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As previously noted, the interest rates for both the SRF loan and revenue bond are based on current interest rates. The actual interest rate will depend on whether the City receives an SRF loan or issues revenue bonds and municipal bond interest rates at the time of borrowing. To ensure the City's water rates have sufficient funding to cover future debt service, staff is recommending that the water rate model used in the current water rate study assume the interest is four percent. If the actual interest rate is less than four percent actual rate increases can be adjusted down accordingly. Summary of Estimated Water Rate Impacts from Financing The City's utility rate consultant, Raftelis, modeled the two debt service scenarios in the water rate model. As described below, the rate increases from debt service based on current interest rates range from 17.9 percent to 21.9 percent. Rate Im •acts from Debt Service SRF Loans. r , - ,RevenueBond` • wnz 3a� � w g.•. .s•S, .,:.3 x... e:.. ""`� ...g:� �u�..a�..a.am.,..r.. .c..�.:a,.; a, �bA- B...o..�v• ..cA. A aw.Os • $9.50 average increase to bi-monthy • $11.60 average increase to bi-monthly water bill water bill • 17.9% increase • 21.9% increase Other Rate Considerations Staff will restart the water and sewer rate study once Council approves a PFAS and Wells Rehabilitation Funding Plan. There are other areas of the City's operating and capital costs that will also affect rates including: • Increased labor costs (wages and pension) • Additional staff and non-labor costs are required to manage the new centralized treatment facility • Increased major maintenance capital improvements from the Water System Master Plan, and • Drought related revenue impacts Settlement Proceeds The primary source of PFAS contamination is fire-fighting foam that was commonly used by airports, military bases, fire training facilities, and chemical factories. The City filed a lawsuit against manufacturers of fire-fighting foam and the chemicals used to make them to recover the costs to mitigate PFAS in the City's groundwater. The City's lawsuit has been consolidated before a US District Court in South Carolina along with over 500 similar lawsuits. It is currently unclear when the City's litigation will be resolved and whether the City will receive a settlement. If the City receives a settlement before incurring debt for the project, the debt principal will be reduced. If the City receives a settlement after incurring debt, the settlement proceeds will be used to make debt service payments. Page 5 of 7