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EXHIBIT #1 Council Retreat of 01/28/2011 Why Are We Here?  Validate Vision, Critical Success Factors and Mission Statement Validate current and pending initiatives. Discuss budgetary goals EXHIBIT #1 Council Retreat of 01/28/2011 January 28, 2011 - Council Retreat 1

Are these statements still valid? VISION The City of Dover is a place where people want to live! Through the team effort of its elected officials, employees, and citizens, Dover is a clean and safe community with a future of balanced growth and opportunity where all citizens are heard, enjoy a high quality of life, and diversity is valued. CRITICAL SUCCESS FACTORS With these, we can achieve our Vision . . -Customer Satisfaction and Effective Community Communication - Employee Satisfaction and Effective Employee Communication - Cost and Revenue Efficiency - Improve Downtown and Surrounding Neighborhoods - City Wide Safety - Economic Development and Job Growth January 28, 2011 - Council Retreat 2

Are these statements still valid? MISSION STATEMENT It shall be the mission of the City of Dover to advance the following policies and projects however and whenever possible: Quality of Life -Establish a Regional Library in Dover - Promote Homeownership and Affordable Housing - Strengthen Property Maintenance and Enforcement - Support the building of the Inner City Cultural Center Infrastructure - Maintain and Improve the City’s infrastructure and implement Brown Water Solutions - Implement plan to secure Electric Generation for the next 20 years. Economic Development - Implement Economic Development Strategy (Garrison Tract Development & Downtown) January 28, 2011 - Council Retreat 3

EXHIBIT #2 Council Retreat of 01/28/2011 2011 COUNCIL RETREAT VOTES BROAD - OUTCOMES # OF ITEM # VOTES FOR VOTES DESCRIPTION OF PRIORITY Bonar, Carey, Hogan, McGiffin, McGlumphy, 1 8 Improve Public Safety - Gang Activity Russell, Salters, Williams Keep Up to Date with Enforcement of Abandoned 2 2 Leary, Ruane Properties 3 1 Keep Revenues up with Costs McGiffin Bonar, Hogan, 4 4 Continue Updating and Improving the Charter McGiffin, Russell Increase and Intensify Economic Development 5 Initiatives Improve/Mend Relationships - Kent County, Bonar, Carey, Leary, 6 5 Chambers of Commerce, Kent County Partnership, McGlumphy, Williams State of Delaware, etc. Carey, Hogan, McGiffin, Ruane, 7 7 Secure Electric Generation - Next 20 Years Russell, Salters, Williams 8 1 Secure Ownership of Electric System Williams 9 Strategic Funding of Economic Development Carey, McGiffin, 10 5 Continue/Increase Support of Cultural Arts McGlumphy, Russell, Salters Bonar, Carey, Leary, 11 6 Contain Cost to Meet the Current Revenue Base McGlumphy, Ruane, Williams Bonar, Carey, Hogan, Leary, McGiffin, 12 9 Continue Efforts to Meet/Change the Pension/OPEB McGlumphy, Ruane, Russell, Salters 13 1 Increase Affordable Housing Ruane

2011 COUNCIL RETREAT VOTES PAGE 2 # OF ITEM # VOTES FOR VOTES DESCRIPTION OF PRIORITY 14 2 Create Partnership with County for Joint Programs Hogan, Salters Hogan, Leary, 15 4 Contain the Size of City Government McGlumphy, Salters Bonar, Leary, Russell, 16 4 Stop Continued Duplication of Services Williams 17 1 County Property Tax Relief for City Residents Ruane SPECIFIC ACTIONS/PROGRAMS/PROJECTS # OF ITEM # VOTES DESCRIPTION OF PRIORITY VOTES FOR Bonar, Carey, Hogan, McGiffin, Ruane, 1 8 Continue Pressing of West Dover Connector Russell, Salters, Williams Bonar, Carey, 2 5 Support Youth Mentoring McGiffin, McGlumphy, Salters 3 2 Recreation - Support Youth Development Salters, Williams Bonar, Carey, Leary, 4 6 Increase Police to Appropriate Level McGlumphy, Ruane, Williams Implement Recommendations of Joint Legislative, McGiffin, Ruane, 5 3 Finance, and Administration and Safety Advisory and Williams Transportation Committee 6 1 Support Family Support Programs Williams Bonar, Carey, Hogan, Stay Fully Compliant with Current Financial Leary, McGlumphy, 7 8 Standards/Government Accounting Standards Board Russell, Salters, (GASB)/City Policies Williams Local Delaware Economic and Financial Advisory 8 Council (DEFAC) Group

2011 COUNCIL RETREAT VOTES PAGE 3 # OF ITEM # VOTES DESCRIPTION OF PRIORITY VOTES FOR 9 2 Go to Accurate Multi-year Budgeting McGlumphy, Ruane Collaborate More with Delaware Economic 10 2 Development Office (DEDO), League of Local McGlumphy, Salters Governments, and Kent County 11 Amend Charter to Address Annexation of Enclaves Re-examine the Authority and Scope of the Historic 12 2 Hogan, Leary District Commission Create Strategic Loan Fund for Economic 13 1 Carey Development Review the Dover Housing Authority and It’s 14 2 Hogan, Leary Relationship to the City Bonar, Carey, Hogan, Leary, McGiffin, 15 9 Ensure Fair and Impartial Redistricting Ruane, Russell, Salters, Williams Carey, Leary, 16 5 Re-examine Consent Decree on Minority District McGiffin, Ruane, Russell 17 Reduce Tax Delinquency - Step up Tax Sales Bonar, Carey, Leary, McGiffin, 18 8 Improve Minority Recruitment Efforts McGlumphy, Russell, Salters, Williams Bonar, Hogan, McGiffin, 19 6 Complete the Library McGlumphy, Ruane, Russell 20 Support Drug Abuse Rehabilitation Programs Bonar, Carey, Address Issues/Provide Remedies for Abandoned McGiffin, 21 6 Developments - Utility Committee Recommendation McGlumphy, Ruane, Williams

2011 COUNCIL RETREAT VOTES PAGE 4 # OF ITEM # VOTES DESCRIPTION OF PRIORITY VOTES FOR Establish Random Drug Testing Program for All 22 1 Russell Employees Hogan, Leary, 23 5 Establish an Ethics Hotline McGiffin, Russell, Salters 24 2 Review Council Benefits Russell, Salters 25 2 Explore Term Limits for Members of Council Bonar, Hogan 26 1 Explore Length of Terms for Members of Council McGlumphy Present State Legislation to Implement Local Service 27 3 Hogan, Leary, Ruane Function Budget for Kent County /jg/dd S:\ATTAC HM EN TS & EX HIBITS\C ouncil Exhibits\2011 Exhibits\01-28-2011\01-28-2011-2 C O U N C IL R ETR EAT - V otes.w pd

EXHIBIT #3 Council Retreat of 01/28/2011 Three Funds • Electric Fund – In the best shape, no rate increase – Can discuss: • Increasing the Power Cost Adjustment Credit • Capital Projects per CIP and Plant Improvements • Water/Wastewater Fund EXHIBIT #3 – Operation in good shape – Some planned rate increases in Water and Wastewater will be proposed for infrastructure replacement Council Retreat of 01/28/2011 January 28, 2011 - Council Retreat 1

Three Funds - continued • Groundwater Inflow Adjustment – Is working to pay down the deficit – No increase is planned – Further monitoring for possible adjustment down or contribution to Inflow and Infiltration projects • General Fund – In worse shape – Will focus on this today January 28, 2011 - Council Retreat 2

General Fund Expenses • Assumes – 3½ new positions ($136,275) – 2 Police officers, 1.5 FTE for Library – Reduction in workforce of 1.5 positions (LanTech for half year and Craftsperson) – Capital project spending – Follows the Budget model - spending according to Transfer Tax revenue where appropriate – Less than desirable – Operating Expenditures remain the same – Salary increases based on contracts and policies January 28, 2011 - Council Retreat 3

General Fund Revenues • Revenue Projection – $619,029 over Fiscal 2011 Final Budget • Assumes maintaining Electric Fund Transfer at $8,856,000 (or $1,606,000 above the current financial policy limit of $7.250 million) – This is approximately 9% of Electric revenues. • Resuming the transfer from the Water/Wastewater fund - $454,000 January 28, 2011 - Council Retreat 4

Water/Wastewater • Water/Wastewater fund financial soundness is improving • Level of infrastructure investment drives projected increases January 28, 2011 - Council Retreat 5

Water CIP • Maintains reasonable standard of investment – requires the following increase in rates(based on last year’s forecast): - FY11 – 11.1%; FY12 – 4%; FY13 – 12.5%; FY14 – 4.8%: FY15 – 5.2% (37.6% Total, without FY11 = 26.5%) • Comparable with surrounding private companies and most public water entities January 28, 2011 - Council Retreat 6

Wastewater CIP • Maintains reasonable standard of investment – requires the following increase in rates (based on last year’s forecast): - FY11 – 26.2%; FY12 – 12.8%; FY13 – 10%; FY14 – 4%; FY15 – 2.0% (45% Total with FY11or 28.8% without FY11) • Comparable with surrounding private companies (Tidewater & Artesian) and most public water entities January 28, 2011 - Council Retreat 7

Kent County Sewer Treatment Adjustment • Keeping up with I/I – projecting FY11 decrease in net loss • Deficit is so far going down slightly (2.5 – 3%) due to the implementation of the Ground Water Adjustment (GWA) Charge • Consider lowering the Groundwater Inflow Adjustment Charge or funding Inflow/Infiltration projects January 28, 2011 - Council Retreat 8

Budget Model – Early Indicator Only • Carry Forward Balance and Electric Transfer keep General Fund in shape (MR or model rows 109 and 11) • $ are available for some reserve contributions (MR 114) • Relate Funds to Revenue where rational relation is possible – Intra Fund Transfer & Electric Transfer – Support Services (MR 11-41) – Property Tax, Police Fines & Electric Excess to Safety (Police & Fire) (MR 43-55) January 28, 2011 - Council Retreat 9

Budget Model continued • Trash Fees to Sanitation Expenses (MR 57 – 64) – Model indicates a 16% increase in the rate is needed – Yard waste separation makes this difficult to predict • Street Aid and W/WW transfer to Street Programs (MR 66 - 73) – Model indicates that no changes are necessary • Transfer Tax and Excess Carry Forward to Capital Assets Fund – work towards only drawing for funds in reserve, not dependent upon transfer tax (MR 95 -102) January 28, 2011 - Council Retreat 10

Budget Model continued • Licenses and Permits to Quality of Life (MR 75-93) - Model indicates a 15% increase in Permits and Other Licenses is needed January 28, 2011 - Council Retreat 11

Fiscal 2012- Capital Investment Plans General Fund Project Name (Department) Fiscal 2012 Library 11,195,009 Annual Contribution to Robbins Hose (Fire) 369,820 Street & Alley Program (Public Services) 350,000 Concrete Construction & Replacement Program (Public Services) 60,000 Downtown Security Cameras (Mayor) 33,000 Pay-As-You-Go Water Load Station (Customer Service) 30,240 Dover Park Roof Replacement (Parks & Recreation) 30,000 Parking Lot Repair (Police) 25,300 GIS Infrastructure & Mobile Solutions (Public Services) 18,000 Total General Fund Projects $ 12,111,369 January 28, 2011 - Council Retreat 12

Fiscal 2012- Capital Investment Plans General Fund – Vehicle/Equipment Replacements Department Fiscal 2012 Central Services (Forklift and hybrid for mail courier) 60,187 Police (8-Crown Victoria’s, 3-Fusion’s) 221,234 Public Services – Grounds (1-Mower & 1-Dump Truck) 102,220 Public Services – Life Safety (Generator) 17,500 Public Services – Sanitation (1-Automated Trash Truck) 232,084 Public Services – Streets (1-Dump Truck & 1-Street Sweeper) 301,083 TOTAL GENERAL FUND VEHICLE REPLACEMENTS $934,308 January 28, 2011 - Council Retreat 13

Fiscal 2012 – Capital Investment Plans Water/Wastewater Fund Project Name Fiscal 2012 Project Name Fiscal 2012 Inflow/Infiltration Removal $ 1,000,000 Misc. Distribution System Improvements $ 60,000 SCADA Equip. Technology Upgr. 84,900 Wellhead Redevelopment Program 65,000 Lepore Road Pump Station Replacement 350,000 Emergency Generators (Wells) 80,000 Baltray Pump Station Replacement 25,000 Water Quality Improvements 500,000 Dover Brook Gardens Pump Station Upgrade 15,000 WATER MANAGEMENT TOTAL $705,000 Brandywine Pump Station Replacement 52,000 McKee Road Pump Station Replacement 10,000 WATER/WASTEWATER FUND TOTAL $2,278,900 Misc. Sewer System Improvements 37,000 WASTEWATER MANAGEMENT TOTAL $1,573,900 January 28, 2011 - Council Retreat 14

Fiscal 2012- Capital Investment Plans Water/Wastewater - Vehicle Replacements Division Fiscal 2012 Water/Wastewater Management $ 85,450 - 1 Utility Truck*, 2 Pick-Up Trucks *, & 1 Utility Truck w/Crane Water Management 42,450 - 1 Utility Truck & @2 Pick-Up Trucks* Water Construction 30,100 - 1 Utility Truck Water Treatment Plant 22,900 - 1 Pick- Up Truck TOTAL VEHICLE REPLACEMENTS $180,900 * 50/50 split between divisions January 28, 2011 - Council Retreat 15

Fiscal 2012 – Capital Investment Plans Electric Fund Project Name Fiscal 2012 Project Name Fiscal 2012 Substation PT & CT Replacement $ 267,715 Units 1 & 2 Cooling Tower Life Extension $ 25,410 Lighting Project & Rehabilitation 50,000 McKee Run Unit 3 Turbine Inspection 348,000 Equipment Replacement 40,000 McKee Run Unit 3 Auxiliary Sys. Comp. 113,000 Generator Replacement 50,000 Misc. Equipment Replacements 70,000 Frazier Substation Reliability Upgrade 155,000 McKee Run Unit 3 Stack Repairs 25,000 Distribution Feeder Replacement 277,510 Units 1 & 2 Life Extension 184,000 Distribution Capacitors and Controls 100,000 Unit 3 FD & ID Fan Control Damper Upgrade 92,000 Transmission Line Maintenance 75,000 Unit 3 DCS Computer and Software Upgrades 85,000 SCADA Master Hardware Replacement 75,000 McKee Run Demineralizer Control Replacement 65,000 Distribution Upgrades 500,000 McKee Run Unit 3 Boiler Systems 130,000 ELECTRIC ENGINEERING TOTAL $1,590,225 Van Sant Unit 11 Component Replacement 50,000 McKee Run Preservation of Structures 38,000 New Developments $600,000 Unit 3 Cooling Water Line Life Extension 25,000 ELECTRIC T & D TOTAL $600,000 McKee Run Unit 3 Air Heater Expansion Joint 70,000 McKee Run Switchyard Blast Walls 50,000 ELECTRIC GENERATION TOTAL $ 1,370,410 January 28, 2011 - Council Retreat 16 ELECTRIC FUND GRAND TOTAL $3,560,635

Fiscal 2012- Capital Investment Plans Electric -Vehicle Replacements Division Fiscal 2012 Electric T & D 48,337 - 2 Pick-Up Trucks TOTAL VEHICLE REPLACEMENTS $48,337 January 28, 2011 - Council Retreat 17

EXHIBIT #4 Council Retreat of 01/28/2011 1 City of Dover 2 Estimated Schedule of Expense and Revenues 3 As of January 28, 2011 4 5 Preliminary Estimate Only - Subject to Change 6 For Discussion Purposes Only 7 9 Expense Difference Revenue Increases 10 % of Rev Proprosed 11 SUPPORT SERVICES Maximum 1.072 1.154 1.230 12 CITY CLERK 297,248 ELECTRIC TRANSFER 8,856,000 8,856,000 9,493,700 10,219,900 11,677,300 13 COUNCIL 130,777 INTRAFUND SERV WATER/WASTEWATER 995,764 14 TAX ASSESSOR 202,910 INTRAFUND SERVICE RECEIPTS ELECTRIC 3,492,547 15 CITY MANAGER 585,983 16 INFORMATION TECHNOLOGY 729,966 17 FINANCE 851,213 18 PUBLIC SERVICES - ADMINISTRATION 382,821 19 FACILITIES MANAGEMENT 959,298 20 CENTRAL SERVICES 682,470 21 FLEET MAINTENANCE 775,212 22 CUSTOMER SERVICES 896,239 23 HUMAN RESOURCES 368,540 24 MAYOR 88,976 25 EMERGENCY PREPAREDNESS 308,447 26 DEPARTMENT SUBTOTALS 7,260,100 27 28 OTHER EXPENSE 29 DEBT SERVICE 331,800 30 DSWA RECYCLING PROGRAM - 31 INSURANCE 600,000 32 RETIREES HEALTH CARE 1,297,509 33 RETIREES PAYMENTS - 34 UNCOLLECTIBLES - TRASH AND OTHER 10,000 35 STREET LIGHTS 985,000 36 TRANSFER TO PENSION UNFUNDED LIABILITY 995,000 37 TRANSFER TO POLICE PENSION UNFUNDED LIABILITY 95,000 38 OTHER EXPENSE SUBTOTAL 4,314,309 39 TOTAL 11,574,409 TOTAL 13,344,311 13,344,311 13,982,011 14,708,211 16,165,611 40 41 FUNDED/(UNFUNDED) 1,769,902 1,769,902 2,407,602 3,133,802 4,591,202 42 43 SAFETY 44 FIRE 722,100 FINES AND POLICE REVENUE 536,502 45 POLICE 13,127,323 911 FEE 45,000 46 POLICE EXTRA DUTY 460,754 POLICE RELATED GRANTS 138,350 47 FIRE CAPITAL 369,820 CAPITAL SCHOOL DISTRICT REVENUE 73,500 48 POLICE CAPITAL 246,534 POLICE EXTRA DUTY 327,254 1.000 1.150 1.250 1.185 49 PROPERTY TAXES 10,678,798 10,678,798 12,280,618 13,348,498 12,654,376 50 PILOT 431,402 51 CIVIL TRAFFIC PENALTIES 1,200,000 52 TOTAL 14,926,531 TOTAL 13,430,806 13,430,806 15,032,626 16,100,506 15,406,384 53 Cents on tax Rate 5.12 8.53 6.31 EXHIBIT #4 54 FUNDED/(UNFUNDED) (1,495,725) (1,495,725) 106,095 1,173,975 479,853 55 CUMULATIVE FUNDED/(UNFUNDED) 274,177 274,177 2,513,697 4,307,777 5,071,055 56 REV EXP MODEL TT032210 (Cap) Council Retreat of 01/28/2011

57 SANITATION 1.000 1.160 1.000 1.000 58 SANITATION 908,356 TRASH FEE 2,050,000 2,050,000 2,378,000 2,050,000 2,050,000 59 LANDFILL FEES & RECYCLING 1,462,200 60 61 TOTAL 2,370,556 TOTAL 2,050,000 2,050,000 2,378,000 2,050,000 2,050,000 62 Fee 11.70 11.70 63 FUNDED/(UNFUNDED) (320,556) (320,556) 7,444 (320,556) (320,556) 64 CUMULATIVE FUNDED/(UNFUNDED) (46,379) (46,379) 2,521,141 3,987,221 4,750,499 65 66 STREETS 67 STREETS 871,615 MUNICIPAL STREET AID 526,843 1.000 1.000 1.000 1.000 68 STREET PAVING CAPITAL 410,000 WATER/WASTEWATER TRANSFER 453,743 453,743 453,743 453,743 453,743 69 TRANSFER TAX - 30% 300,000 300,000 300,000 300,000 300,000 70 TOTAL 1,281,615 TOTAL 1,280,586 1,280,586 1,280,586 1,280,586 1,280,586 71 72 FUNDED/(UNFUNDED) (1,029) (1,029) (1,029) (1,029) (1,029) 73 CUMULATIVE FUNDED/(UNFUNDED) (47,408) (47,408) 2,520,112 3,986,192 4,749,470 74 75 QUALITY OF LIFE 1.000 1.000 1.000 1.000 76 GROUNDS MAINTENANCE 1,036,828 BUSINESS LICENSES 1,523,675 1,523,675 1,523,675 1,523,675 1,523,675 77 LIBRARY 1,208,663 1.000 1.155 1.000 1.000 78 RECREATION 806,310 PERMITS AND OTHER LICENSES 934,000 934,000 1,078,770 934,000 934,000 79 CODE INFORCEMENT 286,098 1.000 1.000 1.000 1.000 80 PLANNING 438,410 LIBRARY REVENUES 64,189 64,189 64,189 64,189 64,189 81 INSPECTIONS 517,589 KENT COUNTY BOOK REIMBURSEMENT 460,000 1.000 1.000 1.000 1.000 82 ECONOMIC DEVELOPMENT 253,687 RECREATION REVENUE 141,500 141,500 141,500 141,500 141,500 83 TRANSFER TO CDBG FUND 6,000 BID REVENUE 52,692 84 FIRE MARSHALLS 200,657 INVESTMENT INCOME 127,500 85 DEMOLITION REVENUE - 86 MISCELLANEOUS CHARGES 54,250 87 FRANCHISE FEE 520,000 88 TOTAL 4,754,242 RENT REVENUE - GARRISON FARM 87,000 89 COURT OF CHANCERY FEES 645,000 90 TOTAL 4,609,806 4,609,806 4,754,576 4,609,806 4,609,806 91 92 FUNDED/(UNFUNDED) (144,436) (144,436) 334 (144,436) (144,436) 93 CUMULATIVE FUNDED/(UNFUNDED) (191,844) (191,844) 2,520,446 3,841,756 4,605,034 94 95 TRANSFER TO CAPITAL FUND - PROJECTS 703,656 FINAL FY10 DSWA REBATE - 96 TO CAPITAL RESERVE - TRANSFER TAX - 70% 700,000 97 98 99 TOTAL 703,656 TOTAL 700,000 700,000 100 101 FUNDED/(UNFUNDED) (3,656) (3,656) (3,656) (3,656) (3,656) 102 CUMULATIVE FUNDED/(UNFUNDED) (195,500) (195,500) 2,516,790 3,838,100 4,460,598 103 TOTAL REVENUE(does not include Fund 104 TOTAL EXPENSE 35,611,009 Balance) 35,415,509 35,415,509 105 106 FUNDED/(UNFUNDED) (195,500) (195,500) 2,516,790 3,838,100 4,460,598 107 CUMULATIVE FUNDED/(UNFUNDED) (195,500) (195,500) 2,516,790 3,838,100 4,460,598 108 109 FUND BALANCE REQUIREMENT 2,833,241 FUND BALANCE JULY 1 3,471,979 110 111 FUNDED/(UNFUNDED) 638,738 443,238 3,155,528 4,476,838 5,099,336 112 CUMULATIVE FUNDED/(UNFUNDED) 443,238 443,238 3,155,528 4,476,838 5,099,336 113 114 TRANSFER EXCESS FUND BALANCE TO RESERVE(S) 443,238 EXCESS FUND BALANCE 443,238 115 116 FUNDED/(UNFUNDED) 0 117 CUMULATIVE FUNDED/(UNFUNDED) 0 REV EXP MODEL TT032210 (Cap)

Projected Shortage for the Year> (195,500) General Fund 35,611,009 195,500 Expense minus Reveneus 35,415,509 General Fund 35,415,509 Tie to Expenses - - - - Tie to Revenues - One cent of tax rate 313,008 - REV EXP MODEL TT032210 (Cap)

EXHIBIT #5 Council Retreat of 01/28/2011 CITY OF DOVER Capital Project Financing Governmental Funds January 28, 2011 EXHIBIT #5 Council Retreat of 01/28/2011

OTHER GOVERNMENTS - GENERAL FUNDS CAPITAL PROJECT FUNDS – FUND BALANCES  State of Delaware 6/30/10 CAFR ($33.6M) Unreserved  Annual Debt Service 3.9% of Budget  Federal Fund Balance ($48.4M); Deferred Revenue $124.8M  FY09 Federal $32.9M; Capital $16.0M  New Castle County 6/30/10 CAFR ($304.7M) Unreserved  Annual Debt Service 12.9%  Kent County 6/30/09 CAFR $12.0M Unreserved  Annual Debt Service 1.8% of Budget  City of Newark 12/31/09 CAFR $4.9M Unreserved  Annual Debt Service is 0.0% of Budget  City of Dover 6/30/10 CAFR $.5M Unreserved  Designated $3.5M for Library  Annual Debt Service is 1.0% of Budget 2

FINANCING STRATEGIES  Pay as you go – more appropriately used for small p j rojects or q p equipment that have a short useful life; i.e. less than 10 years  Capital project funds or capital reserves – utilized to partially fund or completely fund capital projects;  Debt Financing – Bonds or Loans are more appropriately used for large projects that have a j long useful life; i.e. greater than 10 years;  The City currently uses all three above strategies for Water, Wastewater and Electric projects  The City currently uses pay as you go for all Governmental p j rojects 3

WHEN IS BORROWING A GOOD IDEA?  When a facility or equipment is very expensive and may represent an excessive burden on current taxpayers or rate payers.  More closely matches the cost of the facility to the generational use  Smooth out cash flow requirements of the operating budget versus doing pay go for major projects yet continues to meet h i the needs of h the community  When the useful life of a facility will extend for a long time (over 10 years)  When asset value received equals value invested (i.e. capital construction, land acquisition) 4

WHEN IS BORROWING NOT A GOOD IDEA?  To fund p operating p expenses – no asset value received, long term debt obligation  When the useful life is less than the payback period  When interest costs are excessive  When the total cost of debt begins to interfere with normal, necessary operating expenses 5

PREVIOUS ACTIONS TAKEN TO FINANCE FUTURE GOVERNMENTAL ASSETS  FY03 Creation of Capital Asset Reserve p  Analysis on Page 7  FY07 Creation of Designated Library Reserve  Analysis on Page 8  FY08 Creation of Governmental Capital Project Fund  Analysis on Page 9 6

FY03 CREATION OF CAPITAL ASSET RESERVE o The City created the Capital Asset Reserve with a one-time receipt of $750,000 in transfer taxes from the sale of the Dover Mall o Policy – The City will create a Capital Asset Reserve account for Governmental Fund asset procurements. Optimally, the amount set aside for future asset replacements should equal the annual depreciation (FY 10 $2.5 million) of the current assets. The City will appropriate excess (amounts greater than budgeted) revenues to fund this account, or if the balance is less than the $500,000 minimum, $200,000 per annum until such time the minimum balance is replenished 7

FY07 CREATION OF LIBRARY RESERVE 8

FY08 CREATION OF GOVERNMENTAL CAPITAL PROJECT FUND  Takes projects out of the operating fund and eliminates large increases/decreases related to projects when analyzing operating changes  Policy – The City will create a General Capital Project Fund to account for all General Government asset procurement and projects. The City will provide operating fund transfers and/or debt proceeds for each fiscal year’s Capital Investment Plan. All vehicle and equipment purchases under $25,000 will be budgeted on a pay as you go basis 9

GENERAL FUND CHALLENGES  Dedicated receipts sufficient to fund current fiscal year projects as well as build balances for future projects  Current annual depreciation $2.5 million based on historical values of assets; not replacement cost; policy benchmark is annual depreciation  Streets $1.1 million  Buildings $.3 million  Storm Sewers $64,000  Street Lights $16,000  All other equipment and vehicles equal the remaining $1.3 million  Current economic environment i ifi i significantly impeding our ability to affect change  Demands on limited resources for operations, wages, benefits, and capital replacements 10

MOST RECENT DEBT ISSUES  1992 Bond Issue - $1,000,000  Street program and tax ditches for Water Street flooding  1993 Bond Issue - $3,340,000  Refunding 1987 & 1988 Bonds ($2.4 mil), Street program, and Phase II of tax ditch for Water Street flooding, other miscellaneous projects  1995 Bond Issue - $3 000 ,000,000  Police Station addition and improvements  2003 Bond Issue - $3,430,000  Refunded balance of 1992 bonds and 1995 bonds improvements  Ratio of Debt Service to Total General Fund Expenditures  2010 = 1.0%; 2005 = 1.6%; 2000 = 4.3%;  2010 = $328,410; 2005 = $440,371; 2000 = $687,904;  2010 = $32.7M; 2005 = $27.9M; 2000 = $20.0M; 11

GENERAL FUND DEBT SERVICE SCHEDULE 12

SUGGESTIONS – PLANNING FOR THE FUTURE  Some suggestions  Identify dedicated receipts for capital projects  Implement plan – set a time period in which to build sufficient fund balances dedicated to replacement or improvement of buildings and infrastructure  Include in Capital Improvement Plan sources of funds to pay for projects and whether or not we will use current resources or if fee increases will be warranted; i.e. Financial Forecast – Utilities  Insure Capital Improvement Plan is not too aggressive in trying to replace too many long-term assets over a short-time horizon;  Adhere to the City’s capital improvement program; It doesn’t help the City’s infrastructure or credit ratings to continually defer projects in tight budgets; This creates a build up of replacements and financing issues; Once again, financing will help to smooth these requirements;  As debt service payments decline, add new debt to keep up with needed improvements to maintain the same budget level; Otherwise the funds will be reverted to some other line item;  C ti ontinually monitor debt levels for ff d affordability  Continue to evaluate core services and needs of community 13