Lump-sum Cost Calculation of Private Sewer Facility	Version 5A	10/25/2004
Facility Cost (Paid up front to vendor )
Estimated Cost New Private Facility	250,000
Additional   (legal, consulting, hauling etc)	25,000
Total facility cost requiring up-front financing	275,000
For each 1.79% unit	4,923
For each 2.86% unit	7,865
For each 1.34% unit	3,685
Base Year Operating Cost Assumptions
Estimated Annual Sewage Plant Operating  Budget for 2005
Expected 2005 private facility electricity cost	4,000
Expected 2005 Sewage plant operating contract	36,000
Expected 2005 Sewage plant maintenance cost	6,000
Expected 2005 Supplies	4,000
Total sewage plant operating budget for 2005	50,000
For each 1.79% unit	895
For each 2.86% unit	1,430
For each 1.34% unit	670
Projected Operating Costs Over Life of Plant (Included in condo fee)
Assumptions:
Annual Increase in Sewage Plant Operating Cost	0.03
Life of new facility in years  (n)	30
Total outlay over 30years	2,581,134
NPV discount rate"r"(http://www.cbo.gov/showdoc.cfm?index=3983&sequence=5)	0.035
Computation:
NPV of "30" increasing payments discounted @ "3.5"%	1,449,275
For each 1.79% unit	25,942
For each 2.86% unit	41,449
For each 1.34% unit	19,420
Replacement Reserve (Included in condo fee)
Assumptions:
Replacement Horizon (Years)	30
Original cost of facility	250,000
Expected annual increase in replacement cost	0.015
Expected annual return on accumulated reserve(See WSJ 10/18/04 p. C-2)	0.04
Discount rate to use in PV calculation	0.04
Computation:
Replacement Cost=Original cost+ annual increase over30yr life of plant	390,770
Annual required replacement set-aside (PMT)	6,967
PV of stream of "30" equal annual set asides discounted @ 4 %	120,482
For each 1.79% unit	2,157
For each 2.86% unit	3,446
For each 1.34% unit	1,614
Summary: Lump-sum cost of private facility option
Total lump-sum cost of installing new private facility	275,000
Total lump-sum cost of operating private facility over 30 years	1,449,275
Total lump-sum cost of replacing private facility after 30 years	120,482
Total lump-sum cost of building, operating & replacing private facility	1,844,757
For each 1.79% unit	33,021
For each 2.86% unit	52,760
For each 1.34% unit	24,720
Compare to lump-sum cost of county sewer pumping station
DL share of county owned & operated pumping station	748,000
NPV of sewage fee of $3600/yr increasing @ 0.5% /yr for 30 years@4%	66,026
Total lump-sum cost of DL contribution + stream of sewage fees	814,026
(Note: The $814,026 lump-sum does not include the $3,000/unit
hook-on fee which is added to each unit below)	168,000
	Public	Vs. Private
For each 1.79% unit	14,571
After adding $3000 per unit Hook-on fee	17,571	33,021
For each 2.86% unit	23,281
After adding $3000 per unitHook-on fee	26,281	52,760
For each 1.34% unit	10,908
After adding $3000 per unitHook-on fee	13,908	24,720
The following material is provided for those who want to dig into the numbers and assumptions
Year	Operating Cost	Sewage Fee
1	-50,000	3,600
2	-51,750	3,618
3	-53,561	3,636
4	-55,436	3,654
5	-57,376	3,673
6	-59,384	3,691
7	-61,463	3,709
8	-63,614	3,728
9	-65,840	3,747
10	-68,145	3,765
11	-70,530	3,784
12	-72,998	3,803
13	-75,553	3,822
14	-78,198	3,841
15	-80,935	3,860
16	-83,767	3,880
17	-86,699	3,899
18	-89,734	3,919
19	-92,874	3,938
20	-96,125	3,958
21	-99,489	3,978
22	-102,972	3,998
23	-106,576	4,017
24	-110,306	4,038
25	-114,166	4,058
26	-118,162	4,078
27	-122,298	4,098
28	-126,578	4,119
29	-131,009	4,140
30	-135,594	4,160
http://www.cbo.gov/showdoc.cfm?index=3983&sequence=5
Financing
In consultation with a half-dozen experts from the water and municipal bond
industries, CBO derived pairs of assumptions about future interest rates,
borrowing terms, and the use of debt financing versus pay-as-you-go (or
paygo) for capital investment. CBO used related assumptions to estimate the
average annual spending to service debt on "old" (that is, pre-2000)
investments in drinking water and wastewater systems; the resulting
estimates are common to both of CBO's scenarios but somewhat lower than
those used in WIN's analysis.
The low-cost case uses a real interest rate of 3 percent (as does WIN's
analysis), and the high-cost case uses 4 percent. CBO chose those
assumptions on the basis of an estimated 3.2 percent weighted average
covering market-rate bonds and subsidized rates on state revolving fund
(SRF) loans. The estimate took into account CBO's long-run projections for
inflation and the nominal interest rate on 30-year Treasury bonds,
traditional spreads between Treasuries and municipal bonds, projections of
potential assistance from SRFs, and current interest rates on SRF loans.
That range from 3 percent to 4 percent may understate the true uncertainty
about average interest rates over the 2000-2019 period; however, once those
figures are combined with the many other pairs of low-cost and high-cost
assumptions, CBO believes that they yield suitably low and high estimates of
investment spending.
CBO assumes the average repayment period on borrowed funds to be 30 years in
the low-cost case and 25 years in the high-cost case; WIN's analysis assumes
a shorter period of 20 years. Although some (mostly smaller) municipalities
continue to borrow at terms as short as 10 years and loans from state
revolving funds must still be amortized over no more than 20 years, industry
experts told CBO that water bond maturities have lengthened overall and that
30 years is now the standard term. Even within the wastewater SRF program,
EPA now interprets its regulations to allow SRFs themselves to borrow
30-year money and use it to buy local systems' debt. As investment programs
increase, stretching out debt service will be increasingly important as a
way to contain rate increases; indeed, the Boston-area Massachusetts Water
Resources Authority is now borrowing 40-year money. Accordingly, CBO
considers 30 years a cautiously optimistic assumption for the average dollar
borrowed over the 2000-2019 period and 25 years an adequately pessimistic
alternative.
Similarly, keeping rates low in the face of rising investments will also
mean reducing the use of paygo financing in favor of borrowed funds. In two
small 1999 surveys of drinking water and wastewater systems, indirect data
appear to suggest average paygo shares of roughly 40 percent and 50
percent.(7) Nonetheless, according to industry experts, systems undertaking
large amounts of investment generally use paygo financing very little (often
a share of just a few percent), suggesting that the national average paygo
share will fall as capital spending rises. Reflecting the uncertainty about
how quickly and how far the average will fall through 2019, the high-cost
and low-cost cases use paygo rates of 30 percent and 15 percent,
respectively. WIN's analysis assumes a paygo share of 25 percent.
Assumptions about borrowing terms, paygo shares, and interest rates are also
relevant in estimating the costs of "old" debt service--that is, the
financing costs associated with previous investments still being paid off
during the 2000-2019 period. For simplicity, CBO uses the same assumptions
about those costs in both scenarios.(8) In particular, CBO assumes that the
repayment period on funds borrowed before 2000 is 20 years (shorter than the
25-year and 30-year periods used going forward) and that the assumed paygo
shares decline by 1 percent each year, from 50 percent in 1980 to 31 percent
in 1999. The latter assumption is broadly consistent with the theory that
paygo shares decrease as investment programs increase; a higher trajectory
of paygo rates could have been justified by the available (limited) survey
data, but would have implied larger discontinuities between 1999 and 2000.
Finally, rather than assume a fixed real interest rate, CBO's analysis used
each year's average nominal rate for 10-year Treasuries, reduced by spreads
ranging from 5 percent to 15 percent between municipal and Treasury bonds.
CBO then converted total annual payments for debt service to constant
dollars using the gross domestic product (GDP) deflator. For federal loans
through EPA's state revolving funds and the U.S. Department of Agriculture's
(USDA's) rural utilities program, the analysis used those same interest
rates less 2 percent.(9)
The estimates of average annual costs for "old" debt service resulting from
those assumptions are somewhat lower than WIN's: $4.4 billion instead of
$5.1 billion for drinking water and $4.3 billion instead of $4.4 billion for
wastewater.(10) The differences are primarily attributable to CBO's higher
paygo shares and differences in data sources; the use of variable interest
rates and the different method of converting to real dollars did not have
much impact.
http://www.bankrate.com/brm/rate/dep_ratehome.asp?web=brm&prodtype=dep&state=MD&market=759%2C558&search_from=1&sort=4&no_comments=&product=19&submit=Search
National Savings Rates		Updated as of Thu Oct 21, 01:13PM EST
Type	Rate	Yield
3 Mo CD	1.51%	1.52%
6 Mo CD	1.81%	1.83%
1 Yr CD	2.32%	2.34%
2 Yr CD	2.88%	2.92%
2.5 Yr CD	2.76%	2.80%
3 Yr CD	3.24%	3.29%
5 Yr CD	3.89%	3.96%
The WSJ listed the Five-year CD ann yield as 4% on 10.19.04, p C-2