN::SS WHEREOF. the parties hereto have set their hands as of the date written above, AUGUSTA, GEORGIA FINANCIAL SECURITY ASSURANCE INC, By: Title: By: Title: Managing Director Pag€ 2 of 2 minary Summary of 2002 Financing $152,345,000 WI to meet GEFA refinancing will provide savings of approx. $547,000 on a net present value basis, or nearly $50,000 per year; o 2002 Financing is phase two of the master plan approved in 2000; Given the projects covered by this borrowing, one less issue is required in future years than anticipated; o Preli Uses of Funds - 3% 2% 1% 1% earnings Capitalized Interest will allow revenues to grow debt service requirements in early years; Project Fund, when combined with interest fund projects totaling $130 million o o o Project Fund o Capitalized Interest o GEFA Refunding . Original Issue Discount o Costs of Issuance . Bond Insurance & Surety Bond Average rate IS expected to be approx. 5.21 % Aggregate Debt Service and Expected Coverage o /' / /' /' / I- II 45,ocx),ocx) 4Q,OCX),OCX) 35,ocx),ocx) 3O,OCX),OCX) 25,ocx),OCX) 2O,OCX),OCX) 15,ocx),OCX) lQ,OCX),OCX) 5,ocx),ocx) Rates Bonds due October "1 st Vleld nntv Vield 1 .67 2013 4.50 1 .85 2014 4.61 2.45 2015 4.71 2.92 2016 4.81 3.21 2017 4.88 3.48 2018 4.95 3.76 2019 5.02 3.95 2020 5.08 4.15 2021 5.13 4.26 2022 5.17 4.37 Anticipated Interest Serial nntv 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 ==:II Series 1997 c=:::::::J Series 2002 ~.fL~fE!k c::::== Series 1996 B _ Series 2002 . GEFA _ Series 1996 A === Series 2000 = Revenues Term Bonds due October "1 st nntv Vield 2027 5.26 2032 5.30 . . . . . . . . . . . . . . . . . . . . . . . . .. ... . . . . ... - - - - - - - - - - - ~ - - ... . -- - - - ~ - - - - Augusta, Georgia Water & Sewerage Revenue Bonds, Series 2002 ~4__,~. -.; '~~,~ . "'~~A~~""f,~~t<i:::r:~) .,~ -~~~ '<,. <..,r', ~t.:1s" ';:,.. ":-'~~:;'-." " '~1:.-.tf ~~" :~ . , . ,'*:" ' ";:<:j~".; - i.~ _....:.t.:'.)~~~~~\.:fl ",:. ~ j.~'" ;..r-) r.:.1')-~ t ,r-. ~ff~L+~;e~\ '. "~~'~-"{ >~ ",:" " .tt " . ~t,. ~ i' I ' I, , ;:.; Ii )' ,"f - . :';-r ;~ _r..... , I ',--;i' ~.~:~ i):rh, It;'; ,? I ";;it ' ~~(,!!"', "'~~..'f~i.':~-, II,: ,~'~~J ,l,' ~ "-.;<1_'" Ct ,-:~::~:.t, :" ',', " 1;:. ,~~, ~.J:~ . \'':.., . ~-r;'.';'-~' ;,17" '....:... ii' , / ~.! . i,,' I .' '\ 'I ~. , I, f~ -, ..... .~ , I ""I ":. .:, I~.'l"\'~ ~ \','..., 8 ", i /. N ..? '. !.#~\ \ :'f~ ~ I '." ~ ( "' Engineer's Report June 13, 2002 Prepared by CH2MHILL . . . . . . . . . . . . . . . . . . . . . . . . . . . . REPORT Engineer's Report Water and Sewerage Revenue Bonds, Series 2002 Prepared for Augusta Utilities Department June 13, 2002 - ., - - Prepared by CH2MHILL Utility Management Services - - ~ - - - - - - - - - - ... - - - - - - - - .- - . . . . . . . . . . . . . . . . . . . . . . . . . . . . Contents ... ., 1.0 In trod ucti on ............. .......... ...... ....... ..... ......... ......................... ............. .... .................. .......... 1-1 1.1 Authorization and Purpose ....................................................................... ........... 1-1 1.2 References...... ......... ..... ........ ...... ...............................,..... ....... .............................. ... 1-2 1.3 Assumptions............................. .......................... .................. .................................. 1-3 2.0 System History and Organization, and County Growth............................................ 2-1 2.1 Organizational Structure ... ......... ................ .......................................................... 2-1 2.1.1 Augusta.......... ........... ........ ......................................................................... 2-1 2.1.2 System Management .......... ...................................................................... 2-1 2.2 Augusta-Richmond Cormty Population Trends ............................................... 2-6 3.0 Water System..... ...... ...... ........ ............... ......................... ..... ............. ................. ....... ........... 3-1 3.1 Overview of Potable Water System..................................................................... 3-1 3.2 Water Service Area ............................. ....................... ................................ ....... ..... 3-1 3.3 Water Supply......................................................................... ................................. 3-1 3.3.1 Raw Water Pumping ........ ........................................................................ 3-3 3.3.2 Raw Water Transmission and Storage................................................... 3-4 3.4 Water Trea tment Facilities .......................................... ........... ............................... 3-5 3.4.1 HigWand Avenue WTP System Processes............................................ 3-5 3.5 Finished Water Storage, Chemical Feed Systems, and High Service Pumping .............................. ........................................ ........................... ....... .......... 3-6 3.5.1 Finished Water Storage .............................................................. .............. 3-6 3.5.2 Chemical Feed Systems.................. ........ .......... ............................... ......... 3-7 3.5.3 High Service Pumping ............................................................................. 3-7 3.6 Water Distribution System.. ....... .......................................................................... 3-8 3.7 Water Quality ...., ......................... ........ .......................... ................ ............... ........ 3-13 3.8 Projected Water Demand ................................................................. ................... 3-13 3.9 Regula tory Impacts...................... ............................ ................................ ............ 3-16 3.9.1 Existing Regulations ................................. ............................. .......... ....... 3-17 3.9.2 Recently Promulgated Regulations ...................................................... 3-18 3.9.3 Future Regula tions .. ............................. .................................................. 3-19 4.0 Wastewater System................ ........ ...................................................... ........................ ...... 4-1 4.1 Overview of Wastewater System................................... ........ ............. ................. 4-1 4.2 Wastewater Collection and Conveyance ............................................................4-2 4.3 Wastewater Treatment Facilities ................................. ....................... ................. 4-3 4.4 Projected Wastewater Flows ............... ...................... ........................................... 4-5 4.5 Regulatory Impacts.... .............................. ..... ......................................................... 4-7 4.5.1 Watershed Management ......................................................... ........ ......... 4-7 4.5.2 Total Maximum Daily Load (TMDL) Development............................ 4-8 4.5.3 NPDES Permitting and Nutrient Management.................................... 4-8 4.5.4 Onsite Septage Systems ....................................................................... .... 4-9 4.5.5 Residuals Management and 503 Regulations ....................................... 4-9 4.5.6 General Permit for Stormwater Discharge Associated with Industrial Activity.............................. ............................................... ........ 4-9 - - . - -- - -- - - - -- - -- - - ., -- - - - -- - -- - P:\ 161047\ 161047 AUO 2002 PMlBONO RNANCING REPORT\SEC I&2FINAL6_13_02,OOC - - . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tables ..... - ..... - - - -- - 2-1 3-1 3-2 3-3 3-4 3-5 3-6 3-7 3-8 3-9 - - a ... . -- - - - - - - - ENGINEER'S REPORT AUGUSTA lJTlUTIES DEPARTMENT WATER AND SEWERAGE REVENUE BONDS, SERIES 2002 4.5.7 Stormwater Pollution Prevention Plan ..................................................4-9 4.5.8 Spill Prevention, Control, and Countermeasures Plan...................... 4-10 4.5.9 Municipal Storm Water Discharge Pennit .......................................... 4-10 4.5.10 Security and Vulnerability.............................................. ........... ..... ....... 4-10 5.0 Proposed System CIP ... ............................................................................................ ......... 5-1 5.1 Plaruting Criteria and Assumptions.................................................................... 5-1 5.2 Cost Opinions for Recommended Projects ........................................................ 5-1 5.3 Summary of Capital Improvements.................................................................... 5-2 5.3.1 Water Treatment ................................ ....................................................... 5-3 5.3.2 Water Distribution System ............................. ............................ ............. 5-6 5.3.3 Wastewater Treatment.... .... .................. .... ........................................ ....... 5-8 5.3.4 W astewa ter Conveyance....................... .... ................................... ...... ...... 5-9 5.3.5 System-wide Improvements .......................................................... ....... 5-11 5.4 Anticipated Future W ork.................................. .................................................. 5-12 6.0 Financial Performance ............... ................ ................... ............... .......... .... ............ ........... 6-1 6.1 Historical Performance. .................... ...... ......... ..... ......... ....................................... 6-1 6.2 Water and Sewer Rates .........................................................................................6-1 6.3 Financial Policies................... ..... ......... ..................... ...... ................................. ....... 6-4 6.4 Projected Opera ling Results..... .... ........................ ......... ....... ........ .... ............ .... .... 6-5 6.4.1 Revenues ..... ........ ........ ........... ................. ...... ............ ................................. 6-5 6.4.2 Expenses. ....... ..................... .......... ...................... ........... ..................... ........ 6-7 6.4.3 Debt Service ...... .................... ..................... ................................................ 6-7 6.4.4 Debt Service Coverage ............................................................ ................. 6-8 6.4.5 Opera ling Fund Balances.. ...... ................... .............................. ............ .... 6-8 6.5 Capital Financing,.... .................................... ..... ................................................... 6-10 6.6 Conclusions......................................................... .................................................. 6-10 Appendices A Acronyms B Population Growth within Census Tracts C Future Water Treatment Regulations D 10- Year Capital Improvement Plan Popula tion Forecasts....... ............. ...... ......... ............................ ........ ............................. ...... 2-8 Water Withdrawal Pennits........... ...... ............................................................ ................... 3-2 Existing Equipment at the Raw Water Pump Station.................................................... 3-4 Water Treatment Plants and Chlorination System ........................................................ 3-5 Summary of High Service Pumping ................................................................................ 3-7 Pressure Gradient Summary.............................................. ......................................... ...... 3-9 Surface Water Storage Facilities...................................................................................... 3-10 Surface Water Pumping Facilities.............................. ................................... .................. 3-10 Groundwater System Storage Facilities ..................................................................... .... 3-11 Groundwa ter System Pumping Facilities... ..... ............. ...... ........ ............ ....... ................ 3-12 ..... - IIJP:\161047\161047 AUD 2002 PMlBOND RNANCING REPORl'SEC1&2FINAL_6_13_02,DOC III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ENGINEER'S REPORT AUGUSTA UTIUTlES DEPARTMENT WATER AND SEWERAGE REVENUE BONDS, SERIES 2002 3-10 Water Demand 2001 ............................................................,............................................3-13 3-11 The 10 Largest Water Customers.................................................................................... 3-14 3-12 Projected Water Consumption .......... ....................................... .............................. ......... 3-15 3-13 Projected Water Usage by Customer Class ................................................................... 3-15 3-14 Summary of Stage 1 D /DBP Rule Limits ......................................................................3-19 4-1 Wastewater Treatment Plants Owned by Augusta........................................................ 4-3 4-2 J. B. Messerly WWTP Effluent Limitations ..................................................................... 4-4 4-3 Spirit Creek Effluent Limita tions.. .............. ......... ......... ........ .... ...... ..... ........ ........ ..... ........ 4-4 4-4 Wastewater Flows, by Plant (mgd) ..................................................................................4-5 4-5 10 Largest Wastewater Customers ............................................... .................................... 4-6 5-1 Series 2002 Bond Projects-Summary of Estimated Costs............................................ 5-2 5-2 Series 2002 Bond Projects-Summary of Estimated Water Treatment Costs............. 5-4 5-3 Summary of Site Evaluation Findings for Selected Sites............................................... 5-5 5-4 Series 2002 Bond Projects-Summary of Estimated Costs for Water Distribution Projects .. .......................................... ................................... ..... ...... ................. 5-6 5-5 Series 2002 Bond Projects-Summary of Estimated Wastewater Treatment System Costs.......... ........................... ................................................................ 5-8 5-6 Series 2002 Bond Projects-Summary of Estimated Wastewater Conveyance System Costs.................................................. .... ............... .............. .... .......... 5-9 5-7 Series 2002 Bond Projects-Summary of Estimated System-wide Costs.................. 5-12 6-1 Historical Water and Sewer System Operating Results ................................................ 6-2 6-2 Current Water and Sewer Rates (Effective 4/1/2002)................................................... 6-3 6-3 Comparison of Typical Monthly Residential Customer Bills ....................................... 6-3 6-4 Water and Sewer System Operating Results ................................................................... 6-6 6-5 Additional Bonds Test.......................... .................... .......................................................... 6-8 6-6 Operating Fund, Sources and Uses of Cash Flows ........................................................ 6-9 6-7 Funding Decisions ........... ....................................................... ......... ....... .......................... 6-11 Figures .. ., 2-1 Loea tion Map..................................... ................................ ......................................... ......... 2-2 2-2 Utilities Department Organiza tion Chart................... .................................. ......... .......... 2-5 2-3 Population Growth by Region .................................. ........................................ ................ 2-7 3-1 Water Service Area and Major Water Distribution Lines ............................................. 3-2 3-2 Existing Wells and Water Treatment Plants ................................................................... 3-3 3-3 Water Pumping Stations ...... ............................................................. ................................. 3-9 4-1 Wastewater Service Area and Treatment Plants ............................................................ 4-1 4-2 Drainage Basins............. ......................................................................... ............................. 4-2 5-1 Proposed Capital Improvements - Water System .........................................................5-6 5-2 Proposed Capital Improvements - Wastewater System ............................................. 5-10 . .... -- .... - - - -- - - - - - - ., .... - - -- - - -- - IVP:\1610471161047 AUD 2002 PMIBOND FINANCING REPORTlSEC1&2FINAL_6_13_02.DOC IV -- - . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.0 Introduction 1.1 Authorization and Purpose CH2M HILL was retained to prepare this Engineer's Report ("the Report") as an analysis of the feasibility of issuing $149,820,000 Augusta, Georgia Water and Sewerage Revenue Bonds, Series 2002 (the "Series 2002 Bonds"). CH2M HILL has served as the overall program manager for both the $42 million water and sewerage (also referred to as "wastewater") capital improvement program in Augusta, funded by the 1996 bond issue, and the $94,000,000 water and sewerage capital improvement program in Augusta, funded by the 2000 bond issue. CH2M HILL also completed the Augusta Master Plan 2000, approved by the Augusta-Richmond County Commission on July 19, 2000, which presented a multiple phase capital improvement plan (CIP). This plan identified capital improvements to be financed through the Series 2000 Bonds and the Series 2002 Bonds. The proceeds of the Series 2002 Bonds will be applied in the following approximate amounts: $125,691,320 -which, combined with interest earnings, will finance improvements to the County water and wastewater system in the amount of $130,000,000; $ 8,432,512 -prepayment of the outstanding principal on one of three loans issued by the Georgia Environmental Facilities Authority (GEFA); $ 1,912,484 -costs of issuance (including underwriter's discount, legal fees, rating fees, and other miscellaneous costs associated with issuance of the Series 2002 Bonds); $ 654,802- net original issue discount; $ 1,193,714 -payment of the premium for a debt service reserve surety bond and bond insurance; - - - .. - .. $ 11,930,438 -capitalized interest through April 1, 2004; and $ 4,730 -contingency associated with the preliminary sizing of the Series 2002 Bonds. The "System" is defined as the water and wastewater facilities that are owned and operated by Augusta, Georgia (" Augusta") together with all water and wastewater facilities acquired or used by Augusta in furnishing water and wastewater services. Major components of the System are referred to herein as the "Water System" and the "Wastewater System." This Report contains the following sections: · Section 1- Introduction - outlines authorization and purpose of the Report, study references, and assumptions. -- - - - - .. . - - - - - - - - P:\161047\161047 AUD 2002 PMlBOND RNANCING REPORl\SECI&2RNAL_6_13_02,DOC 1.1 -- - . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ENGINEER'S REPORT AUGUSTA UTIUTIES DEPARTMENT WATER AND SEWERAGE REVENUE BONDS, SERIES 2002 · Section 2 - System History and Organization, and County Growth - provides an overview of the System's history, organization, management, and county population trends. · Section 3 - Water System - describes the current Water System service area, facilities, operations, and assets. · Section 4 - Wastewater System - describes the current Wastewater System's service area, facilities, operations, and assets. · Section 5 - Proposed System elP - provides the planning criteria and assumptions used for identifying needed capital improvements and describes the purpose and function of categories of planned improvements · Section 6 - Financial Performance - describes historical and projected financial performance, Augusta's financial policies, and a funding analysis for the Series 2002 Bonds. 1.2 References ... - - - CH2M HILL reviewed and relied upon information provided by the Augusta Utilities Department (the "Department"). As part of previous and current project assignments CH2M HILL has independently verified a significant portion of this information. Although CH2M HILL offers no assurances regarding information not independently verified, CH2M HILL has no reason to believe that the information is invalid for the purposes of this Report. Information used to complete this Report included: · Interviews with Department staff · Preliminary Official Statement, Augusta, Georgia Water and Sewerage Revenue Bonds, Series 2002, dated May, 2002. · Augusta Utilities Department, 2002 Budget Workbook · AUGUSTA-RICHMOND COUNTY, GEORGIA, Annual Financial Statements, 1997-2001 · AUGUSTA-RICHMOND COUNTY UTILITIES, Financial Statements and Accompanying Information for the year ended 1997-1999 · City of Augusta, Georgia and Richmond County, Georgia, Combined Water and Sewerage Funds, Combined Balance Sheets, 1997-2001. · Augusta-Richmond County Utilities, Miscellaneous Statistical Data for the years ended 1997-2001 (prepared by Augusta Utilities Department) · Augusta Canal Power Utilization and Raw Water Pumping Engineering Study, prepared by ZEL Engineers, July 6, 1998. · Augusta-Richmond County Comprehensive Land Use Plan (prepared by Augusta-Richmond County Planning Commission) '1 I I . . ... - .. ... .... .... - - P:\161047\161047 AUD 2002 PM\BOND RNANCING REPORMEC1&2FINAl....6_13_02,DQC 1.2 - - ENGINEER'S REPORT AUGUSTA UTIUTlES DEPARTMENT WATER AND SEWERAGE REVENUE BONDS, SERIES 2002 . The Regional Economic Forecast of Population and Employment Comprehensive Study, volume 11., prepared by DRI/McGraw-Hill for the Georgia Department of Natural Resources (DNR), September 1996. . Georgia Office of Planning and Budget Projection-The Georgia County Guide, Eighteenth Edition 1999. Center for Agribusiness and Economic Development. Ed. Boatright, Susan R. Bachtel, and Douglas C. Bachtel. 1999. . Master Plan 2000 for Water and Wastewater Systems, Augusta Utilities Department, Technical Memorandum 1.2A: Population Distribution and Water and Wastewater Flow Projections, AprilS, 2002 (An update to TM 1.2 prepared by Diane Reilly, Consultant) . Master Plan 2000 for Water and Wastewater Systems, Augusta Utilities Department, Technical Memorandum 2.1A: Water System Regulatory Compliance Review, April 4, 2002 (An update to TM 2.1 prepared by CH2M HILL) . Master Plan 2000 for Water and Wastewater Systems, Augusta Utilities Department, Technical Memorandum 2.2A: Wastewater Treatment Regulatory Review, April 4, 2002 (An update to TM 2.2 prepared by CH2M HILL) . Master Plan 2000 for Water and Wastewater Systems, Augusta Utilities Department, Technical Memorandum 5.1: James B. Messerly WWTP Evaluation, January 21,2000 (prepared by CH2M HILL) :!it. " . Master Plan 2000 for Water and Wastewater Systems, Augusta Utilities Department, Technical Memorandum 5.2: Augusta-Richmond County Wastewater Conveyance System Evaluation, April 4, 2002 (prepared by CH2M HILL) . Master Plan 2000 for Water and Wastewater Systems, Augusta Utilities Department, Summary of Recommendations for Expansions and Improvements, February 4, 2000 (prepared by CH2M HILL) · Water Distribution System Analysis for Augusta-Richmond County, Georgia, September 2001 (prepared by CH2M HILL) . Highland Avenue Water Treatment Plant Preliminary Design Report, November 2001 (prepared by CH2M HILL) . Raw Water Intake and Water Plant Site Assessment, Technical Memorandum No.1, April 13, 2001 (prepared by CH2M HILL) · Raw Water Intake and Water Plant Site Assessment, Technical Memorandum No.2, September 26, 2001 (prepared by CH2M HILL) . Raw Water Intake and Water Plant Site Assessment, Technical Memorandum No.3, October, 2001 (prepared by CH2M HILL) 1.3 Assumptions ,;' CH2M HILL also made certain assumptions about future conditions with regard to the System. While these assumptions are reasonable for the purposes of this Report, actual P:\161047\161047 AUD 2002 PM\BOND FINANCING REPORT\SEC1&2RNAl_6_13_02,OQC 1-3 , ''; ENGINEER'S REPORT AUGUSTA UTIUTIES DEPARTMENT WAlER AND SEWERAGE REVENUE BONDS, SERIES 2002 conditions may differ from those assumed. To the extent that future conditions differ from those assumed, results will vary from those forecast. CH2M HILL's principal assumptions regarding future conditions are: ij . Augusta's population will increase from the 2000 level of 199,775 to 242,150 by 2020, according to the Augusta-Richmond County Comprehensive Land Use Plan. In addition, many areas of the County are under new development as a result of a shift in growth patterns. This growing, shifting population will require that the Department expand serVice to new areas to provide water and wastewater utility service to new customers. . Augusta has adopted a policy to mandate conversion to central wastewater collection when service is available. The Department is developing plans to ensure enforcement but conservatively estimates that actual connections will occur over a period of 3 years following completion of new collection lines in unsewered areas. . System water consumption and wastewater flows will increase in proportion to the forecast increases in the number of water and wastewater accounts and per capita flows, with limited price elasticity adjustments to reflect responses to projected rate increases. . The Augusta-Richmond County Commission will adopt the rate increases necessary to implement the financial plan outlined in Section 6. Additional assumptions used in preparing the CIP are described in Section 5. if, '" ~ ,"Ii P:\161 047\161 047 AUD 2002 PMlBOND FINANCING REPOR1\SEC1&2FINAU_13_02,DQC 1-4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.0 System History and Organization, and County Growth Augusta, Georgia (Augusta) is a political subdivision of the State of Georgia} created on January 1, 1996 pursuant to Acts of the General Assembly of the State of Georgia, which authorized the consolidation of the mrmicipal corporation known as "The City Cormcil of Augusta" and the political subdivision known as "Richmond Cormty, Georgia" (the "Consolidation Charter"). See Figure 2-1 for the Cormty's location in Georgia. Augusta owns the water supply, treabnent, and distribution system, as well as the wastewater collection and treabnent system. The Deparbnent is responsible for the operation and maintenance of the water treabnent and distribution facilities (the "Water System"), as well as the wastewater conveyance and treabnent facilities (the "Wastewater System") that serve Augusta's service area. In addition, the Deparbnent provides customer service functions induding meter reading and customer billing, revenue collections, and inspection of new construction. .. - 2.1 Organizational Structure 2.1.1 Augusta On January 1, 1996, Augusta was created as a consolidated city-cormty gover:nrnent, whose territorial jurisdiction extends to all of what was formerly Richmond Cormty. Blythe and Hephzibah, small municipalities with populations of approximately 400 and 2,600, respectively, still hold their own municipal charters within the consolidated territory. The relationship between Augusta and Blythe and Hephzibah is similar to that or corm ties and municipalities within the territoriallirnits of such cormties. As a result of cOI1$olidation, Augusta is able to provide public services throughout its territorial limits through a single organization and management structure. Augusta has a municipal form of government. Under the Consolidation Chatter, the governing authority of Augusta is a board of conunissioners designated as the Augusta- Richmond Cormty Commission (the "Conunission"). The Commission consists of a Mayor, who is the chief executive officer of the Commission, and 10 commissioners. - .. -- - - - 2.1.2 System Management The System is managed by Augusta through the Deparbnent. The Administrator of Augusta, who is appointed by the Commission upon recommendation of the Mayor, oversees the management of the operations and capital program of the Deparbnent. The chief managerial officer of the Deparbnent is the Director, who is appointed by the Commission. - - -, - -. - - ... -- -- -. - ...... -- P:\161047\161047 AUD 2002 PM\BOND FINANCING REPORl\SEC1&2FINA~6_13_02,DOC 2.1 -- - . . . . . . .' . . . . . . . . . . . . ENGINEER'S REPORT AUGUSTA UTILlTlES DEPARTMENT WATER AND SEWERAGE REVENUE BONDS, SERIES 2002 N A fOO 0 100~ ~---J ... ~ - - - - -- - CH2MHILL Agura 2.1 location Map ~ GeagiJ 1flIDl>>m11An.\Ia;ICJ~M - - ADMINISTRATOR. a. - George R. Kolb, age 53, has been the Administrator of Augusta since May 1, 2001. From April of 1992 to January of 2001, Mr. Kolb was the Deputy City Manager of the City of Richmond, Virginia. From August of 1989 to April of 1992, Mr. Kolb was the Assistant to the City Manager/Employee Services of the City of Saginaw, Michigan. From October of 1981 to October of 1988, Mr. Kolb was the City Manager of the City of Albion, Michigan. Mr. Kolb received a B.B.A. degree in Marketing from Eastem Michigan University in 1970 and a Masters of Public Administration in Urban Administration from the University of Michigan in 1971. Mr. Kolb also studied in the Senior Executives in State and Local Govemment graduate program at John F. Kennedy School of Govemment of Harvard University. DIRECTOR OF FINANCE. - - -- -- ..... David Persaud, age 47, has been the Director of Finance of Augusta since June 3, 2002. Mr. Persaud was the Director of Finance for Chatham County, Georgia from November of 1985 through May of 2002. From August of 1984 through November of 1985, Mr. Persaud was the Director of Finance of the City of Mount Dora, Florida. From February of 1982 through August of 1984, Mr. Persaud was the accountant for Glynn County, Georgia. Prior to August of 1984, Mr. Persaud was employed in the private sector. Mr. Persaud received a B.s. degree in Business Administration and Accounting from the University of Coast "- California and a Masters degree in Public Administration from Savannah Sta~e University. P:\ 161047\ 161 047 AUD 2002 PMlBOND RNANCING REPORl\SEC1&2FINAL....6_13_02,DQC 2.2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ENGINEER'S REPORT AUGUSTA UTlLmES DEPARTMENT WATER AND SEWERAGE REvENUE BONOS, SERIES 2002 He is a Certified Government Financial Manager (CGFM) and has a Chartered Pension I Executive (CPE) certification. DIRECTOR. N. Max Hicks, P.E., age 62, has been the Director of the Augusta Utilities Department since June 4,1996. From 1991 to 1996, Mr. Hicks was the General Superintendent and the Assistant General Superintendent, respectively, of the City's Water Works Office. From 1989 to 1991, Mr. Hicks was Public Works Director for the City of Toccoa, Georgia. Prior to that, he was a partner, director, and vice president of the consulting engineering fp-m of Zimmerman, Evans, and Leopold, Inc., Augusta, Georgia. Mr. Hicks studied.Engineering and English at Charlotte College (now University of North Carolina at Charlotte), Charlotte, North Carolina, and Economics and Accounting at the University of South Carolina at Aiken, Aiken, South Carolina. Mr. Hicks is a Registered Professional Engine~r in Georgia and South Carolina. Mr. Hicks was the 1996 recipient of the Elizabeth McIntire Award for Outstanding Service in Water Supply from the Georgia Water and Pollution Control Association. ASSISTANT DIRECTOR OF FINANCE & ADMINISTRATION. Steven J. Little, c.P.A., age 45, has been the Assistant Director of Finance and Administration of the Augusta Utilities Department since December of 2001. From 2000 to 2001, he was the Assistant to the Chief Financial Officer at the national headq1,larters for Electrolux Home Products, makers of Frigidaire appliances, located in Augusta, Georgia. Prior to that, he was the Chief Financial Officer for a start-up medical referral company and its sister corporation in Aiken, South Carolina. His previous experience includes over 10 years of public accounting, with an emphasis in auditing local governments, and internal auditing for a private utility company. Mr. Little is a certified public accountant. He received a B.B.A. degree in Accounting from Iowa State University in 1982. ASSISTANT DIRECTOR, WASTEWATER TREATMENT. D. Allen Saxon, Jr., age 45, has been the Assistant Director of Wastewater for the Augusta Utilities Department since March 5,2001. Mr. Saxon previously served as the Supervisor of Water Pollution for the City for 17 years until September of 1994, when he resigned to further his education. He is an active member of the Georgia Water & Pollution Control Association and the Water Environment Federation. Mr. Saxon was Georgia's 1990 recipient of the William D. Hatfield Award from the Water Environment Federation. Mr. Saxon earned a B.B.A. degree in 1983 from Augusta College and an M.S. degree in 1996 from Georgia State University. Mr. Saxon is certified as a Class I Wastewater Treatment System Operator by the State of Georgia. ASSISTANT DIRECTOR, WATER PRODUCTION. Clifford A. (Drew) Goins, age 47, has been the Assistant Director of Water for the Augusta Utilities Department since May 29,2001. Mr. Goins has been employed by the City for almost 20 years in various capacities. He began his employment with the City as a Resident Engineer in 1982 until his promotion to Assistant Commissioner of Public Works and Director of Engineering in 1990. From 1993 through 1996, Mr. Goins served as the acting Commissioner of Public Works and Director of Engineering while the Commissioner of ( P:\161047\161047 AUD 2002 PMlBOND FINANCING REPOR1\SEC1&2RNAL_6_13_02,DOC 2.3 . . . . . . . . . . . . . . . . . . . . . . . . . . .. ... ENGINEER'S REPORT AUGUSTA UTILITIES DEPARTMENT WATER AND SEWERAGE REVENUE BONDS, SERIES 2002 Public Works was reassigned to the position of acting City Administrator. After serving in that capacity, Mr. Goins served as the Assistant Director of Public Works and Engineering until he accepted his current position. Mr. Goins has been a 10th District Chapter Director for American Public Works Georgia and a committee member of the American Public Works National Engineering & Technology PET. He received a Bachelor of Civil Engineering Technology Degree from Southern Teclmical Institute in 1981. ASSISTANT DIRECTOR, ENGINEERING & CONSTRUCTION. Douglas A. Cheek, P.E., age 37, has been the Assistant Director of Engineering and Construction for the Augusta Utilities Department since May 29,2001. From August of 1998 until June of 2001, Mr. Cheek served as the City/County Engineer for Augusta. From February of 1995 until July of 1998, Mr. Cheeks served as the Bridge Construction Liaison Engineer for the Georgia Department of Transportation's Metro Atlanta District Office. In June of 1998, Mr. Cheek received a Bachelor of Civil Engineering from the Georgia Institute of Technology in Atlanta, Georgia. He also studied Biology at Clayton State College in Morrow, Georgia from 1982 to 1984. Mr. Cheek is a Registered Professional Engineer in Georgia. CUSTOMER SERVICE SUPERINTENDENT. . . Alma Stephenson, age 53, has been the Superintendent of Sales, Collections, and Customer Service of the Augusta Utilities Department since June 4, 1996. Ms. Stephenson was employed by the City for 27 years and was appointed Director of Consolidated Revenue/Manager of the Water Works Office and Sales Department in June of 1995, after serving for 8 years as the Assistant Director of Consolidated Revenue/Manager of the Water Works Office and Sales Department. The Department has 234 full-time equivalent positions authorized in its FY 2002 budget and had 12 vacancies as of March 31, 2002. Figure 2-2 illustrates the current organization of the Department. No employees of the System are represented by labor organizations or are subject to provisions of collective bargaining agreements, and the Commission is not aware of any union organizing efforts. The System's plant operators and maintenance and repair personnel are required to meet the certification levels prescribed by the State of Georgia Board of Certification of Water and Wastewater Operators. Augusta pays for continuing education programs to ensure that System personnel are qualified, and achieve and maintain certification of their qualifica- tions. The System's operators meet or exceed the minimum credentials required by the State of Georgia. Additionally, all field employees must attend safety meetings and participate in safety training programs; these cover shoring and trenching, confined space entry, lock-out/tag- out, and other safety topics. . .... ... - -- - - - - - - ~ - ... ., -.. - .- - - - P:\161047\161047 AUD 2002 PMlBOND RNANCING REPORl\SEC1&2FINAU_13_02,DQC 2-4 - - 4 . 4 t 4 ~ . . 4 ~ 4~ ~ . 4 ~ 4 t .. .. l . 4~ . . . . . .. . . . . . . . . .' . . . . . . . Ie . . . . . . ENGINEER'S REPORT AUGUSTA UTIUTlES DEPARTMENT WATER AND SEWERAGE REVENUE BONDS, SERIES 2002 Utilities Department ~l Clork Mechonle I Optrlltors ( Utln~tS lnsptdo< (9) Boekllow ~gram Manager Backflow P"'II",m AssIsl, Adm'nlstrot1vel seereto"Y (2) I AssIstant Director Engineering III Con8tructlon Division r ~nt Director I RnanC8 a. Admlnlstntlon Met~r Reader Supervlsor i i 'Workll'lG Foreman - - - - L..a.bor., lJIborel r AMlstant Director Wane Watllr Treatment Dlvlalon . Ccnt~~ct.OPeratOf . 1 < Ml:utrlyPfant &. ,,,,Wlttancjs is!li'lt Crook Planl Pol........ RioIIOil ~-- ~ "'faint. Foreman O1><ll'lllors (10) Admlnlstl'llt:tve I Se-ctetary utIJ1t1a ' l '_ntu JIll ~s..v""'l L.',,'....-' -1 Gi'ouhdilM.llntenan.c.1 ~tjlftles- ACC01Jr'1~n ~Tedi"lctonl ~ ----, Branch Manaoe '6,,"ieh "'orlO1lil' DowntoWn "PeaCh Ord1.rd Rd. i lnd~~tr..t. I iStu<l~;.,t::."on I lOb TOdll\Jdlln (2) In5trument. MBI"t-. TechnicJan MoIlnt. Tectm\.dan (2) Draftsman r J."'to< (2 - CO~aln - Mechtlfllc ~=="l MlIIlnt. Mechank: - - - (2) I AMlstilnt,Oberotions l AlsJstantOllenSt)onsJ M!n8Qer MM6gel" ~:j,,~l [AdmJn.lstretlve sea.wv r AsslOtant ()Denl""",, I L ,f'I1anager - Worker Worker - - Worlc~r Worker C6I-<Malnl, Suptiv_ :rew Leader Woiker J~ W~.r ;~ Worker ~ .Work~ ~ ~ C&.M Holn!, SU_or ::re'N l.eadtl CllM Molnl Supervl:lot :row LNda< CAM~jnt. Supervisor ::rt!w Leadtl Worker ~ Maim. SUPIl"V~r :rew lUder Worker C&M MoInt. Supervtsor :,ew ~del Wo.rktl - - Workf!r Worker - - Worker Workei 2.5 Ht.8w Equipment HellV'; Equipment. Hellvy EquJpmenl Locator Locator Locator Control RoOm Control Room Control Room Control Room Conttol Room Crew SUoer. Plre Hydrant Crew Leader FIre t-lydrtlnt WMcor FIre Hydran Crew Sucel Varve Cre-w lC&de Valve Worker Val....e WoMc.er Wor~r Heavy Equlpmenl ~ tieaY't' HelIvy Supervisor equipment equipment Olteporb to 01_ ~Crew b~derl Hoovy HellvY Equipment EQuipment 8 Reporb to _ Director oIl'lna.... . Admlnlotnrtlon .....vY . Reports to _1st. ol_oIlngl..-rtng. ~ Worker EqUIJJ~t o "-to_ ol_oIW_W_T_ ORepolbtoAnUt.Ol_ofW-. ~ Work.r P:\161 047\161 047 AUD 2002 PMIBOND FINANCING REPORTlSEC1&2FINAU_1U2,DOC . . . . . . . . . . . . . . . . . . ... .. . .. .... - - ENGINEER'S REPORT AUGUSTA UTIUTIES DEPARTMENT WATER AND SEWERAGE REVENUE BONDS, SERIES 2002 2.2 Augusta-Richmond County Population Trends A - From 1990 to 2000, the total population of Richmond County grew by 5.3 percent, from 189,719 to 199,775 according to the US Bureau of the Census. Statewide, the population in Georgia increased by 26.4 percent during the 1990s. Despite the relatively slow growth, the County ranks seventh in the State in tenns of total population, behind five metropolitan Atlanta counties (Fulton, DeKalb, Cobb, Gwinnett, and Clayton) and Savannah's Chatham County. While the growth rate of Richmond County has been relatively modest compared to the accelerated growth experienced elsewhere in the State, previously undeveloped areas of the County have experienced significant population growth. This redistribution of in- county population has precipitated some of the requirements for planned capital improvements. The general population shift within the County from more densely developed areas, which have infrastru.cture in place to support the water and wastewater demands of the population, to more rural areas, which previously had limited services or were unserved, will require the Department to expand System capacity in the growth areas. Appendix B shows population growth by Census Tract, illustrating the recent growth (in positive percent change) occurring in the less developed areas of the County (measured by 1990 density). The Department retained CH2M HILL to prepare the Master Plan 2000 for Water and Wastewater Systems to meet the needs of its shifting population efficiently and cost- effectively. Several population projections have been developed for the County and are presented in Table 2-1. The projections used by CH2M HILL in forecasting water and wastewater flows (see Sections 3.8 and 4.5) were based on the "High" year 2010 forecast presented in the Augusta-Richmond County Comprehensive Land Use Plan. The 2000 population estimate presented is from the U.S. Bureau of the Census. The 2020 projection is extrapolated based on the expected percentage change between 2000 and 2010 shown in Figure 2-3. Use of the Planning Commission's "High" 2010 projection will help ensure that the Department will have adequate infrastructure in place to support future growth. While growth is affected by factors that Augusta cannot directly control, such as growth in adjacent counties and the health of the Augusta Metropolitan Statistical Area's (MSA) economy, the pattern of population distribution that ultimately occurs will be heavily influenced by the economic development and growth management policies of the local government. The population distribution projections delineate a range of water and wastewater infrastructure needs, and related system financing options and constraints. - - ... .... ... .... - - -- - - - -- - - .- - - - - P:\161047\161047 AUD 2002 PMlBOND RNANCING REPORl\SEC1&2FINAl_6_13_02,OQC 2-6 ............................... ENGINEER'S REPORT AUGUSTA UTlUTIES DEPARTMENT WATER AND SEWERAGE REVENUE BONDS, SERIES 2002 N A 4. ... ~t ...... 4~ 8000 0 8000 Feel '-----------' Fort Gordon not Included, Data represents approximate value for entire region. Actual V8n8/Jca within blocks may be sJgnfficant. 2.7 Figure 2-3 Population Growth by Region (Based Upon Census Tracts) % Population Change 2000 through 2010 Augusta, Georgia 8Apf 20D16~"'. u....: NMOUO~'f. 200:1 Elf ~2Ca~ 2000.2.010 ~FJ,., P&ltl: ...~~4...UglA!.~\r'\khd.uOOJ:_-""-~crt.apl'..D.r.: P:\161047\161047 AUD 2002 PM\BOND FINANCING REPORTlSEC1&2FINAU_13_02,DOC CH2MHILL Y'104200201M.n \ Augutta 102..rna . . . . . . . . . . . . . . . . ENGINEER'S REPORT AUGUSTA UTlUTlES DEPARTMENT WATER AND SEWERAGE REVENUE BONDS, SERIES 2002 TABLE 2-1 Population Forecasts Augusta-Richmond County, 1990 (estimate) through 2020 Forecast Augusta-Richmond County Planning Projection used for this Analysis Percent Change Augusta-Richmond County Planning Commission2 Low 189,719 Percent Change Moderate Percent Change High Percent Change "Building Permit" Projection3 Percent Change Regional Economic Forecast4 Percent Change Georgia Office of Planning and BudgetS Percent Change Sources: 1 US Bureau of the Census, 2000 Census. 2Augusta-Richmond County Comprehensive Land Use Plan, prepared by Augusta-Richmond County Planning Commission) 3 The Building Permit Projection uses the August-Richmond Planning Commission's 1998 population estimate, based on building permit activity, as a starting point and then applies the moderate projection's growth rate (from the Comprehensive Land Use Plan) 4The Regional Economic Forecast of Population and Employment Comprehensive Study, Volume II. prepared by DRI/McGraw-Hill for the Georgia Department of Natural Resources (DNR), September 1996. sGeorgia Office of Planning and Budget projection-The Georgia County Guide, Eighteenth Edition 1999, Center for Agribusiness and Economic Development. Ed. Boatright, Susan R. and Douglas C. Bachtel. 1999, 1990 (estimate) 189,719 2000 (projected) 199,7751 2010 (projected) 222,497 5.3% 11.4% 196,465 203,450 3.6% 3,6% 189,719 199,990 213,826 5.4% 6.9% 189,719 204,439 222,497 7.8% 8.8% - - 189,719 222,414 208,022 .- .. 9,6% 6.9% 189,719 207,261 230,423 - - 9.2% 11,2% - - 189,719 234,582 211,688 -- 11,6% 10.8% -- - ~ -- - P:\ 1610471161047 AUO 2002 PMlBOND RNANCING REPORT\SEC1&2FINAl_6_13_02,QOC 2020 (projected) 242,150 8.8% 233,745 5.1% 260,904 13.2% 2-8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.0 Water System 3.1 Overview of Potable Water System Augusta owns and operates a potable water system serving 58,246 residential and 7,424 commercial and industrial customers as of December 31, 2001.The Water System's surface water supply is the Savannah River, supplemented by groundwater wells throughout the County. Water from the Savannah River is treated at the HigWand Avenue Water Treatment Plant (WTP). Water from the wells is treated at one of three groundwater treatment plants (GWTPs). Water transmission and distribution facilities convey treated water from these plants throughout the Water System service area. 3.2 Water Service Area The Water System supplies water to residential, commercial, and industrial customers located within the County. The service area encompasses approximately 210 square miles (approximately 88 percent of the land area of the County exclusive of Fort Gordon) containing an estimated population in excess of 180,000. The water systems of Fort Gordon and the Cities of Blythe and Hephzibah provide water service within their respective jurisdictions in the County. Figure 3-1 presents the areas currently served by the Water System with overlays of existing major water distribution lines. Generally, the service area can be characterized as having complete water service coverage for potential customers who wish to connect to the Water System. Projects defined in Section 5 as part of the CIP will continue to enhance the Water System's ability to serve this area. 3.3 Water Supply ... WI' - WI' The Water System's primary source of raw water is the Savannah River, withdrawing directly from the river as well as from the Augusta Canal, which is fed by and located parallel to the river. The Water System has four raw water intakes on the canal, two primary and two secondary, plus an additional diesel-engine-driven standby raw water pump that can pump from either the canal or the river. The raw water supply is pumped from the Water System's raw water facilities located between the Augusta Canal and the Savannah River to the HigWand Avenue WTP through a system of parallel raw water lines. There are four raw water transmission lines: a 3Q-inch-diameter cast iron pipe, 36-inch steel pipe, 60-inch ductile iron (DI) pipe, and an inactive 42-inch pre-stressed concrete cylinder pipe. The Georgia Water Quality Control Act authorizes the DNR Environmental Protection Division (EPD) to regulate the withdrawal of water from lakes, streams, and aquifers in Georgia. Augusta holds permits for raw water sources as noted in Table 3-1. I - - - - - ...... - - ~ -" - - ~ - - P:\161047\161047 AUD 2002 PMlBOND FINANCING REPOR1\SEC3&4RNA1.6_13_02 .DOC AO 733055.1 3-1 ENGINEER'S REPORT AUGUSTA UTIUllES DEPARTMENT WATER AND SEWERAGE REVENUE BONDS, SERIES 2002 lEGEND: ~ ~Waltlr~Area. IV Majoi' Water Lk1es /\; SltGels N A ,Aug<.ots$eQ(oe......_,."._ FfJd GotOOn. HepIdM<JfB/ijlha 110oO lllllOfeoI """" , j~ CH2MHILL ~1~ti:i::J:". .~Ra"*~J;!i9JIlil;t',,,D*--16.-..t.r;.:J.)lo:n';:armst)"fw:a..Pl;lliI<ii FiJlll!'9~1 WllIet service AreliMdMiljol'WlIlet DiSIribtJfiori'lJiies ~Geagij TABLE 3.1 Water Withdrawal Permits .. .w Permitted Withdrawal (mgd) 1\, '" Raw Water Source Monthly Average 24 hour Max. Day Surface Water: Primary Source: Savannah River/Augusta Canal EPD Permit No. 121-0191-06 60.0 60.0 ""- iN ~ ~ North Location: Savannah River EPD Permit No. 121-0191-09 (being relocated to the new intake site) Groundwater: 15.0 18.5 % ,," Monthly Average Annual Average " .-; 26 Active Wells -located at GWTP Nos. 1, 2, and 3 plus three individual sites (Rural Chlorination Sys.) EPD Permit No. 121-0007 Note: mgd = million gallons per day 18.4 17.4 "I ,'" In 1991 EPD issued to the former County a permit for withdrawal of raw water from the Savannah River of 30 mgd monthly average and 37 mgd maximum daily capacity. The .i) " , P:\161 047\161 047 AUD 2002 PM\BOND FINANCING REPOR1\SEC3&4ANAl.6_13.02 ,DOC 3-2 AO 733055.1 ,"> '" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ENGINEER'S REPORT AUGUSTA UTIUTlES DEPARTMENT WATER AND SEWERAGE REVENUE BONDS, SERIES 2002 intake was located just north of Interstate 20 where a new WTP was initially,planned (EPD Permit No. 121-0191-09), referred to as the North Location. The plant at this location was not constructed. After the consolidation of the former City of Augusta and Richmond County, all permits were also consolidated. In June 2000, EPD approved the transfer of 15 mgd monthly average capacity to the current secondary raw water intake (EPD Permit No. 121- 0191-06), increasing the monthly average/24-hour maximum day withdrawal capacity from the Savannah River to 60 mgd. The remaining 15-mgd capacity from this North Location will be relocated to a new WTP intake discussed further in Section 5. In addition, Augusta is permitted to withdraw supplemental raw water from the Tuscaloosa Formation aquifer through 32 wells: 26 actively producing, 5 deactivated, and 1 inactive. The Water System is currently permitted to withdraw groundwater under EI,'D Permit No. 121-0007 to pump 18.4 mgd maximum month average; and 17.4 mgd maximum annual average. See Figure 3-2 for the location of the wells and WTPs in the service area. ,// /'" /' .,'~.\.~ Existing RWI I ..1" ..' -. -). ,,' - i \ -- , N A LEGENO: @ Ground Water Treatment PIanl D Surface Water Treatment Plant o Wets @ Wels (Kept on Rural ChIa!1nali>n) ..... RWI eooo 0 aoc.oFool ~-- // '- - - -;,""- ,F';" /- / ,/ ,/ ,/ -~/. FORTGOROON / / F. ..1/' I " / / ..". / .~~/ -........... ""\.............. !' "' ) \,: \./~'~Fl r~; - - t . 0-L, .j'"'" -~-~ --"""''--..l' '>'/ .,-,"- ;- "--- - - FIGURE 3-2 Existing Wells and Water Treatment Plants , Augusta, Georgia - - - - - - 3.3.1 Raw Water Pumping - - Withdrawal of raw water from Augusta's primary raw water supply is accomplished via a raw water intake (RWI) that has an aggregate pump capacity of 88 mgd and is located on the Augusta Canal. Raw water pumping is accomplished primarily using two pumps, Units 1 and 4, with capacities of 20 mgd and 30 mgd, respectively. Units 1 and 4 are powered by water-driven turbines, originally constructed in 1952 and 1975, respectively, and improved in 1993 and 1999. Unit 1 is a two-stage centrifugal pump and Unit 4 is a single-stage centrifugal pump. Units 2 and 3 are older pumps, each with a capacity of 9.0 mgd, which are ~ - - - - - ~ - - P~161047\161047 AUD 2002 PMlBOND RNANCING REPORn5EC3&4RNAL_6_13_02 ,DOC AO 733055,1 3-3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ENGINEER'S REPORT AUGUSTA UTIUTlES DEPARTMENT WATER AND SEWERAGE REVENUE BONDS, SERIES 2002 used as supplemental supply for peak demands and when one of the other units is taken out of service for maintenance. These pumps were originally constructed in 1898, were improved in 1939, and received major upgrading in 1999. A fifth unit, Unit 5, is a standby diesel-engine-driven raw water pump, with a water intake which can be used in the Augusta Canal or the Savannah River, and a raw water pumping capacity of 20 mgd. This standby auxiliary pump was originally constructed in 1975 and is housed in the same building as Unit 4, which received major upgrading in 1999. See Table 3-2 for detailed information on the five raw water pumps. Table 3-2 outlines information on the existing raw water pump station equipment as well as its general condition. The Department maintenance staff has rated the pumps based upon equipment age, performance, and reliability. Those rated" good" are considered reliable for continuous use with little maintenance, while those rated "fair" are older and considered reliable for occasional use only. For pumps rated "fair", maintenance is more difficult due to age of equipment and wear. Upgrading of the pump station is part of the planned capital improvements described in Section 5. TABLE 3-2 Existing Equipment at the Raw Water Pump Station Pump Flow Capacity No. (mgd) No. 1 20 NO.2 9 Turbine Flow Installed (cfs) Capacity Comments 550 1,650 hp Good condition 250 750 hp Fair condition 250 750 hp Fair condition 814 2,500 hp Good condition o (Diesel-driven) 2,000 hp Good condition No.3 9 No.4 30 No.5 20 (17 if withdrawing water directly from the river) Source: Technical Memorandum 4.2: Highland Avenue Filtration Plant Evaluation, December 18, 1999 Note: cfs = cubic feet per second 3.3.2 Raw Water Transmission and Storage . Raw water is currently transmitted from the existing PS to the raw water reservoirs at the HigWand Avenue WTP via three pipelines: 30-inch cast iron and 36-inch steel pipes and a recently completed 60-inch DI transmission line. (An existing 42-inch concrete pipeline has been taken out of service to be evaluated for possible use as a backup supply line.) The pipelines have a total capacity range of 102.15 to 163.40 mgd or a firm carrying capacity with the 60-inch line out of service of 38.7 to 61.88 mgd, at typical velocity ranges of 5 to 8 feet per second (fps) for pumped flow, respectively. Augusta has raw water storage capacity of approximately 379 acre-feet or 124 million gallons (MG) at two raw water storage reservoirs that serve the Water System. They provide pre-settling of suspended matter in the raw water as well as storage during times of low river or canal flows. Water flows by gravity from these reservoirs to the WTP. - - .- .. .- .. - - - - P:\161047\161047 AUD 2002 PMlBOND ANANCING REPORT\SEC3&4F1NAL_6_13_02 ,DOC AD 733055.1 3-4 - - - - . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ENGINEER'S REPORT AUGUSTA UTIUTlES DEPARTMENT WATER AND SEWERAGE REVENUE BONOS, SERIES 2002 3.4 Water Treatment Facilities Augusta owns four WTPs and a rural chlorination system, as summarized in Table 3-3. TABLE 3-3 Water Treatment Plants and Chlorination System Rated Plants Capacity for 2001 Production Date of EPD Operating Permit Treatment of of Treated Water Original Dates of No. CS2450000 Raw Water (maximum day) Construction Improvements Highland Avenue WTP 60.0 mgd 40.50 mgd 1939 1949,1954,1987, Permitted to 60 mgd but 1994,2000 improvements, currently under design, are necessary before plant can sustain that production level. Current sustainable capacity 45 mgd. Peach Orchard (GWTP No.1) 5.0 mgd 6.49 mgd 1966 1969,1996 Original capacity of 10 mgd reduced to 5 mgd in 2001; the new GWTP No. 3 replaced lost capacity. Highway 56 Loop (GWTP No, 2) 10.0 mgd 8.95 mgd 1979 1985, 1992, 1996 Old Waynesboro Road (GWTP 5.0 mgd 6.08 mgd 2001 No, 3) Rural Chlorination System 3.7 mgd 1.77 mgd 1972 Each year since 1981 Totals 83.7 mgd 63.79 mgd' 'Current operating limit 78.4 mgd The rural chlorination system is served by three wells identified as Brown Road, Plantation Road, and Kimberly-Clarke Wells; at each well there is a chlorine solution feed system for disinfection, a caustic soda solution feed system for pH adjustment, and fluoridation via addition of hydrofluosilicic acid, Results of regular water quality sampling at the wells are in compliance with state (EPD) permit requirements. - ... - ... - - 3.4.1 Highland Avenue WTP System Processes The following processes used by the Department are standard for similar water treabnent systems and comply fully with current regulatory requirements. Using this treatment technology results in a treated water that complies with permit criteria and satisfies user demands for a high quality, reliable water supply. Pre-Flash Mixing and Flow Splitting: Pre-treatment chemicals are added just downstream of the raw water venturi meter and control valve. These chemicals include chlorine, lime, and alum. (Polymer, when added, is injected upstream of the flow meter.) Flocculation: Flocculation is provided through six flocculation basins-the effluents from the first two are combined and split among sedimentation basins 1, 2, and 3. Each of the remaining four sedimentation basins has its own flocculation basin. - - - - . - - - - - - P:\161 047\161 047 AUD 2002 PMlBOND RNANCING REPOR1\SEC3&4RNAL_6_13_02 ,DOC AO 733055.1 3-5 - - - - . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ENGINEER'S REPORT AUGUSTA UTlUllES DEPARTMENT WATER AND SEWERAGE REVENUE BONDS, SERIES 2002 Sedimentation Basins: Flow into sedimentation basins 1, 2, and 3 is through a series of 12 inlets for each basin. Settled water from these first three basins enters a settled water flume that is separate from the one serving the other basins. The two settled water flumes combine in the filter influent flume. Sedimentation basins 4, 5, 6, and 7 each receive flow from their respective flocculation basin. Influent into the basins is through a series of 10 openings in the bottom of the respective inlet flume. The effluent from basins 4, 5, 6, and 7 combines in a single settled water flume, which flows to the filter influent flume. Filtration: From the sedimentation basins, settled water flows through two separate channels (one from sedimentation basins 1 through 3; the second from sedimentation basins 4 through 7) to the filter influent flume. The Highland Avenue WTP includes 10 dual-media, two-celled filters, each with a surface area of approximately 1,050 square feet (ft2). At the current rated capacity of 60 mgd, the filtration rate is 4.0 gallons per minute (gpm)/ft2 with all filters in service. Each filter includes Leopold underdrains, 8 inches of gravel, 9 inches of sand, and 20 inches of anthracite. Backwash troughs are cast-in-place concrete. Rotary surface wash arms with nozzles are included for cleaning the expanded media during backwashing. Filter effluent piping includes a rate-of-flow controller for each filter. Post Flash Mixing: Post flash mixing occurs in a two-compartment basin, with each compartment having a pitched blade turbine mixer. Post-treatment chemicals (fluoride, lime, phosphate, and chlorine solution) are added as the filtered water enters the basin in the transition piece from a 72-inch pipe to a 6-foot by 4-foot rectangular opening. 3.5 Finished Water Storage, Chemical Feed Systems, and High Service Pumping ... - Once the water is treated, distribution throughout the system requires high service pumping and storage in order to maintain a reliable, continuous supply for residential, commercial, and industrial customer uses. The systems described below are maintained at a level to provide operating pressures throughout the system that exceed EPD requirements of 35 psi minimum line pressure (measured at remote fire hydrants located in residential areas). The Department generally maintains line pressures of 60 psi to 120 psi (measured at the remote fire hydrants located in residential areas as described above), which is within the American Water Works Association (A WW A) guidelines, promotes high levels of customer satisfaction, and provides adequate fire protection in the system. ... - - - ~ - - - - - 3.5.1 Finished Water Storage The Highland Avenue WTP finished water storage tanks (clearwells) supply the lower pressure zones directly by gravity while the remaining capacity is pumped to the Water System's storage facilities located in various pressure zones. The treated water is then fed by gravity or pumped throughout the water distribution network.u - - - - ... - - - - - P:\161 047\161 047 AUD 2002 PM\BONO RNANCING REPOR1\SEC3&4RNAl.6_13_02 .DOC AD 733055.1 3-6 - . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ENGINEER'S REPORT AUGUSTA UTlUTlES OEPARTMENT WATER AND SEWERAGE REVENUE BONDS, SERIES 2002 There are five clearwells at the HigWand Avenue WTP, with a total storage capacity of 15.45 MG: · Clearwell No.1 - 1.25 MG · Clearwell No.2 - 3.0 MG · Clearwell No.3 - 5.0 MG · Clearwell No.4 - 1.6 MG · Clearwell No.5 - 4.6 MG Clearwell No.2 was modified in 2000 to add baffling for disinfection concentration multiplied by time (CT). This will facilitate continued compliance with Safe Drinking Water Act (SDW A) regulations. The current modifications will result in all treated water being directed through Clearwell No.2. Two additional3Q-inch influent pipes were added from the post flash mix basin into this clearwell. Several pipes connect Clearwell No.2 with the four other finished water clean-vells. 3.5.2 Chemical Feed Systems The chemical feed system at the HigWand Avenue WTP includes: a'liquid lime system that has two bulk tanks and three lime slurry feed pumps; a dry lime system used as a backup to the liquid feed system: a chlorination system with five chlorine containers on-line and five that serve on a standby basis; a polymer feed system used when required by high turbidity levels; a powdered activated carbon (PAC) system used when required for taste and odor problems; and a phosphate feed system. Also, the liquid alum system includes two bulk tanks, a day tank, and new feed pumps. 3.5.3 High Service Pumping There are three sets of high service pumps at the Highland Avenue WTP: the generator building pumps (also identified as the old Fort Gordon high service pumps), the filter gallery pumps, and the auxiliary pumps plus the Central Avenue Booster Pump Station (BPS). An additional set of high service pumps is located at the Wrightsboro Road BPS. Table 3-41ists each system's pumping capacities in gpm, elevation of the pressure zone served (nominal mean sea level [msl], feet) and the difference in elevation the pumps must pump against (head, feet). The pressure zone is designated in elevation (it msl) of the water surface in storage tanks serving the area when the water is at the full tank level. Reworking of the high service pumps is included as part of the HigWand Avenue WTP improvements listed in Section 5. TABLE 3-4 Summary of High Service Pumping From To Head (ft) Flow Elevation Elevation Total Dynamic Head Location (msl) (msl) (TDH) gpm Central Avenue BPS 433 420 66 3,000 Aux. High Service Pump 433 564 173 8,100 Aux, High Service Pump - Diesel 433 564 173 8,100 High Service Pump - Diesel 433 564 160 2,000 - - . . . . . - - ~ - P:\161047\161047 AUD 2002 PMlBOND FINANCING REPORl\SEC3&4RNAL_6_13_02 ,DOC AD 733055,1 3-7 . . . . . . . . . . . . . . . . . . . . . . . . ENGINEER'S REPORT AUGUSTA UTIUTlES DEPARTMENT WATER AND SEWERAGE REVENUE BONDS. SERIES 2002 TABLE 3-4 Summary of High Service Pumping From To Head (ft) Flow Elevation Elevation Total Dynamic Head Location (msl) (msl) (TDH) gpm High Service Pump 433 564 160 5,600 High Service Pump - Backup 433 564 160 2,000 High Service Pump 433 564 160 3,500 Fort Gordon Pump 433 630 or 598- 310 1,250 Fort Gordon Pump 433 630 or 598- 300 2,500 Fort Gordon Pump 433 630 or 598- 300 2,500 Fort Gordon Pump 433 630 or 598- 300 1,250 Wrightsboro Road Pump 564 630 100 700 Wrightsboro Road Pump 564 630 100 900 Wrightsboro Road Pump 564 630 100 900 -This station can pump to either pressure zone. 3.6 Water Distribution System - .. ... .. The water distribution system includes approximately 1,010 miles of pipelines ranging in size from 6 inches to 24 inches in diameter. Most of the pipelines are made of cast iron or ductile iron (DI). Approximately 20 percent of these pipelines have been in service for 50 years or more, with the oldest pipelines installed approximately 140 years ago. Finished water is distributed from the Highland Avenue WTP by gravity and by pwnping. Finished water is pwnped using the Filter Gallery PS, the Auxiliary High Service PS, and the Fort Gordon PS. Gravity flow is used to supply the 417-ft msl gradient (Intermediate- North) and the 31o-ft msl gradient (Low). The Auxiliary High Service PS is used to supply the northern part of the system, which has pressure zone elevations of 564 ft rnsl and 500 ft rns!. The Fort Gordon PS is used to supply the western part of the Water System and can supply either the 598-ft msl system or the 630-ft msl system. The Wrightsboro Road PS has been recently refurbished to supply the 630-ft msl pressure zone. Finished water is pwnped from GWTP No.1 into the Intermediate-South pressure gradient (417 ft msl) and from GWTP No.2 into the Pine Hill pressure gradient (457 ft msl). Distribution system PSs situated at various locations are used to feed isolated higher pressure zones. See Figure 3-3 for the locations of the PSs and pressure zones. - - - - - - ~ - ~ - - - P:\161047\161047 AUD 2002 PMlBOND RNANCING REPORT\SEC3&4RNAl_6_13_02 ,DOC AO 733055.1 3-8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ENGINEER'S REPORT AUGUSTA UTILITIES DEPARTMENT WATER AND SEWERAGE REVENUE BONDS, SERIES 2002 lEGEND: l!J Qound - Tl!lIlllrenl Plant C &Ifaoo WIllorT_PlII1I A rim ~S1alIons CJ "'-<n Zonoo N A tall tallFeol r""""l CH2MHILL Agure 3-3 Water Pumping Stations Augusta, Goorgia MC2DO>>1&Q1.'~ 1ai.M .....At..~ ~0Ik ....-z....-=uwo:at.,.,.........,... Water levels in the finished water clearwells at the Highland Avenue WTP and system pressure requirements at the 417-ft msl gradient limit gravity flow from the clearwells into the 417-ft msl (Intermediate-North) pressure zone. Areas in the 417-ft msl (Intermediate- South) pressure zone not served from the Highland Avenue WTP are supplied from GWTP No. I. In addition to the pressure zones listed above, the distribution system contains several smaller pressure zones created by the significant variations in elevation throughout Augusta. These isolated pressure zones are fed using individual wells, BPSs, or pressure reducing valves (PRVs) to meet the Department's operating pressure requirements. A summary of pressure zones is presented in Table 3-5. TABLE 3-5 Pressure Gradient Summary - ,. System Surface Water Plant Pressure Zones Overflow Elevation (ft) Water Source - - Super High High Adjusted High Intermediate-North Low 630 564 500 433/417 310 Fort Gordon PS or BPS from the 564 pressure zone High Service and Auxiliary High Service PS PRV from the564 pressure zone Gravity or BPS from the 433/417 pressure zone PRVs from the 433 pressure zone . . . . .... - - - P~161047\161047 AUD 2002 PMlBOND ANANCING REPORTlSEC3&4FINAU_13_02 ,DOC AD 733055,} 3-9 - ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ENGINEER'S REPORT AUGUSTA lJTlUTIES DEPARTMENT WATER AND SEWERAGE REVENUE BONDS, SERIES 2002 TABLE 3-5 Pressure Gradient Summary System Groundwater Plant Pressure Zones High Pine Hill High Pine Hill Intermediate-South Overflow Elevation (ft) Water Source 597 521 457 433 BPS from the 417 pressure zone or the Fort Gordon Ps GWTP No 3 GWTP No 2 and Pine Hill Wells 1 and 2 GWTP No.1 or BPS from the 433 pressure zone In addition, the distribution system is equipped with several storage tanks and BPSs. A summary of the distribution system storage facilities for the surface water plants is presented in Table 3-6. A summary of the surface water system pumping facilities is presented in Table 3-7. TABLE :Hi Surface Water Storage Facilijjes Location Location Elevation Pressure Systems Served Gallons Capacity Highland Ave WTP Clearwell1 433 1,250,000 Highland Ave WTP Clearwell 2 433 3,000,000 Highland Ave WTP Clearwell 3 433 5,000,000 Highland Ave WTP Clearwell 4 433 1,600,000 Highland Ave WTP Clearwell 5 433 4,600,000 -------------------------------------------------------------------------------------_.--_.--------------------._-------- Total Clearwells 433 All 15,450,000 Berckmans Road 417 433/417 500,000 Highland Ave Tank 564 564 500,000 Highpoint Tank 564 564 1,000,000 Walton Way Extension 500 500 750,000 Belair Road 630 630 1,000,000 Total Elevated Storage 3,750,000 .. - - - TABLE 3-7 Surface Water Pumping Facilities Head Rate Location From To (ft) (gpm) Summary of Surface Water System Pumping Central Avenue BPS 433 417 66 3,000 Aux. High Service Pump 433 564 173 8,100 Aux. High Service Pump - Future 433 564 0 Aux. High Service Pump - Future 433 564 0 Aux. High Service Pump -- Diesel 433 564 173 8,100 High Service Pump - Diesel 433 564 160 2,000 P:\161 l>471161 l>47 AUD 2002 PM\BOND RNANCING REPORl\SEC3&4FINAl_6_13_02 .ooc 3-10 AO 733055.1 - - .- - ~ - .- - ~ - - - -- -- ..... . . ENGINEER'S REPORT . AUGUSTA UTIUllES DEPARTMENT WATER AND SEWERAGE REVENUE BONDS, SERIES 2002 . . TABLE 3-8 . Groundwater System Storage Facilities location Elevation System Gallons . Greenland Road 597 597 500,000 . Total Elevated 3,150,000 . Table 3-9 presents a summary of groundwater system pumping facilities. . . TABLE 3-9 . Groundwater System Pumping Facilities location From To Head (ft) gpm . Summary of Groundwater System Pumping . GWTP No. 1 - Pump 1 162 417 310 1 ,400 . GWTP No. 1 - Pump 2 162 417 310 1 ,400 . GWTP No. 1 - Pump 3 162 417 310 1 ,400 . GWTP No. 1 - Pump 4 162 417 310 1 ,400 GWTP NO.1 - Pump 5 162 417 310 1,400 . GWTP NO.2 - Pump 1 128 457 352 1,800 . GWTP NO.2 - Pump 2 128 457 352 1,800 . GWTP NO.2 - Pump 3 128 457 352 1,800 . GWTP NO.2 - Pump 4 128 457 352 1,800 GWTP NO.2 - Pump 5 128 457 , 352 1,800 . GWTP No.3 - Pump 1 240 521 337 1,850 . GWTP No, 3 - Pump 2 240 521 337 1,850 .. GWTP NO.3 - Pump 3 240 521 337 1,850 WI' ~ GWTP NO.3 - Pump 4 240 521 337 1,850 - ---- Morgan Road BPS 417 597 180 2,300 ... - Morgan Road BPS 417 597 180 2,300 -- Cedar Ridge 417 521 1,000 - -- Cedar Ridge 417 521 1,000 - - Brown's Road BPS 457 521 124 1 ,400 - Brown's Road BPS 457 521 124 1 ,400 .-. Faircrest BPS 417 597 285 1,050 -- Faircrest BPS 417 597 285 1,050 Faircrest BPS 417 597 285 1,050 Faircrest BPS 417 597 285 1,050 Richmond Hill BPS 417 597 280 1,060 Richmond Hill BPS 417 597 280 1,060 Richmond Hill BPS 417 597 280 1,060 Norton Road BPS 433 417 59 1,360 Norton Road BPS 433 417 59 1,360 Norton Road BPS 433 417 52 2,350 Golden Camp BPS - Vertical 417 597 285 1,050 Golden Camp BPS 417 597 236 1,100 P:\1610471161047 AUD 2002 PMlBOND ANANCING REPOR1\SEC3&4FINAL_6_13_02 ,DOC AO 733055,1 3-12 . . . . . . . . . . . . . . . . . . . . ENGINEER'S REPORT AUGUSTA UTIUllES DEPARTMENT WATER AND SEWERAGE REVENUE BONOS, SERIES 2002 TABLE 3-9 Groundwater System Pumping Facilities Location Summary of Groundwater System Pumping Golden Camp BPS (spare) Golden Camp BPS (spare) Total Groundwater Pumping From To Head (ft) gpm 417 417 597 597 700 700 48,800 The distribution system delivers water to customers through meters at each point of service connection, which are read once per month for billing purposes. The 2001 ratio of non-billed water to purchased water or unaccounted for water (representing water that was lost because of unmetered usage or leaks), was approximately 9.5 percent (monthly average). This lost and unaccounted for rate is not unusual for water systems of Augusta's vintage. The significant number of older, large meters contributes significantly to this amount of unaccounted for water usage. The Department is in the process of replacing all older meters, including the smaller residential units. 3.7 Water Quality - . . . . As a retail water system, Augusta is required to conduct appropriate testing of distribution system water quality. The results of this testing indicate that the Water System's program is in compliance with regulatory criteria. The system's raw water supply has been of such high quality that it is considered to be ideal for the surface water treatment processes used by Augusta. See Section 3.9 on regulatory impacts for further discussion of water quality requirements - - ..- - 3.8 Projected Water Demand -. During 2001, Augusta billed customers for approximately 13,364 million gallons of water. See Table 3-10 for the number of customers by class and average daily water consumption. The total revenue of the 10 largest customers represented 14.28 percent of 2001 sales. The 10 largest water customers of the System are presented in Table 3-11. No independent investigation has been made of the stability or financial condition of any of the customers listed in Table 3-11. Consequently, no definitive representation can be made as to whether such customers will remain major customers of the Water System. Total water sales for year ending December 31, 2001, were $17,810,769. - - - - - - TABLE 3-10 Water Demand 2001 Actual 2001 water consumption, metered and billed (million gallons) ) Water Demand Average Daily, delivered from WTPs (mgd) Maximum Daily, delivered from WTPs (mgd) 13,364 40.5 59.1 P:l1610471161047 AUD 2002 PM\BOND RNANCING REPORl\SEC3&4RNAL_6_13_02.DOC AD 733055.1 3-13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Et\GINEER'S REPORT AUGUSTA lJTlUllES DEPARTMENT WATER AND SEWERAGE REVENUE BONOS, SERIES 2002 TABLE 3-10 Water Demand 2001 Actual 2001 water consumption, metered and billed (million gallons) ) Number of Water Connections (End of Year) Residential Commercial and Industrial Total 13,364 58,246 7,424 65,670 TABLE 3-11 The 10 Largest Water Customers (for the 12-month period ending December 31, 2001) Thousand Gallons Annual % of Total Water Customer (kgal) Metered Billing Revenues Nutra Sweet 604,304 753,462 4.23% Huron Tech 195,414 244,260 1.37% Castleberry 193,245 245,293 1.38% MCG 173,785 246,668 1.38% Shapiro 160,141 200,166 1.12% Monsanto Dairy 145,276 184,039 1.03% Avondale 143,469 179,276 1.01% Searle 142,804 178,921 1.00% Kendall 129,612 162,318 0.91% University Hospital 114,893 150,822 0.85% Total of 10 Largest Water Customers 2,002,943 2,545,225 14.28% - .... Augusta's projection of future water production needs is based on the County's anticipated total population, excluding Fort Gordon. The geographical distribution of population is not a factor in plant-level planning but is important planning water transmission as part of the hydraulic distribution of water to customers. EPD requires utility systems to consider water conservation in their planning efforts and Augusta continues to practice passive conservation rather than a more aggressive conservation program. With the current level of conservation, Augusta is expected to experience a small increase in per capita use over the next few years. The Technical Memorandum prepared to analyze the projected water demand (Technical Memorandum 1.2A: Population Distribution and Water and Wastewater Flow Projections, AprilS, 2002), estimates that the Water System will experience a 2 percent (0.09 percent per year) increase in. per capita water usage by the year 2020 largely due to the availability of water service and pressures for previously deferred uses (e.g. irrigation). . . . . . P:\1610471161047 AUD 2002 PM\BOND RNANCING REPORl\SEC3&4ANAL_6_13_02 .DOC AD 733055.1 3-14 - - ... - . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ENGINEER'S REPORT AUGUSTA lJTlLlllES DEPARTMENT WATER AND SEWERAGE REVENUE BONDS. SERIES 2002 Table'3-12 presents Augusta's 2000 and projected per capita water usage in gpd. This usage rate is determined by total water produced divided by population. This rate then includes both customer-billed usage plus unaccounted for water. The per capita needs include residential and commercial usage. Industrial needs are presented separately because they are not directly linked to population growth. The projected annual average production in mgd and maximum day production are planning-level estimates (e.g. +/-10%) of the future needs of the Department's service area. TABLE 3-12 Projected Water Consumption 2000 to 2020 Total Population Per capita Water Usage, gpd (commercial and residential) Industrial Usage, mgd Annual Avg. Water Usage, mgd Max. Day Water Usage, mgd 1US Bureau of the Census, 2000 Census 2000 2010 2020 199,7751 222,497 242,150 151 153 154 10.3 10.5 10.7 41.3 44.5 48.0 61.1 71.2 77.0 While the Department is taking actions to encourage conservation, it should be noted that the development pattern and population distribution will also affect the level of water consumption. This includes both per capita water usage and the maximum day production, factors that are held constant in these projections. For example, the northeastern part of the service area, the former City of Augusta, is expected to have limited population growth in most areas and with implementation of water conservation, the net increase in demand should be relatively low. However, other areas are projected to have significant growth which will increase water demand even with conservation measures. Residential and commercial water usage is projected to be directly related to population growth. Industrial needs, however, generally develop independently of population growth. It is assumed that industrial water usage, exclusive of conservation, will increase by 5 percent over the planning period (2000 through 2020). Table 3-13 summarizes water usage by customer class. TABLE 3-13 Projected Water Usage by Customer Class 2000 to 2020 Class 2000 2010 2020 Residential Avg. Annual Water Usage 18.6 20.4 22.4 Max. Day Water Usage (Peaking factor: varies) 36.0 44.4 48.4 Commercial Avg. Annual Water Usage 12.4 13.6 14.9 Max. Day Water Usage (Peaking factor: 1.2) 14.8 16.3 17.9 Industrial Avg. Annual Water Usage 10.3 10.5 10.7 a. .... . . . . . P:\1610471161047 AUD 2002 PM\BOND FINANCING REPORTlSEC3&4FINAL_6_13_02 .DOC AD 733055.1 3-15 - ... - ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ENGINEER'S REPORT AUGUSTA UTILITIES DEPARTMENT WATER AND SEWERAGE REVENUE BONOS, SERIES 2002 TABLE 3-13 Projected Water Usage by Customer Class 2000 to 2020 Class Max. Day Water Usage (Peaking factor: 1.0) Total Avg. Annual Water Usage Max. Day Water Usage 2000 10.3 2010 10.5 2020 10.7 41.3 61.1 44.5 71.2 48.0 77.0 Source: Technical Memorandum 1.2A: Population Distribution and Water and Wastewater Flow Projections, AprilS, 2002. The peaking factor defined in Technical Memorandum 1.2A: Population Distribution and Water and Wastewater Flow Projections, AprilS, 2002, for industrial usage is assumed to be 1.0; in other words, maximum day and average annual needs are assumed to be, for analytical purposes, roughly the same. Commercial consumption is expected to have a maximum day peaking factor of 1.2 times average day demand. All additional peak day needs are assumed to be associated with residential consumption. These peaking factors are employed to determine the peak day requirements for capacity sizing in the Department's facilities. System-wide maximum day needs are currently 1.47 times average annual usage. By 2010, the system-wide peaking factor is expected to increase to 1.6 as additional water becomes available for irrigation. System-wide maximum day demands are projected to be 71.2 mgd as a consequence, representing roughly a 16 percent increase in required maximum day delivery capacity. The major growth is anticipated in areas where residential lots are large and home irrigation systems are becoming predominant. New developments that will use the sigrLificant open spaces will also have irrigation of common grounds and recreation areas such as golf courses. This increase in per capita demand will be somewhat offset by conservation measures, but the net result is expected to still be a significant increase in average and maximum day consumption. It is assumed that total Augusta water demands will increase by as much as 16 percent over the next 8 years. To meet projected demands, the Department has authorized design of upgrades to the Highland Avenue WTP and started construction of a new (15 mgd) WTP. The current withdrawal permits for raw water from the Savannah River will be sufficient to meet surface water supply needs for both facilities, as discussed in Section 5. 3.9 Regulatory Impacts The Department has responded to the challenges of the 1996 Amendments to the SDW A to produce drinking water that is in compliance with all applicable rules. However, drinking water regulations have recently been changed imposing still more stringent regulations, with additional regulations planned for the near future. The recently promulgated and planned SDW A regulations will have an impact on the drinking water treatment plants and distribution system. The Department is currently in compliance with all of the primary and secondary standards as promulgated by the SDW A. P:l161 0471161 047 AUD 2002 PMlBOND FINANCING REPORl\SEC3&4FINAU_13_02 .DOC AD 733055.1 3-16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ENGINEER'S REPORT AUGUSTA UTIUllES DEPARTMENT WATER AND SEWERAGE REVENUE BONOS, SERIES 2002 The Department has taken a proactive approach for compliance with the recently promulgated and the proposed regulations by developing water quality goals that are more stringent than current regulations. The developed water goals will position the Department to meet the future regulations. Drinking water regulations that impact the Department can be divided into three categories: · Existing regulations · Recently promulgated regulations · Future regulations. The following is a brief discussion of each category and the impact on the Department drinking water supply system. 3.9.1 Existing Regulations EPD has issued rules (Rules and Regulations of the DNR, Chapter 391-3-5- Safe Drinking Water) to establish policies, procedures, requirements, and standards for implementing the drinking water regulations. 3.9.1.1 Surface Water Treatment Rule The Surface Water Treatment Rule (SWTR), promulgated in 1992, establishes treatment techniques instead of maximum contaminant levels (MCLs) for the control of Giardia, viruses, heterotrophic plate count (HPe) bacteria, and Legionella. The SWTR required all water systems to maintain a filtered water turbidity of 0.5 Nephelometric Turbidity Unit (NTU) and to provide a minimum level of inactivation of Giardia and viruses by maintaining adequate contact time with the primary disirLfectant. In addition, the SWTR required all water systems to maintain a detectable chlorine residual in the distribution system. The Department is currently in compliance with all of the SWTR requirements. 3.9.1.2 Total Coliform Rule The Total Coliform Rule was promulgated on June 29, 1989. Total coliforms include both fecal coliforms and E. coli. Compliance with the Coliform Rule is based on the results of sampling in the distribution system. The frequency and number of collected samples are a function of the system size (number of people served). The Department has maintained compliance with the Total Coliform Rule by (1) maintaining adequate distribution system disinfectant residual and (2) frequently flushing low flow areas. - - - - - - 3.9.1.3 Primary Contaminants EPD currently regulates a list of 83 contaminants that includes inorganic and organic compounds. These contaminants do not occur at concentrations of concern in most surface waters that are not subject to contamination. Surface waters used by the Department, from the Savannah River, have concentrations of regulated contaminants well below US Environmental Protection Agency (EP A) prescribed limits. - - - - -. - - ... 3.9.1.4 Lead and Copper Rule On June 7, 1991, the EP A published Action Limits (ALs) and national primary drinking water regulations for lead and copper. Under this regulation, lead and copper levels must - - - - - - P:\1610471161047 AUD 2002 PMlBOND RNANCING REPORl\SEC3&4RNAL_6_13_02 .DOC AD 733055.1 3-17 - - - - . . . . . . . . . . . . . . . . . . . . . . . . . ENGINEER'S REPORT AUGUSTA UTIUllES DEPARTMENT WATER AND SEWERAGE REVENUE BONOS, SERIES 2002 not exceed ALs of 0.015 mg/L and 1.3 mg/L, respectively, in 90 percent of the samples collected. Actions required for AL exceedances include collecting source water samples, conducting public education, conducting a corrosion control study, and establishing a corrosion control program. This Rule also requires that lead and copper be monitored at consumers' taps every 6 months. Samples at consumers' taps must be taken at high-risk locations, which include homes with lead solder installed after 1982, lead service lines, and lead interior piping. Revisions to the Lead and Copper Rule were promulgated in April 2000. The revisions reduced the frequency of monitoring required for low lead and copper tap levels and updated the analytical methods used for analyzing lead and copper levels. The Department currently controls the corrosivity of its finished water by adding a phosphate-based corrosion inhibitor. The Water System has continuously been in compli- ance with the lead and copper ALs. - .. ... .... ... - - - 3.9.1.5 Risk Management Plans (RMPs) The EP A set a deadline of June 21, 1999 for all utilities that store hazardous chemicals (including chlorine gas) above a specified threshold limit, to prepare a risk management plan (RMP). The regulation outlines requirements for preventing or minimizing the conse- quences of catastrophic releases of toxic, reactive, flammable, or explosive chemicals. The threshold level for chlorine is 2,500 pounds. The RMP must include evaluations of buildings and equipment to protect the safety of workers around chlorine facilities and to develop an emergency response plan if a leak occurs. Key irLformation developed will be submitted to the EP A and posted on the internet for public access. The Department has prepared an RMP for the Highland Avenue WTP. In addition, the Department is improving the existing safety program that provides guidance to operators on correct chlorine operations and maintenance procedures and the emergency response plan to be used if there is a leak. The Department is planning to install onsite chlorine generation at the Highland Avenue Plant <4}d the proposed Tobacco Road Plant to eliminate safety and security concerns associated with chlorine gas. - 3.9.1.6 Residuals Management The State of Georgia currently prohibits the direct discharge of water treatment residuals to a receiving stream. A National Pollutant Discharge Elimination System (NPDES) permit is required which specifies an acceptable pH and total suspended solids (TSS) concentration for the discharge of any waste or decant stream from WTPs. The Highland Avenue WTP is currently discharging all of the waste streams to Turknett Pond. An NPDES permit was obtained by the Department to allow discharge of decant from the Turknett Pond. Settled sludge in the pond is dredged when needed by the Department. - 3.9.2 Recently Promulgated Regulations 3.9.2.1 Interim Enhanced Surface Water Treatment Rule (IESWTR) The IESWTR was promulgated in December 1998 and established a 2-log Cryptosporidium removal requirement for filtered systems. Under this rule, conventional treatment is assumed to meet the Cryptosporidium removal requirement by maintaining a filtered turbidity of 0.3 NTU 95 percent of the time and at no time exceed 1.0 NTU. The IESWTR also P:\1610471161047 AUD 2002 PM\BOND RNANCING REPORl\SEC3&4RNAL_6_13_02 .DOC AD 733055.1 3-18 . . . . . . . . . . . . . . . . . . . . ENGINEER'S REPORT AUGUSTA UTILmES DEPARTMENT WATER AND SEWERAGE REVENUE BONOS, SERIES 2002 requires individual filter monitoring and additional requirements related to distribution system tank covers. The Highland Avenue Plant is in compliance with the IESWTR requirements. 3.9.2.2 Disinfectants and Disinfection Byproducts (D/DBP) Rule - Stage 1 Stage 1 D /DBP Rule limits resulted in the final maximum contaminant level (MCL) requirements shown in Table 3-14. The Department has taken these requirements into consideration in both the upgrade of the Highland WTP and the new WTP currently under a design contract with the intent of maintaining full compliance. TABLE 3-14 Summary of Stage 1 D/DBP Rule Limits Final Stage 1 MCls Total Trihalomethanes (TTHMs): 80 micrograms per liter (Ilg/L) Haloacetic Acids (HAA5): 60 Ilg/L Bromate: 10 Ilg/L Chlorite: 1.0 mg/L Final Stage 1 Maximum Residual Disinfectant levels Free Chlorine: 4.0 mg/L as CI2 Chloramine: 4.0 mg/L as CI2 Chlorine Dioxide: 0.8 mg/L as CI02 - - 3.9.2.3 Filter Backwash Rule The Filter Backwash Rule was promulgated in June 2001 and applies to all systems that use conventional or direct filtration and that recycle spent filter backwash water. The Highland Avenue WTP does not practice recycling. The proposed Tobacco Road WTP will discharge all produced waste streams, including backwash, to the wastewater treatment plant (WWTP). Therefore, the Filter Backwash Rule is not expected to have any impact on the existing or proposed water plants. 3.9.2.4 Arsenic Rule The Arsenic Rule was promulgated on January 22, 2001. This rule established an MeL of 0.01 mg/L. The Arsenic Rule applies to both Community and Non-Transient, Non- Community Water Systems. Systems must meet this requirement by January 2006. Despite the new lower limit, it is not anticipated that the arsenic regulations will have an impact on the Department. Arsenic is not expected to occur in the surface water supply at concentrations of concern. .- - .- - . .- - .- - - - - - - 3.9.3 Future Regulations The EP A is currently in the process of developing additional regulations related to microbial and disinfection byproducts. The planned regulations are being developed as a follow up to the IESWTR and Stage DBPs. See Appendix C for a detailed discussion of these regulations. P:\161 0471161 047 AUD 2002 PM\BOND RNANCING REPORl\SEC3&4FINAl.6_13_02 .DOC AD 733055.1 3-19 . . . . . . . . . . . . . . . . . . . . . . . . . 4.0 Wastewater System 4.1 Overview of Wastewater System The Wastewater System serves approximately 44,048 residential and 5,591 commercial and industrial customers, as of December 31, 2001. The Wastewater System provides sewer services to an area of approximately 106 square miles with an estimated population in excess of 150,683. Figure 4-1 shows the areas currently served by the Wastewater System with overlays of existing wastewater collection lines and location of WWTPs. Augusta has the non-exclusive right to provide water and wastewater service within the County. The wastewater systems of Fort Gordon and the Cities of Blythe and Hephzibah provide wastewater service within those jurisdictions in the County. The Department's service area includes all or parts of eight drainage basins shown in Figure 4-2. lB3END: c=l Augusta Sewerage Servlce !vea' I'v' Sewerage Lines A Waslewa1erT...tmenIPlanI N A ............. SeMalAt03_ rltJl_ForI GottI>\ Ilep/rzibahcr/Jlj1he. AI ... ... - ... ... ... - SCOJ 0 I!O)JFtQl J"""-_ -. - - - - - .- - CH2MHILL Flgulll 4-1 Wastewater Seriice Area and T realment Plants ~ Go<<pio M;2M2ll1W1.\~~~ ~/'lIIJ'#;~~.~...n.~"""?2'Xll.I.W':~.'XOl[R(.Ia..-flFtl,;Jt..... P:\ 1610471161047 AUD 2002 PMIBOND RNANCING REPORl\SEC3&4FINAL_6_13_02 .DOC AD 733055.1 4.1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ENGINEER'S REPORT AUGUSTA UTIUTlES DEPARTMENT WATER AND SEWERAGE REVENUE BONOS, SERIES 2002 N A lIl)OO 0 ~ "'OlF... CH2MHILL ~1VIn.v...q,.tIto'-" ~,.."-!L'r"r-............:. ~~o...l'I.:a2,~~ZlQ'Il""l~_ Flgu", 4-2 Dra;nage BasIns ~'*""'" 4.2 Wastewater Collection and Conveyance ... - ... .. Augusta's wastewater collection system dates from storm water drains constructed in downtown Augusta prior to 1900. Over time, wastewater was diverted mto the storm water drains, and Augusta's downtown storm water drains evolved into a combined storm and wastewater collection system. Until 1968, this system emptied into the Savannah River without treatment. In the 1980s and early 1990s, Augusta eliminated all known combined sewers by constructing trunk wastewater mains to keep wastewater separate from storm water. It is possible that undocumented interconnections of the two systems were not eliminated and remain. As a result, the Department has an ongoing program to verify complete separation of the storm water drain and wastewater collection systems. Augusta's wastewater collection and conveyance system consists of 8 drainage basins, 28 wastewater pumping stations, and approximately 640 miles of collection pipes which transport primarily sanitary sewage. Approximately 80 percent of the wastewater collection system is drained by gravity; the remainder requires pumping at least once. The wastewater collection system includes pipes ranging in size from 8-inch to 72-inch diameter. Approximately 20 percent of the wastewater collection system has been in service for 50 years or more. The wastewater collection system includes standby pumps and a standby power system. The piping in the wastewater collection system was constructed using a wide variety of materials, including clay, brick, concrete, and polyvinyl chloride (PVC), creating significant problems for maintenance of the system. In a recent system evaluation of the Spirit, Butler, and Rocky Creek basins, major infiltration and inflow (III) has been identified. An -. - - - - - - - - - - - - - .- P:l1610471161047 AUD 2002 PMlBOND RNANCING REPORl\SEC3&4FINAL_6_13_02.DOC AD 733055.1 4-2 . . . . . . . . . . . . . . . . . . . . ENGINEER'S REPORT AUGUSTA lJTlUTIES DEPARTMENT WATER AND SEWERAGE REVENUE BONOS, SERIES 2002 estimated 10 percent of the current wastewater flows are contributed by III. Rehabilitation is underway for portions of these basins, but significant reduction of III will require a continuous III program. The CIP (Section 5) addresses additional corrections to the problems encountered in these basins. 4.3 Wastewater Treatment Facilities Augusta owns two WWTPs as summarized in Table 4-1. TABLE 4-1 Wastewater Treatment Plants Owned by Augusta Permitted 2001 Treated Treatment Date of Wastewater Capacity Original (Maximum Dates of Receiving Plant (Monthly Avg) Construction Day) Improvements Stream James B. Messerly (also 46.1 mgd 1968 36.8 mgd 1976,1984, Butler Creek known as the Butler Creek 1995,1997, WWTP) 2001,2002 Spirit Creek 2.24 mgd 1988 3.2 mgd 1995 Spirit Creek Totals 48.34 mgd 40.0 mgd - - ... ... - ... - ... The J. B. Messerly WWTP has two separate treatment trains, the North Plant and the South Plant. The North Plant, constructed in 1976, was originally designed to provide only pri- mary treatment.1 Later, an oxidation ditch was constructed to provide secondary treatment capacity of approximately 17.8 mgd. In 1984, the South Plant was constructed with a design capacity of 28.4 mgd. Flow equalization basins were added in 1995. In 1997, the first stage of a wetlands system was constructed to provide additional ammonia-nitrogen removal. In 2001 the second stage of the wetlands system was completed along with the first phase of various retrofit projects to significantly improve plant performance. These retrofits included improvements to secondary Clarifiers, primary clarifiers, sludge pumps, and various mech- anical and electrical systems throughout the plant. In 2002 the third stage of the wetlands will be completed and the second phase of retrofit projects will begin. Effluent flows from the wetlands to the Savannah River by way of Butler Creek. -. - - - - - - The J. B. Messerly WWTP receives domestic wastewater from the surrounding community as well as a significant load (3,120 million gallons in 2001) from 18 major industrial con- tributors. The J. B. Messerly WWTP was originally rated, based on "normal strength" wastewater, to have a treatment capacity of 46 mgd, and is currently permitted for a capacity of 46.1 mgd (monthly average). The influent strength of the wastewater has increased over the years as a result of additional industrial waste and reduction in collection system III. This increased organic loading has reduced the effective capacity. Recent upgrades and further improvements discussed in Section 5 will restore the full capacity of the J.B. Messerly WWTP. 1 The primary treatment system includes the primary clarifiers, primary sludge pumps, and scum pumps. This system removes settled solids from screened and degritted wastewater. The secondary treatment system includes aeration basins, aeration blower systems, and secondary clarification. P:l1610471161047 AUD 2002 PM\BOND FINANCING REPOR1\SEC3&4FINAL_6_13_02 .DOC AD 733055.1 4-3 . . . . . . . . . . . . . . . . . . . . ENGINEER'S REPORT AUGUSTA lJTlUllES DEPARTMENT WATER AND SEWERAGE REVENUE BONOS, SERIES 2002 The Department's planned improvements to the wastewater treatment system are expected to maximize use of existing plant components and increase the level of reliability in meeting stringent effluent limits. See Section 5 for a description of the capital improvements. The J. B. Messerly WWTP discharges under NPDES Permit GA0037621, which was issued in 1996, was modified in January 2002, and expires in June 2006. Table 4-2 presents the plant's permit information. TABLE 4.2 J. B. Messerly WWTP Effluent Limitations - - - - Parameter Flow - m3/day (mgd) BOD 5-day--mg/L (kg/day) TSS-mg/L (kg/day) Ammonia as N--mg/L (kg/day) Fecal Coliform Bacteria Total Residual Chlorine--mg/L Daily maximum limitations. m3/d cubic meters per day mL milliliters mg/L milligrams per liter kg/day kilograms per day The Spirit Creek WWTP consists of primary treatment shredding and screening, secondary treatment in aerated lagoons, disinfection, and polishing lagoons. The Spirit Creek WTP discharges under NPDES Permit GA0047147, which was issued in 1999 and expires in October 2004. A detailed Wastewater Treatment Master Plan will be funded by the Series 2002 Bonds to address future permit compliance needs. Table 4-3 presents the plant's permit information. Discharge Limitations Monthly Average Weekly Average 174488 (46.1) 218016 (57.6) 10(1,747) 15(2,184) 30 (5243) 45 (6551) 1.5 (262) 2.25 (328) 200/100 mL 400/100 mL 0.013 0.013' - - -. - -. - - - TABLE 4-3 Spirit Creek Effluent Limitations - - - - Discharge Limitations m3/d mL mg/L kg/day Parameter Flow - m3/day (mgd) BOD 5-day mg/L (kg/day) TSS mg/L (kg/day) Ammonia as N mg/L (kg/day) Fecal Coliform Bacteria Total Residual Chlorine mg/L Daily maximum limitations. cubic meters per day milliliters milligrams per liter kilograms per day Monthly Average 8,478 (2.24) 30 (255) 30 (255) 17.4 (148) 200/100 mL 0.24 Weekly Average 10,598 (2.80) 45(318) 45(318) 26.1 (185) 400/100 mL 0.24' P:\1610471161047 AUD 2002 PM\BOND FINANCING REPORl\SEC3&4FINAL_6_13_02 .DOC AD 733055.1 4-4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ENGINEER'S REPORT AUGUSTA lJTlUllES DEPARTMENT WATER AND SEWERAGE REVENUE BONOS, SERIES 2002 4.4 Projected Wastewater Flows To estimate future wastewater flows, the projected population and proportion of water accounts connected to the wastewater system in each WWTP's service area were considered. WWTP service area population projections were constructed through an allocation of year 2000 Census population by tract. Population projections for the service areas were developed assuming that those Census tracts with population growth will continue to receive a constant proportion of the population increase associated with growing tracts. This population increase will come from either new population growth or from population shifts within the County. For tracts with declining population, the rate (percentage) of decline is projected to remain stable through the planning period. Wastewater flows were projected based on the estimated proportion of households connected to the Wastewater System, using the 1990 Census as a basis2. This proportion is expected to change over time as new residences and businesses, as well as some portion of the existing residences not served currently, connect to the Wastewater System. It is assumed that residential and commercial wastewater flows will grow in proportion to the growth in the sewered population. However, if the Department implements a successful III reduction program, a reduction in future per capita wastewater flows of 2 percent may be achieved by 2020. Table 4-4 presents the sewered population and percentage change in sewered population in each WWTP's service area, as well as projected annual average flows and maximum month flows. The maximum month flows were calculated as 120 percent of the annual average flow based on historical flows. TABLE 4-4 Wastewater Flows, by Plant (mgd) (a) 2000 to 2020 Plant Spirit Creek WWTP (Capacity: 3 mgd) Sewered Population Percent Change 2000 2010 2020 10,950 24,924 35,577 14.2% 127.6% 42.7% 3.4 7.2 10.0 4.0 8.6 12.0 Average Annual Flow Max. Month Flow (b) J. B. Messerly WWTP (Capacity: 46.1 mgd) Sewered Population Percent Change 139,732 2.8% 156,548 12.0% 165,603 5.8% Average Annual Flow Max. Month Flow (b) 31.5 37.8 34.8 41.8 36.7 44.1 2 The 2000 Census did not collect infonnation on the source of wastewater disposal. P:l1610471161047 AUD 2002 PM\BOND ANANCING REPORl\'3EC3&4RNAL....6_13_02 .DOC AD 733055.1 4-5 . . . . . . . . . . . . . . . . . . . . . . . . . ENGINEER'S REPORT AUGUSTA lJTlUllES DEPARTMENT WATER AND SEWERAGE REVENUE BONDS, SERIES 2002 TABLE 4-4 Wastewater Flows, by Plant (mgd) (a) 2000 to 2020 Plant 2000 2010 2020 Total WWTP Flows (Capacity: 49.1 mgd) Sewered Population 150,683 181,472 201 ,179 Percent Change 3.6% 20.4% 10.9% Average Annual Flow 33.4 42.0 46.7 Max. Month Flow (b) 46.3 50.4 56.1 (a) The figures presented in this table will be impacted by changes to the overall level of 1/1 in the WWTP service areas. (b) The maximum day flows are 120 percent of the annual average flows based on historical relationships. ... .. a - Major III improvements have begun within the collection system serving the Spirit Creek WWTP that will significantly reduce flows. Assuming the WWTP service area remains the same, however, the Spirit Creek WWTP will need to be significantly expanded in the near future to meet the demands of the growing population in the southern census tracts. An evaluation of expansion options is now underway with recommended expansion to be funded in future years (see Section 5). The J. B. Messerly WWTP is the larger of the two plants in the Wastewater System. Increases in wastewater flows to this plant are the result of expanding service areas, as well as a growing population. Based on current service areas, however, the Messerly WWTP has sufficient capacity to treat maximum month wastewater flows. The combined volume of the 10 largest customers represented 23.56 percent of 2001 sales. The 10 largest wastewater customers of the Wastewater System are presented in Table 4-4. No independent investigation has been made of the stability or financial condition of any of the customers listed in Table 4-5. Consequently no representation can be made as to whether such customers will continue as major customers. . - - -. - TABLE 4-5 10 Largest Wastewater Customers (for the 12-month period ending December 31, 2001) - - - - Annual Billing % of Total (based upon water consumption plus Sewer Customer kgal Metered additional sewer surcharges) Revenues Nutra Sweet 604,304 1,409,137 7.89% Castleberry 243,847 344,708 1.93% EKA Noble, Inc. 187,396 462,911 2.59% Shapiro 177,655 482,104 2.70% Amoco 162,460 369,880 2.07% .-.. - - P:\1610471161047 AUD 2002 PM\BOND RNANCING REPORl\SEC3&4RNAL_6_13_02 .DOC AD 733055.1 4~ . . . . . . . . . . . . . . . . . . . . . . . . . . ENGINEER'S REPORT AUGUSTA lJTJUTJES DEPARTMENT WATER AND SEWERAGE REVENUE BONOS. SERIES 2002 TABLE 4-5 10 Largest Wastewater Customers (for the 12.month period ending December 31, 2001) Annual Billing % of Total (based upon water consumption plus Sewer Customer kgal Metered additional sewer surcharges) Revenues Procter & Gamble 148,372 208,573 1.17% Monsanto Dairy 144,225 247,259 1.38% Avondale 143,469 221,407 1.24% Searle 142,804 212,273 1.19% Kendall 129,612 252,139 1.41% Total of 10 Largest 2,084,144 4,210,391 23.56% Wastewater Customers Total sewer charges including industrial sewer surcharges (unaudited number) for year ending 12/31/2001 were $17,868,934. 4.5 Regulatory Impacts .. - The following regulatory issues affecting the Wastewater System are discussed below: · Watershed Management · Total Maximum Daily Load (TMDL) Development · NPDES Permitting and Nutrient Management · Onsite Septage Systems · Residuals Management and 503 Regulations · General Permit for Stormwater Discharge Associated with Industrial Activity . Stormwater Pollution Prevention Plans (SWP3s) · Spill Prevention, Control, and Countermeasures Plan · Municipal Stormwater Discharge Permit · Security and Vulnerability . - .... - - - - -. - 4.5.1 Watershed Management -. -- The EPD has formulated a policy to require municipalities to conduct watershed assessments and develop watershed management programs to address non-point pollution sources. These studies are required for new, or the renewal of, NPDES discharge permits. In addition, EPD requires a Source Water Assessment Plans (SWAP) for water supply watersheds to assess the potential for water supply contamination. The Department is conducting a watershed assessment for the entire County area that drains into the Savannah River. Initial implementation of the recommended management plan to be funded by the Series 2002 Bonds is expected to begin later this year. This will allow Augusta to meet the next cycle of NPDES permit renewals which will likely require - P:l161 0471161047 AUD 2002 PM\BOND RNANCING REPORl\SEC3&4FINAL_6_13_02.DOC AD 733055.1 4.7 . . . . . . . . . . . . . . . . . . . . . . . . .. - ENGINEER'S REPORT AUGUSTA lJTlUllES DEPARTMENT WATER AND SEWERAGE REVENUE BONOS, SERIES 2002 watershed management implementation benchmarks. Simultaneously, the Department is conducting a SWAP for the Savannah River watershed upstream of the current water intake. Recommendations for source water protection will be developed in the next phase of study, as required by the SDW A. 4.5.2 Total Maximum Daily Load (TMDL) Development The Clean Water Act (CW A) provides a trigger mechanism for requiring development of TMDLs when a water body does not meet water quality standards. When setting a TMDL, the regulatory agency must consider the designated uses of the water body, water quality standards, various pollutant sources, and the ability of the water body to assimilate pollutants. The State of Georgia has a court-mandated schedule for development of TMDLs that is the most aggressive in the country. The proposed TMDLs for the Savannah River basin must be developed by June 2004. The current 303d list of impaired water bodies lists fecal coliforms, dissolved oxygen (DO), and metals as the water quality parameters not meeting standards in portions of the Savannah River basin. Results of the watershed assessment and the recommendations in the watershed management plan will provide Augusta with an approach for watershed management to meet the anticipated TMDLs. . 4.5.3 NPDES Permitting and Nutrient Management The NPDES is a federal program for regulating the discharge of pollutants to the waters of the United States. In Georgia, the EPD has been delegated the authority to administer the program. EPD has adopted a "zero tolerance" policy for permit violations and is imposing penalties or issuing Consent Orders specifying actions that the permittee must take when violations occur. Augusta facilities were not designed with a "zero tolerance" perspective, and therefore do not have the level of redundancy that would be included in a facility designed today. Although operational excursions and facility bypasses are expected to be infrequent, Augusta's irLfrastructure will be evaluated for modifications that would prevent overflows and bypasses, retain pollutants, or upgrade treatment capabilities to enhance the ability to achieve 100 percent compliance with permit conditions. As a result of interstate discussions on water resources, EPD decided to mandate maximum retention of a community's water consumption to minimize the amount of water lost. This will require the Department to increase efforts to rehabilitate system facilities, including replacement of some major lines. EPD expects to be working on the implementation strategy and policy in the next year. Permit conditions may change to restrict the consumptive retention of water which may necessitate the elimination of onsite septage systems where feasible and a revision to the water pricing structure. EP A's proposed Capacity, Maintenance, Operation, and Management, also referred to as CMOM, program will require increased accountability for operation and maintenance of wastewater collection systems. This proposed program has been in development for several years, and has been undergoing federal administrative review since January 2000. It is anticipated that when the CMOM program is implemented, it will use NPDES permits as the enforcement vehicle. The Department has begun implementation of CMOM elements. Currently, the State of Georgia requires nutrient removal only in basins where water quality in lakes downstream of a discharge is found to be adversely impacted by the discharge. - - . - - _. - - ..-. P:\1610471161047 AUD2002 PMIBOND ANANCING REPORl\SEC3&4RNAL_6_13_02.DOC AD 733055.1 4-8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ENGINEER'S REPORT AUGUSTA lJTlUTIES DEPARTMENT WATER AND SEWERAGE REVENUE BONOS, SERIES 2002 However, the federal EP A is currently considering the possible need for nationwide nutrient discharge limitations due to concerns about off-shore waters. The greatest concern is in the Gulf of Mexico, but any shallow waters such as those along the Georgia coast could be affected by this possible policy change. 4.5.4 Onsite Septage Systems The design of septage systems is regulated by the Georgia Department of Health (Georgia Code Chapter 290-5-26). Local jurisdictions establish minimum lot requirements for septage systems and requirements for connection to a central wastewater collection system. With the increasing emphasis on minimizing water consumption and water quality issues in watershed management, it will be necessary to evaluate policies related to septage systems and prepare for an expanded role for central wastewater collection systems in the future. Augusta has adopted a policy to mandate conversion to central wastewater collection when service is available and is implementing a program to extend service to 10,000 new customers in the next 10 years. This policy and program will limit the potential impacts of pending regulations related to onsite septage systems. 4.5.5 Residuals Management and 503 Regulations The EP A mandates that wastewater residuals be managed in compliance with its 503 regulations. Since 1993, these regulations have required that utilities obtain 503 permits and provide annual documentation of compliance with regulatory requirements. The 503 regulations identify different classes of sludge and mandate minimum practices for treatment, handling, and disposal of each class of sludge. ... ... .., - 4.5.6 General Permit for Stormwater Discharge Associated with Industrial Activity In 1993, EPD issued NPDES Permit 000000 - Authorization to Discharge Under the National Discharge Elimination System Stormwater Discharges Associated with Industrial Activity. This permit requires properties with certain activities - those included in a specific list of SIC Codes -- to file a Notice of Intent for coverage under the permit and to prepare and maintain a Stormwater Pollution Prevention Plan (SWP3) and a Spill Prevention, Control, and Countermeasures Plan (SPCCP). In 1998, EPD issued a new general permit, GAROOOOOO, and mandated that any entity with an intent to use that general permit would have to update its plans and conform to the new requirements of the permit. The Department plans to update and modify all SWP3s to conform to the additional conditions in the 1998 storm water permit, and identify new locations which might be subject to an SWP3. - - .. .... - - 4.5.7 Stormwater Pollution Prevention Plan -. - As part of the compliance requirements for the General Permit for Industrial Activity, EPD requires that covered properties prepare a SWP3. This plan describes the stormwater discharge points, the potential pollution sources on the site and the material handling and housekeeping practices used to prevent contamination of stormwater runoff. EPD has issued a general storm water permit that can be used by any location wishing to conform to the permit conditions, as opposed to applying for a site-specific permit. During the original - - . -. - - ...., .- -- P:\1610471161047 AUD 2002 PM\BOND FINANCING REPORl\SEC3&4FINAL_6_13_02 .DOC AD 733055.1 4-9 - -. - . . . . . . . . . . . . . . . . . . . . . . . . .. -- ENGINEER'S REPORT AUGUSTA lJTlLlTIES DEPARTMENT WATER AND SEWERAGE REVENUE BONOS, SERIES 2002 round of storm water pennit issuance, the Department complied with the general conditions for its storm water permitting. 4.5.8 Spill Prevention, Control, and Countermeasures Plan The EP A, through 40 CFR Part 112, mandates that an SPCCP be prepared for any facility or location where one of several threshold oil-based material storage triggers are exceeded: any tank of 660-gallon capacity or greater; 1,320 gallons of total onsite storage; or a 20,000-gallon underground tank of petroleum-based product. This requirement is administered by EPD through the General Permit for Stormwater Discharges Associated with Industrial Activity. In addition to the SWP3, any facility meeting the material storage triggers mentioned above must prepare an SPCCP. An SPCCP provides documentation on oil-based products and specifies reporting and documentation requirements for best management practices (BMPs). The Department has implemented a formal inspection of all system facilities and document the tanks and quantities of oil-based products stored onsite. This review will either (1) identify those locations that need an SPCCP or, (2) if no SPCCP is required, satisfy the regulatory requirements and thus provide legal protection. The Department will also prepare a statement for each facility as to whether that facility needs an SPCCP and what basis was used to determine the applicability for each facility. - .... A - - - 4.5.9 Municipal Storm Water Discharge Permit EPD currently requires municipalities with populations generally over 100,000 (Phase 1 communities) to obtain an NPDES permit to operate a Municipal Separate Storm Sewer System (MS4). In 2003, a general permit will be prepared (Phase 2 Regulations), which will cover communities in other "urbanized areas." Each Phase 2 community, including Augusta-Richmond County, will be required to submit a Notice of Intent to be covered by the general permit, and must implement a stormwater management program that addresses the six "minimum control measures of the MS4 program: · Public education and outreach · Public participation/involvement . Illicit discharge detection and elimination · Construction site runoff · Post-construction runoff control · Pollution prevention/ good housekeeping The stormwater management program must be phased in over the initialS-year permit period. - - - - - - .- 4.5.10 Security and Vulnerability ....... As a consequence of recent terrorist acts against the US, there are several pending Federal and State requirements dealing with security and vulnerability. The Department is currently conducting an assessment of security and vulnerability to ascertain what actions and precautions should be implemented. P:\161047\161047 AUD 2002 PM\BOND RNANCING REPORl\SEC3&4RNA'--6_13_02.DOC AD 733055.1 4-10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ... 5.0 Proposed System CIP Proceeds of the Water and Sewerage Revenue Bonds, Series 2002 program (2002 Program) will be used to fund a 5-year Capital Improvement Plan (CIP) that will assist in eliminating current System deficiencies, meeting current and future regulatory requirements, and accommodating future demands related to system growth. It is anticipated that construction associated with the CIP will be completed in 2006. The 2002 Bonds are being issued to qualify for the 5-year spending period provided for in the Treasury Regulations for certain capital projects involving a substantial amount of construction expenditures and for which a construction period longer than 3 years is necessary . 5.1 Planning Criteria and Assumptions The Department's Master Plan 2000, which defines CIP needs through 2020, uses a number of planning criteria for identifying the facilities necessary for the System. The Master Plan includes Technical Memoranda (TMs) that document a baseline approach to evaluating the System facilities with respect to water demands, wastewater conveyance needs, and treatment requirements. Some of these TMs have been updated to reflect new information such as the 2000 Census and changes in regulations. The major planning criteria and assumptions used for development of the CIP include: . Population in Augusta is shifting from developed areas to undeveloped areas where water and sewer services were previously unavailable. . Water and wastewater system demand will increase as the population grows in Augusta. Projected water demands for the design year of 2020 are for average day demand of 48 mgd and maximum day demand of 77 mgd. Wastewater flow projections are for an average day flow of 46.7 mgd and a maximum month flow of 56.1 mgd. - - · Water and wastewater treatment improvements and expansions must be planned for compliance with all current regulatory requirements, as well as changes to these requirements that are anticipated in the next 5 years. A sigrLificant number of the CIP projects defined in the Master Plan 2000 began and will be completed within the Water and Sewerage Revenue Bonds, Series 2000 program (2000 Program). Other projects were only designed under the 2000 Program, anticipating that construction would be funded under the 2002 Program. The CIP projects planned for the 2002 Program are discussed in the following paragraphs. ... - - .... - - - .... 5.2 ~ost Opinions for Recommended Projects . A cost opinion was prepared for each of the recommended projects to establish an initial construction budget for projects to be funded by the Series 2002 Bonds. The cost - - - - .- - P:l1610471161047 AUD 2002 PM\BOND RNANCING REPORl\SEC5RNAL_6_'3_02.00C AO 733056.1 5-1 - - - . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ENGINEER'S REPORT AUGUSTA lJTlUllES DEPARTMENT WATER AND SEWERAGE REVENUE BONOS, SERIES 2002 opinions also include, as indirect costs, engineering and other technical services. Other designated projects may include only planning or special services and not include construction costs. The cost opinions were prepared using 2001 construction costs from similar projects in the Augusta area and the State of Georgia. The cost opinions were based on recent design engineering estimates or inspection of facilities and projections of equipment and facility needs, experience with similar projects, and manufacturer prices for recommended equipment. By necessity, some project cost opinions were developed in advance of detailed engineering work including preparation of specifications and detailed design drawings. For these projects, all of the required information concerning the nature and full scope of the project has not yet been obtained so cost opinions are based upon similar facilities constructed recently in this area. Rehabilitation of an existing facility (e.g., Messerly WWTP or the Highland Avenue WTP) could encounter a variety of unforeseen factors that can affect project costs and schedule. Examples of these factors include contaminated soils, piping and duct banks not located in the same locations as indicated on drawings, concealed defects in existing construction, need to upgrade facilities to current codes, and incomplete demolition of former structures (or abandoned in place rather than removed as shown on the record drawings). For this reason, contingencies are included to cover unforeseen costs. This cost opinion also includes cost values for construction allowances. These are known scope activities that cannot be quantified at this stage of cost estimation and as such, are defined through the use of allowances. These allowances have been developed as percentages of construction cost based on experience with numerous other projects and range from 10 percent to 25 percent. These allowances, at a Program level, are anticipated to be more than sufficient to meet project requirements. 5.3 Summary of Capital Improvements - - - - The 5-year CIP is summarized in Table 5-1 and further described in the following sections. It will provide for upgrades and development of the water treatment and distribution system, wastewater conveyance, and wastewater treatment facilities. For the Water System, the CIP provides for significant improvements to the existing Highland Avenue WTP, improvements to the water distribution system, and construction of a new WTP. For the Wastewater System, the CIP provides for significant improvements to the J.B. Messerly WWTP and expansions and extensions to the wastewater conveyance system. ..- - - TABLE 5-1 Series 2002 Bond Projects-Summary of Estimated Costs Recommended Improvements Note: All estimated costs in 2002 dollars Water Treatment Facilities (Section 5.3.1) Water Distribution System (Section 5.3.2) Wastewater Treatment Plants (Section 5.3.3) Wastewater Conveyance System (Section 5.3.4) System-Wide Projects (Section 5.3.5) TOTAL SYSTEM Estimated Costs 57,829,000 14,739,000 8,867,800 41,219,200 7,345,000 130,000,000 - - - - -- - - -. - P:\161 0471161 047 AUD 2002 PM\BOND RNANCING REPORl\SECSRNAL_6_13_02.00c AO 733056.1 5-2 . . . . . . . . . . . . . . . . . . . . ENGINEER'S REPORT AUGUSTA UTILITIES DEPARTMENT WATER AND SEWERAGE REVENUE BONOS. SERIES 2002 The Series 2002 Bonds projects are discussed below. Planning-level cost estimates have been developed from available information for guidance in project evaluation. Final project costs will depend on actual labor and material costs, competitive market conditions, actual site conditions, implementation schedules, and other variables. Detailed engineering design plans have been completed for some projects and the proceeds of the Series 2002 Bonds will fund their construction. Other projects for which detailed engineering design plans have not yet been developed will involve both design and construction funded by the proceeds of the Series 2002 Bonds. Project budgets are based upon either the completed engineering plans or conceptual layouts for those yet to be designed. An allowance has been added to all construction costs to cover legal, administrative, financial, engineering, and program management costs. The construction costs are based on Augusta and Atlanta area market conditions, as of the first quarter of 2002. - - 5.3.1 Water Treatment The existing Highland Avenue WTP has a rated capacity of 60 mgd and the three existing Ground Water Treatment Plants (GWTP) together add 20 mgd: GWTP No.1 with a capacity of 5 mgd (located at Peach Orchard Rd.), GWTP No.2 with a capacity of 10 mgd (located at the Highway 56 Loop), and GWTP No.3 with a capacity of 5 mgd (located on Old Waynesboro Rd.). A portion of Well Field No.1 (5 mgd) was phased out and replaced by GWTP No.3 and Well Field No.3. The strategy for meeting the 2020 water needs defined in Master Plan 2000 for the Augusta Utilities Department recommends surface water as the primary water source. This requires expansion and modification of the Highland Avenue WTP to increase reliability and efficiency, and to sustain operation capacity of 60 mgd. The design for this expansion and upgrade of the raw water pumping system serving the Highland Avenue WTP is underway. The first phase of the construction will be funded by proceeds of the Series 2002 Bonds. In addition, design and construction of a new 15-mgd SWTP is underway to meet additional demand and minimize reliance upon groundwater supply. A contract for both design and construction of this facility was authorized in 2001 covering the initial phase. This new SWTP will be completed with proceeds of the Series 2002 Bonds. Upon completion of this 15-mgd facility, the remaining wells serving GWTP No.1 will be taken off-line. The system will then have a total production capability of 75 mgd from surface water supply only, as required by EPD to meet the projected 77- mgd maximum day demand. A reserve capacity of 18 mgd will be available from the GWTPs. - ... . . - - -. - - - - "'11II"" - - ~ -- Implementation of this strategy began with the completion of GWTP No.3 and the initial design of the Highland Avenue WTP upgrade and the new SWTP (currently identified as the Tobacco Road WTP). 5.3.1.1 Improvements to the Water Treatment Plants Improvements to the water treatment system to be funded by the Series 2002 Bonds are shown in Table 5-2. P:\1610471161047 AUD 2002 PM\BOND RNANCING REPORl\SEC5ANAL_6_'3_02.DOC AO 733056.1 5-3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ENGINEER'S REPORT AUGUSTA UTIUllES DEPARTMENT WATER AND SEWERAGE REVENUE BONOS, SERIES 2002 The Highland Avenue WTP improvements currently being designed include upgrades to and expansion of the plant to meet anticipated regulatory needs and future demands. These improvements will enable the treatment plant to serve as a primary water supply for Augusta, with production capacity of 60 mgd. Upon completion of design, the Series 2002 Program will fund initial construction of the recommended components noted in Table 5-2. TABLE 5-2 Series 2002 Bond Projects-Summary of Estimated Water Treatment Costs Recommended Improvements Note: All estimated costs in 2002 dollars Highland Avenue WTP Phase 1: New Treatment System Pre-flash Mixing New ChemicaVFilter/Administration Bldg. Pumping Systems UV Treatment System Electrical, Instrumentation and Controls Site Work General Conditions Total for Phase 1 Improvements The raw water pump station will be upgraded in two phases. The first phase, funded by Series 2002 bonds, will include an engine-powered pumping station with three diesel engine-driven vertical turbine pumps; interconnection to the existing piping; and installation of two new lines crossing the Augusta Canal. This project will provide redundancy in pumping capacity to further assure reliable supply of raw water to the Highland Avenue WTP. Phase 2, to be constructed later, will replace the current hydropowered pumping system. Augusta has been instructed by EPD to move toward use of surface water supply as its primary water supply source and away from groundwater due to the shallow depths of its older well fields No.1 and 2, the reduction of aquifer recharge areas from development activity, and the EPD policy of minimizing groundwater reliance if quality surface water is available. In order to meet projected water demands and commit Augusta to surface water as its primary supply source (with groundwater as reserve capacity), an additional source of water supply is required. Augusta has begun the design and construction a new 15-mgd SWTP which will withdraw water from the Savannah River. Development of the new plant required location of a second RWI along the Savannah River. Augusta has two permits for Upgrade Raw Water Pumping - Diesel Auxiliary System Total Highland Avenue WTP Improvements New SWTP Raw Water Pump Station Treatment Facility UV Treatment System Raw Water Storage Total New WTP Total Water Treatment System - - . .. .. - - - .... .. .. -. - - - - - P:l1610471161047 AUD 2002 PM\BOND RNANCING REPORT\SEC5RNAL_6_13_02.00C AO 733056.1 - - - - Estimated Costs 150,000 8,000,000 1,200,000 1,800,000 3,050,000 1,500,000 629,000 16,329,000 $10,000,000 $26,329,000 2,400,000 21,500,000 3,200,000 4,400,000 $31,500,000 $57,829,000 5-4 . . . . . . . . . . . . . . . . . . . . . . . . . . . ENGINEER'S REPORT AUGUSTA UTIUllES DEPARTMENT WATER AND SEWERAGE REVENUE BONOS, SERIES 2002 withdrawing water from the Savannah River, one on the Augusta Canal for the Highland Avenue WTP at 60 mgd (EPD Permit No. 121-0191-06) and another on the Savannah River for 15 mgd (EPD Permit No. 121-0191-09) to be assigned to the new SWTP intake location. A systematic approach was adopted in selecting the optimum site for the new RWI and SWTP. The process provided Augusta with maximum flexibility in evaluating and screening the available options. Impacts on the distribution system, raw water pipeline, future growth, and many other factors were part of the process. The findings from the evaluation of the selected sites are summarized in Table 5-3. The locations shown on Figure 5-1 were determined to provide Augusta with the best combination for the new SWTP. TABLE 5-3 Summary of Site Evaluation Findings for Selected Sites Evaluation Criteria Selected Sites Impact on Distribution System Land Availability and Zoning Geotechnical and Topographic Conditions Environmental Issues Raw Water Pipeline Raw Water Intake ... - - - Raw Water Quality Permitting -. - - - Will eliminate capital projects and provide needed relief in projected growth areas. River-side property is City-owned. Industrial area, zoning, and aesthetics requirements expected to be minimal for the RWI and the SWTP. Typical construction conditions will be used for the RWI and the SWTP with only limited special construction methods. Additional field investigations at the RWI site and SWTP site found no environmentally sensitive areas. Significantly less expensive than the other altemative and will involve shorter construction schedule and minimal impact on traffic. Will allow design consideration of multiple configurations to determine most cost- effective alternative. Upstream of the industrial area and wastewater discharges from neighboring systems. Existing withdrawal capacity of 15 mgd from the Savannah River will be transferred to meet initial requirements but a new withdrawal permit will be needed for ultimate requirements of 60 mgd. - P:\161 0471161 047 AUD 2002 PMlBOND FINANCING REPORl\SEC5RNAL_6_13_02.00C AO 733056.1 5-5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ENGINEER'S REPORT AUGUSTA lJTlUllES DEPARTMENT WATER AND SEWERAGE REVENUE BONOS, SERIES 2002 lfGEIlD: c:::::J Augu5la _ ServOo_' N wap_u.es - N - L>slribo1Ion Pnljeds . W_SuoItIPro;>cls '..,...,S<n<o__"""""'''''_ _a_ -- \~" N A ; !(;]gsO>apelRoal l I ~RoooSysen_I- am 0 aJnFod .-- FORr GORDON ; ~ fto-/5624'W""_ I '-.--, '; t f\ );'L, . ''( . \I'~.'" .. 'r .~- , \.._-') '--"' \.;~.... ;''-{? /-.,./ "'--...i-> FIGURE 5-1 Proposed Capital Improvements-Water System Augusta, Georgia 5.3.2 Water Distribution System Table 5-4 is a summary of water distribution system improvements to be funded by the 2002 Program. The construction projects are shown on Figure 5-1. TABLE 5-4 Series 2002 Bond Projects-Summary of Estimated Costs for Water Distribution Projects Recommended Improvements Note: All estimated costs in 2002 dollars Estimated Costs Primary Supply System - - Central Connector GWTP No.3 - 20. Main Hwy 56 24" Water Main Hwy 56 20. Water Main Rose Hill lines - Windsor Spring Rd. 3,800,000 2,710,000 1,250,000 800,000 1,250,000 9,810,000 -. - - - Other System Improvements 4,929,000 - Total Water Distribution System 14,739,000 - 5.3.2.1 Primary Supply System Improvements The Master Plan identified several distribution system improvements that will be completed as part of a program to maintain adequate system pressure and improve reliability and operating conditions. The Water Distribution System Analysis further clarified the improvements and identified others. The following list identifies the most P:l1610471161047 AUD 2002 PM\BOND FINANCING REPORl\SECSFINAL_6_13_02.DOC AO 733056. I 5-6 . . . . . . . . . . . . . . . . ENGINEER'S REPORT AUGUSTA UTILITIES DEPARTMENT WATER AND SEWERAGE REVENUE BONOS. SERIES 2002 critical projects from Table 5-4; these are major improvements to be completed withID the next 5 years. These projects will strengthen delivery capability throughout the system. · The Central Connector will improve hydraulic capacity from the Highland Avenue WTP to GWTP No.1 and the 417 ft service area: the GWTP No.1 high service pumps will serve as a booster station after the well field is taken out of service. The 12-inch Old Savannah Rd. line, and the Central Avenue 24-inch pipeline, or its alternative, the White Rd. extension, are also part of this project, which is designed to increase flow capacity into the 433 ft zone and increase pressures during peak hour conditions. .. ... .. ... · Service will be improved in the rapidly growing southern water service area of Augusta by expanding the distribution system supplied by the recently completed GWTP No.3. This line, the GWTP No.3 20-inch main, will stabilize pressures throughout the area now that sufficient supply is available. · The Highway 56 2D-inch and 24-inch water mains will be installed from the new WTP along Highway 56 north to add flow capacity from the new WTP towards GWTP No.1 to ensure effective distribution of the new WTP flows to the 417 ft zone. - - · Additional new lines will be required to allow gravity feed from the 521 zone to the western part of the 457 ft zone, which is currently served by the Rose Hill Pump Station. This will include 16-inch and 12-inch lines referred to as the Rose Hill Lines- Windsor Spring Road. - - - - - 5.3.2.2 Other System Improvements Other system improvements include multiple water distribution line improvements listed in the Master Plan and Water Distribution System Analysis to complete pressure distribution, strengthen supply, and support fire protection in the city. Refitting and replacing all water meters with meters fitted for radio-read will improve meter reading and billing efficiency and eliminate older meters that are no longer reliable. These various distribution system improvements include the following: Other System Improvements 500 Zone Elev Storage 1.5MG (site acquisition) Dennis Rd 3.0 MG GS & PS Meter Replacement Program Pleasant Home Rd Kings Chapel Wrightsboro Road System Upgrade SCADA Systems/CMMS 100,000 1,500,000 2,500,000 60,000 144,000 125,000 100,000 4,529,000 State highway improvements require the Department to relocate water lines prior to roadway improvements. These relocations allow for accelerated improvement to related water system assets and location of new assets away from roadways where repair and maintenance can be costly. Highway projects to be built are: P:l1610471161047 AUD 2002 PM\BOND FINANCING REPORl\SEC5FINAL_6_13_02.DOC AO 733056.1 f>-7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ENGINEER'S REPORT AUGUSTA UTIUTIES DEPARTMENT WATER AND SEWERAGE REVENUE BONOS, SERIES 2002 Other System Improvements: State Highway Projects 1-20/1-520 Crossings and Improvements St. Sebastian 1 Greene Street System US 25 Improvements Total Highway Projects: 160,000 160,000 80,000 400,000 5.3.3 Wastewater Treatment Planned improvements to the J.B. Messerly WWTP will result in increased treatment capacity from the addition of new facilities, will maximize the use of existing plant components, and will increase the level of reliability in meeting stringent effluent limits. The prioritized projects summarized in Table 5-5 address components of the J. B. Messerly facility that are most susceptible to failure and that pose limitations to future growth and development. These projects are a continuation of ongoing improvements and will be implemented following completion of an updated portion of the Master Plan 2000 that focuses specifically on this facility (identified as the Wastewater Treatment Master Plan). TABLE 5-5 Series 2002 Bond Projects-Summary of Estimated Wastewater Treatment System Costs Recommended Improvements Note: All estimated costs in 2002 dollars Messerly WWTP Solids Handling System Secondary Treatment Systems Effluent Disinfection System Electrical and Control Systems Miscellaneous Improvements Total WWTP Improvements Estimated Costs 1,200,000 5,869,000 528,000 840,000 430,800 8,867,800 The Master Plan 2000 suggested prioritization of improvements and continues as the general guide for the following projects to be funded by the Series 2002 Bonds. Solids Handling System: This system will be upgraded with the rerouting of filtrate to one of the equalization basins; the addition of a transfer pumping station; modification of equalization inlet and outlet piping to accommodate filtrate/centrate and feed back into the plant for treatment; and replacement of the digester control system. Secondary System: An additional 5 MG of aeration basin volume will be provided which should give sufficient capacity through year 2010. The additional aeration basin volume will also require modifications to the plant flow splitting scheme, yard piping (both liquid and air), and controls. The blowers will be replaced and upgraded with an additional 8/700 scfm of blower capacity to match the additional aeration basin capacity for year 2010 conditions. In addition to the blowers, the blower control systems will be replaced and the blower buildings upgraded, including new HV AC systems, lights, and air inlet louvers. Effluent Disinfection: Replacement of the effluent disinfection system has been recommended for safety and security reasons rather than as a capacity-related issue. The gas chlorination system will be replaced with a liquid sodium hypochlorite disinfection system. P:l161 0471161 047 AUD 2002 PM\BOND RNANCING REPORl\SECSRNAL_6_13_02.DOC AO 733056.1 5-8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ENGINEER'S REPORT AUGUSTA UTILlllES DEPARTMENT WATER AND SEWERAGE REVENUE BONOS, SERIES 2002 Electrical and Control Systems: Many existing flow measurement devices are out of service and will be repaired or replaced. Additional flow measurement devices will be installed for flow streams that should be measured for process control but are not currently measured. Flow meters will be integrated with the plant control system. Miscellaneous Improvements: To improve operating conditions and safety for personnel, most plant doors and handrails will be replaced and the plant air system will be upgraded. A detailed Wastewater Treatment Master Plan will be developed to address current and future needs, making adjustments for upgrades that have been completed and evaluating the needs for those previously planned and noted above. This plan will also include recommendations regarding the Spirit Creek WWTP. 5.3.4 Wastewater Conveyance Table 5-6 is a summary of wastewater conveyance system improvements to be funded by the Series 2002 Bonds. The construction projects are shown in Figure 5-2. TABLE 5-6 Series 2002 Bond projects-Summary of Estimated Wastewater Conveyance System Costs Recommended Improvements Note: All estimated costs in 2002 dollars Estimated Costs Planning/Operations/Monitoring Interceptor Upgrades Infiltration/Inflow Reduction Unsewered Pockets Expansions/Extensions 840,000 17,613,200 3,260,000 12,506,000 7,000,000 Total Conveyance System Improvements 41,219,200 P:l1610471161047 AUD 2002 PM\BOND RNANCING REPORl\SEC5FINAL_6_13_02.00C AO 733056.\ 5-9 . . . . . . . . . . . . . . . . . . ENGINEER'S REPORT AUGUSTA UTIUTlES DEPARTMENT WATER AND SEWERAGE REVENUE BONOS, SERIES 2002 lEGEND: too) 0 <<OJ Fed c::::'_ ------l N A . ~ s.r."",Arw dles "",_foil. GoIlb1. Hr;ilzIbah "" ~ .. - . - ., ... .... CH2MHILL FIgure 5-2 Proposed Capital Improvements - WasteYr.l1er System Augu>l/I.~ ~2M2i)1I.\1l\.tu;XI1C:l~ &ua;~F'rt~J.aoc:a'~~..a::o.0U;14~2lO-u..tt4lOl.Ot(2OO::iDl"~F"'t-:~~... . . 5.3.4.1 Planning/Operations/Monitoring The 2002 Program includes initial Planning/Operations/Monitoring projects that will provide immediate benefit by identifying previously undetected problems and developing baseline information for the Department's system-wide hydraulic capacity management plan. Projects to be hmded by the 2002 Program include: - .... - - - - - - - - PlanninglOperationslMonitoring Wetlands Study and Scope of Mitigation Flow Monitoring & Modeling SCADA Systems/CMMS Total PlanninglOperations/Monitoring 60,000 450,000 330,000 840,000 - - - - 5.3.4.2 Interceptor Upgrades The Butler Creek and Rae's Creek interceptors will be upgraded with new lines to replace or supplement current pipes. The required areas have been defined by previously completed designs. Interceptor Upgrades Butler Creek Interceptor Sewer Rae's Creek Relief Sewer Main Interceptor Sewer Total Interceptor Upgrades 3,650,000 8,863,200 5,100,000 17,613,200 P:\1610471161047 AUD 2002 PM\BOND RNANCING REPORT\SEC5FINAL_6_13_02.DOC AO 733056.1 5-10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ENGINEER'S REPORT AUGUSTA UllUTIES DEPARTMENT WATER AND SEWERAGE REVENUE BONOS, SERIES 2002 5.3.4.3 Infiltrationllnflow Reduction The collection systems in the following basins will have ongoing infiltration/inflow (III) reduction projects funded by this program. The result will be reduced external flow, resulting in more capacity for wastewater flow and fewer maintenance problems. The allocation among basins is estimated to be as follows: VI Reduction Interceptor Rights-of-way Clearing Butler Creek Rocky Creek Spirit Creek Total VI Reduction 320,000 980,000 980,000 980,000 3,260,000 5.3.4.4 Pocketed Sewers Throughout the existing collection system, there are various "pockets" of unsewered areas. These are locations ranging in size from one block long to entire subdivisions that were bypassed when sewers were first built in a neighborhood and are now adjacent to or surrounded by sewered areas. These projects will enhance environmental protection through reduced reliance on septic systems and will provide additional customer connections to the system. Projects that will provide sewer service to the following pockets have been identified for the 2002 Program: Unsewered Pockets Farrington Sewer Jamestown Sewer Ridge Forest Drive Horsepen Collection Phase 2 Olive Road Wimberly Park Meadowbrook Drive Total Pockets 4,700,000 2,000,000 1,300,000 1,381,000 1,450,000 350,000 1,325,000 12,506,000 -. - - - 5.3.4.5 Expansions and Extensions "Expansion" is defined as providing sewer service to basins not currently having access to sewer systems. An "extension" is defined as lengthening a line beyond its current point of terminus to unsewered areas. These projects will enhance environmental protection through reduced reliance on septic systems and will provide additional customer connections to the system. The proposed areas for sewer expansion and extensions are listed below: - - Expansions/Extensions Butler Interceptor Improvements Butler Creek Collector Extension Industrial PS / FM Total ExpansionlExtension Projects 2,000,000 3,700,000 1,300,000 7,000,000 - - -. -. - -. 5.3.5 System-wide Improvements System-wide improvements are summarized in Table 5-7. - - - - - - P:l1610471161047 AUD 2002 PM\BOND FINANCING REPORl\SEC5RNAL_6_13_02.DOC AO 733056.1 5-11 . . . . . . . . . . . . . . . . . . . . . . . . . . ENGINEER'S REPORT AUGUSTA UTIUllES DEPARTMENT WATER AND SEWERAGE REVENUE BONOS, SERIES 2002 TABLE 5-7 Series 2002 Bond Projects-Summary of Estimated System-wide Costs Recommended Improvements Estimated Note: All estimated costs in 2002 dollars Costs System-wide Projects New Utility AdminJMaint. Facility Program Management Legal, Advertising, Other Professional Watershed Assessment Implementation 2,000,000 5,000,000 130,000 215,000 7,345,000 A new Utility Administration/Maintenance Building, currently under design, will be constructed with Series 2002 Bond funds. This building will relieve space constraints for administrative and engineering operations, and is being designed to address the Department's needs for the next 10 years considering both space requirements and implementation of new management and communication technologies. To continue effective implementation of the CIP, various professional services will be required to assist the Department, including Program and Construction Management (Program Management) and legal support related to land and rights-of-way acquisition. 5.4 Anticipated Future Work ... ., . The system will require continued investment to meet projected demands throughout the service area, address regulatory requirements, and meet its commitment to deliver quality services. Priority capital improvement funding needed to meet projected demands and address system deficiencies is summarized in Appendix D, Table D-l. Series 2002 Bonds will fund the completion of: · Projects begun under the 2000 Program and other key facilities that are most susceptible to failure, - - · Projects that will alleviate potential limitations to future growth and development, and - - - - Projects that will provide service to areas that need water and sewer infrastructure immedia tely. Improvements planned for later years will continue strengthening and expanding the water distribution and sewer collection network. Work will also include completing projects initiated with funds from the Series 2002'Bonds such as the upgrades to the Highland Avenue WTP, the J. B. Messerly WWTP, and the Spirit Creek WWTP. - - - - - - -. - - - - - - - - P:l161 0471161 047 AUD 2002 PM\BOND RNANCING REPORl\SEC5RNAL_6_13_02.00C AO 733056.1 5-12 -- . . . . . . . . . . . . . . . . . . . . . . . . . 6.0 Financial Performance This section presents an overview and evaluation of the historical and projected financial performance of the System for the study period 2002 through 2011. 6.1 Historical Performance Table 6-1 presents the financial performance of the Department for the past 5 years, 1997- 2001. System revenues increased from $29.5 to $38.3 million during this period, an increase of 29.8 percent. Operations and maintenance (O&M) expenses increased 65.1 percent, from $19.2 million to $31.7 million. This large increase was a result of increased depreciation as new capital projects were finished, costs associated with improvements to the WWTP operations, and rising personnel costs. After deducting depreciation and other expenses, net revenues available to pay debt service totaled between $14.6 and $18.2 million. Over the 5-year period, the Department received sales tax proceeds of approximately $21.0 million. During that same period, the Department made net transfers to Augusta's General Fund totaling $11.4 million. These transfers were eliminated in 2000 as a result of restrictions imposed by the bond resolution in 2000. The Department's minimum debt service coverage requirement for the issuance of additional debt is 1.25 times maximum annual debt service. Additionally, the Department has an annual rate covenant of 1.10 times debt service payments. Between 1997 and 2000, actual debt service coverage ranged from 3.07 to 4.32. Following issuance of the Series 2000 Bonds, actual debt service coverage remained substantially in excess of the minimum requirement at 1.65 times actual debt service for 2001. ... ... .... .... 6.2 Water and Sewer Rates . The Department's current water rate structure consists of a monthly customer charge and a two-tiered volumetric rate. For residential customers with metered consumption exceeding 3,000 gallons per month, the current monthly customer charge is $7.28. The volumetric rate is $1.00 per kgal for the first 3,000 gallons and $1.12 for each additional kgal. For customers using less than 3,000 gallons per month, a $10.51 customer charge applies with no v'olumetric charges. The Department's current sewer rate struchue is based on monthly gallons of water used and also consists of a monthly customer charge and volumetric rate. For residential customers with metered water consumption exceeding 3,000 gallons per month, the - - -. - - - - - P:\1610471161047 AUD 2002 PM\BOND FINANCING REPORl\SEC6RNAL_6_13_02.00C AO 733090.1 6-1 ............................. ENGINEER'S REPORT AUGUSTA UTlUTlES DEPARTMENT WATER AND SEWERAGE REVENUE BONOS, SERIES 2002 4. 4. ~t ~~ 4. 4. ~ 4. .. 4 . 4 . 4 ~ o 4 . s Water and Sewer TABLE 6-1 Historical 2001 $ 38.339.666 6,591,639 13,526,443 800,000 1,065,996 9,735,642 31,719,720 $ 6,619,946 2000 $ 34.806,812 5,144,857 11 ,158,505 697,325 1,000,000 6,820,600 24,821,287 $ 9,985,525 Ended December 31 1999 ,486 $ 33,471 5,392,565 11,989,298 697,325 885,823 9,059,606 28,024,617 $ 5,446,869 For Year 1998 $ 29.376,306 5,830,339 8,823,186 697,325 840,000 5,250,743 21,441,593 $ 7,934,713 1997 $ 29.527,450 5,403,668 8,256,568 549,736 Results OPERATING REVENUES Charges and Fees OPERATING EXPENSES Personnel Services Other Operating Expenses Payment in Lieu of Taxes Payment. in Lieu of Franchise Fees Depreciation - 5,039,882 19,249,854 10,277,596 Total 6,731,515 (9,484,376) (327,039) 2,954,996 (5,886,522) (284,268) 3,009,471 - (5,086,775) 202,255 (4,343,131 ) 78,842 77,037) (4 $ Operating Income (Loss) Non-operating Revenues (Expenses) Interest Income Bond Interest & Fiscal Charges Amortization of Bond Issuance Costs Intergovemmental Revenue Other Revenues (E - 3,079,900) $ 3,540,046 - 206,323) $ 9,n9,202 4,734,350 127,700 (224,725) $ 5,222,144 4,734,359 4,861,794 5,455,277 13,389,990 8,521,829 2,396,731 6,820,365 17,097,961 $ 3,782,534 8,982,534 $ (Loss) Before Transfers Transfers IN Transfers OUT ncome 2.500.000 3,565,394 7,265,394 $ 3,540,046 9,484,376 0,062,681 . (6,370.931 ) - $16,716,172 $ 5,274,379 3.17 $ 9,n9,202 5,886,522 7,104,868 - (2,455,166) (3,009,471 ) $ 17,305,955 $ 4,727,115 3.66 $ 2,722,144 5,086,775 9,059,606 2,500,000 - (4,734,350) $ 14,634,175 $ 4,763,210 3.07 $ 9,689,990 4,343,131 5,250,743 3,700,000 - (4,734,359) $ 18,249,505 $ 4,n5,760 3.82 S 11,897,961 4,177,037 5,039,882 5,200,000 - {8,521 ,829) $ 17,793,051 $ 4,121,378 4.32 NET INCOME (LOSS) Bond Interest & Fiscal Charges Depreciation & Amortization Net Operating Transfer Out Construction Fund Interest Income Intergovemmental Revenues Net Revenues Available for DS Debt Service on Revenue Bonds' Debt Service Coveraae Ratio Plus Less Data Source: Audited Financial Statements 1997-2001 · Debt service in 2001 excludes $4,873,722 paid from the Capitalized Interest fund. Inclusion of 2001 debt service paid from the Capitalized Interest fund would decrease the coverage ratio to 1.65x. 6-2 P:\161 0471161047 AUD 2002 PM\BOND FINANCING REPORl\SEC6FINAL_6_13_02.DOC AO 733090.1 . . . . . . . . . . . . . . . . . . . . . . . A - ENGINEER'S REPORT AUGUSTA lJTIUTIES DEPARTMENT WATER AND SEWERAGE REVENUE BONOS, SERIES 2002 current monthly customer charge is $13.24 and the volumetric rate is $1.22 per kgal. For customers using less than 3,000 gallons per month, a $9.44 customer charge applies with no volumetric charges. Customer charges and volumetric rates by meter size for both residential and non-residential customers are shown in Table 6-2. TABLE 6-2 Current Water and Sewer Rates (Effective 4/1/2002) Water Customer Rate Sewer Customer Rate Meter Size Kgals Metered Charge (per kgal) Charge (per kgal) RESIDENTIAL RATES All Meters Less than 3 $10.51 NA $9.44 NA All Meters Greater than 3 $7.28 $1.00, $1.12' $13.24 $1.22 NON-RESIDENTIAL RATES 5/8" & 3,4" NA $7.90 $1.28, 1.41' $13.95 $1.54 1" NA $11.19 Same $19.94 Same 1-1/4" & 1-1/2" NA $18.55 Same $33.31 Same 2" NA $26.64 Same $48.12 Same 3" NA $44.58 Same $81.00 Same 4" NA $64.58 Same $117.35 Same 6" NA $108.89 Same $198.33 Same 8" NA $157.95 Same $287.95 Same 10" NA $210.96 Same $384.90 Same 12" NA $273.76 Same $487.47 Same 'The first charge is.applied to each of the first 3 kgals of metered consumption; the second charge is applied to each additional kgal. . The current monthly water bill for a typical residential water customer is $17.00, and the residential sewer bill is $24.221. A comparison of typical residential monthly water and sewer bills for customers of various systems throughout Georgia is presented in Table 6-3. This table indicates that Augusta's existing water and sewer rates are relatively low compared to those of other Georgia communities. TABLE 6-3 Comparison of Typical Monthly Residential Customer Bills Monthly Billing Local Jurisdiction Water' Sewer' Total Clayton County 18.00 18.90 36.90 City of Cumming (inside City limits) 19.20 20.10 39.30 Augusta $17.00 $24.22 $41.22 City of Lawrenceville 12.78 30.19 42.97 City of Gainesville 22.50 33.98 56.48 Henry County 30.21 30.21 60.42 Cherokee County 31.50 31.50 63.00 Fayette County 35.60 31.50 67.10 Gwinnett County 31.60 36.73 68.33 Douglas County 29.44 39.73 69.17 City of Roswell 22.20 48.75 70.95 Fulton County 25.50 45.75 71.25 Rockdale County 35.63 40.55 76.18 Forsyth County 33.24 43.56 76.80 Paulding County 38.75 38.75 77.50 'Based on average consumption of 9,000 gallons per month. Data source: State of Georgia Water and Sewerage Systems Rate Comparisons 2000/2001 . . a ... - - - - - - - - .- - - - - - ...... - - - - 1 Both water and sewer bills are based on average consumption of 9,000 gallons per month. - - -- P:\161 0471161 047 AUD 2002 PM\BOND FINANCING REPORl\SEC6FINAL_6_13_02.DOC AO 733090.1 6-3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ENGINEER'S REPORT AUGUSTA lJTlUTIES DEPARTMENT WATER AND SEWERAGE REVENUE BONOS, SERIES 2002 For purposes of this analysis, equal percentage water and sewer rate increases are projected and are assumed to be applied uniformly across customer classes2. Two 11 percent rate increases have already been adopted in 2001 and 2002, and 11 percent per annum increases are scheduled in 2003 through 2007 followed by 3 percent per annum increases in 2008 through 2011. These planned rate increases will be applied to all water and sewer customer charges, volumetric rates, and industrial surcharge rates and will increase the typical residential customer's monthly water bill in 2011 to $32.30 ($24.76 in 2002 dollars) and monthly sewer bill to $45.91 (or $35.19 in 2002 dollars)3. While this represents a total increase of 89.7 percent in combined monthly bills over the 10-year forecast period, the combined monthly bill in current dollars ($59.95) is below the median of the range of typical monthly bills presented in Table 6-3, without accounting for prospective increases in these communities' water and sewer rates. Water and sewer tap fees are $350 per service for residential connections4. The water and sewer tap fees assessed to new customers connecting to the system are conservatively assumed to remain constant throughout the forecast period. 6.3 Financial Policies The Department uses a system of fund accounting to track water and sewer system revenues and expenditures. There are three funds: the Operating Fund, the Renewal Fund, and the Bond Fund. With the exception of sales tax proceeds, all revenues are deposited into the Operating Fund. Operating Fund expenses include all O&M expenses, transfers to the Renewal Fund for capital projects, and transfers to the Bond Fund for capital projects funded through debt proceeds. Bond proceeds are deposited into a Construction Fund, a restricted asset of the Operating Fund. As indicated in the Bond Resolution, the Department is required to maintain a minimum balance in the Operating Fund of the lesser of $2,500,000 or 5 percent of the preceding fiscal year's operating revenues. The Operating Fund's cash and investment balance as of January 1, 2002, was $24,888,031. Throughout the forecast period, Operating Fund cash balances are projected to range from a low of $4.0 million to $25.1 million. In the past, the Department has made transfers from the Operating Fund to Augusta's General Fund. In 1997, 1998, and 1999 these transfers totaled approximately $5.2 million, $3.7 million, and $2.5 million, respectively. Conversely, over the same period, the Department has received sales tax revenues totaling approximately $21.0 million. To ensure financial integrity and self-sufficiency, the Bond Resolution contemplates, and this analysis assumes, that the Department will not make transfers to Augusta's General Fund other than payments in lieu of taxes and franchise fees, nor receive sales tax revenue in the future. .- ... . . - .. 2 The Department established a uniform water and sewer rate schedule for the System effective April 1, 1996. 3 A 3.0 percent discount rate was used. 4 Tap fees vary depending on water meter and tap sizes. Cost does not include additional fees assessed for road crossing or sidewalk replacement. . . P:l161 0471161047 AUD 2002 PM\BOND RNANCING REPORl\SEC6RNAl_6_13_02.00C AO 733090.1 6-4 .- .. . . . . . . . . . . . . . . . . . . . . . ENGINEER'S REPORT AUGUSTA UTILITIES DEPARTMENT WATER AND SEWERAGE REVENUE BONOS, SERIES 2002 6.4 Projected Operating Results Table 6-4 presents projected operating results for the System, including projected revenues, expenses, debt service, and debt service coverage through 2011. 6.4.1 Revenues - Projections of new customers, water and sewer consumption by customer class, and proposed rate increases are used to forecast water and sewer sales revenues over the plan- ning period. As of December 31, 2001, the System provided service to 65,670 active water accounts and 49,639 active sewer accounts. Growth of residential water customers is based on projected population growth and is consistent with historical customer growth patterns. Annual water system growth is expected to range between 0.83 and 1.21 percent-an increase of between 600 and 800 new water accounts per annum. Total water accounts are projected to increase 10.5 percent over the 10-year study period. Sewer customer growth projections are established from a detailed analysis of the proposed extension of sewer service to isolated pockets of water customers within the Department's service area. Annual sewer customer growth is expected to fluctuate between 1.02 percent in 2011 and 3.22 percent in 2004 as collection lines are extended to these as well as new System customers. New sewer accounts are projected to increase between 600 and 1,725 annually; the total number of sewer accounts is projected to increase 20.1 percent over the forecast period. This analysis assumes that revenue collection for one-half of annual new customers is delayed until the following year. In addition, water and sewer commercial and industrial customer accounts are projected to remain constant over the forecast period. Weighted average monthly consumption estimates by customer class were developed from customer billing information and are consistent with historical revenues. However, to account for reduced consumption in response to proposed rate increases, consumption estimates across all customer classes are forecast using an elasticity of demand factor of 0.155. The elasticity factor is also applied to industrial surcharge revenues which are subject to the proposed rate increase schedule. Annual water sales revenues are forecast to increase from $19.8 to $36.9 million and sewer sales and industrial surcharge revenues from $19.7 to $38.7 million. Water and sewer tap fees are projected based on new accounts resulting from system growth and expansion. These fees are expected to generate $6.1 million between 2002 and 2011. Cut-on fees, set to recover administrative costs associated with new accounts, and other miscellaneous revenues are assumed to remain unchanged over the study period. These fees and revenue items are expected to total $11.5 million between 2002 and 2011. Interest revenues are assumed to earn 3.5 percent on bond proceeds in the Construction Fund and 1.51 percent on balances in the Operating Fund. - - - .... - - ... - -. .... - -. - - - 5 Price elasticity of demand is equal to the percentage change in quantity demanded divided by the percentage change in price. An elasticity factor of 0.15 indicates that, for every 10% increase in price, demand (consumption) will decrease by 1.5%. P:\1610471161047 AUD 2002 PM\BOND RNANCING REPORl\SEC6RNAL....6_13_02.00C AO 733090.1 6-5 ............................ ENGINEER'S REPORT AUGUSTA UTIUllES DEPARTMENT WATER AND SEWERAGE REVENUE BONOS, SERIES 2002 tt tt . ~ . 4 4 . . . . 4 . . . 4 4 Results TABLE 6-4 Water and Sewer S 201 3.0% 2010 3.0% 2009 3.0% 2008 3.0% 2007 11.0% 2006 11.0% $23,567,415 $26,068,286 $28,836,309 23,957,075 26,804,672 29,899,309 2005 11.0% 2004 1.0% 2003 11.0% $21,307,768 21,420,595 2002 11.0% $19,755,381 19,742,605 $36,927,901 38,714,944 420,000 1,152,000 $77,214,845 $57,594,179 $19,620,666 $35,768,159 37,457,326 420,000 1,152,000 $74,797,485 $55,562,168 $19,235,316 $34,644,405 36,239,911 420,000 1,152,000 $72,456,316 $53,260,848 $19,195,467 $33,555,531 35,056,175 430,500 1,152,000 $70,194,206 $51,098,160 $19,096,046 $31,900,217 33,242,635 637,000 1,152,000 $66,931,852 $48,893,037 $18,038,815 883,750 862,750 679,000 1,152,000 1,152,000 1,152,000 $49,560,240 $54,887,708 $60,566,618 $40,247,217 $44,024,865 $46,484,381 $9,313,023 $10,862,843 $14,082,237 829,500 1,152,000 $44,709,862 $38,562,957 $6,146,905 532,000 1,152,000 $41,181,987 $35,732,927 $5,449,060 Water Sales Revenue Sewer Sales and Industrial Surcharges Water, Sewer Tap Fee Revenue Other Revenue Gross Revenue Operations and Maintenance Expenses Operating Income Scheduled Rate Increases 82,362) $- $(2,561,696) $(22, $(22,670,443) $- $(3,435,126) 31,018) $- $(3,935,551) $(16,300,979) $(23, $- $2,795,067 6,646,278) '$- $1,392,536 $(8,188,030) $(1 $(5,000,000) $894,207 $(8,323,850) $- $2,538,993 $(8,166,311) $(20,000,000) $(18,853,288) $(8,270,169) $- $(2,123,264) $(8,364,715) $- $(2,915,655) Non-Operating Revenues (Expenses) Operating Transfers Net Income $21,825,201 $22,670,106 $- $41,933,611 $21,146,602 $23,128,127 $- $40,839,602 $20,053,150 $23,558,778 $- $39,676,378 $19,148,506 $16,684,863 $- $38,628,437 $18,059,131 $16,994,891 $- $36,446,559 $13,529,744 $15,709,838 $16,826,688 $8,733,320 $8,639,744 $8,554,985 $20,000,000 $- $5,000,000 $23,409,776 $26,888,575 $31,275,879 $11,806,272 $8,794,706 $- $18,4n,714 $10,980,984 $8,879,254 $- $16,944,583 Depreciation Bond Interest & Fiscal Charge Net Operating Transfers Out Revenue Available for Debt Service s Plus: Net $11,692,378 $10,160,500 $9,067,100 $30,919,978 6-6 .36 $11,688,991 $9,589,928 $9,073,600 $30,352,519 .35 $11,688,831 $8,983,458 $8,841,800 $29,514,089 .34 $11,379,218 $8,747,992 $7,621,800 $27,749,010 .39 $11,072,143 $8,276,285 $7,621,800 $26,970,228 .35 $9,699,802 $9,686,233 $10,037,293 $4,723,852 $8,272,070 $8,275,985 $. $- $3,810,900 $14,423,654 $17,958,303 $22,124,178 .41 .50 .62 $9,681,963 $1,174,031 $- $10,855,994 .70 P:\161 0471161 047 AUD 2002 PM\BOND FINANCING REPORTlSEC6FINAU_13_02.DOC AO 733090.1 $9,713,035 $296,716 $- $10,009,751 .69 Existing Debt SeNlce Series 2002 Bonds Debt SeNice Projected Debt SeNice Total Debt SeNice Debt Service Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . ENGINEER'S REPORT AUGUSTA lJTlUllES DEPARTMENT WATER AND SEWERAGE REVENUE BONOS, SERIES 2002 In 2011, total revenues of $77.2 million are projected to be comprised of water sales (47.8 percent), sewer sales (50.1 percent), other revenues (1.5 percent), and water and sewer tap fees (less than 1 percent). Total revenues are expected to grow 87.4 percent from $41.2 million in 2002 to $77.2 million in 2011. Of the $36.0 million differential, nearly $35.5 million is attributed to water and sewer rate increases (98.6 percent) and $0.5 million to system growth and expansion (1.4 percent). A .. A - 6.4.2 Expenses Total system O&M expenses for 2001 were $31.7 million and are projected to be $35.7 million in 2002. System operating expenses have been developed with a forward looking perspective and include incremental costs related to the installation of new capital facilities. Expenses are stated in 10 categories: Administration (includes payments to the General Fund in lieu of Franchise Fees and Taxes), Customer Service, Construction and Maintenance, Raw Water, Surface Water Treatment, Groundwater, Messerly Treatment Plant, New Programs and Positions, New WTP, and Depreciation. The escalation rate for these categories is computed as the annual rate of inflation (3 percent) plus half the rate of annual residential customer growth; for water-related categories, 3.58 percent, for sewer- related categories, 4.05 percent6. Operating capital, excluded from the debt service coverage calculation, is expected to total $4.2 million in 2002 and is escalated at 3.82 percent per annum throughout the forecast period. Additional O&M expenses attributed to the capital improvement program are included in the fiscal year 2002 budget for each category and include additional staffing expenses and recurring costs related to process changes, system expansions, and other circumstances. Two of the cost centers, New Programs and Positions and New WTP, are projected to total $19.0 million over the lO-year period and are comprised exclusively of incremental operating costs required for new facilities. Total operating expenses are expected to grow 61.3 percent from $35.7 to $57.6 million over the study period. Of the $21.9 million differential, $11.1 million (50.7 percent) is attributed to increases in O&M costs and $10.8 million (49.3 percent) is attributed to rising depreciation costs as new projects are placed into service. . - - 6.4.3 Debt Service -. - Projected debt service includes debt service for both existing and proposed revenue bond issues. Currently, the Department is repaying four revenue bond issues: Series 1996A Bonds, Series 1996B Bonds, Series 1997 Bonds, and Series 2000 Bonds. The combined annual principal and interest payment for the existing revenue bonds ranges between $9.7 and $11.7 million over the forecast period. The 1996B Bonds will be retired in 2002, the 1997 Bonds in 2021, the 1996A Bonds in 2028, and the 2000 Bonds in 2030. Using $8.4 million of proceeds from the Series 2002 Bonds, the Department will repay the outstanding principal on one of three loans issued by the Georgia Environmental Facilities Authority (GEFA). Subject to the bond resolution, these loans are not included in the parity coverage requirements and are therefore not included in debt service coverage calculations. - - ..... - - - - 6 For categories such as Administration and Customer Service, 3.82 percent is used-an average of the two escalation rates. Exceptions are: depreciation is escalated based on the installation of new capital; payments in lieu of franchise fees are escalated at 3.0 percent per annum; and payments in lieu of taxes are not escalated. P:\1610471161047 AUD 2002 PM\BOND FINANCING REPORl\SEC6RNAL_6_13_02.00C AO 733090.1 6-7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ENGINEER'S REPORT AUGUSTA UTIUTIES DEPARTMENT WATER AND SEWERAGE REVENUE BONOS, SERIES 2002 Proposed bond amounts were selected to fund the capital program, maintain appropriate Operating Fund reserves, meet debt service coverage criteria, and minimize rate impacts. In addition to existing debt service and the projected debt service schedule for the Series 2002 Bonds, annual debt service includes payments associated with a scheduled debt issue of $127.0 million in 2005. This future debt issue assumes a 30-year term, an interest rate of 6.0 percent, an issuance cost of $750,000, and an underwriter's discount equal to 0.5 percent of the par amount. The future debt issue also assumes a debt service reserve surety bond premium equal to 2.5 percent of debt service requirements and a bond insurance cost equal to 30 basis points of total debt service. Capitalized interest on the Series 2002 Bonds and the subsequent issue in 2005 totals $16.3 million. Annual debt service costs are budgeted at $10.0 million in 2002. Future debt service costs are projected to increase to $30.9 million in 2011 under the proposed bond issuance schedule. 6.4.4 Debt Service Coverage Debt service coverage is evaluated in terms of the System as a whole (combined water and sewer). For new debt issues, the System has a minimum parity coverage requirement of 1.25 times maximum annual debt service during the forecast period. Additionally, the system has an annual rate covenant of 1.10 times debt service payments. System debt service coverage is estimated to be 1.69 in 2002 and projected to range from 1.34 to 1.70 over the study period as shown in Table 6-4. As indicated in Table 6-5, under rate projections established in the Bond Resolution for the Series 2002 Bonds and upon completion of the construction period, the System will generate net revenues available for debt service in excess of maximum annual debt service requirements in ratios ranging from 1.36 to 1.78, and above Bond Resolution requirements of 1.25 for Additional Bonds. TABLE 6-5 Additional Bonds Test. 2006 2007 2008 2009 Net Revenues Available $31,275,879 $36,446,559 $38,628,437 $39,676,378 Maximum Debt Service 23,001,470 23,001,470 23,001,470 23,001,470 Debt Service Coverage 1.36 1.58 1.68 1.72 .The Additional Bonds test shows debt service coverage ratios for the forecast period following completion of construction using the maximum annual debt service payment (which occurs in 2025). 2010 $40,839,602 23,001,470 1.78 ... - - - - - 6.4.5 Operating Fund Balances Operating Fund cash flows are presented in Table 6-6. In addition to operating expenses and debt service payments, uses of cash include current revenue financing of planned capital improvements, GEFA loan payments, Renewal and Extension project funding, and the Department's budgeted requirements for operating capital. Expenditures for Renewal and Extension projects are budgeted at $2 million and are escalated at 3.0 percent annually. These funds are used for minor or miscellaneous capital improvements to existing infrastructure. - - - - - - - Scheduled rate increases provide for compliance with the Bond Resolution requirement to maintain Operating Fund balances equal to the lesser of $2.5 million or 5 percent of the preceding fiscal year's operating revenues. Operating fund balances range from $4.0 million to $25.1 million over the forecast period and reflect the effect of debt service payments inclusive of all other cash requirements of the Department. - - - - P:l1610471161047 AUD 2002 PM\BOND RNANCING REPORl\SEC6RNAL_6_13_02.00C AO 733090.1 EHl .................... ENGINEER'S REPORT AUGUSTA lJTlLmES DEPARTMENT WATER AND SEWERAGE REVENUE BONDS, SERIES 2002 41~ 41~ 41~ 4. 4. . 4. o . . 2003 $24,771,434 TABLE 6-6 Qoeratina Fund, Sources and Uses of Cash Flows 2002 $24,888,031 2011 $10,43 2010 $8,994,205 2009 $7,600,213 2008 $5,217,063 2007 $3,974,440 2006 $7,802,999 2005 $6,608,337 2004 $25,121,667 79 $36,927,901 38,714,944 420,000 1,152,000 487,744 $77,702,589 $35,768,159 37,457,326 420,000 1,152,000 457,684 $75,255,169 $34,644,405 36,239,911 420,000 ,152,000 427,760 $33,555,531 35,056,175 430,500 1,152,000 383,884 $70,578,090 $31,900,217 33,242,635 637,000 1,152,000 348,613 $67,280,465 $28,836,309 29,899,309 679,000 1,152,000 366,955 $60,933,573 $26,068,286 26,804,672 862,750 1,152,000 315,894 $55,203,602 $23,567,415 23,957,075 883,750 1,152,000 567,009 $50,127,249 $21,307,768 21,420,595 829,500 1,152,000 524,537 $45,234,399 $19,755,381 19,742,605 532,000 1,152,000 514,539 $41,696,526 Beginning Balance SOURCES: Water Sales Revenues Sewer Sales and Industrial Surcharges Water and Sewer Tap Fee Revenue Other Revenues Interest Revenue $33,475,379 2,293,600 - 856,239 11,692,378 19,227,600 2,609,546 5,876,288 $76,031,030 $32,165,469 2,250,097 856,239 1,688,991 8,663,528 2,533,540 5,660,330 $73,818,194 $72,884,076 $30,999,837 2,207,861 856,239 11,688,831 17,825,258 2,459,748 5,452,310 $71,490,083 $29,782,798 2,166,856 - 856,239 11,379,218 16,369,792 2,388,105 5,251,934 $68,194,940 $28,706,861 2,127,044 856,239 11,072,143 15,898,085 2,318,548 5,058,922 $66,037,842 $27,569,301 2,088,392 5,000,000 856,239 10,037,293 12,086,885 2,251,018 4,873,003 $64,762,132 $26,264,161 2,050,866 856,239 9,686,233 8,272,070 2,185,454 4,693,917 $54,008,941 $24,703,040 2,014,433 20,000,000 856,239 9,699,802 4,723,852 2,121,800 4,521,413 $68,640,579 $24,777,624 1,979,062 856,239 9,681,963 1,174,031 2,060,000 4,355,248 $44,884,167 $22,807,223 1,944,720 - 856,239 9,713,035 296,716 2,000,000 4,195,190 $41,813,123 TOTAL USES: Operations and Maintenance PILOT and PILOFF Current Revenue Financing GEFA Payments Existing Debt Service Proposed Debt Service Renewal and Extension Projects Operatina Capital and Leases TOTAL $12,102,739 $1,671,559 6-9 $10,431,179 $1,436,974 $8,994,205 $1,393,993 $7,600,213 $2,383,150 $5,217,063 $1,242,623 $3,974,440 $(3,828,559) $7,802,999 $1,194,662 $6,608,337 $(18,513,330) $25,121,667 $350,233 P:\1610471161047 AUD 2002 PM\BOND FINANCING REPORT\SEC6FINAL_6_13_02.DOC AO 733090.1 ,434 $24,77 Balance - Net Increase (Decrease) Endin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ENGINEER'S REPORT AUGUSTA UTIUllES DEPARTMENT WATER AND SEWERAGE REVENUE BONOS, SERIES 2002 6.5 Capital Financing The capital improvement program will require approximately $285.5 million ($267.5 million in 2002 dollars) in total funding over the 10-year period, as discussed in Section 5 and shown in Appendix D and Table 6-7. Three sources of funds will be used to fund the capital program: bond proceeds (86.5 percent), current revenues (8.7 percent), and interest in the Construction Fund (4.8 percent). Just over $247 million in bond proceeds will be generated by separate issues in 2002 ($127.3 million) and 2005 ($120.0 million). Current revenue transfers totaling $25.0 million will be made from the Operating Fund over.the forecast period and are expected in 2004 ($20 million) and 2006 ($5 million). Interest in the Construction Fund is projected to total $13.9 million over the 10-year period. Proposed water and sewer rate increases are projected to generate nearly $197.4 million in additional revenues over the forecast period; tap fees are projected to generate $6.1 million. Use of these funds provides an appropriate matching of revenues to capital expenses (including debt service payments) planned to accommodate system growth and extension of sewer service to unsewered areas. In the event that actual growth in the Department's water and sewer systems is less than projected, project deferrals may be employed without degradation of services to ensure adequate matching of system revenues and projected capital expenditures. 6.6 Conclusions ... .... CH2M HILL's projection of the financial performance of the System for the 10-year period 2002 through 2011 is summarized as follows: · Total revenues are projected to increase 87.4 percent over the 10-year period. Operating expenses, including incremental expenses attributed to planned capital expenditures, are projected to increase by 61.3 percent over the forecast period. · Projects identified in the Department's 10-year CIP reflect priority needs of the system and, after adjusting for inflation, are expected to total $285.5 million. These expenditures will be funded through a combination of debt issues in 2002 and 2005 ($247.3 million), current revenues ($25.0 million), and interest on the Construction Fund ($13.9 million). . Financing of the planned 10-year capital program will be enabled by planned system- wide water and sewer rate increases of 11 percent per annum from 2003 through 2007, and 3 percent increases from 2008 through 2011. The typical residential bill for both water and sewer service is projected to increase 89.7 percent over the forecast period as a result of these rate increases. However, projected residential bills are expected to remain comparable to, and competitive with, those of other Georgia communities. . Given scheduled water and sewer rate increases throughout the forecast period, net revenues of the System will be sufficient to meet projected debt service obligations on the Series 2002 Bonds and planned 2005 bonds. - - - - - - - - - - - - - P:\16t0471161047 AUD 2002 PMlBOND ANANCING REPORT\SEC6FINAL_6_13_02.DOC AO 733090.1 6-10 ........................... ENGINEER'S REPORT AUGUSTA UTIUTlES DEPARTMENT WATER AND SEWERAGE REVENUE BONOS, SERIES 2002 on 4 t 4 t o 4 ~ o 4 ~ TABLE 6.7 Funding Decisions TOTAL 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 Beginning Balance, Construction Fund 53 ,642 $1 43,310 $11,349,432 $3 $26,372,587 $54,827,335 $87,614,417 $29,836,753 $68,830,526 $121,564,939 $ Total Capital Expenditures $978,580 583,463 $8,455,383 $1 $15,671,936 307 $29,85 $40,236,940 $64,242,381 $60,690,753 $56,009,028 $7,778,653 $285,498.424 Bond Proceeds Available $ $ $247,252,795 $127,252,795 $ $ $ $ $ $ $120,000,000 Current Revenue Financed Project Amounts $ $ $ $ $ $5,000,000 $ $20,000,000 $ $ $25,000,000 Interest Eamed in Construction Fund $40,350 $ 82,305 $249,261 $648,782 $1,396,559 $2,449,858 $2,020,045 $1,696,980 $3,274.615 $2,090,797 $13,949,552 Total Funds $40,350 $703,923 6. $82.305 53 642 $249,261 143,310 $1 $3 $648,782 349,432 $11 396,559 $26,372,587 $1 $7,449,858 $54,827,335 696,980 $122,020,045 $87,614,417 $29,836,753 $2 $3,274,615 $68,830,526 P:\1610471161047 AUD 2002 PMlBOND FINANCING REPORTlSEC6FINAU_13_02.DOC AO 733090.1 $286,202,347 $129,343,592 $121,564,939 Ending Balance, Construction Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Appendix A Acronyms AWWA BPS CIP CMOM DI D /DBP DNR DO EPA EPD PM GEFA fps gpm/ ft2 gpd GWTP lOSE IESWTR 1/1 kgal LAS LRAA LTIESWTR LTIESWTR MCC MCL(G) MG mgd msl NPDES - .... . - - - - - - - .... - - - - - American Water Works Association booster pump station Capital Improvement Plan Capacity, Maintenance, Operation, and Management ductile iron Disinfectants/Disinfection Byproducts Rule Department of Natural Resources Dissolved Oxygen United States Environmental Protection Agency State of Georgia, Department of Natural Resources, Environmental Protection Division force main Georgia Environmental Facilities Authority feet per second gallons per minute per square foot gallons per day groundwater treatment plant Initial Distribution System Evaluation Interim Enhanced Surface Water Treatment Rule infiltration and inflow 1,000 gallons land application system Locational Running Annual Average Long- Term 1 Enhanced Surface Water Treatment Rule Long-Term 2 Enhanced Surface Water Treatment Rule motor control center maximum contaminant level (goal) million gallons million gallons per day mean sea level National Pollutant Discharge Elimination System P:\1610471161047 AUD 2002 PM\BOND RNANCING REPORl\APPEND_6_13_02.00C A-1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . NTU O&M PS PSI PVC RMP SCADA scfm SDWA SWAP SWTR TTHM WTP WWTP - ,. - - - - - - -. - - - - - - - - - - - Nephelometric Turbidity Unit Operations and maintenance pump station pounds per square inch polyvinyl chloride risk management plan Supervisory Control and Data Acquisition standard cubic feet per minute Safe Drinking Water Act Source Water Assessment Plan Surface Water Treatment Rule total trihalomethanes water treatment plant wastewater treatment plant P:l1610471161047 AUD 2002 PM\BOND RNANCING REPORT\APPEND_6_13_02.DOC A-2 . . . . . Appendix B . Populatio~ Growth within Census Tracts . . . . Population Growth wijhin Census Tracts (a) . Augusta-Richmond County, 1990 to 2000 1990 . 1990 1990 Density 2000 2000 Change, Census Census Population (persons Census Population 2000 1990 to . Tract Acres population Share per acre) Population Share Density 2000 . 1 1,152 4,672 2.6% 4.06 4,237 2.2% 3.68 -9.3% 2 640 3,260 1.8% 5.09 3,204 1.7% 5.01 -1. 7% . 3 320 1,963 1.1% 6.13 1,739 0.9% 5.43 -11.4% 4 384 783 0.4% 2.04 920 0.5% 2.40 17.5% . 6 512 2,691 1.5% 5.26 3,051 1.6% 5.96 13.4% . 7 320 1,837 1.0% 5.74 1,264 0.7% 3.95 -31 .2% 8 384 1,022 0.6% 2.66 685 0.4% 1.78 -33.0% . 9 320 3,394 1.9% 10.61 2,664 1.4% 8.33 -21.5% 10 512 3,311 1.8% 6.47 3,412 1.8% 6.66 3.1% . 11 512 1,753 1.0% 3.42 1,829 1.0% 3.57 4.3% 12 960 4,808 2.7% 5.01 4,826 2.5% 5.03 0.4% . 13 448 1,748 1.0% 3.90 1,512 0.8% 3.38 -13.5% . 14 384 2,755 1.5% 7.17 2,953 1.5% 7.69 7.2% 15 320 2,411 1.3% 7.53 1,636 0.9% 5.11 -32.1 % . 16 2,112 8,876 4.9% 4.20 8,316 4.3% 3.94 -6.3% 101.01 1,280 3,994 2.2% 3.12 4,062 2.1% 3.17 1.7% . 101.02 1,984 6,274 3.5% 3.16 6,884 3.6% 3.47 9.7% 101.04 1,920 3,466 1.9% 1.81 3,845 2.0% 2.00 10.9% . 101.05 1,216 5,654 3.1% 4.65 5,333 2.8% 4.39 -5.7% . 102.01 1,472 5,356 3.0% 3.64 5,275 2.7% 3.58 -1.5% 102.03 1,216 4,014 2.2% 3.30 4,432 2.3% 3.64 10.4% . 102.04 8,000 4,480 2.5% 0.56 7,930 4.1% 0.99 77.0% 103 1,280 5,899 3.3% 4.61 5,337 2.8% 4.17 -9.5% . 104 1,216 4,987 2.8% 4.10 4,259 2.2% 3.50 -14.6% 105.04 3,136 7,541 4.2% 2.40 6,836 3.6% 2.18 -9.3% . 105.05 2,368 8,126 4.5% 3.43 8,255 4.3% 3.49 1.6% . 105.06 1,280 5,282 2.9% 4.13 4,661 2.4% 3.64 -11 .8% 105.07 1,728 6,701 3.7% 3.88 6,059 3.2% 3.51 -9.6% . 105.08 768 3,844 2.1% 5.01 3,331 1.7% 4.34 -13.3% 105.09 1,024 4,602 2.5% 4.49 4,455 2.3% 4.35 -3.2% ... 105.10 1,344 5,456 3.0% 4.06 5,103 2.7% 3.80 -6.5% .... 105.11 1,792 3,796 2.1% 2.12 3,855 2.0% 2.15 1.6% - 106 17 ,856 6,512 3.6% 0.36 5,840 3.0% 0.33 -10.3% - -. 107.03 3,008 8,210 4.5% 2.73 9,602 5.0% 3.19 17.0% - 107.04 5,504 6,859 3.8% 1.25 9,845 5.1% 1.79 43.5% -. 107.05 4,032 7,363 4.1% 1.83 9,881 5.1% 2.45 34.2% - 107.06 7,616 3,548 2.0% 0.47 5,225 2.7% 0.69 47.3% - 109.01 37,824 5,508 3.1% 0.15 8,166 4.3% 0.22 48.3% - - 109.02 44,800 7,823 4.3% 0.17 11 ,302 5.9% 0.25 44.5% Total (b) 207,167 180,579 100% 1.11 196,685 100% 1.21 8.9% - (a) Source: US Bureau of the Census. - - (b) Excludes Census Tract 108 (Fort Gordon), which had an estimated 9,140 persons in 1990 and 7,754 in - 2000. - - - P:l1610471161047 AUD 2002 PM\BOND RNANCING REPORl\APPEND_6_13_02.00C B-1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Appendix C Future Water Treatment Regulations Long-Term 2 Enhanced Surface Water Treatment Rules (L T2ESWTR) The LTIESWTR, incorporates system-specific treatment requirements based on a Microbial Framework approach. This approach generally involves assignment of systems into one of several categories (or bins) based on results of source water Cryptosporidium monitoring. Additional treatment requirements depend on the bin to which the system is assigned. Systems will then chose technologies to comply with additional treatment requirements from a toolbox of options. To determine bin classification for systems greater than or equal to 10,000 customers, source water Cryptosporidium monitoring must be conducted using EP A Method 1622/23 and no less than 10-L samples. Cnjptosporidium, E. coli, and turbidity source water sampling must be carried out on a predetermined schedule for 24 months with two choices: - - · Bin classification based on the highest 12-month running annual averages of monthly samples or · Optional bin classification based on 2-year mean if facility conducts twice-per-month monitoring for 24 months. Systems with at least 2 years of historical Cnjptosporidium data that are equivalent in sample number, frequency, and data quality (volume analyzed, percent recovery) to data that would be collected under the LTIESWTR may use those data to determine bin classification by submitting the data to the State/Primacy Agency. Systems that provide 2.5 logs of treat- ment for Cnjptosporidium in addition to conventional treatment are exempt from monitoring for purposes of selecting bin placement. "Conventional treatment" is defined as coagulation, flocculation, sedimentation, and granular media filtration. Action bins (for conventional treatment plants) have been structured considering the total Cryptosporidium oocyst count, uncorrected for recovery, as measured using EP A Method 1623 and 10-L samples. Systems have 3 years following initial bin classification to meet the treatment requirements associated with the bin (see Table C-l). The State/Primacy Agency may grant systems an additional2-year extension to comply when capital investments are necessary . Systems currently using ozone, chlorine dioxide, ultraviolet (UV) treatment, or membranes in addition to conventional treatment may receive credit for those technologies towards bin requirements. The additional treatment requirements in Table C-l are based in part on the assumption that conventional treatment plants in compliance with the IESWTR achieve an average of 3 logs removal of Cryptosporidium. The total Cryptosporidium removal - - - - - - - - - - - - - - P:\1610471161047 AUD 2002 PM\BOND RNANCING REPORl\APPEND_6_13_02.DOC c., . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . requirements for the action bins with 1 log, 2 log, and 2.5 log additional treatment correspond to total Cryptosporidium removals of 4, 5, and 5.5 log, respectively. Meeting the log treatment requirements identified for each "action bin" in Table C-l may necessitate one or more actions from an array of management strategies which include watershed control, reducing influent Cryptosporidium concentrations, improved system performance, and additional treatment barriers. Based on available information, the Federal Advisory Committee (FAC) recommended in its September Agreement that LTIESWTR use a "toolbox" approach, and that the specific tools (when properly designed and imple- mented) receive log credit (or range of credit) as shown in Table C-2. EP A must use the best information available in developing the final rule and will request comment on the pro- posed log credits shown in Table C-2. EP A will also provide guidance for determining if toolbox options are properly designed and implemented. TABLE C-1 Bin Requirements as Set Forth in September 2000 Agreement in Principle Average Cryptosporidlum Concentration Bin Number Additional treatment requirements for systems with conventional treatment that are In full compliance with IESWTR Cryptosporidium < 0.075/L No action 2 0.075/L ~ Cryptosporidium 1-log treatment (systems may use any technology or combination of < 1.0/L technologies from toolbox as long as total credit is at least 1-log) 3 1.0/L ~ Cryptosporidium 2.0-log treatment (systems must achieve at least 1-log of the required < 3.0/L 2-log treatment using ozone, chlorine dioxide, UV, membranes, bag/cartridge filters, or in-bank filtration) 4 Cryptosporidium > 3.0/L 2.5 log treatment (systems must achieve at least Hog of the required 2.5-log treatment using ozone, chlorine dioxide, UV, membranes, bag/cartridge filters, or in-bank filtration) ... .... - - In the next few years, the anticipated Stage 2 D/DBP Rule and the anticipated LTESWTR are expected to require increased levels of Giardia and Cryptosporidium removal! inactivation, while at the same time effectively limiting the maximum free chlorine CT for the disinfection process. As a result, many utilities may need to consider an alternative primary disinfectant, such as ozone or UV, in order to balance the requirements of the two upcoming regula tions. The Department has incorporated the design and construction of UV facilities at the Highland Avenue and the Tobacco Road WTPs. The UV facilities will be sized based on research data currently available and based on draft copies of the proposed LTIESWTR that have been released by the EP A for public comment. In addition, a filtered water turbidity goal of 0.1 NTU is also being established for both water plants to ensure compliance with possible future reduction and potential inactivation credits of Cn;ptosporidium. . - - -. - - .... ... - - .... - - - - P:\1610471161047 AUD 2002 PM\BOND RNANClNG REPOR1\APPEND.6_13_02.00C C-2 - - - . . . . . . . . . . . . . . . . . . . . . . . . TABLE C-2 Microbial Toolbox Components to be Used in Addition to Existing Treatment (from Stage 2 M-DBP, FAG Agreement in Principle, September Signature Copy) APPROACH Watershed Control Potentiallo~ Credit 0.5 l 1 I 2 ~ WATERSHED CONTROL PROGRAM (1) X I I I Reduction in oocyst concentration (3) As measured Reduction in viable oocyst concentration (3) As measured Alternative Source INTAKE RELOCATION (3) As measured Change to Altemative Source of Supply (3) As measured Management of Intake to Reduce Capture of Oocysts in Source Water (3) As measured Managing Timing of Withdrawal (3) As measured Managing Level of Withdrawal in Water Column (3) As measured Pretreatment OFF-STREAM RAW WATER STORAGE 3.1.1.1.1. WI DETENTION - X DAYS (1) Off-Stream Raw Water Storage wi Detention - Y weeks (1) X Pre-Settling Basin wlCoagulant X ~ Lime Softening (1) .. In-Bank Filtration (1) X .... Improved Treatment LOWER FINISHED WATER TURBIDITY (0.15 NTU X 95 PERCENTILE IN COMBINED FILTERED EFFLUENT) Slow Sand Filters (1) X Roughing Filter (1) X .... Membranes (MF, UF, NF, RO) (1) X Bag Filters (1) X ... Cartridge Filters (1) X Improved Disinfection ... - CHLORINE DIOXIDE (2) X X OZONE (2) X X X UV (2) X Peer Review I Other Demonstration I Validation or System Performance Peer Review Proaram (ex. Partnership Phase IV) I X I I Performance studies demonstrating reliable specific log removals for technologies not listed above. This provision does not supercede other As demonstrated inactivation requirements. Kev to table svmbols: (X) indicates potential log credit based on proper design and implementation in accordance with EP A guidance. Arrow indicates estimation of potential log credit based on site-specific or technology-specific demonstration of performance. Table footnotes: (1) Criteria to be specified in guidance to determine allowed credit, (2) Inactivation dependent on dose and source water characteristics, (3) Additional monitoring for Cryptosporidium after this action would determine new bin classification and whether additional treatment is required. -. - - - - - - - DIDBP Rule - Stage 2 Considerable debate resulted from the proposed Stage 2 D /DBP Rule with TIHM and HAA limits of 40 and 30 Jlg/L, respectively. As a result, EP A and various stakeholders formed the FAC to address concerns of interested parties. The result is the September 12 Signature P:l161 0471161 047 AUD 2002 PM\BOND RNANCING REPORT\APPEND_6_13_02.DOC C-3 . . . . . . . . . . . . . . . . . . . . . . . . . Copy of the Stage 2 M-DBP Agreement in Principle (Agreement). Table C-3 summarizes the proposed Stage 2 D jDBP Rule limits that resulted from the Agreement TABLE c-3 Summary of Stage 2 D/DSP Rule Limits Parameter Timeline Action Monitoring IDSE Monitoring Phase 1 Phase 2 Phase 2 Monitoring - - - .... ... - Bromate MCL Conduct Cryptosporidium and Initial Distribution System Evaluation (IDSE) monitoring and submit results to State/Primacy Agency IDSE: monitor bimonthly (on regular schedule of approximately every 60 days) for one year at 8 distribution sites per plant (at sites that are in addition to Stage l/DBP compliance monitoring sites). For plants with chlorine distribution systems, sites will include: · One near distribution system entry point . Two at average residence time, · Five at points representative of highest THM and HAA5 concentrations · THM/HAAs of 80/60 l-lg/L running annual average (RAA) · THM/HAAs of 120/100 l-lg/L locational running annual average (LRAA) . Based on Stage 1 monitoring sites THM/HAAs of 80/60 ~g/L LRAA based on all new sampling sites based on IDSE Monitor quarterly (on a regular schedule approximately every 90 days) at 4 sites: · One representative average from among current Stage 1 locations · One representative of highest HAA5 identified under IDSE . Two at highest TTHM identified during IDSE At least one quarterly sample must be taken during the peak historical month for DBP levels. . 0.010 mg/L for purposes of Stage 2. Under review to 0.005 mg/L as part of 6-year review 2 years and 2- Y2 years, . respectively after promulgation 3 years after promulgation 6 years after promulgation 6 years after promulgation . - - a Plus 2 years for systems requiring capital improvements .- -- - .-. - P:l1610471161047 AUD 2002 PM\BOND FINANCING REPORMPPEND_6_13_02.00C C-4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Appendix D 10-Year Capital Improvement Plan Cost Estimates for 10-Year Capital Improvement Plan Recommended Improvements Note: All estimated costs in 2002 dollars. 2002 2005 2008 Water Treatment Facilities 57,829,000 38,500,000 2,000,000 Water Distribution System 14,739,000 13,700,000 1,500,000 Wastewater Treatment Plants 8,867,800 33,100,000 15,200,000 Wastewater Conveyance System 41,219,200 20,000,000 4,200,000 System-Wide Projects 7,345,000 7,200,000 2,100,000 10-Year CIP Projects Estimated Costs 130,000,000 112,500,000 25,000,000 .6l. - - - - - - - - - - - .- - - ... -. - - - P:\1610471161047 AUD 2002 PM\BOND RNANCING REPORT\APPEND_6_13_02.DOC 0-1 - - -. -