As we move forward through the second half of 2019, the primary focus will be to determine the impacts to our income, expenses and cash flow resulting from planned procedural changes. These changes will be taken into account as we finalize the rate structure for 2020 and beyond based on the USDA Project completion with full water meter installations. We also plan to continue our water meter usage studies with the ever increasing number of activated meters, which is now at 869 (+50% of the total), and factor these most current readings into our rate structure planning as needed.

As presented at the annual meeting in June, the procedural changes that could have an impact on our long term cash flow, budgets and rates include the following:

Meter installations – As new meters are activated, based on the current rate structure, the shareholder’s annual fee will decrease from a “non‐metered rate” of $873 to a “metered rate” of $799, a reduction of $74. This change in revenue over the next 12‐18 months will need to be factored into our future rate structure planning

Transitioning to new bi‐monthly electronic billing and payment process – The bi‐monthly billings will impact cash flow based on revenue being collected every other month throughout the year as opposed to annual fee payments currently collected in February. The 3rd party service costs for electronic billing & payments will also need to be analyzed to determine impacts on expenses

Inclusion of USDA loan repayment surcharges into billings – The shareholder’s bi‐monthly billings starting in approximately June 2020 will include a line item as part of the base rate for their portion of the USDA annual loan repayment. This will need to be factored into our income and expense estimates

Future annual “base rate” structure changes under consideration – The base rates for each category (i.e., metered residence, non‐metered residence, bare lot and combined lot) are being reviewed to ensure that the overall rate structure is as fair and equitable as possible without imposing too high of risk to our financials and capital reserves. Any approved base rate changes will affect both income and cash flow Implementation of Shareholder Service Line Replacement Loan Program – Based on the new main pipelines being installed as part of the USDA Project, many shareholders will be required to move their service line. Any service line replacement loans approved and issued to shareholders with financial hardship will be interest free and repaid over a 2‐5 year term. A tracking process is being setup to determine the impacts on our cash flow

Potential of adding new USDA Project Scope – The BLSMWC staff requested we consider the addition of new high priority scope items addressing safety (fire flow) and liability tasks within the total USDA budget allocation. Full analysis by the LRPC and BOD of the current baseline USDA project cost and schedule performance must occur prior to approval, as these new tasks will impact cash flow based on an extended project schedule and increased interim loan interest

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