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improvement projects. It is recommended that transfers be made from the Capital <br />Projects Fund # 422 to the Pavement Management Plan gradually over the next several <br />years. <br />Issuance of Equipment Certificates Debt: The City Council may issue Equipment <br />Certificates (Certificates of Indebtedness) to finance the purchase of public safety <br />equipment, road construction or maintenance equipment, and other capital equipment <br />provided the equipment has an expected useful life at least as long as the terms of the <br />debt. The annual debt service, both the principal and interest, will be paid off with <br />future increased debt service tax levies. Attached is Exhibit 3 illustrating a possible <br />scenario of vehicles eligible to be financed with Equipment Certificates and Exhibit 4, <br />an example of a possible Equipment Certificate amortization schedule which the <br />Council could issue in 2011. <br />Explanation: The financing models for the Capital Replacement Plans have been updated to <br />reflect these recommendations. As a type of forecasting model, it makes assumptions as to the <br />future. Two critical assumptions are 1) that the annual installments, included in the annual <br />operating budgets, are increased by approximately 3% each year, and 2) the cost of replacements <br />increase by 3% each year. <br />Attached are a series of graphs and supporting schedules. There are four graphs, Exhibits 5 <br />through 8, which are the same as used for presentation purposes at the August 14, 2010, City <br />Council worksession: 1) Exhibit 5 illustrates the scheduled dollar amount of capital replacement <br />purchases, 2) Exhibit 6 adds a trend line to the same graph in exhibit 5, 3) Exhibit 7 is a graph of <br />the purchases trend line matched up with the current annual installments (assuming they are <br />increased 3% each year), and 4) Exhibit 8 is a graph of the recommended financing solution. <br />Also attached is Exhibit 9 which is a schedule of total replacement purchases from 2011 through <br />2025, along with the recommended financing sources to demonstrate the financial feasibility of <br />the recommendation. <br />Dan Maiers <br />Director of Finance <br />Page 3 of 3