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City of Pleasanton <br />2025 Water Rate Study <br /> <br />Water Resources Economics <br />6 <br />water rates are sufficient to meet key financial performance metrics. This section shows two important <br />metrics: fund balance and debt coverage. <br /> <br />Figure 1-1 shows the projected potable and recycled fund balances under the status quo scenario. The <br />green bars represent the ending fund balances, and the dashed line represents the reserve policy targets. <br />In this scenario, the City will not meet its reserve targets starting in FY 2026, indicated by the alert <br />balance (red circles). Projected fund balances will be negative starting in FY 2027. Without additional rate <br />revenues, the City is constrained by these fund balances. <br /> <br />Figure 1-1: Projected Potable and Recycled Fund Balances (Status Quo Financial Plan) <br /> <br />Figure 1-2 shows the projected potable and recycled debt coverage under the status quo scenario. The <br />City’s existing debt service has a required coverage of 125%. Debt coverage is calculated by dividing the <br />net operating revenue (revenues less O&M expenses) by annual debt service payments. In this scenario, <br />the City is not able to meet its debt coverage requirements starting in FY 2027 without any revenue <br />adjustments. <br />