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The results shown in Table ES -1 indicate the need for the City to adjust their local sewer rates. Overall, it appears that the City's local sewer rates will be deficient by approximately 35% at the end of this planning period (FYE 2017). 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 improvement funding 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. With the City operating at a deficit, HDR would recommend the City adjust rates over a multi -year period in order to minimize the deficit over the planning horizon. In discussion with City staff it is HDR's understanding that the overall level of rates will be adjusted based on annual CPI adjustments. Given those adjustments, and the proposed inflationary increases in O &M expenses, and the capital funding requirements the City will be operating at a deficit starting in FYE 2014. If no further rate adjustments are approved the City will need to adjust the capital transfer, or budgeted expenditure levels, to meet the level of funding available from the rates. Summary of the Rate Design Analysis The final step in the rate study process is to design rates that meet the overall revenue requirement needs of the City's local sewer utility. The City did not want to raise rates during 2010 due to the current state of the economy and instead will increase rats over the next several years based on the annual increases in the Consumer Price Index (CPI), which for purposes of this study have been estimated at 3% per year beginning July I 2011. Table ES -2 provides a comparison of the proposed rate designs for residential customers over a five -year period beginning July 1, 2011. Table ES-2 Present and Proposed Residential Local Sewer Rates (Sal- Month) Single -Fa milyff ownho mes Base Charge Second Unit Condo Base Charge Multi- Family Base Charge Present Rates July I, July I, 2011 2012 2013 2014 2015 July 1, Provided below in Table ES -3 is a summary of the present and proposed local commercial sewer rates over the next five -year period beginning July 1, 2011. Executive Summary I-D3 City of Pleasanton Local Sewer Rate Study July 1, July I, 521.70 522.35 $23.00 $23.70 524.40 $25.15 11.35 1 1.70 12.05 12.40 512.75 513.15 514.90 515.35 515.80 516.25 516.75 517.25 511.35 511.70 $12.05 512.40 512.75 $13.15 ES-5