2005/05/11 Council Agenda Packet

I continue throughout all 240 months of the 20-year contract period,transition O&M will last only during the portion of the first year in which transition activities are necessary. The prices for capital projects include prices for initial capital upgrades(ICUs)and for other capital projects.Prices for ICUs are shown in Table S-2 and prices for other capital projects are shown in Table S-3.These prices are in terms of"nominal dollars" in that they include inflation. Improvements necessary to bring the NSE utility systems into conformance with standards needed for Everett to safely provide the service. Everett will make these improvements during the first 5 years of ownership and operation. Costs have been estimated and then amortized over 10 to 15 years depending on the project. Amortization will be per federal guidelines (30-year bond as shown in"Nominal Interest Rates on Treasury Notes and Bonds"published in OMB Circular No.A-94). Other capital projects are renewals and replacements to existing system components that need to be renewed or replaced during the contract term. As shown in Table S-3,the full cost of those projects will be charged to NSE as the renewals and replacements are made.No projects are anticipated for renewal and replacement of water system components at NSE.In 2005 dollars,about$1.2 million in renewals and replacement of sewer system components are planned;about$1.3 million in renewals and replacement of oily water separation components are also planned. Everett's cost proposal(summarized in Tables S-1,S-2,and S-3)has identified 6 cost line item numbers for the water,wastewater and OWTP as are: Normal 0&M,Transition 0 &M,Initial Capital Upgrades(ICUs),Other Capital(renewals and replacements), Purchase Price Recovery,and Purchase Price Payment. 64 S:\MSadla\WORD\Navy\final docs\comcil Executive Summary.doc 4 5/2/2005