The LRPC’s recent focus has been on the Engineering and Design progress being made on the USDA funded Water Distribution
System Improvement Project. Overall, the project is moving along well toward our final design milestones leading to the bidding
and construction services by mid‐2018. Recently, as a result of findings during the initial design phase, the team has proposed
some important design changes that will lead to operational improvements to the overall water distribution system.

Moving forward, there are several interrelated factors that must be planned out carefully over the next 2‐3 years pertaining to
the USDA Loan timelines, repayment processes, and the resulting impacts to our internal finances and contingency reserves.
Recently, we were informed by the USDA of the requirement to obtain “interim financing” from the start to the completion of
the construction phase as opposed to the USDA reimbursing our costs directly as they are incurred. This poses a greater burden
on our internal budget reserves while we cover certain costs and additional “interim loan” interest payments (not included in the
USDA loan agreement) until eligible for reimbursement. The above factors create significant challenges and decisions that will
have to be made as the project progresses and costs become known.

The LRPC will also continue to collect meter usage data throughout 2018 to utilize for our future year rate analysis, perform a
more comprehensive reserve accounts plan, and based on the complicated financial situation ahead, continue to update our
multi‐year cash flow analysis.

These design changes, which were approved at the Jan. 13th Board of Director’s Meeting, will be funded from USDA loan contingencies
and are estimated to have no overall impact on construction costs.