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2. Wastewater Treatment Plant (WWTP) / Utility Rates / Property Tax Levy — The City of Paris has issued significant debt in order to construct a new WWTP. More debt is forecasted to be issued in 2024 to prepare for future phases of this WWTP construction. To pay for this debt, the City has been incrementally increasing its sewer utility rate. Pursuant to City Code A10.004, we have planned rate increases that began in 4/01/2021 and routinely increase approximately every six months (with exceptions) until a final increase that is planned on 04/01/2026. It is unknown whether these increases will completely cover the ultimate cost of the WWTP debt as we still yet must bid out the next phase of construction. With this, we are fully aware of the impact this is having to our residents and their monthly bills. The City Council and Staff are taking necessary steps to protect our future ability of treating wastewater by constructing the WWTP; there is unfortunately no avoiding this project and the costs that come with it. We are also, however, always working on ways of alleviating the burden on our residents. First, City Staff continue to work hard to seek out best practices and prices to avoid sharp operational cost increases (ex: bidding). Second, we have recently obtained the City Council's approval to bring back documents necessary to refund and restructure the GO Bond Series 2013 which will save an approximate $1 million each year in existing debt payment that can be reallocated towards the WWTP debt payments (these early year savings are created by extending the initial term of the debt by 10 years). Third, given the amount of debt we have incurred has reached certain thresholds, we may now have available to us an option of issuing the next round of debt as a "Commercial Paper Loan" which in layman terms is a form of line of credit that will reduce interest costs on that debt (more is to be researched on this before making a recommendation to the City Council). Fourth, we were fortunate this year in that when we performed our annual rate analysis, it produced results showing that a water rate increase was not necessary for this upcoming year. Fifth, we have been working to plug holes in our utility revenue stream by identifying bad debt accounts (ex: City of Toco, Route 40, etc.) and bringing them in to compliance, thus opening up revenue we were not previously receiving. Sixth, our Community Development Department and Paris Economic Development Corporation are very busy working with developers to add new retail, residential and industrial growth to our community (in essence, adding more chairs to the table to spread our existing cost out amongst). To help facilitate this, seventh, the Public Works Department, with the use of ARPA Funds, has been installing new water lines in our industrial districts with the added benefit of servicing existing customers in the surrounding area via looping of utility lines, but also making these properties more "shovel ready" for attracting industry to our community. All of these efforts can and will have positive impacts on alleviating the burden —. over time — to our utility rate customers. Our next option available to us that we are recommending to pursue as part of the Proposed FY23/24 Budget is to shift a portion of debt expense from the utility rates to property tax. As has been discussed in the above Summary section of this memo, the City of Paris can, for the second year in a row, maintain our Maintenance and Operation (M&O) Property Tax Levy flat at $8,030,000.00. Gains in Sales Tax as well as other revenues are enough to balance the cost increases we are seeing in the General Fund without asking for additional property tax. This results in an even lower Property Tax Rate for the M&O. Our Debt Service Property Tax Rate (aka, "Interest and Sinking" or "I&S") was scheduled to adjust only on account of existing changes in our debt payment schedule for various bonds, however that was not foreseen to be a significant amount. We as City Staff, after working closely with our Financial Advisor and Utility Rate Consultant, would like to propose moving $1.5 million in existing Utility Bond Debt from utility rates to I&S property tax. Much like how the refund and restructuring works for the GO Bond Series 2013, this would free up existing $1.5 million in annual revenue from the utility rates that can be reallocated towards the WWTP debt payments. The City's Property Tax Rates would change as follows: Year a M&0— I&S�—Total FY22/23 $ 0.34377 I ........ $0.09901 $0.44278 FY23/24 $ 0.32176 $0.15606 $0.47782 Net $(0.02201) $0.05705 $0.03504 Page 7 of 23