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38 <br />Additional Information Regarding Projections. The table above reflects a number of <br />assumptions regarding projected debt service coverage for Fiscal Years 2022-23 through 2025- <br />26, including the following: <br />•There is a 2.5% growth in customers during the projection period coming out of a <br />drought. <br />•Rate increases during the projection period consistent with the previously <br />adopted rate study, which provides for increases of approximately 32.5% for <br />calendar year 2024 and 11.5% for calendar year 2025. <br />•Purchased Water expenses are projected by the City to increase by up to 6% per <br />year; actual costs charged by Zone 7 may vary significantly from this estimate. <br />Other expenses, consisting of personnel services and services & supplies, are <br />projected to increase at between 3% to 5% per year. <br />•A borrowing of $6 million was estimated for the near-term infrastructure <br />improvements during the projection period. <br />With respect to capital costs associated with the Water System, the City’s current CIP <br />identifies several projects for planning purposes. All future years’ projects and their related <br />funding require annual review and approval by the City Council and are therefore subject to <br />change. The City records its infrastructure capital costs, including Water System capital costs <br />as capital assets. Because capital costs are not included in the definition of Maintenance and <br />Operation Costs, they will not affect the availability of Net Revenues to make the Installments <br />Payments. Should the City decide to finance any of these capital costs through the issuance of <br />Parity Debt within the projection period, projected debt service coverage could decrease without <br />a corresponding increase in either rates or customers. <br />Page 314 of 448Page 323 of 557