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DISCUSSION Proposed Funding Plan The Funding Plan strategy is to minimize the use of debt to fund the Project, which reduces the impact to water rates while ensuring funding is available when the Project is ready to construct and/or procure equipment. The proposed Funding Plan reflects staff's belief that the Project is the highest priority Water Utility project over the next four years. To that end, staff prepared the following funding framework for the Project by the fiscal year in which funding will be required: PFAS Treatment and Well Renovation Funding Plan Financing, Settlement Water Op Connection proceeds & Fiscal Year Total Est. Cost Fund Fees Grants 2020/21* $540,000 $540,000 2021/22* 1,707,500 1,707,500 2022/23* 8,026,200 1,067:500 $1,271,804 $5,686,896 2023/24 30,988,300 4,000,000 3,000,000 23,988,300 2024/25 4,713,000 2,000,000 1,000,000 1,713,000 Totals $45,975,000 $9,315,000 $5,271,804 $31,388,196 *FYs 2020/21 through 2022/23 Water Operating Fund allocations totaling $3.3 million have already been allocated. Each of the proposed funding sources is discussed separately below. Water Operating Fund - $6 million Staff proposes to allocate an additional $6 million to the Project in the FYs 2023/24 and 2024/25 Capital Improvement Program (CIP) of which $2 million is from reducing the budget of the McCloud Tank project from $2.5 million to $0.5 million since that project was not scheduled to go to construction until after FY 2024/25. The remaining $4 million will be part of the Water Fund's annual allocation to the CIP. Staff proposes to prioritize the PFAS and Wells Rehabilitation Project as the highest priority for those two years while staff complete the Water System Master Plan. Water Connection Fees - $5.3 million Staff proposes to allocate $5.3 million between FY 2022/23 and 2024/25 from Water Connection Fees to the Project, or 11.5 percent of total project costs. The current Water Connection Fee fund balance is $4 million, all of which will be allocated to the Project. The remaining $1.3 million in Water Connection Fee revenues will come from future collections though it is likely that the Project will need to borrow against those future collections to have funds in place in a timely fashion. The City collects Water Connections fees from new development to mitigate the impact of housing and commercial developments on the City's water infrastructure. The City's Page 3 of 7