Water and Wastewater Financial Plan
Updates
Preliminary Findings
February 25, 2025
2 Agenda
1. Water Financial Plan • Financial inputs • Capital spending forecast • Proposed rates
2. Sewer Financial Plan • Financial inputs • Capital spending forecast • Proposed rates
3. Project Schedule
3 Legal Requirements
for Setting Water and Sewer Rates In California
Proposition 218 (Article XIIID, Section 6 of California Constitution) • Revenues shall not exceed funds required to provide service; nor used for another purpose
• Amount shall not exceed the proportional cost of the service attributable to the parcel
• Service must be actually used or immediately available • Approval process includes 45-day notice, public hearing, and written majority protest. Does not require a voting process (unlike taxes). 4 Study Findings Summary
A 5-year rate schedule was adopted in 2022 for both Water and Wastewater rates.
This current study updated both financial plans in order to check whether the respective utilities are “on track” with the 2022 projections.
Both financial plan updates have found that utility rates will need to be modified due to changes in both revenues and expenses.
5 Water Utility
Water Operating Expenses
FY2024/25 Budget
6 7
Annual Inflation Assumptions
Salaries………….….. 3%
Benefits………….….. 4%
Utilities………………..18%, then 8% (2 years), then 5%
Insurance……………15%, then 6% (3 years), then 3%
Water Purchases….. 12%, then 6%
Subregional………….6%, then averaging 4%
All other costs………..3%
Water Capital Spending
8 Recent average Capital:
$406K Forecasted average Capital:
$1.3M
Includes Cypress
Storage Tank and
associated water
main
Water Capital Project List
9 Water Proposed Capital Funding Strategy
10 Proposed Water Financial Plan
11 12
Financial Changes since 2022 Water Rate Study
• Revenue
• Annual Usage revenue is lower by 16% ($220 thousand) due to decrease in water usage
• Projected Capital Spending from 2025 - 2032
• 2022 projection: $5.8M
• Updated projection: $10.4M (79% increase)
• Operating Expenses for FY 2026
• Previously projected to be $2.27M
• Actual budget is $2.42M (increase of 6%)
The increase is largely driven by water supply, utilities, insurance, & salaries (includes UAL) 13 Proposed 5-Year Water Rate Schedule
14 Example of Water Bill Impacts with Year 1 Rates
15 Sewer Rates
Sewer Operating Expenses
FY2024/25 Budget
16 Sewer Capital Spending
17 Recent average Capital:
$740K
Forecasted average Capital:
$606K
Sewer Capital Project List
18 Sewer Financial Plan
19 20
Financial Changes since 2022 Sewer Rate Study
• Revenue
• Usage revenue is lower by 12% ($208 thousand) due to decrease in water usage • Projected Capital Spending from 2025 - 2032
• 2022 projection: $2.1M
• Updated projection: $4.2M (100% increase)
• Operating Expenses for FY 2026
• (no significant difference)
21 Proposed Sewer Rate Schedule
22 Example of Sewer Bill Impacts with Year 1 Rates
Survey
Combined monthly water & sewer bill for Single Family Homes assumes 3/4” meter, 7 TGAL of monthly water usage and 4.5 TGAL of sewage 23 24
1. Preliminary Recommendations to City Council – February 25
2. Final Recommendation to City Council – March 11
3. Mail Prop 218 Notices – Late March
4. Public Hearing– May 27
5. Implement Rates – June 15
Schedule