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Mr. Lawson said that was his impression. At that fee level, the reserves become <br />enormous after eight to ten years, if you continue to sell the DUEs. The cycle is not <br />necessarily predicted to happen, it is viewed as the worst case economic scenario. The issue <br />is simply that you sell the DUEs that you plan to sell over a period of time. As long as that <br />is done and adjust the connection fee, you are okay. <br /> <br /> Mr. Lawson then showed a chart of growth curves used for fee design and there was <br />discussion of the various estimates for growth and where it would occur. <br /> <br /> Ms. Ayala asked for clarificationof the concept of developers securing the debt. <br /> <br /> Mr. Lawson said the developers can guarantee to buy so many DUEs per year, <br />whether they need them or not. In that event there is no concern about economic <br />downturns. <br /> <br /> Ms. Michelotti expressed concern about where the commercial development would <br />come from. She asked whether there would be risk to the current ratepayers on the debt <br />service if all development stops. <br /> <br /> Mr. Lawson said if growth stops, there is a liability whether it is financed regionally <br />with DSRSD or locally with DSRSD. Right now you have the bigger customer base to do <br />that and they have a smaller customer base. That changes in ten years. In the year 2010, <br />they become bigger than you according to the growth curves. <br /> <br /> Mr. Tarver felt the question was whether DSRSD and Pleasanton can sustain what <br />is shown on the charts. The estimates for DSRSD are significant and it is important that it <br />can sustain that over a long period of time. <br /> <br /> Mr. Pico believed that ultimately the question is whether the bond market <br />underwriters believed the estimates and were willing to lend the money. <br /> <br /> Mr. Lawson did not think the bond market cared about the connection fees because <br />the debt was secured by the existing ratepayers. This is an affluent community and the <br />market will review the strength of the economy and whether the community can support the <br />debt. That will determine how the debt will be rated. <br /> <br /> Mr. Pico said at this point there is no debt and at some point Pleasanton will have to <br />decide whether to encumber the community is willing to have everything stop and have the <br />existing ratepayers underwrite the debt. We have not come to that point yet. <br /> <br /> Mr. Lawson said no. First Pleasanton has to elect to participate in the expansion <br />project and then elect the financing mechanism, whether jointly with DSRSD or alone. In <br />either case, the existing ratepayers are liable. <br /> <br />Pleasanton City Council 18 09/07/99 <br />Meeting <br /> <br /> <br />