Fairfield City Council
November 4, 2025

the average annual funding levels recommended in PUMP, additional rate increases could be phased in in future years to support long-term capital needs.

Based on the options outlined above, in the absence of a majority protest, staff recommend an 8% annual rate increase for the next five years. If the council approves the proposed increases and modifications to the water rates, the new water rates will become effective on January 1, 2026, with rate increases on each subsequent January 1 through January 1, 2030 and the rates will be subject to water rate adjustments and pass-throughs as described above through January 1, 2030 without the requirement to conduct additional majority protest proceedings pursuant to Proposition 218.

The proposed water rates also include a number of rate structure modifications designed to simplify and standardize the City’s water rates and realign rates with the cost of providing service.

These modifications were presented at the June 17, 2025, council meeting and are detailed in the water rate study.

At the conclusion of the public hearing, the city clerk will complete the tabulation of all written protests received from record property owners receiving water service and water customers, including any received during the public hearing. Only one protest will be counted per parcel in determining the existence of a majority protest. The city clerk will then report on the results to the council.

If, according to the final tabulation, the written protests submitted against the proposed water rates represent more than 50% of all the parcels in the City receiving water service, a majority protest exists, and the council shall not impose the proposed water rates. In the absence of a majority protest, the council may adopt the resolution establishing the new water rates.

FINANCIAL IMPACT
If the 8% annual rate increases are adopted, the high priority water system improvements identified in PUMP would be partially deferred and spread over approximately nine to ten years.

The current rates generate minimal revenue to conduct any capital improvement projects and leaves the enterprise fund in an operational deficit if no rate increases are implemented. After the five-year phase-in of rate increases, the 8% rate increases will enable the City to fund its projected operating and debt service expenses, and enable the City to accomplish annual rate revenues of approximately $16 million per year for existing and new debt service, and ongoing capital funding needs, leaving approximately $5 million per year to help fund ongoing capital needs such as funding approximately half of ongoing future capital funding needs. Without rate increases, the water enterprise funds (Fund 461 and 462) are projected to have annual deficits ranging from $12 million to $24 million and a negative working capital by fiscal year 2027-28.

PUBLIC CONTACT/ADVISORY BODY RECOMMENDATION
On October 16, 2025, and October 28, 2025, staff invited the public to learn about the water system and how the proposed adjustments will impact the residents and have questions answered.

ALTERNATIVE ACTION
The council may choose not to adopt the resolution, but doing so would undermine FMU’s future financial security.

COORDINATED WITH
City Attorney’s Office and Finance Department

STAFF CONTACT
Michael Hether, Assistant Public Works Director - Utilities (707) 428-7493
[email protected]

ATTACHMENTS
Attachment 2: Proposed Resolution
Attachment 3: Exhibit A – Water Rates Schedule
Attachment 4: Exhibit B – Fairfield Water Rate Study

CITY OF FAIRFIELD
RESOLUTION NO. 2025-217
APPROVING AND ESTABLISHING WATER RATES EFFECTIVE JANUARY 1, 2026, JANUARY 1, 2027, JANUARY 1, 2028, JANUARY 1, 2029, AND JANUARY 1, 2030 WHEREAS, the City of Fairfield has a Municipal Water Utility that provides water services to residents and businesses; and
WHEREAS, the City Council is authorized pursuant to California Health and Safety Code Section 5471 to prescribe, revise and collect rates for providing water services; and WHEREAS, the City’s Water Utility operational, maintenance, and capital improvement costs have increased substantially since the last rate increase in 2021, and are estimated to continue increasing significantly; and
WHEREAS, the City’s currently established water rates are not adequate to meet increasing operating, maintenance, and capital improvements costs and required debt service coverage ratios in connection with the City’s water bonds; and
WHEREAS, the City’s consultant, Bartle Wells Associates, has conducted a Water Rate Study for the Water Utility Enterprise funds to ensure the financial health of the Municipal Water Utility; and
WHEREAS, an overview of the Water Rate Study, including recommendations for proposed increases and modifications to the City’s water rates, was presented on June 17, 2025, council meeting and the draft Water Rate Study was placed on file in the office of the City Clerk and available for public inspection; and
WHEREAS, the council wishes to modify and increase the City’s water rates; and WHEREAS, in order to increase and modify the City’s water rates, the City must comply with Article XIII D of the California Constitution, more commonly known as Proposition 218; and WHEREAS, in order to increase and modify the City’s water rates, the City must comply with Article XIII D of the California Constitution, more commonly known as Proposition 218; and WHEREAS, on June 17, 2025, the council adopted Resolution No. 2025-118 setting a public hearing to consider the proposed increases and modifications to the City’s water rates on November 4, 2025 (Public Hearing), and directing staff to initiate the Proposition 218 majority protest process for the proposed water rate increases and modifications; and WHEREAS, the council identified the parcels upon which the proposed water rates would be imposed and calculated the amount of the proposed rates; and

RES. NO. 2025-217

WHEREAS, in accordance with Proposition 218 and the Proposition 218 Omnibus Implementation Act, the City provided mailed notice of the Public Hearing and held the Public Hearing on November 4, 2025; and
WHEREAS, at the Public Hearing, the council considered the Water Rate Study and heard and considered all oral testimony and written protests and materials submitted regarding the proposed water rates; and
WHEREAS, following the conclusion of the Public Hearing, in conformity with Proposition 218, the council determined that no majority protest against the proposed water rates exist (i.e., written protests against the proposed water rates submitted and not withdrawn do not represent a majority of the parcels (50% +1) that receive water service).

NOW, THEREFORE, THE COUNCIL OF THE CITY OF FAIRFIELD HEREBY RESOLVES:

Section 1. The Recitals set forth in this Resolution are true and correct and are incorporated herein by reference.

Section 2. The council hereby approves the water rates in the amounts and on the effective dates as shown in Exhibit A, attached hereto and incorporated herein by reference, which, through January 1, 2030, are subject to the potential pass through of increases in wholesale water purchase costs authorized in Section 3, below, and subject to water rate and pass-through adjustments for customers in the Willotta Oaks Subdivision, as authorized in Section 4. Such water rate adjustments and pass-throughs do not require additional majority protest proceedings pursuant to Proposition 218.

Section 3. The City purchases untreated wholesale water supply from the Solano County Water Agency and Solano Irrigation District. Wholesale water charges from these agencies may be subject to unanticipated increases that are outside the City’s control. To provide financial protection for these unanticipated cost increases, the council hereby authorizes the pass-through of increases to future wholesale water supply charges in excess of 4% per year via corresponding increases to the City’s water volume charges pursuant to California Government Code 53756.

Pass-through adjustments will be implemented by increasing all of the City’s water volume charges per hundred cubic feet (HCF), where one HCF equals approximately 748 gallons, by a consistent amount (measured in cents per HCF). This amount will correspond to the weighted average cost per HCF of water supply established by the City’s wholesale water suppliers.

These pass-throughs will only apply to customers connected to the City’s water system. Prior to passing through any wholesale water rate increase, the City will notify all customers at least 30 days prior to implementation.

RES. NO. 2025-217

Section 4. The City bills a small number of water customers who are located in the Willotta Oaks subdivision (Subdivision), which is outside the City’s water system service area, and who receive water service from the City of Vallejo’s Lake Area water system (Willotta Customers). The City of Vallejo charges Fairfield for providing water service to the Willotta Customers. The council hereby authorizes the pass through of the cost of service to the Willotta Customers by charging water rates that correspond with Vallejo’s charges to Fairfield for providing water service, without any markup. The water rates for Willotta Customers effective January 1, 2026, are based on current charges levied by Vallejo on Fairfield as follows: a) Fixed Service Charge: $0.29 per day per residential dwelling unit or equivalent, plus b) Volume Charge: $16.21 per HCF billed based on metered water consumption. In addition, the council hereby authorizes the pass-through of future increases to the charges for water billed to Fairfield by Vallejo for water service to the Willotta Customers pursuant to California Government Code 53756, which will be applied by increasing fixed charges by the same percentage increase to applicable fixed charges adopted by Vallejo for service to the Customers, and increasing volume charges by the same amount (measured in cents per HCF) corresponding with increases to usage charges adopted by Vallejo for service to the Willotta Customers.

Section 5. If any provision of this resolution or its application is deemed invalid by a court of competent jurisdiction, the council intends that such invalidity will not affect the effectiveness of the remaining provisions or their application and, to this end, the provisions of this resolution are severable.

PASSED AND ADOPTED this 4
th day of November 2025, by the following vote:

AYES: MEMBERS: MOY/BERTANI/CARR/PANDURO/SANDHU/TONNESEN/WILLIAMS NOES: MEMBERS: _________________________________________________ ABSENT: MEMBERS: _________________________________________________ ABSTAIN: MEMBERS: _________________________________________________ _________________________________________________
MAYOR
ATTEST:
___________________________

CITY CLERK

EXHIBIT A
January 1 January 1 January 1 January 1 January 1
2026 2027 2028 2029 2030

RESIDENTIAL
Per Dwelling Unit $1.04 $1.12 $1.21 $1.31 $1.41

NON-RESIDENTIAL
Includes commercial, institutional, irrigation and other non-residential accounts Meter Size
Up to 3/4" $1.56 $1.68 $1.82 $1.97 $2.12
1" 2.60 2.80 3.03 3.28 3.53
1-1/2" 5.20 5.60 6.05 6.55 7.05
2" 8.32 8.96 9.68 10.48 11.28
3" 16.64 17.92 19.36 20.96 22.56
4" 26.00 28.00 30.25 32.75 35.25
6" 52.00 56.00 60.50 65.50 70.50
8" 83.20 89.60 96.80 104.80 112.80
LARGE INDUSTRIAL 1,825.68 1,971.73 2,129.47 2,299.83 2,483.82

RESIDENTIAL
Zones 1-2 $2.79 $3.01 $3.25 $3.51 $3.79
Zones 3-5 3.82 4.13 4.46 4.82 5.21
NON-RESIDENTIAL 2.79 3.01 3.25 3.51 3.79
Includes commercial, institutional, irrigation and other non-residential accounts Hydropneumatic Pump Surcharge 0.68 0.73 0.79 0.85 0.92
LARGE INDUSTRIAL 1.99 2.15 2.32 2.51 2.71
Water Rates
Water Rates Effective

FIXED SERVICE CHARGES
Fixed service charges per day

VOLUME CHARGES
Billed based on metered water consumption ($ per hundred cubic feet)

PREPARED BY
Water Rate Study

PREPARED FOR
City of Fairfield
DRAFT REPORT | JULY 2025

EX EXHIBIT B

July 2025
City of Fairfield
1000 Webster Street
Fairfield, CA 94533
Re: Water Rate Study
Bartle Wells Associates (BWA) is pleased to submit the attached Water Rate Study Draft Report. Key elements of the study include development of financial projections to identify water system funding needs and evaluate rate increases, and an update of the City’s water rate structure.

Prior to this study, the City’s water rates had not been increased since January 1, 2021, over 4-1/2 years ago.

Since then, the City has experienced substantial increases in operating and maintenance expenses.

Additionally, in May 2025, the City adopted a Public Utility Master Plan that identifies over $340 million of capital improvements needed to address existing system deficiencies, replace aging infrastructure, and support safe and reliable service.

Based on evaluation of financial scenarios, BWA recommends the City phase in a series of 8% overall annual water rate increases effective January 1 of each of the next five years. The rate increases are needed to support the water system’s operating, debt service and capital funding needs and are phased in as gradually as possible to minimize the impact on ratepayers. The first-year rate adjustment also includes some modifications to the City’s water rate structure designed to simplify and standardize rates and realign rates with the cost of providing service.

Based on a survey of 16 regional agencies, Fairfield’s water service charges for a typical single family home are currently among the lowest in the region. With full implementation of the proposed rates adjustments, the City’s rates are projected to remain in the lower-middle range.

I enjoyed working with the City on this study and appreciate the ongoing collaboration, input and assistance received from the City’s project team. This draft report will be finalized after the City goes through the full rate adoption process and holds a public hearing scheduled for November 4, 2025 to allow for incorporation of additional input.

BARTLE WELLS ASSOCIATES
Alex Handlers, MPA, CIPMA
Principal/President
2625 Alcatraz Ave, #602
Berkeley, CA 94705
Tel 510 653 3399
www.bartlewells.com

N-C-268-60-22-20-WP-R-WMP
i City of Fairfield
July 2025
Table of Contents

1.0 Background & Executive Summary ................................................................................................ 1

1.1 Background ....................................................................................................................................... 1

1.2 Goals & Objectives ........................................................................................................................... 2

1.3 Regional Water Rate Survey ............................................................................................................. 2

1.4 Financial Projections & Rate Increases ............................................................................................. 3

1.5 Proposed Water Rates ...................................................................................................................... 4

1.6 Historical & Proposed Rate Increases .............................................................................................. 6

2.0 Water Rates & Financial Projections.............................................................................................. 7

2.1 Historical Water Rates ...................................................................................................................... 7

2.1 Water Enterprise Debt Service ......................................................................................................... 9

2.2 Water System Finances .................................................................................................................. 10

2.3 Key Factors Impacting the Need for Rate Increases ....................................................................... 10

2.3.1 Operating Cost Inflation ........................................................................................................ 10

2.3.2 Capital Improvement Needs of Aging Facilities .................................................................... 10

2.3.3 Support Compliance with Debt Service Legal Covenants ..................................................... 11

2.4 Financial & Rate Projections ........................................................................................................... 11

2.4.1 Scenario A: Fully Support PUMP Capital Funding Needs ..................................................... 11

2.4.2 Scenario B: Reduced Rate Increases & Deferred PUMP Capital Funding ............................ 12

2.4.3 Scenario C: Minimum Recommended Rate Increases ......................................................... 12

2.5 Recommended Water Rate Increases ............................................................................................ 19

3.0 Water Rate Structure Recommendations .................................................................................... 20

3.1 Summary of Water Rate Structure Recommendations .................................................................. 20

3.1.1 Fixed Service Charge Recommendations .............................................................................. 20

3.1.2 Volume Charge Recommendations ...................................................................................... 20

3.1.3 Other Water Rate Structure Recommendations .................................................................. 21

3.1.4 Willotta Oaks Subdivision Pass-Through Charges ................................................................. 21

3.1.5 Pass-Through Authorization for Wholesale Water Charges ................................................. 21

4.0 Water Accounts & Use ................................................................................................................ 22

4.1 Water Customers ............................................................................................................................ 22

4.2 Historical & Project Water Use ....................................................................................................... 23

4.3 Single Family Residential Bill Distribution ...................................................................................... 23

5.0 Water Rate Derivation ................................................................................................................ 26

5.1 Substantive Requirements of Proposition 218 ............................................................................... 26

5.2 Fixed vs. Volumetric Revenue Recovery ......................................................................................... 26

5.3 Fixed Service Charge Derivation ..................................................................................................... 27

5.3.1 Meter Equivalents ................................................................................................................. 27

5.3.2 Fixed Service Charge per Meter Equivalent .......................................................................... 28

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July 2025
Table of Contents

5.3.3 Proposed Fixed Service Charges ........................................................................................... 28

5.4 Volume Charge Derivation ............................................................................................................. 29

5.4.1 Uniform Volume Charge Derivation ..................................................................................... 29

5.4.2 Updated Pumping Charges ................................................................................................... 30

5.4.3 Proposed Volume Charges .................................................................................................... 32

6.0 Projected Water Rates & Impacts ............................................................................................... 33

6.1 Projected Water Rates ................................................................................................................... 33

6.1 Projected Residential Rate Impacts ................................................................................................ 34

6.2 Non-Residential Rate Impacts ........................................................................................................ 35

6.3 Economic Hardship Discount .......................................................................................................... 35

LIST OF TABLES
Table 1 – Proposed Water Rates ................................................................................................................... 5 Table 2 – Historical Water Rates ................................................................................................................... 8 Table 3 – Water Enterprise Debt Service ...................................................................................................... 9 Table 4 – PUMP Water Master Plan Capital Improvements ....................................................................... 11 Table 5 –Cash Flow Projections – Scenario A.............................................................................................. 13 Table 6 –Cash Flow Projections – Scenario B .............................................................................................. 15 Table 7 –Cash Flow Projections – Scenario C .............................................................................................. 17 Table 8 – Water Customers ........................................................................................................................ 22 Table 9 – Historical & Projected Water Use (hcf) ....................................................................................... 23 Table 10 – Single Family Bill Distribution .................................................................................................... 24 Table 11 – Fixed vs. Volume Charge Revenue Recovery ............................................................................. 27 Table 12 – Water Meter Equivalents .......................................................................................................... 27 Table 13 – Anheuser Busch Meter Equivalents .......................................................................................... 28 Table 14 – Fixed Charge per Meter Equivalent ........................................................................................... 28 Table 15 – Proposed Base Year Fixed Service Charges ............................................................................... 29 Table 16 – Base Year Volume Charge Derivation ........................................................................................ 30 Table 17 – Updated Pumping Charges ........................................................................................................ 31 Table 18 – Proposed Base Year Volume Charges ........................................................................................ 32 Table 19 – Projected Water Rates .............................................................................................................. 33 Table 20 – Residential Rate Impacts ........................................................................................................... 34

LIST OF FIGURES
Figure 1 – Regional Water Rate Survey......................................................................................................... 3 Figure 2 – Historical & Projected Rate Increases .......................................................................................... 6 Figure 3 – 10-Year Revenue & Expense Projections – Scenario A .............................................................. 14 Figure 4 – 10-Year Revenue & Expense Projections – Scenario B .............................................................. 16 Figure 5 – 10-Year Revenue & Expense Projections – Scenario C .............................................................. 18 Figure 6 – Historical & Projected Rate Increases ........................................................................................ 19 Figure 7 – Single Family Residential Bill Distribution .................................................................................. 25

N-C-268-60-22-20-WP-R-WMP
1 City of Fairfield
July 2025
Background & Executive Summary

1.0 BACKGROUND & EXECUTIVE SUMMARY

1.1 Background
The City of Fairfield is located roughly halfway between the Cities of San Francisco and Sacramento in Solano County, California. Fairfield provides water service to roughly 120,000 residents and 2,000 commercial, institutional and industrial customers via approximately 33,700 metered water connections.

Residential customers account for a little over 90% of total connections and about 60% of total annual water use.

The City owns and operates a water distribution system that includes over 375 miles of pipelines, 12 water storage tanks with a combined capacity of 78 million gallons, and 14 pump stations. Sources of water supply include untreated water purchased from Solano County Water Agency and the State Water Project (via Solano Irrigation District). The City operates two water treatment plants including the Waterman Water Treatment Plant and the North Bay Regional Treatment Plant, which is jointly owned by the Cities of Fairfield and Vacaville. Many facilities are old and will need to be rehabilitated and/or replaced in upcoming years.

The City’s water utility is a self-supporting enterprise that relies predominantly on revenues from water rates to fund the costs of providing service. As such, rates need to be set at adequate levels to support operations, maintenance, debt service, and capital improvements needed to support safe and reliable service.

The City has not implemented any water rate increases since January 2021, over 4-1/2 years ago. Water rates from 2021 are still in effect despite substantial increases in operating expenses and capital funding needs of the City’s aging water system infrastructure.

Fairfield’s water rates are currently among the lowest in the region based on a survey of 16 regional water agencies. The monthly water bill for a typical single family home using 10 hundred cubic feet (hcf) of water (about 250 gallons per day) is $54.00, which is about 30% below the regional average.

Fairfield historically provided strong financial management via adoption of small annual water rate adjustments to keep revenues in line with the cost of providing service. However, the City temporarily stopped raising rates after 2021 as it was embarking on an updated water master plan to evaluate the condition of water system infrastructure and identify capital improvement funding needs.

An updated Public Utility Master Plan (aka PUMP) was recently completed for the City’s water system by West Yost, a water resource management and engineering firm, and adopted by City Council in May, 2025.

PUMP identifies over $340 million of capital improvements to address existing system deficiencies, replace aging infrastructure, and support safe and reliable service.

Water Rate Study
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July 2025

1.2 Goals & Objectives
In conjunction with the development of the PUMP water master plan, Bartle Wells Associates (BWA) was retained to develop an updated water rate study. Key goals of the rate study include:
 Develop updated water enterprise financial projections to identify future funding needs and evaluate rate increases
 Evaluate the City’s water rates and recommend modifications to improve the rate structure and reflect the cost of providing service
 Develop updated water rates that:
a. recover the City’s costs of providing water service
b. are fair and equitable to all customers
c. are easy to understand and implement
d. comply with the legal requirements of Proposition 218 and other California law e. provide adequate funding for capital improvement needs including high-priority near-term needs and long-term rehabilitation and replacement of aging infrastructure  Aim for steady, gradual annual rate increases to the extent possible in order to help minimize the annual impact on ratepayers while supporting the funding needs of the City’s water enterprise.

BWA worked closely with City staff throughout the rate study process to evaluate alternatives and develop rate recommendations for the next five years.

1.3 Regional Water Rate Survey
Figure 1 shows a regional survey of monthly water service charges for a typical single family home..

Fairfield’s water rates are currently among the lowest in the region based on a survey of 16 regional water agencies. Fairfield’s monthly water bill for a typical single family home using 10 hundred cubic feet (hcf) of water (about 250 gallons per day) is $54.00, which is about 30% below the regional average.

Water Rate Study
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July 2025
Figure 1 – Regional Water Rate Survey

1.4 Financial Projections & Rate Increases
BWA worked with City staff to develop long-term financial projections to identify future funding needs and evaluate rate increases. BWA evaluated rate increases needed under three financial scenarios differentiated by the level of water system capital improvement funding targeted over the next five years.

All scenarios assume a) the City would draw down a substantial amount of fund reserves to help fund near-term capital needs while rate increase are phased in, and b) the City would issue $50 - $60 million of new debt service in the next 4-5 years to support PUMP capital improvement needs.  Scenario A – Fully Support PUMP Capital Funding Needs  Scenario B – Reduced Rate Increases & Deferred PUMP Capital Funding  Scenario C – Minimum Recommended Rate Increases
Based on evaluation and input from City staff, rate increases under Scenario C: Minimum Recommended Rate Increases are proposed for Council consideration. While the water enterprise would be able to more aggressively address its capital funding needs with Scenarios A or B, the level of rate increase in Scenario C balances the competing objectives of a) providing adequate funding for operating and capital needs, and b) minimizing the impact on ratepayers and keeping rates as affordable as possible. Additionally, the level of capital funding under Scenario C was deemed to be more realistic based on water system staffing levels and the City’s estimated ability to manage and deliver capital improvements.

Water Rate Study
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July 2025
Proposed rate increases under Scenario C are summarized below. Note that due to proposed modifications to the City’s water rate structure, the impact to customers’ bills the first year will vary based on customer class, meter size, and water consumption. Rate increases in subsequent years are applied on an across-the-board basis with the same percentage increase to all components of the City’s water rate structure.
* Note: Billing impacts will vary the first year due to modifications to the water rate structure.

1.5 Proposed Water Rates
Table 1 shows a schedule of proposed water rates for the next five years. The proposed rates account for both overall annual rate increases as well as a number of modifications to the City’s water rate structure designed to align rates with the cost of providing service and ensure rates are equitably applied to all customers. The City’s water rates include the following components:
• Fixed Service Charges: These charges are billed per day and help recover the City’s fixed costs of providing water service. Residential customers pay fixed service charges per dwelling unit. NonResidential customers pay fixed charges based on the size of each customer’s water meter. Large Industrial accounts pay fixed charges determined on a case-by-case basis according each customer’s contract and/or water demand.
• Volume Charges: These charges are billed based on each customer’s metered water consumption.

Residential Volume Charges vary based on elevation zone, with most customers in Zones 1-2. As proposed, Non-Residential customers would pay a uniform rate for all water use consistent with the Residential rate for Zones 1-2. The City’s Volume Charges are billed in units of one hundred cubic feet (hcf). One hcf equals approximately 748 gallons. Hence the proposed rate of $2.79 per hcf effective January 1, 2026 (for Residential Zone 1-2 and Non-Residential accounts) equates to $0.37 per hundred gallons, or a little less than 4/10ths of a cent per gallon. • Hydropneumatic Pump Surcharge: This charge recovers costs for pumping to a pressurized zone that serves a small number of Non-Residential customers and is billed based on metered water use.

The City bills monthly for water service.

Jan-1 Jan-1 Jan-1 Jan-1 Jan-1
2026 2027 2028 2029 2030
8% 8% 8% 8% 8%
Scenario C: Projected Rate Increases *

Water Rate Study
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July 2025
Table 1 – Proposed Water Rates
Current
Water Jan-1 Jan-1 Jan-1 Jan-1 Jan-1
Rates 2026 2027 2028 2029 2030

RESIDENTIAL
Per Dwelling Unit $0.97 $1.04 $1.12 $1.21 $1.31 $1.41

NON-RESIDENTIAL
Includes commercial, institutional, irrigation and other non-residential accounts Meter Size
Up to 3/4" $1.46 $1.56 $1.68 $1.82 $1.97 $2.12
1" 2.55 2.60 2.80 3.03 3.28 3.53
1-1/2" 5.63 5.20 5.60 6.05 6.55 7.05
2" 9.91 8.32 8.96 9.68 10.48 11.28
3" 22.33 16.64 17.92 19.36 20.96 22.56
4" 39.59 26.00 28.00 30.25 32.75 35.25
6" 89.09 52.00 56.00 60.50 65.50 70.50
8" 158.76 83.20 89.60 96.80 104.80 112.80
LARGE INDUSTRIAL 1,699.94 1,825.68 1,971.73 2,129.47 2,299.83 2,483.82 RESIDENTIAL Zones 1-2 $2.45 $2.79 $3.01 $3.25 $3.51 $3.79
Zones 3-5 3.04 - 3.63 3.82 4.13 4.46 4.82 5.21 NON-RESIDENTIAL 2.59 - 3.05 2.79 3.01 3.25 3.51 3.79 Includes commercial, institutional, irrigation and other non-residential accounts Hydropneumatic Pump Surcharge 0.40 0.68 0.73 0.79 0.85 0.92 LARGE INDUSTRIAL 1.84 1.99 2.15 2.32 2.51 2.71 ECONOMIC HARDSHIP DISCOUNT Eligibility based on US Dept of Housing & Urban Development Very Low Income Limits for Solano County Annual Discount/Rebate $158.00 $171.00 $185.00 $200.00 $216.00 $233.00 * 1 hundred cubic feet (hcf) = approximately 748 gallons Note: Rates for customers outside City of Fairfield boundaries in the Willotta Oaks Subdivision shall not exceed the costs of service based on charges levied by the City of Vallejo.

Proposed Water Rates
Proposed Water Rates Effective

FIXED SERVICE CHARGES
Fixed service charges per day

VOLUME CHARGES
Billed based on metered water consumption ($ per hundred cubic feet)

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July 2025

1.6 Historical & Proposed Rate Increases
Figure 2 shows historical and projected water rate increases. Rate increases are projected to become effective starting January 1, 2026, a full 5 years after rates were last increased. With full implementation of the proposed 8% rate increases over the next five years, the projected rates in 2030 roughly equate to the City’s rates last adjusted in 2021 escalated by 4.37% per year, a little higher than if the City had continued with 4% annual rate adjustments since rates were last increased in 2021. From a longer-term perspective, the City’s projected rates in 2030 roughly equate to the City’s rates from 2014 escalated by

3.92% per year.

Figure 2 – Historical & Projected Rate Increases

N-C-268-60-22-20-WP-R-WMP
7 City of Fairfield
July 2025
Water Rates & Financial Projections

2.0 WATER RATES & FINANCIAL PROJECTIONS

2.1 Historical Water Rates
Table 2 shows a history of water rates since July 1, 2013. The City historically adopted small annual rate adjustments to keep revenues in line with escalating costs of service. However, the City temporarily stopped raising rates after 2021 in the aftermath of the Covid pandemic as it was embarking on an updated water master plan to evaluate the condition of water system infrastructure and identify capital improvement funding needs.

The City has not implemented any water rate increases since January 2021, over 4-1/2 years ago. Water rates from 2021 are still in effect despite substantial increases in operating expenses and capital funding needs of the City’s aging water system infrastructure.

A column added to the right side of the table for informational purposes only shows a) the monthly equivalent of the City’s current Fixed Service Charges per day assuming a 30-day month, and b) the City’s current Volume Charges per hundred cubic feet converted to a rate per hundred gallons.

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Table 2 – Historical Water Rates
July 1 July 1 July 1 July 1 Jan 1 Jan 1 Jan 1 Jan 1
2013 2014 2015 2016 2018 2019 2020 2021
Rate Increase % 2.5% 2.5% 2.5% 4.0% 4.0% 4.0% 4.0%
FIXED SERVICE CHARGES Currently Monthly
Fixed service charges per day per Residential dwelling unit or based on meter size in effect Charge Residential (30 Days)
Per Dwelling Unit $0.77 $0.79 $0.81 $0.83 $0.86 $0.89 $0.93 $0.97 $29.10 Monthly Equivalent (30 days) 23.10 23.70 24.30 24.90 25.80 26.70 27.90 29.10 General Service Meter Size Meter Type
5/8" to 3/4" Displacement $1.16 $1.19 $1.22 $1.25 $1.30 $1.35 $1.40 $1.46 $43.80 1" Displacement 2.03 2.08 2.13 2.18 2.27 2.36 2.45 2.55 76.50 1-1/2" Displacement 4.47 4.58 4.69 4.81 5.00 5.20 5.41 5.63 168.90 2" Compound 7.86 8.06 8.26 8.47 8.81 9.16 9.53 9.91 297.30 1-1/2" Turbine 13.05 13.35 13.68 14.02 14.58 15.16 15.77 16.40 492.00 2" Turbine 17.73 18.17 18.62 19.09 19.85 20.64 21.47 22.33 669.90 3" Compound 17.73 18.17 18.62 19.09 19.85 20.64 21.47 22.33 669.90 4" Compound 31.52 32.21 33.02 33.85 35.20 36.61 38.07 39.59 1,187.70 3" Turbine 47.24 48.42 49.63 50.87 52.90 55.02 57.22 59.51 1,785.30 6" Compound 70.71 72.48 74.29 76.15 79.20 82.37 85.66 89.09 2,672.70 8" Compound 126.01 129.16 132.39 135.70 141.13 146.78 152.65 158.76 4,762.80 4" Turbine 168.28 172.49 176.80 181.22 188.47 196.01 203.85 212.00 6,360.00 10" Compound 199.26 204.24 209.35 214.58 223.16 232.09 241.37 251.02 7,530.60 6" Turbine 389.19 398.92 408.89 419.11 435.87 453.30 471.43 490.29 14,708.70 8" Turbine 766.23 785.39 805.02 825.15 858.16 892.49 928.19 965.32 28,959.60 10" Turbine 1,323.54 1,356.63 1,390.55 1,425.31 1,482.32 1,541.61 1,603.27 1,667.40 50,022.00 Large Industrial
Per Unit 1,363.62 1,397.71 1,432.65 1,468.47 1,511.24 1,571.69 1,634.56 1,699.94 50,998.20 VOLUME CHARGES Equivalent
Billed based on metered water consumption ($ per hundred cubic feet or hcf) Charge per Residential 100 gallons
Zones 1-2 $1.95 $2.00 $2.05 $2.10 $2.18 $2.27 $2.36 $2.45 $0.33 Zones 3-4 2.42 2.48 2.54 2.60 2.70 2.81 2.92 3.04 0.41
Zones 5+ 2.89 2.96 3.03 3.11 3.23 3.36 3.49 3.63 0.49
General Service 2.11 2.06 2.16 2.21 2.30 2.39 2.49 2.59 0.35 Hydroneumatic Pump Surcharge 0.33 0.32 0.34 0.35 0.36 0.37 0.38 0.40 0.05 Large Industrial 1.51 1.47 1.55 1.57 1.63 1.70 1.77 1.84 0.25 Irrigation 2.49 2.43 2.55 2.61 2.71 2.82 2.93 3.05 0.41 Special Landscape Irrigation 2.16 2.11 2.21 2.27 2.36 2.45 2.55 2.65 0.35 Reclaimed Landscape Irrigation 2.00 1.95 2.05 2.10 2.18 2.27 2.36 2.45 0.33 ECONOMIC HARDSHIP DISCOUNT Monthly
Eligibility based on 2016 HUD Very Low Income Limits for Solano County Discount Annual Discount/Rebate $135.00 $140.00 $146.00 $152.00 $158.00 $13.17 Historical Water Rates

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2.1 Water Enterprise Debt Service
Table 3 shows a schedule of recent historical and outstanding debt of the water enterprise. The City currently has two outstanding debt obligations including 2007 Capital Appreciation Certificates and 2017 Water Revenue Refunding Bonds. Debt repayment is secured by the City’s legal obligation to increase water rates and charges as needed to repay debt and generate net revenues (gross revenues remaining after payment of operating and maintenance expenses) that are at least a) 1.25x annual debt service and b) 1.00x annual debt service excluding revenues from connection fees and any rate stabilization fund transfers.

Table 3 – Water Enterprise Debt Service
Fiscal Year 2007 2013 Water 2017 Water Total
Ending Installment Revenue Revenue Annual
June 30 Payments Bonds Refunding Bonds Debt Service
2018 -- $600,200 $6,587,746 $7,187,946
2019 -- 601,600 6,587,856 7,189,456
2020 -- 602,200 6,589,056 7,191,256
2021 5,785,000 602,000 1,357,256 7,744,256
2022 5,790,000 601,000 1,356,456 7,747,456
2023 5,785,000 603,750 1,355,456 7,744,206
2024 6,480,000 -- 1,359,256 7,839,256
2025 6,480,000 -- 1,359,306 7,839,306
2026 6,480,000 -- 1,359,206 7,839,206
2027 6,480,000 -- 1,358,956 7,838,956
2028 6,480,000 -- 1,354,956 7,834,956
2029 6,480,000 -- 1,355,706 7,835,706
2030 6,480,000 -- 1,354,856 7,834,856
2031 6,480,000 -- 1,358,856 7,838,856
2032 6,480,000 -- 1,357,294 7,837,294
2033 6,480,000 -- 1,355,306 7,835,306
2034 6,480,000 -- 1,357,881 7,837,881
2035 6,480,000 -- 1,354,831 7,834,831
2036 6,480,000 -- 1,356,606 7,836,606
2037 6,480,000 -- 1,358,031 7,838,031
2038 6,480,000 -- 1,359,106 7,839,106
2039 -- -- 6,114,500 6,114,500
2040 -- -- 6,118,000 6,118,000
2041 -- -- 6,113,750 6,113,750
2042 -- -- 6,121,500 6,121,500
2007 Capital Appreciation Certificates: Not subject to optional prepayment 2017 Bonds: Optional Redemption starts April 1, 2027
Rate Covenant: 1.25x debt service coverage requirement with 1.00x requirement excluding connection fees & rate stabilization transfers

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2.2 Water System Finances
The City’s water utility is a self-supporting enterprise that relies predominantly on revenues from water rates to fund the costs of providing service. As such, rates need to be set at adequate levels to support operations, maintenance, and capital improvements needed to support safe and reliable service.

As previously noted, the City historically provided strong financial management via adoption of small annual water rate adjustments to keep revenues in line with the cost of providing service but temporarily stopped raising rates after 2021. While the City has been able to get by with no rate increases for more than 4-1/2 years, it now needs to resume raising rates to bring revenues back in line with the cost of service, support future cost escalation, and generate adequate funding for high-priority capital improvement needs.

2.3 Key Factors Impacting the Need for Rate Increases
Currently, the water enterprise is facing a number of financial challenges that are driving the need for rate increases in upcoming years. Key factors impacting the need for rate increases include:

2.3.1 Operating Cost Inflation
The City has experienced substantial increases in operating and maintenance expenses over the past 4+ years with no corresponding rate increases. Costs have increased for staffing, materials, electricity, insurance, PERS funding requirements, and professional services. Utilities historically face higher inflationary cost increases than CPI, which more a measure of consumer inflation. The proposed rates are designed to both catch up with cost inflation from recent years and account for projected operating cost inflation in future years.

2.3.2 Capital Improvement Needs of Aging Facilities
Like many regional agencies, the City has a lot of aging water infrastructure that will require rehabilitation and replacement in upcoming years. Many of the City’s water pipelines have been in service from 50 to over 80 years and have reached or are approaching the end of their useful lives. Other infrastructure, including both water treatment plants, are old and in need of substantial improvements to address existing deficiencies and support safe and reliable service.

The recently-completed PUMP water master plan identifies $341 million of capital improvements (in current $) needed over the next 25 years including $147 million of high-priority near-term needs recommended for completion over the next 5-6 years (through 2030) and $194 million of longer-term funding needs over the subsequent 20 years.

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Table 4 – PUMP Water Master Plan Capital Improvements
The $147 million of near-term funding needs include almost $80 million of water system storage and distribution improvements, $15 million of Waterman Treatment Plant improvements, and $53 million for Fairfield’s share of capital needs for upgrading and expanding the aging North Bay Regional (NBR) Water Treatment Plant.

2.3.3 Support Compliance with Debt Service Legal Covenants The deferral of rate increases in recent years has diminished the City’s ability to meet debt service coverage covenants that secure outstanding water debt. The City is legally obligated to increase water rates to maintain compliance with its debt covenants.

2.4 Financial & Rate Projections
Bartle Wells Associates worked closely with City staff to develop updated water enterprise financial projections to identify funding needs and evaluate rate increases. The projections incorporate the latest financial information and engineering cost estimates for capital improvement needs. After almost 4-1/2 years since rates were last adjusted, the City needs to resume raising water rates to support its operating, capital and debt service funding needs.

BWA developed 3 financial and rate scenarios differentiated by the level of water system capital improvement funding targeted over the next 5 years. All scenarios assume the City would draw down a substantial amount of fund reserves to help fund near-term capital needs while rate increase are phased in. All scenarios also assume issuance of debt in the next 4 to 5 years to support $50-$60 million of capital needs including Fairfield’s share of cost for rehabilitation and expansion of the North Bay Regional (NBR) Water Treatment Plant. Costs of NBR expansion are projected to be repaid in future years by new development.

All scenarios assume projected rate increases are phased in over 5 years to help minimize the annual impact on ratepayers. The alternative would be a substantially larger up-front rate increase.

After proposed rates are fully phased in over 5 years, the City can re-evaluate future funding needs and rate increases for subsequent years. In general, more rate increases over the next 5 years will result in the subsequent need for less rate increases in future years, and vice versa.

2.4.1 Scenario A: Fully Support PUMP Capital Funding Needs This scenario supports projected operating expenses and completion of $94 million (current $) of nearterm, high-priority water system improvements and Fairfield’s $53 million (current $) share of NBR water

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treatment plant rehabilitation and expansion as recommended in the PUMP water master plan for completion over the next roughly 5 years through 2029/30. After the 5-year phase in of rate increases, the City’s water rates would support average annual long-term funding needs of approximately $10 million per year (current $) as identified in PUMP to address ongoing future funding needs for rehabilitation and replacement. Projected rate increases under this scenario are shown below.

2.4.2 Scenario B: Reduced Rate Increases & Deferred PUMP Capital Funding This scenario assumes 5-year, high-priority water system improvements identified in the PUMP water master plan are partially deferred and instead spread over approximately 7-8 years resulting in reduced capital funding levels. After the 5-year phase in of rate increases, the City’s water rates would support approximately $8 million (current $) per year of annual funding needed to help address longer-term capital funding needs. Projected rate increases under this scenario are shown below.

2.4.3 Scenario C: Minimum Recommended Rate Increases
This scenario assumes 5-year, high-priority water system improvements identified in the Master Plan are partially deferred and instead spread over approximately 9-10 years resulting in further reduced capital funding levels. After the 5-year phase in of rate increases, the City’s water rates would support approximately $5 million per year of annual funding needed to address ongoing, longer-term capital funding needs.

While this scenario supports substantially less than the funding levels recommended in the PUMP master plan over the next 5 years, this scenario supports substantial steps in the right direction. As noted, with less increases over the next 5 years, additional rate increases would be needed in future years to support completion of the near-term PUMP master plan projects and eventually also support long-term capital needs. The level of rate increases in this scenario is recommended as the minimum prudent level of rate increases needed over the next 5 years. Projected rate increases under this scenario are shown below.

Cash flow projections and tables detailing the level of capital improvement funding for each scenario are shown on the following pages.

Jan-1 Jan-1 Jan-1 Jan-1 Jan-1
2026 2027 2028 2029 2030
12% 12% 12% 10% 10%
Scenario A: Projected Rate Increases
Jan-1 Jan-1 Jan-1 Jan-1 Jan-1
2026 2027 2028 2029 2030
10% 10% 10% 10% 10%
Scenario B: Projected Rate Increases
Jan-1 Jan-1 Jan-1 Jan-1 Jan-1
2026 2027 2028 2029 2030
8% 8% 8% 8% 8%
Scenario C: Projected Rate Increases

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Table 5 –Cash Flow Projections – Scenario A Scenario A Years 1 - 10 1 2 3 4 5 6 7 8 9 10 Cost Esc 2024/25 2025/26 2026/27 2027/28 2028/29 2029/30 2030/31 2031/32 2032/33 2033/34 Effective Date of Rate Increases tbd Jan-1 Jan-1 Jan-1 Jan-1 Jan-1 Jan-1 Jan-1 Jan-1 Jan-1 Overall Rate Adjustment % 0.0% 12% 12% 12% 10% 10% 4% 3% 3% 3% Annual % Change in Water Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Interest Earnings Rate 4.0% 3.0% 2.5% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% Beginning Fund Balances $83,157,000 $75,608,000 $58,437,000 $43,949,000 $32,106,000 $31,808,000 $32,453,000 $33,038,000 $34,138,000 $35,185,000 REVENUES Water Rate Revenues 34,800,000 38,050,000 42,616,000 47,730,000 53,001,000 58,301,000 62,474,000 64,685,000 66,626,000 68,625,000 Construction Rate Revenues 200,000 212,000 237,000 265,000 294,000 323,000 346,000 358,000 369,000 380,000 Investment Income 3,326,000 2,268,000 1,461,000 879,000 642,000 636,000 649,000 661,000 683,000 704,000 Connection Fees 3.0% 3,000,000 3,090,000 3,183,000 3,278,000 3,376,000 3,477,000 3,581,000 3,688,000 3,799,000 3,913,000 Other/Miscellaneous 3.0% 1,100,000 1,133,000 1,167,000 1,202,000 1,238,000 1,275,000 1,313,000 1,352,000 1,393,000 1,435,000 ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ Total Revenues 42,426,000 44,753,000 48,664,000 53,354,000 58,551,000 64,012,000 68,363,000 70,744,000 72,870,000 75,057,000 Projected Debt Proceeds 30,000,000 30,000,000 EXPENSES Operating & Maintenance Budget Budget+ Budget+ Personnel 4.0% 11,689,000 11,374,000 11,884,000 12,359,000 12,853,000 13,367,000 13,902,000 14,458,000 15,036,000 15,637,000 Addl Staffing (Needed for CIP) 4.0% 0 300,000 600,000 624,000 649,000 675,000 702,000 730,000 759,000 789,000 Operating Materials/Supplies 4.0% 3,012,000 3,817,000 3,811,000 3,963,000 4,122,000 4,287,000 4,458,000 4,636,000 4,821,000 5,014,000 Repairs & Maintenance 4.0% 3,052,000 3,387,000 3,370,000 3,505,000 3,645,000 3,791,000 3,943,000 4,101,000 4,265,000 4,436,000 Utilities 4.0% 1,384,000 1,952,000 2,029,000 2,110,000 2,194,000 2,282,000 2,373,000 2,468,000 2,567,000 2,670,000 Internal Service Charges 4.0% 5,496,000 5,822,000 6,032,000 6,273,000 6,524,000 6,785,000 7,056,000 7,338,000 7,632,000 7,937,000 Capital Outlay & Vehicle Maint 4.0% 879,000 879,000 879,000 914,000 951,000 989,000 1,029,000 1,070,000 1,113,000 1,158,000 ContractuaI Svcs & Other Expenses 4.0% 2,195,000 3,641,000 3,041,000 3,163,000 3,290,000 3,422,000 3,559,000 3,701,000 3,849,000 4,003,000 Expense Credits for NBR Admin 4.0% (754,000) (916,000) (916,000) (953,000) (991,000) (1,031,000) (1,072,000) (1,115,000) (1,160,000) (1,206,000) Fairfield Share of NBR O&M (no CIP) 4.0% 5,950,000 5,916,000 6,109,000 6,353,000 6,607,000 6,871,000 7,146,000 7,432,000 7,729,000 8,038,000 ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ Subtotal 32,903,000 36,172,000 36,839,000 38,311,000 39,844,000 41,438,000 43,096,000 44,819,000 46,611,000 48,476,000 Debt Service 2007 Water Certificates 6,480,000 6,480,000 6,480,000 6,480,000 6,480,000 6,480,000 6,480,000 6,480,000 6,480,000 6,480,000 2017 Water Revenue Bonds 1,359,000 1,359,000 1,359,000 1,355,000 1,356,000 1,355,000 1,359,000 1,357,000 1,355,000 1,355,000 Projected 2028 Bonds (5%, 30-Yr, 1.5Yrs Int Only) - - - - 1,518,000 3,036,000 4,010,000 4,010,000 4,010,000 4,010,000 ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ Subtotal 7,839,000 7,839,000 7,839,000 7,835,000 9,354,000 10,871,000 11,849,000 11,847,000 11,845,000 11,845,000 Capital Improvements Long-Term Annual CIP Target Water System Capital Projects 3.0% 8,000,000 17,650,000 18,180,000 18,725,000 19,287,000 19,865,000 11,600,000 11,948,000 12,306,000 12,675,000 Fairfield Share of NBR CIP 3.0% 1,000,000 1,030,000 1,061,000 1,093,000 27,631,000 28,460,000 1,000,000 1,030,000 1,061,000 1,093,000 Drawdown of City's NBR Repl Rsrvs tbd (1,000,000) (1,000,000) (1,000,000) (7,500,000) (7,500,000) 0 0 0 0 Repayment of Loan from NBR Rsrvs 233,000 233,000 233,000 233,000 233,000 233,000 233,000 0 0 0 ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ Subtotal 9,233,000 17,913,000 18,474,000 19,051,000 39,651,000 41,058,000 12,833,000 12,978,000 13,367,000 13,768,000 Total Expenses 49,975,000 61,924,000 63,152,000 65,197,000 88,849,000 93,367,000 67,778,000 69,644,000 71,823,000 74,089,000 Revenues Less Expenses (7,549,000) (17,171,000) (14,488,000) (11,843,000) (298,000) 645,000 585,000 1,100,000 1,047,000 968,000 Ending Fund Balances 75,608,000 58,437,000 43,949,000 32,106,000 31,808,000 32,453,000 33,038,000 34,138,000 35,185,000 36,153,000 Min Rsrv Target: 50% O&M&D + $5MCIP 25,370,000 27,010,000 27,340,000 28,070,000 29,600,000 31,150,000 32,470,000 33,330,000 34,230,000 35,160,000 Debt Service Coverage (Min >1.25x) 1.21 1.09 1.51 1.92 2.00 2.08 2.13 2.19 2.22 2.24 Covg Excl Conn Fees (Min >1.00x) 0.83 0.70 1.10 1.50 1.64 1.76 1.83 1.88 1.90 1.91 City of Fairfield Water Cash Flow Projections 2028 Water Bonds $60M tbd Near-Term High-Priority CIP Completed by 2030

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Figure 3 – 10-Year Revenue & Expense Projections – Scenario A

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Table 6 –Cash Flow Projections – Scenario B Scenario B Years 1 - 10 1 2 3 4 5 6 7 8 9 10 Cost Esc 2024/25 2025/26 2026/27 2027/28 2028/29 2029/30 2030/31 2031/32 2032/33 2033/34 Effective Date of Rate Increases tbd Jan-1 Jan-1 Jan-1 Jan-1 Jan-1 Jan-1 Jan-1 Jan-1 Jan-1 Overall Rate Adjustment % 0.0% 10% 10% 10% 10% 10% 5% 5% 5% 3% Annual % Change in Water Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Interest Earnings Rate 4.0% 3.0% 2.5% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% Beginning Fund Balances $83,157,000 $75,608,000 $63,153,000 $52,854,000 $44,445,000 $42,352,000 $41,302,000 $36,672,000 $33,157,000 $33,826,000 REVENUES Water Rate Revenues 34,800,000 37,725,000 41,498,000 45,647,000 50,212,000 55,233,000 59,448,000 62,420,000 65,541,000 68,213,000 Construction Mtr Rate Revenues 200,000 210,000 231,000 254,000 279,000 307,000 330,000 347,000 364,000 379,000 Investment Income 3,326,000 2,268,000 1,579,000 1,057,000 889,000 847,000 826,000 733,000 663,000 677,000 Connection Fees 3.0% 3,000,000 3,090,000 3,183,000 3,278,000 3,376,000 3,477,000 3,581,000 3,688,000 3,799,000 3,913,000 Other/Miscellaneous 3.0% 1,100,000 1,133,000 1,167,000 1,202,000 1,238,000 1,275,000 1,313,000 1,352,000 1,393,000 1,435,000 ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ Total Revenues 42,426,000 44,426,000 47,658,000 51,438,000 55,994,000 61,139,000 65,498,000 68,540,000 71,760,000 74,617,000 Projected Debt Proceeds 25,000,000 25,000,000 EXPENSES Operating & Maintenance Budget Budget+ Budget+ Personnel 4.0% 11,689,000 11,374,000 11,884,000 12,359,000 12,853,000 13,367,000 13,902,000 14,458,000 15,036,000 15,637,000 Addl Staffing (Needed for CIP) 4.0% 0 300,000 600,000 624,000 649,000 675,000 702,000 730,000 759,000 789,000 Operating Materials/Supplies 4.0% 3,012,000 3,817,000 3,811,000 3,963,000 4,122,000 4,287,000 4,458,000 4,636,000 4,821,000 5,014,000 Repairs & Maintenance 4.0% 3,052,000 3,387,000 3,370,000 3,505,000 3,645,000 3,791,000 3,943,000 4,101,000 4,265,000 4,436,000 Utilities 4.0% 1,384,000 1,952,000 2,029,000 2,110,000 2,194,000 2,282,000 2,373,000 2,468,000 2,567,000 2,670,000 Internal Service Charges 4.0% 5,496,000 5,822,000 6,032,000 6,273,000 6,524,000 6,785,000 7,056,000 7,338,000 7,632,000 7,937,000 Capital Outlay & Vehicle Maint 4.0% 879,000 879,000 879,000 914,000 951,000 989,000 1,029,000 1,070,000 1,113,000 1,158,000 ContractuaI Svcs & Other Expenses 4.0% 2,195,000 3,641,000 3,041,000 3,163,000 3,290,000 3,422,000 3,559,000 3,701,000 3,849,000 4,003,000 Expense Credits for NBR Admin 4.0% (754,000) (916,000) (916,000) (953,000) (991,000) (1,031,000) (1,072,000) (1,115,000) (1,160,000) (1,206,000) Fairfield Share of NBR O&M (no CIP) 4.0% 5,950,000 5,916,000 6,109,000 6,353,000 6,607,000 6,871,000 7,146,000 7,432,000 7,729,000 8,038,000 ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ Subtotal 32,903,000 36,172,000 36,839,000 38,311,000 39,844,000 41,438,000 43,096,000 44,819,000 46,611,000 48,476,000 Debt Service 2007 Water Certificates 6,480,000 6,480,000 6,480,000 6,480,000 6,480,000 6,480,000 6,480,000 6,480,000 6,480,000 6,480,000 2017 Water Revenue Bonds 1,359,000 1,359,000 1,359,000 1,355,000 1,356,000 1,355,000 1,359,000 1,357,000 1,355,000 1,355,000 Projected 2028 Bonds (5%, 30-Yr, 1.5Yrs Int Only) - - - - 1,267,000 2,533,000 3,345,000 3,345,000 3,345,000 3,345,000 ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ Subtotal 7,839,000 7,839,000 7,839,000 7,835,000 9,103,000 10,368,000 11,184,000 11,182,000 11,180,000 11,180,000 Capital Improvements Long-Term Annual CIP Target Water System Capital Projects 3.0% 8,000,000 12,607,000 12,985,000 13,375,000 13,776,000 14,190,000 14,615,000 15,054,000 12,300,000 12,669,000 Fairfield Share of NBR CIP 3.0% 1,000,000 1,030,000 1,061,000 1,093,000 27,631,000 28,460,000 1,000,000 1,000,000 1,000,000 1,030,000 Drawdown of City's NBR Repl Rsrvs tbd (1,000,000) (1,000,000) (1,000,000) (7,500,000) (7,500,000) 0 0 0 0 Repayment of Loan from NBR Rsrvs 233,000 233,000 233,000 233,000 233,000 233,000 233,000 0 0 0 ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ Subtotal 9,233,000 12,870,000 13,279,000 13,701,000 34,140,000 35,383,000 15,848,000 16,054,000 13,300,000 13,699,000 Total Expenses 49,975,000 56,881,000 57,957,000 59,847,000 83,087,000 87,189,000 70,128,000 72,055,000 71,091,000 73,355,000 Revenues Less Expenses (7,549,000) (12,455,000) (10,299,000) (8,409,000) (2,093,000) (1,050,000) (4,630,000) (3,515,000) 669,000 1,262,000 Ending Fund Balances 75,608,000 63,153,000 52,854,000 44,445,000 42,352,000 41,302,000 36,672,000 33,157,000 33,826,000 35,088,000 Min Rsrv Target: 50% O&M&D + $5M CIP 25,370,000 27,010,000 27,340,000 28,070,000 29,470,000 30,900,000 32,140,000 33,000,000 33,900,000 34,830,000 Debt Service Coverage (Min >1.25x) 1.21 1.05 1.38 1.68 1.77 1.90 2.00 2.12 2.25 2.34 Covg Excl Conn Fees (Min >1.00x) 0.83 0.66 0.97 1.26 1.40 1.56 1.68 1.79 1.91 1.99 City of Fairfield Water Cash Flow Projections 2028 Water Bonds $50M tbd Near-Term High-Priority CIP Spread Over Years 1 - 8

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Figure 4 – 10-Year Revenue & Expense Projections – Scenario B

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Table 7 –Cash Flow Projections – Scenario C Scenario C Years 1 - 10 1 2 3 4 5 6 7 8 9 10 Cost Esc 2024/25 2025/26 2026/27 2027/28 2028/29 2029/30 2030/31 2031/32 2032/33 2033/34 Effective Date of Rate Increases tbd Jan-1 Jan-1 Jan-1 Jan-1 Jan-1 Jan-1 Jan-1 Jan-1 Jan-1 Overall Rate Adjustment % 0.0% 8% 8% 8% 8% 8% 8% 8% 5% 5% Annual % Change in Water Sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Interest Earnings Rate 4.0% 3.0% 2.5% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% Beginning Fund Balances $83,157,000 $75,608,000 $65,133,000 $56,147,000 $48,217,000 $45,604,000 $42,841,000 $37,687,000 $35,189,000 $34,607,000 REVENUES Water Rate Revenues 34,800,000 37,400,000 40,392,000 43,623,000 47,113,000 50,882,000 54,953,000 59,349,000 63,262,000 66,425,000 Construction Mtr Rate Revenues 200,000 208,000 225,000 243,000 262,000 283,000 306,000 330,000 351,000 369,000 Investment Income 3,326,000 2,268,000 1,628,000 1,123,000 964,000 912,000 857,000 754,000 704,000 692,000 Connection Fees 3.0% 3,000,000 3,090,000 3,183,000 3,278,000 3,376,000 3,477,000 3,581,000 3,688,000 3,799,000 3,913,000 Other/Miscellaneous 3.0% 1,100,000 1,133,000 1,167,000 1,202,000 1,238,000 1,275,000 1,313,000 1,352,000 1,393,000 1,435,000 ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ Total Revenues 42,426,000 44,099,000 46,595,000 49,469,000 52,953,000 56,829,000 61,010,000 65,473,000 69,509,000 72,834,000 Projected Debt Proceeds 25,000,000 25,000,000 EXPENSES Operating & Maintenance Budget Budget+ Budget+ Personnel 4.0% 11,689,000 11,374,000 11,884,000 12,359,000 12,853,000 13,367,000 13,902,000 14,458,000 15,036,000 15,637,000 Addl Staffing (Needed for CIP) 4.0% 0 300,000 600,000 624,000 649,000 675,000 702,000 730,000 759,000 789,000 Operating Materials/Supplies 4.0% 3,012,000 3,817,000 3,811,000 3,963,000 4,122,000 4,287,000 4,458,000 4,636,000 4,821,000 5,014,000 Repairs & Maintenance 4.0% 3,052,000 3,387,000 3,370,000 3,505,000 3,645,000 3,791,000 3,943,000 4,101,000 4,265,000 4,436,000 Utilities 4.0% 1,384,000 1,952,000 2,029,000 2,110,000 2,194,000 2,282,000 2,373,000 2,468,000 2,567,000 2,670,000 Internal Service Charges 4.0% 5,496,000 5,822,000 6,032,000 6,273,000 6,524,000 6,785,000 7,056,000 7,338,000 7,632,000 7,937,000 Capital Outlay & Vehicle Maint 4.0% 879,000 879,000 879,000 914,000 951,000 989,000 1,029,000 1,070,000 1,113,000 1,158,000 ContractuaI Svcs & Other Expenses 4.0% 2,195,000 3,641,000 3,041,000 3,163,000 3,290,000 3,422,000 3,559,000 3,701,000 3,849,000 4,003,000 Expense Credits for NBR Admin 4.0% (754,000) (916,000) (916,000) (953,000) (991,000) (1,031,000) (1,072,000) (1,115,000) (1,160,000) (1,206,000) Fairfield Share of NBR O&M (no CIP) 4.0% 5,950,000 5,916,000 6,109,000 6,353,000 6,607,000 6,871,000 7,146,000 7,432,000 7,729,000 8,038,000 ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ Subtotal 32,903,000 36,172,000 36,839,000 38,311,000 39,844,000 41,438,000 43,096,000 44,819,000 46,611,000 48,476,000 Debt Service 2007 Water Certificates 6,480,000 6,480,000 6,480,000 6,480,000 6,480,000 6,480,000 6,480,000 6,480,000 6,480,000 6,480,000 2017 Water Revenue Bonds 1,359,000 1,359,000 1,359,000 1,355,000 1,356,000 1,355,000 1,359,000 1,357,000 1,355,000 1,355,000 Projected 2028 Bonds (5%, 30-Yr, 1.5Yrs Int Only) - - - - 1,267,000 2,533,000 3,345,000 3,345,000 3,345,000 3,345,000 ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ Subtotal 7,839,000 7,839,000 7,839,000 7,835,000 9,103,000 10,368,000 11,184,000 11,182,000 11,180,000 11,180,000 Capital Improvements Water System Capital Projects 3.0% 8,000,000 10,300,000 10,609,000 10,927,000 11,255,000 11,593,000 10,651,000 10,970,000 11,300,000 11,639,000 Fairfield Share of NBR CIP 3.0% 1,000,000 1,030,000 1,061,000 1,093,000 27,631,000 28,460,000 1,000,000 1,000,000 1,000,000 1,000,000 Drawdown of City's NBR Repl Rsrvs tbd (1,000,000) (1,000,000) (1,000,000) (7,500,000) (7,500,000) 0 0 0 0 Repayment of Loan from NBR Rsrvs 233,000 233,000 233,000 233,000 233,000 233,000 233,000 0 0 0 ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ Subtotal 9,233,000 10,563,000 10,903,000 11,253,000 31,619,000 32,786,000 11,884,000 11,970,000 12,300,000 12,639,000 Total Expenses 49,975,000 54,574,000 55,581,000 57,399,000 80,566,000 84,592,000 66,164,000 67,971,000 70,091,000 72,295,000 Revenues Less Expenses (7,549,000) (10,475,000) (8,986,000) (7,930,000) (2,613,000) (2,763,000) (5,154,000) (2,498,000) (582,000) 539,000 Ending Fund Balances 75,608,000 65,133,000 56,147,000 48,217,000 45,604,000 42,841,000 37,687,000 35,189,000 34,607,000 35,146,000 Min Rsrv Target: 50% O&M&D + $5MCIP 25,370,000 27,010,000 27,340,000 28,070,000 29,470,000 30,900,000 32,140,000 33,000,000 33,900,000 34,830,000 Debt Service Coverage (Min >1.25x) 1.21 1.01 1.24 1.42 1.44 1.48 1.60 1.85 2.05 2.18 Covg Excl Conn Fees (Min >1.00x) 0.83 0.62 0.84 1.01 1.07 1.15 1.28 1.52 1.71 1.83 City of Fairfield Water Cash Flow Projections 2028 Water Bonds $50M tbd Near-Term High-Priority CIP Costs Spread Over Years 1 - 10

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Figure 5 – 10-Year Revenue & Expense Projections – Scenario C

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2.5 Recommended Water Rate Increases
Based on evaluation and input from City staff, rate increases under Scenario C: Minimum Recommended Rate Increases are proposed for Council consideration. While the water enterprise would be able to more aggressively address its capital funding needs with Scenarios A or B, the level of rate increase in Scenario C balances the competing objectives of a) providing adequate funding for operating and capital needs, and b) minimizing the impact on ratepayers and keeping rates as affordable as possible. Additionally, the level of capital funding under Scenario C was deemed to be more realistic based on water system staffing levels and the City’s estimated ability to manage and deliver capital improvements.

Rate increases are projected to become effective starting January 1, 2026, a full 5 years after rates were last increased. With full implementation of the projected 8% rate increases over the next five years, the projected rates in 2030 roughly equate to the City’s rates last adjusted in 2021 escalated by 4.37% per year, a little higher than if the City had continued with 4% annual rate adjustments since rates were last increased in 2021. From a longer-term perspective, the City’s projected rates in 2030 roughly equate to the City’s rates from 2014 escalated by 3.92% per year.

Figure 6 – Historical & Projected Rate Increases

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Water Rate Structure Recommendations

3.0 WATER RATE STRUCTURE RECOMMENDATIONS

3.1 Summary of Water Rate Structure Recommendations
The City’s water rate structure has not been independently reviewed or updated in many years. Based on review of existing rates, BWA generally recommends cleaning up, simplifying, and standardizing the City’s water rates, realigning rates with cost of service, and charging the rates consistently for all water customers.

BWA developed updated water rates based on a cost-of-service analysis that accounts for both a) the recommended 8% overall annual water rate increases, and b) a number of proposed modifications to the City’s water rate structure and related billing practices.

The proposed rate structure modifications would be implemented concurrently with the first-year rate increase on January 1, 2026. This will result in first-year rate impacts that will vary for each customer based on their customer class, meter size, and amount of water use. After the rate structure adjustments are implemented the first year, future rate increases starting January 1, 2027 would be applied on an across-the-board basis with the same percentage rate increases for all rates and charges.

Key water rate structure recommendations are summarized as follows.

3.1.1 Fixed Service Charge Recommendations
 Residential Accounts: Maintain fixed charges per residential dwelling unit.  Non-Residential Accounts: BWA recommends the non-residential accounts including commercial, institutional and irrigation customers, transition to a uniform set of fixed charges by meter size, with one charge for each meter size proportionally based on meter capacity. This will result in lower fixed charges for a relatively small number of customers with larger meters. The City no longer has need for different fixed charges for different types of meters as almost all of the City’s turbine meters have been replaced by single-jet meters.
 Irrigation Accounts: Unlike other customer classes, irrigation customers (including customers currently classified as Irrigation, Special Landscape Irrigation, and Reclaimed Landscape Irrigation) currently are not billed any Fixed Charges and instead pay Volume Charges which are set a slightly higher rate than General Service commercial rates. BWA recommends transitioning to charging all customers a standard set of fixed and volumetric water rates. This would result in irrigation customers starting to pay Fixed Monthly Charges consistent with other customer classes. At the same time, irrigation customers would only be charged the same Volume Charges as other customers (not higher charges), which will partially offset the impact of starting to pay Fixed Charges.

3.1.2 Volume Charge Recommendations
 Uniform Rate for Residential and Non-Residential Water Use: The City’s Volume Charges currently vary a little based on customer class. BWA recommends the City transition to a uniform rate for all potable water use for Residential and Non-Residential customers (including commercial, institutional, irrigation and other non-residential accounts)
 Residential Pumping Zone Charges: BWA updated these surcharges based on analysis of the costs of pumping to higher elevation zones. In addition to updating the charges, BWA recommends

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consolidation of the two higher residential elevation zone rate classes into a single class, particularly since less than 5 accounts are in one of the zones.
 Hydropneumatic Pump Surcharges: BWA updated these surcharges based on analysis of the costs of pumping water to higher elevation and pressure zones.

3.1.3 Other Water Rate Structure Recommendations
 Large Industrial Rates for Anheuser Busch: Large Industrial customer class charges for Anheuser Busch were updated and reflect only very minor adjustments from current charges. However, Anheuser Busch would be subject to the same overall water rate increases as all other City customers.  Unbilled Accounts: Some accounts have historically not been billed for water service. Pursuant to legal requirements established by Proposition 218, BWA believes the City needs to start billing these accounts to help ensure that costs funded by other customers do not exceed their proportionate cost of service.

3.1.4 Willotta Oaks Subdivision Pass-Through Charges
33 homes in the Willotta Oaks Subdivision receive water service from Vallejo’s Lake Area water system but are currently customers of Fairfield pursuant to a legal agreement from the 1970s. Fairfield pays Vallejo for providing water service to these customers based on Vallejo’s Lake Area water rates. In turn, Fairfield bills these customers at significantly lower rates set at 150% of Fairfield’s general service charges pursuant to the City’s Municipal Code, resulting in a revenue shortfall for serving the Willotta Oaks Subdivision customers.

BWA recommends that Fairfield’s customers in the Willotta Oaks Subdivision be transitioned to become customers of Vallejo, which serves as the customers’ water service provider. Until this transition takes place, BWA recommends the City bill customers in Willotta Oaks charges that reflect the cost of service by passing through Vallejo’s charges for water service to these accounts. Authorization for this passthrough would need to be authorized via the Proposition 218 process.

BWA also recommends the City review the historical agreement with Vallejo to confirm if Vallejo’s charges comply with the agreement’s provisions in order to ensure that Fairfield is not being overcharged.

3.1.5 Pass-Through Authorization for Wholesale Water Charges The City purchases untreated wholesale water supply from the Solano County Water Agency (SCWA) and Solano Irrigation District (SID). Wholesale water charges from these agencies may be subject to unanticipated increases that are outside the City’s control. To provide financial projection for these unanticipated cost increases, BWA recommends the City authorize the ability to pass through future adopted increases in wholesale water supply charges via the Proposition 218 process.

The financial and rate projections already account for 4% annual increases in operating costs including the costs of wholesale water supply. As such, the pass through would only apply to increases in the weighted average wholesale water supply charges per hundred cubic feet adopted by SCWA and SID in excess of 4% per year. The pass through would be calculated as a charge per hundred cubic feet of water that would be in addition to the adopted charges in effect and would be applied consistently to all of the City’s Water Volume Charges other than Reclaimed Landscape Irrigation Rates.

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Water Accounts & Use

4.0 WATER ACCOUNTS & USE

4.1 Water Customers
Table 8 shows a breakdown of water customers by class and meter size. The number of residential dwelling units shown includes both single family and multi-family units and accounts for over 90% of the total. Also note that most non-residential accounts are served by smaller meter sizes up to 2-inches, with only a relatively small number of accounts served by larger meter sizes.

Table 8 – Water Customers
Res 3/4" 1" 1-1/2" 2" 3" 4" 6" Total

RESIDENTIAL
Residential Dwelling Units 39,867 39,867

NONRESIDENTIAL
GS34 General Service 5/8-3/4 Meter 1,109 1,109
GS34PZ Gen Service 5/8-3/4 PumpZone 3 3
GS01 General Service 1in Meter 285 285
GS15 General Service 1.5 in Meter 240 240
GS2C General Service 2 in Compound 170 170
GS3C General Service 3 in Compound 58 58
GS3T General Service 3 in Turbine 1 1
GS3TO General Service 3 in T Outside 1 1
GS4C General Service 4 in Compound 17 17
GS6C General Service 6 in Compound 4 4
GS6CPZ Gen Service 6 in Comp PumpZone 1 1
IL Landscape Irrigation 118 232 155 119 25 13 3 665
IR Reclaimed Irrigation 1 1
IS Special Irrigation 4 2 12 14 6 4 42
NOBILL Not Currently Billed 13 55 23 30 3 2 1 127
_____ _____ _____ _____ _____ _____ _____ _____
SUBTOTAL 1,247 574 430 334 94 36 9 2,724
TOTAL WATER ACCOUNTS 39,867 1,247 574 430 334 94 36 9 42,591

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4.2 Historical & Project Water Use
Table 9 shows historical and projected water broken out by proposed customer classes. In general, water use has declined in recent years to levels that remained relatively consistent over the past two fiscal years.

Water use can vary from year to year based on many factors. The water use projections used in this study are based largely on water use from recent years.

Table 9 – Historical & Projected Water Use (hcf)

4.3 Single Family Residential Bill Distribution
Table 10 and Figure 7 show a distribution of single family residential water bills broken out by monthly water use based on data from fiscal year 2023/24. Some single family residential water statistics include:
 Lowest 25% of bills had monthly water use up to 4 hcf.  Median single family use was 7 hcf. The median represents the mid-point of all single family bills with half of single family monthly bills based on water use up to 7 hcf, and half at 7 hcf or higher.  Average monthly use was 10.3 hcf. The average is typically skewed upwards by a relatively small number of bills with high levels water use. A little over 2/3rds of bills were based on water use at or below the average.
 Top 10% of bills were based on water use above 21 hcf (roughly double the average).

Fiscal Year Fiscal Year Fiscal Year Fiscal Year Projected 2021/22 2022/23 2023/24 2024/25 Use
Esti mated
Residential
Zones 1-2 4,545,748 4,322,407 4,095,208 4,153,892 4,200,000 Zones 3-5 94,097 88,867 78,990 77,580 80,000 __________ __________ __________ __________ __________ Subtotal 4,639,845 4,411,274 4,174,198 4,231,472 4,280,000 Non-Residential
Comm'l/Institutional/Light Industrial 1,108,984 1,109,697 1,034,026 1,045,632 1,050,000 Irrigation 1,346,115 1,221,308 1,163,004 1,195,914 1,190,000 Est. Additional Irrigation 180,000 180,000 180,000 180,000 180,000 __________ __________ __________ __________ __________ Subtotal 2,635,099 2,511,005 2,377,030 2,421,546 2,420,000 Large Industrial (Anheuser Busch) 372,556 405,544 330,175 350,953 360,000 Construction/Other 45,537 52,848 34,002 26,923 20,000 Total 7,340,372 7,733,336 6,915,405 7,030,894 7,080,000

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Table 10 – Single Family Bill Distribution
Monthly
Use (hcf) In Block % of Total Cumulative Cumulative % In Block % of Ttl Use (hcf) % of Ttl 0 Es t 12,000 3.5% 12,000 3.5% 0 0.0% 0 0.0%
1 11,533 3.4% 23,533 6.9% 11,533 0.3% 330,401 9.3%
2 18,915 5.5% 42,448 12.4% 37,830 1.1% 649,269 18.3%
3 25,123 7.3% 67,571 19.7% 75,369 2.1% 949,222 26.8%
4 Low Use 28,576 8.3% 96,147 28.1% 114,304 3.2% 1,224,052 34.6% 5 29,221 8.5% 125,368 36.6% 146,105 4.1% 1,470,306 41.5% 6 27,176 7.9% 152,544 44.6% 163,056 4.6% 1,687,339 47.7% 7 Median 24,171 7.1% 176,715 51.6% 169,197 4.8% 1,877,196 53.0% 8 20,824 6.1% 197,539 57.7% 166,592 4.7% 2,042,882 57.7% 9 17,548 5.1% 215,087 62.8% 157,932 4.5% 2,187,744 61.8% 10 Average 15,084 4.4% 230,171 67.2% 150,840 4.3% 2,315,058 65.4% 11 13,022 3.8% 243,193 71.0% 143,242 4.0% 2,427,288 68.6% 12 11,104 3.2% 254,297 74.3% 133,248 3.8% 2,526,496 71.4% 13 9,408 2.7% 263,705 77.0% 122,304 3.5% 2,614,600 73.8% 14 8,377 2.4% 272,082 79.5% 117,278 3.3% 2,693,296 76.1% 15 7,221 2.1% 279,303 81.6% 108,315 3.1% 2,763,615 78.1% 16 6,297 1.8% 285,600 83.4% 100,752 2.8% 2,826,713 79.8% 17 5,479 1.6% 291,079 85.0% 93,143 2.6% 2,883,514 81.4% 18 5,026 1.5% 296,105 86.5% 90,468 2.6% 2,934,836 82.9% 19 4,410 1.3% 300,515 87.8% 83,790 2.4% 2,981,132 84.2% 20 3,894 1.1% 304,409 88.9% 77,880 2.2% 3,023,018 85.4% 21 Top 10% 3,522 1.0% 307,931 89.9% 73,962 2.1% 3,061,010 86.5% 22 3,157 0.9% 311,088 90.9% 69,454 2.0% 3,095,480 87.4% 23 2,828 0.8% 313,916 91.7% 65,044 1.8% 3,126,793 88.3% 24 2,499 0.7% 316,415 92.4% 59,976 1.7% 3,155,278 89.1% 25 2,313 0.7% 318,728 93.1% 57,825 1.6% 3,181,264 89.9% 26 1,972 0.6% 320,700 93.7% 51,272 1.4% 3,204,937 90.5% 27 1,798 0.5% 322,498 94.2% 48,546 1.4% 3,226,638 91.1% 28 1,705 0.5% 324,203 94.7% 47,740 1.3% 3,246,541 91.7% 29 Top 5% 1,487 0.4% 325,690 95.1% 43,123 1.2% 3,264,739 92.2% 30 1,330 0.4% 327,020 95.5% 39,900 1.1% 3,281,450 92.7% 31 1,207 0.4% 328,227 95.9% 37,417 1.1% 3,296,831 93.1% 32 1,144 0.3% 329,371 96.2% 36,608 1.0% 3,311,005 93.5% 33 953 0.3% 330,324 96.5% 31,449 0.9% 3,324,035 93.9%
34 930 0.3% 331,254 96.7% 31,620 0.9% 3,336,112 94.2%
35 822 0.2% 332,076 97.0% 28,770 0.8% 3,347,259 94.5%
36 754 0.2% 332,830 97.2% 27,144 0.8% 3,357,584 94.8%
37 713 0.2% 333,543 97.4% 26,381 0.7% 3,367,155 95.1%
38 618 0.2% 334,161 97.6% 23,484 0.7% 3,376,013 95.4%
39 562 0.2% 334,723 97.8% 21,918 0.6% 3,384,253 95.6%
40 486 0.1% 335,209 97.9% 19,440 0.5% 3,391,931 95.8%
41 489 0.1% 335,698 98.0% 20,049 0.6% 3,399,123 96.0%
42 443 0.1% 336,141 98.2% 18,606 0.5% 3,405,826 96.2%
43 393 0.1% 336,534 98.3% 16,899 0.5% 3,412,086 96.4%
44 344 0.1% 336,878 98.4% 15,136 0.4% 3,417,953 96.5%
45 330 0.1% 337,208 98.5% 14,850 0.4% 3,423,476 96.7%
46 303 0.1% 337,511 98.6% 13,938 0.4% 3,428,669 96.8%
47 285 0.1% 337,796 98.7% 13,395 0.4% 3,433,559 97.0%
48 277 0.1% 338,073 98.7% 13,296 0.4% 3,438,164 97.1%
49 243 0.1% 338,316 98.8% 11,907 0.3% 3,442,492 97.2%
50 237 0.1% 338,553 98.9% 11,850 0.3% 3,446,577 97.3%
51-100 3,367 1.0% 341,920 99.9% 217,549 6.1% 3,507,801 99.1% 101-200 439 0.1% 342,359 100.0% 56,054 1.6% 3,531,980 99.8% >200 _______ 42 _______ 0.0% 342,401 100.0% _______ 12,721 _______ 0.4% 3,540,501 100.0% Total 342,401 100.0% 3,540,501 100.0%
Number of Bills Water Use (hcf) Use Through Break

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Figure 7 – Single Family Residential Bill Distribution

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Water Rate Derivation

5.0 WATER RATE DERIVATION

5.1 Substantive Requirements of Proposition 218
The water rates developed in this report are designed to reflect the cost of service in compliance with the substantive requirements of Article 13D, Section 6 of the California Constitution, which was established by voter approval of Proposition 218 in November 1996. This Section of the Constitution applies to property-related charges including water rates. Key provisions of Section 6 state:

A fee or charge shall not be extended, imposed, or increased by any agency unless it meets all of the following requirements:
(1) Revenues derived from the fee or charge shall not exceed the funds required to provide the property related service.
(2) Revenues derived from the fee or charge shall not be used for any purpose other than that for which the fee or charge was imposed.
(3) The amount of a fee or charge imposed upon any parcel or person as an incident of property ownership shall not exceed the proportional cost of the service attributable to the parcel. (4) No fee or charge may be imposed for a service unless that service is actually used by, or immediately available to, the owner of the property in question. Fees or charges based on potential or future use of a service are not permitted. Standby charges, whether characterized as charges or assessments, shall be classified as assessments and shall not be imposed without compliance with Section 4.
(5) No fee or charge may be imposed for general governmental services including, but not limited to, police, fire, ambulance or library services, where the service is available to the public at large in substantially the same manner as it is to property owners.

Section 6 and subsequent Government Code legislation also established procedural requirements for adopting or increasing property-related charges such as water rates. The City is in process of complying with these procedural requirements.

5.2 Fixed vs. Volumetric Revenue Recovery
The proposed rates were designed to recover 50% of rate revenues from Fixed Service Charges and 50% from Volume Charges. This level of revenue recovery a) provides a prudent balance of fixed vs. volumetric revenue recovery, b) reasonably reflects the City’s costs of providing service, and c) is roughly in line with recent historical data.

Table 11 allocates the base year water rate revenue target for recovery from Fixed Service Charges vs.

Volume Charges. The base year revenue target reflects current estimated annual water rate revenues accounting for proposed rate structure and rate application adjustments, but excluding any rate increases.

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Table 11 – Fixed vs. Volume Charge Revenue Recovery

5.3 Fixed Service Charge Derivation
Fixed Service Charges are calculated by dividing a) the amount of revenues allocated for fixed rate recovery by b) the total number of residential water meter equivalents served by the City. This results in an underlying charge per residential meter equivalent that is applied to non-residential accounts based on meter size and capacity.

5.3.1 Meter Equivalents
Table 7 calculates the number of residential meter equivalents served by the City. Residential dwelling units are each assigned 1 meter equivalent. Non-residential meter equivalents are calculated based on the capacity of each meter size in relation to that of the base residential meter. For example, a 2-inch meter has 8x the capacity of the base residential meter and correspondingly accounts for 8 meter equivalents. The capacity of each meter size is based on industry standards developed by the American Water Works Association. Some adjustments are made to the number of meter equivalents to account for a) a proposed change in the billing method for Fire Service Meters and b) the number of meter equivalents assigned to Anheuser Busch based on water use from the past five years.

Table 12 – Water Meter Equivalents
Water Rate Annual Funding Target (Base Year) $36,300,000 With Rate Structure & Rate Application Adjustments
Fixed Service Charge Revenue Recovery
Revenue Recovery % 50%
Revenue Recovery $ 18,150,000
Volume Charge Revenue Recovery
Revenue Recovery % 50%
Revenue Recovery $ 18,150,000
Res 3/4" 1" 1-1/2" 2" 3" 4" 6" Total
TOTAL WATER ACCOUNTS 39,867 1,247 574 430 334 94 36 9 42,591

METER CAPACITY RATIO
Meter Capacity (gpm) [1] 20 30 50 100 160 320 500 1,000 Meter Capacity Ratio 1.0 1.5 2.5 5.0 8.0 16.0 25.0 50.0

METER EQUIVALENTS
Subtotal (from above) 39,867 1,871 1,435 2,150 2,672 1,504 900 450 50,849 Less Est. 70% of Fire Service Meters (1.4) (668.9) (22.8) (24.5) (5.6) (723) Anheuser Busch 1,761
Total Meter Equivalents 39,866 1,202 1,412 2,126 2,666 1,504 900 450 51,886 1 Source: American Water Works Association Manual of Water Supply Practices M-22, Sizing Water Service Lines and Meters; Table 6-1 AWWA Meter Standards, Maximum Flow Rate.

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Table 13 calculates the number of meter equivalents assigned to Anheuser Busch based on a) a 5-year average of historical water use divided by b) annual water use per commercial meter equivalent. This results in a number of meter equivalents assigned to Anheuser Busch that reflects actual water use from recent years and is proportionate to water demand from other non-residential accounts.

Table 13 – Anheuser Busch Meter Equivalents

5.3.2 Fixed Service Charge per Meter Equivalent
Table 14 calculates a Fixed Service Charge per meter equivalent by dividing a) the base-year fixed rate recovery target by b) the total number of meter equivalents served by the City’s water system. The resulting fixed charge per meter equivalent of $0.96 per day is extremely close the City’s current Fixed Service Charge of $0.97 per day per residential dwelling unit.

Table 14 – Fixed Charge per Meter Equivalent

5.3.3 Proposed Fixed Service Charges
Table 15 shows a schedule of proposed base year Fixed Service Charges reflecting updated charges excluding any rate increases. Fixed charges for non-residential accounts are calculated based on a) the fixed charge per residential meter equivalent multiplied by b) the meter ratio of each meter size which reflects the capacity of each meter size in relation to that of a standard residential dwelling unit. 2019/20 2020/21 2021/22 2022/23 2023/24 5-Yr Avg
Anheuser Busch Water Use (hcf) 412,396 416,293 405,544 372,556 330,175 387,393 Commercial Water Use per Meter Equivalent (hcf) 220 Anheuser Busch Corresponding Meter Equivalents 1,761 Fixed Service Charge Revenue Recovery $18,150,000
Meter Equivalents 51,886
Charge per Meter Equivalent
Annual Charge $349.80
Charge per Day (rounded to nearest 1 cent) 0.96
Equivalent Charge per 30 days 28.80

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Table 15 – Proposed Base Year Fixed Service Charges

5.4 Volume Charge Derivation
Volume Charges are calculated by dividing a) the amount of revenues allocated for volumetric rate recovery by b) the amount of annual water use. This results in a uniform volume charge applicable to almost all water use. The exceptions include a) rates for higher residential elevation zones and a nonresidential pressure zone that also recover the additional costs of pumping, and b) rates for Anheuser Busch that reflect lower costs of service since water is supplied directly off a transmission line.

5.4.1 Uniform Volume Charge Derivation
Table 16 calculates a uniform Volume Charge by dividing a) base year volumetric rate recovery by b) projected annual water use from the City’s residential and non-residential customer classes. The revenue target is adjusted to exclude projected revenues from pumping zone surcharges and Anheuser Busch, which are separately calculated and billed.

The Volume Charge for Anheuser Busch is calculated at 75% of the uniform charge for Residential and Non-Residential customers served by the City’s municipal water system, reflecting estimated lower costs of service for water supplied directly off the Nelson Hill Transmission Line, without use of the City’s local water distribution system pipelines.

Meter Fixed Charge
Ratio [1] per Day
Charge per Meter Equivalent ($/day) $0.96
RESIDENTIAL 1.0 0.96
Fixed Service Charge per Dwelling Unit

NON-RESIDENTIAL
Fixed Service Charge per Meter Size
3/4-inch 1.5 1.44
1-inch 2.5 2.40
1-1/2-inch 5.0 4.80
2-inch 8.0 7.68
3-inch 16.0 15.36
4-inch 25.0 24.00
6-inch 50.0 48.00
8-inch 80.0 76.80
Large Industrial (Anheuser Busch) 1,761 1,690.44
1 Source: Based on American Water Works Association Manual of Water Supply Practices M-22, Sizing Water Service Lines and Meters; Table 6-1 AWWA Meter Standards, Maximum Flow Rate.

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Table 16 – Base Year Volume Charge Derivation

5.4.2 Updated Pumping Charges
Table 17 calculates updated pumping charges that apply to higher residential elevation zones and a nonresidential pressure zone. The charges are designed to recover costs for electricity and average annual pump station capital improvement costs based on the PUMP master plan. Since some of the benefit of water pumped to the higher zones also benefits customers in lower zones, cost recovery is allocated at 75% reflecting the estimated share of benefit to the pump zones.

Pumping costs allocated for recovery are divided by water use weighted to account for estimated higher levels of pumping needed for the City’s Residential elevation zones than for the non-residential pressure zone. Correspondingly, the updated pumping charges reflect that the level of pumping required to supply water to the City’s residential elevation zones is approximately 50% higher than the level of pumping required for the non-residential pressure zone.

Volume Charge Revenue Recovery $18,150,000
Less Residential Pumping Zone Cost Recovery (126,615)
Less Est Large Industrial Volume Charges (698,180) ____________ Net Revenue Recovery 17,325,205
Projected Water Use (hcf) 6,700,000
Residential & Non-Residential
Volume Charge per hcf
Residential & Non-Residential $2.59
Large Industrial (Anheuser Busch) [1] 75% $1.94
_____________ 1 Volume-related costs for serving Anheuser Busch are estimated at 75% of the costs for the City's municipal water system since Anheuser Busch is served directly off the Nelson Hill Transmission Line.

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Table 17 – Updated Pumping Charges
Pump Station Costs for Recovery
For pump stations servings zones higher than Zone 2
Electricity [1] $108,784
Avg Annual Capital Improvements [2] 60,036 __________
Subtotal 168,820
Benefit Allocation Factor [3] 75% __________
Net Cost Recovery 126,615
Applicable Pump Zone Water Use (hcf) Est Use (hcf) Weighting Factor [4] Residential Zones 3-5 80,000 1.50 120,000 Non-Residential Pump Zone 80,000 1.00 80,000 __________ Use x Weighting Factor 200,000
Pumping Cost per Unit ($/hcf) Weighting Factor [4]
Residential Zones 3-5 1.50 0.95
Non-Residential Pump Zone 1.00 0.63
_____________ 1 Based on pump station electricity bills for relevant pumping stations in fiscal year 2024/25. 2 Based on PUMP capital improvements for relevant pump stations (current dollars). 3 Allocation to applicable pumping zones excluding general system benefit. 4 Based on estimated amount of pumping requirements per customer class

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5.4.3 Proposed Volume Charges
Table 18 shows a schedule of base year Volume Charges compared to current charges. The proposed uniform charge that would be applicable to most water use is a) equal to the City’s current Volume Charge for General Service commercial customers, b) slightly higher than the current Residential Volume Charge for the lowest elevation zones, and c) a little lower than current irrigation rates.

Table 18 – Proposed Base Year Volume Charges
Current Proposed
Volume Base Year
Charges Charges
Residential
Zones 1-2 $2.45 $2.59
Zones 3-5 3.04 - 3.63 3.54 Non-Residential 2.59 2.59
Includes commercial, institutional, irrigation and other non-residential accounts Irrigation $2.59 3.05
Special Landscape Irrigation 2.59 2.65 Hydropneumatic Pump Surcharge 0.63 0.40 Large Industrial 1.81 1.84

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Projected Water Rates & Impacts

6.0 PROJECTED WATER RATES & IMPACTS

6.1 Projected Water Rates
Table 19 shows a schedule of water rates projected for the next five years accounting for both a) the overall level of rate increases determined by the financial projections, b) proposed rate structure adjustments designed to simplify and standardize the City’s water rates, and c) the updated rate derivations designed to realign rates with the cost of service.

Table 19 – Projected Water Rates
Current Updated
Water Base Year Jan-1 Jan-1 Jan-1 Jan-1 Jan-1
Rates Rates 2026 2027 2028 2029 2030
Rate Increase % 8% 8% 8% 8% 8%
Residential Units
Per Dwelling Unit 39,867 $0.97 $0.96 $1.04 $1.12 $1.21 $1.31 $1.41 Monthly Equiv (30 days) 29.10 28.80 31.20 33.60 36.30 39.30 42.30 Non-Residential Includes commercial, institutional, irrigation and other non-residential accounts Meter Size Accounts
Up to 3/4" 1,247 $1.46 $1.44 $1.56 $1.68 $1.82 $1.97 $2.12 1" 574 2.55 2.40 2.60 2.80 3.03 3.28 3.53 1-1/2" 430 5.63 4.80 5.20 5.60 6.05 6.55 7.05 2" 334 9.91 7.68 8.32 8.96 9.68 10.48 11.28 3" 94 22.33 15.36 16.64 17.92 19.36 20.96 22.56 4" 36 39.59 24.00 26.00 28.00 30.25 32.75 35.25 6" 9 89.09 48.00 52.00 56.00 60.50 65.50 70.50 8" 0 158.76 76.80 83.20 89.60 96.80 104.80 112.80 Large Industrial 1 1,699.94 1,690.44 1,825.68 1,971.73 2,129.47 2,299.83 2,483.82 Residential Zones 1-2 $2.45 $2.59 $2.79 $3.01 $3.25 $3.51 $3.79
Zones 3-5 3.04 - 3.63 3.54 3.82 4.13 4.46 4.82 5.21 Non-Residential 2.59 2.59 2.79 3.01 3.25 3.51 3.79 Includes commercial, institutional, irrigation and other non-residential accounts Irrigation $2.59 2.79 3.05 3.01 3.25 3.51 3.79 Special Landscape Irrigation 2.59 2.65 2.79 3.01 3.25 3.51 3.79 Hydropneumatic Pump Surcharge 0.63 0.40 0.68 0.73 0.79 0.85 0.92 Large Industrial 1.81 1.84 1.99 2.15 2.32 2.51 2.71 Billed based on metered water consumption ($ per hundred cubic feet)* Projected Water Rates
Projected Rates Effective

FIXED SERVICE CHARGES
Fixed service charges per day

VOLUME CHARGES

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6.1 Projected Residential Rate Impacts
Table 20 shows a projection of monthly residential bills with different levels of water use. Note that the first-year rate increase accounts for both an overall rate increase as well as rate structure adjustments and updated rate derivations, while rate increase are applied on an across-the-board basis in subsequent years. With the proposed rate increases, the City’s water rates are projected to remain in the lower to lower-middle range compared to other regional agencies. Many other regional agencies have adopted or are anticipating water rate increases in upcoming years.

Table 20 – Residential Rate Impacts
A small number of residential customers in the Willotta Oaks subdivision who receive water service from Vallejo’s Lake Area water system would experience a substantial increase in water charges with a direct pass-through of charges levied by the City of Vallejo for providing these customers with water service.

Monthly Current
Use Monthly Jan-1 Jan-1 Jan-1 Jan-1 Jan-1
(hcf) Bill 2026 2027 2028 2029 2030 $/month % $/day
Overall Rate Increase 8% 8% 8% 8% 8% 46.9%
0 $29.50 $31.63 $34.07 $36.80 $39.85 $42.89 $13.38 45.4% $0.44 1 31.95 34.42 37.08 40.05 43.36 46.68 14.72 46.1% 0.48
2 34.40 37.21 40.09 43.30 46.87 50.47 16.06 46.7% 0.53
3 36.85 40.00 43.10 46.55 50.38 54.26 17.40 47.2% 0.57
4 39.30 42.79 46.11 49.80 53.89 58.05 18.74 47.7% 0.62
5 41.75 45.58 49.12 53.05 57.40 61.84 20.08 48.1% 0.66
6 44.20 48.37 52.13 56.30 60.91 65.63 21.42 48.5% 0.70
7 46.65 51.16 55.14 59.55 64.42 69.42 22.76 48.8% 0.75
8 49.10 53.95 58.15 62.80 67.93 73.21 24.10 49.1% 0.79
9 51.55 56.74 61.16 66.05 71.44 77.00 25.44 49.4% 0.84
10 54.00 59.53 64.17 69.30 74.95 80.79 26.78 49.6% 0.88 11 56.45 62.32 67.18 72.55 78.46 84.58 28.12 49.8% 0.92 12 58.90 65.11 70.19 75.80 81.97 88.37 29.46 50.0% 0.97 13 61.35 67.90 73.20 79.05 85.48 92.16 30.80 50.2% 1.01 14 63.80 70.69 76.21 82.30 88.99 95.95 32.14 50.4% 1.06 15 66.25 73.48 79.22 85.55 92.50 99.74 33.48 50.5% 1.10 16 68.70 76.27 82.23 88.80 96.01 103.53 34.82 50.7% 1.14 17 71.15 79.06 85.24 92.05 99.52 107.32 36.16 50.8% 1.19 18 73.60 81.85 88.25 95.30 103.03 111.11 37.50 51.0% 1.23 19 76.05 84.64 91.26 98.55 106.54 114.90 38.84 51.1% 1.28 20 78.50 87.43 94.27 101.80 110.05 118.69 40.18 51.2% 1.32 21 80.95 90.22 97.28 105.05 113.56 122.48 41.52 51.3% 1.37 22 83.40 93.01 100.29 108.30 117.07 126.27 42.86 51.4% 1.41 23 85.85 95.80 103.30 111.55 120.58 130.06 44.20 51.5% 1.45 24 88.30 98.59 106.31 114.80 124.09 133.85 45.54 51.6% 1.50 25 90.75 101.38 109.32 118.05 127.60 137.64 46.88 51.7% 1.54 Projected Monthly Bills 5-Year Impact
Median
Average
Lowest 25%
2x Average

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6.2 Non-Residential Rate Impacts
The proposed rates reflect overall 8% annual rate increases but also account for rate structure modifications designed to simplify and standardize the City’s water rates, realign rates with cost of service, and apply rates consistently for all water customers. Due to the rate structure modifications, the first year rate impacts for non-residential customers will vary depending on customer class, meter size, and water use.
 Most Non-Residential customers will only experience relatively small impacts due to the rate structure modifications. Non-Residential customers with larger meters will benefit from a reduction in fixed charges.
 Irrigation customers that currently do not pay any fixed charges will start paying Fixed Service Charges consistent with all other customers. At the same time, these customers currently pay Volume Charges that are higher than other general service accounts, but going forward will pay the same uniform Volume Charges as other non-residential accounts.

After the first year rate adjustments, rate increases in subsequent years will apply on an across-the-board basis with the same percentage increases to all components of the City’s water rate structure.

6.3 Economic Hardship Discount
The City offers a water rate discount of $158 per year, equal to about $13.17 per month. Eligibility is based on Very Low Income Limits for Solano County established by the US Department of Housing and Urban Development (HUD). The City has historically adjusted the discount roughly corresponding with the level of adopted water rate increases. BWA recommends the City continue to increase the discount corresponding with the City’s future water rate increases.