Agenda packet — East Palo Alto City Council, January 17, 2023 (part 2 of 2)

Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether the City’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

Badawi & Associates, CPAs
Berkeley, California
December 21, 2022
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Packet Pg. 257 Attachment: East Palo Alto Single Audit FY2022 20221229 1457 - signed (2531 : Annual Financial Reports for Fiscal Year 2021-22)

REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM

AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM

GUIDANCE
Independent Auditor’s Report
To the Honorable Mayor and Members of the City Council
of the City of East Palo Alto
East Palo Alto, California
Report on Compliance for Each Major Federal Program
Opinion on Each Major Federal Program
We have audited the City of East Palo Alto, California (City)’s compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of the City’s major federal programs for the year ended June 30, 2022. The City’s major federal programs are identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs.

In our opinion, the City, complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2022.

Basis for Opinion on Each Major Federal Program
We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Our responsibilities under those standards and the Uniform Guidance are further described in the Auditor’s Responsibilities for the Audit of Compliance section of our report.

We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on compliance for each major federal program. Our audit does not provide a legal determination of the City’s compliance with the compliance requirements referred to above.

Responsibilities of Management for Compliance
Management is responsible for compliance with the requirements referred to above and for the design, implementation, and maintenance of effective internal control over compliance with the requirements of laws, statutes, regulations, rules, and provisions of contracts or grant agreements applicable to the City’s federal programs.
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Packet Pg. 258 Attachment: East Palo Alto Single Audit FY2022 20221229 1457 - signed (2531 : Annual Financial Reports for Fiscal Year 2021-22) To the Honorable Mayor and Members of the City Council
of the City of East Palo Alto
East Palo Alto, California

Page 2 ends

Auditor’s Responsibilities for the Audit of Compliance
Our objectives are to obtain reasonable assurance about whether material noncompliance with the compliance requirements referred to above occurred, whether due to fraud or error, and express an opinion on the City’s compliance based on our audit. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards, Government Auditing Standards, and the Uniform Guidance will always detect material noncompliance when it exists. The risk of not detecting material noncompliance resulting from fraud is higher than for that resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

Noncompliance with the compliance requirements referred to above is considered material if there is a substantial likelihood that, individually or in the aggregate, it would influence the judgment made by a reasonable user of the report on compliance about the City’s compliance with the requirements of each major federal program as a whole.

In performing an audit in accordance with generally accepted auditing standards, Government Auditing Standards, and the Uniform Guidance, we:
• Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material noncompliance, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the City’s compliance with the compliance requirements referred to above and performing such other procedures as we considered necessary in the circumstances.
• Obtain an understanding of the City’s internal control over compliance relevant to the audit in order to design audit procedures that are appropriate in the circumstances and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control over compliance. Accordingly, no such opinion is expressed.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and any significant deficiencies and material weaknesses in internal control over compliance that we identified during the audit.

Report on Internal Control Over Compliance
A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.
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Packet Pg. 259 Attachment: East Palo Alto Single Audit FY2022 20221229 1457 - signed (2531 : Annual Financial Reports for Fiscal Year 2021-22) To the Honorable Mayor and Members of the City Council
of the City of East Palo Alto
East Palo Alto, California

Page 3 ends

Our consideration of internal control over compliance was for the limited purpose described in the Auditor’s Responsibilities for the Audit of Compliance section above and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. Given these limitations, we did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. However, material weaknesses or significant deficiencies in internal control over compliance may exist that have not been identified.

Our audit was not designed for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, no such opinion is expressed.

The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose.

Report on Schedule of Expenditures of Federal Awards Required by the Uniform Guidance We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City, as of and for the year ended June 30, 2022, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements. We issued our report thereon dated December 21, 2022, which contained unmodified opinions on those financial statements. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the basic financial statements.

The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by the Uniform Guidance and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements.

The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of expenditures of federal awards is fairly stated in all material respects in relation to the basic financial statements as a whole.

Badawi & Associates, CPAs
Berkeley, California
December 29, 2022, except for the Schedule of Expenditures of Federal Awards, which is as of December 21, 2022
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Packet Pg. 261 Attachment: East Palo Alto Single Audit FY2022 20221229 1457 - signed (2531 : Annual Financial Reports for Fiscal Year 2021-22) City of East Palo Alto
Schedule of Expenditures of Federal Awards
For the year ended June 30, 2022
Assistance State
Listing Pass-through Program
Grantor Agency and Grant Title Number Number Expenditures U.S. Department of Commerce:

Enonomic Development Cluster
Direct Programs
Economic Adjustment Assistance - Bay Road Phase II and III 11.307 07 79 07507 310,260 Subtotal Economic Development Cluster 310,260
Total U.S. Department of Commerce 310,260
U.S. Department of Justice:

Direct Programs
COVID-19 - BJA FY20 Coronavirus Emergency Supplemental Funding 16.034 2020-H5682-CA-VD 18,726 Total U.S. Department of Justice 18,726
U.S. Department of Transportation:

Highway Planning and Construction Cluster
Passed through State of California Department of Transportation (CalTrans) Highway Planning and Construction 20.205 STPL-5438(018) 105,000 Highway Planning and Construction 20.205 HPLUL-5438(011) 2,050,886 Subtotal Highway Planning and Construction Cluster 2,155,886 Total U.S. Department of Transportation 2,155,886
U.S. Department of Treasury:

Direct Programs
COVID-19 - Coronavirus State and Local Fiscal Recovery Funds 21.027 n/a 3,506,266 Passed through California Water Resource Control Board
COVID-19 - Coronavirus State and Local Fiscal Recovery Funds 21.027 n/a 186,919 Total U.S. Department of Treasury 3,693,185
U.S. Department of Health and Human Services:

Aging Cluster
Passed through County of San Mateo Area Agency on Aging Congregate lunch program/transportation 93.044 n/a 4,901 Congregate lunch program/transportation 93.045 n/a 36,350 Subtotal Aging Cluster 41,251
Total U.S. Department of Health and Human Services 41,251 U.S. Department of Homeland Security:

Passed through California Office of Emergency Services
Federal Emergency Management Agency (FEMA) 97.036 n/a 72,725 Total U.S. Department of Homeland Security 72,725
Total Expenditures of Federal Awards $ 6,292,033
See accompanying Notes to Schedule of Expenditures of Federal Awards. 7 9.1.c
Packet Pg. 262 Attachment: East Palo Alto Single Audit FY2022 20221229 1457 - signed (2531 : Annual Financial Reports for Fiscal Year 2021-22) City of East Palo Alto
Notes to the Schedule of Expenditures of Federal Awards For the year ended June 30, 2022
A. Reporting Entity
The financial reporting entity consists of (a) the primary government, City of East Palo Alto, California (City), (b) organizations for which the primary government is financially accountable, and (c) other organizations for which the primary government is not accountable, but for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete. The component unit discussed below is included in the reporting entity because of its operational or financial relationships with the City.
x East Palo Alto Public Financing Authority
Component units are legally separate organizations for which the elected officials of the primary government are financially accountable. In addition, component units can be other organizations for which the primary government’s exclusion would cause the reporting entity’s financial statements to be misleading or incomplete.

Separate financial statements for the East Palo Alto Financing Authority are not prepared. There are currently no reportable financial transactions of the Authority.

B. Basis of Accounting
Funds received under the various grant programs have been recorded within the general, special revenue, and capital projects funds of the City. The City utilizes the modified accrual basis of accounting for the general, special revenue, and capital projects funds. Expenditures of federal awards reported on the Schedule of Expenditures of Federal Awards (Schedule) are recognized when incurred.

C. Relationship of Schedule of Expenditures of Federal Awards to Financial Statements The accompanying Schedule presents the activity of all federal financial assistance programs of the City.

Federal financial assistance received directly from federal agencies as well as federal financial assistance passed through the State of California is included in the Schedule.

The Schedule was prepared only from the accounts of various grant programs and, therefore, does not present the financial position or results of operations of the City.

D. Pass-Through Entities’ Identifying Number
When federal awards were received from a pass-through entity, the Schedule shows, if available, the identifying number assigned by the pass-through entity. When no identifying number is shown, the City determined that no identifying number is assigned for the program or the City was unable to obtain an identifying number from the pass-through entity.

E. Indirect Costs
The City did not elect to use the 10% de minimis indirect cost rate. 8 9.1.c
Packet Pg. 263 Attachment: East Palo Alto Single Audit FY2022 20221229 1457 - signed (2531 : Annual Financial Reports for Fiscal Year 2021-22) City of East Palo Alto
Schedule of Findings and Questioned Costs
For the year ended June 30, 2022
Section I – Summary of Auditor’s Results
Financial Statements
Types of auditors’ report issued on whether financial statements audited were prepared in accordance with GAAP Unmodified Internal control over financial reporting:
x Material weakness(es) identified? No
x Significant deficiency(ies) identified? None noted
Any noncompliance material to the financial statements noted? No Federal Awards
Internal control over major programs:
x Material weakness(es) identified? No
x Significant deficiency(ies) identified? None noted
Type of auditor’s report issued on compliance for major programs Unmodified Any audit findings disclosed that are required to be reported in accordance with section 200.516(a)? No
Identification of major programs:

Dollar threshold used to distinguish between type A and type B program $750,000 Auditee qualified as low-risk auditee under
section 200.520? No
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Packet Pg. 264 Attachment: East Palo Alto Single Audit FY2022 20221229 1457 - signed (2531 : Annual Financial Reports for Fiscal Year 2021-22) City of East Palo Alto
Schedule of Findings and Questioned Costs, Continued
For the year ended June 30, 2022
Section II – Current Year Findings
A. Financial Statement Audit
No current year financial statement findings.

B. Federal Award Program Audit
No current year federal award program audit findings.

Section III- Prior Year Findings
A. Financial Statement Audit
No prior year financial statement findings.

B. Federal Award Program Audit
No prior year federal award program audit findings.
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Packet Pg. 265 Attachment: East Palo Alto Single Audit FY2022 20221229 1457 - signed (2531 : Annual Financial Reports for Fiscal Year 2021-22)

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Packet Pg. 266 Attachment: East Palo Alto Single Audit FY2022 20221229 1457 - signed (2531 : Annual Financial Reports for Fiscal Year 2021-22) Measure A Fund
East Palo Alto, California
Independent Accountant’s Report on
Schedule of Receipts and Disbursements
For the year ended June 30, 2022

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Packet Pg. 267 Attachment: East Palo Alto Measure A FY2022 20221220 - signed (2531 : Annual Financial Reports for Fiscal Year 2021-22) City of East Palo Alto Measure A Transportation Fund
For the year ended June 30, 2022
Table of Contents
Page
Independent Accountant’s Report ............................................................................................................................. 1 Schedule of Receipts and Disbursements ................................................................................................................... 2 Management’s Report on Compliance with the Agreement for Distribution of San Mateo County Measure A Funds for Local Transportation Purposes .......................................................................................... 3

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Packet Pg. 268 Attachment: East Palo Alto Measure A FY2022 20221220 - signed (2531 : Annual Financial Reports for Fiscal Year 2021-22) INDEPENDENT ACCOUNTANT’S REPORT
To the Honorable Mayor and Members of the City Council
of the City of East Palo Alto
East Palo Alto, California
We have examined management’s assertion, that the accompanying schedule of receipts and disbursements is in compliance with the Agreement for Distribution of San Mateo County Measure A Funds for Local Transportation Purposes in accordance with the 2004 Measure A between the City of East Palo Alto (City) and the San Mateo County Transportation Authority entered into on January 20, 2009, and that the City complied with the requirements of the Agreement during the year ended June 30, 2022. The City’s management is responsible for the assertion. Our responsibility is to express an opinion on the assertion based on our examination.

Our examination was made in accordance with attestation standards established by the American Institute of Certified Public Accountants and accordingly, included examining, on a test basis, evidence supporting that the City’s schedule of cash receipts and disbursements is in compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our examination provides a reasonable basis for our opinion.

In our opinion, management’s assertion referred to above is fairly stated in conformity with the Agreement for Distribution of San Mateo County Measure A Funds for Local Transportation Purposes in accordance with the 2004 Measure A for the year ended June 30, 2022.

Badawi & Associates, CPAs
Berkeley, California
December 19, 2022

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Packet Pg. 269 Attachment: East Palo Alto Measure A FY2022 20221220 - signed (2531 : Annual Financial Reports for Fiscal Year 2021-22) City of East Palo Alto Measure A Transportation Fund
Schedule of Receipts and Disbursements
For the year ended June 30, 2022
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Packet Pg. 270 Attachment: East Palo Alto Measure A FY2022 20221220 - signed (2531 : Annual Financial Reports for Fiscal Year 2021-22)

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Packet Pg. 271
Attachment: East Palo Alto Measure A FY2022 20221220 - signed (2531 : Annual Financial Reports for Fiscal Year 2021-22) Measure C Fund
East Palo Alto, California
Financial Statements and
Independent Auditor’s Reports
For the year ended June 30, 2022

9.1.e
Packet Pg. 272 Attachment: East Palo Alto Measure C FY2022 20221219 - signed (2531 : Annual Financial Reports for Fiscal Year 2021-22) City of East Palo Alto
Measure C Fund
Financial Statements
For the year ended June 30, 2022
Table of Contents
Page
Independent Auditor’s Report ................................................................................................................................. 1 Financial Statements:

Combined Balance Sheet ...................................................................................................................................... 3 Combined Statement of Revenues, Expenditures and Changes in Fund Balances ..................................... 4 Notes to Financial Statements ............................................................................................................................. 5 Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards ................... 9

9.1.e
Packet Pg. 273 Attachment: East Palo Alto Measure C FY2022 20221219 - signed (2531 : Annual Financial Reports for Fiscal Year 2021-22) INDEPENDENT AUDITOR’S REPORT
To the Honorable Mayor and Members of the City Council
of the City of East Palo Alto
East Palo Alto, California
Report on Financial Statements
We have audited the accompanying financial statements of the Measure C Special Revenue Fund (Measure C Fund) of the City of East Palo Alto (City), as of and for the year ended June 30, 2022, and the related notes to the financial statements as listed in the table of contents.

In our opinion, the financial statements referred to above present fairly in all material respects the financial position of the Measure C Special Revenue Fund at June 30, 2022 and the respective changes in financial position for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the City, and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Emphasis of Matter
As discussed in Note 1, the financial statements of the Measure C Fund are intended to preset the financial position, and changes in financial position that is attributable to the transactions of the Measure C Fund.

They do not purport to, and do not, present fairly the financial position of the City as of June 30, 2022, and the changes in its financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter.

Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,

9.1.e
Packet Pg. 274 Attachment: East Palo Alto Measure C FY2022 20221219 - signed (2531 : Annual Financial Reports for Fiscal Year 2021-22) To the Honorable Mayor and Members of the City Council
of the City of East Palo Alto
East Palo Alto, California

Page 3 ends

2 intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with generally accepted auditing standards, we:
• Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, no such opinion is expressed.
• Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 19, 2022 on our consideration of the City's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control over financial reporting and compliance.

Badawi & Associates, CPAs
Berkeley, California
December 19, 2022

9.1.e
Packet Pg. 275 Attachment: East Palo Alto Measure C FY2022 20221219 - signed (2531 : Annual Financial Reports for Fiscal Year 2021-22) City of East Palo Alto
Measure C Fund
Combined Balance Sheet
Public Violence
Safety Prevention
Program Program Total
ASSETS:

Cash and investments $ 30,157 $ 186,936 $ 217,093
Accrued interest 79 487 566
Total assets $ 30,236 $ 187,423 $ 217,659
FUND BALANCES:

Restricted $ 30,236 $ 187,423 $ 217,659
Total fund balances 30,236 187,423 217,659
$ 30,236 $ 187,423 $ 217,659
June 30, 2022
Total liabilities and fund balances
Special Revenue Fund
Measure C
See accompanying notes to the financial Statements
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Packet Pg. 276 Attachment: East Palo Alto Measure C FY2022 20221219 - signed (2531 : Annual Financial Reports for Fiscal Year 2021-22) City of East Palo Alto
Measure C Fund
Combined Statement of Revenues, Expenditures and Changes in Fund Balances Public Violence
Safety Prevention
Program Program Total
REVENUES:

Interest Income $ (764) $ (4,737) $ (5,501)
Total revenues (764) (4,737) (5,501)
FUND BALANCES:

Beginning of year 31,000 192,160 223,160
End of year $ 30,236 $ 187,423 $ 217,659
For the year ended June 30, 2022
Special Revenue Fund
Measure C
See accompanying notes to the financial Statements
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Packet Pg. 277 Attachment: East Palo Alto Measure C FY2022 20221219 - signed (2531 : Annual Financial Reports for Fiscal Year 2021-22) City of East Palo Alto
Measure C Fund
Notes to Financial Statements
For the year ended June 30, 2022
5 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Reporting Entity
All transactions of the Measure C Special Revenue Fund (Measure C Fund) of the City of East Palo Alto, California (City), are included as a separate special revenue fund in the basic financial statements of the City. The Measure C Fund accounts for the City’s share of revenues earned and expenditures incurred under the City’s Measure C parcel tax. The accompanying financial statements are for the Measure C Fund only and are not intended to fairly present the financial position or results of operations of the City.

B. Basis of Accounting and Measurement Focus
The accompanying financial statements are prepared on the modified accrual basis of accounting.

Revenues are generally recorded when measurable and available, and expenditures are recorded when the related liabilities are incurred.

The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. All governmental funds are accounted for using a current financial resources measurement focus, wherein only current assets and current liabilities generally are included on the balance sheet.

Operating statements of governmental funds present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets.

C. Fund Accounting
The operations of the Measure C Fund are accounted for in a separate special revenue fund. The fund is a separate accounting entity with a set of self-balancing accounts which comprise the assets, liabilities, fund equity, revenues, and expenses.

D. Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures during the reporting period. Actual results could differ from those estimates.

9.1.e
Packet Pg. 278 Attachment: East Palo Alto Measure C FY2022 20221219 - signed (2531 : Annual Financial Reports for Fiscal Year 2021-22) City of East Palo Alto
Measure C Fund
Notes to Financial Statements
For the year ended June 30, 2022
6 2. CASH AND INVESTMENTS
Measure C monies are pooled with the City’s cash, cash equivalents, and investments. The City pools cash resources from all funds to facilitate the management of cash. Cash and cash equivalents are considered amounts on hand, in demand deposits, and short-term investments with a maturity date within three months of the date acquired by the City and are presented as "Cash and Investments". The City invests in two external investment pools, the State of California Local Agency Investment Fund (LAIF) and the San Mateo County Investment Fund (County Pool).

All pooled cash and investments held by the City are considered cash and cash equivalents because LAIF and the County Pool are used essentially as demand deposits from the standpoint of the City. Information about the City's Cash and Investments is disclosed in the City's Comprehensive Annual Financial Report.

As of June 30, 2022, the Measure C Fund has the following cash and investment activity:

Cash and Investments $ 217,093
Investments are stated at fair value using the aggregate method, resulting in the following investment income allocation to the Measure C Fund:

Interest Income $ 2,196
Unrealized Loss on Change in fair value of investments (7,697) $ (5,501)

3. MEASURE C FUNDS
In November 2006, the Voters approved Measure C, a special parcel tax to fight crime through community prevention and law enforcements programs. The proceeds of the parcel tax are to be used for enhancing services and programs to prevent violence and crime in East Palo Alto. The tax was enacted for a ten-year period ending June 30, 2017.

Tax proceeds may only be used as part of the following integrated programs of violence prevention and public safety intervention, in accordance with the following specific purposes:
(1) Community and neighborhood policing, training, crime suppression and investigations. (2) Violence Prevention services with an emphasis on youth and families. Such services include preventive social services provided by the City of East Palo Alto or by adding capacity to community-based nonprofit programs with a focus on youth, ex-felons, domestic violence, and support for senior citizens.
(3) Not less than 1% or more than 3% of funds appropriated to each police service or social service program shall be set aside for the purpose of independent evaluation of the program, including the number of people served and the rate of crime or violence reduction achieved.

9.1.e
Packet Pg. 279 Attachment: East Palo Alto Measure C FY2022 20221219 - signed (2531 : Annual Financial Reports for Fiscal Year 2021-22) City of East Palo Alto
Measure C Fund
Notes to Financial Statements
For the year ended June 30, 2022
7 3. MEASURE C FUNDS, Continued
(4) Mandated apportionment of funds: Of the total proceeds spent on programs enumerated in this section 3, Paragraphs 1 and 2, not less than 50% of such proceeds shall be directed at violence prevention programs with emphasis on youth, ex-felons, and senior protection.

The City Council approved that 50% of Measure C funding is designated to the Police Department for Public Safety and the remaining 50% of funding is used for Crime Prevention Programs.

C. Measure C Grant Commitments
The City awards Measure C program funds through a grant process, and commits funds to various agencies. As of June 30, 2022, unexpended grant commitments total $10,000.

9.1.e
Packet Pg. 280 Attachment: East Palo Alto Measure C FY2022 20221219 - signed (2531 : Annual Financial Reports for Fiscal Year 2021-22) 8 This page intentionally left blank

9.1.e
Packet Pg. 281 Attachment: East Palo Alto Measure C FY2022 20221219 - signed (2531 : Annual Financial Reports for Fiscal Year 2021-22)

REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE

AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN

ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
INDEPENDENT AUDITOR’S REPORT
To the Honorable Mayor and Members of the City Council
of the City of East Palo Alto
East Palo Alto, California
We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the basic financial statements of the Measure C Special Revenue Fund, as of and for the year ended June 30, 2022, and the related notes to the financial statements, and have issued our report thereon dated December 19, 2022.

Report on Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered City's internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of City's internal control. Accordingly, we do not express an opinion on the effectiveness of City's internal control.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the City's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

9.1.e
Packet Pg. 282 Attachment: East Palo Alto Measure C FY2022 20221219 - signed (2531 : Annual Financial Reports for Fiscal Year 2021-22) To the Honorable Mayor and Members of the City Council
of the City of East Palo Alto
East Palo Alto, California

Page 2 ends

10 Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Measure C Special Revenue Fund financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that is required to be reported under Government Auditing Standards.

Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

City of East Palo Alto
Berkeley, California
December 19, 2022

9.1.e
Packet Pg. 283 Attachment: East Palo Alto Measure C FY2022 20221219 - signed (2531 : Annual Financial Reports for Fiscal Year 2021-22) Measure HH Fund
East Palo Alto, California
Financial Statements and
Independent Auditor’s Reports
For the year ended June 30, 2022

9.1.f
Packet Pg. 284 Attachment: East Palo Alto Measure HH FY2022 20221219 - signed (2531 : Annual Financial Reports for Fiscal Year 2021-22) City of East Palo Alto
Measure HH Fund
Financial Statements
For the year ended June 30, 2022
Table of Contents
Page
Independent Auditor’s Report ................................................................................................................................. 1 Financial Statements:

Balance Sheet .......................................................................................................................................................... 3 Statement of Revenues, Expenditures and Changes in Fund Balances ......................................................... 4 Notes to Financial Statements ............................................................................................................................. 5 Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards ................... 9

9.1.f
Packet Pg. 285 Attachment: East Palo Alto Measure HH FY2022 20221219 - signed (2531 : Annual Financial Reports for Fiscal Year 2021-22) INDEPENDENT AUDITOR’S REPORT
To the Honorable Mayor and Members of the City Council
of the City of East Palo Alto
East Palo Alto, California
Report on Financial Statements
We have audited the accompanying financial statements of the Measure HH Special Revenue Fund (Measure HH Fund) of the City of East Palo Alto (City), as of and for the year ended June 30, 2022, and the related notes to the financial statements as listed in the table of contents.

In our opinion, the financial statements referred to above present fairly in all material respects the financial position of the Measure HH Special Revenue Fund at June 30, 2022 and the respective changes in financial position for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Emphasis of Matter
As discussed in Note 1, the financial statements of the Measure HH Fund are intended to preset the financial position, and changes in financial position that is attributable to the transactions of the Measure HH Fund. They do not purport to, and do not, present fairly the financial position of the City as of June 30, 2022, and the changes in its financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter.

9.1.f
Packet Pg. 286 Attachment: East Palo Alto Measure HH FY2022 20221219 - signed (2531 : Annual Financial Reports for Fiscal Year 2021-22) To the Honorable Mayor and Members of the City Council
of the City of East Palo Alto
East Palo Alto, California

Page 2 ends

2 resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

Badawi & Associates, CPAs
Berkeley, California
December 19, 2022

9.1.f
Packet Pg. 287 Attachment: East Palo Alto Measure HH FY2022 20221219 - signed (2531 : Annual Financial Reports for Fiscal Year 2021-22) City of East Palo Alto
Measure HH Fund
Balance Sheet
Measure HH
Special Revenue
Fund
ASSETS:

Cash and investments 4,730,693 $
Accrued interest 12,161
Total assets $ 4,742,854
Fund Balances:

Restricted 4,742,854
Total fund balances 4,742,854
$ 4,742,854
June 30, 2022
Total liabilities and fund balances
See accompanying notes to the financial Statements
3 9.1.f
Packet Pg. 288 Attachment: East Palo Alto Measure HH FY2022 20221219 - signed (2531 : Annual Financial Reports for Fiscal Year 2021-22) City of East Palo Alto
Measure HH Fund
Statement of Revenues, Expenditures and Changes in Fund Balances Measure HH
Special Revenue
Fund
REVENUES:

Parcel Tax - Measure HH 1,677,265 $
Interest income (101,281)
Total revenues 1,575,984
EXPENDITURES:

Administration
General government 6
Community development 121,483
Total expenditures 121,489
EXPENDITURES 1,454,495
FUND BALANCES:

Beginning of year 3,288,359
End of year $ 4,742,854
For the Year Ended June 30, 2022

REVENUES OVER (UNDER)
See accompanying notes to the financial Statements
4 9.1.f
Packet Pg. 289 Attachment: East Palo Alto Measure HH FY2022 20221219 - signed (2531 : Annual Financial Reports for Fiscal Year 2021-22) City of East Palo Alto
Measure HH Fund
Notes to Financial Statements
For the year ended June 30, 2022
5 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Reporting Entity
All transactions of the Measure HH Special Revenue Fund (Measure HH Fund) of the City of East Palo Alto, California (City), are included as a separate special revenue fund in the basic financial statements of the City. The Measure HH Fund accounts for the City’s share of revenues earned and expenditures incurred under the City’s Measure HH parcel tax. The accompanying financial statements are for the Measure HH Fund only and are not intended to fairly present the financial position or results of operations of the City.

B. Basis of Accounting and Measurement Focus
The accompanying financial statements are prepared on the modified accrual basis of accounting.

Revenues are generally recorded when measurable and available, and expenditures are recorded when the related liabilities are incurred.

Operating statements of governmental funds present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets.

C. Fund Accounting
The operations of the Measure HH Fund are accounted for in a separate special revenue fund. The fund is a separate accounting entity with a set of self-balancing accounts which comprise the assets, liabilities, fund equity, revenues, and expenses.

9.1.f
Packet Pg. 290 Attachment: East Palo Alto Measure HH FY2022 20221219 - signed (2531 : Annual Financial Reports for Fiscal Year 2021-22) City of East Palo Alto
Measure HH Fund
Notes to Financial Statements
For the year ended June 30, 2022
6 2. CASH AND INVESTMENTS
Measure HH monies are pooled with the City's cash, cash equivalents, and investments. The City pools cash resources from all funds to facilitate the management of cash. Cash and cash equivalents are considered amounts on hand, in demand deposits, and short-term investments with a maturity date within three months of the date acquired by the City and are presented as "Cash and Investments". The City invests in two external investment pools, the State of California Local Agency Investment Fund (LAIF) and the San Mateo County Investment Fund (County Pool).

As of June 30, 2022, the Measure HH Fund had the following cash and investment activity:

Investments are stated at fair value using the aggregate method, resulting in the following investment income allocated to the Measure HH Fund:

3. MEASURE HH FUNDS
In November 2018, the voters approved Measure HH, a special parcel tax to combat community displacement through affordable housing programs and assets, and provide programs for facilitating community access to job opportunities. The proceeds of the parcel tax are to be used for affordable and supportive housing programs, programs that facilitate access to job opportunities in the S.T.E.M. sectors, and building trades and strengthen First Source Hiring.

Revenue generated from this special tax can be used only for the following purposes:
x to create and maintain affordable and supportive housing programs, with an emphasis on the creation of net new housing;
x to create and maintain programs that facilitate access to job opportunities for East Palo Alto residents in the science, technology, engineering, and mathematics (STEM) sectors, building trades, and to strengthen the City's First Source Hiring Program, and; x to pay for City staff and overhead costs to administer the ordinance and provide an annual report.

Revenue generated from this special tax must be used in the following manner:
x a minimum of 35% of the revenue must be used exclusively for the construction of new, affordable housing stock.

9.1.f
Packet Pg. 291 Attachment: East Palo Alto Measure HH FY2022 20221219 - signed (2531 : Annual Financial Reports for Fiscal Year 2021-22) City of East Palo Alto
Measure HH Fund
Notes to Financial Statements
For the year ended June 30, 2022
7 3. MEASURE HH FUNDS, Continued
x a maximum of 15% of the revenue may be used for City staff and overhead costs to administer the ordinance and to provide an annual report.
x the remaining proceeds may be used for any of the other purposes specified in the ordinance at the discretion of the City Council
The tax revenue cannot be used for any other purpose.

The authority to levy the tax imposed by Chapter 3.70 shall not expire unless ended by the voters of East Palo Alto. Measure HH authorizes the City Council to amend the parcel tax without subsequent voter approval, provided such amendment does not increase the amount of tax paid by any taxpayer in excess of the rate set forth in the Measure or change the allowed uses for the tax revenues.

A. Measure HH Expenditures
During fiscal year 2022, the City incurred $121,489 in administrative activities.

9.1.f
Packet Pg. 292 Attachment: East Palo Alto Measure HH FY2022 20221219 - signed (2531 : Annual Financial Reports for Fiscal Year 2021-22) 8 This page intentionally left blank

9.1.f
Packet Pg. 293 Attachment: East Palo Alto Measure HH FY2022 20221219 - signed (2531 : Annual Financial Reports for Fiscal Year 2021-22)

REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE

AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN

ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
INDEPENDENT AUDITOR’S REPORT
To the Honorable Mayor and Members of the City Council
of the City of East Palo Alto
East Palo Alto, California
We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the basic financial statements of the Measure HH Special Revenue Fund, as of and for the year ended June 30, 2022, and the related notes to the financial statements, and have issued our report thereon dated December 19, 2022.

9.1.f
Packet Pg. 294 Attachment: East Palo Alto Measure HH FY2022 20221219 - signed (2531 : Annual Financial Reports for Fiscal Year 2021-22) To the Honorable Mayor and Members of the City Council
of the City of East Palo Alto
East Palo Alto, California

Page 2 ends

10 Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Measure HH Special Revenue Fund financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that is required to be reported under Government Auditing Standards.

Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

Badawi & Associates, CPAs
Berkeley, California
December 19, 2022

9.1.f
Packet Pg. 295 Attachment: East Palo Alto Measure HH FY2022 20221219 - signed (2531 : Annual Financial Reports for Fiscal Year 2021-22) Measure W Fund
East Palo Alto, California
Schedule of Receipts and Disbursements and
Independent Accountants’ Reports
For the year ended June 30, 2022

9.1.g
Packet Pg. 296 Attachment: East Palo Alto Measure W FY2022 20221220 -signed (2531 : Annual Financial Reports for Fiscal Year 2021-22) City of East Palo Alto
Measure W Fund
For the year ended June 30, 2022
Table of Contents
Page
Independent Accountant’s Report ............................................................................................................................. 1 Schedule of Receipts and Disbursements ................................................................................................................... 3 Management’s Report on Compliance with the Agreement for Distribution of San Mateo County Measure W Funds for Local Transportation Purposes ......................................................................................... 5

9.1.g
Packet Pg. 297 Attachment: East Palo Alto Measure W FY2022 20221220 -signed (2531 : Annual Financial Reports for Fiscal Year 2021-22) INDEPENDENT ACCOUNTANTS’ REPORT
To the Honorable Mayor and Members of the City Council
of the City of East Palo Alto
East Palo Alto, California
We have examined management’s assertion, included in the accompanying Management’s Report on Compliance with the Agreement for Distribution of San Mateo County Measure W Funds for Local Transportation Purposes (Agreement) between the City of East Palo Alto (City) and the San Mateo County Transportation Authority entered into on October 17, 2019, that the City complied with the requirements of the Agreement during the year ended June 30, 2022. Management is responsible for the City’s compliance with those requirements. Our responsibility is to express an opinion on management’s assertion about the City’s compliance based upon our examination.

Our examination was made in accordance with attestation standards established by the American Institute of Certified Public Accountants and accordingly, included examining, on a test basis, evidence about the City’s compliance with those requirements and performing such other procedures as considered necessary in the circumstances. We believe that our examination provides a reasonable basis for our opinion. Our examination does not provide a legal determination of the City’s compliance with specified requirements.

In our opinion, management’s assertion that the City complied with the aforementioned requirements for the year ended June 30, 2022, is, in all material respects, fairly stated.

Badawi & Associates, CPAs
Berkeley, California
December 19 2022

9.1.g
Packet Pg. 298 Attachment: East Palo Alto Measure W FY2022 20221220 -signed (2531 : Annual Financial Reports for Fiscal Year 2021-22) 2 This page intentionally left blank

9.1.g
Packet Pg. 299 Attachment: East Palo Alto Measure W FY2022 20221220 -signed (2531 : Annual Financial Reports for Fiscal Year 2021-22) City of East Palo Alto Measure W Fund
Schedule of Receipts and Disbursements
For the year ended June 30, 2022
3 9.1.g
Packet Pg. 300 Attachment: East Palo Alto Measure W FY2022 20221220 -signed (2531 : Annual Financial Reports for Fiscal Year 2021-22) 4 This page intentionally left blank

9.1.g
Packet Pg. 301 Attachment: East Palo Alto Measure W FY2022 20221220 -signed (2531 : Annual Financial Reports for Fiscal Year 2021-22)

9.1.g
Packet Pg. 302
Attachment: East Palo Alto Measure W FY2022 20221220 -signed (2531 : Annual Financial Reports for Fiscal Year 2021-22) East Palo Alto, California
Independent Accountant’s Report
For the year ending June 30, 2023

9.1.h
Packet Pg. 303 Attachment: East Palo Alto Gann AUP FY2023 20221219 - Final (2531 : Annual Financial Reports for Fiscal Year 2021-22) City of East Palo Alto
Appropriations Limit Schedule
For the year ending June 30, 2023
Table of Contents
Page
Independent Accountant’s Report .......................................................................................................................... 1 Appropriations Limit Schedule .............................................................................................................................. 3 Notes to Appropriations Limit Schedule .............................................................................................................. 4

9.1.h
Packet Pg. 304 Attachment: East Palo Alto Gann AUP FY2023 20221219 - Final (2531 : Annual Financial Reports for Fiscal Year 2021-22) INDEPENDENT ACCOUNTANT’S REPORT
To the Honorable Mayor and City Council
of the City of East Palo Alto
East Palo Alto, California
We have performed the procedures enumerated below to the accompanying Appropriations Limit Schedule of the City of East Palo Alto (City) for the fiscal year ending June 30, 2023. The City’s management is responsible for the accompanying Appropriations Limit Schedule.

The City has agreed to and acknowledged that the procedures performed are appropriate to meet the intended purpose of the requirements of Section 1.5 of Article XIII-B of the California Constitution.

Additionally, the League of California Cities (as presented in the publication entitled Agreed-upon Procedures Applied to the Appropriations Limitation Prescribed by Article XIII-B of the California Constitution) has agreed to and acknowledged that the procedures performed are appropriate for their purposes. This report may not be suitable for any other purpose. The procedures performed may not address all the items of interest to a user of this report and may not meet the needs of all users of this report and, as such, users are responsible for determining whether the procedures performed are appropriate for their purposes.

The procedures performed and our findings are described below:

1. We obtained the completed worksheets used by the City to calculate its appropriations limit for the fiscal year ending June 30, 2023, and determined that the limit and annual calculation factors were adopted by resolution of City Council. We also determined that the population and inflation options were selected by a recorded vote of City Council.

Finding: No exceptions were noted as a result of our procedures.

2. For the accompanying Appropriations Limit Schedule, we added the prior year’s limit to the total adjustments, and agreed the resulting amount to the current year’s limit.

Finding: No exceptions were noted as a result of our procedures.

3. We agreed the current year information presented in the accompanying Appropriations Limit Schedule to corresponding information in worksheets used by the City.

Finding: No exceptions were noted as a result of our procedures.

4. We agreed the prior year appropriations limit presented in the accompanying Appropriations Limit Schedule to the prior year appropriations limit adopted by the City Council during the prior year.

Finding: No exceptions were noted as a result of our procedures.

9.1.h
Packet Pg. 305 Attachment: East Palo Alto Gann AUP FY2023 20221219 - Final (2531 : Annual Financial Reports for Fiscal Year 2021-22) To the Honorable Mayor and Members of City Council
of the City of East Palo Alto
East Palo Alto, California

Page 2 ends

2 We were engaged by the City to perform this agreed-upon procedures engagement and conducted our engagement in accordance with attestation standards established by the AICPA. We were not engaged to and did not conduct an examination or review, the objective of which would be the expression of an opinion or conclusion, respectively, on the accompanying Appropriation Limit Schedule. Accordingly, we do not express such an opinion or conclusion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you.

We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements related to our agreed-upon procedures engagement.

This report is intended solely for the information and use of the City Council and management of the City and is not intended to be and should not be used by anyone other than these specified parties. However, this report is a matter of public record, and its distribution is not limited.

Badawi & Associates, CPAs
Berkeley, California
December 19, 2022

9.1.h
Packet Pg. 306 Attachment: East Palo Alto Gann AUP FY2023 20221219 - Final (2531 : Annual Financial Reports for Fiscal Year 2021-22) City of East Palo Alto
Appropriations Limit Schedule
For the year ending June 30, 2023
Amount Source
A. Appropriations limit for the year ended June 30, 2022 35,514,101 $ Prior Year Schedule B. Calculation factors:

1. Population increase % 0.9908 State Department of Finance

2. Inflation increase % 1.0755 State Department of Finance

3. Total adjustment factor % 1.0656 B1 * B2
C. Annual adjustment increase 2,329,917 [(B3-1)*A)]
D. Other adjustments:

Loss responsibility (-) - N/A
Transfers to private (-) - N/A
Transfers to fees (-) - N/A
Assumed responsibility (+) - N/A
E. Total adjustments 2,329,917 (C+D)
F. Appropriations limit for the year ending June 30, 2023 37,844,018 $ (A+E) 3 9.1.h
Packet Pg. 307 Attachment: East Palo Alto Gann AUP FY2023 20221219 - Final (2531 : Annual Financial Reports for Fiscal Year 2021-22) City of East Palo Alto
Notes to Appropriations Limit Schedule
For the year ending June 30, 2023
4 1. PURPOSE OF LIMITED PROCEDURES REVIEW
Under Article XIIIB of the California Constitution (the Gann Spending Limitation Initiative), California governmental agencies are restricted as to the amount of annual appropriations from proceeds of taxes.

Effective for years beginning on or after July 1, 1990, under Section 1.5 of Article XIIIB, the annual calculation of the appropriations limit is subject to this agreed upon procedures engagement.

2. METHOD OF CALCULATION
Under Section 10.5 of Article XIIIB, for fiscal years beginning on or after July 1990, the appropriations limit is required to be calculated based on the limit for the fiscal year 1986-1987, adjusted for the inflation and population factors discussed in Notes 3 and 4 below.

3. INFLATION FACTORS
A California governmental agency may use as its inflation factor either the annual percentage change in the 4th quarter per capita personal income (which percentage is supplied by the State Department of Finance), or the percentage change in the local assessment roll from the preceding year due to the change of local nonresidential construction. The factor adopted by the City of East Palo Alto for the fiscal year 2022-2023 represents the percentage change per capita personal income.

4. POPULATION FACTORS
A California governmental agency may use as its population factor either the annual percentage change of the jurisdiction’s own population, or the annual percentage change in population in the County where the jurisdiction is located. The factor adopted by the City of East Palo Alto for fiscal year 2022-2023 represents the population change in San Mateo County.

5. OTHER ADJUSTMENTS
A California government agency may be required to adjust its appropriations limit when certain events occur, such as the transfer of responsibility for municipal services to, or from, another government agency or private entity. There were no adjustments made for the fiscal year ending June 30, 2023.

9.1.h
Packet Pg. 308 Attachment: East Palo Alto Gann AUP FY2023 20221219 - Final (2531 : Annual Financial Reports for Fiscal Year 2021-22)

EAST PALO ALTO

CITY COUNCIL

STAFF REPORT
DATE: January 17, 2023
TO: Honorable Mayor and Members of the City Council
VIA: Patrick Heisinger, Interim City Manager
BY: Batool Zaro, Assistant Civil Engineer
Humza Javed, Public Works Director
SUBJECT: Resolution of Intent to increase water capital surcharge rates on April,1 2023 and provide notice of a proposition 218 public hearing set for March 21, 2023 Recommendation
Adopt a Resolution of Intent to increase water capital surcharge rates on April,1 2023 and provide notice of a Proposition 218 Public Hearing set for March 21, 2023.

Alignment with City Council Strategic Plan
This recommendation is primarily aligned with:

Priority No. 1: Enhance Public Safety and Emergency Preparedness Priority No. 4: Improve Public Facilities and Infrastructure Priority No. 6: Create a Healthy and Safe Community
Background
The City of East Palo Alto (City)-owned water system is leased to and operated by Veolia under the management of the Public Works Department. The service area covers approximately 80 percent of the City with nearly all water provided by San Francisco Public Utilities Commission (SFPUC). The lease was entered into on April 9, 2001, with American Water, the former operator, and expires in 2026. The lease was amended on July 19, 2016, and Veolia took over the lease agreement from American Water around July 2020.

On July 27, 2021, City Council adopted a resolution authorizing the City Manager to execute a contract with EKI Environment & Water, Inc., (EKI) for the preparation of the 2022 Water System Master Plan (WSMP).

On October 4, 2022, City Council adopted the 2022 WSMP. The adopted Master Plan provides

9.2 Packet Pg. 309
the City with an overall plan for potable water infrastructure improvements over the next twenty (20) years to maintain water system reliability and support anticipated development within the City. The 20-year CIP plan was based on the developed hydraulic model.

The Final 2022 WSMP may be found on the City website here:
https://www.cityofepa.org/publicworks/project/water-system-master-plan-2022 As part of the WSMP scope, a rate study and funding analysis were performed to determine how the proposed CIP project may affect rates and how the program will be funded. Bartle Wells Associates (BWA) performed the rate analysis, in conjunction with EKI.

During the October 4, 2022, meeting, City Council approved a funding strategy for a few of the Priority 1A projects, and the rate study looked at how the allocated Water Capital Funds will impact rates. Detailed project information is included on the project summary sheets in the WSMP. The goal of the rate study was to understand how all priority projects identified in the WSMP will be financed. Table 2 details the cost recovery needed to be able to fund the priority projects identified in the WSMP over the next five (5) years.

TABLE 2
5-Year Water Capital Improvements for Cost Recovery
Project # Project Description Cost Included in Fee
Recovery
WS-04B/WD-04C/P-3/P21A12" University Avenue
Watermain Replacement
Project
12" Weeks Street Watermain
Replacement Project
$3,006,000
P-29 Pipeline Replacement on East
Bayshore Road
$1,290,000
P-32 Pipeline Replacement on
West Bayshore Road
$727,600
P-33 Pipeline Replacement West of
Highway 101 and West of
University Ave
$1,752,000
WD-07 Small Projects/ Water Valve
Replacement Project
$750,000
WD-06 Hydrant Replacement Project $331,500
Subtotal with Cost Escalation $8,459,707
Less Use of Water Capital Reserves ($2,000,000)
Total for Fee recovery $6,459,707
Note: Costs include project expenditures anticipated over the next 5 years; some projects will require additional funding in subsequent years. Some of the priority projects listed in the WSMP will be financed by funds other than the City (i.e. development-funded or grant-funded), so the costs are not included in the recovery fee.

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A portion of the costs needed for water capital improvements will come from the existing water capital reserves. The City has approximately $4.6 million in water capital reserves. These reserves are typically set aside to be able to fund any emergency/ unexpected water system costs. Staff is comfortable drawing down the reserves, collected over the past 5 years, by $2 million as an effort to finance water capital projects without significantly impacting customers.

The project price estimates come from the adopted WSMP and account for design and construction management. The amount budgeted for design/construction management could potentially allow the City to hire a full-time water capital project engineer in the future. This would give the City the staffing capacity to take on more water capital projects.

The City’s existing water capital fees currently include a water meter replacement surcharge to fund the City’s water meter replacement program. The goal of the program is to replace all meters within the City’s service area. The City has purchased approximately 2800 meters and approximately 460 meters have been installed to date. Veolia will have the remaining meters installed by 2025. The City collected sufficient revenue, approximately $1.5 million, for this program through the surcharge, so staff proposes suspending the water meter surcharge fee.

In the future, any additional program charges will be funded through the City’s water capital surcharge.

Analysis
Increase in Water Capital Improvements Surcharges
The proposed water capital surcharge rates will be increased to fund priority 1A projects identified in the WSMP over the next five years. The costs recovered for each project are demonstrated in Table 2.

As a result of the WSMP rate study, the City’s meter replacement surcharge is planned to be suspended, and the capital surcharge was revisited. This was done to be able to fund the capital improvement projects identified in the 2022 WSMP to support the City’s water supply strategy and increase capacity to meet the recommended performance criteria.

Projects were prioritized based on two main categories (1) the condition of the improvement, which includes physical condition (pipe material, age, and size) and hydraulic performance, and (2) the consequence of failure of the improvement, which includes service requirements, environmental/public impact, safety, and supply impact.

Table 3 below reflects current water capital rates along with the proposed rate increase:

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TABLE 3
Proposed Water Capital Improvement Surcharges
As shown in Table 3, the meter replacement program surcharge was removed and replaced solely with the water capital improvements surcharge. The proposed rate schedule is projected to achieve the cost recovery needed as shown in Table 2. The rates include a cost escalation factor to account for inflation.

Table 4 demonstrates the projected billing impacts on the fixed and per-usage surcharge:

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TABLE 4
Projected Billing
Impacts
Table 4 shows the potential impact on low, typical, moderate-high, and high water users.

The proposed calculated rates include two components a fixed charge component that is levied based on customer class and water meter size regardless of water use, and a variable charge component that is levied based on metered water consumption.

The proposed surcharges are designed to recover costs from a balance of fixed and variable charges with 65% of revenues recovered from fixed charges and 35% from variable charges.

This balance reflects that a large share of water system infrastructure is sized to meet the capacity needs of each account based on customer class and meter size, but also reflects that a significant portion of costs will be recovered based on actual water usage such that customers that use more water will also pay for more infrastructure related to actual water delivery. Staff recommends the 65/35 split in order to ensure enough revenue is collected to fund the capital projects. Having a heavily fixed charge is recommended by experts because it’s guaranteed revenue based on customers. Additionally, with the California drought water, water usage is anticipated to decrease, reducing the revenue to be recovered from variable charges. The variable charge percentage (35%) is higher than most jurisdictions, and this was done to protect customers with lower water use. If a 100% fixed charge was used, all the revenue needed will come from the fixed charge, meaning all customers with the same meter

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size would be charged the same rate regardless of actual water use. Having 35% of the revenue coming from a variable charge allows lower water users to pay less.

The proposed rate increases are proposed to begin April 1, 2023.

The full rate study is attached as an Attachment 2 and can also be found on the City website linked here:
https://www.cityofepa.org/publicworks/project/water-system-master-plan-2022 As part of the study, the consultant evaluated what the City’s water capital surcharge rates would look like if the City planned to complete all the projects outlined in the WSMP over the next 20 years. The 20-year CIP plan includes approximately $81 million dollars of capital projects; this amount includes projects that will be fully funded by developers and projects partly funded by grants or other sources. The total includes a) roughly $14 million of development‐related hydraulic improvements that will be funded by new development, b) approximately $2 million for replacement of old water meters, and c) roughly $65 million for replacement of aging and substandard pipelines and other improvements needed to support water system reliability for the City’s customer base.

City Staff will continue to investigate alternative funding options such as usage of bonds to accelerate water projects without significantly impacting ratepayers.

See Appendix A of the 2022 WSMP rate study for the water capital surcharges with a 20-year capital program. Appendix A includes a set of tables deriving Maximum Surcharges designed to support full funding of the roughly $65 million of ratepayer infrastructure improvements needed over the next 20 years as identified in the updated WSMP.

Proposition 218 rate Increase Process
Water Capital Surcharge rates are subject to the procedural and substantive requirements as set forth in Proposition 218. Proposition 218 was adopted by California voters in 1996 and added Articles XIIIC and XIIID to the California Constitution. Article XIIID governs propertyrelated charges which have been determined to include ongoing utility service charges such as water, sewer, and garbage rates. The procedural requirements of Proposition 218 include:

1. Noticing Requirement: The City must mail a notice of proposed rate increases to all affected customers of record. The notice must specify the basis of the fee, the reason for the fee, and the date/time/location of a public rate hearing at which the proposed rates will be considered/adopted.

2. Public Hearing: The City must hold a public hearing prior to adopting the proposed rate increases. The public hearing must be held not less than 45 days after the required notices are mailed.

3. Rate Increases Subject to Majority Protest: At the public hearing, the proposed rate increases are subject to majority protest. If more than 50% of affected customers submit written protests against the proposed rate increases, the adjustments cannot be adopted.

9.2 Packet Pg. 314
Staff and the City Clerk are recommending that notices be issued in English and Spanish.

Fiscal Impact
Water capital improvement projects are funded with revenue derived from the rates paid by water customers.
• Approximately $6.5 million needs to be recovered over the next 5 years to fund the planned CIP projects; about $1.29 million needs to be collected per year. See Table 2 of this report (or Table 3 of the Rate Study Report) for the breakdown of the recovery cost • The City currently collects around $820-840K in revenue and this includes the revenue from the water capital surcharge and the water meter replacement surcharge • An increase in the water capital surcharge rate would result in an increase in water capital funds of approximately $471k per fiscal year totaling in a new annual revenue of about $1.29 million a year
• For the impact on specific customers, see Table 4 of this report (or Table 6 of the Rate Study Report)
Public Notice
The public was provided notice of this agenda item by posting the City Council agenda on the City’s official bulletin board outside City Hall and making the agenda and report available at the City’s website and at the San Mateo Co. Library located at 2415 University Avenue, East Palo Alto.

The proposed rate increases will be presented to the City Council at the regular January 17, 2023 City Council meeting. Should the Council choose to go forward in the process, following that meeting, staff will issue notices informing the public and their right of protest. A public hearing is planned for March 21, 2023, no less than 45 days following the mailing of the notice.

Staff and the City Clerk are recommending that notices be issued in English and Spanish.

Environmental
The action being considered by the City Council is exempt from the California Environmental Quality Act (CEQA) because it is not a “project” pursuant to 15378(b)(4) because it is a fiscal activity which does not involve any commitment to any specific project which may result in a potentially significant impact on the environment.

Attachments

1. Intent Draft Resolution - WSMP Rate Study

2. Attachment 2 - East Palo Alto Water Capital Improvement Surcharges - December 2022

3. Attachment 3 - Proposed Prop 218 Notice English

9.2 Packet Pg. 315
Resolution No. XX-2023 1
RESOLUTION NO. XX – 2023

A RESOLUTION OF THE CITY COUNCIL

OF THE CITY OF EAST PALO ALTO

INTENTION OF THE CITY COUNCIL OF THE CITY OF EAST PALO ALTO TO INCREASE WATER CAPITAL RATES, SETTING A PUBLIC HEARING DATE FOR MARCH 21, 2023, AND DIRECTING

STAFF TO PROCEED WITH MAILING NOTICES TO ALL WATER CUSTOMERS WITHIN THE CITY’S SERVICE AREA
WHEREAS, American Water Enterprises leased the water system under a twenty-five year agreement with the City of East Palo Alto; and
WHEREAS, Veolia took over the lease agreement in 2020; and WHEREAS, the City adopted the 2022 Water System Master Plan prepared by EKI Environment & Water, Inc., (EKI) on October 4, 2022, which outlined capital improvements projects for the next 20 years; and
WHEREAS, Bartle Wells Associates (BWA) performed the water rate analysis, in conjunction with EKI; and
WHEREAS, the proposed rate changes will help ensure the City recovers enough fees to fund the capital improvement projects identified in the 2022 WSMP to support the City’s water supply strategy and increase capacity to meet the recommended performance criteria; and WHEREAS, the City Council intends to adopt the proposed rates following the procedural requirements of Proposition 218, Article XIIID, Section 6 of the California Constitution; and WHEREAS, the City Council directs staff to adhere to Council Policy establishing procedural guidelines for the submission and tabulation of protests, attached hereto as Exhibit A “Guidelines for the Submission and Tabulation of Protests.”

NOW, THEREFORE, BE IT RESOLVED THAT THE CITY COUNCIL OF THE CITY OF EAST PALO ALTO HEREBY affirms, authorizes, and directs as follows:

1. The foregoing recitals are true and correct.

2. Proceedings are initiated to adopt an updated water capital surcharge rate.

3. The 21st day of March, 2023 at 6:30 pm in the Chambers of the City Council at City Hall, 2415 University Avenue, East Palo Alto California, is set as the time and place for a public hearing (“Public Hearing”) on the proposed water capital rates.

4. The City Clerk is instructed to provide notice of the proposed water capital rate increases in conformity with Proposition 218.

5. At the Public Hearing, the City Council shall consider all objections or protests, if any, to the proposed water rate increases, and any person shall be permitted to present written or oral testimony. Although oral comments at the Public Hearing will not qualify as formal protest, the City Council welcomes community input during the Public Hearing.

6. At the conclusion of the Public Hearing, all protests submitted will be tabulated in conformity with the City’s tabulation guidelines.

9.2.a
Packet Pg. 316 Attachment: Intent Draft Resolution - WSMP Rate Study (2533 : Resolution of Intent to increase water capital surcharge rates and provide Resolution No. XX-2023 2

7. A majority protest exists if protests are submitted in opposition to the proposed water rates by a majority (50% plus 1) of service customers.

8. If there is a majority protest against the imposition of the proposed rates, the City Council shall not adopt the rate increases.

PASSED AND ADOPTED this 17th day of January 2023, by the following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:
_________________________
Lisa Yarbrough-Gauthier, Mayor
ATTEST: APPROVED AS TO FORM:

James Colin, City Clerk John D. Lê, City Attorney

9.2.a
Packet Pg. 317 Attachment: Intent Draft Resolution - WSMP Rate Study (2533 : Resolution of Intent to increase water capital surcharge rates and provide Resolution No. XX-2023 3
Guidelines for the Submission and Tabulation of Protests When notice of a public hearing with respect to a service rate increase, such as for water or solid waste collection service, has been given by the City pursuant to Article XIIID, Section 6 of the California Constitution, the following shall apply:

Submission of Protests

1. Any property owner or customer/ratepayer may submit a written protest to the City Clerk, either by mail or delivery to EPA Government Center, 2415 University Avenue, East Palo Alto, CA 94303-1164 or by submitting the protest at the public hearing. Protests must be received by the end of the public hearing. No postmarks will be accepted.

2. Each protest must be in writing and must state that it is a protest (or indicate opposition to the proposed rates) and include the following information: (i) the name of the owner or customer/ratepayer submitting the record, (ii) the street address or assessor’s parcel number of the parcel (or service location) for which the protest is submitted, and (iii) the signature of the person submitting the protest.

3. Email or facsimile protests cannot be accepted. Although the City Council welcomes input from the community during the public hearing on the proposed fees, oral comments at the public hearing will not qualify as a formal protest unless accompanied by a written protest.

4. If a parcel receiving service is owned by more than one record owner; if more than one name appears on the City’s records as the customer/ratepayer for the parcel; or if the customer/ratepayer is not the record owner, any owner or customer/ratepayer may submit a protest, but only one protest will be counted per parcel and any one protest submitted in accordance with these rules will be sufficient to count as a protest for that parcel.

5. A protest by a property owner that is a trust must be signed by the Trustee and identified as such with the signature (i.e., John Smith, Trustee for Smith Family Trust). Protests by property owners that are corporations, partnerships, or similar entities must be signed by a person authorized to execute documents on behalf of the property owner. A property owner that is not shown on the last equalized assessment roll for a parcel must accompany the protest with evidence of ownership.

6. Any person who submits a protest may withdraw it by submitting to the City Clerk a dated written request that the protest be withdrawn. The withdrawal of a protest must contain sufficient information to identify the affected parcel and the name of the record owner or record customer/ratepayer who submitted both the protest and the request that it be withdrawn.

7. A fee protest proceeding is not an election.

8. To ensure transparency and accountability in the fee protest tabulation, protests shall constitute disclosable public records from and after the time when they are opened by the City at the public hearing. Protests will be retained by the City for three years and then may be destroyed.

9.2.a
Packet Pg. 318 Attachment: Intent Draft Resolution - WSMP Rate Study (2533 : Resolution of Intent to increase water capital surcharge rates and provide Resolution No. XX-2023 4
Tabulation of Protests

1. The City Clerk, or designee, shall determine the validity of all protests. The City Clerk shall not accept as valid any protest if s/he determines that any of the following conditions exist:
a. The protest does not identify a parcel that will be subject to the proposed fees. b. The protest does not bear an original signature of a record owner or customer/ratepayer associated with the parcel.
c. The protest does not state its opposition to the proposed fees or is illegible. d. The protest has been altered in any way by someone other than the person who signed it. e. The protest was not received by the City Clerk before the close of the public hearing on the proposed fees.
f. A request to withdraw the protest was received by the City Clerk prior to the close of the public hearing on the proposed fees.
g. The protest or request for withdrawal is dated prior to the date of mailing of the notices of hearing on the proposed fees.

2. The City Clerk’s decision that a protest is not valid shall constitute a final action of the City and shall not be subject to any internal appeal.

3. A majority protest exists if written protests are timely submitted and not withdrawn by owners or customers/ratepayers with respect to a majority (50.0% plus one) of the parcels subject to the proposed fee.

4. A majority protest also exists is written protests are timely submitted and not withdrawn by customers/ratepayers with respect to a majority (50.0% plus one) of the service locations (customer accounts) subject to the proposed fee.

5. At the conclusion of the public hearing, the City Clerk shall count all protests received, including those received during the public hearing, and shall report the results to the City Council upon completion. If review of the protests received demonstrates that the number received is manifestly less than one-half of the parcels served by the City with respect to the fee which is the subject of the protest, then the City Clerk may advise the Council of the absence of a majority protest without determining the validity of all protests.

6. If, at the conclusion of the public hearing, the Clerk determines that s/he will require additional time to count the protests, s/he shall so advise the Council, which may adjourn the meeting to allow the count to be completed on another day or days. If so, the Council shall declare the time and place of the count, which shall be conducted in a place where interested members of the public may observe the counting, and the Council shall declare the time at which its meeting shall be resumed to receive and act on the report of the Clerk.

9.2.a
Packet Pg. 319 Attachment: Intent Draft Resolution - WSMP Rate Study (2533 : Resolution of Intent to increase water capital surcharge rates and provide Water Capital Improvement Surcharges
December 2022
City of East Palo Alto

9.2.b
Packet Pg. 320 Attachment: Attachment 2 - East Palo Alto Water Capital Improvement Surcharges - December 2022 (2533 : Resolution of Intent to increase Date: December 22, 2022
To: Batool Zaro
Engineering Division
City of East Palo Alto
From: Alex Handlers
Principal & Vice‐President
Bartle Wells Associates
Re: Updated Water Capital Improvement Surcharges
Water Capital Improvement Surcharges
In 2015, Bartle Wells Associates(BWA) assisted the City of East Palo Alto with development of a Water Capital Improvement Surcharge to provide funding for infrastructure improvements to the City’s aging water system facilities. The surcharge was adopted by the City in June 2015 and is collected in addition to the City’s regular Water Service Charges. The surcharge is used to fund high‐priority capital improvements needed to address current deficiencies, improve water system reliability, and minimize the potential forservice outages. Revenues are used to fund costs associated with planning, analysis, design, and construction of water system infrastructure, and cannot be used for any other purpose.
2022 Water System Master Plan Update
In September 2022, the City received an updated Water System Master Plan developed by the engineering consulting firm EKI Environment & Water, Inc. (EKI). The Master Plan identifies $81 million (current $) of potable water system infrastructure improvements needed over the next approximately 20 years to maintain water system reliability and meet the City’s projected future water demands. The total includes a) roughly $14 million of development‐related hydraulic improvements that will be funded by new development, b) approximately $2 million for replacement of old water meters, and c) roughly $65 million for replacement of aging and substandard pipelines and other improvements needed to support water system reliability for the City’s customer base.

Updated Water Capital Improvement Surcharges
The City’s current Water Capital Improvement Surcharges only generate roughly $500,000 per year and are not adequate to fund the capital funding needs identified in the updated Master Plan. To help support the City’s water infrastructure needs, BWA developed updated Water Capital Improvement Surcharges.
2625 Alcatraz Ave, #602
Berkeley, CA 94705
Tel: 510 653 3399
www.bartlewells.com
Water Capital Improvement Surcharge Update 1

9.2.b
Packet Pg. 321 Attachment: Attachment 2 - East Palo Alto Water Capital Improvement Surcharges - December 2022 (2533 : Resolution of Intent to increase Updated Water Capital Improvement Surcharges were developed under two scenarios, including:
 Proposed Surcharges designed to support the City’s highest‐priority water system infrastructure needs over the next 5 years.
 Maximum Surcharges designed to support full funding of the roughly $65 million of ratepayer capital improvements needed over the next 20 years as identified in the updated Master Plan.

While the Proposed Surcharges are substantially lower than the Maximum Surcharges, they do represent a significant increase over the City’s existing capital surcharges.

Reduced Billing Impacts due to Suspension of Meter Replacement Program Surcharges and Reduction of Water Usage Charges
Roughly concurrently with implementation of the Proposed Water System Capital Surcharges, the City is also planning to suspend collection of its Meter Replacement Program Surcharges. As such, the billing impacts due to the proposed increases to the capital surcharges will be partially offset by a reduction due to suspension of the Meter Replacement Program Surcharges.

While the net impacts will vary depending on customer class and meter size, the net billing impact to a typical single family home with 10 hundred cubic feet (hcf) of monthly water use is estimated at $2.81 per month. Customers with lower water use will face smallerimpacts and customer with higher levels of water use will face larger increases.

In addition, the City also recently reduced its regular Water Usage Charges by roughly 9% effective November 1, 2022. Accounting for this rate reduction, all single family residential customers, and most multi‐family and commercial customers, will end up with water bills that are lower than they were paying prior to November 1 when the updated Water Capital Improvement Surcharges are projected to go into effect.

Proposed Water Capital Improvement Surcharge Derivation The attached tables provide information on the City’s current and historical water rates and surcharges and calculate updated Water System Capital Surcharges designed to support the City’s highest‐priority water system infrastructure needs over the next 5 years. A description of each table is summarized staring on the following page.

As noted, the Proposed Surcharges are lower than the Maximum Surcharges calculated to support full funding of ratepayer capital needs identified in the updated Master Plan. Tables deriving the Maximum Surcharges are included in Appendix A.

Water Capital Improvement Surcharge Update 2

9.2.b
Packet Pg. 322 Attachment: Attachment 2 - East Palo Alto Water Capital Improvement Surcharges - December 2022 (2533 : Resolution of Intent to increase Table 1 shows a history of water rates and surcharges. In addition to regular Water Service Charges for ongoing water service, the City also levies two surcharges including the Water Capital Improvement Surcharges and Meter Replacement Program Surcharges.

Table 2 shows a breakdown of water accounts by customer class and meter size along with the associated number of Demand Equivalents. Each Demand Equivalent represents the equivalent water demand of a typical single family home. Demand Equivalents are assigned to accounts based on customer class and meter size in proportion to both usage by customer class (as determined by analysis of water use over the past two years) and meter capacity. In total, the City serves 3,935 water service accounts whose water demands equate to about 6,541 Demand Equivalents.

Table 3 shows the City’s highest priority water system capital improvements planned for the next 5 years. The projects are estimated to cost roughly $8.5 million with projected 3% cost escalation to construction midpoint. The City anticipates applying $2 million of water capital fund reservesto these projects to reduce the funding needs from updated capital surcharges. Proposed Water System Capital Surcharges are designed to recover the remaining roughly $6.5 million of funding needs over the next 5 years.

Table 4 calculates proposed updated Water Capital Improvement Surcharges, which include two components, similar to the City’s existing capital surcharges:
 A fixed charge component that is levied based on customer class and water meter size regardless of water use.
 A variable charge component that is levied based on metered water consumption.

The capital surcharges can be recovered anywhere within a range from 100% fixed charges (recovered based on the system capacity needs for serving each account) to 100% variable charges (recovered based on each customer’s actual water usage). The proposed surcharges are designed to recover costsfrom a balance of fixed and variable charges with 65% of revenuesrecovered from fixed charges and 35% from variable charges. This balance reflects that a large share of water system infrastructure issized to meet the capacity needs of each account based on customer class and meter size, but also reflects that a significant portion of costs will be recovered based on actual water usage such that customers that use more water will also pay for more infrastructure related to actual water delivery.

Table 5 shows proposed Water Capital Improvement Surcharges which include both Fixed Monthly Meter Surcharges based on customer class and metersize (aligned with the capacity needsforserving each account) and Water Usage Surcharges levied per hundred cubic feet of metered water use.

Water Capital Improvement Surcharge Update 3

9.2.b
Packet Pg. 323 Attachment: Attachment 2 - East Palo Alto Water Capital Improvement Surcharges - December 2022 (2533 : Resolution of Intent to increase Table 6 calculates the monthly billing impacts of the proposed Water Capital Improvement Surcharges on a range of customers. The billing impacts account for proposed increases to Water Capital Improvement Surcharges offset by suspension of the City’s Meter Replacement Program Surcharges. This table does not also account for the recent approximately 9% reduction in regular Water Usage Charges, which would more than offset the increases to the combined water rate surcharges for most of the City’s water customers.

For a small number of commercial customers with larger meter sizes but low monthly water use, the proposed Water Capital Improvement Surcharges will result in a net increase in the total monthly water bill as the increase in the capital surcharges will exceed to the amount offset due to the suspension of the meter replacement program surcharges and recent reduction to Water Usage Charges.

Chart A shows a comparison of current vs. proposed surchargesforsingle family homes with 5/8‐inch meters and a range of monthly water usage. Current surcharges include both a) existing Water Capital Improvement Surcharges and b) Meter Replacement Program Surcharges, while proposed surcharges include only the updated Water Capital Improvement Surcharges assuming the City suspends the Meter Replacement Program Surcharges. Again, this chart does not also account for the recent approximately 9% reduction in regular Water Usage Charges.

Maximum Water Capital Improvement Surcharge Derivation
Appendix A includes a set of tables deriving Maximum Surcharges designed to support full funding of the roughly $65 million of ratepayer infrastructure improvements needed over the next 20 years as identified in the updated Master Plan.

Water Use per Meter Equivalent
Appendix B includes tables calculating water use per meter equivalent based on two recent years of water consumption data. A meter equivalent represents the demand and associated water system capacity needs for serving a single family residential 5/8‐inch meter. On average, commercial and multi‐family customers use significantly more water per meter size than single family homes. Based on the updated analysis, water use per comparable meter size for customers other than single family homes is 1.55x that per average single family residence. This ratio is in line with the historical ratio factored into the City’s existing water rates and surcharges.

Water Capital Improvement Surcharge Update 4

9.2.b
Packet Pg. 324 Attachment: Attachment 2 - East Palo Alto Water Capital Improvement Surcharges - December 2022 (2533 : Resolution of Intent to increase Table 1
City of East Palo
Water Rates
July 2 July 1 July 1 July 1 Nov 1 July 1
2019 2020 2021 2022 2022 2023

WATER SERVICE CHARGES
Water Usage Charges ($ per ccf) $7.40 $7.55 $7.66 $8.55 $7.76 $8.67 Fixed Monthly Meter Charges
Single Family Residential
5/8" ‐ 1" $17.19 $17.53 $17.79 $18.06 $18.06 $18.33
All Other
5/8" $25.34 $25.85 $26.24 $26.63 $26.63 $27.03
3/4" 38.01 38.77 39.35 39.94 39.94 40.54
1" 63.36 64.63 65.60 66.58 66.58 67.58
1‐1/2" 126.72 129.25 131.19 133.16 133.16 135.16
2" 202.75 206.81 209.91 213.06 213.06 216.26
3" 380.15 387.75 393.57 399.47 399.47 405.46
4" & larger 633.58 646.25 655.94 665.78 665.78 675.77

MONTHLY FIRE SERVICE & EMERGENCY INTERTIE CHARGE
5/8" $5.07 $5.17 $5.25 $5.33 $5.33 $5.41
3/4" 7.60 7.76 7.87 7.99 7.99 8.11
1" 12.67 12.93 13.12 13.32 13.32 13.52
1‐1/2" 25.34 25.85 26.24 26.63 26.63 27.03
2" 40.54 41.36 41.98 42.61 42.61 43.25
3" 76.02 77.55 78.72 79.89 79.89 81.09
4" & larger 126.70 129.25 131.20 133.15 133.15 135.15

WATER CAPITAL IMPROVEMENT SURCHARGES
Water Usage Charges ($ per ccf)
All Customers $0.43 $0.43 $0.43 $0.43 $0.43 tbd
Fixed Monthly Meter Charges
Single Family Residential
5/8" ‐ 1" $2.88 $2.88 $2.88 $2.88 $2.88 tbd
All Other Water Service Meters
5/8" $4.46 $4.46 $4.46 $4.46 $4.46 tbd
3/4" 6.70 6.70 6.70 6.70 6.70 tbd
1" 11.16 11.16 11.16 11.16 11.16 tbd
1‐1/2" 22.29 22.29 22.29 22.29 22.29 tbd
2" 35.66 35.66 35.66 35.66 35.66 tbd
3" 66.86 66.86 66.86 66.86 66.86 tbd
4" & larger 111.44 111.44 111.44 111.44 111.44 tbd

METER REPLACEMENT PROGRAM SURCHARGES
Monthly Meter Replacement Program Surcharge Planning to All Water Service Meters Terminate
5/8" $6.24 $6.24 $6.24 $6.24 $6.24 ‐
3/4" 6.50 6.50 6.50 6.50 6.50 ‐
1" 6.94 6.94 6.94 6.94 6.94 ‐
1‐1/2" 9.84 9.84 9.84 9.84 9.84 ‐
2" 10.92 10.92 10.92 10.92 10.92 ‐
3" 36.10 36.10 36.10 36.10 36.10 ‐
4" 37.34 37.34 37.34 37.34 37.34 ‐
6" 43.35 43.35 43.35 43.35 43.35 ‐
* One ccf = one hundred cubic feet = approximately 748 gallons.

Water Capital Improvement Surcharge Update 5

9.2.b
Packet Pg. 325 Attachment: Attachment 2 - East Palo Alto Water Capital Improvement Surcharges - December 2022 (2533 : Resolution of Intent to increase Table 2
City of East Palo
Water Service Accounts & Demand Equivalents
Number Demand Demand
of Accounts Ratio Equivalents
Water Service Accounts by Class & Meter Size
Single Family Residential
5/8" ‐ 1" 3,607 1.00 3,607.0
All Other Water Service Accounts
5/8" 94 1.55 145.7
3/4" 18 2.33 41.9
1" 36 3.88 139.7
1‐1/2" 51 7.75 395.3
2" 94 12.40 1,165.6
3" 20 23.25 465.0
4" & larger 15 38.75 581.3 ______ ______
Subtotal 328 2,934.4
Total 3,935 6,541.4
Source: Active Accounts with Meter Size and Customer Type; July 2022.

Water Capital Improvement Surcharge Update 6

9.2.b
Packet Pg. 326 Attachment: Attachment 2 - East Palo Alto Water Capital Improvement Surcharges - December 2022 (2533 : Resolution of Intent to increase Table 3
City of East Palo
5‐Year Water Capital Improvements for Cost Recovery
Project # Project Description
Cost Included in
Fee Recovery
WD‐048 / WD‐04C / P‐3 / P‐21A
12" University Ave Watermain Replacement &
12" Weeks Street Watermain Replacement $3,006,000
P‐29 East Bayshore Improvements 1,290,000
P‐32 West Bayshore Improvements 727,600
P‐33 Euclid Project 1,752,000
WD‐07 Small Projects/Water Valve Replacement Project 750,000 WD‐06 Hydrant Replacement Projects 331,500
Subtotal 7,857,100
Cost Escalation 3% for 2.5 Years to Midpoint 1.077
Subtotal with Cost Esc $8,459,707
Less Use of Capital Fund Reserves (2,000,000)
Total for Fee Recovery $6,459,707
Note: Costs include project expenditures anticipated over the next 5 years; some projects will require additional funding in subsequent years.

Source: Based on 5‐Year Water Capital Improvements from City of East Palo Alto and cost estimates identified in the Water System Master Plan.

Water Capital Improvement Surcharge Update 7

9.2.b
Packet Pg. 327 Attachment: Attachment 2 - East Palo Alto Water Capital Improvement Surcharges - December 2022 (2533 : Resolution of Intent to increase Table 4
City of East Palo
Calculation of Proposed Water Capital Improvement Surcharge Net Capital Funding Requirement $6,459,707
Years for Completion 5
Annual Funding Requirement $1,291,941
Fixed Charge Revenue Recovery 65% $839,762
Current Meter Equivalents 6,541.4
Meter Equivalents with Estimated 10% Growth 654.1 ___________ Estimated Meter Equivalents 7,195.6
Charge per Meter Equivalent: Annual $116.71
Charge per Meter Equivalent: Monthly $9.73
Variable Charge Revenue Recovery 35% $452,180
Projected Annual Metered Water Sales* 700,000
Charge per Unit (ccf) $0.65
* Source: City of East Palo Alto, based on 2022 Annual Water Supply and Demand Assessment, assumes continuation of Water Shortage Contingency Plan Stage 2 and accounts for a roughly 40,000 ccf increase in water demand due to anticipated growth.

Water Capital Improvement Surcharge Update 8

9.2.b
Packet Pg. 328 Attachment: Attachment 2 - East Palo Alto Water Capital Improvement Surcharges - December 2022 (2533 : Resolution of Intent to increase Table 5
City of East Palo
Proposed Water Capital Improvement Surcharges
Demand Proposed Water Capital
Ratio Improvement Surcharges
Water Usage Surcharge
$ per hundred cubic feet of metered use $0.65
Fixed Monthly Meter Surcharge
Single Family Residential
5/8" ‐ 1"                         1.00 $9.73
All Other
5/8"                         1.55 $15.07
3/4"                         2.33 22.61
1"                         3.88 37.69
1‐1/2"                         7.75 75.37
2"                      12.40 120.60
3"                      23.25 226.12
4" & larger                      38.75 376.86
Water Capital Improvement Surcharge Update 9

9.2.b
Packet Pg. 329 Attachment: Attachment 2 - East Palo Alto Water Capital Improvement Surcharges - December 2022 (2533 : Resolution of Intent to increase Table 6
City of East Palo Billing Impact of Surcharges Only
Projected Billing Impacts
Monthly Est % of Bills Meter Prog $ Increase
Use (ccf) at or Below Fixed Usage Fixed Chg Total Fixed Usage Total Single Family Residential Rate Impacts
Meter Size 5/8" ‐ 1"
Low Use 5 25% $2.88 $2.15 $6.24 $11.27 $9.73 $3.25 $12.98 $1.71 Typical Use 10 50% 2.88 4.30 6.24 13.42 9.73 6.50 16.23 2.81 Mod‐High Use 15 75% 2.88 6.45 6.24 15.57 9.73 9.75 19.48 3.91 High Use 20 90% 2.88 8.60 6.24 17.72 9.73 13.00 22.73 5.01 Sample Commercial & Multi‐Family Residential Rate Impacts Meter Size 5/8"
Low Use 8 $4.46 3.44 6.24 14.14 $15.07 $5.20 $20.27 $6.13 Moderate Use 17 4.46 7.31 6.24 18.01 15.07 11.05 26.12 8.11 Mod‐High Use 25 4.46 10.75 6.24 21.45 15.07 16.25 31.32 9.87 Meter Size 2"
Low Use 75 $35.66 32.25 10.92 78.83 $120.60 $48.75 $169.35 $90.52 Moderate Use 150 35.66 64.50 10.92 111.08 120.60 97.50 218.10 107.02 Mod‐High Use 225 35.66 96.75 10.92 143.33 120.60 146.25 266.85 123.52 Meter Size 4" (Estimates)
Ikea 800 $111.44 344.00 37.34 492.78 $376.86 $520.00 $896.86 $404.08 Bay Road Housing 1500 111.44 645.00 37.34 793.78 376.86 975.00 1,351.86 558.08 Four Seasons 2000 111.44 860.00 37.34 1,008.78 376.86 1,300.00 1,676.86 668.08 Proposed Capital Surcharge
Current Surcharges
Capital Surcharge
Proposed Surcharges
Water Capital Improvement Surcharge Update 10

9.2.b
Packet Pg. 330 Attachment: Attachment 2 - East Palo Alto Water Capital Improvement Surcharges - December 2022 (2533 : Resolution of Intent to increase

6.24 6.24 6.24 6.24

2.88 9.73

2.15 3.25 4.30

6.50 6.45

9.75 8.60

13.00 11.27

12.98 13.42

16.23 15.57

19.48 17.72

22.73 $0
$10$20$30
Current Proposed Current Proposed Current Proposed Current Proposed Meter Program Charge: FixedCapital Surcharge: FixedCapital Surcharge: Usage Low Use
5 hcf
High Use
20 hcf
Moderate‐High
15 hcf
Typical Use
10 hcf
City of East Palo Alto
Current vs. Proposed Water Capital Improvement & Meter Surcharges Single Family Home with 5/8" Meter
Current
Fixed
Charges
Total
$9.12
Assumes termination of the current Meter Replacement Program Surcharges.

Chart A
Increase
$1.71
Increase
$2.81
Increase
$3.91
Increase
$5.01
Water Capital Improvement Surcharge Update 11

9.2.b
Packet Pg. 331
Attachment: Attachment 2 - East Palo Alto Water Capital Improvement Surcharges - December 2022 (2533 Table 7
City of East Palo
Current Surcharges vs. Proposed Water Capital Improvement Surcharges Proposed
Water Meter Water
Capital Replacement Total Capital
Number of Improvement Program Current Improvement
Accounts Surcharges Surcharges Surcharges Surcharges
Water Usage Charges ($ per ccf)
All Customers $0.43 ‐ $0.43 $0.65
Fixed Monthly Meter Charges
Single Family Residential
5/8" ‐ 1"         3,607 $2.88 $6.24 $9.12 $9.73
All Other Water Service Meters
5/8"               94 $4.46 $6.24 $10.70 $15.07
3/4"               18 6.70 6.50 13.20 22.61
1"               36 11.16 6.94 18.10 37.69
1‐1/2"               51 22.29 9.84 32.13 75.37
2"               94 35.66 10.92 46.58 120.60
3"               20 66.86 36.10 102.96 226.12
4" & larger               15 111.44 37.34 148.78 376.86 One ccf = one hundred cubic feet = approximately 748 gallons.

Assumes termination of current Meter Replacement Program Surcharges.

Current
Water Capital Improvement Surcharge Update 12

9.2.b
Packet Pg. 332 Attachment: Attachment 2 - East Palo Alto Water Capital Improvement Surcharges - December 2022 (2533 : Resolution of Intent to increase Maximum Water Capital Improvement Surcharges
With 20‐Year Capital Program

APPENDIX A
Water Capital Improvement Surcharge Update 13

9.2.b
Packet Pg. 333 Attachment: Attachment 2 - East Palo Alto Water Capital Improvement Surcharges - December 2022 (2533 : Resolution of Intent to increase Table A‐1 With 20‐Year Capital Program
City of East Palo Costs in 2022 $
20‐Year Water Capital Improvements for Cost Recovery
Master Plan CIP Funding Requirement
Capital Improvement Program Cost (2022 $) $81,151,000
Less Meter Replacements (2,167,000)
Less Development‐Related Hydraulic Improvements (14,242,000) ___________ Subtotal 64,742,000
Less Fund Balances & Other Funding Sources
Less Total Capital Improvement Fund Balance ($4,600,000) Less total Meter Replacement Fund Balance (1,560,000)
Less Projected Grants/Other Funding Sources (5,000,000) ___________ Subtotal (11,160,000)
Net Funding Requirement (2022 $) $53,582,000
Source: Water System Master Plan 2022 and City of East Palo Alto.

Water Capital Improvement Surcharge Update 14

9.2.b
Packet Pg. 334 Attachment: Attachment 2 - East Palo Alto Water Capital Improvement Surcharges - December 2022 (2533 : Resolution of Intent to increase Table A‐2 With 20‐Year Capital Program
City of East Palo Surcharges in 2022 $
Calculation of Maximum Water Capital Improvement Surcharges Net Capital Funding Requirement (2022 $) $53,582,000
Number of Years to Completion 20
Annual Funding Requirement (2022 $) $2,679,100
Fixed Charge Revenue Recovery 65% $1,741,415
Current Meter Equivalents 6,541.4
Plus Meter Equivalents from Estimated Growth* 2,725.0 ___________ Projected Meter Equivalents 9,266.4
Charge per Meter Equivalent: Annual $187.93
Charge per Meter Equivalent: Monthly $15.66
Variable Charge Revenue Recovery 35% $937,685
Projected Metered Water Sales (ccf)* 1,027,000
Charge per Unit (ccf) $0.91
* Based on 2020 Urban Water Management Plan, average annual demand from 2025 ‐ 2045 and corresponding percentage of growth in the City's customer base.

Water Capital Improvement Surcharge Update 15

9.2.b
Packet Pg. 335 Attachment: Attachment 2 - East Palo Alto Water Capital Improvement Surcharges - December 2022 (2533 : Resolution of Intent to increase Table A‐3 With 20‐Year Capital Program
City of East Palo Surcharges in 2022 $
Maximum Water Capital Improvement Surcharges
Demand Capital Improvement
Ratio Surcharge
Water Usage Surcharge
$ per hundred cubic feet of metered use $0.91
Fixed Monthly Meter Surcharge
Single Family Residential
5/8" ‐ 1"                         1.00 $15.66
All Other
5/8"                         1.55 $24.27
3/4"                         2.33 36.41
1"                         3.88 60.68
1‐1/2"                         7.75 121.37
2"                       12.40 194.19
3"                       23.25 364.11
4" & larger                       38.75 606.85
Surcharge can be adjusted annually based on the change in the Engineering News‐Record Construction Cost Index (20‐Cities Average) to keep revenues in line with construction cost inflation.

Water Capital Improvement Surcharge Update 16

9.2.b
Packet Pg. 336 Attachment: Attachment 2 - East Palo Alto Water Capital Improvement Surcharges - December 2022 (2533 : Resolution of Intent to increase Table A‐4 With 20‐Year Capital Program
City of East Palo Surcharges in 2022 $
Projected Billing Impacts
Monthly Est. % of Bills Meter Prog $ Increase
Use (hcf) at or Below Fixed Usage Fixed Chg Total Fixed Usage Total to Bill Single Family Residential Rate Impacts
Meter Size 5/8" ‐ 1"
Low Use 5 25% $2.88 $2.15 $6.24 $11.27 $15.66 $4.55 $20.21 $8.94 Typical Use 10 50% 2.88 4.30 6.24 13.42 15.66 9.10 24.76 11.34 Mod‐High Use 15 75% 2.88 6.45 6.24 15.57 15.66 13.65 29.31 13.74 High Use 20 90% 2.88 8.60 6.24 17.72 15.66 18.20 33.86 16.14 Sample Commercial & Multi‐Family Residential Rate Impacts Meter Size 5/8"
Low Use 8 $4.46 3.44 6.24 14.14 $24.27 $7.28 $31.55 $17.41 Moderate Use 17 4.46 7.31 6.24 18.01 24.27 15.47 39.74 21.73 Mod‐High Use 25 4.46 10.75 6.24 21.45 24.27 22.75 47.02 25.57 Meter Size 2"
Low Use 75 $35.66 32.25 10.92 78.83 $194.19 $68.25 $262.44 $183.61 Moderate Use 150 35.66 64.50 10.92 111.08 194.19 136.50 330.69 219.61 Mod‐High Use 225 35.66 96.75 10.92 143.33 194.19 204.75 398.94 255.61 Meter Size 4" (Estimates)
Ikea 800 $111.44 344.00 37.34 492.78 $606.85 $728.00 $1,334.85 $842.07 Bay Road Housing 1500 111.44 645.00 37.34 793.78 606.85 1,365.00 1,971.85 1,178.07 Four Seasons 2000 111.44 860.00 37.34 1,008.78 606.85 1,820.00 2,426.85 1,418.07 Current Charges Proposed Charges
Capital Surcharge Maximum Capital Surcharge
Water Capital Improvement Surcharge Update 17

9.2.b
Packet Pg. 337 Attachment: Attachment 2 - East Palo Alto Water Capital Improvement Surcharges - December 2022 (2533 : Resolution of Intent to increase

6.24 6.24 6.24 6.24

2.88 15.66 2.88 15.66 2.88 15.66 2.88 15.662.15

4.55 4.30

9.10 6.45

13.65 8.60

18.20 11.27

20.21 13.42

24.76 15.57

29.31 17.72

33.86 $0
$10$20$30$40$50
Current Projected Current Projected Current Projected Current Projected Meter Program Charge: FixedCapital Surcharge: FixedCapital Surcharge: Usage Low Use
5 hcf
High Use
20 hcf
Moderate‐High
15 hcf
Typical Use
10 hcf
City of East Palo Alto
Current vs. Projected Water Capital Improvement & Meter Surcharges Single Family Home with 5/8" Meter
Assumes termination of the current Meter Replacement Program Surcharges.

With 20‐Year Capital Program
Surcharges in 2022 $
Chart B
Increase
$8.94
Increase
$11.34
Increase
$13.74
Increase
$16.14
Water Capital Improvement Surcharge Update 18

9.2.b
Packet Pg. 338
Attachment: Attachment 2 - East Palo Alto Water Capital Improvement Surcharges - December 2022 (2533

APPENDIX
B
Water Use per Meter Equivalent
Water Capital Improvement Surcharge Update 19

9.2.b
Packet Pg. 339 Attachment: Attachment 2 - East Palo Alto Water Capital Improvement Surcharges - December 2022 (2533 : Resolution of Intent to increase Table B‐1
City of East Palo Alto Year 1: September 2020 ‐ August 2021 Water Use per Meter Equivalent
5/8" 3/4" 1" 1 1/2" 2" 3" 4" 6" 8" Total

SINGLE FAMILY RESIDENTIAL
Annual Water Use (ccf)   328,638     28,737      ‐            ‐            ‐            ‐            ‐            ‐            24,163   381,538 Meter Equivalents
Avg Accounts in Year 3,145.8            249.5        239.3 ‐            ‐            ‐            ‐            ‐            ‐               3,634.7 Meter Capacity Ratio 1.0                        1.0             ‐            ‐            ‐            ‐            ‐            ‐            1.0 _______ _______ _______ _______ _______ _______ _______ _______ _______ Meter Equivalents 3,145.8            249.5         ‐            ‐            ‐            ‐            ‐            ‐            239.3    3,634.7 Water Use per Meter Equivalent
Annual (ccf)        105.0
Monthly (ccf)            8.7

ALL OTHER
Annual Water Use (ccf)
Apartment        5,629 ‐                21,313     15,792     81,447     22,184     20,218 ‐            ‐ Commercial     10,602        2,691     26,700     10,894     51,512     17,718        9,955        8,328 ‐ Government           196             39           761           671     17,651 ‐            ‐                            ‐            9 Industrial        3,355           508        2,068        1,106        1,641 ‐            ‐            ‐            ‐            _______ _______ _______ _______ _______ _______ _______ _______ _______ Subtotal     19,782        3,238     50,842     28,463   152,251     39,902     30,173        8,337 ‐              332,988 Meter Equivalents
Avg Accounts in Year
Apartment           ‐            11.0          26.8          26.0          39.7          11.0             ‐            ‐            4.0 Commercial          55.0            9.0          31.3          13.8          38.5          10.0            8.7             ‐            2.0 Government            2.7            2.2            5.0            4.0           ‐            ‐            17.2             ‐            1.0 Industrial          31.5            2.5            6.0            5.0             ‐            ‐            ‐            ‐            2.0 _______ _______ _______ _______ _______ _______ _______ _______ _______ Subtotal        100.2          13.7          69.2          48.8          97.3          21.0          12.7             ‐            3.0 Meter Capacity Ratio 1.0                        1.5            2.5            5.0            8.0          15.0          25.0          50.0          80.0 Meter Equivalents        100.2          20.5        172.9        244.2        778.7        315.0        316.7        150.0 ‐               2,098.1 Water Use per Meter Equivalent
Annual (ccf)        158.7
Monthly (ccf)          13.2
Ratio to Single Family Residential          1.51
Water Capital Improvement Surcharge Update 20

9.2.b
Packet Pg. 340 Attachment: Attachment 2 - East Palo Alto Water Capital Improvement Surcharges - December 2022 (2533 : Resolution of Intent to increase Table B‐2
City of East Palo Alto Year 2: September 2021 ‐ August 2022 Water Use per Meter Equivalent
5/8" 3/4" 1" 1 1/2" 2" 3" 4" 6" 8" Total

SINGLE FAMILY RESIDENTIAL
Annual Water Use (ccf)   314,930     37,924     24,781              ‐            ‐            ‐            ‐            ‐            71   377,706 Meter Equivalents
Avg Accounts in Year 2,899.8            310.3        228.0             ‐            ‐            ‐            ‐            ‐            0.8    3,438.9 Meter Capacity Ratio 1.0                        1.0            1.0             ‐            ‐            ‐            ‐            ‐            1.0 _______ _______ _______ _______ _______ _______ _______ _______ _______ Meter Equivalents 2,899.8            310.3        228.0             ‐            ‐            ‐            ‐            ‐            0.8    3,438.9 Water Use per Meter Equivalent
Annual (ccf)        109.8
Monthly (ccf)            9.2

ALL OTHER
Annual Water Use (ccf)
Apartment        7,633 ‐                21,541     18,116     91,717     25,524     20,770 ‐            ‐ Commercial     12,780        3,723     32,217     13,540     46,008     13,193     18,088        9,795 ‐ Government           147             40           630        1,473     15,775 ‐            ‐                         ‐            10 Industrial        3,201           467        1,915        1,416        1,887 ‐            ‐            ‐            ‐            _______ _______ _______ _______ _______ _______ _______ _______ _______ Subtotal     23,761        4,230     56,303     34,545   155,387     38,717     38,858        9,805 ‐              361,606 Meter Equivalents
Avg Accounts in Year
Apartment             ‐            9.6          25.7          25.3          34.9          11.0             ‐            ‐            5.3 Commercial          51.3          11.9          31.3          13.3          37.1            8.9          10.0             ‐            2.0 Government            2.0            2.8            4.3            3.8           ‐            ‐            16.1             ‐            1.0 Industrial          28.8            3.4            5.8            4.8             ‐            ‐            ‐            ‐            1.9 _______ _______ _______ _______ _______ _______ _______ _______ _______ Subtotal          91.8          18.2          66.9          47.3          90.0          19.9          15.3             ‐            3.0 Meter Capacity Ratio 1.0                        1.5            2.5            5.0            8.0          15.0          25.0          50.0          80.0 Meter Equivalents          91.8          27.3        167.3        236.3        720.0        298.8        383.3        150.0 ‐               2,074.6 Water Use per Meter Equivalent
Annual (ccf)        174.3
Monthly (ccf)          14.5
Ratio to Single Family Residential          1.59
Water Capital Improvement Surcharge Update 21

9.2.b
Packet Pg. 341 Attachment: Attachment 2 - East Palo Alto Water Capital Improvement Surcharges - December 2022 (2533 : Resolution of Intent to increase Table B‐3
City of East Palo Alto 2 Year Average
Water Use per Meter Equivalent
5/8" 3/4" 1" 1 1/2" 2" 3" 4" 6" 8" Total

SINGLE FAMILY RESIDENTIAL
Annual Water Use (ccf)   321,784     33,331     24,472              ‐            ‐            ‐            ‐            ‐            36   379,622 Meter Equivalents
Avg Accounts in Year 3,022.8            279.9        233.7             ‐            ‐            ‐            ‐            ‐            0.4    3,536.8 Meter Capacity Ratio 1.0                        1.0            1.0             ‐            ‐            ‐            ‐            ‐            1.0 _______ _______ _______ _______ _______ _______ _______ _______ _______ Meter Equivalents 3,022.8            279.9        233.7             ‐            ‐            ‐            ‐            ‐            0.4    3,536.8 Water Use per Meter Equivalent
Annual (ccf)        107.3
Monthly (ccf)            8.9

ALL OTHER
Annual Water Use (ccf)
Apartment        6,631 ‐                21,427     16,954     86,582     23,854     20,494 ‐            ‐ Commercial     11,691        3,207     29,459     12,217     48,760     15,456     14,022        9,062 ‐ Government           172             40           696        1,072     16,713 ‐            ‐                         ‐            10 Industrial        3,278           488        1,992        1,261        1,764 ‐            ‐            ‐            ‐            _______ _______ _______ _______ _______ _______ _______ _______ _______ Subtotal     21,772        3,734     53,573     31,504   153,819     39,310     34,516        9,071 ‐              347,297 Meter Equivalents
Avg Accounts in Year
Apartment           ‐            10.3          26.3          25.7          37.3          11.0             ‐            ‐            4.7 Commercial          53.2          10.5          31.3          13.6          37.8            9.5            9.3             ‐            2.0 Government            2.3            2.5            4.6            3.9           ‐            ‐            16.6             ‐            1.0 Industrial          30.2            3.0            5.9            4.9             ‐            ‐            ‐            ‐            2.0 _______ _______ _______ _______ _______ _______ _______ _______ _______ Subtotal          96.0          15.9          68.0          48.0          93.7          20.5          14.0             ‐            3.0 Meter Capacity Ratio 1.0                        1.5            2.5            5.0            8.0          15.0          25.0          50.0          80.0 Meter Equivalents          96.0          23.9        170.1        240.2        749.3        306.9        350.0        150.0 ‐               2,086.4 Water Use per Meter Equivalent
Annual (ccf)        166.5
Monthly (ccf)          13.9
Ratio to Single Family Residential          1.55
Water Capital Improvement Surcharge Update 22

9.2.b
Packet Pg. 342 Attachment: Attachment 2 - East Palo Alto Water Capital Improvement Surcharges - December 2022 (2533 : Resolution of Intent to increase Public Notice

CITY OF EAST PALO ALTO

WATER CAPITAL SURCHARGE RATES

NOTICE OF PUBLIC HEARING
6:30 p.m.

March 21, 2023
Hybrid Meeting: City Council Chambers and via Zoom
2415 University Avenue, East Palo Alto
The City of East Palo Alto is currently reviewing water capital surcharge rates. The City charges these rates to water service customers within the City’s service area in order to fund the costs of providing safe and reliable service. At the date, time and place set forth above, the City Council of the City of East Palo Alto will hold a public hearing regarding the proposed rate increases described in this notice.

Purpose of the Notice
You are receiving this notice because you are a customer of the City of East Palo Water System. Customers pay for water services directly to the City’s water contractual water operator, at the rates adopted by the East Palo Alto City Council.

Table 1
Proposed Water Capital Surcharge Rate Schedule
Current Proposed
Total Surcharge Water Capital
Improvement
Surcharges
Water Usage Charges ($ per ccf)
All Customers $0.43 $0.65
Fixed Monthly Meter Charges
Single Family Residential
5/8’’ - 1’’ $9.12 $9.73
All Other Water Service Meters
5/8’’ $10.70 $15.07
¾” $13.20 $22.61
1’’ $18.10 $37.69
1- ½'’ $12.13 $75.37
2’’ $46.58 $120.60
3’’ $102.96 $226.12
4’’ & Larger $148.78 $376.86
Note: The proposed charges assume the suspension of the water meter charge One ccf = one hundred cubic feet = approximately 748 gallons Basis of the Proposed Rates
In 2022, the City of East Palo Alto adopted the 2022 Water System Master Plan (WSMP). The adopted Master Plan provides the City with an overall plan for potable water infrastructure improvements over the next twenty (20) years to maintain water system reliability and support anticipated development within the City. The 20-year capital improvements project (CIP) plan was based on the developed hydraulic model. As part of the WSMP scope, a rate study and funding analysis were performed to determine how the proposed CIP project may affect rates and how the program will be funded.

The City’s current Water Capital Improvement Surcharges does not generate adequate revenue to fund the capital funding needs identified in the updated Master Plan. To help support the City’s water infrastructure needs, the City’s consultant developed

9.2.c
Packet Pg. 343 Attachment: Attachment 3 - Proposed Prop 218 Notice English (2533 : Resolution of Intent to increase water capital surcharge rates and updated Water Capital Improvement Surcharges. The surcharge is used to fund high‐priority capital improvements needed to address current deficiencies, improve water system reliability, and minimize the potential for service outages. Revenues are used to fund costs associated with planning, analysis, design, and construction of water system infrastructure, and cannot be used for any other purpose.

Approximately $6.5 million needs to be recovered over the next five (5) years to fund the planned CIP’sidentified in the Master Plan. The proposed rate increases are the result of the planned water CIP’s over the next five (5) years. The project list may be found in the Master Plan on the City website: https://www.cityofepa.org/publicworks/project/water-system-master-plan-2022 The City currently collects around $820k in revenue and this includes the revenue from the water capital surcharge and the water meter replacement surcharge. An increase in the water capital surcharge rate would result in an increase in water capital funds of approximately $471k per fiscal year totaling in a new annual revenue of about $1.29 million a year. The program is designed to collect enough revenue to fund the planned projects. For the impact on specific customers, see Table 6 of the Rate Study Report which can be found on the City website.

Concurrently with the proposed water capital rate change, staff is proposing to suspend the water meter replacement surcharge.

Through the Water Meter Replacement Surcharge the City collected sufficient revenue to fund the program. In the future, any additional program charges will be funded through the City’s water capital surcharge.

Proposition 218 and the Rate Protest Process
Water Capital Surcharge rates are subject to the procedural and substantive requirements as set forth in Proposition 218.

Proposition 218 was adopted by California voters in 1996 and added Articles XIIIC and XIIID to the California Constitution. A rticle XIIID governs property-relatedcharges which have been determined to include ongoing utility service charges such as water, sewer, and garbage rates. The procedural requirements of Proposition 218 include:

2. Public Hearing: The City must hold a public hearing prior to adopting the proposed rate increases. The public hearing must be held not less than 45 days after the required notices are mailed.

You are invited to provide oral or written testimony at the public hearing. You also have the right to file a formal written protest against the proposed increases. A formal protest must be in writing, must be signed by the customer or property owner, must indicate the address, account number or assessor’s parcel number for which it is submitted, and must indicate that it is a water capital surcharge rate protest. If the City Council receives protests with respect to a majority of the parcels served by the City Water System, or receives protests from a majority of customers, then it will not approve the increase. Protests may be mailed or delivered to the City Clerk at City of East Palo Alto, 2415 University Avenue, 2nd Floor, East Palo Alto, CA 94303, or may be presented at the hearing. Protests must be received by the close of public comment at the hearing in order to be counted. The City will follow its Procedures for the Acceptance and Tabulation of Written Protests in handling and counting protests. Procedures available at City Hall, 2415 University Avenue, 2nd Floor, East Palo Alto, from the City Clerk’s Office or via email:
[email protected].

Questions regarding this item may be sent to [email protected].

Note: Customers with multiple accounts per address may receive multiple letters in the mail. Customers may also receive multiple letters in the mail because a letter was sent out to each account holders mailing address and service address. Customers with multiple accounts may file one formal protest per account, but each protest must include a different account number (i.e. multiple protests may come from a single address if the address has multiple accounts linked to that address, but the customer must include the account numbers).

9.2.c
Packet Pg. 344 Attachment: Attachment 3 - Proposed Prop 218 Notice English (2533 : Resolution of Intent to increase water capital surcharge rates and

East Palo Alto City CouncilJanuary 17, 2023

East Palo Alto City Council
January 17, 2023