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If a customer pays a CF absent a debt service credit, the customer will have paid twice for the value of an asset; once within the CF and then again within their rates which includes the principle amount on outstanding debt service. Given this issue, a debt service credit is included within the calculation of the City's CF based upon the present value of the outstanding principle associated with the City's future debt. The City is planning to finance the Phase 1A and B projects. Total outstanding principal for these two items would be 519.2 million in principal. The 519.2 was reduced to $18.1 million to reflect those customers converting from potable water to recycled water that will pay a recycled water connection fee. Therefore this amount was credited or deducted from the connection fee. 4.4 Allowable Recycled Water Connection Fee Next, the existing and future infrastructure costs are added together to determine the total capacity costs related to providing recycled water service. The total, of approximately $17.9 million, is then divided by the system capacity of 4.0 MGD to develop a cost per gallon. The cost per gallon is then multiplied by the per ERU planning criteria in gallons /day /ERU of 16,597. This resulted in a connection fee of $74,447 per ERU for a 1 -1/2" meter. Table 4 -4 summarizes this calculation. Allowable Table Recycled L Connection Gin l ERU Plant Component Total "Allowable" Capacity Fee Total Existing Plant (Replacement New Less Depreciation) Total Future Plant Total Existing and Future Plant Total Capacity (mgd) for Phase 1A and 1B [1] Cost ($ /Gal) Gallons per ERU $2,632 15,310 $17,942 4.0 $4.49 16,597 Allowable Recycled Water CF per ERU (for 1 -1/2" Meter) $74,447 Note: [1] Additional future recycled water system improvements, not included within this analysis will expand the system to 8 mgd of capacity. The methodology used to establish the recycled water connection fee is a "combined approach ". The combined approach adds the existing or buy -in component and the future or incremental component together, and accounts for any existing contributions or debt credit resulting in a "net allowable connection fee ". Based on the sum of the component costs Determination of the City's Recycled Water Connection Fee 16 City of Pleasanton - Recycled Water Connection Fee