ITEM 24 ATTACHMENT 2 - Laserfiche WebLink

City of Pleasanton 2025 Water Rate Study Water Resources Economics 20 2. FINANCIAL PLAN 2.1 FINANCIAL PLAN METHODOLOGY The purpose of a financial plan is to project revenues, expenses, cash flows, reserve balances, and debt coverage over a multi-year period to assess financial sufficiency and performance and to determine the amount of required rate revenue. For this study, the planning period is from FY 2026 through FY 2029; data for FY 2024 and FY 2025 are shown when needed to represent actual or budgeted data inputs. The key steps in developing a financial plan for a potable and recycled water enterprise are below: • Revenue projections: Annual revenues from rates and other miscellaneous sources are projected over the planning period. Rate revenues are projected based on current rates to establish baseline revenues from which the need for additional rate increases can be evaluated. • Expense projections: Annual expenses are projected over the study period, including O&M expenses, debt service, and CIP costs. CIP funding options (grants, debt, etc.) are also evaluated as part of the financial plan. • Financial policy evaluation: Key financial policies include debt coverage requirements and reserve targets. Debt coverage requirements are typically explicitly stated in official agreements on outstanding debt issuances. Reserve targets are typically set by an agency’s elected officials and may need to be periodically evaluated and updated. • Status quo financial plan projections: Cash flow, reserve balances, and debt coverage are projected over the study period in the absence of additional rate increases (this scenario is called the “status quo”). Projected reserve balances and debt coverage are then compared to the agency’s financial policy requirements and targets. The status quo financial plan provides a baseline to evaluate the need for rate increases. • Proposed financial plan projections: The magnitude and timing of annual proposed revenue increases over the study period are evaluated and determined based on the agency’s financial policies, financial performance, and policy objectives. Proposed rate increases (referred to as “revenue adjustments”) should generate sufficient revenue to recover the agency’s expenses, maintain adequate reserves, and meet all debt coverage requirements. The proposed financial plan determines the total annual rate revenue requirement over the study period. 2.2 REVENUES CURRENT WATER RATES The City’s current potable and recycled water rates includes a bi-monthly fixed charge based on meter size and a variable charge based on units of water in ccf. Single Family Residential customers have a four-tiered variable charge; Multi-Family, Commercial/Industrial, Potable Irrigation, and Recycled Irrigation customers have a uniform variable charge. The combined variable charge includes separate components for Recycled Irrigation customers and all other water customers (Single Family, Multi-Family, Commercial/Industrial, and Potable Irrigation). The combined variable charge for recycled water customers includes its own distribution and supply charges. The combined variable charge for potable customers includes the Zone 7 charge for treated potable water, subject to change year to year based on actual costs paid to Zone 7 each year, and the Pleasanton distribution charge. The combined variable charge also includes a recycled water surcharge applied to Single Family Tier 4, Multi-Family, Commercial/Industrial, and Potable Irrigation to fund the