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Metropolitan Wastewater Management Commission Budget and Program Summary <br />4. The Equipment Replacement Contribution is a budgeted transfer of operating revenues to "sinking , <br />funds" (reserves) for scheduled future. replacement of major equipment, vehicles, and computers. See <br />table on page 21 for year-end balance. <br />5. The Capital Reserve Contribution is a budgeted transfer of operating revenues to "sinking funds" ~ . <br />(reserves). Capital is passed through the Springfield Administration Budget. See table on page 23 for <br />year-end balance. - <br />6. The Working Capital Reserve acts as a revolving account which is drawn down and replenished on a <br />monthly basis to fund Eugene's and Springfield's cash flow needs. <br />7. The Rate Stability Reserve is used to accumulate revenues available at year-end after the budgeted <br />Operating Reserve target is met. It i5 budgeted based on projected revenues and expenditures and is <br />intended to lessen the size of needed rate increases over time. See Exhibit Ton page 20 for year-end <br />balance. <br />8. The Operating Reserve is used to account for the accumulated operating revenues net of operations <br />expenditures. The Commission has adopted a policy of maintaining a minimum Operating Reserve <br />balance approximately equal to 10% of the adopted Operating Budget. This targeted level of funding <br />provides for contingency funds in the event unanticipated expenses or revenue shortfalls occur during the <br />budget year. <br />9. The Revenue Bond Reserve was established in FY OS-06 to recognize and record reserves required by <br />revenue bond covenants. This reserve was eliminated during FY 06-07 because bond insurance was <br />purchased in-lieu-of retaining funds in a bond reserve. <br />10. The Debt Service line item is the sum of annual interest and principal payments on the Revenue Bonds <br />made from the Operating Budget (derived from user rates). The total amount of debt service budgeted in <br />FY 07-08 is $3,702,088, the balance of which is budgeted from SDCs. <br />11. The Rate Stabilization Reserve is a result of the 2006 MWMC Revenue Bond Declaration and <br />Covenants. It holds aone-time contribution, which is available if needed, to ensure debt service <br />payments can be made. <br />~, <br />Page 10 FY 07-08 BUDGET AND CIP <br />