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