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1.7.2.FINANCIAL PLAN RESULTS Table 1-4 shows the proposed revenue adjustments that allows the City to maintain financial sufficiency,fund operating and capital expenses, and achieve recommended cash reserves for the water utility.The proposed adjustments apply to the City's rate revenues,which were projected for future years assuming no growth in customer accounts or demand during the Study period. Water demand in FY 2022 represents estimated baseline use for the City's customers.We assume an annual increase in demand of 2.5%from FY 2025 through FY 2026 for all customer classes except recycled water irrigation,which is assumed to remain at constant demand for the study period.The assumed account growth is 1.0%annually across all customer classes. Demand and account growth assumptions based on the most recent Water Master Plan. The proposed revenue adjustments represent the increase to total rate revenues required to recover the water utility's costs and not the expected impact to each customer class. Water rates developed for the base year(FY 2024)reflect the results of the COS analysis,which impacts each customer class,and tier,differently. Revenue adjustments in subsequent years are applied across all charges,classes,and tiers proportional to the base year rates. Table 1-4: Proposed Revenue Adjustments Revenue Adjustments(All Revenues) FY 2024 FY 2025 FY 2026 Effective Month January January January Percent Adjustment 30.0% 20.0% 12.0% Figure 1-1 and Figure 1-2 show the three-year financial plans for FY 2024 through FY 2026 for water and recycled water, respectively. The stacked bars represent the costs of the water utility: O&M expenses make up most of the water financial plan(light gray bars). Debt service(dark gray bars)is only part of the recycled water financial plan and takes up the majority of expenses in the first two years of the Study period. CIP costs(yellow bars)represent the costs of the rate funded capital program. Purchased water from Zone 7(blue bars)will be recovered through passthrough charges. Net cash flow(light green bars)represent revenue used to contribute to reserve targets and is a large portion of the recycled water financial plan in the last three years of the Study period. Current revenues (solid line)equal the projected revenues at the City's existing water rates and proposed revenues(dotted line)equal the projected revenues with the proposed revenue adjustments in Table 14 applied. Figure 1-1: Proposed Water Financial Plan Financial Plan - Water C $60 $50 $40 $30 $20 $10 $0 FY 2024 FY 2025 FY 2026 O&M Expenses Debt Service Rate Funded Capital Resenie Funding Purchased Water Current Revenues --- Proposed Revenues 6 CITY OF PLEASANTON