APPA Business & Financial Conference Savannah, Georgia September 15, 2009 Kevin Crawford, CPA Financial Analysis & Compliance Manager Gainesville Regional Utilities Utility Debt and Investment Policies

2 Gainesville Regional Utilities Municipally-owned Combined Utility System –Located in Gainesville, Florida –898 employees serving: 92,849 Electric customers 33,777 Natural Gas customers 69,772 Water customers 61,552 Wastewater customers Revenue Base is Diversified –FY 2008 combined systems revenue of $352.6 million –FY 2008 Revenue Breakdown: Electric 63.8%, Wastewater 14.4%, Water 12.3%, Gas: 5.3%, Other 4.3% Total Debt Outstanding of approximately $785m, with an overall cost of debt below 4.50% Current Investable balance of $144m, increasing to $349m

3 Debt Management Policy Objective –Take a long term approach in borrowing funds at the lowest possible interest cost in view of GRU’s risk tolerance Investment Structure is contemplated in debt management Annual Plan of Finance projects the amount of debt to be issued considering –Capital project evaluation –Availability of equity funds –Desired debt service coverage levels

4 Debt Management Policy: Debt Structure Authorized to issue senior and subordinate debt Can issue either tax-exempt or taxable Fixed versus Variable Rate Debt –Overall cost of capital –Interest rates –Shape of the yield curve –Changing tax or other laws –Flexibility –Goal is a 60% Fixed/Synthetic Fixed and 40% Variable Evaluate risk versus cost savings GRU consults with our financial advisor routinely

5 Debt Management Policy: Debt Structure

6 Net Fixed and VariableSwap Composition

7 Debt Management Policy Ability to: –Fund a Debt Service Reserve –Utilize bond insurance –Refund debt where economical –Enter into interest rate swaps –Select underwriters, bond counsel and others Reporting and Compliance –Annually report on outstanding indebtedness summarizing principal amounts, interest rates and maturities –Responsibility to comply with all arbitrage and other bond related requirements –Regularly analyze investments and use of bond proceeds

8 Investment Policy Objectives –Preservation of Capital –Provide sufficient liquidity to meet requirements –Provide returns commensurate with risk limitations Ethical Standards –“Prudent Person Rule” –No conflict of interest Authorized Institutions and Dealers –“Primary Security Dealers” –Approved by Investment Committee –Selection Based on: State Law, City of Gainesville ordinance, Bond Resolution Financial Condition of company Competitiveness Performance & Expertise References

9 Investment Policy Security Selection Criteria –Competitive bids from at least three firms –Comparison to the current market price –Flexibility to sole source due to market conditions, time constraints, unique security Authorized Investments are Defined by the Bond Resolution and City Ordinance –Government Securities (Bills, SLGS, Treasuries Bills/Notes) –CDs issued by Florida Qualified Public Depositories –Federal Instrumentalities (FNMA, FHLB, FHLMC) –Federal Agencies –State and Local Government Taxable/Tax-Exempt Debt –Corporate Fixed Income Securities –SBA Investment Pool –Fixed-Income Mutual Funds –Repurchase Agreements –Money Market Mutual Funds

10 Investment Policy Portfolio Composition and Diversification Allowable Investments Maximum Maturity Maximum Total Portfolio Minimum Total Portfolio Government Securities 10 years100%20% Certificate of Deposit 1 year20%N/A Agencies10 years45%N/A Commercial Paper5 years20%N/A Government Sponsored Entities 10 years45%N/A

11 Investment Policy Reporting & Performance Measurement –Establish Investment Committee to review investment activity and performance –Provide monthly investment report Balances Portfolio Composition, Mix, Terms & Maturities Earnings & Yield Analysis and history Cash Flow estimates and requirements Credit Monitoring Benchmarking Analysis –Approve exceptions Other Items to Consider –Internal Controls –Continuing Education –Reporting Requirements –Investment Committee Oversight

12 Maintenance Oversight is critical. –Strict adherence to the monitoring prescribed in the policies is essential –Exceptions, specific authorizations, reporting requirements should all be noted and documented. Change is inevitable. –Prudent policy management dictates changes from time to time. Market conditions may change, certain investment/debt instruments may no longer be prudent or practical, etc. –Any modifications to the policies should be made in accordance with established guidelines

13 Summary Oversight & Governance Debt & Investment Activity Reporting & Monitoring Debt & Investment Management Policies