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• <br /> 1 i <br /> r ,, &spy <br /> IP <br /> Section IV <br /> Capital Budgeting: <br /> Realistically projecting the growth trends and capital project needs of your <br /> community, and then modeling a series of financing strategies to finance <br /> these projects is an essential starting point. A financing strategy involves <br /> far more than just a decision of when and how much debt to issue. It <br /> encompasses the whole set of' development policies, including assessment <br /> rates, target debt levels, etc. <br /> Usually, the City's planners and engineers are most capable of determining <br /> growth and projecting the capital improvement plans. Our role is to <br /> generate a computer model to evaluate the financial impacts of a proposed <br /> strategy on debt levels, cash flow and tax rates. The process is ongoing <br /> and continuous, as new projects are completed and the needs for future <br /> ones are identified. The goal, however, is to assure that the community is <br /> proceeding with its financings in a manner that will preserve financial <br /> strength, maintain cash flow, and keep tax and utility rates within <br /> acceptable levels. <br /> Juran & Moody is prepared to develop a debt capacity analysis to assess <br /> the City's ability to raise debt capital in the future. A computerized <br /> financial model would be developed to assess the ability of alternative <br /> financing strategies to economically provide the required level of funding <br /> over time. The first step is the identification of the key assumptions that <br /> will be common to all strategies. The second step is to structure each <br /> alternative and evaluate its feasibility. <br /> Once the model is constructed, existing debt structures of the issuer will <br /> be incorporated to test the impact of each alternative financing strategy on <br /> the overall financial statements and financing plan. As a result, the current <br /> financing program can be evaluated by itself and in concert with previous <br /> or future financings or refundings depending on the financing policies <br /> established from the outset (e.g._ minimize debt service, maintain level <br /> debt service, lengthen or shorten maturities, etc.). <br /> Finally, the financial model will have the flexibility to project the capital <br /> program using both "constant" and "current" dollar scenarios. This will <br /> prevent the issuer from embarking on a financing plan that, while feasible <br /> using constant dollars, becomes suspect or unfeasible when the impact of <br /> inflation is recognized. This model will be adaptable to special workshop <br /> sessions with City staff and Council Members so that an interactive <br /> analysis can be performed. <br /> City of Centerville. Minnesota - 7 <br />