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SOUTH BEND MUNICIPAL SEWAGE WORKS <br />South Bend, Indiana <br />Notes to Rate Analysis and Summary of Significant Assumptions <br />1 ) <br />2013, 2014, 2015, and 2016 financial information was taken from the Rate and Financing Report dated <br />February 10, 2014. <br />Sewer User Fees and Sales for Resale for 2014 and (2) beyond are adjusted for the estimated revenues <br />from the projected rate increases. The projected rate increases are assumed to go into effect on <br />January 1 of each year. <br />Forfeited Discounts and Miscellaneous Operating Revenues are assumed to be held constant at 2013 <br />levels for 2014 and beyond. <br />(4) <br />The amounts shown for Operation and Maintenance Expenses and FICA Tax Expenses for 2014 and <br />beyond are calculated by applying a three percent (3 %) inflation rate to the previous year amount. <br />Maintenance Due to CSO Projects was provided by the City of South Bend. <br />Payments in Lieu of Taxes for 2014 and beyond were calculated by applying a three percent (3 %) <br />inflation rate to the previous year amount. <br />Capital Improvements from Cash on Hand was calculated by maintaining a minimum of 140% coverage <br />on the annual debt service in the years 2017 through 2029. The amount available in 2013 through 2016 <br />was taken from the Rate and Financing Report dated February 10, 2014. <br />(6) <br />The Proposed Bond Issues for the Years 2014 through 2029 include the debt service reserve funding <br />within the bond issuance. The estimated Interest rate is 5% for a term of 20 years. <br />(9) <br />The Capital Improvement Program and the Amount Funded by Outstanding Bonds were provided by the <br />City and the consulting engineer, Greeley and Hansen, and included an amount for engineering fees, <br />legal and administration. The U0lity's management reduced the sewer lining estimate to $1,500,000 per <br />year. <br />Prepared by Crowe Horwath LLP -3- February 10, 2014 <br />