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transfers or budgeted expenditures may need to be reduced. However, should additional growth occur, or costs escalations decrease over the next several years, the proposed adjustments may provide adequate operating and capital funding. It should also be noted that the revenue requirement plan as developed, may not include sufficient capital funded through rates when the City has completed its asset management study. 1.9 Consultant's Conclusions and Recommendations Based upon the revenue requirement analysis developed herein, it is projected that the City will operate at a deficit for the projected planning period. These deficiencies are primarily a result of the need to begin funding a replacement reserve, while at the same time, increasing the capital improvements funded from rates. The size and timing of the adjustments to the City's local sewer rates are a policy decision of the Pleasanton City Council. HDR would recommend a larger rate increase than the consumer price index in order to cover the deficit the City will have over the planning horizon. 1.10 Summary This section of the report has provided a discussion of the City's revenue requirement analysis. The revenue requirement developed a financial plan to support Pleasanton's local sewer operating and capital infrastructure requirements. A rate transition plan was developed to implement the needed rate adjustments, while attempting to minimize the impacts to customers. The next section of the report will discuss the proposed rates developed for the City's local sewer utility. Development of the Revenue Requirement 1-8 MR City of Pleasanton Local Sewer Rate Study