January 6, 2010

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INTRODUCTION

OVERVIEW OF FUNDS

SUMMARY

QUESTIONS

SUPPLEMENTAL INFORMATION

◦ Background Information and Capital Projects

◦ Proposed budgets , levies and circuit breaker

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The Gary Sanitary District (the “GSD”) is seeking assistance from the Distressed Unit Appeals Board pursuant to I.C. 6-1.1-20.3-6.

We are seeking assistance to ensure continuation of sanitary district services to users of the systems.

Under the provisions of I.C. 6-1.1-20.3-6, GSD would be required to reduce its tax levy in the amount of $2,900,939 in 2009, $3,561,094 in 2010 and $3,539,220 in 2011.

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To comply with the circuit breaker legislation, GSD respectfully requests that the DUAB grant a continuation of its financial plan covering the next 3-year period and allow GSD to phase-in of the tax caps.

Three funds are funded from property taxes:o Sewer Operating Fund – pays for sewer cave-ins and

sewer collection system costs.o Solid Waste Fund – in conjunction with user fees pays for

garbage collection and disposal costs. o Debt Service Fund – pays annual debt service on 2 bonds.

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The Sewer Operating Fund (property tax fund) pays for:

◦ Sewer collection system cave-ins.

◦ Sewer cleaning and televising the lines.

◦ Gary portion of O & M expenses of the collection system.

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Solid Waste Fund (property tax fund) The Solid Waste Fund was established in approx. 1999

when Gary’s landfill was closed and provided funds for costs of disposal of waste to another landfill and to assist the City with paying the costs of its sanitation workers.

In fall of 2008, GSD amended contract with Allied Waste to provide for the collection, disposal and recycling of waste.

Resident paid garbage fees were approved by GSD Board in Oct. 2008 and implemented in January 2009.

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Solid Waste Fund (continued) Initial garbage fees were never intended to cover full

cost of garbage collection and disposal. During 2009, litigation occurred on the amended

garbage contract and fees. Between May and October 2009 court order issued to

stop billing customers for garbage collection fees. Garbage fee billings were resumed in October 2009. GSD estimates that it is behind approx. $1.5M in

garbage fee collections as result of court order.

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Debt Service Fund (property tax fund) Historically GSD has paid debt service on bonds issued

for capital projects from property taxes. Two bond issues are currently funded from property

taxes. Two bond issues (1993 SRF and 2003 Refunding Bonds)

will be paid off in 2013.

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In 2009 GSD had foregone circuit breaker relief for property tax-based funds.

GSD requests to phase in its circuit breaker credits in 2010 and 2011.

Without relief in 2010, GSD will not be able to repair significant sewer cave-ins and garbage collection and disposal services will be in jeopardy – creating serious health and safety issues.

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Sewer Operating Fund Sewer Operating Fund to remain as a tax

levy fund for repairing sewer cave-ins and collection system repairs. ◦ GSD’s collection system is old and many lines are

collapsing (many are 50+ years). ◦ Over $3,000,000 of emergency cave-in work is

pending. ◦ Without property tax support, future capital

projects would cause GSD to impose impossibly high sewer rate increases causing extreme hardship to Gary’s system users.

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Sewer Operating Fund (continued)

The Sewer Operating Fund can function within the property tax caps after 2012.

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Solid Waste Fund Tax levy needed in 2010 and 2011 to fund

garbage collection and disposal. GSD to consider an increase in garbage fees

during 2010 and 2011. Annual estimated cost of garbage collection and

disposal is between $7.5M and $7.8M. Due to on-going litigation over garbage contract

and fees and current fees do not cover total costs – need tax levy in 2010 and 2011 to fund garbage collection and disposal.

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Solid Waste Fund (continued)

In excess of $1.5M in revenue shortfall in 2009 due to court mandated stoppage of garbage fee billings.

Goal to remove Solid Waste Fund from property tax funding by 2012.

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Debt Service Fund

GSD’s Debt Service Fund pays annual debt service for 2 bond issues (1993 SRF Loan and 2003 Refunding Bond) which is funded by property taxes.

Bond issues are fully paid off in early 2013 which removes approximately $.09 from GSD’s property tax rate beginning in 2013.

No future bonds issues are being planned to be repaid out of property taxes.

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QUESTIONS?

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SUPPLEMENTAL INFORMATION

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General Information & Capital Projects GSD operates a 60 MGD wastewater treatment

facility. GSD operates under a modified EPA Consent

Decree (2002) and approved NPDES permit (2006).

Since 1992 GSD has spent over $ 60M in capital improvements for its wastewater and sewer collection systems.

Currently is designing approx.$9.8M in IDEM approved, SRF loan funds, for projects estimated to be completed by June 30, 2010.

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General Information & Capital Projects (Con’t.)

Other IDEM Required Capital Projects:◦ Rehabilitating Filter Building $16-18M (90% designed)

◦ New digesters $5 to $6M (currently being designed)

◦ Anticipate new SRF loan to complete both projects.

Ralston Street Lagoon – Under US DOJ/EPA 2002 consent decree to develop plan to remediate PCB contaminated lagoon. Projected costs may range up to $70M (unfunded mandate).

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General Information & Capital Projects (Con’t.) Long-Term Control Plan – federally required plan is due

at end of 2010 (unfunded mandate). ◦ Plan may require GSD to eliminate CSO’s.

◦ Additional capital costs are unknown at this time.

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General Information (Continued)

Sewer user fees pays for:◦ O & M on the wastewater treatment facility ◦ O & M for collection system (in conjunction with Sewer Operating

(property tax funds) ◦ Equipment Replacement funding and ◦ Annual debt service on the 2000 SRF Revenue Bonds ($25.4M)

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Circuit Year Budget Levy

Breaker (1)2009 2,559,041 2,184,979 (2) N/A2009 2,423,642 2,050,304 (3) N/A2010 2,547,368 2,210,000 N/A2011 2,540,705 2,334,655 N/A2012 2,533,050 2,029,058 N/A

(1) Property taxes imposed to pay debt service are not considered for purposes of calculating the circuit breaker in Lake County, Indiana.

(2) Certified Levy per Pay 2009 1782 Notice.(3) Levy per DUAB Final Determination.

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Circuit Year Budget Levy

Breaker (1)2009 4,515,717 3,277,468 (2) 1,300,2012009 3,740,372 1,027,975 (3) 1,300,2012010 2,500,000 2,700,000 1,158,4242011 4,150,000 3,500,000 2,752,8052012 5,000,000 4,500,000 N/A

(1) Circuit Breaker per Legislative Services Agency, December 1, 2009.(2) Certified Levy per Pay 2009 1782 Notice. Includes excess levy.(3) Levy per DUAB Final Determination.

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Circuit Year Budget Levy

Breaker (1)2009 7,075,027 4,034,896 (2) 1,600,7382009 6,513,776 2,925,821 (3) 1,600,7382010 6,550,000 5,600,000 2,402,6702011 7,265,738 1,000,000 786,4152012 7,265,738 0 N/A

(1) Circuit Breaker per Legislative Services Agency, December 1, 2009.(2) Certified Levy per Pay 2009 1782 Notice. Includes excess levy.(3) Levy per DUAB Final Determination.

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$-

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

Year

Budget to Levy ComparisonSewer Operating Fund

2006 - 2012

Budget Levy

25

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$-

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

$7,000,000

$8,000,000

Year

Budget to Levy ComparisonSolid Waste Fund

2006 - 2012

Budget Levy

27

28

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