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The financial drivers that make up the costs are listed in Table 3 below. <br /> Table 3 <br /> Purchased Water $23,800,021 $25,417,735 $25,150,627 <br /> Water Supply Alternatives $2,000,000 $2,250,000 $2,475,000 <br /> City O&M $11,605,056 $12,155,062 $12,692,975 <br /> CIP and Debt $4,806,384 $5,076,384 $6,998,244 <br /> Reserve Funding $0 $0 $0 <br /> Total $42,211,461 $44,899,180 $47,316,846 <br /> The City's Reserve Policy target is 35 percent of annual operations and maintenance <br /> (O&M) and 5-year average cash-funded CIP. The proposed water rates over the next <br /> three years meet the Reserve Policy target in FY 2026 as shown in Figure 2 below. <br /> Figure 2 <br /> Fund Balances - Total Funds <br /> $16 <br /> Ln <br /> o $14 $134 <br /> $12 <br /> $10 $8.4 <br /> $79 <br /> $8 <br /> $6 <br /> $4 <br /> $2 <br /> $o <br /> F`( 2024 FY 2025 Fr' 2026 <br /> Ending Balances -Reser�e Target <br /> The financial plan determines the revenue requirement, while the cost of service <br /> allocates the cost to different customer classes based on the nature of their use. <br /> Cost of Service <br /> Cost of service is the allocation of the expenses to the different cost components, as <br /> required by State law (Proposition 218 of 1996). Different customer classes have been <br /> established because of the nature of their use and characteristics. The cost of service <br /> determines how to allocate the costs between the different customer types. <br /> Page 6 of 17 <br />