JOINT POWERS FINANCING AUTHORITY AGENDA PACKET 9-15-26

14 (c) all other payments required for compliance with the Installment Sale Agreement, the Indenture and the Parity Debt Instruments; and (d) all payments required to meet any other obligations of the City that are charges, liens, encumbrances upon or payable from the Gross Revenues of the Water System or the Net Revenues of the Water System. Debt Service Coverage. In addition, under the Installment Sale Agreement, the City will fix, prescribe, revise and collect rates and charges for the Water System during each Fiscal Year which are sufficient to yield Net Revenues at least equal to 120% of the Installment Payments and Debt Service on Parity Debt in such Fiscal Year. For purposes of this paragraph, the amount of Net Revenues for a Fiscal Year will be computed on the basis that any transfers into the Water Fund in such Fiscal Year from the Rate Stabilization Fund are included in the calculation of Net Revenues (except to the extent of amounts transferred into the Rate Stabilization Fund from Gross Revenues received by the City in such Fiscal Year, so as to avoid double counting). Parity Debt The City currently has two outstanding long-term debt obligations payable from Net Revenues of the Water System on parity with the 2026 Bonds. See “THE WATER SYSTEM – Outstanding Indebtedness.” In the future, the City may, by a Parity Debt Instrument, issue or incur other loans, advances or indebtedness payable from Net Revenues to be derived from the Water System, to provide financing for the Water System, in such principal amount as may be determined by the City. The City may issue or incur any such Parity Debt subject to the following specific conditions that are made conditions precedent to the issuance and delivery of such Parity Debt: (a) The City will be in compliance with all covenants set forth in the Installment Sale Agreement and in the Indenture. (b) The Net Revenues of the Water System, calculated on generally accepted accounting principles, as shown by the books of the City for the latest Fiscal Year or any more recent 12-month period selected by the City ending not more than 60 days prior to the adoption of the Parity Debt Instrument pursuant to which such Parity Debt is issued, as shown by the books of the City, plus, at the option of the City, any or all of the items hereinafter in this paragraph designated (i) and (ii), must at least equal 120% of Maximum Annual Debt Service, with Maximum Annual Debt Service calculated on all bonds and other obligations to be outstanding immediately subsequent to the issuance of such Parity Debt which have a lien on Net Revenues of the Water System. The items any or all of which may be added to such Net Revenues for the purpose of issuing or incurring Parity Debt under the Installment Sale Agreement are the following: (i) An allowance for Net Revenues from any additions to or improvements or extensions of the Water System to be made with the proceeds of such Parity Debt, and also for Net Revenues from any such additions, improvements or extensions which have been made from moneys from any source but in any case which, during all or any part of such Fiscal Year or such 12-month period, were not in service, all in an amount equal to 90% of the estimated additional average annual Net Revenues to be derived from such Page 142 of 205