§ 3.09.030. General Provisions.

The District will maintain its liquidity and capital funds in separate, designated sub-accounts in a manner that ensures its financial soundness and provides transparency to its ratepayers. Only cash and marketable securities will be used to fund the designated Fund balances as outlined in this Policy. The Fund balances are considered the minimum necessary to maintain the District's creditworthiness and adequately provide for:

A.

Compliance with applicable statutory requirements.

B.

Financing of future capital facilities and repair and replacement of existing assets.

C.

Financing of water purchases through the Water Banking Program.

D.

Cash flow requirements.

E.

Economic uncertainties, local disasters, and other financial hardships or downturns in the local or national economy.

F.

Contingencies or unforeseen operating and/or capital needs.

In the context of funding future capital facilities and maintaining and replacing existing assets, in each instance, the District will analyze the benefits and trade-offs of utilizing Pay-Go and/or debt financing to determine the optimal funding strategy or combination of funding strategies in accordance with the District's Debt Management Policy 1.5. The analysis will consider the District's current and projected liquidity, capital positions, the impact of inflation, the cost of water and other operational factors of the District and its capital improvement program. The District will measure its liquidity position by calculating "day's cash" or other appropriate liquidity calculations. In addition, the District will calculate its capital positions, as measured by its debt-to-equity ratio and any other appropriate calculation.

The District has established and will maintain the following primary Funds and their respective sub-accounts:

A.

Restricted Funds: Comprised of Bond Proceeds Fund and Developer Fees.

B.

Capital Funds: Comprised of the Capital Project Account, the Emergency Account, the Administrative CIP Account, and the Local Water Resource Development Account.

C.

Liquidity Funds: Rate Stabilization Account, Water Banking Account, the Operating Reserve Account, the Compensated Absences Reserve Account, and the Customer Assistance Program Reserve Account.

Fund balances will be reviewed on an annual basis to ensure compliance with this Policy. On an as-needed basis, moneys can be moved between the Capital and Liquidity Funds as approved by the Board.

The minimum established for each Fund represents the baseline financial condition that is acceptable to the District from risk and long-range financial planning perspectives. Maintaining reserves at appropriate levels is a prudent, ongoing business process that consists of an iterative, dynamic assessment and application of various revenue generating alternatives. These alternatives (either alone or in combination with each other) include, but are not limited to: fees and charges, water usage, capital financing, investment of funds and levels of capital expenditures.

( Res. No. 2015-11-5, § 1, 11-24-2015 ; Res. No. 2018-12-1 , § 3, 12-11-2018)