2
Active Months Total Cost/Phase % Cost Reserves % Cost Grant % Cost Loan Cash Flow Over Project Life *For further explanation on this chart, see the following page. Cash Flow Considerations Example Phase 2: Planning to Evaluate and Select Technical and Funding Alternatives Phase 3: Permitting and Design to Secure Permission to Build and Complete Plans and Specifications for Bidding Phase 4: Construction to Build Planned Improvements 6 12 12 2 Revenue (Grant/Loan Reimbursment) Expenses (Bills) 50% 20% $1,200,000 $240,000 $90,000 0% 50% 50% 0% 50% 0% 0% 80% Phase 1: Preliminary Review to Consider Issues, Direction, and Preliminary Funding $20,000 100% 0% -$25,000 -$20,000 -$15,000 -$10,000 -$5,000 $0 $5,000 $10,000 $15,000 $20,000 $25,000 1 2 3 4 5 6 7 -$25,000 -$20,000 -$15,000 -$10,000 -$5,000 $0 $5,000 $10,000 $15,000 $20,000 $25,000 1 2 3 4 -$40,000 -$30,000 -$20,000 -$10,000 $0 $10,000 $20,000 $30,000 $40,000 1 2 3 4 5 6 7 8 9 10 11 12 13 Bridge Loan -$150,000 -$100,000 -$50,000 $0 $50,000 $100,000 $150,000 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Project Loan 3 to 12 Months to Secure Planning Funding 0 to 12 Months to Secure Design and Permitting Funding 6 to 24 Months to Secure Construction Funding $0 $25,000 $50,000 $75,000 1 2 3 4 $0 $25,000 $50,000 $75,000 1 2 3 4 5 6 7 8 $0 $25,000 $50,000 $75,000 1 2 3 4 5 6 7 8 9 10 11 12 13 14 $0 $25,000 $50,000 $75,000 1 2 3 4 5 6 7 8 9 10 11 12 13 14 $0 $200,000 $400,000 $600,000 $800,000 1 2 3 4 $0 $200,000 $400,000 $600,000 $800,000 1 2 3 4 5 6 7 8 $0 $200,000 $400,000 $600,000 $800,000 1 2 3 4 5 6 7 8 9 10 11 12 13 14 $0 $200,000 $400,000 $600,000 $800,000 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Cash On Hand ($) Cumulative Debt ($) Bridge Loan Construction Bridge Loan

Cash Flow Considerations Example, Project Funding

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Page 1: Cash Flow Considerations Example, Project Funding

$10,000 $15,000 $15,000 $25,000 $15,000 ###### $7,500 $10,000 $15,000 $25,000 $25,000 $30,000 $40,000 $30,000 $25,000 $15,000 $10,000 $7,500 $70,000 $80,000 $90,000 ####### ####### ####### ####### ####### ####### $90,000 $80,000 $70,000

($10,000) ######## -$10,000 ####### ####### ####### ####### -$10,000 -$7,500 #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! ###### ####### ####### ####### ####### ####### ####### ####### ####### ####### ####### #######

Active MonthsTotal Cost/Phase% Cost Reserves

% Cost Grant% Cost Loan

Active Months 1 2 3 4 1 2 3 4 5 6 7 8 1 2 3 4 5 6 7 8 9 10 11 12 13 14 1 2 3 4 5 6 7 8 9 10 11 12 13 14Expenses (Bills) -$10,000 -$10,000 -$10,000 ####### ####### ####### ####### -$10,000 -$7,500 ####### ####### ####### ####### ####### ####### ####### ####### ####### ####### -$7,500 ####### ####### ####### ####### ####### ####### ####### ####### ####### ####### ####### #######

Revenue (Debt) $0 $0 $10,000 $15,000 $15,000 $25,000 $15,000 $10,000 $7,500 $10,000 $15,000 $25,000 $25,000 $30,000 $40,000 $30,000 $25,000 $15,000 $10,000 $7,500 $70,000 $80,000 $90,000 ####### ####### ####### ####### ####### ####### $90,000 $80,000 $70,000

Cumulative Expenses $10,000 $20,000 $20,000 $30,000 $45,000 $60,000 $85,000 ####### ####### ####### ###### ####### ####### ####### ####### ####### ####### ####### ####### ####### ####### ####### $350,000 ####### ####### ###### ####### ####### ####### ####### ####### ####### ####### ####### ####### ####### ####### ####### #######

Cumulative Debt $0 $0 $0 $6,000 $9,000 $12,000 $17,000 $20,000 $22,000 $22,000 ###### $58,750 $63,750 $71,250 $83,750 $96,250 ####### ####### ####### ####### ####### ####### $175,000 ####### ####### ###### ####### ####### ####### ####### ####### ####### ####### ####### ####### ####### ####### ####### #######

Cumulative Revenue $0 $0 $0 $0 $10,000 $25,000 $40,000 $65,000 $80,000 $90,000 ###### $90,000 $97,500 ####### ####### ####### ####### ####### ####### ####### ####### ####### $322,500 ####### ####### ###### ####### ####### ####### ####### ####### ####### ####### ####### ####### ####### ####### ####### #######

Cash In Hand By Phase $70,000 $60,000 $50,000 $50,000 $40,000 $35,000 $35,000 $25,000 $35,000 $40,000 $50,000 ###### $42,500 $40,000 $35,000 $25,000 $25,000 $20,000 $10,000 $20,000 $25,000 $35,000 $40,000 $42,500 $50,000 $50,000 ###### $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000

Starting Ba ###### $80,000 $90,000 ####### ####### ####### ####### ####### ####### $90,000 $80,000 $70,000

Cash Flow Over Project LifeMonth 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

Bills $0 -$17,500 -$25,000 ####### ### ####### ####### ####### ####### ####### ####### ####### ###### ### ####### $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Revenue $0 $0 $17,500 $95,000 ### ####### ####### ####### ####### ####### ####### ####### ###### ### $70,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Cash In Hand $70,000 $52,500 $45,000 $40,000 ### $30,000 $30,000 $10,000 $5,000 $10,000 $50,000 $85,000 ###### ### ####### ####### ####### ####### ####### ####### ####### ####### ####### ####### ####### $110,000 ####### ####### ### ###### ####### ####### ####### ####### ####### ####### ####### ####### ####### ####### #######

*For further explanation on this chart, see the following page.

Cash Flow Considerations Example

Phase 2: Planning to Evaluate and Select Technical and

Funding Alternatives

Phase 3: Permitting and Design to Secure Permission to Build and Complete Plans and Specifications for Bidding

Phase 4: Construction to Build Planned Improvements

6 12 122

$70,000

Revenue (Grant/Loan

Reimbursment)

Expenses (Bills)

50%20%

$1,200,000$240,000$90,0000%

50%50%

0%50%

0%

0%80%

Phase 1: Preliminary Review to Consider Issues,

Direction, and Preliminary

Funding

$20,000100%

0%

-$25,000

-$20,000

-$15,000

-$10,000

-$5,000

$0

$5,000

$10,000

$15,000

$20,000

$25,000

1 2 3 4 5 6 7

-$25,000

-$20,000

-$15,000

-$10,000

-$5,000

$0

$5,000

$10,000

$15,000

$20,000

$25,000

1 2 3 4

-$40,000

-$30,000

-$20,000

-$10,000

$0

$10,000

$20,000

$30,000

$40,000

1 2 3 4 5 6 7 8 9 10 11 12 13

Bridge Loan

-$150,000

-$100,000

-$50,000

$0

$50,000

$100,000

$150,000

1 2 3 4 5 6 7 8 9 10 11 12 13 14

Project Loan 3

to 1

2 M

onth

s to

Secu

re P

lann

ing

Fund

ing

0 to

12

Mon

ths t

o Se

cure

Des

ign

and

Perm

ittin

g Fu

ndin

g

6 to

24

Mon

ths t

o Se

cure

Con

stru

ctio

n Fu

ndin

g

$0

$25,000

$50,000

$75,000

1 2 3 4$0

$25,000

$50,000

$75,000

1 2 3 4 5 6 7 8$0

$25,000

$50,000

$75,000

1 2 3 4 5 6 7 8 9 10 11 12 13 14$0

$25,000

$50,000

$75,000

1 2 3 4 5 6 7 8 9 10 11 12 13 14

$0

$200,000

$400,000

$600,000

$800,000

1 2 3 4$0

$200,000

$400,000

$600,000

$800,000

1 2 3 4 5 6 7 8$0

$200,000

$400,000

$600,000

$800,000

1 2 3 4 5 6 7 8 9 10 11 12 13 14$0

$200,000

$400,000

$600,000

$800,000

1 2 3 4 5 6 7 8 9 10 11 12 13 14

Cash

On

Hand

($)

Cum

ulat

ive

Debt

($)

Bridge Loan

Construction Bridge Loan

Page 2: Cash Flow Considerations Example, Project Funding

Cash Flow Considerations Example The diagram on the previous page shows a typical cash flow for a funded water or wastewater project. The graphic also shows agency cash on hand, or reserves, as well as cumulative debt. In the example, the cumulative debt is assumed to increase only with the percentage of project cost which is funded through loans. (% Cost Loan). The project funding that occurs through grants does not affect the cumulative debt (% Cost Grant). Typical characteristics of each project phase are described below:

Phase 1: Preliminary review to consider issues, direction and preliminary funding. A utility must spend existing funds in order to identify the needs of the water system and the programs available to fund the project. This process typically takes several months to complete. This step is typically non-refundable.

Phase 2: Planning to evaluate and select technical and funding alternatives. Costs are typically eligible for reimbursement through long-term grant or loan programs; however, agencies should check with potential funders for more information. A bridge loan1 may be needed if the cash on hand (reserves) are not accessible or if the final funding source does not reimburse planning and design costs until the construction phase. The example on the previous page assumes a bridge loan is needed, and reimbursement of costs is obtained within a month.

Phase 3: Permitting and design to secure permission to build and plans and specifications to bid. The final design and permitting for the project takes place, and bids come in from contractors. Similar to Phase 2, this process generally requires a bridge loan, although many funding agencies are now providing direct reimbursement.

Phase 4: Construction to build planned improvements. In this phase, costs are reimbursed through the final grant or loan funding source, which can take between 1 week to 3 months for reimbursement to begin from when costs are submitted to the funding agency. In this case, a construction bridge loan is needed to cover the time between when payment is due to the contractor and when reimbursement is received form the funder. The example assumed a 2 month reimbursement period and the bridge loan covers costs in the same month and is shown as a line on the graph. The bridge loan amount needed is equal to the two highest consecutive payments, which in the example is $280,000.

1Bridge Loans: Bridge loans are designed for two purposes. One is to provide temporary financing for a utility until permanent financing is secured. A second is to cover time gaps during construction between when contractor payment is due and funding agency reimbursement is provided. Due to the short term nature of bridge loans, they typically have higher interest rates than conventional loans. Bridge loans will typically be made for the largest amount that must be paid out of pocket, which ensures that the costs will be adequately covered throughout the phase of the project. Bridge loan funds are typically disbursed quickly and received within a month of being requested.