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• Quality of management. This is revealed in -among other things -adaptability to regulatory <br />changes and fmancial constraints, track record of regulatory compliance, and sound staffmg <br />practices. <br />• Strategic focus. Moody's favorably considers multi-year capital improvement plans that <br />include current and anticipated capital needs that cover asset maintenance, upgrades, and <br />system expansions. <br />• Rates, rate structure, and rate-making flexibility. Moody's evaluates whether rates and <br />revenues cover all financial commitments, with enough reserve for emergencies, and whether <br />they are reasonable and affordable, which could affect asset maintenance and expansion of the <br />user base. <br />• Liquidity. Moody's examines whether debt service coverage ratios include recurring and one- <br />time charges. Systems with large, completed, and compliant capital improvement programs can <br />afford narrower margins. Adequate excess revenues enable systems to cash-fund more of their <br />capital needs. <br />The Qualitative Analysis <br />Many of the factors listed in the analytical frameworks outlined above are qualitative indicators; <br />that is, they are not generally measurable. While credit rating agencies cannot readily compare <br />qualitative measures against national benchmarks or averages, these indicators can and do <br />provide general information about the characteristics credit agencies prefer to see in the utilities <br />they rate highly, including: <br />• The presence of long-term fmancial forecasting and planning by the utility - MWMC <br />typically projects revenues and expenses 10 years into the future during the annual <br />budget process. <br />• Strength and diversity in the local economy and customer base, and other local <br />socioeconomic characteristics - MWMC is the sole provider for wastewater services in <br />the Eugene/Springfield Metropolitan area. The local economy has diversified in recent <br />years. <br />• Regular financial reporting -Budget compliance reports are presented to the Commission <br />monthly and audited financial statements are presented to the Commission annually. <br />• Attention to customer relations, including an open rate-setting process - MWMC always <br />conducts a public hearing prior to budget adoption. <br />• An independent Board of Directors with seasoned management -The Commission is <br />independent (not paid by or stockholders of the utility). Commission members are a <br />combination of experienced, knowledgeable elected officials and citizen representatives. <br />Commission members have staggered terms to protect the utility against periods of <br />unseasoned leadership. <br />• Political will to increase rates when needed -The Commission has repeatedly <br />demonstrated their will to increase rates when the need was demonstrated. <br />• Anticipation of capital requirements due to new regulations - MWMC staff work <br />proactively with Federal and State personnel to keep well informed on upcoming new <br />regulations. MWMC maintains a 20-year list of capital improvements that is reflective of <br />anticipated new regulations. <br />2005 MWMC Financial Plan - Appendix I Page 23 <br />