Purpose

San Antonio Water Company shall maintain reserve funds. This policy establishes the level of reserves necessary for maintaining the Company's credit worthiness and for adequately providing for:

• Funding infrastructure replacement.
• Economic uncertainties and other financial hardships.
• Future debt or capital obligations.
• Cash flow requirements.

Operating Reserves

The Operating Reserve Fund is used for unanticipated operating expenses and to meet routine cash flow needs. 

The minimum target level for the Operating Reservce is 90 days of Company's budgeted total operating expenses.  The maximum target level for the Operating Reserve is 180 days of Company's budgeted total operating expenses.

Capital Investment and Depreciation Reserves

The Capital Investment and Depreciation Reserve Fund is intended for:

• The planned replacement of capitalized assets when they reach the end of their useful lives.
• The emergency replacement of capitalized assets when they have catastrophically failed.

The Company will strive to maintain a minimum balance totaling 5% of Company's Total Property, Plant and Equipment value as reported in the most recent Independent Auditors' Report.

The Company will strive to maintain balance below 20% of Company's Total Property, Plant and Equipment value as reported in the most recent Independent Auditors' Report.

Debt Service Reserves

The Debt Service Reserve Fund is intended to comply with restrictions set forth in legal documents pertaining to the Company's borrowing of money.  These funds may be held in trust in favor of the loan holder.

The Company will maintain a minimum balance as determined by conditions set forth in the borrowing documents.

The Company will strive to maintain a maximum balance that is no more than required to ensure continued compliance with conditions of the borrowing documents.

Procedure for Monitoring Reserve Levels

Fund balances will be reviewed by the Board on an monthly basis.  Operating Reserve Fund balance that exceeds the established maximum will be transferred as necessary into the Capital Reserve Fund.

On an as-needed basis, monies from the Capital Reserve Fund can be used to pay for operating emergencies as a supplement to the Operating Reserve Fund. 

Capital Reserve fund balance will be approved by the Board during preparation of annual budget.

Debt Service Reserves will be reviewed by staff on a regular basis consistent with the payment schedule conditions of the borrowing documents.

The Board has sole authority to amend or revise the Reserve Funds Polity.