Ms. Scheidler stated that their commitment to the project is just as serious on the financial side as it is on the service providing side. TNRCC will be on top of it every step of the way to make sure that it will pay for itself and that the District will not be vulnerable for any kind of financial burden or appearance of financial burden that would be out of line with its current financial state which is extremely solid. She assists systems in bringing in outside resources that will help offset any costs so that the revenue generated would be more in line with what the cost is going to be. Their goal is to bring in other possible outside resources to help reduce the cost so that it can be supported by revenue.

Mr. Bradford advised that the Sand Branch Community has been without a water system for quite some time. There has been a very good response to the surveys the Committee has done and the Community will do whatever is necessary to get water into the community. The Sand Branch Community is asking the District for their support. Sand Branch community consists of around 120 homes.

Mr. Wells, State Director of Community Resource Group (CRG), advised that they are a federally funded non-profit organization funded primarily by the United States Department of Agriculture, EPA and a couple of other federal agencies. Part of a national organization of the RF system (rural community assistance program) with the national office in Washington. Their objective is to assist rural communities under 10,000 to bring water and sewer into their communities.

It has been determined that this is a feasible project for this community. RUS will fund the project with a loan grant program. An example for this loan is, according to the median household income of the service area, if the household income is $27,143 or less, they qualify for up to a 50% grant; if the median household income is $21,144, they qualify up to a 75% grant. Under Federal regulations, RUS does not have a 100% grant program; at least 25% of the project cost must be borrowed, depending on the median household income. RUS is currently conducting a survey to determine the median household income. From the survey forms that have been received to-date and if the income level remains the same, there is a good possibility that this community will qualify for the highest level of grant available. When the application is submitted to RUS with the Preliminary Engineering Report (PER) and the debt service is calculated with the number of households, the revenue that will be received will pay for the debt service and O & M.

The number of households will determine whether or not this is a feasible project. RUS will not fund a project that is not feasible and cannot be paid back by the revenue of the customers. A lot of engineering firms who deal with the government, will work on a contingency basis and know up front that they will not be paid until the project is funded. The choice of engineer is left up to the Board although they can choose to continue to work with the engineer who was asked by RUS to come up with the preliminary figures. The engineer would work with Dallas’ Public Works to submit the PER. Independent feasibility studies are not funded through RUS but the PER submitted with the application is to see if the project is feasible.

Federal grants for sewer projects are backed by bonds, which requires an entity that has the authority to levy taxes; not to say that taxes will be or have to be levied. From past experience, taxes will never be levied. This Community is aware that an entity with the authority to levy taxes is necessary and they are willing to be annexed by the District to get these services.

Mr. Beecham advised that the District could set Sand Branch up as a sub-district. As a sub-district, taxes could be assessed (and raised if necessary) to the sub-district only and not the entire District should it be determined that the revenue generated does not cover the debt service. The revenues from sub-district would be used for the debt service, not the revenue from existing customers of the District. The numbers were run before for water service only and the numbers were feasible at that time.

The District would assume financial responsibility at loan closing. Engineering and attorney fees are calculated in the overall budgeting, however, should the District use an engineer that has to be paid up front before closing of the loan, that money would be reimbursed. Repayment of the loan does not start until the system is operating. At the time of loan closing is the time when the percentage of the grant is determined and the interest rate will probably not exceed 5%. The feasibility study is actually the PER. RUS will work as a liaison between the Community and the District and will do a lot of the legwork.

They are asking the District to commit, in principal, to continue to explore and investigate these options so TNRCC and RUS can show the District numbers that will make sense and answer any questions to make it work for the District.