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WATER & SEWER RATE MAINTENANCE POLICY <br />In order to safeguard the financial integrity of the City of Paris' Water Works and Sewer System, the City <br />Council hereby establishes the following policy regarding the setting of rates and the establishment of <br />necessary reserves and interest & sinking funds. <br />Section 1. MAINTENANCE OF RATES. <br />The City of Paris agrees that it will at all times charge and collect for services rendered by the System <br />rates and other charges that will produce gross revenues sufficient to pay all expenses of the System's <br />operation, maintenance, improvement, replacement, and expansion including expenses paid to the <br />City's General Fund for administrative services and utility franchise fees and to provide net revenues <br />equal to 1.1 times the principal and interest payments on all outstanding debt of the System. <br />Section 2. Interest & Sinking Fund(s). <br />An interest & sinking fund(s) shall be established for the purpose of paying the principal and interest <br />payments of any outstanding System bonds or certificates of obligation. The interest and sinking fund(s) <br />will be funded from net system revenues by monthly deposits in amounts sufficient to pay the next <br />maturing principal and interest payment. <br />Section 3. Reserve Fund <br />A Reserve Fund will be accumulated and maintained for all outstanding debt issues in an amount equal <br />to the average annual principal and interest requirements for all outstanding debt issues. When debt is <br />issued, the Reserve Fund must accumulate any additional reserves needed within five years of the new <br />debt issuance. <br />Section 4. Contingency Fund <br />Further security will be provided by a$500,000 Contingency Fund to be accumulated over no longer <br />than a five year period and maintained at the City's depository for the purpose of paying the cost of any <br />repairs or extensions to the System for which no other funds are available. The Contingency Fund may <br />also be used to pay principal and interest payments on outstanding System debt if there is a deficiency <br />in the Interest & Sinking Fund and the Reserve Fund. <br />EXHIBiTA <br />