Agenda packet — Gilroy City Council, August 21, 2023 (part 2 of 3)

City of Gilroy

STAFF REPORT
Agenda Item Title: Selection and Appointment of Youth Commission Members
Meeting Date: August 21, 2023
From: Jimmy Forbis, City Administrator
Department: City Clerk
Submitted By: Thai Nam Pham, City Clerk
Prepared By: Thai Nam Pham, City Clerk
STRATEGIC PLAN GOALS Not Applicable

RECOMMENDATION
Review the applications and interviews from the candidates and proceed with the formal appointment of suitable candidates to the vacant positions within the Youth Commission.

BACKGROUND
On August 7, 2023, the Council interviewed candidates for the Youth Commission.

These interviews aimed to fill the following:
• One (1) seat expiring on September 30, 2024. This was previously held by Commissioner James Dinh, who tendered his resignation on July 6, 2023. • Five (5) seats, each with a term ending September 30, 2025. The breakdown of these is as follows:
o Two (2) are currently occupied by Commissioners Lavender Hwang and Aiden Francis, both of whom have reapplied. These positions will become vacant starting October 1, 2023.
o Three (3) previously held by Commissioners Issac Hwang, Alexis Miller, and Ezequiel Lopez, who resigned on August 8, 2023, August 1, 2023, and August 7, 2023, respectively. These seats will have a term starting on August 21, 2023.

Agenda Item 10.1 Page 145 of 308
Selection and Appointment of Youth Commission Members
City of Gilroy City Council Page 2 of 2 August 21, 2023 During the recruitment window, applications were received from Crystal Garcia Pablo, Kuber Sihra, Chad Knauss, and Lavender Hwang (an incumbent). Post the September 21, 2023 application deadline, an additional five applications were submitted by Maya Beyret, Zara Ting-Tee, Thanmay Sarath, Aiden Francis (an incumbent), and Saed Mustafa.

At the regular meeting on August 7, 2023, the Council interviewed all applicants except for Aiden Francis. The Council is now poised to consider these individuals for appointment to the Youth Commission.

Attachments:

1. Application – Crystal Garica Pablo

2. Application – Kuber Sihra

3. Application – Chad Knauss

4. Application – Lavender Hwang

5. Application – Maya Beyret

6. Application – Zara Ting-Tee

7. Application – Thanmay Sarath

8. Application – Aiden Francis

9. Application – Saed Mustafa
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Youth Commission Application - Crystal Garcia Pablo

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City of Gilroy
Board, Committee, & Commission Application
All Commission, Board, and Committee applications are a public record.

Board/Committee/ Commission of Interest: Youth Commission Name: Crystal Garcia Pablo
Phone
number(s):
email
address*:

Are you a registered voter within the City limits? No
Physical
Address*:

Driver’ s License
or
ID No.:

Date of
Birth*:

Last 4 of
SSN:

List your qualifications for this appointment:

I possess a range of qualifications that make me well-suited for this position. My strong public speaking and communication skills allow me to effectively engage with adults and peers when seeking assistance or sharing ideas, a skill set I have practiced through my involvement in other boards and committees. I have a genuine openness to new ideas and enjoy collaborating with others, valuing the diverse perspectives they bring. In addition, I have expertise in social media management, graphic design for creating flyers, and spreading awareness through various channels. I am also skilled in editing and own a camera, which I frequently use to capture images for other boards and events. Furthermore, I have expertise in website creation and maintenance, ensuring a strong online presence for the board or committee. Together, these qualifications, like public speaking, communication, social media, graphic design, photography, and website development, make me a well-rounded and capable candidate for this position.

List any service to the community including any prior appointments:

I have dedicated my time to volunteering at events organized by the Gilroy Youth Commission, such as Dia de los Niños and the Christmas drive. Additionally, I played a role in reintroducing Girls Who Code to the Gilroy Library, where we successfully conducted 6-8 week coding programs for young girls, having 28 girls. As a member of Gilroy's Teen Advisory Board for the library, I manage social media, capture event photos, and collaborate with my peers to plan engaging activities. Furthermore, I actively contribute as a member of the YMCA Youth Board, where we work collectively to organize events for YMCA youth and raise funds for Power School and also the yearly toy drive during Christmas. Within my school, I tutor underclassmen and participate in various clubs, including the Women Empowerment STEM Club as treasurer, the Interact Club, and the Culture Club. Beyond the community and school, I am also involved with WriteCause, an organization that addresses global issues and amplifies the voices of teenagers.

As the marketing director.

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Youth Commission Application - Crystal Garcia Pablo

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What are your goals while serving on this Board/Commission/ Committee? I am eager to join the Gilroy Youth Commission and actively contribute to the community, making a significant impact. One thing I truly enjoy is collaborating with a team to share our ideas with the community. Supporting and uplifting our community by working together with others is a genuine passion of mine, and being a member of this board would provide me with the perfect platform to create a meaningful difference. I am enthusiastic about the opportunity to work with a team and collectively contribute to the improvement of our community through teamwork. I aim to represent the youth in our community and also raise awareness and participation in various events. Additionally, I hope to coordinate with my team to generate more opportunities and raise funds for the youth in our community.

Why are you the most qualified to serve on this Board/Commission/ Committee? I am highly qualified to serve on this Board/Commission/ Committee due to my extensive leadership experience, both within the community and my school. I have demonstrated my ability to take charge and effectively communicate my ideas. Additionally, I have actively engaged with the public and sought assistance from various organizations such as YMCA, the Gilroy Library, and the Morgan Hill Library. My passion for the community is unwavering, and I genuinely believe that I can bring valuable contributions to this board. I am confident in my ability to engage with people, secure funding, and raise awareness, which are essential for the success of the Youth Commission. With my dedication and drive, I am eager to demonstrate the power and potential of the youth within the Gilroy community. * I just wanted to clarify that I lived in Gilroy for my whole life (El Roble Elementary, Luigi Aprea Elementary, Brownell Middle School) but I just recently moved this year to San Juan and truly want to continue to be apart of Gilroy's community.

By clicking on this box, I declare under penalty of perjury that I am currently a registered voter within the City limits of the City of Gilroy. Furthermore, I understand that this application and any attachments are subject to disclosure under the Public Records Act and must complete mandatory Open Government Ordinance Training. I further understand that members of the Planning Commission, Building Boards of Appeals, and Physically Challenged Board of Appeals are also subject to filing the Fair Political Practice Commission’ s Statement of Economic Interest Form 700 relating to financial disclosures.

Agenda Item 10.1 Page 148 of 308
Youth Commission Application - Kuber Sihra

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City of Gilroy
Board, Committee, & Commission Application
All Commission, Board, and Committee applications are a public record.

Board/Committee/ Commission of Interest: Youth Commission Name: Kuber Sihra
Phone
number(s):
email
address*:

Are you a registered voter within the City limits? No
Physical
Address*:

Driver’ s License
or
ID No.:

Date of
Birth*:

Last 4 of
SSN:

List your qualifications for this appointment:

I have a great sense of leadership and teamwork, as well as a sense of creativity and being a helpful person in general overall which would be helpful when doing these tasks within the youth commission such as planning and organizing.

List any service to the community including any prior appointments:

I have volunteered tutoring kids at the CIEL center the past years and have also volunteered for backpack drives in Morgan Hill.

What are your goals while serving on this Board/Commission/ Committee? My goals are to be helpful when planning and organizing as well as be supportive to new ideas.

My goals are also to help either improve or continue events in the City of Gilroy upon the youth commission.

Why are you the most qualified to serve on this Board/Commission/ Committee? My sense of teamwork, planning, and organizing all would make me the most qualified to serve for the youth commission. This would mean I am open to all ideas that the rest of the commission would agree to do together. My sense of teamwork, planning, and organizing would also be helpful as a whole when doing these events.

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Youth Commission Application - Kuber Sihra

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Agenda Item 10.1 Page 150 of 308
Youth Commission Application - Chad Knauss

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City of Gilroy
Board, Committee, & Commission Application
All Commission, Board, and Committee applications are a public record.

Board/Committee/ Commission of Interest: Youth Commission Name: Chad Knauss
Phone
number(s):
email
address*:

Are you a registered voter within the City limits? No
Physical
Address*:

Driver’ s License
or
ID No.:

Date of
Birth*:

Last 4 of
SSN:

List your qualifications for this appointment:

I applied for and was selected by the Junior High faculty at my school to be a member of our student Campus Leadership Team. As a member, I served for two years. The goal of the Campus Leadership Team was to improve student morale for sixth, seventh and eighth graders and to act as a liaison between students and faculty. Some of my duties included mentoring incoming sixth graders, meeting with small groups monthly so that they felt comfortable throughout their first year of junior high. I was also involved in planning, budgeting and executing school events to foster student sprit throughout the school year. This included our Fall Festival, Cultural Fair, Christmas Rally, Summer Extravaganza and more. As part of the student leadership team, we also raised funds to distribute to local charities and homeless shelters.

List any service to the community including any prior appointments:

We moved to Gilroy in 2020 and unfortunately, COVID limited my ability to get involved in city events, but I am eager to get involved now.

What are your goals while serving on this Board/Commission/ Committee? I would like to be appointed to the Gilroy Youth Commission because I want to contribute to the betterment of my community. I believe in the power of youth voices and want to make a positive impact on the issues that affect the youth in our city. Civic engagement is extremely important to me and having an opportunity to serve on the Youth Commission and make a difference within my city truly excites me.

Why are you the most qualified to serve on this Board/Commission/ Committee? Being a two year member of my junior high Campus Leadership Team has given me an opportunity to find creative ways to improve student morale for over 700 students. I was part of Agenda Item 10.1 Page 151 of 308
Youth Commission Application - Chad Knauss

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a small leadership team that planned, budgeted and executed student led events and activities while also raising funds for local charities. I have a passion for, and closely follow, local, state, and federal government. My personal goal is to be civically engaged throughout high school and to pursue a degree in political science in college and continue to be involved in government at some level thereafter.

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Youth Commission Application - Lavender Hwang

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City of Gilroy
Board, Committee, & Commission Application
All Commission, Board, and Committee applications are a public record.

Board/ Committee/ Commission of Interest: Youth Commission Name: Lavender Hwang
Phone number(s): email address*:

Are you a registered voter within the City limits? No
Physical Address*:

Driver’s License or
ID No.:

Date of
Birth*:

Last 4 of
SSN:

List your qualifications for this appointment:

Served as Youth Commision member for last two years (2021-2023 term) •Served as Youth Commission Chair for last year (2022-2023 term) •Leadership and public speaking skills •Extensive experience with teamwork and collaboration
List any service to the community including any prior appointments:

Served on Youth Commission ( 2021- 2023) • Founded club at Gilroy Library teaching STEM to young girls 2022-2023) •Completed over 200+ community service hours locally What are your goals while serving on this Board/ Commission/ Committee? I hope to continue implementing the projects that we proposed last year and have planned for this year such as a teen resource fair to foster youth engagement within the community and make local opportunities more accessible to teenagers. My primary goals are projects that emphasize making a lasting impact, as well as increased accessibility to resources and solutions for the local youth.

Why are you the most qualified to serve on this Board/ Commission/ Committee? I have served on the Youth Commision for the last two years, where I have familiarized myself with the Brown Law under which we operate, as well as the programs and events we plan and coordinate. I believe, as a returning member, I have the knowledge and experience to offer insight to incoming members while still collaborating in a team effort to plan projects and events that serve the youth of our community.

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must complete mandatory Open Government Ordinance Training. I further understand that members of the Planning Commission, Building Boards of Appeals, and Physically Challenged Board of Appeals are also subject to filing the Fair Political Practice Commission’ s Statement of Economic Interest Form 700 relating to financial disclosures.

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Youth Commission Application - Maya Beyret

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City of Gilroy
Board, Committee, & Commission Application
All Commission, Board, and Committee applications are a public record.

Board/Committee/ Commission of Interest: Youth Commission Name: Maya Beyret
Phone
number(s):
email
address*:

Are you a registered voter within the City limits? No
Physical
Address*:

Driver’ s License
or
ID No.:

Date of
Birth*:

Last 4 of
SSN:

List your qualifications for this appointment:

My qualifications for becoming a part of the Youth Commission are organizational, communication, and teamwork skills. These three skills make me qualified for the Youth Commission because they help create a productive environment in which problems can be resolved.

List any service to the community including any prior appointments:

I've volunteered within the Gilroy community on multiple occasions. most notably, I've volunteered for the downtown activities last summer and a few times throughout the school year last year. I've also participated as a tutor for the Academic & Wellness Center for over a year.

Not only was I able to be more involved in our Gilroy community through these two endeavors, but I was able to make an impact of numerous people's lives.

What are your goals while serving on this Board/Commission/ Committee? I have a few goals while serving on the Youth Commission. I hope to be a valuable member of this group by providing accurate and helpful feedback about the youth in Gilroy. I also hope to encourage other people my age to be more involved in our tight-knit community. Being more involved would help everyone become more connected and create a safer, more welcoming environment in our city.

Why are you the most qualified to serve on this Board/Commission/ Committee? I am most qualified to serve on Youth Commission because of my past and current experiences.

Being a part of Youth Commission requires good communication skills which I have gained from both taking a class in that specific area and also enacting those skills into my job. Currently, I work at Gilroy Gardens in the Admissions department which tends to receive various complaints Agenda Item 10.1 Page 155 of 308
Youth Commission Application - Maya Beyret

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throughout the day from guests. It is my job (and all of those whom work with me) to communicate back to the guests in a calm and respectful manner the appropriate information.

This makes me most qualified to serve on the Youth Commission because in a similar way, I will listen to any specific youth issues that occur in our community and respond accordingly.

School: Dr. Tj Owens Gilroy Early College Academy / Grade: 11th By clicking on this box, I declare under penalty of perjury that I am currently a registered voter within the City limits of the City of Gilroy. Furthermore, I understand that this application and any attachments are subject to disclosure under the Public Records Act and must complete mandatory Open Government Ordinance Training. I further understand that members of the Planning Commission, Building Boards of Appeals, and Physically Challenged Board of Appeals are also subject to filing the Fair Political Practice Commission’ s Statement of Economic Interest Form 700 relating to financial disclosures.

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Youth Commission Application - Zara Ting-Tee

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City of Gilroy
Board, Committee, & Commission Application
All Commission, Board, and Committee applications are a public record.

Board/Committee/ Commission of Interest: Youth Commission Name: Zara Ting-Tee
Phone
number(s):
email
address*:

Are you a registered voter within the City limits? No
Physical
Address*:

Driver’ s License
or
ID No.:

Date of
Birth*:

Last 4 of
SSN:

List your qualifications for this appointment:

My qualifications for this appointment are the following: 1) In 2022, I worked as a mentor in the STAR Arts Education program here in Gilroy. I was a part of the pioneer crew for the infamous Oak Tree Garden, which belonged to the Ohlone people for centuries. I was absolutely honored to share this rich history with the youth of the program. I worked with Mrs. Marilyn Cardinali to guide the students and introduce the children through the powerful concept of theater. Prior to this, I was also a part of STAR's podcasting class, in which I worked with Mr. Ethan Chargin to later help create a video to promote the new musical Puff's to other youth and expose them to the wonders of being in a community based musical. 2) As a Junior Olympic Gymnast from 2015 through 2020, I helped coach young and aspiring gymnasts who were interested in being a part of the competitive team. I absolutely loved teaching and guiding these junior gymnasts to embody the life and skills of a competitive gymnast. Some of these junior gymnasts have joined the team and have given back their knowledge to the community by being great role models and excellent leaders. 3) I have volunteered at various elementary/middle schools across Gilroy. I have also went back to mentor and give a presentation to upcoming middle-schoolers in my previous fifth grade GATE class in Rucker Elementary. I gave them honest and significant advice on the transition from elementary to middle school and the transition from middle school to high school. I was incredibly honored to stand in place of those who had done the same for me. 4) I was actively involved in Gavilan's Science Alive Gallery and really enjoyed assisting the middle schoolers in finding their passions in science and math. It was so fun to watch the kids experience real science and to watch their amazement. My wish is for these students to gain the knowledge and eventually contribute their expertise to our city. 5) In my middle schools years, I was passionately involved as a member of the Kindness Club ran by Ms. Fortino (Brownell), in which we would visit Wheeler Manor to brings smiles to the senior community and visit the local shelters to care for our city's animals. It brought a lot of happiness and contentment to be involved in such a positive motion for our Gilroy community. 6) During COVID, I made personal cards to all the seniors at Wheeler Manor. My yearning to be a part of the community during the Agenda Item 10.1 Page 157 of 308
Youth Commission Application - Zara Ting-Tee

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pandemic, has given me the opportunity to bring a little smile and joy to the senior residents during the unfortunate lockdown period. I was delighted to be a part of this while also being able to recruit other youth to do the same. 7) I am always open and active in GECA's student body. I consistently participate in school events and provide advice and ideas for the members of the student council to promote a healthy and inclusive environment in our GECA community.

List any service to the community including any prior appointments:

I was a mentor at STAR Arts and also helped promote the arts and sciences to youth in both the STAR and Science Alive programs. I am a frequent volunteer to schools across Gilroy and enjoy introducing others to being active in the amazing Gilroy community.

What are your goals while serving on this Board/Commission/ Committee? While serving on this Board/Commission/Committee, my main goal is to allow the youth community in Gilroy to understand and feel that they have a voice and role in our community. I also hope to encourage people to get more involved in the community itself, and I hope to be able to provide affective advice to help the board and city in any way I can. Throughout my life, I had been a recipient from very kind people in Gilroy, so now, I want to give back to our city and to the wonderful people in it.

Why are you the most qualified to serve on this Board/Commission/ Committee? I am a person who loves analyzing problems and finding solutions to them, in both large or more private situations. I have a huge interest to how the world works through trial and error and changes, so that is why I took multiple sociology classes, in the past year, in Gavilan College to better understand the functioning of societies. I am a great listener and have public speaking skills that I've gained through speeches, theater, and Poetry Out Loud. I enjoy voicing my honest opinion and working as a team to acknowledge issues and create greater opportunities for others. After the many mentors I've had through the years, such as police officers, librarians, school counselors/teachers, and even running non-profits, I believe I have a strong understanding of community and will make a conscientious effort to be an effective member of the Gilroy City Youth Committee.

School: Dr. TJ Owen's Gilroy Early College Academy / Grade: 10th By clicking on this box, I declare under penalty of perjury that I am currently a registered voter within the City limits of the City of Gilroy. Furthermore, I understand that this application and any attachments are subject to disclosure under the Public Records Act and must complete mandatory Open Government Ordinance Training. I further understand that members of the Planning Commission, Building Boards of Appeals, and Physically Challenged Board of Appeals are also subject to filing the Fair Political Practice Commission’ s Statement of Economic Interest Form 700 relating to financial disclosures.

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Youth Commission Application - Thanmay Sarath

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City of Gilroy
Board, Committee, & Commission Application
All Commission, Board, and Committee applications are a public record.

Board/ Committee/ Commission of Interest: Youth Commission Name: Thanmay Sarath
Phone number(s): email address*:

Are you a registered voter within the City limits? No
Physical Address*: 9591 Hummingbird Ln
Driver’s License or
ID No.:

Date of
Birth*:

Last 4 of
SSN:

List your qualifications for this appointment:

Advanced Academic Achievement: Completed High School Geometry in 7th grade and High School Algebra 2 Honors in 8th grade, showcasing dedication and strong academic performance. Continuous Learning:

Currently enrolled in a High School History course during the summer break to further enhance knowledge and education. Artistic Accomplishments: Recognized as the Youngest Artist in the Bay Area and featured in ABC News and various local channels. Conducted numerous Solo Art exhibits throughout the Bay Area and received commendation from the City of Milpitas. Intellectual Aptitude: A member of the American Mensa society, demonstrating critical thinking skills and an eagerness for intellectual exchange.

Programming Skills: Proficient in multiple programming languages, including HTML, CSS, JavaScript, Java, Python, and NodeJS. Developed web applications for reputable organizations like Geeknasium, Koalasoft, and DonerSiliconValley. Community Engagement: Volunteer at Gilroy Veterans Memorials, running the Vets and Tech program to assist veterans with technology, showcasing commitment to community service.

Entrepreneurial Spirit: Founded Garlic Shield, organizing cybersecurity seminars for kids and the elderly, and provided free vulnerability scans and penetration tests to local vendors, displaying leadership and initiative. Covid Initiatives: Developed applications like BasicSupply.us to monitor local grocery levels and LonelyList.com to list free online events globally, contributing to the community during the Covid pandemic. Fundraising Experience: Successfully organized and raised $45,000 through a fundraiser for Kerala flooding relief in 2018, exhibiting fundraising skills for charitable causes. Diverse Interests:

Enthusiast of various hobbies, including dirt biking, MX Racing, machine building, and archery (Compound Free Style), showing a well-rounded personality and interests.

List any service to the community including any prior appointments:

Volunteer at Gilroy Veterans Memorials (January 2023 - Present): Run the Vets and Tech program, providing technology assistance and support to veterans. Founder, Garlic Shield (2021-2023): Organized cybersecurity seminars for kids and the elderly, promoting cyber awareness and safety. Provided free vulnerability scans and penetration tests to local vendors to enhance cybersecurity measures. Developed BasicSupply. us (2019): Created an application during Covid to monitor local grocery levels, facilitating easy navigation for shoppers. Enabled shoppers to update the grocery list, providing real- time information to assist others in their shopping needs. Developed LonelyList. com ( 2019): Developed an application during Covid to list free online events worldwide, encouraging global collaboration and engagement. Fundraiser Agenda Item 10.1 Page 159 of 308
Youth Commission Application - Thanmay Sarath

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for Kerala Flooding Relief ( 2018): Successfully organized a fundraiser during the Kerala flooding in 2018, raising $ 45,000 for charity to aid relief efforts. 99Bridges Summer Intern ( Summer 2020): Assisted in setting up Edge Devices and installing custom OS on the devices to support the organization' s initiatives.

What are your goals while serving on this Board/ Commission/ Committee? While serving on the City of Gilroy Youth Commission, my goals are centered on making a meaningful and positive impact on the youth and the community. I aim to bring a fresh perspective and a proactive approach to address the needs and concerns of young individuals in Gilroy. My goals include: Youth Empowerment: To advocate for the empowerment of youth in Gilroy, ensuring that their voices are heard, valued, and considered in decision-making processes that directly impact their lives. Community Engagement: To actively engage with the local youth community, encouraging their participation and involvement in civic activities, events, and initiatives. Education and Opportunities: To promote educational opportunities and support initiatives that enhance academic success, career exploration, and personal growth among the youth of Gilroy. Mental Health and Well-being: To focus on mental health awareness and resources, striving to create a supportive environment for youth facing mental health challenges. Diversity and Inclusion: To champion diversity and inclusion efforts, advocating for a welcoming and inclusive community where all youth feel accepted and celebrated. Youth Programs and Activities: To work with other commissioners and community leaders to develop and support various programs, events, and activities that cater to the interests and needs of the youth. Safety and Security: To prioritize the safety of the youth by collaborating with local authorities and organizations to address any safety concerns and promote a secure environment. Bridging the Generation Gap: To foster understanding and collaboration between different generations, promoting mutual respect and cooperation in the community. Environmental Awareness: To promote environmental awareness and sustainable practices among the youth, encouraging their active involvement in protecting and preserving the environment. Collaboration and Partnerships: To collaborate with various stakeholders, schools, non- profit organizations, and local businesses to create a unified effort in supporting the well- being and growth of the youth. By achieving these goals, I aspire to contribute to a vibrant and thriving community, where the youth of Gilroy can confidently face the challenges and opportunities that lie ahead. Through active engagement and dedicated service on the Youth Commission, I aim to represent the best interests of the youth and contribute positively to the overall development of our city.

Why are you the most qualified to serve on this Board/ Commission/ Committee? I believe I am most qualified to serve on the City of Gilroy Youth Commission due to a combination of my diverse experiences, passion for community engagement, and dedication to making a positive impact on the lives of young individuals in Gilroy. Leadership and Initiative: As an accomplished artist, web developer, and founder of community initiatives such as Garlic Shield, BasicSupply.us, and LonelyList.com, I have demonstrated leadership, creativity, and initiative. These experiences have equipped me with problemsolving skills and the ability to drive meaningful projects to fruition. Academic Excellence: Completing High School Geometry in 7th grade and High School Algebra 2 Honors in 8th grade exemplifies my commitment to academic excellence and a thirst for knowledge. I believe in applying this same drive and dedication to serving on the Youth Commission. Strong Communication Skills: My experience as an artist, programmer, and public speaker has honed my communication skills, enabling me to effectively convey ideas, advocate for causes, and engage with individuals from diverse backgrounds. Community Service: Through volunteering at Gilroy Veterans Memorials and running the Vets and Tech program, I have demonstrated a genuine commitment to giving back to my community. I have also organized fundraisers and contributed to Kerala flooding relief efforts, showcasing a dedication to helping those in need. Entrepreneurial Spirit:

Founding Garlic Shield and creating applications during Covid reflects my entrepreneurial spirit and willingness to take on challenges to benefit the community. Technological Expertise: My proficiency in various programming languages and web development skills will enable me to contribute to the commission' s initiatives related to technology and digital engagement. Youth Perspective: As a member of the youth community myself, I understand the unique challenges and aspirations of young individuals. This perspective will allow me to represent the youth effectively and advocate for their needs. Collaborative Approach: I believe in the power of collaboration and am eager to work alongside other commissioners and community stakeholders to achieve common goals. Dedication to Inclusion: My passion for diversity and inclusion will ensure that all voices, regardless of background or identity, are heard and represented Agenda Item 10.1 Page 160 of 308
Youth Commission Application - Thanmay Sarath

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on the commission. Vision for a Better Future: Above all, I have a strong vision for a more vibrant and supportive community, and I am eager to contribute my skills and dedication to bring about positive change for the youth of Gilroy. I am confident that my qualifications and dedication make me the ideal candidate to serve on the City of Gilroy Youth Commission and contribute effectively to the betterment of our community.

School: / Grade: null
By clicking on this box, I declare under penalty of perjury that I am currently a registered voter within the City limits of the City of Gilroy. Furthermore, I understand that this application and any attachments are subject to disclosure under the Public Records Act and must complete mandatory Open Government Ordinance Training. I further understand that members of the Planning Commission, Building Boards of Appeals, and Physically Challenged Board of Appeals are also subject to filing the Fair Political Practice Commission’ s Statement of Economic Interest Form 700 relating to financial disclosures.

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Youth Commission Application - Aiden Francis

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City of Gilroy
Board, Committee, & Commission Application
*All Commission, Board, and Committee applications are a public record.

Board/Committee/Commission of Interest: Youth Commission

Name: Aiden Francis

Phone number(s): Mobile - email address*:

Are you a registered voter within the City limits? No

Physical Address*:

Driver’s License or
ID No.:

Date of
Birth*:

Last 4 of
SSN:

List your qualifications for this appointment:

Served as a youth commissioner for the past two years. I have been the youth commission treasurer for the past six months.

List any service to the community including any prior appointments:

I have been on the youth commission for the past two years. I also regularly volunteer at second harvest of Silicon Valley. I also volunteer at my high school.

What are your goals while serving on this Board/Commission/Committee? my goal while serving on the Youth Commission is to increase our footprint on the Gilroy community. In these past two years, the youth commission has been suffering from a lack of applicants, and a lack of impact on the community. My goal is to increase this impact by implementing ideas and events that we have thought of, but not yet put into action.

Why are you the most qualified to serve on this Board/Commission/Committee? I am most qualified to serve on the Gilroy Youth Commission, because I understand the issues affecting the youth of Gilroy. As a highschooler, I see both the mental and environmental issues that affect all students like drugs, mental health, gun violence, and bullying. Through my knowledge of these problems, I am able to be empathetic and lend a helping hand to those who are in need of help.

School: / Grade: null
☐
By clicking on this box, I declare under penalty of perjury that I am currently a registered voter within the City limits of the City of Gilroy. Furthermore, I understand that this application and any attachments are subject to disclosure under the Public Records Act and must complete mandatory Open Government Ordinance Training. I further understand that Agenda Item 10.1 Page 162 of 308
Youth Commission Application - Aiden Francis

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members of the Planning Commission, Building Boards of Appeals, and Physically Challenged Board of Appeals are also subject to filing the Fair Political Practice Commission’s Statement of Economic Interest Form 700 relating to financial disclosures.

Agenda Item 10.1 Page 163 of 308
Youth Commission Application - Saed Mustafa

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City of Gilroy
Board, Committee, & Commission Application
*All Commission, Board, and Committee applications are a public record.

Board/Committee/Commission of Interest: Youth Commission Name: Saed Mustafa
Phone
number(s):

Mobile - email
address*:

Are you a registered voter within the City limits? No
Physical
Address*:

Driver’s License
or
ID No.:

Date of
Birth*:

Last 4 of
SSN:

List your qualifications for this appointment:

I have been playing football for a little over 11 years I maintain a hard work ethic by going to the gym 5 times a week After football season I do 7on7 for an athletic organization called Xios which goes through multiple seasons I run track I am a member of the following clubs at my highschool: NHS(National Honor Society),NAHS(National Arts Honor Society), Asu (Asian student union), CSF( California Scholarship Federation ), Academic future club, young life club, fishing club , finance club, and business club) I am the President of the beginners baking club the biggest club on campus Some of my keys skills consist of the following : Quick thinker, Money skills, Adapt well, understanding, leader, good with customers, can speak publically, learn quickly, good under pressure, and I am dedicated to what I do). Technologically literate in word, google suite, and social medias Fluent in the computer languages(python and java) Fluent in Spanish language and can understand multiple other languages List any service to the community including any prior appointments:

Community Service Experience Dates of 2022-2024 Help kids at the church with their faith Serve as a leader and role model to younger students. Collaborate with community leaders to advocate for youth needs and ideas at church I used to volunteer at gilroy gardens almost every weekend and received 16 hours of community service hours a weekend earning a whopping 2,000 dollars for the NHS(National honors society ) I volunteered at jeff garcia camps to help kids with their football skills which were located at Gilroy high I volunteered at Christopher high girls volleyball games through out their season 60+ community service hours What are your goals while serving on this Board/Commission/Committee? If I were given the opportunity to serve on the committee my immediate instinct would be to bring about a sense of change in the community, a change that would have an affect for a years Agenda Item 10.1 Page 164 of 308
Youth Commission Application - Saed Mustafa

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to come , this would include inspiring the rest of the members to do great things and do the best we can to give back to the community and take care of it after all that’s it been to us .

Why are you the most qualified to serve on this Board/Commission/Committee? I believe that I am most qualified to serve for the comities not only because I was born and raised in Gilroy and know it like the back of my hand but because I am also willing to do the above and beyond for my community to give back for what it has done for me . Thank you very much and I hope you accept my application 🙌.
☐
By clicking on this box, I declare under penalty of perjury that I am currently a registered voter within the City limits of the City of Gilroy. Furthermore, I understand that this application and any attachments are subject to disclosure under the Public Records Act and must complete mandatory Open Government Ordinance Training. I further understand that members of the Planning Commission, Building Boards of Appeals, and Physically Challenged Board of Appeals are also subject to filing the Fair Political Practice Commission’s Statement of Economic Interest Form 700 relating to financial disclosures.

Agenda Item 10.1 Page 165 of 308

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City of Gilroy

STAFF REPORT
Agenda Item Title: Introduction of an Ordinance of the City of Gilroy Amending Section 2.13 of the Gilroy City Code to
Modify the Regular Meeting Schedule of the City
Council
Meeting Date: August 21, 2023
From: Jimmy Forbis, City Administrator
Department: City Clerk
Submitted By: Thai Nam Pham, City Clerk
Prepared By: Thai Nam Pham, City Clerk
STRATEGIC PLAN GOALS Not Applicable

RECOMMENDATION

1. Motion to read the ordinance by title only and waive further reading of the ordinance; and

2. Introduce an ordinance of the City Council of the City of Gilroy amending Chapter 2 relating to the Regular Meeting Schedule of the City Council.

EXECUTIVE SUMMARY
This staff report presents a revised ordinance amendment for the City Council's consideration. The proposed amendment is based on the Council's direction provided at the August 7, 2023, City Council meeting. The revision addresses the timing of regular City Council meetings for the months of July and December. Specifically, the proposed amendment stipulates that the regular City Council meeting in July is moved to the last Monday of the month and that the City Council meeting in December be held on the second Monday of the month.

The rationale behind moving the July meeting is to offer a designated legislative recess during the summer months, allowing for a more substantial break for all stakeholders.

This break recognizes the historically lower attendance during the summer season, Agenda Item 10.2 Page 166 of 308
Introduction of an Ordinance of the City of Gilroy Amending Section 2.13 of the Gilroy City Code to Modify the Regular Meeting Schedule of the City Council City of Gilroy City Council Page 2 of 4 August 21, 2023 making it an opportune time for Council members and staff to take vacations and for the community to enjoy a break. The change aligns with practices observed in other cities and ensures that Council convenes in July when necessary. The proposed changes aim to accommodate the needs of the City while adhering to the City Charter's requirements.

BACKGROUND
The City of Gilroy currently holds regular City Council meetings on the first and third Mondays of each month, as outlined in Section 2.13(a) of the Gilroy City Code. The Council has recognized the need to modify the meeting schedule, particularly in December, due to the timing of installing newly elected council members following the certification of election results by the Santa Clara County Registrar of Voters (ROV).

Initially, Staff recommended that Council introduce the ordinance with the following changes (the previous staff report is attached as a reference):
• No regular meetings for the month of July; and
• One regular meeting in December scheduled for the second Monday of the month.

However, the City Charter mandates at least one regular meeting each month, which necessitated further evaluation of the proposed ordinance's feasibility.

As a result, staff asked Council to refrain from proceeding with the introduction of the proposed ordinance. Instead, staff sought additional direction from the Council to address the Charter's requirements while still pursuing the goal of providing a more extended legislative recess during the summer months. The revised ordinance now aims to strike a balance between these considerations, aligning with the Council's direction while respecting the Charter's stipulations.

ANALYSIS
The proposed ordinance amends Section 2.13(a) of the Gilroy City Code to establish the regular City Council meeting in December on the second Monday of the month and to move the regular City Council meeting in July to the last Monday of the month. The amended ordinance reads as follows (additions are bolded and italicized, and removals are redlined and strikethrough):

2.13 Regular meetings.
(a) Time. Regular meetings of the City Council shall be held on the first and third Mondays of each month at 6:00 p.m. Whenever the day fixed for any regular meeting of the Council falls upon a day designated by law as a legal or national holiday, such meeting shall be held at the same hour on the next Monday. If said Monday is also a legal or national holiday, the Council meeting shall be held on the next weekday not a holiday following Agenda Item 10.2 Page 167 of 308
Introduction of an Ordinance of the City of Gilroy Amending Section 2.13 of the Gilroy City Code to Modify the Regular Meeting Schedule of the City Council City of Gilroy City Council Page 3 of 4 August 21, 2023 said Monday.

Notwithstanding the above, at least one regular council meeting shall be held in July. The date of the first regular meeting shall be held on the first day of July not a holiday and excluding Friday, Saturday or Sunday. In July, there shall be at least one regular meeting of the council, held on the last Monday of the month at 6:00 p.m. If the last Monday of July is a legal or national holiday, the meeting shall be held on the immediately preceding weekday that is not a holiday or a Friday.

In December, there shall be at least one regular meeting of the council, held on the second Monday of the month at 6:00 p.m. If the second Monday of December is a legal or national holiday, the meeting shall be held on the next weekday not a holiday.

This amendment aims to provide a more suitable timeframe for the installation of newly elected council members in December and accommodates the holiday season while adhering to the City Charter.

Additionally, the proposed changes resonate with the Council's objective of offering an extended summer recess, providing council members, staff, and the public an opportunity to benefit from a more substantial break during the summer months.

ALTERNATIVES
The Council may choose to approve, modify, or reject the proposed ordinance. Any modifications to the ordinance will require a new introduction and first reading.

FISCAL IMPACT/FUNDING SOURCE
The proposed ordinance does not entail direct financial or operational implications for the City of Gilroy. It primarily addresses procedural matters to enhance the scheduling of regular City Council meetings.

PUBLIC OUTREACH
Public outreach efforts were conducted regarding the proposed amendment. The outreach activities included posting the proposed ordinance on the City's official website, accessible to the general public.

NEXT STEPS
Should Council introduce the proposed ordinance, Council will need to adopt it at the next regular meeting. Once adopted, staff will update the Gilroy City Code and prepare the 2024 meeting schedule.

Agenda Item 10.2 Page 168 of 308
Introduction of an Ordinance of the City of Gilroy Amending Section 2.13 of the Gilroy City Code to Modify the Regular Meeting Schedule of the City Council City of Gilroy City Council Page 4 of 4 August 21, 2023 Attachments:

1. Proposed Ordinance

2. August 7, 2023 Staff Report
Agenda Item 10.2 Page 169 of 308
ORDINANCE NO. 2023-XX

AN ORDINANCE OF THE CITY OF GILROY AMENDING
SECTION 2.13 OF THE GILROY CITY CODE TO MODIFY

THE REGULAR MEETING SCHEDULE OF THE CITY

COUNCIL
WHEREAS, the City of Gilroy currently holds regular meetings on the first and third Mondays of each month, as specified in Section 2.13(a) of the Gilroy City Code; and WHEREAS, it is deemed necessary and in the best interest of the City to modify the City Code to establish the regular City Council meeting in December on the second Monday of the month; and
WHEREAS, it is further deemed necessary and in the City's best interest to move the regular City Council meeting for July to the last Monday of the month.

NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF GILROY DOES HEREBY ORDAIN AS FOLLOWS:

SECTION I
The foregoing recitals are true and correct and are incorporated herein by this reference.

SECTION II
Section 2.13(a) of the Gilroy City Code shall be amended as follows:

Time. Regular meetings of the city council shall be held on the first and third Mondays of each month at 6:00 p.m. Whenever the day fixed for any regular meeting of the council falls upon a day designated by law as a legal or national holiday, such meeting shall be held at the same hour on the next Monday. If said Monday is also a legal or national holiday, the council meeting shall be held on the next weekday not a holiday following said Monday.

In July, there shall be at least one regular meeting of the council, held on the last Monday of the month at 6:00 p.m. If the last Monday of July is a legal or national holiday, the meeting shall be held on the immediately preceding weekday that is not a holiday or a Friday.

SECTION III
If any section, subsection, sentence, clause, or phrase of this Ordinance is for any reason held to be invalid or unconstitutional, such decision shall not affect the validity of the Agenda Item 10.2 Page 170 of 308
Ordinance No. 2023-XX
Amending City Council Regular Meetings
City Council Regular Meeting | August 21, 2023

Page 2 of 2 ends

remaining portions of this Ordinance. The City Council of the City of Gilroy hereby declares that it would have passed and adopted this ordinance and each section, subsection, sentence, clause, or phrase hereof, irrespective of the fact that any one or more sections, subsections, sentences, clauses or phrases may be declared invalid or unconstitutional.

SECTION IV
This Ordinance shall take effect thirty (30) days after its adoption. The City Clerk is hereby directed to publish this Ordinance or a summary thereof pursuant to Government Code Section 36933.

PASSED AND ADOPTED this 11th day of September 2023 by the following roll call vote:

AYES: COUNCIL MEMBERS:

NOES: COUNCIL MEMBERS:

ABSTAIN: COUNCIL MEMBERS:

ABSENT: COUNCIL MEMBERS:

APPROVED:

Marie Blankley, Mayor
ATTEST:
_______________________
Thai Nam Pham, City Clerk
Agenda Item 10.2 Page 171 of 308

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City of Gilroy

STAFF REPORT
Agenda Item Title: Introduction of an Ordinance of the City of Gilroy Amending Section 2.13 of the Gilroy City Code to
Modify the Regular Meeting Schedule of the City
Council
Meeting Date: August 7, 2023
From: Jimmy Forbis, City Administrator
Department: City Clerk
Submitted By: Thai Nam Pham, City Clerk
Prepared By: Thai Nam Pham, City Clerk
STRATEGIC PLAN GOALS Not Applicable

RECOMMENDATION

1. Motion to read the ordinance by title only and waive further reading of the ordinance; and

2. Introduce an ordinance of the City Council of the City of Gilroy amending Chapter 2 relating to the Regular Meeting Schedule of the City Council.

EXECUTIVE SUMMARY
This staff report proposes an amendment to Section 2.13 of the Gilroy City Code regarding regular meetings of the City Council. The purpose of this amendment is to address two items:
1) the removal of regular meetings for the month of July; and 2) timing of installing newly elected council members following the certification of election results by the Santa Clara County Registrar of Voters (ROV).

Historically, the City of Gilroy attempts to install newly elected council members during the first meeting of December. However, due to the ROV's certification timeline, this installation has been missed in recent years. To rectify this issue and ensure Agenda Item 10.2 Page 172 of 308
Introduction of an Ordinance of the City of Gilroy Amending Section 2.13 of the Gilroy City Code to Modify the Regular Meeting Schedule of the City Council City of Gilroy City Council Page 2 of 4 August 7, 2023
compliance with the City Charter, it is recommended to modify the City Code to have only one regular meeting in December, scheduled on the second Monday of the month.

BACKGROUND
The Registrar of Voters is responsible for certifying election results within thirty days from the date of the election. In the past, the ROV has typically been able to provide the certification of the election before the first City Council meeting, allowing the City of Gilroy to install newly elected council members during the first meeting of December.

However, in the recent municipal election held on November 8, 2022, the ROV certified the results on December 8, 2022, missing the December 5, 2022 Regular Meeting. This delay in certification caused the City to be unable to install the newly elected council members as scheduled.

Looking ahead, next year's General Municipal Election is scheduled for November 5, 2024. Based on experience and the fact that it is a presidential election year, it is anticipated that the ROV will require the full thirty-day period to certify the general election results. Consequently, the certification date for the general election is expected to fall on December 5, 2024, which would again result in the City missing the December 2, 2024 City Council Regular Meeting for the installation of newly elected council members.

Furthermore, the City Charter, specifically Section 402, outlines the term of office for the Mayor and City Council members. According to this section, elected officials assume office after the first regular meeting following the certification of the City Council election. Therefore, it is crucial to ensure that the installation of newly elected members aligns with the City Charter's requirements.

Given these circumstances, it is necessary to amend the City Code to address the timing of installing newly elected council members following the certification of election results by the ROV. By modifying the regular meeting schedule to have the first regular meeting in December scheduled on the second Monday of the month, the City can ensure compliance with the City Charter and provide a more suitable timeframe for installing newly elected council members.

ANALYSIS
To address the challenges mentioned above, it is proposed to amend Section 2.13(a) of the Gilroy City Code as follows (additions are bolded and italicized, and removals are strikethrough):

2.13 Regular meetings.
(a) Time. Regular meetings of the City Council shall be held on the first and third Mondays of each month at 6:00 p.m. Whenever the day fixed for any regular meeting of the council falls upon a day designated by law as a legal or national holiday, such meeting shall be held at the same hour on Agenda Item 10.2 Page 173 of 308
Introduction of an Ordinance of the City of Gilroy Amending Section 2.13 of the Gilroy City Code to Modify the Regular Meeting Schedule of the City Council City of Gilroy City Council Page 3 of 4 August 7, 2023
the next Monday. If said Monday is also a legal or national holiday, the council meeting shall be held on the next weekday not a holiday following said Monday.

No regular council meetings shall be held in the month of July.

Special meetings may be scheduled during the same month by the Council as needed.

Notwithstanding the above, at least one regular meeting shall be held in December. The regular meeting in December shall be held on the second Monday of the month at 6:00 p.m.

This amendment does two things:

1. It enables the City to have a designated summer recess from the 2nd meeting of June until the 1st meeting in August, providing an opportunity for council members, staff, and the community to enjoy a longer break during the summer season. This recess period allows for more efficient use of resources and acknowledges the historically lower attendance during the summer months. In addition, these changes ensure clarity allowing the Council to convene in July when necessary. Otherwise known as a ”Legislative Recess,” this break is common in many cities.

2. It codifies the City's current practice of having one regular meeting in December and canceling the second regular meeting. Formalizing this practice into the City Code ensures that there is only one regular meeting in December, providing council members, staff, and the community an opportunity to observe the holiday season. Furthermore, this amendment aligns with the requirements of the City Charter by allowing for the installation of newly elected members after the first regular meeting following the certification of the City Council election.

ALTERNATIVES
Council may choose to reject or modify the ordinance. Should Council determine to modify the proposed ordinance, the introduction process would be restarted with a new introduction and first reading.

FISCAL IMPACT/FUNDING SOURCE
The proposed amendment to the City Code does not have any direct financial or operational implications for the City of Gilroy. It primarily addresses procedural matters to ensure compliance with the City Charter and streamlines the installation of newly elected council members.

Agenda Item 10.2 Page 174 of 308
Introduction of an Ordinance of the City of Gilroy Amending Section 2.13 of the Gilroy City Code to Modify the Regular Meeting Schedule of the City Council City of Gilroy City Council Page 4 of 4 August 7, 2023

PUBLIC OUTREACH
Public outreach efforts were conducted regarding the proposed amendment. The outreach activities included:
• Publication in the Gilroy Dispatch: On July 28, 2023, the proposed amendment was publicized in the Gilroy Dispatch.
• City's Website: The proposed amendment was also posted on the City's official website, accessible to the general public.

NEXT STEPS
Should Council approve the introduction of the proposed ordinance at this meeting, Council will need to adopt it at its regular meeting on August 21, 2023. Once adopted, staff will update the Gilroy City Code and prepare the 2024 meeting schedule.

Attachments:

1. Proposed Ordinance
Agenda Item 10.2 Page 175 of 308

Page 1 of 10 ends

City of Gilroy

STAFF REPORT
Agenda Item Title: Presentation of the Comprehensive Water and Wastewater Utilities Rate Study; Adoption of a
Resolution Commencing the Proposition 218 Noticing
Process, and Setting October 16, 2023, as the Date for
the Public Hearing to Adopt Water and Wastewater
Rates
Meeting Date: August 21, 2023
From: Jimmy Forbis, City Administrator
Department: Finance
Submitted By: Harjot Sangha, Finance Director
Prepared By: Harjot Sangha, Finance Director
STRATEGIC PLAN GOALS Develop a Financially Resilient Organization Maintain and Improve City Infrastructure

RECOMMENDATION

1. Receive report; and

2. Adopt a resolution:
a. declaring intent to adjust water and wastewater rates; b. commencing the Proposition 218 noticing process; and c. Setting October 16, 2023, as the date for the Public Hearing to adopt the new proposed water and wastewater rates.

EXECUTIVE SUMMARY
The City engaged a consultant, NBS Government Finance Group, to conduct a Comprehensive Water and Wastewater Rate Study (Rate Study) with several objectives, including meeting revenue requirements, reviewing rising costs of providing services, funding capital improvements and change in costs, and complying with specific legal requirements, such as Proposition 218 which requires that rates not exceed the cost of providing the service and be proportionate to the cost of providing service to all customers. The City’s goal is to ensure both utilities maintain adequate Agenda Item 11.1 Page 176 of 308
Presentation of the Comprehensive Water and Wastewater Utilities Rate Study; Adoption of a Resolution Commencing the Proposition 218 Noticing Process, and Setting October 16, 2023, as the Date for the Public Hearing to Adopt Water and Wastewater Rates City of Gilroy City Council Page 2 of 10 August 21, 2023 funding for operational and capital costs, reasonable reserves, and revenue stability in the utility rates. The Rate Study has yielded that both utilities will need to establish multi-year rate adjustments to continue investing in the critical infrastructure and keep pace with the rising operating costs. The overall rate adjustments (as a percentage) necessary for both utilities for a five-year period are as follows:

FY24* FY25 FY26 FY27 FY28
Water 8% 8% 6% 4% 4%
Wastewater 4% 4% 4% 4% 4%
*First-year adjustments will vary for each customer based on their customer classification, as the cost-of-service analysis has been updated to reallocate costs recovered between customer classes.

Staff recommend the City Council accept the Rate Study report, authorize the commencement of the required Proposition 218 Noticing requirements, and set October 16, 2023, as the date for the Public Hearing to adopt the new proposed water and wastewater rates. If approved, the proposed rates for FY24 will become effective on January 1, 2024, and annually on January 1 for subsequent fiscal years thereafter.

BACKGROUND
As a full-service City, Gilroy owns and operates its own water and wastewater utilities, providing services to over 15,000 customers and growing. To ensure both utilities collect revenue sufficient to meet the growing demand, keep pace with the rising operational costs, and fund the multi-year capital improvement plans, the City has conducted a utilities' rate study. The last utility rate study was completed in 2015, and the City has kept its water and wastewater rates the same since 2019.

The City's operational costs for the water utility continue to increase due to inflationary cost increases for materials/services, electricity, and continued increases in water extraction charges from Valley Water. Statewide conservation efforts enacted in recent years due to the droughts also impacted the revenues collected as the City was mandated to reduce water consumption. In 2021, the City issued wastewater revenue bonds to finance the City's share (approximately $50 million) of the $86 million expansion of the South County Regional Wastewater Authority (SCRWA) plant due to be complete in 2025. In addition to the annual debt payment requirements, the City's cost for the wastewater utility is also expected to increase for its share of the treatment plant expense as the expansion becomes operational and state mandates require additional compliance.

In April 2023, the City approved the updated Water and Wastewater Master Plans. The Plans assess utility systems against the desired level of service and identify infrastructure improvements needed to fix existing systems' deficiencies and service growth. The plans collectively identified over $50.3 million in new improvements, of which $21.7 million is for existing users (ratepayers) and $28.6 million for future developments.

Agenda Item 11.1 Page 177 of 308
Presentation of the Comprehensive Water and Wastewater Utilities Rate Study; Adoption of a Resolution Commencing the Proposition 218 Noticing Process, and Setting October 16, 2023, as the Date for the Public Hearing to Adopt Water and Wastewater Rates City of Gilroy City Council Page 3 of 10 August 21, 2023 For the City to continue investing in critical utilities' infrastructure and keep pace with rising operational costs, the City needs to establish multi-year rate adjustments.

ANALYSIS
A comprehensive rate study, such as the one City initiated, typically includes three components and is intended to follow industry standards:

1. Financial Plan – compares the current sources and uses of the funds and determines the revenue needed from rates and project rate adjustments. The net revenue requirement is the amount of rate revenue required to fund operations, capital improvement (including debt service), and reserves. As current rates fall short of that net revenue requirement, rate adjustments are typically warranted.

2. Cost-of-Service Analysis – An analysis that classifies expenses and allocates costs to different customer classes in a fair and equitable manner. These classifications include commodity, capacity, and customer service-related costs.

3. Rate Design Analysis – An analysis of the rate structure which considers the relationship between fixed (personnel, debt service, etc.) and variable costs (purchased water, electricity, etc.) to be recovered. Most rate structures contain a fixed, or a minimum, charge in combination with a volumetric charge. Ideally, utilities should recover all their fixed costs from fixed charges and all their variable costs from volumetric charges.

The Rate Study is attached to this staff report. The below sections highlight notable changes within respective utilities and the recommended rate adjustments for the next five-year period.

Water Utility and Rates
Financial Plan
• The Rate Study determined that the projected net revenue requirements for the water system range annually from $15.9 million in Fiscal Year 2023-24 (FY24) to $18.8 million in FY28. Without rate adjustments, the water utility is projected to have a gap in the net revenue requirement of approximately $2.0 million in FY24, increasing to $3.9 million by FY28.
• Reserves:
o The operating reserve is recommended to equal six months of operating and maintenance expenses, which is approximately $8.2 million in FY24.

An operating reserve is intended to promote financial viability in the event of any short-term fluctuation in revenues and/or expenditures, such as those caused by weather patterns and variability in demand-based revenues (volumetric charges).
o The capital rehabilitation/replacement reserve is recommended to be equal to 50% of the average annual capital improvement costs over the five-year period. The five-year average is approximately $8.2 million, with Agenda Item 11.1 Page 178 of 308
Presentation of the Comprehensive Water and Wastewater Utilities Rate Study; Adoption of a Resolution Commencing the Proposition 218 Noticing Process, and Setting October 16, 2023, as the Date for the Public Hearing to Adopt Water and Wastewater Rates City of Gilroy City Council Page 4 of 10 August 21, 2023 the recommended annual reserve being approximately $4.1 million. This reserve is intended to be a cash resource set aside to address long-term capital system replacement and rehabilitation needs.
o The water utility is projected to meet the total recommended operating and capital reserve target during the five-year period, FY24 through FY28. • Capital improvement Projects: The water system has approximately $41 million in planned capital expenditures over the next five years, an average of $8.2 million annually. The City has accumulated fund balances programmed to be utilized for the capital improvement program. The Rate Study assumes the City will need to issue approximately $16 million in revenue bonds in the latter years of the five-year period. However, whether the new debt will be required will depend on the actual delivery of capital projects (i.e., the timing and costs) in the current budget cycle.

Cost-of-Service and Rate Design Analysis
• The City currently charges residential and non‐residential customers a monthly fixed water charge, also known as a base charge, based on meter size. In addition to a fixed monthly charge, all customers pay a variable charge, also known as volumetric rate, per 1,000 gallons consumed, consisting of two rate tiers of consumption (under and above 30,000 gallons) and three different pump pressure zones.
• The City’s current rates collect revenue in proportions of approximately 30% fixed and 70% variable. The cost-of-service analysis determined the actual cost distribution of the fixed and variable costs to approximately 40% fixed and 60% variable. The current rate design is not reflective of the actual cost distribution; thus, a change in the water utility rate structure is recommended to align with the actual distribution. For comparison purposes, the Rate Study also evaluated the current rate structure (30%/70%), and it is presented as an alternative 2 in the study.
• The City’s current variable (volumetric) charge consists of two rate tiers of consumption (under and above 30,000 gallons) and three different pump pressure zones. Given that the City receives its water supply from a single source, it is recommended that the City transition to a uniform tier for all customers.

Water Rate Adjustments
The table below outlines the current and proposed water rates for FY24 through FY28.

It is important to note that since the last rate study in 2015, factors such as the number of meters and consumption of each customer class have changed. The cost-of-service analysis rebalances the allocation based on these factors, including the shift to 40% fixed and 60% variable proportions. As a result, there is an uneven adjustment in the first year. In subsequent years, the proposed charges are adjusted by the proposed percentage increases in total rate revenue needed for the net revenue requirement.

Agenda Item 11.1 Page 179 of 308
Presentation of the Comprehensive Water and Wastewater Utilities Rate Study; Adoption of a Resolution Commencing the Proposition 218 Noticing Process, and Setting October 16, 2023, as the Date for the Public Hearing to Adopt Water and Wastewater Rates City of Gilroy City Council Page 5 of 10 August 21, 2023 Note: The proposed rates for FY23/24 will be implemented on January 1, 2024, and annually on January 1 for subsequent fiscal years thereafter
Impact on Water Bills
The Rate Study also compares the current and proposed water rates on the customer bills. The following two charts illustrate a five-year comparison of the average monthly water bill impact for a single-family residential and commercial customer.

Based on an average of 8,300 gallons monthly consumption for single-family residential, the water bill will increase from the current $55.68/month to $62.29/month in the first year and $77.12/month by FY28.

Agenda Item 11.1 Page 180 of 308
Presentation of the Comprehensive Water and Wastewater Utilities Rate Study; Adoption of a Resolution Commencing the Proposition 218 Noticing Process, and Setting October 16, 2023, as the Date for the Public Hearing to Adopt Water and Wastewater Rates City of Gilroy City Council Page 6 of 10 August 21, 2023 Based on an average of 32,000 gallons of monthly consumption for commercial customers, the water bill will decrease from the current $152.01/month to $148.80/month in the first year and subsequently increase annually to $184.24/month by FY28. The change in the first year is attributed to the shift in rate design to align with the actual 60% fixed and 40% variable distribution.

Wastewater Utility and Rates
Financial Plan
• The Rate Study determined that the projected net revenue requirements for the wastewater system range annually from $13.1 million in Fiscal Year 2023-24 (FY24) to $17.1 million in FY28. Without rate adjustments, the wastewater utility is projected to have a gap in the net revenue requirement of approximately $0.3 million in FY24, increasing to $2.7 million by FY28, and would struggle to meet its debt service coverage requirements on the existing 2021A sewer revenue bonds. • Reserves:
o The operating reserve is recommended to equal six months of operating and maintenance expenses, which is approximately $6.8 million in FY24.

An operating reserve is intended to promote financial viability in the event of any short-term fluctuation in revenues and/or expenditures, such as those caused by weather patterns and variability in demand-based revenues (volumetric charges) or costs of wastewater treatment. o The capital rehabilitation/replacement reserve is recommended to be equal to 50% of the average annual capital improvement costs over the five-year period. The five-year average is approximately $8.8 million, with Agenda Item 11.1 Page 181 of 308
Presentation of the Comprehensive Water and Wastewater Utilities Rate Study; Adoption of a Resolution Commencing the Proposition 218 Noticing Process, and Setting October 16, 2023, as the Date for the Public Hearing to Adopt Water and Wastewater Rates City of Gilroy City Council Page 7 of 10 August 21, 2023 the recommended annual reserve being approximately $4.4 million. This reserve is intended to be a cash resource set aside to address long-term capital system replacement and rehabilitation needs.
o The wastewater utility is projected to meet the total recommended operating and capital reserve target during the five-year period, FY24 through FY28, as well as the debt service coverage ratio required by the 2021A bond covenants.
• Capital improvement Projects: The wastewater system has an average of $8.8 million annually in planned capital expenditures over the next five years. The City has accumulated fund balances and bond proceeds (SCRWA Expansion Project) that are programmed to be utilized for the capital improvement program. Thus, the rate increases required for the wastewater utility are less than those needed for the water utility.

Cost-of-Service and Rate Design Analysis
• Currently, the wastewater utility’s residential customers are charged a fixed monthly charge, and non-residential customers are charged a fixed monthly charge and a volumetric charge. The non-residential fixed monthly charge is based on City’s wastewater monitoring and pretreatment program costs and is determined by the use of the facility. Similarly, the non-residential variable charge is based on the strength category (low to high), also determined by the use of the facility, which takes into account the biochemical oxygen demand (BOD) and total suspended solids (TSS) in accordance with industry standards. o Low Strength (example: offices, schools, retail, and department stores) o Domestic Strength (example: hotel/motel, auto dealers, service stations, and beauty shops)
o Medium Strength (example: commercial laundries, multi-use facilities, and hotels with restaurants)
o High Strength (example: food processors/manufacturers, restaurants, grocery stores, etc.)
• It is recommended that the wastewater utility maintain the existing rate design, which utilizes the wastewater strengths for various customer types based on State Water Resources Control Boards’ guidelines, and it provides consistency and continuity for the customers.

Wastewater Rate Adjustments
The table below outlines the current and proposed wastewater rates for FY24 through FY28. Like the water rates, the first year’s rates reflect the cost-of-service adjustments that occur based on changes in customer classes, consumption, and other factors. The projected rates for subsequent years are adjusted by the proposed 4% annual increases.

Agenda Item 11.1 Page 182 of 308
Presentation of the Comprehensive Water and Wastewater Utilities Rate Study; Adoption of a Resolution Commencing the Proposition 218 Noticing Process, and Setting October 16, 2023, as the Date for the Public Hearing to Adopt Water and Wastewater Rates City of Gilroy City Council Page 8 of 10 August 21, 2023 Note: The proposed rates for FY23/24 will be implemented on January 1, 2024, and annually on January 1 for subsequent fiscal years thereafter
Impact on Wastewater Bills
The Rate Study compares the current and proposed wastewater rates on the customer bills. The following two charts illustrate a five-year comparison of the average monthly wastewater bill impact for a single-family residential and commercial customer.

For single-family residential, the average monthly will increase from the current $46.64/month to $51.07/month in the first year and increase to $59.74/month by FY28.

For non-residential customers, the average monthly will increase from the current $106.31/month to $119.92/month in the first year and increase to $140.29/month by FY28. Bill comparisons for other strength categories are included in the Rate Study.

Agenda Item 11.1 Page 183 of 308
Presentation of the Comprehensive Water and Wastewater Utilities Rate Study; Adoption of a Resolution Commencing the Proposition 218 Noticing Process, and Setting October 16, 2023, as the Date for the Public Hearing to Adopt Water and Wastewater Rates City of Gilroy City Council Page 9 of 10 August 21, 2023 Next Steps
In order to implement the fee adjustments, the City is required to follow Proposition 218 majority protest proceedings. Proposition 218 requires specific procedures to be followed with regard to property-related fee increases. The California Constitution requires local governments to give mailed notice of any property-related proposed fee changes at least 45 days before holding a public hearing where the City Council may adopt or reject the changes. Those opposed to the proposed rate adjustments can submit written protests to the City. If a majority (50% plus one) of customers oppose the proposed rate adjustments, City Council cannot implement the proposed increases.

This process includes the following steps:
• Schedule a public hearing requiring 45 days’ of mailed public notice to adopt the rate adjustments. Draft of the 45-day Proposition 218 Public Notice is included as attachment 3.
• Mail the Public Notice describing the proposed rate adjustments to all property owners and occupants subject to the rate adjustments.
• During the 45 days following the Public Notice, the City will accept any eligible written protests from property owners and occupants subject to the rate adjustments (protests can be received until the end of the public hearing). • Only one rate protest per property will be counted. For example, if the property owner and their tenant file a protest, only one will be counted for that property.

Agenda Item 11.1 Page 184 of 308
Presentation of the Comprehensive Water and Wastewater Utilities Rate Study; Adoption of a Resolution Commencing the Proposition 218 Noticing Process, and Setting October 16, 2023, as the Date for the Public Hearing to Adopt Water and Wastewater Rates City of Gilroy City Council Page 10 of 10 August 21, 2023 • After the public hearing, and assuming a majority of protests (50% plus one) is not received, conduct a vote of the City Council to adopt the rate adjustments. • The proposed rate adjustments will become effective on January 1, 2024, after the public hearing and annually on January 1 of each subsequent fiscal year through FY28.

Staff recommends the City Council adopt a resolution (attachment 2) declaring intent to adjust the water and wastewater rates, authorizing the staff to commence the Proposition 218 noticing process, and setting October 16, 2023, as the date of the public hearing where Council will consider adoption of the rates.

ALTERNATIVES
Council could elect not to adopt the resolution of intent to adjust the water and wastewater rates. This is not recommended as the water and wastewater utility rates have not been adjusted since 2019, and it is vital for the City to continue investing in critical utilities' infrastructure and keep pace with rising operational costs.

FISCAL IMPACT/FUNDING SOURCE
The fiscal and resource impact of preparing the report is included in the staff’s annual workplan. The total cost for the comprehensive water and wastewater rate study is $72,325, which was budgeted and funded by the Water (705) and Wastewater (700) Funds.

The cost of printing/mailing the Proposition 218 notices is estimated at $15,000 and will be funded by the Water and Wastewater Funds.

If the Proposition 218 process concludes without the majority protest, and the water and wastewater rates are adopted as presented, the new rates would generate an average of $2.7 million annually for the water utility and an average of $1.8 million for the wastewater utility, over the next five-year period.

PUBLIC OUTREACH
Each property owner will receive a mailed Proposition 218 public hearing notice. In addition, the notice will also be included with the monthly utility bills for the September statements to notify all current customers. Staff will also conduct a community meeting in September 2023, a date to be determined, to present the Rate Study.

Attachments:

1. Utilities Rate Study

2. Draft Resolution

3. Draft Proposition 218 Notice
Agenda Item 11.1 Page 185 of 308
Draft Report for:

Comprehensive Water and
Wastewater Utility Rate Study

Aerial view of City of Gilroy
via Google Earth
nbsgov.com
August 2023
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City of Gilroy – Comprehensive Water & Wastewater Utility Rate Study Prepared by NBS – August 2023 TOC

TABLE OF CONTENTS
A. PURPOSE .................................................................................................................... 1 B. OVERVIEW OF THE STUDY.......................................................................................... 1 A. KEY WATER RATE STUDY ISSUES................................................................................. 6 B. FINANCIAL PLAN......................................................................................................... 6 C. COST-OF-SERVICE ANALYSIS....................................................................................... 9 D. CHARACTERISTICS OF WATER CUSTOMERS BY CUSTOMER CLASS ...........................11 E. RATE DESIGN ANALYSIS ............................................................................................12 F. PROPOSED WATER RATES ........................................................................................14 G. COMPARISON OF CURRENT AND PROPOSED WATER BILLS .....................................15 A. KEY WASTEWATER RATE STUDY ISSUES ...................................................................20 B. FINANCIAL PLAN.......................................................................................................20 C. COST-OF-SERVICE ANALYSIS.....................................................................................22 D. RATE DESIGN ANALYSIS ............................................................................................24 E. PROPOSED WASTEWATER RATES.............................................................................25 F. COMPARISON OF CURRENT AND PROPOSED WASTEWATER BILLS ..........................26 A. CONSULTANT RECOMMENDATIONS ........................................................................31 B. NEXT STEPS...............................................................................................................31 C. NBS’ PRINCIPAL ASSUMPTIONS AND CONSIDERATIONS ..........................................31 Agenda Item 11.1 Page 188 of 308
City of Gilroy – Comprehensive Water & Wastewater Utility Rate Study Prepared by NBS – August 2023 TOF

TABLE OF FIGURES
Figure 1. Primary Components of a Rate Study............................................................................. 1 Figure 2. Summary of Water Revenue Requirements................................................................... 8 Figure 3. Summary of Primary Water Reserve Funds.................................................................... 9 Figure 4. Allocation Percentages of Revenue Requirements .......................................................10 Figure 5. Allocated Net Revenue Requirements – Preferred Rate Alternative............................10 Figure 6. Water Consumption by Customer Class.......................................................................11 Figure 7. Peaking Factors by Customer Class ..............................................................................11 Figure 8. Number of Meters by Customer Class..........................................................................12 Figure 9. Hydraulic Capacity Factors...........................................................................................13 Figure 10. Equivalent Meters......................................................................................................13 Figure 11. Calculation of Fixed Service Charges..........................................................................14 Figure 12. Uniform Tier Rates for FY 2023/24.............................................................................14 Figure 13. Current and Proposed Water Rates............................................................................15 Figure 14. Monthly Water Bill Comparison for Residential Customers.......................................16 Figure 15. Monthly Water Bill Comparison for Commercial Customers......................................17 Figure 16. Residential Water Bills – 5-Years................................................................................17 Figure 17. Commercial Water Bills – 5-Years...............................................................................18 Figure 18. Residential Bills Comparison for Similar Communities...............................................19 Figure 19. Summary of Wastewater Revenue Requirements......................................................21 Figure 20. Summary of Wastewater Reserve Funds....................................................................21 Figure 21. Development of the Flow Allocation Factor ...............................................................22 Figure 22. Development of the Strength Allocation Factor.........................................................23 Figure 23. Development of the Customer Allocation Factor.......................................................23 Figure 24. Allocation of Revenue Requirements by Customer Class...........................................24 Figure 25. Development of Fixed and Variable Charges..............................................................25 Figure 26. Current vs. Proposed Wastewater Rates....................................................................26 Figure 27. Single-Family Residential Wastewater Bill Comparison..............................................26 Figure 28. Multi-Family Residential Wastewater Bill Comparison...............................................27 Figure 29. Non-Residential Low Strength Wastewater Bill Comparison......................................28 Figure 30. Non-Residential Domestic Strength Wastewater Bill Comparison .............................28 Figure 31. Non-Residential Medium Strength Wastewater Bill Comparison...............................29 Figure 32. Non-Residential High Strength Wastewater Bill Comparison.....................................29 Figure 33. Non-Residential High Strength Wastewater Bill Comparison.....................................30 Agenda Item 11.1 Page 189 of 308
City of Gilroy – Comprehensive Water & Wastewater Utility Rate Study Prepared by NBS – August 2023 1
Section 1. Purpose and Overview of the Study
A. Purpose
The City of Gilroy (City) retained NBS to conduct a comprehensive utility rate study for its water and wastewater enterprise funds. The City had several objectives and goals in mind for this study including meeting revenue requirements, reviewing the rising costs of providing services, funding capital improvements and changes in costs, and complying with certain legal requirements (e.g., California Constitution Article XIII D, Section 6, which is commonly referred to as Proposition 218 [Prop 218]). The City’s broader objectives in this study include ensuring adequate funding for operating and capital costs, maintaining reasonable reserves, ensuring revenue stability in utility rates. The rates resulting from this study were developed in a manner that is consistent with industry standard cost-of-service principles. In addition to documenting the rate study methodology, this report is provided with the intent to assist the City in its continuing effort to maintain transparent communications with the residents and community it serves.

In developing new rates for the City’s enterprise funds, NBS worked cooperatively with City staff and the City Council (Council) in selecting the appropriate rate alternatives that address the City’s goals and objectives. Based on input provided by City staff, NBS proposes the rates summarized in this report. The Council has the final decision regarding the adoption of the proposed rates and whether to proceed with the Prop 218 approval process.

B. Overview of the Study
Comprehensive rate studies, such as this one, typically include three components: (1) preparation of a financial plan that identifies the net revenue requirements for the utility; (2) analysis of the cost to serve each customer class, and (3) the rate structure design. These steps are shown in Figure 1 and are intended to follow industry standards and reflect the fundamental principles of cost-of-service rate making embodied in the American Water Works Association’s (AWWA) Principles of Water Rates, Fees, and Charges,
1 also referred to as Manual M1, and the Water Environment Federation’s Financing and Charges for Wastewater Systems (Manual of Practice No. 27). 2 Rate studies also address requirements under Prop 218 that rates not exceed the cost of providing the service and be proportionate to the cost of providing service for all customers. In terms of the chronology of the study, the three steps shown in Figure 1 represent the order in which they were performed in this study.

Figure 1. Primary Components of a Rate Study
1 Principles of Water Rates, Fees, and Charges, Manual of Water Supply Practices, Manual M1, American Water Works Association (AWWA), 7th Edition, 2017. 2 Financing and Charges for Wastewater Systems, Manual of Practice No. 27, Water Environment Federation, Fourth Edition, 2018.

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City of Gilroy – Comprehensive Water & Wastewater Utility Rate Study Prepared by NBS – August 2023 2
1 FINANCIAL
PLAN 2 COST-OFSERVICE

ANALYSIS
3 RATE DESIGN

ANALYSIS
Compares current sources and
uses of funds and determines the
revenue needed from rates and
projects rate adjustments.

Proportionally allocates revenue
requirements to the customer
classes in compliance with industry
standards and State Law.

Considers the rate structure that
best meets the City’s need to collect
rate revenue from various types of
customers.

NBS projected revenues and expenditures, developed net revenue requirements, performed cost-ofservice rate analyses, and developed new water and wastewater rates for the City using this approach.

The following sections in this report present an overview of the methodologies, assumptions, and data used along with the financial plans and rates developed. Detailed tables and figures documenting the development of the proposed rates are provided in the Appendices.

The City provided NBS with the data necessary to conduct the study, including historical, current, and projected revenues and expenditures, number of customer accounts, and water consumption data along with other operational and capital cost information.

FINANCIAL PLAN
As a part of the rate study, NBS projected revenues and expenditures on a cash-flow basis for the next five (5) years. The amount of rate revenue required, that will allow reserves to be maintained at the recommended levels, is known as the net revenue requirement. As current rate revenue falls short of the net revenue requirement, rate adjustments – or more accurately, adjustments in the total revenue collected from rates – are recommended. This report presents an overview of the methodologies, assumptions, and data used along with the financial plan and proposed rates developed in this study.3

COST-OF-SERVICE ANALYSIS
The basic purpose of the cost-of-service analysis (COSA) is to fairly and equitably allocate costs to customer classes. The cost-of-service analysis consists of two major components: (1) the classification of expenses, and (2) the allocation of costs to customer classes. For example, a key task is the “classification” of the water revenue requirements into the following categories:
• Commodity related costs
• Capacity related costs
• Customer service related costs
For the sewer utility, the normal classification of sewer revenue requirements uses the following categories:
• Commodity related costs
3 The complete financial plans are available in the Appendices.

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City of Gilroy – Comprehensive Water & Wastewater Utility Rate Study Prepared by NBS – August 2023 3
• Capacity related costs
• Customer service related costs
However, a unique aspect of the City’s sewer rates is the use of separate fixed charges to recover the costs of the monitoring, sampling, and pretreatment program costs.4 These costs are significantly different between various non-residential customers, who have been placed into one of three categories:
• Significant/Categorical
• Non-Significant/Categorical
• Other Non-Residential
Because these costs are allocated directly to these three classes of non-residential customers, they are allocated directly to these classes; this adds a fourth classification category (i.e., monitoring, sampling, and pretreatment program costs). Together, these four allocation factors represent the cost allocation classifications used in the cost of service analysis. Further details are discussed below and documented in the Appendices.

RATE DESIGN ANALYSIS
During the rate design phase of the study, NBS and City staff worked together to develop rate alternatives that will meet the City’s objectives. It is important for the City to send proper price signals to its customers about the actual cost of providing service. This objective is typically addressed through both the magnitude of the rate adjustments and the rate structure design. In other words, both the amount of revenue collected and the way in which the revenue is collected from customers are important.

Several criteria are typically considered in setting rates and developing sound rate structures. The fundamentals of this process have been well documented in several rate-setting manuals, such as AWWA’s Manual M1. The foundation for evaluating rate structures is generally credited to James C.

Bonbright in Principles of Public Utility Rates,
5 which outlines pricing policies, theories, and economic concepts along with various rate designs. The following is a simplified list of the attributes of a sound rate structure:
• Rates should be easy to understand from the customer’s perspective. • Rates should be easy to administer from the utility’s perspective. • Rates should be equitable and non-discriminating (i.e., cost-based). • Rates should promote the efficient allocation of the resource. • There should be continuity in the rate making philosophy over time. • Rates should address other utility policies (e.g., conservation and economic development). • Rates should provide month-to-month and year-to-year revenue stability. 4 This methodology for recovering these program costs was first established in the City’s 2015 rate study, and the City has decided to continue with this approach.
5 James C. Bonbright, Albert L. Danielsen, and David R. Kamerschen, Principles of Public Utility Rates, Arlington, VA: Public Utilities Report, Inc., Second Edition, 1988, pp. 383-384.

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RATE STRUCTURE TERMINOLOGY
This section covers basic rate design criteria that NBS and City staff considered as a part of their review of the rate structure alternatives. One of the most fundamental points in considering rate structures is the relationship between fixed and variable costs. Fixed costs, such as debt service and personnel costs, typically do not vary with the amount of water consumed. In contrast, variable costs, such as the cost of purchased water, chemicals, and electricity, tend to change with the quantity of water sold. Most rate structures contain a fixed, or minimum, charge in combination with a volumetric charge.  Fixed Charges – Fixed charges can be called base charges, minimum monthly charges, customer charges, fixed meter charges, etc. Fixed charges for water utilities typically increase by meter size. For example, a customer with a 2-inch meter has a fixed meter charge that is more than five times greater than the typical residential customer based on the safe operating capacity of the meter.
6 Since a large portion of utility costs are typically related to meeting capacity requirements, individual capacity demands are important in establishing equitable rates for customers.
 Variable (Consumption-Based) Charges – In contrast to fixed charges, variable costs, such as purchased water, groundwater replenishment costs, and the cost of electricity used in pumping water and chemicals for treatment, tend to change with the quantity of water produced. For a water utility, variable charges are calculated based on a metered consumption per unit price (e.g., per 100 cubic feet, or HCF).
 Uniform (Single-Tier) Water Rates – There are significant variations in the basic philosophy of variable charge rate structure alternatives. Under a uniform (single tier) rate structure, the cost per unit does not change with consumption and, therefore, provides a simple and straightforward approach from the customer’s perspective and in terms of the City’s rate administration.
 Zonal Water Rates – The City has chosen to reflect the cost variations due to pumping costs for moving water to the three elevation zones in the City. This is based on the higher costs for pumping-related energy costs and additional infrastructure for more pumping stations.

However, the City has decided to only include the actual energy costs in the zonal water rates.  Tiered Water Charges – The 2015 San Juan Capistrano court decision held that water agencies may only charge tiered rates if they can show that the tiered rates are proportionate to the agency’s higher costs to serve those customers, meaning that caution must be used to ensure that customers are appropriately allocated costs that meet legal requirements. Although the City’s current rates include two tiers for all water customers, tiered water rates have been discontinued because source of supply data and costs do not lend themselves to using tiered 6 Principles of Water Rates, Fees, and Charges, Manual of Water Supply Practices, Manual M1, AWWA, 7th Edition, 2017, pp. 151-152.

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rates for the City’s water customers and they would be difficult to defend under Prop 218 from a legal standpoint.

KEY FINANCIAL ASSUMPTIONS
The following is a summary of the key financial assumptions used in the analyses. The following capital and operational fund targets reflect input from City staff to meet specific utility objectives:
 Funding of Capital Projects – The capital improvement costs will be funded with a combination of cash in reserves and the additional revenue generated from the proposed rate increases. The capital projects listed in the financial plan are from the City’s capital improvement program. The analysis assumes:
• Capital costs attributable to existing customers are funded using rate revenue. • Capital costs attributable to growth are funded by revenue from the impact fee reserves.
 Reserve Targets – For each utility (i.e., water and wastewater), the City maintains reserves for operations, capital, and other specific needs. The details of each utility’s reserve targets are covered in their respective section of this report.
 Inflation and Growth Projections – Assumptions were made in the analysis regarding cost inflation to project future revenues and expenses for the study period. The following inflation factors were used in the analysis:
• Customer growth is estimated at 1.50% per year.
• General cost inflation is set at 3.07% annually.
• Labor cost inflation is set at 3.50% annually.
• Energy cost inflation is set at 7.44% annually.
• Fuel & Utilities cost inflation is set at 5.24% annually. • Water purchases inflation factor is set at 5.0% annually.

These inflation factors are based on long-term trends; therefore, the City should re-examine these factors in another year to assess the impacts on utility costs and whether projected rate increases will be sufficient for the remainder for the rate adoption period.

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Section 2. Water Rate Study
A. Key Water Rate Study Issues
The City’s water rate analysis was undertaken with a few specific objectives, including:
• Generating sufficient revenue to meet anticipated operating and maintenance costs and fund necessary capital improvement projects for the next five years. • Continuing with a rate design that promotes revenue stability. • Verifying the cost-of-service linkage between the current rate structure and the proposed water rates, including the zonal water rates.
• Maintaining adequate reserve levels to ensure continuity in operations. • Complying with the legal requirements of Prop 218 to ensure the cost of providing service is properly allocated amongst user classifications. This was the basis for eliminating tiered water rates.

NBS developed various water rate alternatives as requested by City staff over the course of this study. All rate structure alternatives relied on industry standards and cost-of-service principles. The rate alternative that will ultimately be implemented is the decision of the City Council. The fixed and volume-based charges were calculated based on the net revenue requirements, number of customer accounts, water consumption and estimated water discharge, and other relevant data provided by the City.

The following are the basic components included in this analysis:
 Developing Cost Allocations – The water revenue requirements were “functionalized” into three categories: (1) commodity (or volume-based) costs; (2) fixed capacity costs; and (3) customer service costs. These functionalized costs were then used to develop unit costs based on various factors, such as water consumption, peaking factors, and number of accounts by meter size.  Determining Revenue Requirements by Customer Class – The total revenue that needs to be collected from each customer class was determined using the functional costs and allocation factors. For example, customer costs are allocated based on the number of meters, while volumerelated costs are allocated based on the water consumption of each customer class. Once the costs are allocated and the net revenue requirement for each customer class is determined, collecting the revenue requirements from each customer class is addressed within the rate design.  Evaluating Rate Design (Fixed vs. Variable Charges) – The revenue requirements for each customer class are collected through a combination of fixed monthly service charges and volumetric rates. Based on direction from City staff, the rates proposed in this report will collect 40% of the rate revenue from the fixed charge and 60% from the variable charges.

B. Financial Plan
It is important for municipal utilities to not only collect sufficient revenues every year, but to also maintain reasonable reserves to handle emergencies, fund working capital, maintain a good credit rating, and Agenda Item 11.1 Page 195 of 308
City of Gilroy – Comprehensive Water & Wastewater Utility Rate Study Prepared by NBS – August 2023 7
generally follow sound financial management practices. Rate adjustments are governed by the need to meet operating and capital costs as well as maintain reasonable reserve levels. The current state of the City’s water utility, regarding these objectives, is as follows:
 Meeting Net Revenue Requirements: For FY 2023/24 through FY 2027/28, the projected net revenue requirement (that is, total annual expenses plus debt service and rate-funded capital costs, less non-rate revenues) for the water system averages $15.9 - $18.8 million annually. If no rate adjustments are implemented, the City is projected to run an annual deficit of approximately $2 million in FY 2023/24, increasing to more than $3.9 million by FY 2027/28, and will be unable to meet its debt service coverage requirements in FY 2026/27 and FY 2027/28 when new debt service payments begin on the assumed bond issuance.
 Maintaining Reserve Funds: Reserve funds provide a basis for a utility to cope with fiscal emergencies, such as revenue shortfalls, asset failure, and natural disasters, among other events.

The City’s existing reserves are healthy and the challenge is to meet future revenue requirements and still maintain adequate reserves. NBS together with City staff have chosen to set the following reserve targets:
• Operating Reserve equal to 6 months of operating and maintenance expenses, or approximately $8.2 million in FY 2023/24. An operating reserve is intended to promote financial viability in the event of any short-term fluctuation in revenues and/or expenditures, such as those caused by weather patterns, the natural inflow and outflow of cash during billing cycles, natural variability in demand-based revenue streams (e.g., volumetric charges), and – particularly in periods of economic distress – changes or trends in the age of receivables. NBS considers a 6-month operating reserve to be a very conservative reserve fund target (i.e., most municipal water utilities use a 3- month target for the operating reserve).
• Capital Rehabilitation & Replacement Reserve equal to 50% of the average capital improvement costs over the 5-year rate adoption period; the five-year average is approximately $8.2 million, so the target reserve is $4.1 million. This reserve is intended to be a cash resource set aside to address long-term capital system replacement and rehabilitation needs. NBS considers a 50% capital reserve target to be at the higher end of what most utilities aim for. Many utilities aim for 3% to 6% of net assets, which in the City’s case would be $1.8 to $3.6 million.
 Funding Capital Improvement Projects: The City must fund necessary capital improvements to maintain current service levels. City staff has identified roughly $41 million in expected capital expenditures over the next five years (FY 2023/24 through FY 2027/28) which is an average of $8.2 million in capital expenditures annually. This rate study assumes the City will be issuing $16 million in revenue bonds in FY 2025/26 through FY 2027/28. Proceeds from these revenue bonds along Agenda Item 11.1 Page 196 of 308
City of Gilroy – Comprehensive Water & Wastewater Utility Rate Study Prepared by NBS – August 2023 8
with the recommended rate increases, enable the City to fund these capital expenditures without exhausting the existing reserves, although reserves will decrease significantly over the next five years, they are projected to end at about the target reserve level.  Inflation and Growth Projections: Cost inflation and growth assumptions are necessary to project future revenues and expenses for the study period. Customer growth is expected to be nearly 1.5% annually. This factor was used in the analysis for rate revenues while inflation factors, including the Consumer Price Index,7 were used in projecting expenses.  Maintaining Adequate Bond Coverage: Although the water utility currently has no outstanding debt, this analysis assumes that the City will be issuing $16 million in new debt to fund capital projects. However, whether new debt will be needed will depend on the actual delivery of capital projects (i.e., the timing and costs). The rate covenants of the new revenue bonds include a minimum debt service coverage ratio of 1.25. The benefit of maintaining a higher coverage ratio is that it strengthens the City’s credit rating which can help lower interest rates for debt-funded capital projects and, in turn, reduce annual debt service payments.

Figure 2 summarizes the sources and uses of funds, net revenue requirements, and the annual percent adjustments in total rate revenue recommended for the next 5 years.

Figure 2. Summary of Water Revenue Requirements
Figure 3 summarizes the projected reserve fund balances and reserve targets for the City’s unrestricted funds. A detailed version of the proposed 5-year financial plan is included in Appendix A . The tables in the appendix include the revenue requirement, reserve funds, revenue sources, capital improvement costs, and the proposed rate adjustments needed to meet the City’s funding requirements. 7 Consumer Price Index for all urban consumers in the San Francisco area. Source: Website: https://www.bls.gov/cpi/.

Budget
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 Sources of Water Funds
User Fees $ 13,665,000 $ 13,939,000 $ 14,218,000 $ 14,431,270 $ 14,647,739 $ 14,867,455 Other Revenue 105,000 110,000 112,000 113,680 115,385 117,116 Bank Interest 488,737 499,621 509,514 5,075 5,151 5,228 Total Sources of Funds $ 14,258,737 $ 14,548,621 $ 14,839,514 $ 14,550,025 $ 14,768,275 $ 14,989,800 Uses of Water Funds
Water Administration $ 2,759,176 $ 3,460,721 $ 3,533,818 $ 3,636,249 $ 3,748,440 $ 3,864,096 Finance Water Utility Billing 873,507 1,047,309 1,077,076 1,095,995 1,133,828 1,172,968 Water Operations 4,983,992 6,952,444 6,568,972 6,810,814 7,061,889 7,322,564 Valley Water 3,293,972 4,641,000 4,873,050 5,116,703 5,372,538 5,641,165 Additional Capital Expenditures - 404,450 404,450 - - - Debt Service - - - - 453,067 906,134
Rate-Funded Capital Expenses - - - - - -
Total Use of Funds $ 11,910,647 $ 16,505,924 $ 16,457,366 $ 16,659,760 $ 17,769,761 $ 18,906,927 Surplus (Deficiency) before Rate Increase $ 2,348,090 $ (1,957,303) $ (1,617,852) $ (2,109,735) $ (3,001,486) $ (3,917,128) Additional Revenue from Rate Increases1 - 557,560 1,745,841 2,900,027 3,817,967 4,624,944 Net Revenue Requirement2 $ 11,316,910 $ 15,896,303 $ 15,835,852 $ 16,541,005 $ 17,649,225 $ 18,784,583 Surplus (Deficiency) after Rate Increase $ 2,348,090 $ (1,399,743) $ 127,988 $ 790,292 $ 816,481 $ 707,816 Projected Annual Rate Increase 0.00% 8.00% 8.00% 6.00% 4.00% 4.00% Debt Coverage After Rate Increase N/A N/A N/A N/A 2.80 1.78

1. Revenue from rate increases assumes an implementation date of January 1, 2024 for new rates. For each year thereafter, the assumption is that new rates will also be implemented on January 1st of each year.

2. This is the annual amount needed from water rates. [Net Revenue Requirement = Total Use of Funds - (Non-Rate Revenues + Bank Interest)].

Summary of Sources and Uses of Funds and
Net Revenue Requirements
5-Year Projected Rate Period
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Figure 3. Summary of Primary Water Reserve Funds
C. Cost-of-Service Analysis
Once the net revenue requirements are determined, the cost-of-service analysis (COSA) proportionately distributes the revenue requirements to each of the customer classes. The COSA consists of two major components: (1) the classification of expenses, and (2) the allocation of costs to each customer class. Costs are classified according to the function they serve. All costs in the City’s budget are allocated to each component of the rate structure in proportion to the level of service required by customers.

The level of service is related to the volume and strength of the water treated, infrastructure capacity, and customer service. These costs are based on allocation factors, such as water consumption, number of meters, and customer class. Ultimately, a COSA is intended to result in rates that are proportional to the cost of providing service to each customer class.

FUNCTIONALIZATION AND CLASSIFICATION OF COSTS
Most costs are not typically allocated just to fixed or variable categories but rather allocated to multiple functions of water service. The functionalization and classification process provides the basis for allocating costs to various customer classes based on the cost causation (classification) components described below:
• Commodity related costs are costs associated with the change in the volume of water produced and delivered. These commonly include the costs of water quality testing, energy related to pumping for transmission and distribution, and source of supply. • Capacity related costs are costs associated with sizing facilities to meet the maximum, or peak, demand. This includes both operating costs and capital infrastructure costs incurred to accommodate peak system capacity events.
• Customer related costs are costs associated with having a customer connected to the water system, such as meter reading, postage, billing, and other administrative duties.

The City’s budgeted costs were reviewed and allocated to these cost causation components which are used as the basis for establishing new water rates and translated into fixed and variable charges. Tables in the Appendices show how the City’s expenses were classified and allocated to these cost causation components. In the analysis, these cost causation components are also considered to be either fixed or variable.

Budget
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 Operating Reserve
Ending Balance $ 5,955,000 $ 4,555,257 $ 4,683,245 $ 5,473,537 $ 6,290,019 $ 6,997,835 Recommended Minimum Target 5,955,000 8,253,000 8,229,000 8,330,000 8,658,000 9,000,000 Capital Rehabilitation & Replacement Reserve
Ending Balance $ 25,382,158 $ 22,643,278 $ 8,114,397 $ 7,583,609 $ 7,583,609 $ 7,217,830 Recommended Minimum Target 4,140,000 4,140,000 4,140,000 4,140,000 4,140,000 4,140,000 Total Ending Balance $ 31,337,158 $ 27,198,535 $ 12,797,642 $ 13,057,146 $ 13,873,627 $ 14,215,665 Total Recommended Minimum Target $ 10,095,000 $ 12,393,000 $ 12,369,000 $ 12,470,000 $ 12,798,000 $ 13,140,000 Beginning Reserve Fund Balances and
Recommended Reserve Targets
Projected
Agenda Item 11.1 Page 198 of 308
City of Gilroy – Comprehensive Water & Wastewater Utility Rate Study Prepared by NBS – August 2023 10

FIXED AND VARIABLE COSTS
Ideally, utilities should recover all of their fixed costs from fixed charges and all of their variable costs from volumetric charges. When this is the case, fluctuations in water sales revenues would be directly offset by reductions or increases in variable expenses, which provides greater revenue stability for the utility.

However, other factors are often considered when designing water rates, such as community values, water conservation goals, ease of understanding, and ease of administration.8 NBS functionalized the City’s costs into categories that represent fixed and variable costs. This analysis resulted in a cost distribution that is approximately 40% fixed and 60% variable (i.e., volumetric). However, the City’s current rates collect revenue from customers in proportions of approximately 30% fixed and 70% variable. City staff agrees with NBS that the current rate design is not reflective of the actual cost distribution ad determined by the cost of service analysis. Therefore, the proposed new rates are based on the 40% fixed and 60% variable allocations. NBS also evaluated the current 30% fixed/70% variable rate structure and compares the results below.

Figure 4 summarizes how costs are allocated to each cost component and used to establish new water rates. Figure 5 shows the resulting cost allocation to each cost classification component.

Figure 4. Allocation Percentages of Revenue Requirements Figure 5. Allocated Net Revenue Requirements – Preferred Rate Alternative 8 Principles of Water Rates, Fees, and Charges, Manual of Water Supply Practices, Manual M1, AWWA, 7th Edition, 2017, pp. 6 and

96. Commodity-Related Costs $ 9,032,472 60.0% $ 10,537,884 70.0% Capacity-Related Costs 4,516,236 30.0% 3,161,365 21.0%
Customer-Related Costs 1,505,412 10.0% 1,354,871 9.0%
Net Revenue Requirement $ 15,054,120 100.0% $ 15,054,120 100.0% Classification Components
Net Rev. Reqts
(FY 2023/24)
ALT. 2
(30% Fixed / 70% Variable)
ALT. 1 (Preferred)
(40% Fixed / 60% Variable)
Net Rev. Reqts
(FY 2023/24)

VARIABLE
Residential $ 5,470,437 2,758,274$ $ 1,312,941 $ 9,541,651 Multi-Family 1,053,245 426,815 50,558 1,530,618
Commercial/Industrial 1,354,175 561,903 83,348 1,999,425 Institutional 155,983 103,540 3,302 262,825
Landscape 937,767 611,068 50,019 1,598,854
City Account 239 98 3,399 3,737
Hydrant 60,626 54,538 1,845 117,010
Total Net Revenue Requirement $ 9,032,472 4,516,236$ $ 1,505,412 $ 15,054,120 CustomerRelated CostsCommodityRelated Costs
CapacityRelated
Costs
Cost of Service
Net Revenue
Requirements
Customer Classes
FIXED
Classification Components
Agenda Item 11.1 Page 199 of 308
City of Gilroy – Comprehensive Water & Wastewater Utility Rate Study Prepared by NBS – August 2023 11
D. Characteristics of Water Customers by Customer Class Customer classes are typically determined by grouping customers with similar demand characteristics into categories that reflect the cost differentials to serve each type of customer. Customer classes are most often identified as single-family, multi-family, commercial, landscape, etc., and the City follows this common methodology. The rates proposed in this report follow a similar structure where the fixed charges within each customer class vary by meter size while all customers are charged a uniform volumetric rate based on zones.

The amount of consumption, the peaking factors, and the number of meters by size are used to allocate costs as a part of COSA to allocate costs to customer classes and determine the appropriate rate structures for each. These components of the COSA are presented in the following figures.

Commodity related costs are costs associated with the total annual consumption of water by customer class. Figure 6 below summarizes the most recent consumption data by customer class and represents the expected percent of consumption over the 5-year rate period.

Figure 6. Water Consumption by Customer Class
Figure 7 shows the peaking factors for each customer class. A “peaking factor” is the relationship between the average use by meter size to its peak use.

Figure 7. Peaking Factors by Customer Class
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City of Gilroy – Comprehensive Water & Wastewater Utility Rate Study Prepared by NBS – August 2023 12
Both operating costs and capital infrastructure costs incurred to accommodate peak system capacity events are generally allocated to each meter size according to its contribution to peak capacity events. These peaking factors are used to allocate the capacity-related costs to each customer class and are described in more detail later in this study.

Figure 8 shows the number of meters for each customer class. The percentage of total customers by customer class is then used to develop the customer allocation factors to allocate customer costs.

Customer costs are those costs associated with having customers connected to the water system and include costs related to meter reading, postage, and billing.

Figure 8. Number of Meters by Customer Class

E. Rate Design Analysis
Evaluating the water rate structure includes reviewing rate-design objectives and policies, including continuity of rate design, revenue stability, equity among customers, and water conservation. NBS discussed the 40%/60% (preferred) and 30%/70% rate designs with City staff over the course of this study.

Ultimately, City staff selected the 40%/60% rate alternative, as it is closest to the actual cost of service based on NBS’ analysis. Also, because of the difficulty meeting Prop 218 legal requirements of demonstrating the cost basis for tiered rates given the City’s water supply costs, the preferred rate structure proposes a uniform tier for all customers rather than the existing two-tiers. The following section describe how the proposed water rates were determined.

DEVELOPMENT OF PROPOSED RATES
Fixed Service Charges
The fixed meter charge recognizes that the water utility incurs fixed costs regardless of whether customers use water. There are two components that comprise the fixed meter charge: (1) the capacity component, and (2) the customer component. The capacity component recovers costs associated with sizing the water system to ensure there is sufficient capacity in the system to meet peak demand. A user class with a higher peaking ratio is allocated a proportionately higher share of the capacity-related costs compared to customer classes with lower peaking ratios. The customer component includes those costs related to reading and maintaining meters, customer billing and collection, and other customer service-related costs.

Customer Class
No. of Meters
FY 2021/221 Percent of Total
Residential 13,518 87.2%
Multi-Family 521 3.4%
Commercial/Industrial 858 5.5%
Institutional 34 0.2%
Landscape 515 3.3%
City Account 35 0.2%
Hydrant 19 0.1%
Total 15,500 100.0%

1. Meter count data is based on the City's billing data for June 2022.

Agenda Item 11.1 Page 201 of 308
City of Gilroy – Comprehensive Water & Wastewater Utility Rate Study Prepared by NBS – August 2023 13
Fixed charges also vary based on meter sizes because larger meters have higher capacity requirements and reflect their potential to use more of the system’s capacity. 9 The potential capacity demands (peaking) is
proportional to the maximum hydraulic flow through each meter size based on the hydraulic capacity ratios established by AWWA.
10 The AWWA capacity ratios used for this report are shown in Figure 9.

Figure 9. Hydraulic Capacity Factors
The actual number of meters by size is multiplied by the corresponding capacity ratios to calculate “equivalent” meters. The number of equivalent meters is used as a proxy for the potential demand that each customer can place on the water system. Figure 10 summarizes the number of meters, the hydraulic capacity factors, and the number of equivalent meters (i.e., the number of meters multiplied by the hydraulic capacity factor) by customer class and meter size.

Figure 10. Equivalent Meters
Using the costs allocated to each customer class from Figure 5, Figure 11 shows the calculation of the fixed monthly service charges for all customer classes based on meter size. As previously mentioned, the customer service charge is calculated by dividing the customer service-related costs by the total number of 9 System capacity is the system’s ability to supply water to all delivery points at the time when demanded. 10 Principles of Water Rates, Fees and Charges, Manual of Water Supply Practices, Manual M1, AWWA, 7th Edition, 2017, p. 386.

Water Meters – Selection, Installation, Testing and Maintenance, Manual M6, AWWA, 5th Edition, 2012, pp. 63-65. 3/4 inch 30 1.00
1 inch 50 1.67
1 1/2 inch 100 3.33
2 inch 160 5.33
3 inch 320 10.67
4 inch 500 16.67
6 inch 1,000 33.33
8 inch 1,600 53.33
10 inch 4,200 140.00

1. Per AWWA M-1, Table B-1.

Compound Class I Meters
Turbine Class II Meters
Meter Capacity
(gpm)1
Displacement Meters
Meter Size Equivalency
to 1-inch
Standard Meters
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City of Gilroy – Comprehensive Water & Wastewater Utility Rate Study Prepared by NBS – August 2023 14
meters, whereas the fixed capacity charge is calculated by dividing the capacity-related costs by the total number of equivalent meters for each meter size.

Figure 11. Calculation of Fixed Service Charges
Volumetric Rates
Currently, the City uses a 2-tier rate structure for all customers; however, the proposed rates are based on a uniform, or single tier, volumetric rate. Given the single source of water supply, a uniform volumetric rate is more feasible from a Prop 218 perspective.

Figure 12 shows the calculation of the uniform tier rate per unit of water for all customers, including the basic commodity rate (without pumping costs) and rates for each zone (including pumping costs).

Figure 12. Uniform Tier Rates for FY 2023/24
F. Proposed Water Rates
The City’s previous rate study was completed eight years ago in 2015. Since then, the underlying cost factors (e.g., consumption by class, number of meters, peaking factors) have changed. The cost-of-service analysis by nature “re-balances” how costs are allocated between customer classes and, as a result, there 3/4 inch 1 inch 1 1/2 inch 2 inch 3 inch 4 inch 6 inch 8 inch 10 inch Residential 4,445 8,273 172 459 167 2 0 0 0 13,518
Multi-Family 137 203 84 56 24 17 0 0 0 521
Commercial/Industrial 251 330 0 249 10 14 3 0 1 858
Institutional 0 1 0 15 8 9 1 0 0 34
Landscape 34 182 79 212 4 4 0 0 0 515
City Account 5 7 1 19 2 1 0 0 0 35
Hydrant 0 0 0 0 19 0 0 0 0 19
Total Meters/Accounts 4,872 8,996 336 1,010 234 47 4 0 1 15,500 Hydraulic Capacity Factor 2 1.00 1.67 3.33 5.33 10.67 16.67 33.33 53.33 140.00 Total Equivalent Meters 4,872 14,993 1,120 5,387 2,496 783 133 0 140 29,925 Monthly Fixed Service Charges
Customer Costs ($/Acct/month)3 $8.09 $8.09 $8.09 $8.09 $8.09 $8.09 $8.09 $8.09 $8.09 Capacity Costs ($/Acct/month)4 $12.58 $20.96 $41.92 $67.08 $134.15 $209.61 $419.22 $670.76 $1,760.74 Total Monthly Meter Charge $20.67 $29.05 $50.02 $75.17 $142.24 $217.70 $427.32 $678.85 $1,768.83 Annual Fixed Costs Allocated to Monthly Meter Charges
Customer Costs $ 1,505,412
Capacity Costs 4,516,236
Total Fixed Meter Costs $ 6,021,648
Annual Revenue from Monthly Meter Charges
Customer Charges $ 473,185 $ 873,722 $ 32,633 $ 98,095 $ 22,727 $ 4,565 $ 388 $ - $ 97 $ 1,505,412 Capacity Charges $ 735,283 $ 2,262,797 $ 169,031 $ 812,957 $ 376,697 $ 118,221 $ 20,123 $ - $ 21,129 $ 4,516,236 Total Rev. from Mo. Meter Charges $ 1,208,468 $ 3,136,518 $ 201,664 $ 911,051 $ 399,424 $ 122,786 $ 20,511 $ - $ 21,226 $ 6,021,648

1. Meter by Class and Size are based on June 2022 customer billing data.

2. Source: AWWA Manual M1, "Principles of Water Rates, Fees, and Charges", Table B-1

3. Customer costs are allocated to each customer by dividing the total customer costs by the total number of customers.

4. Capacity costs are allocated by meter size and the hydraulic capacity of the meter.

Total FY2023/24 Number of Meters by Class and Size1
Zone 1 Zone 2 Zone 3
Residential - Tier 1 1,348,786 60.6% $ 4,912,312 $3.64 $4.00 $4.37 $4.73 Multi-Family 259,687 11.7% 945,787 $3.64 $4.00 $4.37 $4.73 Commercial/Industrial 333,884 15.0% 1,216,014 $3.64 $4.00 $4.37 $4.73 Institutional 38,459 1.7% 140,069 $3.64 $4.00 $4.37 $4.73 Landscape 231,215 10.4% 842,091 $3.64 $4.00 $4.37 $4.73 City Account 59 0.0% 215 $3.64 $4.00 $4.37 $4.73
Hydrant 14,948 0.7% 54,441 $3.64 $4.00 $4.37 $4.73
Total Potable Water 2,227,038 39.4% $ 8,110,929
Pumping Costs 921,543
Total Volumetric Reve. Reqts. $ 9,032,472
Uniform Commodity Rates Including
Pumping Costs ($/TG) Water Use
(TG/yr.)1
Total Vol. Rev.

Reqts. (Excl.

Pumping)
Customer Classes % of Total
Water Use
Uniform
Commodity
Rates ($/TG)
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City of Gilroy – Comprehensive Water & Wastewater Utility Rate Study Prepared by NBS – August 2023 15
are uneven adjustments in the first year of the 5-year rate adoption period. In contrast, in the subsequent four years of the rate planning period, proposed charges are simply adjusted by the proposed adjustment in total rate revenue needed to meet projected revenue requirements.

Figure 13 provides a comparison of the current and proposed water rates for FY 2023/24 through 2027/28 for each customer class and meter size. Projected rates for each fiscal year11 reflect adjustments based on the cost-of-service analysis, the 40% fixed/60% variable rate design structure, and the recommended percent increases in rate revenue planned for each year. More detailed tables on the development of the proposed water rates are documented in Appendix A.

Figure 13. Current and Proposed Water Rates
Note: The proposed rates for FY23/24 will be implemented January 1, 2024, and annually on January 1 for subsequent fiscal years thereafter
G. Comparison of Current and Proposed Water Bills
Figure 14 and Figure 15 compare a range of monthly water bills under the current and proposed water rates for residential and commercial customers, including the bills for Alternative 2, the 70% fixed/30% variable option. These monthly bills are based on typical meter sizes and highlight the average consumption levels for each customer.

These bill comparisons assume that financial plan projections remain accurate. However, some costs that are outside of the City’s control could change, such as the cost of water purchased from Valley Water. 11 All rate adjustments are scheduled to be effective on January 1, 2024.

FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
Monthly Fixed Service Charges
Meter Size
3/4 inch $11.53 $20.67 $22.32 $23.66 $24.61 $25.59
1 inch $19.24 $29.05 $31.38 $33.26 $34.59 $35.98
1 1/2 inch $38.47 $50.02 $54.02 $57.26 $59.55 $61.93
2 inch $61.55 $75.17 $81.18 $86.05 $89.50 $93.08
3 inch $115.39 $142.24 $153.62 $162.84 $169.36 $176.13
4 inch $192.30 $217.70 $235.12 $249.23 $259.20 $269.57
6 inch $384.62 $427.32 $461.50 $489.19 $508.76 $529.11
8 inch $615.37 $678.85 $733.16 $777.15 $808.23 $840.56
10 inch $884.50 $1,768.83 $1,910.34 $2,024.96 $2,105.95 $2,190.19 Residential Customers - Tiered Volumetric Rates
Tier 1 - Zone 1 $4.39 $4.00 $4.32 $4.58 $4.77 $4.96
Tier 1 - Zone 2 $4.93 $4.37 $4.72 $5.00 $5.20 $5.41
Tier 1 - Zone 3 $5.52 $4.73 $5.11 $5.41 $5.63 $5.85
Tier 2 ( more than 20 TG)
Tier 2 - Zone 1 $4.93 N.A. N.A. N.A. N.A. N.A.

Tier 2 - Zone 2 $5.47 N.A. N.A. N.A. N.A. N.A.

Tier 2 - Zone 3 $6.06 N.A. N.A. N.A. N.A. N.A.

Current
Rates
Proposed Rates Water Rate Schedule
Variable Charges for All Water Consumed ($/1,000 gallons (or TG)) Uniform Vol. Rates
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City of Gilroy – Comprehensive Water & Wastewater Utility Rate Study Prepared by NBS – August 2023 16
There is a “pass-through” provision that allows the City to make adjustments to water rates if these types of costs exceed those in the City’s projections.

Figure 14. Monthly Water Bill Comparison for Residential Customers $32.41$41.19 $45.58$55.68$67.53 $85.09 $107.04 $41.07$49.07 $53.08$62.29$73.10 $89.11 $109.13 $36.00$45.36 $50.04$60.80 $73.44 $92.16 $115.55 $0
$25
$50
$75
$100
$125
3 5 6 8.3 11 15 20
Monthly Bill
Monthly Water Consumption (TG)
Single-Family Residential Water Bill Comparison
Current vs. Proposed FY'23/24 Rates (1" Meter)
Residential Bill - Current Rates
Residential Bill 60/40 V/F
Residential Bill 70/30 V/F
Average
ANNUAL Bill
Average (8.3 TG/mo.)
WINTER Bill
(6 TG/mo.)
Average
SUMMER Bill
(11 TG/mo.)
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City of Gilroy – Comprehensive Water & Wastewater Utility Rate Study Prepared by NBS – August 2023 17
Figure 15. Monthly Water Bill Comparison for Commercial Customers Figure 16 and Figure 17 compare the single-family and commercial water bills for the five-year rate adoption period assuming average consumption levels.

Figure 16. Residential Water Bills – 5-Years
$55.43
$99.33
$134.45
$152.01
$178.35
$252.98
$340.78
$60.71
$100.75
$132.78
$148.80
$172.82
$240.89
$320.96
$62.89
$109.69
$147.12
$165.84
$193.92
$273.48
$367.08
$0
$50
$100
$150
$200
$250
$300
$350
$400
10 20 28 32 38 55 75
Monthly Bill
Monthly Water Consumption (TG)
Commercial Water Bill Comparison
Current vs. Proposed FY'23/24 Rates (< 1" Meter)
Commercial Bill - Current Rates
Commercial Bill 60/40 V/F
Commercial Bill 70/30 V/F
Average
WINTER Bill
(28 TG/mo.)
Average
ANNUAL Bill
(32 TG/mo.)
Average
SUMMER Bill
(38 TG/mo.)
Agenda Item 11.1 Page 206 of 308
City of Gilroy – Comprehensive Water & Wastewater Utility Rate Study Prepared by NBS – August 2023 18
Figure 17. Commercial Water Bills – 5-Years
Figure 18 presents a comparison of residential water rates for similar communities. $62.29 $67.27 $71.31 $74.16 $77.12
$55.68
$60.80
$65.66
$69.60
$72.39
$75.28
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 Monthly Bill
Monthly Water Consumption (TG)
Residential Water Bill Comparison
5-Year Projection (1" Meter)
Resid. - 5-Year Rates (60/40 V/F)
Resid. - 5-Year Rates (70/30 V/F)
Average Monthly Water Use - 8.3 TG
$152.01
$148.80
$160.70
$170.34
$177.15
$184.24
$165.84
$179.11
$189.86
$197.45
$205.35
$0
$50
$100
$150
$200
$250
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 Monthly Bill
Monthly Water Consumption (TG)
Commercial Water Bill Comparison
5-Year Projection (1" Meter)
Commercial - 5-Year Rates (60/40 V/F)
Commercial - 5-Year Rates (70/30 V/F)
Annual Monthly Water Use - 32 TG
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City of Gilroy – Comprehensive Water & Wastewater Utility Rate Study Prepared by NBS – August 2023 19
Figure 18. Residential Bills Comparison for Similar Communities $56.21 $60.16 $62.39
$73.43 $73.89 $77.76
$99.81 $103.67
$111.46
$134.52
$0
$25
$50
$75
$100
$125
$150
City of
Hollister
City of Gilroy
(Current Rates)
City of Morgan
Hill
Alternative #1
- 40F/60V
Alternative #2
- 30F/70V
City of
Sunnyvale
City of Santa
Clara
City of Milpitas City of Santa
Cruz
San Jose
Municipal
Water
Regional Water Bill Comparion - SFR Customer
Assumes 1" Meter, 14 hcf monthly consumption
Agenda Item 11.1 Page 208 of 308
City of Gilroy – Comprehensive Water & Wastewater Utility Rate Study Prepared by NBS – August 2023 20
Section 3. Wastewater Rate study
A. Key Wastewater Rate Study Issues
The City’s wastewater rate analysis was undertaken with a few specific objectives, including:
• Ensuring equity among customer classes by collecting rate revenue through the cost-of-service process based on both fixed monthly charges and volumetric rates. • Maintain adequate reserve levels to ensure continuity in operations. • Ensure adequate funding for the utility’s capital projects, due to the level of capital investment planned over the next five years.
• Comply with Prop 218 requirements to ensure costs are properly allocated between user classifications.

B. Financial Plan
Like the water utility, it is important for the wastewater utility to ensure rates provide sufficient funding to cover operating and maintenance costs, planned capital expenditures, and maintain reasonable reserves.

The wastewater utility’s rate increases are governed by these needs, and the current state of the City’s wastewater utility is as follows:
 Meeting Net Revenue Requirements: For FY 2023/24 through FY 2027/28, the projected net revenue requirements (that is, total operating expenses plus rate-funded capital costs less non-rate revenues) for the City averages approximately $13.1 million to $17.1 million annually. If no rate increases are implemented, the City is projected to run an annual deficit of approximately $280,000 beginning in FY 2024/25 but increasing to $2.7 million by FY 2027/28, and the utility would struggle to meet its debt service coverage requirements.
 Maintaining Reserve Funds: Reserve funds provide a basis for a utility to cope with fiscal emergencies such as revenue shortfalls, asset failure, and natural disasters, among other events.

Reserve policies provide guidelines for sound financial management, with an overall long-range perspective to maintain financial solvency and mitigate financial risks associated with revenue instability, volatile capital costs, and emergencies. The reserve funds for the wastewater utility are considered unrestricted reserves and consist of the following:
• Operating Reserve: The target ending fund balance for the operating reserve is equal to six months of operating expenses, or approximately $6.8 million in FY 2023/24. An operating reserve is intended to promote financial viability in the event of any short-term fluctuation in revenues and/or expenditures. Fluctuations in revenue can be caused by weather patterns, the natural inflow and outflow of cash during billing cycles, natural variability in demand-based revenue streams (such as volumetric charges), and – particularly in periods of economic distress – changes or trends in age of receivables.
• Capital Rehabilitation & Replacement Reserve equal to 50% of the average capital improvement costs over the 5-year rate adoption period which is approximately $4.4 million.

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City of Gilroy – Comprehensive Water & Wastewater Utility Rate Study Prepared by NBS – August 2023 21
This reserve is set aside to address long-term capital system replacement and rehabilitation needs.
 Maintaining Adequate Bond Coverage: The City is required by the rate covenants of the 2021A Wastewater Revenue Bonds to maintain a minimum debt service coverage ratio of 1.25. The benefit of maintaining a coverage ratio higher than 1.25 is that it strengthens the City credit rating which helps lower interest rates for debt-funded capital projects and can reduce annual debt service payments. With the recommended rate increases, the City is projected to meet the debt coverage requirement for the five-year rate adoption period ending in FY 2027/28.

The recommended rate revenue increases are 4% annually throughout the 5-year rate adoption period.

Figure 19 summarizes the sources and uses of funds, net revenue requirements, and the recommended annual increases in wastewater rate revenue proposed for the next 5 years. Figure 20 summarizes the projected reserve fund balances and reserve targets for the wastewater utility’s unrestricted funds.

Figure 19. Summary of Wastewater Revenue Requirements
Figure 20. Summary of Wastewater Reserve Funds
Proj. Actuals
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 Sources of Sewer Funds
User Fees $ 13,247,000 $ 13,512,000 $ 13,782,000 $ 13,988,730 $ 14,198,561 $ 14,411,539 Interfund Transfer In 1,533,500 2,244,000 2,244,000 2,244,000 2,244,000 2,244,000 Misc. Revenue & Interest Earnings2 992,066 649,871 397,017 15,619 15,853 16,091 Total: Sources of Funds $ 15,772,566 $ 16,405,871 $ 16,423,017 $ 16,248,349 $ 16,458,414 $ 16,671,630 Uses of Sewer Funds
7500 - Sewer Administration $ 3,606,254 $ 2,143,559 $ 2,202,325 $ 2,339,468 $ 2,481,991 $ 2,625,123 7510 - Finance Sewer Utility Billing 921,605 1,037,477 1,083,341 1,120,978 1,159,924 1,200,226 7520 - Sewer Operations 2,758,341 4,362,836 4,320,125 4,464,460 4,613,637 4,767,818 SCWRA Oper. Costs (less Monit., Sampl., Pre-Tr.Cost 5,715,995 6,146,815 6,517,038 6,781,500 6,989,600 7,207,300 Monitoring, Sampling, Pretreatment (Non-Resid. Cos N.A. 365,700 440,200 388,500 400,400 412,700 Subtotal: Operating Expenses $ 13,002,195 $ 13,690,686 $ 14,122,829 $ 14,706,406 $ 15,245,153 $ 15,800,467 Debt Service $ 1,533,500 $ 2,244,000 $ 2,244,400 $ 2,243,600 $ 2,241,600 $ 2,243,300 Rate-Funded Capital Expenses - 75,401 335,906 211,300 755,038 1,334,115 Total: Use of Funds $ 14,535,695 $ 16,010,087 $ 16,703,135 $ 17,161,306 $ 18,241,791 $ 19,377,882 Surplus (Deficiency) before Rate Increase $ 1,236,871 $ 395,784 $ (280,118) $ (912,957) $ (1,783,377) $ (2,706,252) Additional Revenue from Rate Increases1 $ - $ 540,480 $ 1,121,811 $ 1,743,733 $ 2,408,627 $ 3,119,008 Surplus (Deficiency) after Rate Increase $ 1,236,871 $ 936,264 $ 841,693 $ 830,775 $ 625,250 $ 412,756 Projected Annual Rate Increase 0.00% 4.00% 4.00% 4.00% 4.00% 4.00% Debt Coverage After Rate Increase (1.25 required) 1.81 1.45 1.52 1.46 1.62 1.78 Net Revenue Requirement2 $ 12,010,129 $ 13,116,216 $ 14,062,118 $ 14,901,687 $ 15,981,938 $ 17,117,791

1. Revenue from rate increases assumes an implementation date of Jnnuary 1, 2024 for new rates. For each year thereafter, the assumption is that new rates will be implemented on July 1st of each year.

2. This is the annual amount needed from water rates. [Net Revenue Requirement = Total Use of Funds - (Non-Rate Revenues + Bank Interest)].

Summary of Sources and Uses of Funds and
Net Revenue Requirements
5-Year Projected Rate Period
Projected Actuals
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 Unrestricted Reserves
Operating Reserve
Ending Balance $ 6,501,000 $ 6,845,000 $ 7,061,000 $ 7,353,000 $ 7,623,000 $ 7,900,000 Recommended Minimum Target 6,501,000 6,845,000 7,061,000 7,353,000 7,623,000 7,900,000 Capital Rehabilitation & Replacement Reserve
Ending Balance $ 12,942,049 $ 13,495,633 $ 11,271,248 $ 8,151,561 $ 6,946,887 $ 5,648,582 Recommended Minimum Target 4,420,000 4,420,000 4,420,000 4,420,000 4,420,000 4,420,000 Total Ending Balance $ 19,443,049 $ 20,340,633 $ 18,332,248 $ 15,504,561 $ 14,569,887 $ 13,548,582 Total Recommended Minimum Target $ 10,921,000 $ 11,265,000 $ 11,481,000 $ 11,773,000 $ 12,043,000 $ 12,320,000 Beginning Reserve Fund Balances and 5-Year Projected Rate Period Recommended Reserve Targets
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City of Gilroy – Comprehensive Water & Wastewater Utility Rate Study Prepared by NBS – August 2023 22
A more detailed version of the utility’s proposed 5-year financial plan is included in Appendix B. The appendix tables include revenue requirements, reserve funds, revenue sources, proposed rate increases, and the City’s capital improvement program.

C. Cost-of-Service Analysis
Once the net revenue requirements are determined, the cost-of-service analysis (COSA) proportionately distributes the revenue requirements to each of the customer classes. The COSA consists of the classification of expenses and then the allocation of those expenses to customer classes based on allocation factors, such as water consumption and number of equivalent dwelling units (EDUs), or accounts.

Ultimately, a COSA is intended to result in rates that are proportional to the cost of providing service to each customer class.

CUSTOMER CLASSES AND ALLOCATION FACTORS
Customer classes are determined by combining customers with similar demand characteristics and types of use into categories that reflect the cost differentials to serve each type of customer. The most recent water consumption data was the basis for estimating the amount of flow that each customer class sends to the treatment plant.

Figure 21 shows the development of the flow/volume allocation factors by customer class calculated by taking the lowest consecutive 3-month water usage for FY 2021/22 for residential customers, annualizing that usage, and using the annual consumption for non-residential customer classes.

Figure 21. Development of the Flow Allocation Factor
Volumetric charges for non-residential customer classes were based on the annual consumption and their estimated effluent strengths (Residential customers do not have volumetric charges, just fixed monthly charges). Figure 22 summarizes the development of the strength allocation factors by customer class.

These strength-related percentages were used to allocate strength-related costs. (Note: Although residential customers do not have volumetric charges, their strengths, and their estimated pounds of BOD and TSS, are used to allocate capacity-related costs to single- and multi-family customers.) Agenda Item 11.1 Page 211 of 308
City of Gilroy – Comprehensive Water & Wastewater Utility Rate Study Prepared by NBS – August 2023 23
Figure 22. Development of the Strength Allocation Factor Figure 23 summarizes the development of the customer allocation factor.

Figure 23. Development of the Customer Allocation Factor

CLASSIFICATION AND ALLOCATION OF COSTS
As previously noted, costs are classified into the following four categories: (1) flow-related costs, (2) strength-related costs (BOD and TSS), (3) customer-related costs, and (4) direct allocation costs for monitoring, sampling, and pretreatment program costs. Most costs are typically allocated to more than one of these categories except for this last category in which costs, as implied by its name, are directly allocated to the three categories of non-residential customers (i.e., Significant/Categorical, NonSignificant/Categorical, and Other Non-Residential).

The City’s budgeted costs were allocated to these four categories which serve as the basis for calculating the fixed and variable charges. Tables in Appendix B show how the City’s expenses were classified and allocated to these cost-causation components.

Customer Class
Number of
Dwelling Units /
Accounts
Percent
of Total
Residential Customers
Single-Family Residence 12,330 66.2%
Multi-Family Residence 4,585 24.6%
Non-Residential Customers - Strength Classes
Low Strength 427 2.29%
Domestic Strength 253 1.36%
Medium Strength 55 0.30%
High Strength 128 0.69%
Non-Residential Customers - Categorical Classes
Significant/Categorical 6 0.03%
Non-Significant/Categorical 458 2.46%
Other Non-Residential 387 2.08%
Total: 18,628 100.0%
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City of Gilroy – Comprehensive Water & Wastewater Utility Rate Study Prepared by NBS – August 2023 24
Although the analysis of the classification of costs indicated that 44% of cost should be collected from volumetric charges and 56% from fixed charges12, these percentages don’t really apply in the City’s case because:
• Residential classes do not have a volumetric charge.
• Non-residential customers do not have a typical fixed charge that recovers system capacity and related fixed costs, just a volumetric charge based on their strength category. • As mentioned above, non-residential classes do have a separate fixed charge for monitoring, sampling, and pretreatment program costs, but this is only for these directly allocated costs, not system capacity costs.

Figure 24 summarizes the allocation of the net revenue requirements to each cost causation component for the proposed rates.

Figure 24. Allocation of Revenue Requirements by Customer Class D. Rate Design Analysis
During this rate study, NBS discussed with City staff various rate alternatives that collected revenue differently from fixed vs. variable charges. Ultimately, the rate alternative selected by City staff is one similar to the existing rate design. The reasons for selecting this alternative are (1) it maintains the existing rate design developed during the last study which utilize wastewater strengths for various customers types based on values in the State water Resources Control Board guidelines, 13 (2) it provides continuity for
sewer customers, and (3) it is easy to understand from a customer’s perspective and easy to administrate from City staff’s perspective.

FIXED CHARGES
The fixed charge recognizes that the wastewater utility incurs fixed costs regardless of whether customers send any wastewater into the City’s collection system. There are three factors used to develop the fixed charge: 1) the number of dwelling units for residential customers, 2) the number of accounts for non12 FY 2021/22 data indicate sewer rates currently collect 75% of rate revenue from fixed charges and 25% from volumetric charges. 13 The City’s previous rate study showed domestic customer strengths for BOD and TSS of 200 to 225 mg/l (Table 1, page 5). Residential strength factors used here are the 205 mg/l shown in Table 22.

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City of Gilroy – Comprehensive Water & Wastewater Utility Rate Study Prepared by NBS – August 2023 25
residential customers, and 3) the annual revenue requirement. The monthly fixed charge is calculated by taking 100% of total revenue requirements for residential customer classes and dividing by the number of accounts (for single-family) and by the number of dwelling units (for multi-family).

Non-residential fixed charges are based on the directly allocated monitoring, sampling, and pretreatment program costs and divided by the number of accounts in the three non-residential categorical customer classes (i.e., Non-Significant/Categorical, Significant/Categorical, and Other Non-Residential).

VARIABLE CHARGES
The variable charges are calculated by dividing 100% of the annual net revenue requirements for the nonresidential strength-related customer classes by the annual consumption.

The residential and non-residential fixed and variable charge calculations are summarized in Figure 25. The typical single-family residential customer has an average winter flow of 5.4 TG/month and strength factors of 205 mg/l for both BOD and TSS. Multi-family customers have an average winter flow of 3.6 TG/month and the same strength factors as single-family customers.

Figure 25. Development of Fixed and Variable Charges
E. Proposed Wastewater Rates
The proposed wastewater rates are similar to existing rates in terms of the rate design and rate methodology. Figure 26 compares the current and proposed rates for FY 2023/24 through FY 2027/28 by customer class. While proposed rates in the first year (FY 2023/24) reflect the cost-of-service adjustments that often occur when they have not been updated in eight years, the projected rates for future years are strictly tied to annual rate increase in an “across-the-board” adjustment. More detailed tables on the development of the proposed rates are documented in Appendix B.

Agenda Item 11.1 Page 214 of 308
City of Gilroy – Comprehensive Water & Wastewater Utility Rate Study Prepared by NBS – August 2023 26
Figure 26. Current vs. Proposed Wastewater Rates
Note: The proposed rates for FY23/24 will be implemented on January 1, 2024, and annually on January 1 for subsequent fiscal years thereafter
F. Comparison of Current and Proposed Wastewater Bills
The following figures compare monthly wastewater bills under current and proposed rates for various customers over the 5-year rate period. These bill comparisons are calculated at typical levels of consumption. The last figure presents a comparison of residential sewer rates for similar communities.

Figure 27. Single-Family Residential Wastewater Bill Comparison $46.64 $46.64 $46.64 $46.64 $46.64
$51.07
$53.11
$55.24
$57.45
$59.74
$0
$10
$20
$30
$40
$50
$60
$70
FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
Monthly Bill
Monthly Water Consumption (HCF)
SFR - Sewer Bill Comparison
Current vs. Proposed Rates
SFR Bill - Current Rates
SFR Bill - Proposed Rates
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Figure 28. Multi-Family Residential Wastewater Bill Comparison Agenda Item 11.1 Page 216 of 308
City of Gilroy – Comprehensive Water & Wastewater Utility Rate Study Prepared by NBS – August 2023 28
Figure 29. Non-Residential Low Strength Wastewater Bill Comparison Figure 30. Non-Residential Domestic Strength Wastewater Bill Comparison $106.31 $106.31 $106.31 $106.31 $106.31
$119.92
$124.72
$129.71
$134.90
$140.29
$0
$20
$40
$60
$80
$100
$120
$140
$160
FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
Monthly Bill
Monthly Water Consumption (HCF)
Low-Strength Commercial Sewer Bill Comparison
Current vs. Proposed Rates (28 TG/Mo.)
Current Rates Proposed Rates
$260.83 $260.83 $260.83 $260.83 $260.83 $269.31 $280.09 $291.29 $302.94
$315.06
$0
$50
$100
$150
$200
$250
$300
$350
$400
FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
Monthly Bill
Monthly Water Consumption (HCF)
Domestic-Strength Commercial Sewer Bill Comparison
Current vs. Proposed Rates (28 TG/Mo.)
Current Rates Proposed Rates
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City of Gilroy – Comprehensive Water & Wastewater Utility Rate Study Prepared by NBS – August 2023 29
Figure 31. Non-Residential Medium Strength Wastewater Bill Comparison Figure 32. Non-Residential High Strength Wastewater Bill Comparison $812.78 $812.78 $812.78 $812.78 $812.78
$940.48 $978.10 $1,017.22 $1,057.91
$1,100.23
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
Monthly Bill
Monthly Water Consumption (HCF)
High-Strength Commercial Sewer Bill Comparison
Current vs. Proposed Rates (43 TG/Mo.)
Current Rates Proposed Rates
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City of Gilroy – Comprehensive Water & Wastewater Utility Rate Study Prepared by NBS – August 2023 30
Figure 33. Residential Bills Comparison for Similar Communities

$38.90
$46.06 $46.64
$51.07
$61.30
$72.97
$80.38
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
San Jose Watsonville Gilroy,
Current
Gilroy,
Proposed
Santa Cruz Morgan Hill Hollister
Regional Sewer Bill Comparion - SFR Customer
Agenda Item 11.1 Page 219 of 308
City of Gilroy – Comprehensive Water & Wastewater Utility Rate Study Prepared by NBS – August 2023 31
Section 4. Recommendations and Next Steps
A. Consultant Recommendations
NBS recommends the City take the following actions:
• Approve and Accept this Study: NBS recommends the City Council formally approve and adopt this Study and its recommendations and proceed with the next steps outlined below to implement the proposed rates. This will provide documentation of the rate study analyses and the basis for analyzing potential changes to future rates.
• Implement Recommended Levels of Rate Increases and Proposed Rates: Based on successfully meeting the Prop 218 procedural requirements, the City should proceed with implementing the 5-year schedule of proposed rates and rate increases previously shown in Figure 13 and Figure 26. This will help ensure the continued financial health of City’s utilities.

B. Next steps
Annually Review Rates and Revenue – Any time an agency adopts new utility rates or rate structures, those new rates should be closely monitored over the next several years to ensure the revenue generated is sufficient to meet the annual revenue requirements. Changing economic and water consumption patterns underscore the need for this review, as well as potential and unseen changing revenue requirements — particularly those related to environmental regulations that can significantly affect capital improvements and repair and replacement costs.

Note: The attached Technical Appendices provide more detailed information on the analysis of the financial plan, revenue requirements, cost-of-service, and the rate design analyses that have been summarized in this report.

C. NBS’ Principal Assumptions and Considerations
In preparing this report and the opinions and recommendations included herein, NBS has relied on several principal assumptions and considerations regarding financial matters, conditions, and events that may occur in the future. This information and these assumptions, including the City’s budgets, capital improvement costs, customer accounts and consumption, and information from City staff were provided by sources we believe to be reliable, although NBS has not independently verified this data.

While we believe NBS’ use of such information and assumptions is reasonable for the purpose of this report and its recommendations, some assumptions will invariably not materialize as stated herein and may vary significantly due to unanticipated events and circumstances. Therefore, the actual results can be expected to vary from those projected to the extent that actual future conditions differ from those assumed by us or provided to us by others.

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City of Gilroy – Comprehensive Water & Wastewater Utility Rate Study Prepared by NBS – August 2023 32
Technical Appendices
Agenda Item 11.1 Page 221 of 308
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Appendix A. Water Rate Study Tables and Figures
Agenda Item 11.1 Page 222 of 308
CITY OF GILROY Financial Plan & Reserve Summary

WATER RATE STUDY
Financial Plan and Reserve Projections
TABLE 1 : FINANCIAL PLAN AND SUMMARY OF REVENUE REQUIREMENTS Budget
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 Sources of Water Funds
Rate Revenue: 1
User Fees $ 13,665,000 $ 13,939,000 $ 14,218,000 $ 14,431,270 $ 14,647,739 $ 14,867,455 Other Revenue:

Connect/Install Charges 105,000 110,000 112,000 113,680 115,385 117,116 Bank Interest & Misc.2
488,737 499,621 509,514 5,075 5,151 5,228
Total Sources of Funds $ 14,258,737 $ 14,548,621 $ 14,839,514 $ 14,550,025 $ 14,768,275 $ 14,989,800 Uses of Water Funds
Operating Expenses: 1
Water Administration $ 2,759,176 $ 3,460,721 $ 3,533,818 $ 3,636,249 $ 3,748,440 $ 3,864,096 Finance Water Utility Billing 873,507 1,047,309 1,077,076 1,095,995 1,133,828 1,172,968 Water Operations 4,983,992 6,952,444 6,568,972 6,810,814 7,061,889 7,322,564 Valley Water 3,293,972 4,641,000 4,873,050 5,116,703 5,372,538 5,641,165 Additional Capital Expenditures - 404,450 404,450 - - - Subtotal: Operating Expenses $ 11,910,647 $ 16,505,924 $ 16,457,366 $ 16,659,760 $ 17,316,694 $ 18,000,793 Other Expenditures:

New Debt Service $ - $ - $ - $ - $ 453,067 $ 906,134
Rate-Funded Capital Expenses - - - - - -
Subtotal: Other Expenditures $ - $ - $ - $ - $ 453,067 $ 906,134 Total Uses of Water Funds $ 11,910,647 $ 16,505,924 $ 16,457,366 $ 16,659,760 $ 17,769,761 $ 18,906,927 plus: Revenue from Rate Increases3 - 557,560 1,745,841 2,900,027 3,817,967 4,624,944 Annual Surplus/(Deficit) After Rate Increases $ 2,348,090 $ (1,399,743) $ 127,988 $ 790,292 $ 816,481 $ 707,816 Net Revenue Req't. (Total Uses less Non-Rate Revenue) $ 11,316,910 $ 15,896,303 $ 15,835,852 $ 16,541,005 $ 17,649,225 $ 18,784,583 Total Rate Revenue After Rate Increases $ 13,665,000 $ 14,496,560 $ 15,963,841 $ 17,331,297 $ 18,465,706 $ 19,492,400 Projected Annual Rate Revenue Increase 0.00% 8.00% 8.00% 6.00% 4.00% 4.00% Cumulative Increase from Annual Revenue Increases 0.00% 8.00% 16.64% 23.64% 28.58% 33.73% Debt Coverage After Rate Increase N/A N/A N/A N/A 2.80 1.78

1. Revenue and expenses for FY 2022/23 provided by the City. Revenues and expenses for all other years are escalated based on the forecasting assumptions in Table 9 (See Exhibit 1 (O&M) Tab). Source file: FY23 Budgets.xlsx .

2. Interest income for FY FY 2022/23 is from the City's Budget. For all other years, it is calculated based on historical LAIF returns.

3. Revenue from rate increases assumes an implementation date of April 1, 2023 for new rates. For each year thereafter, the assumption is that new rates will be implemented on July 1st of each year.
3 <-- Select Financial Plan Scenario Here
Financial Plan Alternatives FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 1 Alt 1 - No Annual Rate Increases/No New Debt 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 2 Alt 2 - Gen. Infl. Rate Increases/New Rev. Bonds 0.00% 3.50% 3.50% 3.50% 3.50% 3.50% 3 Alt 3 - Custom Rate Increases/New Rev. Bonds 0.00% 8.00% 8.00% 6.00% 4.00% 4.00% 4 Alt 4 - Full CIP/No New Debt 0.00% 12.00% 12.00% 12.00% 8.00% 6.00% CIP Funding Plan:
2 85% Funding of CIP, at actual cost & timing

RATE REVENUE REQUIREMENTS SUMMARY
5-Year Projected Rate Period
Prepared by NBS
www.nbsgov.com | Toll-free: 800.676.7516 Financial Plan, Page 1 of 36 Agenda Item 11.1 Page 223 of 308
CITY OF GILROY Financial Plan & Reserve Summary

WATER RATE STUDY
Financial Plan and Reserve Projections
TABLE 2 : RESERVE FUND SUMMARY
Budget
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 Unrestricted Reserve:

Total Beginning Cash1
$ 29,603,445
Operating Reserve
Beginning Reserve Balance2
$ 6,000,000 $ 5,955,000 $ 4,555,257 $ 4,683,245 $ 5,473,537 $ 6,290,019 Plus: Net Cash Flow (After Rate Increases) 2,348,090 (1,399,743) 127,988 790,292 816,481 707,816 Less: Transfer out to Capital and Infrastructure Reserve (2,393,090) - - - - - Ending Operating Reserve Balance $ 5,955,000 $ 4,555,257 $ 4,683,245 $ 5,473,537 $ 6,290,019 $ 6,997,835 Target Ending Balance (6 Months of O&M) 2
$ 5,955,000 $ 8,253,000 $ 8,229,000 $ 8,330,000 $ 8,658,000 $ 9,000,000 Capital Rehabilitation & Replacement Reserve
Beginning Reserve Balance $ 23,603,445 $ 25,382,158 $ 22,643,278 $ 8,114,397 $ 7,583,609 $ 7,583,609 Plus: Transfer of Operating Reserve Surplus 2,393,090 - - - - - Less: Use of Reserves for Capital Projects (614,378) (2,738,879) (14,528,882) (530,788) - (365,779) Ending Capital and Infrastructure Reserve Balance $ 25,382,158 $ 22,643,278 $ 8,114,397 $ 7,583,609 $ 7,583,609 $ 7,217,830 Target Ending Balance (50% of Avg. CIP Costs) 3
$ 4,140,000 $ 4,140,000 $ 4,140,000 $ 4,140,000 $ 4,140,000 $ 4,140,000 Ending Balance - Unrestricted Reserves $ 31,337,158 $ 27,198,535 $ 12,797,642 $ 13,057,146 $ 13,873,627 $ 14,215,665 Min. Target Ending Balance -Excl. Restricted Reserves $ 10,095,000 $ 12,393,000 $ 12,369,000 $ 12,470,000 $ 12,798,000 $ 13,140,000 Ending Surplus/(Deficit) Compared to Reserve Targets $ 21,242,158 $ 14,805,535 $ 428,642 $ 587,146 $ 1,075,627 $ 1,075,665

1. Beginning cash balances provided by City staff for Fund 705 - Water Operations. Source file: Account Trial Balance FY22 - 430-435-700-705.pdf .

2. The target ending balance is set equal to 6 months of O&M expenses.

3. The target ending balance is set equal to 50% of average CIP costs for the 5-year rate adoption period. See Exhibit 2 (CIP) for details.

TABLE 3 : RESERVE FUND SUMMARY, cont.

Budget
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 Restricted Reserve: 1
Water Impact Fee Reserve (provided for informational purposes only) Beginning Reserve Balance $ 6,053,344 $ 5,887,790 $ 2,632,956 $ 4,254,889 $ 5,195,043 $ 5,540,615 Plus: Interest Earnings & Misc. 99,508 107,507 109,421 47,557 48,451 49,368 Plus: Capacity Fee Revenue 319,569 478,204 1,512,512 892,597 297,121 363,752 Less: Use of Reserves for Capital Projects (584,631) (3,840,545) - - - - Ending Connection Fee Fund Balance $ 5,887,790 $ 2,632,956 $ 4,254,889 $ 5,195,043 $ 5,540,615 $ 5,953,735 Debt Reserve
Beginning Reserve Balance $ - $ - $ - $ - $ - $ 453,067 Plus: Reserve Funding from New Debt Obligations - - - - 453,067 453,067 Plus: Interest Earnings - - - - - 3,838
Ending Debt Reserve Balance $ - $ - $ - $ - $ 453,067 $ 909,972 Target Ending Balance $ - $ - $ - $ - $ 453,067 $ 906,134 Annual Interest Earnings Rate 2

0.85% 0.85% 0.85% 0.85% 0.85% 0.85%

1. The beginning cash balances provided by the City. Source file: Account Trial Balance FY22 - 430-435-700-705.pdf .

2. Historical interest earning rates are per the average annual yields for funds invested in LAIF (2018-2022). The source is the California State Treasurer's website:
https://www.treasurer.ca.gov/pmia-laif/historical/annual.asp .

SUMMARY OF CASH ACTIVITY
5-Year Projected Rate Period

SUMMARY OF CASH ACTIVITY
5-Year Projected Rate Period
Prepared by NBS
www.nbsgov.com | Toll-free: 800.676.7516 Financial Plan, Page 2 of 36 Agenda Item 11.1 Page 224 of 308
CITY OF GILROY Charts & Tables

WATER RATE STUDY
Rate Adjustment Charts and Report Tables
CHART 1
$.0 Mil.
$5.0 Mil.
$10.0 Mil.
$15.0 Mil.
$20.0 Mil.
$25.0 Mil.
$30.0 Mil.
$35.0 Mil.
2023 2024 2025 2026 2027 2028
Annual Obligations
Fiscal Year Ending June 30
Water Revenue Requirements vs.

Revenue Under Existing and Increased Rates
Cash Funded Capital Expenses
O&M Expenses
Revenues under Existing Rates
Revenues under Increased Rates
Prepared by NBS
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CITY OF GILROY Charts & Tables

WATER RATE STUDY
Rate Adjustment Charts and Report Tables
CHART 2
$.0 Mil.
$5.0 Mil.
$10.0 Mil.
$15.0 Mil.
$20.0 Mil.
$25.0 Mil.
$30.0 Mil.
$35.0 Mil.
2023 2024 2025 2026 2027 2028
Fiscal Year Ending June 30
Ending Unrestricted Reserve vs.

Minimum Reserve Targets
Ending Cash Balance (Unrestricted Reserves)
Minimum Target Reserve Balance
Prepared by NBS
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CITY OF GILROY Exhibit 1

WATER RATE STUDY
Operating Revenue and Expenses
TABLE 4 :REVENUE FORECAST1
Projected Actuals
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 Rate Revenue
705 8000 705 -80-8000-000-45120 User Fees 1 $ 13,665,000 $ 13,939,000 $ 14,218,000 $14,431,270 $14,647,739 $14,867,455 Other Revenue
705 8000 705 -80-8000-000-45140 Connect/Install Charges 1 105,000 110,000 112,000 113,680 115,385 117,116 705 8000 705 -80-8000-000-45145 Overhead Revenue 1 - - - - - - 705 8000 705 -80-8000-000-46110 Bank Interest See FP 483,737 494,621 504,514 - - - 705 8000 705 -80-8000-000-47810 Miscellaneous Revenues 1 5,000 5,000 5,000 5,075 5,151 5,228 Subtotal - Other Revenue 593,737 609,621 621,514 118,755 120,536 122,344 Water Impact Fee Revenue
435 5500 435 -55-5500-000-45150 Developer's Impact Fee 1 319,569 478,204 1,512,512 892,597 297,121 363,752 435 5500 435 -55-5500-000-46110 Bank Interest 1 93,615 95,721 97,635 35,771 36,665 37,582 435 5500 435 -55-5500-000-48110 Interfund Transfer In 7 5,893 11,786 11,786 11,786 11,786 11,786 TOTAL: REVENUE $ 14,677,814 $ 15,134,332 $ 16,461,447 $ 15,490,179 $ 15,113,847 $ 15,402,920 DIVISION Basis
5-Year Projected Rate Period FUND ACCOUNT DESCRIPTION
Prepared by NBS
www.nbsgov.com | Toll-Free: 800.676.7516 Exhibit 1 (O&M), 5 of 36 Agenda Item 11.1 Page 227 of 308
CITY OF GILROY Exhibit 1

WATER RATE STUDY
Operating Revenue and Expenses
TABLE 5 :OPERATING EXPENSE FORECAST1
Projected Actuals
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 Fund 705 - Water Operations
8000 - Water Administration
705 8000 705 -80-8000-000-50120 Wages/Part Time 3 $ 43,597 $ 125,000 $ 125,000 $ 129,375 $ 133,903 $ 138,590 705 8000 705 -80-8000-000-50215 Retirement (Part Time) 3 632 2,813 2,813 2,911 3,013 3,119 705 8000 705 -80-8000-000-50220 Medicare 3 705 1,813 1,813 1,876 1,942 2,010 705 8000 705 -80-8000-000-51510 Professional Support 3 - 26,000 26,000 26,910 27,852 28,827 705 8000 705 -80-8000-000-51620 Audit Services 2 8,700 - - - - - 705 8000 705 -80-8000-000-51630 Contractual Services 2 - 6,500 6,400 705 8000 706 -80-8000-000-54110 Interfund Transfer Out 2 13,796 705 8000 705 -80-8000-000-54130 Fleet Service Charge 2 75,931 98,943 100,692 103,779 106,961 110,241 705 8000 705 -80-8000-000-54140 Facility Service Charge 2 124,543 294,076 316,145 325,838 335,829 346,126 705 8000 705 -80-8000-000-54145 Info Tech Service Charge 2 454,960 606,926 558,596 575,723 593,376 611,570 705 8000 705 -80-8000-000-54150 Overhead Charges 2 1,558,875 1,779,498 1,854,574 1,911,438 1,970,045 2,030,450 705 8000 705 -80-8000-000-54155 Liability Insurance Charges 2 401,933 430,902 452,735 466,617 480,924 495,669 705 8000 705 -80-8000-000-57145 Water Conservation 2 60,504 72,500 72,500 74,723 77,014 79,375 705 8000 705 -80-8000-000-58130 Claims 2 15,000 15,750 16,550 17,057 17,580 18,119 Subtotal - Water Administration $ 2,759,176 $ 3,460,721 $ 3,533,818 $ 3,636,249 $ 3,748,440 $ 3,864,096 8010 - Finance Water Utility Billing
705 8010 705 -80-8010-000-50110 Salaries 3 $ 455,813 $ 580,139 $ 620,284 $ 641,994 $ 664,464 $ 687,720 705 8010 705-80-8020-000-50110 Utility Billing Sup/Sen. Acct. 3 - - - - - - 705 8010 705 -80-8010-000-50114 Earned Leave Cashout 3 5,519 - - - - - 705 8010 705 -80-8010-000-50120 Wages/Part Time 3 23,048 33,750 21,788 22,551 23,340 24,157 705 8010 705 -80-8010-000-50130 Overtime 3 14,000 10,000 10,000 705 8010 705 -80-8010-000-50150 Overtime Meals 3 30 - - 705 8010 705 -80-8010-000-50205 Workers Comp 3 2,023 2,411 2,521 2,610 2,701 2,796 705 8010 705 -80-8010-000-50210 Retirement (Full Time) 3 48,749 69,133 71,870 74,385 76,989 79,683 705 8010 705 -80-8010-000-50212 Deferred Compensation 3 1,176 2,016 2,016 2,087 2,160 2,235 705 8010 705 -80-8010-000-50213 UAL Retirement 3 82,911 88,913 95,465 98,806 102,264 105,843 705 8010 705 -80-8010-000-50215 Retirement (Part Time) 3 18 759 490 507 525 544 705 8010 705 -80-8010-000-50220 Medicare 3 7,467 9,053 9,466 9,797 10,140 10,495 705 8010 705 -80-8010-000-50225 Health Insurance Benefits 3 105,332 113,442 113,594 117,570 121,685 125,944 705 8010 705 -80-8010-000-50230 Life Insurance Benefits 3 778 757 779 806 834 863 705 8010 705 -80-8010-000-50235 Employee Assistance Prog 3 935 1,087 1,109 1,148 1,188 1,230 705 8010 705 -80-8010-000-50240 Unemployment Insurance 3 805 912 959 992 1,027 1,063 705 8010 705 -80-8010-000-50255 Misc Disability Insurance 3 984 1,260 1,260 1,304 1,350 1,397 705 8010 705 -80-8010-000-50260 Retiree Medical 3 - 900 900 705 8010 705 -80-8010-000-51110 Employee Training 2 - 3,400 3,400 705 8010 705 -80-8010-000-51120 Employee Travel, Food,Lodge 2 669 1,250 1,250 705 8010 705 -80-8010-000-51430 Postage 2 50 100 100
705 8010 705 -80-8010-000-50510 Professional Support 2 2,200 - - 705 8010 705 -80-8010-000-51630 Contractual Services 2 119,000 126,025 117,825 121,438 125,161 128,999 705 8010 705 -80-8010-000-52110 Office/Computer Supplies 2 2,000 2,000 2,000 Subtotal - Finance Water Utility Billing $ 873,507 $ 1,047,309 $ 1,077,076 $ 1,095,995 $ 1,133,828 $ 1,172,968 DIVISION 5-Year Projected Rate Period
Basis FUND ACCOUNT DESCRIPTION
Prepared by NBS
www.nbsgov.com | Toll-Free: 800.676.7516 Exhibit 1 (O&M), 6 of 36 Agenda Item 11.1 Page 228 of 308
CITY OF GILROY Exhibit 1

WATER RATE STUDY
Operating Revenue and Expenses
TABLE 6 :OPERATING EXPENSE FORECAST, cont.1
Projected Actuals
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 Fund 705 - Water Operations
8020 - Water Operations
705 8020 705 -80-8020-000-50110 Salaries 3 $ 1,463,012 $ 2,269,298 $ 2,432,834 $ 2,517,983 $ 2,606,113 $ 2,697,327 705 8020 705-80-8020-000-50110 FT Engineer I/II (Water) 3 - - - - - - 705 8020 705 -80-8020-000-50110 Employee Training 3 - 25,000 25,000 25,875 26,781 27,718 705 8020 705 -80-8020-000-50120 Employee Travel, Food, Lodging 3 - 5,000 5,000 5,175 5,356 5,544 705 8020 705 -80-8020-000-50114 Earned Leave Cashout 3 9,000 - - - - - 705 8020 705 -80-8020-000-50120 Wages/Part Time 3 37,812 - - - - - 705 8020 705 -80-8020-000-50130 Overtime 3 63,051 73,710 77,395 80,104 82,907 85,809 705 8020 705 -80-8020-000-50150 Overtime Meals 3 - 2,000 2,000 2,070 2,142 2,217 705 8020 705 -80-8020-000-50205 Workers Comp 3 77,758 101,497 106,072 109,785 113,627 117,604 705 8020 705 -80-8020-000-50210 Retirement (Full Time) 3 152,220 271,399 282,934 292,837 303,086 313,694 705 8020 705 -80-8020-000-50212 Deferred Compensation 3 3,772 7,326 7,326 7,582 7,848 8,122 705 8020 705 -80-8020-000-50213 UAL Retirement 3 293,133 353,639 383,140 396,550 410,429 424,794 705 8020 705 -80-8020-000-50215 Retirement (Part Time) 3 521 - - - - - 705 8020 705 -80-8020-000-50220 Medicare 3 24,353 33,996 36,422 37,697 39,016 40,382 705 8020 705 -80-8020-000-50225 Health Insurance Benefits 3 313,426 460,498 461,940 478,108 494,842 512,161 705 8020 705 -80-8020-000-50230 Life Insurance Benefits 3 2,448 3,144 3,243 3,356 3,474 3,595 705 8020 705 -80-8020-000-50235 Employee Assistance Prog 3 2,911 4,262 4,347 4,499 4,657 4,820 705 8020 705 -80-8020-000-50240 Unemployment Insurance 3 2,794 3,620 3,816 3,950 4,088 4,231 705 8020 705 -80-8020-000-50255 Misc Disability Insurance 3 2,999 4,964 4,964 5,138 5,318 5,504 705 8020 705 -80-8020-000-50260 Retiree Medical 3 2,400 2,400 - - - - 705 8020 705 -80-8020-000-50310 Apparel, Boots, Ppe 2 22,291 30,000 30,000 30,920 31,868 32,845 705 8020 705 -80-8020-000-51410 Utilities 5 921,543 1,013,698 1,064,382 1,120,163 1,178,868 1,240,648 705 8020 705 -80-8020-000-51420 Telecommunications 2 50,000 8,100 8,100 8,348 8,604 8,868 705 8020 705 -80-8020-000-51510 Professional Support 2 2,153 5,000 5,000 5,153 5,311 5,474 705 8020 705 -80-8020-000-51630 Contractual Services 2 376,939 1,128,400 450,000 463,798 478,018 492,675 705 8020 705 -80-8020-000-52110 Office/Computer Supplies 2 4,026 15,000 15,000 15,460 15,934 16,423 705 8020 705 -80-8020-000-52150 Department Supplies 2 51,494 60,000 60,000 61,840 63,736 65,690 705 8020 705 -80-8020-000-52210 Repairs & Maintenance 2 147,625 250,000 250,000 257,665 265,566 273,708 705 8020 705 -80-8020-000-52220 Well System Maintenance 2 27,642 150,000 150,000 154,599 159,339 164,225 705 8020 705 -80-8020-000-52310 Equipment Rental 2 33 10,000 10,000 10,307 10,623 10,948 705 8020 705 -80-8020-000-52710 Permits 2 1,973 10,000 10,000 10,307 10,623 10,948 705 8020 705 -80-8020-000-53120 Equipment/Furniture 2 84,337 75,000 75,000 77,300 79,670 82,113 705 8020 705 -80-8020-000-53135 Improvements 2 365,770 - - - - - 705 8020 705 -80-8020-000-53142 Capital Improvement Plan See Exh 2 - - - - - - 705 8020 705 -80-8020-000-54110 Interfund Transfer Out 2 342,000 433,788 458,181 472,229 486,709 501,632 705 8020 705 -80-8020-000-57150 Valley Water 6 3,293,972 4,641,000 4,873,050 5,116,703 5,372,538 5,641,165 Subtotal - Water Operations $ 8,143,407 $ 11,451,740 $ 11,295,146 $ 11,775,500 $ 12,277,089 $ 12,800,885 DIVISION 5-Year Projected Rate Period FUND ACCOUNT DESCRIPTION Basis Prepared by NBS
www.nbsgov.com | Toll-Free: 800.676.7516 Exhibit 1 (O&M), 7 of 36 Agenda Item 11.1 Page 229 of 308
CITY OF GILROY Exhibit 1

WATER RATE STUDY
Operating Revenue and Expenses
TABLE 7 :OPERATING EXPENSE FORECAST, cont.1
Projected Actuals
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 Fund 705 - Water Operations
8030 - Water Backflow Prevention
705 8030 705 -80-8030-000-50110 Salaries 3 $ 79,465 $ 74,991 $ 79,074 $ 81,842 $ 84,706 $ 87,671 705 8030 705 -80-8030-000-50130 Earned Leave Cashout 3 - - - - - - 705 8030 705 -80-8030-000-50205 Wages/Part Time 3 - - - - - - 705 8030 705 -80-8030-000-50210 Overtime 3 6,460 7,500 7,500 7,763 8,034 8,315 705 8030 705 -80-8030-000-50212 Overtime Meals 3 - - - - - - 705 8030 705 -80-8030-000-50213 Compensated Absences 3 - - - - - - 705 8030 705 -80-8030-000-50220 Workers Comp 3 5,789 4,450 4,590 4,751 4,917 5,089 705 8030 705 -80-8030-000-50225 Retirement (Full Time) 3 8,537 9,005 9,233 9,556 9,891 10,237 705 8030 705 -80-8030-000-50230 Deferred Compensation 3 249 - - - - - 705 8030 705 -80-8030-000-50235 Ual Retirement 3 16,763 11,703 12,455 12,891 13,342 13,809 705 8030 705 -80-8030-000-50240 Retirement (Part Time) 3 - - - - - - 705 8030 705 -80-8030-000-50255 Medicare 3 1,340 1,197 1,256 1,300 1,345 1,393 705 8030 705 -80-8030-000-51430 Health Insurance Benefits 3 14,085 12,312 12,312 12,743 13,189 13,651 705 8030 705 -80-8030-000-51510 Life Insurance Benefits 3 104 90 92 95 99 102 705 8030 705 -80-8030-000-51630 Employee Assistance Prog 3 137 116 119 123 127 132 705 8030 705 -80-8030-000-52110 Unemployment Insurance 3 157 117 122 126 131 135 705 8030 705 -80-8030-000-50255 Misc Disability Insurance 3 141 123 123 127 132 136 705 8030 705 -80-8030-000-51110 Employee Training 3 - 1,000 1,000 1,035 1,071 1,109 705 8030 705 -80-8030-000-51120 Employee Travel, Food,Lodge 3 - 1,000 1,000 1,035 1,071 1,109 705 8030 705 -80-8030-000-51430 Postage 3 - 100 - - - - 705 8030 705 -80-8030-000-51510 Professional Support 3 1,331 1,000 1,000 1,035 1,071 1,109 705 8030 705 -80-8030-000-51630 Contractual Services 3 - 6,000 6,000 6,210 6,427 6,652 705 8030 705 -80-8030-000-52110 Office/Computer Supplies 3 - 1,000 1,000 1,035 1,071 1,109 705 8030 705 -80-8030-000-52210 Repairs & Maintenance 3 - 10,000 10,000 10,350 10,712 11,087 Subtotal - Water Backflow Prevention $ 134,558 $ 141,704 $ 146,876 $ 152,017 $ 157,337 $ 162,844 DIVISION ACCOUNT DESCRIPTION Basis
5-Year Projected Rate Period FUND
Prepared by NBS
www.nbsgov.com | Toll-Free: 800.676.7516 Exhibit 1 (O&M), 8 of 36 Agenda Item 11.1 Page 230 of 308
CITY OF GILROY Exhibit 1

WATER RATE STUDY
Operating Revenue and Expenses
TABLE 8 :OPERATING EXPENSE FORECAST, cont.1
Projected Actuals
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 Fund 705 - Water Operations
Additional Capital Expenditures
705 8020 705-80-8020-000-53120 One-time Vehicles One-Time - 404,450 404,450 - - - Subtotal - Additional Expenditures $ - $ 404,450 $ 404,450 $ - $ - $ - TOTAL: WATER OPERATIONS EXPENSES $ 11,910,647 $ 16,505,924 $ 16,457,366 $ 16,659,760 $ 17,316,694 $ 18,000,793 TABLE 9 :FORECASTING ASSUMPTIONS
Basis 2023 2024 2025 2026 2027 2028
Customer Growth31 -- 1.50% 1.50% 1.50% 1.50% 1.50%
General Cost Inflation42 -- 3.07% 3.07% 3.07% 3.07% 3.07% Labor Cost Inflation53 -- 3.50% 3.50% 3.50% 3.50% 3.50% Electricty64 -- 5.64% 5.64% 5.64% 5.64% 5.64%
Fuel & Utilities75 -- 5.24% 5.24% 5.24% 5.24% 5.24%
Water Purchases86 -- 5.00% 5.00% 5.00% 5.00% 5.00%
No Escalation 7 -- 0.00% 0.00% 0.00% 0.00% 0.00%

1. Revenue and expenses for FY 2022/23 provided by the City. Revenues and expenses for all other years are escalated based on the forecasting assumptions in Table 9. Source file: FY23 Budgets.xlsx .

2. Expenses are inflated each year by the following annual inflation factor categories.

3. Customer growth is based on estimated service area population growth through FY 2044/45. Source file: Gilroy 2020 UWMP.pdf , page 3-9.

4. General cost inflation is based on the 5-year average annual change in the Consumer Price Index for all Urban Consumers in the San Francisco-Oakland-Hayward, CA area.

5. Labor cost inflation is based on the 5-year average annual change in the Quarterly Census of Employment and Wages for San Francisco County, CA.

6. Electricity cost inflation is based on the 5-year average change in the Consumer Price Index for San Francisco County.

7. Fuel & Utilities cost inflation is based on the 5-year average annual change in the Consumer Price Index - Average Price Data for Fuels and related products and power. This factor is used for utility costs other than electricity.

8. The growth for water purchases is estimated at 4% annually and calculated using the City's budgets for FY 2021/22 and FY 2022/23. Source file: FY23 Budgets.xlsx . 5-Year Projected Rate Period FUND DIVISION ACCOUNT DESCRIPTION Basis INFLATION FACTORS2
Prepared by NBS
www.nbsgov.com | Toll-Free: 800.676.7516 Exhibit 1 (O&M), 9 of 36 Agenda Item 11.1 Page 231 of 308
CITY OF GILROY Exhibit 2

WATER RATE STUDY
Capital Improvement Plan Expenditures
TABLE 10 : CAPITAL FUNDING SUMMARY
CAPITAL FUNDING FORECAST Budget
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 Grants $ - $ - $ - $ - $ - $ -
Use of Capacity Fee Reserves 584,631 3,840,545 - - - -
SRF Loan Funding - - - - - -
Use of New Revenue Bond Proceeds - - - 6,000,000 6,000,000 4,000,000 Use of Capital Rehabilitation and Replacement Reserve 614,378 2,738,879 14,528,882 530,788 - 365,779 Rate Revenue - - - - - -
Total Sources of Capital Funds $ 1,199,009 $ 6,579,425 $ 14,528,882 $ 6,530,788 $ 6,000,000 $ 4,365,779 Uses of Capital Funds:

Total Project Costs $ 1,199,009 $ 6,579,425 $ 14,528,882 $ 6,530,788 $ 3,199,919 $ 4,365,779 Capital Funding Surplus (Deficiency) $ - $ - $ - $ - $ 2,800,082 $ - SRF Loan Funding $ - $ - $ - $ - $ - $ -
New Revenue Bond Proceeds $ - $ - $ - $ 6,000,000 $ 6,000,000 $ 4,000,000 Financial Plan Scenario:
3 Alt 3 - Custom Rate Increases/New Rev. Bonds

CAPITAL IMPROVEMENT PROGRAM FUNDING OPTIONS
2 Policy Choice 2023 2024 2025 2026 2027 2028
1 Full Funding of CIP, at actual cost & timing $ 1,410,599 $ 7,740,500 $ 17,092,802 $ 7,683,280 $ 3,764,610 $ 5,136,210 2 85% Funding of CIP, at actual cost & timing $ 1,199,009 $ 6,579,425 $ 14,528,882 $ 6,530,788 $ 3,199,919 $ 4,365,779 3 60% Funding of CIP, at actual cost & timing $ 846,359 $ 4,644,300 $ 10,255,681 $ 4,609,968 $ 2,258,766 $ 3,081,726 Capital Improvement Program Funding Choice 2023 2024 2025 2026 2027 2028 Effective Annual Funding Amount $ 1,199,009 $ 6,579,425 $ 14,528,882 $ 6,530,788 $ 3,199,919 $ 4,365,779 5-Year Projected Rate Period
Insert policy choice in box to right, based on options listed below:

Funding Sources:

Prepared by NBS
www.nbsgov.com | Toll-Free: 800.676.7516 Exhibit 2 (CIP), 10 of 36 Agenda Item 11.1 Page 232 of 308
CITY OF GILROY Exhibit 2

WATER RATE STUDY
Capital Improvement Plan Expenditures

CAPITAL IMPROVEMENT PROGRAM
TABLE 11 : CAPITAL IMPROVEMENT PROGRAM COSTS (in Current-Year Dollars ) Project No. Description 2023 2024 2025 2026 22027 2028
Capital Improvement Program - Fiscal Year 2023 to Fiscal Year 2028 800250 Casey and Swanston Water Line Replacement $ - $ 466,707 $ 2,825,800 $ - $ - $ - 800310 Automated Flexnet Water Meter Installation 794,200 612,700 612,700 - - - 800590 Broadway and Sargent Water Line Replacement - - 185,295 877,600 - - 800600 Church and Gurries Water Line Replacement - 86,966 314,600 - - - 800610 Church Street - Welburn to First Water Line Replacement - - 250,335 1,173,400 - - 800620 Forest and Eighth Water Line Replacement - 89,974 369,200 - - - 800630 Steel Water Service Line Replacement Citywide - 104,280 104,280 104,280 104,280 104,280 900740 Monterey-Leavesley to Ronan Water Line Replacement - - 821,473 4,651,900 - - 800640 Monterey and Eighth Water Line Replacement - - 101,325 406,700 - - 800650 Abandon 2" Water Line from 7041 to 7161 Monterey Street - 108,900 847,000 - - - 800660 Murray at Burke Water Line Reroute - - 133,794 469,400 - - 800670 Saint Louise Hospital Large Water Meter Replacement - 63,200 - - - - 800690 Water Reservoirs A and B - Painting - 483,200 - - - - 800700 Water Reservoirs A and B - Retrofit Overflow Piping - 482,000 - - - - 800710 Water Well Nos. 1 and 4 Compliance Improvements - 82,600 - - - - 800720 Water Well Nos. 1, 2, 4 and 6 Upgrade Improvements - 1,025,200 10,527,000 - - - 9000730 Martin and Railroad Water Line - - - - - 1,371,600 Subtotal - Capital Improvement Program $ 794,200 $ 3,605,727 $ 17,092,802 $ 7,683,280 $ 104,280 $ 1,475,880 Water System Master Plan Projects 3
Pipeline Improvements
P1-1 Zone 1 $ - $ - $ - $ - $ 163,250 $ 163,250
P1-2 Monterey Hwy / Orsetti Rd / Hwy 101 - - - - 244,430 244,430 P1-3 Monterey Hwy - - - - 11,690 11,690
P1-4 Murray Ave - - - - 111,650 111,650
P1-5 Arroyo Cir - - - - 3,580 3,580
P1-6 Lewis St - - - - 8,120 8,120
P1-7 Forest St - - - - 13,550 13,550
P1-8 Gilman Rd / Camino Arroyo - - - - 15,240 15,240
P1-9 Pacheco Pass Hwy - - - - 87,810 87,810
P1-10 Camino Arroyo - - - - 154,290 154,290
P1-11 Cameron Blvd - - - - 106,580 106,580
P1-12 ROW - - - - 82,230 82,230
P1-13 ROW / Cameron Blvd - - - - 230,400 230,400
P1-14 Luchessa Ave - - - - 328,850 328,850
P1-15 Thomas Rd - - - - 155,300 155,300
P1-16 Rossi Ln - - - - 138,560 138,560
P1-17 ROW - - - - 91,860 91,860
P1-18 ROW - - - - 146,670 146,670
P1-19 Garlic Farm Wy / Southside Dr - - - - 234,970 234,970 P1-20 Southside Dr - - - - 33,510 33,510
P1-21 Southside Dr - - - - 152,770 152,770
P1-22 Santa Teresa Blvd - - - - 14,230 14,230
Storage Reservoir Improvements
3H-1 Construct an additional storage at existing 3D site - - - - 20,790 20,790 Groundwater Well Improvements
GW-10 Intersection of San Ysidro Ave and Las Animas Ave - - - - 370,000 370,000 GW-11 Intersection of Camino Arroyo and Renz Lane - - - - 370,000 370,000 GW-12 Intersection of Wren Ave and Vickery Lane - - - - 370,000 370,000 Subtotal - Master Plan Projects $ - $ - $ - $ - $ 3,660,330 $ 3,660,330 Impact Fee Projects 4
800050 McCarthy Site Well (Well #9) $ 562,145 $ 3,550,800 $ - $ - $ - $ - Subtotal - Impact Fee Projects $ 562,145 $ 3,550,800 $ - $ - $ - $ - Estimated Future Projects
Future Projects5$ - $ - $ - $ - $ - $ -
Total: CIP Program Costs (Current-Year Dollars) $ 1,356,345 $ 7,156,527 $ 17,092,802 $ 7,683,280 $ 3,764,610 $ 5,136,210 Prepared by NBS
www.nbsgov.com | Toll-Free: 800.676.7516 Exhibit 2 (CIP), 11 of 36 Agenda Item 11.1 Page 233 of 308
CITY OF GILROY Exhibit 2

WATER RATE STUDY
Capital Improvement Plan Expenditures
TABLE 12 : CAPITAL IMPROVEMENT PROGRAM COSTS (in Future-Year Dollars ) 6 Project No. Description 2023 2024 2025 2026 22027 2028 Capital Improvement Program - Fiscal Year 2023 to Fiscal Year 2028 800250 Casey and Swanston Water Line Replacement $ - $ 504,790 $ 2,825,800 $ - $ - $ - 800310 Automated Flexnet Water Meter Installation 825,968 662,696 612,700 - - - 800590 Broadway and Sargent Water Line Replacement - - 185,295 877,600 - - 800600 Church and Gurries Water Line Replacement - 94,062 314,600 - - - 800610 Church Street - Welburn to First Water Line Replacement - - 250,335 1,173,400 - - 800620 Forest and Eighth Water Line Replacement - 97,316 369,200 - - - 800630 Steel Water Service Line Replacement Citywide - 112,789 104,280 104,280 104,280 104,280 900740 Monterey-Leavesley to Ronan Water Line Replacement - - 821,473 4,651,900 - - 800640 Monterey and Eighth Water Line Replacement - - 101,325 406,700 - - 800650 Abandon 2" Water Line from 7041 to 7161 Monterey Street - 117,786 847,000 - - - 800660 Murray at Burke Water Line Reroute - - 133,794 469,400 - - 800670 Saint Louise Hospital Large Water Meter Replacement - 68,357 - - - - 800690 Water Reservoirs A and B - Painting - 522,629 - - - - 800700 Water Reservoirs A and B - Retrofit Overflow Piping - 521,331 - - - - 800710 Water Well Nos. 1 and 4 Compliance Improvements - 89,340 - - - - 800720 Water Well Nos. 1, 2, 4 and 6 Upgrade Improvements - 1,108,856 10,527,000 - - - 9000730 Martin and Railroad Water Line - - - - - 1,371,600 Subtotal - Capital Improvement Program $ 825,968 $ 3,899,954 $ 17,092,802 $ 7,683,280 $ 104,280 $ 1,475,880 Water System Master Plan Projects 3
Pipeline Improvements
P1-1 Zone 1 $ - $ - $ - $ - $ 163,250 $ 163,250
P1-2 Monterey Hwy / Orsetti Rd / Hwy 101 - - - - 244,430 244,430 P1-3 Monterey Hwy - - - - 11,690 11,690
P1-4 Murray Ave - - - - 111,650 111,650
P1-5 Arroyo Cir - - - - 3,580 3,580
P1-6 Lewis St - - - - 8,120 8,120
P1-7 Forest St - - - - 13,550 13,550
P1-8 Gilman Rd / Camino Arroyo - - - - 15,240 15,240
P1-9 Pacheco Pass Hwy - - - - 87,810 87,810
P1-10 Camino Arroyo - - - - 154,290 154,290
P1-11 Cameron Blvd - - - - 106,580 106,580
P1-12 ROW - - - - 82,230 82,230
P1-13 ROW / Cameron Blvd - - - - 230,400 230,400
P1-14 Luchessa Ave - - - - 328,850 328,850
P1-15 Thomas Rd - - - - 155,300 155,300
P1-16 Rossi Ln - - - - 138,560 138,560
P1-17 ROW - - - - 91,860 91,860
P1-18 ROW - - - - 146,670 146,670
P1-19 Garlic Farm Wy / Southside Dr - - - - 234,970 234,970 P1-20 Southside Dr - - - - 33,510 33,510
P1-21 Southside Dr - - - - 152,770 152,770
P1-22 Santa Teresa Blvd - - - - 14,230 14,230
Storage Reservoir Improvements - - - -
3H-1 Construct an additional storage at existing 3D site - - - - 20,790 20,790 Groundwater Well Improvements - - - -
GW-10 Intersection of San Ysidro Ave and Las Animas Ave - - - - 370,000 370,000 GW-11 Intersection of Camino Arroyo and Renz Lane - - - - 370,000 370,000 GW-12 Intersection of Wren Ave and Vickery Lane - - - - 370,000 370,000 Subtotal - Master Plan Projects $ - $ - $ - $ - $ 3,660,330 $ 3,660,330 Impact Fee Projects 4
800050 McCarthy Site Well (Well #9) $ 584,631 $ 3,840,545 $ - $ - $ - $ - Subtotal - Impact Fee Projects $ 584,631 $ 3,840,545 $ - $ - $ - $ - Estimated Future Projects
Future Projects5$ - $ - $ - $ - $ - $ -
Total: CIP Program Costs (Future-Year Dollars) $ 1,410,599 $ 7,740,500 $ 17,092,802 $ 7,683,280 $ 3,764,610 $ 5,136,210 Prepared by NBS
www.nbsgov.com | Toll-Free: 800.676.7516 Exhibit 2 (CIP), 12 of 36 Agenda Item 11.1 Page 234 of 308
CITY OF GILROY Exhibit 2

WATER RATE STUDY
Capital Improvement Plan Expenditures
TABLE 13 : FORECASTING ASSUMPTIONS
Project No. Description 2023 2024 2025 2026 22027 2028
Annual Construction Cost Inflation, Per Engineering News Record74.00% 4.00% 4.00% 4.00% 4.00% 4.00% Cumulative Construction Cost Multiplier from 2023 1.04 1.08 1.12 1.17 1.22 1.27

1. Capital project costs provided by City Staff. Source file: 11. Adopted-CIP-FY24-28.pdf , pages 43, 80-107.

2. Capital projects beginning in FY 2025/26 are unfunded and identified in the City's Capital Improvement Program. These costs have been allocated over a 5-year period from FY 2025/26 through FY 2029/30. Source: 11. Adopted-CIP-FY21-FY25.pdf , pages 243-246.

3. Capital project costs are from the City's Draft Water System Master Plan (May 2022). Source file: Draft Water Master Plan.pdf , Table 8.2, pages 107-108.

4. Capital project funded by impact fees. Source file: 11. Adopted-CIP-FY21-FY25.pdf , pages 98-99.

5. Future project costs beyond FY 2029/30 were calculated based on the City's 7-year average.

6. The project costs in future-year dollars have been inflated by 4% annually.

7. For reference purposes, the annual Construction Cost Inflation percentage is the 5-year average change in the Construction Cost Index for September 2017-2022 (4.0%). Source: Engineering News Record website (http://enr.construction.com ).

Prepared by NBS
www.nbsgov.com | Toll-Free: 800.676.7516 Exhibit 2 (CIP), 13 of 36 Agenda Item 11.1 Page 235 of 308
CITY OF GILROY Exhibit 3

WATER RATE STUDY
Debt Service *Currently, the City does not have any outstanding revenue bonds or loans.

TABLE 14 : EXISTING DEBT OBLIGATIONS
EXISTING DEBT OBLIGATIONS Budget
Annual Repayment Schedules: FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 SRF Loan/Revenue Bond
Principal Payment $ - $ - $ - $ - $ - $ -
Interest Payment - - - - - -
Subtotal: Annual Debt Service $ - $ - $ - $ - $ - $ -
Coverage Requirement ($-Amnt above annual payment) $ - $ - $ - $ - $ - $ - Reserve Requirement $ - $ - $ - $ - $ - $ -
Grand Total: Existing Annual Debt Service $ - $ - $ - $ - $ - $ - Grand Total: Existing Annual Coverage Requirement $ - $ - $ - $ - $ - $ - Grand Total: Existing Debt Reserve Target $ - $ - $ - $ - $ - $ - TABLE 15 : EXISTING ANNUAL DEBT OBLIGATIONS TO BE SATISFIED BY WATER RATES Existing Annual Debt Service $ - $ - $ - $ - $ - $ -
Existing Annual Coverage Requirement $ - $ - $ - $ - $ - $ - Existing Debt Reserve Target $ - $ - $ - $ - $ - $ -
5-Year Projected Rate Period
Prepared by NBS
www.nbsgov.com | Toll-Free: 800.676.7516 Exhibit 3 (Debt), 14 of 36 Agenda Item 11.1 Page 236 of 308
CITY OF GILROY Exhibit 4

WATER RATE STUDY
Projected Water Rates Under Existing Rate Schedule
TABLE 16 : CURRENT WATER RATE SCHEDULE
Current Rates
July 1, 2019
Base Charges
Meter Size
3/4 inch $11.53
1 inch $19.24
1 1/2 inch $38.47
2 inch $61.55
3 inch $115.39
4 inch $192.30
6 inch $384.62
8 inch $615.37
10 inch $884.50
Volumetric Charge for All Water Consumed (in $/1,000 Gallons) Tier 1 - 1-30,000 Gallons
Zone 1 $4.39
Zone 2 $4.93
Zone 3 $5.52
Tier 2 -30,000+ Gallons
Zone 1 $4.93
Zone 2 $5.47
Zone 3 $6.06

1. Rates available on the City website. Source: https://www.cityofgilroy.org/758/Water-and-Wastewater-Rates .

2. Senior citizens who qualify for PG&E's Care Program may apply for a senior low income discount that gives them an exemption for the monthly base charge and the first 5,000 gallons per month.

Water Rate Schedule1,2
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CITY OF GILROY

WATER RATE STUDY
Cost-of-Service Analysis & Rate Design
TABLE 17 : CLASSIFICATION OF EXPENSES FOR COST OF SERVICE ANALYSIS Classification of Expenses
FY 2023/24 (COM) (CAP) (CA) (COM) (CAP) (CA)
Fund 705 - Water Operations
8000 - Water Administration
Wages/Part Time $ 125,000 $ 31,250 $ 31,250 $ 62,500 25.0% 25.0% 50.0% Retirement (Part Time) 2,813 703 703 1,407 25.0% 25.0% 50.0% Medicare 1,813 453 453 907 25.0% 25.0% 50.0%
Professional Support 26,000 6,500 6,500 13,000 25.0% 25.0% 50.0% Audit Services - - - - 25.0% 25.0% 50.0%
Contractual Services 6,500 1,625 1,625 3,250 25.0% 25.0% 50.0% Fleet Service Charge 98,943 24,736 24,736 49,472 25.0% 25.0% 50.0% Facility Service Charge 294,076 73,519 73,519 147,038 25.0% 25.0% 50.0% Info Tech Service Charge 606,926 151,732 151,732 303,463 25.0% 25.0% 50.0% Overhead Charges 1,779,498 444,875 444,875 889,749 25.0% 25.0% 50.0% Liability Insurance Charges 430,902 107,726 107,726 215,451 25.0% 25.0% 50.0% Water Conservation 72,500 18,125 18,125 36,250 25.0% 25.0% 50.0% Claims 15,750 3,938 3,938 7,875 25.0% 25.0% 50.0%
Subtotal - Water Administration $ 3,460,721 $ 865,180 $ 865,180 $ 1,730,361 25.0% 25.0% 50.0% 8010 - Finance Water Utility Billing
Salaries $ 580,139 $ 232,056 $ 290,070 $ 58,014 40.0% 50.0% 10.0% Utility Billing Sup/Sen. Acct. - - - - 40.0% 50.0% 10.0% Earned Leave Cashout - - - - 40.0% 50.0% 10.0%
Wages/Part Time 33,750 13,500 16,875 3,375 40.0% 50.0% 10.0% Overtime 10,000 4,000 5,000 1,000 40.0% 50.0% 10.0%
Overtime Meals - - - - 40.0% 50.0% 10.0%
Workers Comp 2,411 964 1,206 241 40.0% 50.0% 10.0%
Retirement (Full Time) 69,133 27,653 34,566 6,913 40.0% 50.0% 10.0% Deferred Compensation 2,016 806 1,008 202 40.0% 50.0% 10.0% Ual Retirement 88,913 35,565 44,456 8,891 40.0% 50.0% 10.0% Retirement (Part Time) 759 304 380 76 40.0% 50.0% 10.0% Medicare 9,053 3,621 4,527 905 40.0% 50.0% 10.0%
Health Insurance Benefits 113,442 45,377 56,721 11,344 40.0% 50.0% 10.0% Life Insurance Benefits 757 303 379 76 40.0% 50.0% 10.0% Employee Assistance Prog 1,087 435 544 109 40.0% 50.0% 10.0% Unemployment Insurance 912 365 456 91 40.0% 50.0% 10.0% Misc Disability Insurance 1,260 504 630 126 40.0% 50.0% 10.0% Retiree Medical 900 360 450 90 40.0% 50.0% 10.0%
Employee Training 3,400 1,360 1,700 340 40.0% 50.0% 10.0% Employee Travel, Food,Lodge 1,250 500 625 125 40.0% 50.0% 10.0% Postage 100 40 50 10 40.0% 50.0% 10.0%
Professional Support - - - - 40.0% 50.0% 10.0%
Contractual Services 126,025 50,410 63,013 12,603 40.0% 50.0% 10.0% Office/Computer Supplies 2,000 800 1,000 200 40.0% 50.0% 10.0% Subtotal - Finance Water Utility Billing $ 1,047,309 $ 418,923 $ 523,654 $ 104,731 40.0% 50.0% 10.0% Budget Categories
Total Revenue
Requirements
Commodity Capacity Customer Basis of Classification
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CITY OF GILROY

WATER RATE STUDY
Cost-of-Service Analysis & Rate Design
TABLE 18 : CLASSIFICATION OF EXPENSES FOR COST OF SERVICE ANALYSIS, cont.

Classification of Expenses
FY 2023/24 (COM) (CAP) (CA) (COM) (CAP) (CA)
Fund 705 - Water Operations
8020 - Water Operations
Salaries $ 2,269,298 $ 1,021,184 $ 1,134,649 $ 113,465 45.0% 50.0% 5.0% Ft Engineer I/Ii (Water) - - - - 45.0% 50.0% 5.0%
Employee Training 25,000 11,250 12,500 1,250 45.0% 50.0% 5.0% Employee Travel, Food, Lodging 5,000 2,250 2,500 250 45.0% 50.0% 5.0% Earned Leave Cashout - - - - 45.0% 50.0% 5.0%
Wages/Part Time - - - - 45.0% 50.0% 5.0%
Overtime 73,710 33,170 36,855 3,686 45.0% 50.0% 5.0%
Overtime Meals 2,000 900 1,000 100 45.0% 50.0% 5.0%
Workers Comp 101,497 45,674 50,749 5,075 45.0% 50.0% 5.0% Retirement (Full Time) 271,399 122,130 135,700 13,570 45.0% 50.0% 5.0% Deferred Compensation 7,326 3,297 3,663 366 45.0% 50.0% 5.0% Ual Retirement 353,639 159,138 176,820 17,682 45.0% 50.0% 5.0% Retirement (Part Time) - - - - 45.0% 50.0% 5.0%
Medicare 33,996 15,298 16,998 1,700 45.0% 50.0% 5.0%
Health Insurance Benefits 460,498 207,224 230,249 23,025 45.0% 50.0% 5.0% Life Insurance Benefits 3,144 1,415 1,572 157 45.0% 50.0% 5.0% Employee Assistance Prog 4,262 1,918 2,131 213 45.0% 50.0% 5.0% Unemployment Insurance 3,620 1,629 1,810 181 45.0% 50.0% 5.0% Misc Disability Insurance 4,964 2,234 2,482 248 45.0% 50.0% 5.0% Retiree Medical 2,400 1,080 1,200 120 45.0% 50.0% 5.0%
Apparel, Boots, Ppe 30,000 13,500 15,000 1,500 45.0% 50.0% 5.0% Utilities 1,013,698 456,164 506,849 50,685 45.0% 50.0% 5.0% Telecommunications 8,100 3,645 4,050 405 45.0% 50.0% 5.0% Professional Support 5,000 2,250 2,500 250 45.0% 50.0% 5.0% Contractual Services 1,128,400 507,780 564,200 56,420 45.0% 50.0% 5.0% Office/Computer Supplies 15,000 6,750 7,500 750 45.0% 50.0% 5.0% Department Supplies 60,000 27,000 30,000 3,000 45.0% 50.0% 5.0% Repairs & Maintenance 250,000 112,500 125,000 12,500 45.0% 50.0% 5.0% Well System Maintenance 150,000 67,500 75,000 7,500 45.0% 50.0% 5.0% Equipment Rental 10,000 4,500 5,000 500 45.0% 50.0% 5.0% Permits 10,000 4,500 5,000 500 45.0% 50.0% 5.0%
Equipment/Furniture 75,000 33,750 37,500 3,750 45.0% 50.0% 5.0% Improvements - - - - 45.0% 50.0% 5.0%
Capital Improvement Plan - - - - 45.0% 50.0% 5.0%
Interfund Transfer Out 433,788 195,205 216,894 21,689 45.0% 50.0% 5.0% Valley Water 4,641,000 4,641,000 - - 100.0% 0.0% 0.0%
Subtotal - Water Operations $ 11,451,740 $ 7,705,833 $ 3,405,370 $ 340,537 67.3% 29.7% 3.0% Budget Categories
Total Revenue
Requirements
Commodity Capacity Customer Basis of Classification
Prepared by NBS
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CITY OF GILROY

WATER RATE STUDY
Cost-of-Service Analysis & Rate Design
TABLE 19 : CLASSIFICATION OF EXPENSES FOR COST OF SERVICE ANALYSIS, cont.

Classification of Expenses
FY 2023/24 (COM) (CAP) (CA) (COM) (CAP) (CA)
Fund 705 - Water Operations
8030 - Water Backflow Prevention
Salaries $ 74,991 $ 33,746 $ 37,496 $ 3,750 45.0% 50.0% 5.0% Earned Leave Cashout - - - - 45.0% 50.0% 5.0%
Wages/Part Time - - - - 45.0% 50.0% 5.0%
Overtime 7,500 3,375 3,750 375 45.0% 50.0% 5.0%
Overtime Meals - - - - 45.0% 50.0% 5.0%
Compensated Absences - - - - 45.0% 50.0% 5.0%
Workers Comp 4,450 2,003 2,225 223 45.0% 50.0% 5.0%
Retirement (Full Time) 9,005 4,052 4,503 450 45.0% 50.0% 5.0% Deferred Compensation - - - - 45.0% 50.0% 5.0%
Ual Retirement 11,703 5,266 5,852 585 45.0% 50.0% 5.0%
Retirement (Part Time) - - - - 45.0% 50.0% 5.0%
Medicare 1,197 539 599 60 45.0% 50.0% 5.0%
Health Insurance Benefits 12,312 5,540 6,156 616 45.0% 50.0% 5.0% Life Insurance Benefits 90 41 45 5 45.0% 50.0% 5.0%
Employee Assistance Prog 116 52 58 6 45.0% 50.0% 5.0%
Unemployment Insurance 117 53 59 6 45.0% 50.0% 5.0%
Misc Disability Insurance 123 55 62 6 45.0% 50.0% 5.0%
Employee Training 1,000 450 500 50 45.0% 50.0% 5.0%
Employee Travel, Food,Lodge 1,000 450 500 50 45.0% 50.0% 5.0% Postage 100 45 50 5 45.0% 50.0% 5.0%
Professional Support 1,000 450 500 50 45.0% 50.0% 5.0%
Contractual Services 6,000 2,700 3,000 300 45.0% 50.0% 5.0% Office/Computer Supplies 1,000 450 500 50 45.0% 50.0% 5.0% Repairs & Maintenance 10,000 4,500 5,000 500 45.0% 50.0% 5.0% Subtotal - Water Backflow Prevention $ 141,704 $ 63,767 $ 70,852 $ 7,085 45.0% 50.0% 5.0% Additional Capital Expenditures
One-Time Vehicles $ - $ - $ - $ - 100.0% 0.0% 0.0%
Subtotal - Additional Expenditures 404,450 404,450 - - 100.0% 0.0% 0.0% Subtotal - Additional Expenditures $ 404,450 $ 404,450 $ - $ - 100.0% 0.0% 0.0% Rate-Funded CIP $ - $ - $ - $ - 0.0% 100.0% 0.0%
TOTAL: WATER OPERATIONS EXPENSES $ 16,505,924 $ 9,458,154 $ 4,865,057 $ 2,182,714 57.3% 29.5% 13.2% TABLE 20 : CLASSIFICATION OF EXPENSES FOR COST OF SERVICE ANALYSIS, cont.

Classification of Expenses, continued
FY 2023/24 (COM) (CAP) (CA) (COM) (CAP) (CA)
Debt Service Payments
Outstanding Debt $ - $ - $ - $ - 0.0% 100.0% 0.0%
New Debt Issue - SRF Loan - - - - 0.0% 100.0% 0.0%
New Debt Issue - Revenue Bond - - - - 0.0% 100.0% 0.0%
Total Debt Service Payments $ - $ - $ - $ - 0.0% 100.0% 0.0% Capital Expenditures
Rate Funded Capital Expenses $ - $ - $ - $ - 50.0% 50.0% 0.0% TOTAL REVENUE REQUIREMENTS $ 16,505,924 $ 9,458,154 $ 4,865,057 $ 2,182,714 57.3% 29.5% 13.2% Less: Non-Rate Revenues
Other Revenue
Connect/Install Charges $ (110,000) $ (63,032) $ (32,422) $ (14,546) 57.3% 29.5% 13.2% Overhead Revenue - - - - 57.3% 29.5% 13.2%
Bank Interest (494,621) (283,426) (145,788) (65,408) 57.3% 29.5% 13.2% Miscellaneous Revenues (5,000) (2,865) (1,474) (661) 57.3% 29.5% 13.2% NET REVENUE REQUIREMENTS $ 15,896,303 $ 9,108,831 $ 4,685,373 $ 2,102,098 Allocation of Revenue Requirements 100.0% 57.3% 29.5% 13.2% Basis of Classification Budget Categories
Total Revenue
Requirements
Budget Categories
Total Revenue
Requirements
Commodity
Commodity Capacity
Basis of Classification
Customer
Capacity Customer
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CITY OF GILROY

WATER RATE STUDY
Cost-of-Service Analysis & Rate Design
TABLE 21 : ADJUSTMENT TO CLASSIFICATION OF EXPENSES FOR COST OF SERVICE ANALYSIS Classification of Expenses
Adjustment for Current Rate Level: Total (COM) (CAP) (CA) Test Year (FY 2023/24) Target Rate Rev. After Rate Increases $ 15,054,120 Projected Rate Revenue at Current Rates $ 13,939,000
Test Year (FY 2023/24) Projected Rate Adjustment 8%
Adjusted Net Revenue Req'ts $ 15,054,120 $ 8,626,247 $ 4,437,143 $ 1,990,730 Percent of Revenue 100.0% 57.3% 29.5% 13.2%
TABLE 22 : NET REVENUE REQUIREMENTS PER COSA RESULTS
Total Rate
Revenue
Requirements
FY 2023/24
Commodity
Related Costs
Capacity
Related Costs
Customer
Related Costs
Rate-Design Adjustments to Fixed/Variable % 100.0% 57.3% 29.5% 13.2% Rate-Design Adjustments to Fixed/Variable ($) $15,054,120 $8,626,247 $4,437,143 $1,990,730 TABLE 23 : REVISED NET REVENUE REQUIREMENTS PER COSA RESULTS - ALT. #1 Rate-Design Adjustments to Fixed/Variable % 100.0% 57.0% 30.0% 13.0% Rate-Design Adjustments to Fixed/Variable % (Rounded) 100.0% 60.0% 30.0% 10.0% Rate-Design Adjustments to Fixed/Variable ($) $15,054,120 $9,032,472 $4,516,236 $1,505,412 TABLE 24 : REVISED NET REVENUE REQUIREMENTS - 30% FIXED/70% VOLUMETRIC) - ALT. #2 Rate-Design Adjustments to Fixed/Variable % 100.0% 70.0% 21.0% 9.0% Rate-Design Adjustments to Fixed/Variable ($)1
$15,054,120 $10,537,884 $3,161,365 $1,354,871
TABLE 25 : REVISED NET REVENUE REQUIREMENTS - (50% FIXED/50% VOLUMETRIC) - ALT. #3 Rate-Design Adjustments to Fixed/Variable % 102.0% 50.0% 40.0% 12.0% Rate-Design Adjustments to Fixed/Variable ($)1
$15,054,120 $7,527,060 $6,021,648 $1,806,494
Net Revenue Requirements - Per COSA Results
57% Fixed / 43% Variable
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CITY OF GILROY

WATER RATE STUDY
Cost-of-Service Analysis & Rate Design
TABLE 26 : DEVELOPMENT OF THE COMMODITY ALLOCATION FACTOR Development of the Volumetric/Variable Allocation Factor1 Customer Class FY 2021/22
(1,000 Gal.yr.)
% Adjustment
for
Conservation
Est. FY 2021/22
Volume
Adjusted for
Conservation
FY 2021/22
% of Total
Volume
(TG/Yr.)
Residential 1,348,786 0.0% 1,348,786 60.6%
Multi-Family 259,687 0.0% 259,687 11.7%
Commercial/Industrial 333,884 0.0% 333,884 15.0%
Institutional 38,459 0.0% 38,459 1.7%
Landscape 231,215 0.0% 231,215 10.4%
City Account 59 0.0% 59 0.0%
Hydrant 14,948 0.0% 14,948 0.7%
Total 2,227,038 2,227,038 100%

1. Consumption data is based on the City of Gilroy's billing data.

TABLE 27 : DEVELOPMENT OF THE CAPACITY ALLOCATION FACTORS Development of the PEAK CAPACITY (MAX MONTH) Allocation Factors Customer Class
Average
Monthly Use
(TG)
Peak Monthly
Use (TG)
Peak Monthly
Factor
Max Month
Capacity
Factor
Residential 112,399 168,922 1.50 61.1%
Multi-Family 21,641 26,139 1.21 9.5%
Commercial/Industrial 27,824 34,412 1.24 12.4%
Institutional 3,205 6,341 1.98 2.3%
Landscape 19,268 37,423 1.94 13.5%
City Account 5 6 1.22 0.0%
Hydrant 1,246 3,340 2.68 1.2%
Total 185,586 276,583 1.49 100%

1. Based on peak monthly data (peak day data not available).

TABLE 28 : DEVELOPMENT OF THE CUSTOMER ALLOCATION FACTORS Development of the Customer Allocation Factor
Customer Class
No. of Meters
FY 2021/221
Percent of
Total
Residential 13,518 87.2%
Multi-Family 521 3.4%
Commercial/Industrial 858 5.5%
Institutional 34 0.2%
Landscape 515 3.3%
City Account 35 0.2%
Hydrant 19 0.1%
Total 15,500 100.0%

1. Meter count data is based on the City's billing data for June 2022.

Capacity Related Costs: Costs associated with the maximum demand required at one point in time or the maximum size of facilities required to meet this demand.

Commodity Related Costs: Costs associated with the total consumption (flow) of water over a specified period of time (e.g. annual).

Customer Related Costs: Costs associated with having a
customer on the water system. These costs vary with the addition or deletion of customers on the system. Examples:

Meter-reading, Postage and billing.

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CITY OF GILROY

WATER RATE STUDY
Cost-of-Service Analysis & Rate Design
TABLE 29 : ALLOCATION OF WATER REVENUE REQUIREMENTS
Commodity-Related Costs $ 9,032,472 60.0% $ 10,537,884 70.0% $ 7,527,060 49.0% Capacity-Related Costs 4,516,236 30.0% 3,161,365 21.0% 6,021,648 39.0% Customer-Related Costs 1,505,412 10.0% 1,354,871 9.0% 1,806,494 12.0% Net Revenue Requirement $ 15,054,120 100.0% $ 15,054,120 100.0% $ 15,355,202 100.0% TABLE 30 : COST-OF-SERVICE SUMMARY OF REVENUE REQUIREMENTS Residential $ 9,541,651 63.4% $ 9,494,615 63.1% $ 9,811,925 63.9% Multi-Family 1,530,618 10.2% 1,573,058 10.4% 1,507,461 9.8% Commercial/Industrial 1,999,425 13.3% 2,048,215 13.6% 1,977,699 12.9% Institutional 262,825 1.7% 257,430 1.7% 272,002 1.8%
Landscape 1,598,854 10.6% 1,566,826 10.4% 1,656,253 10.8% City Account 3,737 0.0% 3,407 0.0% 4,409 0.0%
Hydrant 117,010 0.8% 110,568 0.7% 125,454 0.8%
Total $ 15,054,120 100% $ 15,054,120 100% $ 15,355,202 100% TABLE 31 : ALLOCATION OF UNADJUSTED NET REVENUE REQUIREMENTS - FY 2023/24 Alt. 1 - 40% Fixed / 60% Variable

VARIABLE
Residential $ 5,470,437 $ 2,758,274 $ 1,312,941 $ 9,541,651 63.4% Multi-Family 1,053,245 426,815 50,558 1,530,618 10.2%
Commercial/Industrial 1,354,175 561,903 83,348 1,999,425 13.3% Institutional 155,983 103,540 3,302 262,825 1.7%
Landscape 937,767 611,068 50,019 1,598,854 10.6%
City Account 239 98 3,399 3,737 0.0%
Hydrant 60,626 54,538 1,845 117,010 0.8%
Total Net Revenue Requirement $ 9,032,472 $ 4,516,236 $ 1,505,412 $ 15,054,120 100%

VARIABLE
$9,032,472
% of COS Net
Revenue Req'ts
COSA Allocated Costs
FY 2020/21
2023/24 COS
Rev. Req't
Allocated Costs
FY 2020/21
ALT. 2
(30% Fixed / 70% Variable)
ALT. 1 (Preferred)
(40% Fixed / 60% Variable)
% of COS
Rev. Req't.
2023/24 COS
Rev. Req't
% of COS
Rev. Req't.
% of COS
Rev. Req't.
2023/24 COS
Rev. Req't
Customer Class
Allocated Costs
FY 2020/21
Net Rev. Reqts
(FY 2023/24)
Cost of Service
Net Revenue
Requirements
$15,054,120 Total Net Revenue Requirement
by Classification Component
Customer Classes
FIXED
Classification Components
FIXED
$6,021,648
Classification Components
ALTERNATIVE 3
(50% Fixed / 50% Variable)
Cost-of-Service Net Revenue
Requirements (FY 2023/24) 1
Net Rev. Reqts
(FY 2023/24)
CustomerRelated CostsCommodityRelated CostsCapacity-Related Costs
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CITY OF GILROY

WATER RATE STUDY
Cost-of-Service Analysis & Rate Design
TABLE 32 : CALCULATION OF MONTHLY FIXED METER SERVICE CHARGES FOR FY 2023/24 - ALTERNATIVE 2 Alt. 1 - 40% Fixed / 60% Variable
3/4 inch 1 inch 1 1/2 inch 2 inch 3 inch 4 inch 6 inch 8 inch 10 inch Residential 4,445 8,273 172 459 167 2 0 0 0 13,518
Multi-Family 137 203 84 56 24 17 0 0 0 521
Commercial/Industrial 251 330 0 249 10 14 3 0 1 858
Institutional 0 1 0 15 8 9 1 0 0 34
Landscape 34 182 79 212 4 4 0 0 0 515
City Account 5 7 1 19 2 1 0 0 0 35
Hydrant 0 0 0 0 19 0 0 0 0 19
Total Meters/Accounts 4,872 8,996 336 1,010 234 47 4 0 1 15,500 Hydraulic Capacity Factor 21.00 1.67 3.33 5.33 10.67 16.67 33.33 53.33 140.00 Total Equivalent Meters 4,872 14,993 1,120 5,387 2,496 783 133 0 140 29,925 Monthly Fixed Service Charges
Customer Costs ($/Acct/month)3
$8.09 $8.09 $8.09 $8.09 $8.09 $8.09 $8.09 $8.09 $8.09
Capacity Costs ($/Acct/month)4$12.58 $20.96 $41.92 $67.08 $134.15 $209.61 $419.22 $670.76 $1,760.74 Total Monthly Meter Charge $20.67 $29.05 $50.02 $75.17 $142.24 $217.70 $427.32 $678.85 $1,768.83 Annual Fixed Costs Allocated to Monthly Meter Charges
Customer Costs $ 1,505,412
Capacity Costs 4,516,236
Total Fixed Meter Costs $ 6,021,648
Annual Revenue from Monthly Meter Charges
Customer Charges $ 473,185 $ 873,722 $ 32,633 $ 98,095 $ 22,727 $ 4,565 $ 388 $ - $ 97 $ 1,505,412 Capacity Charges $ 735,283 $ 2,262,797 $ 169,031 $ 812,957 $ 376,697 $ 118,221 $ 20,123 $ - $ 21,129 $ 4,516,236 Total Rev. from Mo. Meter Charges $ 1,208,468 $ 3,136,518 $ 201,664 $ 911,051 $ 399,424 $ 122,786 $ 20,511 $ - $ 21,226 $ 6,021,648

1. Meter by Class and Size are based on June 2022 customer billing data.

2. Source: AWWA Manual M1, "Principles of Water Rates, Fees, and Charges", Table B-1

3. Customer costs are allocated to each customer by dividing the total customer costs by the total number of customers.

4. Capacity costs are allocated by meter size and the hydraulic capacity of the meter.

Number of Meters by Class and Size1
Total FY2023/24
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CITY OF GILROY

WATER RATE STUDY
Cost-of-Service Analysis & Rate Design
TABLE 33 : ALLOCATION OF UNADJUSTED NET REVENUE REQUIREMENTS - FY 2023/24 Alt. 2 - 30% Fixed / 70% Variable

VARIABLE
Residential $ 6,382,176 $ 1,930,792 $ 1,181,647 $ 9,494,615 63.1% Multi-Family 1,228,786 298,771 45,502 1,573,058 10.4%
Commercial/Industrial 1,579,871 393,332 75,013 2,048,215 13.6% Institutional 181,980 72,478 2,972 257,430 1.7%
Landscape 1,094,062 427,748 45,017 1,566,826 10.4%
City Account 279 69 3,059 3,407 0.0%
Hydrant 70,731 38,176 1,661 110,568 0.7%
Total Net Revenue Requirement $ 10,537,884 $ 3,161,365 $ 1,354,871 $ 15,054,120 99%

VARIABLE
$10,537,884
TABLE 34 : CALCULATION OF MONTHLY FIXED METER SERVICE CHARGES FOR FY 2023/24 - ALTERNATIVE 1 Alt. 2 - 30% Fixed / 70% Variable
3/4 inch 1 inch 1 1/2 inch 2 inch 3 inch 4 inch 6 inch 8 inch 10 inch Residential 4,445 8,273 172 459 167 2 0 0 0 13,518
Multi-Family 137 203 84 56 24 17 0 0 0 521
Commercial/Industrial 251 330 0 249 10 14 3 0 1 858
Institutional 0 1 0 15 8 9 1 0 0 34
Landscape 34 182 79 212 4 4 0 0 0 515
City Account 5 7 1 19 2 1 0 0 0 35
Hydrant 0 0 0 0 19 0 0 0 0 19
Total Meters/Accounts 4,872 8,996 336 1,010 234 47 4 0 1 15,500 Hydraulic Capacity Factor 21.00 1.67 3.33 5.33 10.67 16.67 33.33 53.33 140.00 Total Equivalent Meters 4,872 14,993 1,120 5,387 2,496 783 133 0 140 29,925 Monthly Fixed Service Charges
Customer Costs ($/Acct/month)3
$7.28 $7.28 $7.28 $7.28 $7.28 $7.28 $7.28 $7.28 $7.28
Capacity Costs ($/Acct/month)4$8.80 $14.67 $29.35 $46.95 $93.91 $146.73 $293.46 $469.53 $1,232.51 Total Monthly Meter Charge $16.09 $21.96 $36.63 $54.24 $101.19 $154.01 $300.74 $476.81 $1,239.80 Annual Fixed Costs Allocated to Monthly Meter Charges
Customer Costs $ 1,354,871
Capacity Costs 3,161,365
Total Fixed Meter Costs $ 4,516,236
Annual Revenue from Monthly Meter Charges
Customer Charges $ 425,866 $ 786,350 $ 29,370 $ 88,285 $ 20,454 $ 4,108 $ 350 $ - $ 87 $ 1,354,871 Capacity Charges 514,698 1,583,958 118,321 569,070 263,688 82,755 14,086 - 14,790 3,161,365 Total Revenue from Monthly Meter Charges $ 940,565 $ 2,370,307 $ 147,692 $ 657,355 $ 284,142 $ 86,863 $ 14,436 $ - $ 14,878 $ 4,516,236

1. Meter by Class and Size are based on June 2022 customer billing data.

2. Source: AWWA Manual M1, "Principles of Water Rates, Fees, and Charges", Table B-1

3. Customer costs are allocated to each customer by dividing the total customer costs by the total number of customers.

4. Capacity costs are allocated by meter size and the hydraulic capacity of the meter. $15,054,120
Cost of Service
Net Rev. Req'ts
% of COS Net
Revenue Req'ts Customer Classes
Capacity-Related
Costs
CustomerRelated Costs
Classification Components
FIXED
CommodityRelated Costs
Total Net Revenue Requirement
by Classification Component
Number of Meters by Class and Size1 FY2023/24
FIXED
$4,516,236
Total
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CITY OF GILROY

WATER RATE STUDY
Cost-of-Service Analysis & Rate Design
TABLE 35 : FIXED CHARGES REVENUE CHECK
3/4 inch 1 inch 1 1/2 inch 2 inch 3 inch 4 inch 6 inch 8 inch 10 inch Residential 4,445 8,273 172 459 167 2 0 0 0 13,518
Multi-Family 137 203 84 56 24 17 0 0 0 521
Commercial/Industrial 251 330 0 249 10 14 3 0 1 858
Institutional 0 1 0 15 8 9 1 0 0 34
Landscape 34 182 79 212 4 4 0 0 0 515
City Account 5 7 1 19 2 1 0 0 0 35
Hydrant 0 0 0 0 19 0 0 0 0 19
Total Meters/Accounts 4,872 8,996 336 1,010 234 47 4 0 1 15,500 TABLE 36 : PROJECTED FIXED REVENUE CHECK Alt. 2 - 30% Fixed / 70% Variable 3/4 inch 1 inch 1 1/2 inch 2 inch 3 inch 4 inch 6 inch 8 inch 10 inch Charges by Meter Size $16.09 $21.96 $36.63 $54.24 $101.19 $154.01 $300.74 $476.81 $1,239.80 Revenue from Fixed Charges
Residential $ 858,130 $ 2,179,808 $ 75,604 $ 298,738 $ 202,785 $ 3,696 $ - $ - $ - $ 3,618,762 Multi-Family 26,449 53,487 36,923 36,447 29,143 31,418 - - - 213,867 Commercial/Industrial 48,457 86,950 - 162,061 12,143 25,874 10,827 - 14,878 361,189 Institutional - 263 - 9,763 9,714 16,633 3,609 - - 39,983 Landscape 6,564 47,954 34,725 137,979 4,857 7,393 - - - 239,472 City Account 965 1,844 440 12,366 2,429 1,848 - - - 19,892 Hydrant - - - - 23,071 - - - - 23,071
Total Revenue - Fixed Charges $ 4,516,236
TABLE 37 : PROJECTED FIXED REVENUE CHECK
`
Residential $ 3,112,439 $ 3,618,762 $ 506,323
Multi-Family 344,273 213,867 (130,405)
Commercial/Industrial 468,345 361,189 (107,156)
Institutional 75,450 39,983 (35,467)
Landscape 472,764 239,472 (233,292)
City Account 3,128 19,892 16,764
Hydrant 39,837 23,071 (16,766)
Total $ 4,516,236 $ 4,516,236 $ -
Number of Meters by Class and Size Total FY2023/24
Projected Revenue From Fixed Charges by
Customer Class
FY2023/24
Total
Customer Class
Net Revenue Requirement
(Alternative 1 - 30% Fixed / 70% Variable)
COS
Rev. Req't
Expected
Revenue
Over/(Under)
Collected
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CITY OF GILROY

WATER RATE STUDY
Cost-of-Service Analysis & Rate Design
TABLE 38 : PROJECTED FIXED REVENUE CHECK Alt. 1 - 40% Fixed / 60% Variable 3/4 inch 1 inch 1 1/2 inch 2 inch 3 inch 4 inch 6 inch 8 inch 10 inch Charges by Meter Size $20.67 $29.05 $50.02 $75.17 $142.24 $217.70 $427.32 $678.85 $1,768.83 Revenue from Fixed Charges
Residential $ 1,102,554 $ 2,884,439 $ 103,233 $ 414,032 $ 285,059 $ 5,225 $ - $ - $ - $ 4,794,541 Multi-Family 33,982 70,777 50,416 50,514 40,967 44,412 - - - 291,067 Commercial/Industrial 62,259 115,057 - 224,606 17,069 36,574 15,383 - 21,226 492,175 Institutional - 349 - 13,530 13,656 23,512 5,128 - - 56,175 Landscape 8,433 63,456 47,415 191,231 6,828 10,450 - - - 327,812 City Account 1,240 2,441 600 17,139 3,414 2,612 - - - 27,446 Hydrant - - - - 32,432 - - - - 32,432
Total Revenue - Fixed Charges $ 6,021,648
TABLE 39 : PROJECTED FIXED REVENUE CHECK
`
Residential $ 4,071,215 $ 4,794,541 $ 723,326
Multi-Family 477,373 291,067 (186,306)
Commercial/Industrial 645,250 492,175 (153,076)
Institutional 106,842 56,175 (50,668)
Landscape 661,087 327,812 (333,275)
City Account 3,497 27,446 23,949
Hydrant 56,383 32,432 (23,951)
Total $ 6,021,648 $ 6,021,648 $ -
Projected Revenue From Fixed Charges by
Customer Class Total
FY2023/24
Customer Class
Net Revenue Requirement
(Alternative 2 (COSA) - 40% Fixed / 60%
Variable)
COS
Rev. Req't
Expected
Revenue
Over/(Under)
Collected
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CITY OF GILROY

WATER RATE STUDY
Cost-of-Service Analysis & Rate Design
TABLE 40 : PROJECTED FIXED REVENUE CHECK Net Revenue Requirements (Alternative 3 - 50% Fixed / 50% Variable) 3/4 inch 1 inch 1 1/2 inch 2 inch 3 inch 4 inch 6 inch 8 inch 10 inch Charges by Meter Size $26.48 $37.66 $65.61 $99.15 $188.58 $289.19 $568.68 $904.05 $2,357.36 Revenue from Fixed Charges
Residential $ 1,412,510 $ 3,738,785 $ 135,416 $ 546,099 $ 377,916 $ 6,941 $ - $ - $ - $ 6,217,667 Multi-Family 43,535 91,741 66,134 66,626 54,311 58,996 - - - 381,343 Commercial/Industrial 79,762 149,136 - 296,250 22,630 48,585 20,472 - 28,288 645,122 Institutional - 452 - 17,846 18,104 31,233 6,824 - - 74,459 Landscape 10,804 82,251 62,197 252,229 9,052 13,881 - - - 430,414 City Account 1,589 3,163 787 22,605 4,526 3,470 - - - 36,141 Hydrant - - - - 42,996 - - - - 42,996
Total Revenue - Fixed Charges $ 7,828,142
TABLE 41 : PROJECTED FIXED REVENUE CHECK
`
Residential $ 5,253,228 $ 6,217,667 $ 964,439
Multi-Family 629,757 381,343 (248,414)
Commercial/Industrial 849,221 645,122 (204,099)
Institutional 142,016 74,459 (67,557)
Landscape 874,780 430,414 (444,366)
City Account 4,210 36,141 31,932
Hydrant 74,931 42,996 (31,935)
Total $ 7,828,142 $ 7,828,142 $ -
Projected Revenue From Fixed Charges by
Customer Class
FY2023/24
Total
Customer Class
Net Revenue Requirement
(Alternative 3 - 40% Fixed / 60% Variable)
COS
Rev. Req't
Expected
Revenue
Over/(Under)
Collected
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CITY OF GILROY

WATER RATE STUDY
Cost-of-Service Analysis & Rate Design
TABLE 42 : PROPOSED VOLUMETRIC CHARGES FOR FY 2022/23
Alt. 1 - 40% Fixed / 60% Variable
Zone 1 Zone 2 Zone 3
Residential - Tier 1 1,348,786 60.6% $ 4,912,312 $3.64 $4.00 $4.37 $4.73 Multi-Family 259,687 11.7% 945,787 $3.64 $4.00 $4.37 $4.73 Commercial/Industrial 333,884 15.0% 1,216,014 $3.64 $4.00 $4.37 $4.73 Institutional 38,459 1.7% 140,069 $3.64 $4.00 $4.37 $4.73 Landscape 231,215 10.4% 842,091 $3.64 $4.00 $4.37 $4.73 City Account 59 0.0% 215 $3.64 $4.00 $4.37 $4.73
Hydrant 14,948 0.7% 54,441 $3.64 $4.00 $4.37 $4.73
Total Potable Water 2,227,038 39.4% $ 8,110,929
Pumping Costs 921,543
Total Volumetric Reve. Reqts. $ 9,032,472

1. Water consumption is actual consumption for FY 2021/22 and includes an adjustment for conservation.

2. Total volumetric revenue requirements based on rate alternative less supply costs and pumping costs.

TABLE 43 : CONSUMPTION BY ZONE FOR FY 2021/22
Zone 1 Zone 2 Zone 3
Residential 1,110,987 198,886 38,913 1,348,786
Multi-Family 259,459 0 228 259,687
Comm/Industrial 333,140 744 0 333,884
Institutional 38,459 0 0 38,459
Landscape 202,531 28,638 46 231,215
City Account 59 0 0 59
Hydrant 7,654 1,737 5,557 14,948
Total 1,952,289 230,005 44,744 2,227,038
TABLE 44 : PUMPING BY ZONE FOR FY 2021/22
Zone 1 Zone 2 Zone 3
Residential 1,348,786 237,799 38,913 1,625,498
Multi-Family 259,687 228 228 260,143
Comm/Industrial 333,884 744 0 334,628
Institutional 38,459 0 0 38,459
Landscape 231,215 28,684 46 259,945
City Account 59 0 0 59
Hydrant 14,948 7,294 5,557 27,799
Total 2,227,038 274,749 44,744 2,546,531

1. Includes water in Zone 3 pumped throuhg Zones 1 and 2, etc.

Total Pumping
Uniform Commodity Rates
Water Use Including Pumping Costs ($/TG)
(TG/yr.)1
Total Vol. Rev.

Reqts. (Excl.

Pumping)
Alt. 1 - 40% Fixed / 60% Variable - CONSUMPTION by Zone Customer Class CONSUMPTION by Zone and by Class (TG/Yr.) Total Consumption
Customer Classes % of Total
Water Use
Uniform
Commodity
Rates ($/TG)
Alt. 1 - 40% Fixed / 60% Variable - PUMPING by Zone
Customer Class PUMPING by Zone and by Class (TG/Yr.)1
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CITY OF GILROY

WATER RATE STUDY
Cost-of-Service Analysis & Rate Design
TABLE 45 : ESTIMATED ZONAL PUMPING COSTS AND RATES BY CUSTOMER CLASS AND ZONE Zone 1 Zone 2 Zone 3
Residential $488,101 $86,055 $14,082 $588,238
Multi-Family $93,976 $83 $83 $94,141
Comm/Industrial $120,827 $269 $0 $121,096
Institutional $13,918 $0 $0 $13,918
Landscape $83,672 $10,380 $17 $94,069
City Account $21 $0 $0 $21
Hydrant $5,409 $2,640 $2,011 $10,060
Total $805,924 $99,427 $16,192 $921,543
Pumping by Zone (TG/Yr.) 2,227,038 274,749 44,744
Zonal Pumping Rate ($/TG) $0.362 $0.362 $0.362
TABLE 46 : VOLUMETRIC RATES BY CUSTOMER CLASS AND ZONE
Alt. 1 (40% Fixed/60% Vol.) - Cumulative Zonal Vol. Rates by Zone Zone 1 Zone 2 Zone 3
Residential $3.64 $4.004 $4.366 $4.728
Multi-Family 3.64 $4.004 $4.366 $4.728
Comm/Industrial 3.64 $4.004 $4.366 $4.728
Institutional 3.64 $4.004 $4.366 $4.728
Landscape 3.64 $4.004 $4.366 $4.728
City Account 3.64 $4.004 $4.366 $4.728
Hydrant 3.64 $4.004 $4.366 $4.728
TABLE 47 : ESTIMATED VOLUMETRIC REVENUE BY CUSTOMER CLASS AND ZONE Zone 1 Zone 2 Zone 3
Residential $4,448,288 $868,294 $183,968 $5,500,550
Multi-Family 1,038,850 0 1,078 1,039,928
Comm/Industrial 1,333,862 3,248 0 1,337,110
Institutional 153,986 0 0 153,986
Landscape 810,915 125,027 217 936,160
City Account 236 0 0 236
Hydrant 30,646 7,583 26,272 64,501
Grand Total $7,816,784 $1,004,153 $211,535 $9,032,472
Customer Class
Volumetric Revenue by Zone ($/Yr.) Total
Volumetric
Rate Revenue
Customer Class
Zonal Pumping Costs ($/Yr.) Zonal Costs by
Class ($/Yr.)
Customer Class Volumetric
Rates
Cumulative Vol. Rates by Zone ($/TG)
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CITY OF GILROY

WATER RATE STUDY
Cost-of-Service Analysis & Rate Design
CURRENT VS. PROPOSED WATER RATES Alt. 1 - 40% Fixed / 60% Variable FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
Monthly Fixed Service Charges
Meter Size
3/4 inch $11.53 $20.67 $22.32 $23.66 $24.61 $25.59
1 inch $19.24 $29.05 $31.38 $33.26 $34.59 $35.98
1 1/2 inch $38.47 $50.02 $54.02 $57.26 $59.55 $61.93
2 inch $61.55 $75.17 $81.18 $86.05 $89.50 $93.08
3 inch $115.39 $142.24 $153.62 $162.84 $169.36 $176.13
4 inch $192.30 $217.70 $235.12 $249.23 $259.20 $269.57
6 inch $384.62 $427.32 $461.50 $489.19 $508.76 $529.11
8 inch $615.37 $678.85 $733.16 $777.15 $808.23 $840.56
10 inch $884.50 $1,768.83 $1,910.34 $2,024.96 $2,105.95 $2,190.19 Residential Customers - Tiered Volumetric Rates
Tier 1 - Zone 1 $4.39 $4.00 $4.32 $4.58 $4.77 $4.96
Tier 1 - Zone 2 $4.93 $4.37 $4.72 $5.00 $5.20 $5.41
Tier 1 - Zone 3 $5.52 $4.73 $5.11 $5.41 $5.63 $5.85
Tier 2 ( more than 30 TG)
Tier 2 - Zone 1 $4.93 N.A. N.A. N.A. N.A. N.A.

Tier 2 - Zone 2 $5.47 N.A. N.A. N.A. N.A. N.A.

Tier 2 - Zone 3 $6.06 N.A. N.A. N.A. N.A. N.A.

Note: The City recently transitioned from July1-June 30 fiscal years to calendar years (January to December).

Current
Rates
Proposed Rates Water Rate Schedule
Variable Charges for All Water Consumed ($/1,000 gallons (or TG)) Uniform Vol. Rates
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SFR Bill Comp Tiers, 30 of 36
$32.41
$41.19
$45.58
$55.68
$67.53
$85.09
$107.04
$41.07
$49.07
$53.08
$62.29
$73.10
$89.11
$109.13
$36.00
$45.36
$50.04
$60.80
$73.44
$92.16
$115.55
$0
$25
$50
$75
$100
$125
3 5 6 8.3 11 15 20
Monthly Bill
Monthly Water Consumption (TG)
Single-Family Residential Water Bill Comparison
Current vs. Proposed FY'23/24 Rates (1" Meter)
Residential Bill - Current Rates
Residential Bill 60/40 V/F
Residential Bill 70/30 V/F
Average
ANNUAL Bill
Average (8.3 TG/mo.)
WINTER Bill
(6 TG/mo.)
Average
SUMMER Bill
(11 TG/mo.)
Agenda Item 11.1 Page 252 of 308
$62.29
$67.27
$71.31
$74.16
$77.12
$55.68
$60.80
$65.66
$69.60
$72.39
$75.28
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 Monthly Bill
Monthly Water Consumption (TG)
Residential Water Bill Comparison
5-Year Projection (1" Meter)
Resid. - 5-Year Rates (60/40 V/F)
Resid. - 5-Year Rates (70/30 V/F)
Average Monthly Water Use - 8.3
TG
Agenda Item 11.1 Page 253 of 308
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MFR Bill Comp, 32 of 36
$104.32
$148.22
$200.90
$222.85
$244.80
$279.92
$323.82
$110.07
$150.11
$198.16
$218.18
$238.20
$270.23
$310.27
$106.83
$153.63
$209.79
$233.18
$256.58
$294.02
$340.82
$0
$25
$50
$75
$100
$125
$150
$175
$200
$225
$250
$275
$300
$325
$350
15 25 37 42 47 55 65
Monthly Bill
Monthly Water Consumption (TG)
Multi-Family Residential Water Bill Comparison
Current vs. Proposed FY'22/23 Rates (1.5" Meter)
Multi-Family Residential Bill - Current Rates
Multi-Family Residential Bill 60/40 V/F
Multi-Family Residential Bill 70/30 V/F
Average
ANNUAL Bill
(42 TG/mo.) Average
WINTER Bill
(37 TG/mo.)
Average
SUMMER Bill
(47 TG/mo.)
Agenda Item 11.1 Page 254 of 308
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Commercial Bill Comp, 33 of 36
$55.43
$99.33
$134.45
$152.01
$178.35
$252.98
$340.78
$60.71
$100.75
$132.78
$148.80
$172.82
$240.89
$320.96
$62.89
$109.69
$147.12
$165.84
$193.92
$273.48
$367.08
$0
$50
$100
$150
$200
$250
$300
$350
$400
10 20 28 32 38 55 75
Monthly Bill
Monthly Water Consumption (TG)
Commercial Water Bill Comparison
Current vs. Proposed FY'23/24 Rates (< 1" Meter)
Commercial Bill - Current Rates
Commercial Bill 60/40 V/F
Commercial Bill 70/30 V/F
Average
WINTER Bill
(28 TG/mo.)
Average
ANNUAL Bill
(32 TG/mo.)
Average
SUMMER Bill
(38 TG/mo.)
Agenda Item 11.1 Page 255 of 308
$152.01
$148.80
$160.70
$170.34
$177.15
$184.24
$165.84
$179.11
$189.86
$197.45
$205.35
$0
$50
$100
$150
$200
$250
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 Monthly Bill
Monthly Water Consumption (TG)
Commercial Water Bill Comparison
5-Year Projection (1" Meter)
Commercial - 5-Year Rates (60/40 V/F)
Commercial - 5-Year Rates (70/30 V/F)
Annual Monthly Water Use - 32 TG
Agenda Item 11.1 Page 256 of 308
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Commercial Bill Comp (2), 35 of 36
$149.35
$237.15
$342.51
$425.92
$478.60
$544.45
$610.30
$147.83
$241.43
$353.75
$442.67
$498.83
$569.02
$639.22
$155.25
$235.33
$331.42
$407.49
$455.54
$515.60
$575.66
$0
$100
$200
$300
$400
$500
$600
$700
$800
20 40 64 83 95 110 125
Monthly Bill
Monthly Water Consumption (TG)
Commercial Water Bill Comparison
Current vs. Proposed FY'22/23 Rates (2" Meter)
Commercial Bill - Current Rates
Commercial Bill 70/30 V/F
Commercial Bill 60/40 V/F
Average
WINTER Bill
(64 TG/mo.)
Average
ANNUAL Bill
(83 TG/mo.)
Average
SUMMER Bill
(95 TG/mo.)
Agenda Item 11.1 Page 257 of 308
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Landscape Bill Comp, 36 of 36
$33.48
$64.21
$173.96
$301.27
$384.68
$45.36
$78.12
$195.11
$330.83
$419.75
$49.07
$77.10
$177.20
$293.31
$369.39
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
5 12 37 66 85
Monthly Bill
Monthly Water Consumption (TG)
Landscape Bill Comparison - Commercial
Current vs. Proposed FY'22/23 Rates (2" Meter)
Landscape Bill - Current Rates
Landscape Bill 70/30 V/F
Landscape Bill 60/40 V/F
Average
ANNUAL Bill
(37 TG/mo.)
Average
WINTER Bill
(12 TG/mo.)
Average
SUMMER Bill
(66 TG/mo.)
Agenda Item 11.1 Page 258 of 308
City of Gilroy – Comprehensive Water & Wastewater Utility Rate Study Prepared by NBS – August 2023 34
Appendix B. Wastewater Rate Study Tables and Figures
Agenda Item 11.1 Page 259 of 308
CITY OF GILROY Financial Plan & Reserve Summary

SEWER RATE STUDY
Financial Plan and Reserve Projections
TABLE 1 : FINANCIAL PLAN AND SUMMARY OF REVENUE REQUIREMENTS Projected Actuals
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 Sources of Funds 1
Rate Revenue:

User Fees $ 13,247,000 $ 13,512,000 $ 13,782,000 $ 13,988,730 $ 14,198,561 $ 14,411,539 Other Revenue:

Misc. Revenue & Interest Earnings2 992,066 649,871 397,017 15,619 15,853 16,091 Interfund Transfer In 1,533,500 2,244,000 2,244,000 2,244,000 2,244,000 2,244,000 Total: Sources of Funds $ 15,772,566 $ 16,405,871 $ 16,423,017 $ 16,248,349 $ 16,458,414 $ 16,671,630 Uses of Water Funds 1
Operating Expenses:
7500 - Sewer Administration $ 3,606,254 $ 2,143,559 $ 2,202,325 $ 2,339,468 $ 2,481,991 $ 2,625,123 7510 - Finance Sewer Utility Billing 921,605 1,037,477 1,083,341 1,120,978 1,159,924 1,200,226 7520 - Sewer Operations 2,758,341 4,362,836 4,320,125 4,464,460 4,613,637 4,767,818 SCWRA Oper. Costs (less Monit., Sampl., Pre-Tr.Costs) 5,715,995 6,146,815 6,517,038 6,781,500 6,989,600 7,207,300 Monitoring, Sampling, Pretreatment (Non-Resid. Costs) N.A. 365,700 440,200 388,500 400,400 412,700 Subtotal: Operating Expenses $ 13,002,195 $ 13,690,686 $ 14,122,829 $ 14,706,406 $ 15,245,153 $ 15,800,467 Other Expenditures:

Existing Debt Service $ 1,533,500 $ 2,244,000 $ 2,244,400 $ 2,243,600 $ 2,241,600 $ 2,243,300 Rate-Funded Capital Expenses - 75,401 335,906 211,300 755,038 1,334,115 Subtotal: Other Expenditures $ 1,533,500 $ 2,319,401 $ 2,580,306 $ 2,454,900 $ 2,996,638 $ 3,577,415 Total: Uses of Funds $ 14,535,695 $ 16,010,087 $ 16,703,135 $ 17,161,306 $ 18,241,791 $ 19,377,882 Plus: Revenue from Rate Increases2 - 540,480 1,121,811 1,743,733 2,408,627 3,119,008 Annual Surplus/(Deficit) $ 1,236,871 $ 936,264 $ 841,693 $ 830,775 $ 625,250 $ 412,756 Net Revenue Reqt. (Total Uses less Non-Rate Revenue) $ 12,010,129 $ 13,116,216 $ 14,062,118 $ 14,901,687 $ 15,981,938 $ 17,117,791 Total Rate Revenue After Rate Increases $ 13,247,000 $ 14,052,480 $ 14,903,811 $ 15,732,463 $ 16,607,187 $ 17,530,547 Projected Annual Rate Revenue Increase 0.00% 4.00% 4.00% 4.00% 4.00% 4.00% Cumulative Increase from Annual Revenue Increases 0.00% 4.00% 8.16% 12.49% 16.99% 21.67% Debt Coverage After Rate Increase (1.25 required) 1.81 1.45 1.52 1.46 1.62 1.78

1. Revenue and expenses for FY 2022/23 through FY204/25 provided by the City. Revenues and expenses for all other years are escalated based on the forecasting assumptions in Table 9 (See Exhibit 1 (O&M) Tab). Source file: FY23 Budgets.xlsx . The new vehicles expense in FY24 and FY25 was transferred to the CIP budget to avoid incresaing rates to meet coverage requirements.

2. Interest income for FY2022-23 through FY2024-25 is from the City's Budget. For all other years, it is calculated based on historical LAIF returns.

3. Revenue from rate increases assumes an implementation date of April 1, 2023 for new rates. For each year thereafter, the assumption is that new rates will be implemented on July 1st of each year.

Selection of Financial Plan Alternative 2
Financial Plan Alternatives FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 1 Alternative 1 - 2% Annual Rate Increases 0.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2 Alternative 2 - 4% Annual Rate Increases 0.00% 4.00% 4.00% 4.00% 4.00% 4.00% 3 Alternative 3 - Custom Rate Increases 0.00% 7.00% 7.00% 7.00% 7.00% 7.00% 4 No Rate Increases 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

RATE REVENUE REQUIREMENTS SUMMARY
5-Year Projected Rate Period
Prepared by NBS
www.nbsgov.com | Toll-Free: 800.676.7516 Financial Plan, 1 of 34 Agenda Item 11.1 Page 260 of 308
CITY OF GILROY Financial Plan & Reserve Summary

SEWER RATE STUDY
Financial Plan and Reserve Projections
TABLE 2 : EXCLUDED PLEDGE SUMMARY RESERVE FUND SUMMARY
Projected Actuals
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 Total Beginning Cash1
$ 18,206,179
Unrestricted Reserves:

Operating Reserve
Beginning Reserve Balance $ 13,654,634 $ 6,501,000 $ 6,845,000 $ 7,061,000 $ 7,353,000 $ 7,623,000 Plus: Net Cash Flow (After Rate Increases) 1,236,871 936,264 841,693 830,775 625,250 412,756 Plus: Transfer of Debt Reserve Surplus - - - - - -
Plus: Interest Earnings - 56,234 59,209 61,078 63,603 65,939 Less: Transfer Out to Capital Replacement Reserve (8,390,505) (648,498) (684,902) (599,853) (418,853) (201,695) Ending Operating Reserve Balance $ 6,501,000 $ 6,845,000 $ 7,061,000 $ 7,353,000 $ 7,623,000 $ 7,900,000 Target Ending Balance (6 months of O&M) 2
$ 6,501,000 $ 6,845,000 $ 7,061,000 $ 7,353,000 $ 7,623,000 $ 7,900,000 Capital Rehabilitation & Replacement Reserve
Beginning Reserve Balance $ 4,551,545 $ 12,942,049 $ 13,495,633 $ 11,271,248 $ 8,151,561 $ 6,946,887 Plus: Grant Proceeds - - - - - -
Plus: Transfer of Operating Reserve Surplus 8,390,505 648,498 684,902 599,853 418,853 201,695 Less: Use of Reserves for Capital Projects - (94,914) (2,909,287) (3,719,540) (1,623,527) (1,500,000) Ending Capital Rehab & Replacement Reserve Balance $ 12,942,049 $ 13,495,633 $ 11,271,248 $ 8,151,561 $ 6,946,887 $ 5,648,582 Target Ending Balance (Avg. Annual CIP) 3
$ 4,420,000 $ 4,420,000 $ 4,420,000 $ 4,420,000 $ 4,420,000 $ 4,420,000 Ending Cash Balance - Excl. Restricted Reserves $ 19,443,049 $ 20,340,633 $ 18,332,248 $ 15,504,561 $ 14,569,887 $ 13,548,582 Min. Target Ending Cash Balance -Excl. Restricted Reserves $ 10,921,000 $ 11,265,000 $ 11,481,000 $ 11,773,000 $ 12,043,000 $ 12,320,000 Ending Surplus/(Deficit) Compared to Reserve Targets $ 8,522,049 $ 9,075,633 $ 6,851,248 $ 3,731,561 $ 2,526,887 $ 1,228,582 Days Cash on Hand 546 540 463 380 333 289
Annual Interest Earnings Rate 4

0.85% 0.85% 0.85% 0.85% 0.85% 0.85%

1. Beginning cash balances provided by City staff for Fund 700 - Sewer Operations. Source file: Account Trial Balance FY22 - 430-435-700-705.pdf .

2. The target ending balance is set equal to 90-days of O&M expenses.

3. The target ending balance is set equal to the average annual CIP costs in future dollars for City infrastructure of approximately $30 M; we have doubled this to reflect a lesser reserve target that includes about 50% of SCRWA infrastructure (i.e., half of $74 M).

4. Historical interest earning rates are per the average annual yields for funds invested in LAIF (2018-2022). The source is the California State Treasurer's website:
https://www.treasurer.ca.gov/pmia-laif/historical/annual.asp .

SUMMARY OF CASH ACTIVITY

SEWER FUND RESERVES
5-Year Projected Rate Period
Prepared by NBS
www.nbsgov.com | Toll-Free: 800.676.7516 Financial Plan, 2 of 34 Agenda Item 11.1 Page 261 of 308
CITY OF GILROY Financial Plan & Reserve Summary

SEWER RATE STUDY
Financial Plan and Reserve Projections
TABLE 3 : EXCLUDED PLEDGE SUMMARY RESERVE FUND SUMMARY, cont.

Projected
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 Restricted Reserves:

Sewer Impact Fee Reserve
Beginning Reserve Balance1
$ 14,976,546 $ 15,048,572 $ 15,194,152 $ 18,873,406 $ 19,967,880 $ 18,302,389 Plus: Allocated Interest Earnings1 219,443 224,381 228,868 234,590 240,454 246,466 Less: Interfund Transfer out (1,533,500) (2,244,000) (2,244,000) (2,244,000) (2,244,000) (2,244,000) Plus: Interfund Transfer In 386,083 437,408 410,049
Plus: Impact Fee Revenue1
1,000,000 1,803,192 5,620,243 3,315,184 1,093,093 1,357,983 Less: Use of Reserves for Capital Projects2
- (75,401) (335,906) (211,300) (755,038) (2,840,381)
Ending Impact Fee Fund Balance $ 15,048,572 $ 15,194,152 $ 18,873,406 $ 19,967,880 $ 18,302,389 $ 14,822,457 Target Ending Balance $ - $ - $ - $ - $ - $ -
Debt Reserve
Beginning Reserve Balance3
$ - $ - $ - $ - $ - $ -
Ending Debt Reserve Balance $ - $ - $ - $ - $ - $ -
Target Ending Balance $ - $ - $ - $ - $ - $ -
Annual Interest Earnings Rate 4

0.87% 0.87% 0.87% 0.87% 0.87% 0.87%

1. Beginning cash balance for FY 2022/23 provided by City staff. Source file: 4 - Current Cash and Fund Balance - Wastewater 12062021.xlsx .

2. Determined in the CIP (Exhibit 2).

SUMMARY OF CASH ACTIVITY
5-Year Projected Rate Period
Prepared by NBS
www.nbsgov.com | Toll-Free: 800.676.7516 Financial Plan, 3 of 34 Agenda Item 11.1 Page 262 of 308
CITY OF GILROY Charts & Tables

SEWER RATE STUDY
Financial Plan Charts
CHART 1
$.0 Mil
$2.0 Mil
$4.0 Mil
$6.0 Mil
$8.0 Mil
$10.0 Mil
$12.0 Mil
$14.0 Mil
$16.0 Mil
$18.0 Mil
$20.0 Mil
2023 2024 2025 2026 2027 2028
Annual Obligations
Fiscal Year Ending June 30
Sewer Revenue Requirements vs.

Revenue Under Existing and Increased Rates
Rate Funded Capital Expenses
O&M Expenses
Revenues under Existing Rates
Revenues under Increased Rates
Prepared by NBS
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Charts and Tables, 4 of 34
Agenda Item 11.1 Page 263 of 308
CITY OF GILROY Charts & Tables

SEWER RATE STUDY
Financial Plan Charts
CHART 2
$.0 Mil
$5.0 Mil
$10.0 Mil
$15.0 Mil
$20.0 Mil
$25.0 Mil
2023 2024 2025 2026 2027 2028
Fiscal Year Ending June 30
Ending Cash Balances vs.

Recommended Reserve Targets
Sewer Fund - Unrestricted Reserves
Ending Cash Balance Minimum Target Reserve Balance
Prepared by NBS
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Charts and Tables, 5 of 34
Agenda Item 11.1 Page 264 of 308
CITY OF GILROY Charts & Tables

SEWER RATE STUDY
Financial Plan Charts
CHART 3

0.00%

4.00% 4.00% 4.00% 4.00% 4.00%
0%
1%
1%
2%
2%
3%
3%
4%
4%
5%
2023 2024 2025 2026 2027 2028
Fiscal Year Ending June 30
Projected Increases to Rate Revenue
Prepared by NBS
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Charts and Tables, 6 of 34
Agenda Item 11.1 Page 265 of 308
CITY OF GILROY Exhibit 1 - O&M

SEWER RATE STUDY
Operating Revenue and Expenses
TABLE 4 : REVENUE FORECAST1
Projected Actuals
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 Rate Revenue
700 7500 700 -75-7500-000-45120 User Fees 1 $ 13,247,000 $ 13,512,000 $ 13,782,000 $ 13,988,730 $ 14,198,561 $ 14,411,539 Other Revenue
700 7500 700 -75-7500-000-45145 Overhead Revenue 1 14,505 14,940 15,388 15,619 15,853 16,091 700 7500 700 -75-7500-000-46110 Bank Interest See FP 327,561 334,931 341,629 - - - 700 7500 700 -75-7500-000-46310 Other Interest 1 650,000 300,000 40,000 - - - 700 7500 700 -75-7500-000-48110 Interfund Transfer In 6 1,533,500 2,244,000 2,244,000 2,244,000 2,244,000 2,244,000 700 7500 700 -75-7500-000-48420 Bond Proceeds 6 - - - - - - 700 7510 700 -75-7510-000-43110 Federal Grant 6 - - - - - - TOTAL: RATE AND OTHER REVENUE $ 15,772,566 $ 16,405,871 $ 16,423,017 $ 16,248,349 $ 16,458,414 $ 16,671,630 Sewer Impact Fee Revenue
430 5500 430 -55-5500-000-45150 Developer's Impact Fee 1 1,000,000 1,803,192 5,620,243 3,315,184 1,093,093 1,357,983 430 5500 430 -55-5500-000-46110 Bank Interest See FP 219,443 224,381 228,868 - - - 430 5500 430 -55-5500-000-46210 Interfund Interest Income 1 - - - - - - 430 5500 430 -55-5500-000-48110 Interfund Transfer In 6 386,083 437,408 410,049 - - - TOTAL: IMPACT FEE REVENUE $ 1,605,526 $ 2,464,981 $ 6,259,160 $ 3,315,184 $ 1,093,093 $ 1,357,983 TABLE 5 : OPERATING EXPENSE FORECAST1
Projected Actuals
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 Fund 700 - Sewer Operations
7500 - Sewer Administration
700 7500 700 -75-7500-000-50410 Pension Expense 3 $ - $ - $ - $ - $ - $ - 700 7500 700 -75-7500-000-51510 Professional Support 2 - - - - - - 700 7500 700 -75-7500-000-51620 Audit Services 2 8,700 - - - - - 700 7500 700 -75-7500-000-51630 Contractual Services 2 6,185 5,288 5,552 5,722 5,898 6,079 700 7500 700 -75-7500-000-53165 Contra Capital Outlay 2 - - - - - - 700 7500 700 -75-7500-000-54110 Interfund Transfer Out 2 11,863 - - - - - 700 7500 700 -75-7500-000-54130 Fleet Service Charge 2 59,206 77,139 78,502 80,909 83,390 85,947 700 7500 700 -75-7500-000-54140 Facility Service Charge 2 134,639 216,418 232,659 239,793 247,145 254,723 700 7500 700 -75-7500-000-54145 Info Tech Service Charge 2 434,144 550,530 533,039 549,383 566,228 583,589 700 7500 700 -75-7500-000-54150 Overhead Charges 2 723,376 847,532 883,288 910,371 938,284 967,053 700 7500 700 -75-7500-000-54155 Liability Insurance Charges 2 401,933 430,902 452,735 466,617 480,924 495,669 700 7500 700 -75-7500-000-55110 Loss On Disposal Of F/A 2 - - - - - - 700 7500 700 -75-7500-000-56110 Amortization Expense 2 - - - - - - 700 7500 700 -75-7500-000-56120 Depreciation 2 - - - - - - 700 7500 700 -75-7500-000-57110 Debt Redemption 2 2,440,000 725,000 755,000 778,149 802,009 826,599 700 7500 700 -75-7500-000-57115 Debt Interest 2 904,708 1,519,000 1,489,400 1,535,067 1,582,134 1,630,645 700 7500 700 -75-7500-000-58115 Share Joint Venture Loss 2 - - - - - - 700 7500 700 -75-7500-000-58130 Claims 2 15,000 15,750 16,550 17,057 17,580 18,119 700 7500 700 -75-7500-000-55130 Cash Over Short 2 - - - - - - Subtotal - Sewer Administration $ 5,139,754 $ 4,387,559 $ 4,446,725 $ 4,583,068 $ 4,723,591 $ 4,868,423

DESCRIPTION
ACCOUNT DESCRIPTION Basis
Basis
5-Year Projected Rate Period
5-Year Projected Rate Period FUND DIVISION

FUND DIVISION

ACCOUNT
Prepared by NBS
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Exhibit 1 (O&M), 7 of 34
Agenda Item 11.1 Page 266 of 308
CITY OF GILROY Exhibit 1 - O&M

SEWER RATE STUDY
Operating Revenue and Expenses
TABLE 6 : OPERATING EXPENSE FORECAST, cont.1
Projected Actuals
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 Fund 700 - Sewer Operations
7510 - Finance Sewer Utility Billing
700 7510 700 -75-7510-000-50110 Salaries 3 $ 488,975 $ 617,543 $ 662,408 $ 685,592 $ 709,588 $ 734,424 705 8010 700-75-7510-000-50110 Utility Billing Supervisor (Split: Water/Sewer) 3 - - - - - - 700 7510 700 -75-7510-000-50120 Wages/Part Time 3 23,048 33,750 21,788 22,551 23,340 24,157 700 7510 700 -75-7510-000-50130 Overtime 3 14,000 10,000 10,000 10,350 10,712 11,087 700 7510 700 -75-7510-000-50150 Overtime Meals 3 41 - - - - - 700 7510 700 -75-7510-000-50203 Compensated Absences 3 - - - - - - 700 7510 700 -75-7510-000-50205 Workers Comp 3 2,163 2,563 2,689 2,783 2,880 2,981 700 7510 700 -75-7510-000-50210 Retirement (Full Time) 3 52,305 73,492 76,644 79,326 82,103 84,976 700 7510 700 -75-7510-000-50212 Deferred Compensation 3 1,230 2,070 2,070 2,142 2,217 2,295 700 7510 700 -75-7510-000-50213 UAL Retirement 3 88,677 94,578 101,904 105,471 109,162 112,983 700 7510 700 -75-7510-000-50215 Retirement (Part Time) 3 18 759 490 507 525 544 700 7510 700 -75-7510-000-50220 Medicare 3 7,976 9,595 10,077 10,430 10,795 11,172 700 7510 700 -75-7510-000-50225 Health Insurance Benefits 3 106,784 115,262 115,505 119,547 123,732 128,062 700 7510 700 -75-7510-000-50230 Life Insurance Benefits 3 824 794 821 850 879 910 700 7510 700 -75-7510-000-50235 Employee Assistance Prog 3 964 1,116 1,139 1,179 1,220 1,263 700 7510 700 -75-7510-000-50240 Unemployment Insurance 3 864 971 1,024 1,060 1,097 1,135 700 7510 700 -75-7510-000-50255 Misc Disability Insurance 3 1,030 1,307 1,307 1,353 1,400 1,450 700 7510 700 -75-7510-000-50260 Retiree Medical 3 - 900 900 932 964 998 700 7510 700 -75-7510-000-51110 Employee Training 2 - 3,400 3,400 3,504 3,612 3,722 700 7510 700 -75-7510-000-51120 Employee Travel, Food, Lodge 2 669 1,250 1,250 1,288 1,328 1,369 700 7510 700 -75-7510-000-51420 Telecommunications 2 - - - - - - 700 7510 700 -75-7510-000-51430 Postage 2 50 100 100 103 106 109 700 7510 700 -75-7510-000-51510 Professional Support 2 2,200 - - - - - 700 7510 700 -75-7510-000-51630 Contractual Services 2 119,000 66,025 67,825 69,905 72,048 74,257 700 7510 700 -75-7510-000-52110 Office/Computer Supplies 5 4,000 2,000 2,000 2,105 2,215 2,331 700 7510 700 -75-7510-000-52210 Repairs & Maintenance 2 - - - - - - 700 7510 700 -75-7510-000-50114 Earned Leave Cashout 2 6,787 - - - - - 700 7510 700 -75-7510-000-51230 Tuition 2 - - - - - -
Subtotal - Finance Sewer Utility Billing $ 921,605 $ 1,037,477 $ 1,083,341 $ 1,120,978 $ 1,159,924 $ 1,200,226 Basis 5-Year Projected Rate Period FUND DIVISION ACCOUNT DESCRIPTION Prepared by NBS
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Exhibit 1 (O&M), 8 of 34
Agenda Item 11.1 Page 267 of 308
CITY OF GILROY Exhibit 1 - O&M

SEWER RATE STUDY
Operating Revenue and Expenses
TABLE 7 : OPERATING EXPENSE FORECAST, cont.1
Projected Actuals
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 Fund 700 - Sewer Operations
7520 - Sewer Operations
700 7520 700 -75-7520-000-50110 Salaries 3 $ 1,313,539 $ 1,826,894 $ 1,972,608 $ 2,041,649 $ 2,113,107 $ 2,187,066 700 7520 700-75-7520-000-50110 FT Engineer I/II 3 - - - - - - 700 7520 700 -75-7520-000-50120 Wages/Part Time 3 11,337 60,000 65,000 67,275 69,630 72,067 700 7520 700 -75-7520-000-50130 Overtime 3 50,154 50,000 50,000 51,750 53,561 55,436 700 7520 700 -75-7520-000-50150 Overtime Meals 3 - 1,000 1,000 1,035 1,071 1,109 700 7520 700 -75-7520-000-50203 Compensated Absences 3 - - - - - - 700 7520 700 -75-7520-000-50205 Workers Comp 3 58,511 66,947 70,795 73,273 75,838 78,492 700 7520 700 -75-7520-000-50210 Retirement (Full Time) 3 136,961 218,375 229,291 237,317 245,623 254,219 700 7520 700 -75-7520-000-50215 Retirement (Part Time) 3 156 1,350 1,463 1,514 1,567 1,621 700 7520 700 -75-7520-000-50220 Medicare 3 21,506 28,106 30,290 31,350 32,447 33,583 700 7520 700 -75-7520-000-50225 Health Insurance Benefits 2 240,740 375,906 377,348 388,918 400,842 413,133 700 7520 700 -75-7520-000-50230 Life Insurance Benefits 2 2,149 2,241 2,321 2,393 2,466 2,542 700 7520 700 -75-7520-000-50235 Employee Assistance Prog 2 2,446 3,097 3,159 3,256 3,355 3,458 700 7520 700 -75-7520-000-50240 Unemployment Insurance 2 2,798 2,915 3,096 3,191 3,288 3,389 700 7520 700 -75-7520-000-50255 Misc Disability Insurance 2 2,701 3,733 3,733 3,847 3,965 4,087 700 7520 7007520-50260 RETIREE MEDICAL 1,508 1,800 - - - - 700 7520 700 -75-7520-000-51110 Employee Training 2 - 40,000 40,000 41,226 42,491 43,793 700 7520 700 -75-7520-000-51120 Employee Travel, Food, Lodge 2 - 15,000 15,000 15,460 15,934 16,423 700 7520 700 -75-7520-000-51420 Telecommunications 2 1,939 2,500 2,500 2,577 2,656 2,737 700 7520 700 -75-7520-000-51430 Postage 2 - - - - - -
700 7520 700 -75-7520-000-51510 Professional Support 2 11,298 15,000 15,000 15,460 15,934 16,423 700 7520 700 -75-7520-000-51630 Contractual Services 2 227,332 806,000 550,000 566,864 584,245 602,158 700 7520 700 -75-7520-000-52110 Office/Computer Supplies 2 73 1,500 1,500 1,546 1,593 1,642 700 7520 700 -75-7520-000-52150 Department Supplies 2 8,582 10,000 10,000 10,307 10,623 10,948 700 7520 700 -75-7520-000-52210 Repairs & Maintenance 2 26,213 100,000 100,000 103,066 106,226 109,483 700 7520 700 -75-7520-000-52310 Equipment Rental 2 - 10,000 10,000 10,307 10,623 10,948 700 7520 700 -75-7520-000-53120 Equipment/Furniture 2 25,000 - - - - - 700 7520 700 -75-7520-000-54110 Interfund Transfer Out2 2 300,000 390,000 409,500 422,056 434,997 448,334
SCWRA Operational Costs 2 5,715,995 6,512,515 6,957,238 7,170,000 7,390,000 7,620,000 700 7520 700 -75-7520-000-50114 Earned Leave Cashout 2 11,460 - - - - - 700 7520 700 -75-7520-000-50212 Deferred Compensation 3 3,608 5,742 5,742 5,943 6,151 6,366 700 7520 700 -75-7520-000-50213 UAL Retirement 3 249,086 284,730 310,780 321,657 332,915 344,567 700 7520 700 -75-7520-000-50310 Apparel, Boots, Ppe 2 6,735 9,000 9,000 9,276 9,560 9,854 700 7520 700 -75-7520-000-51410 Utilities 2 2,765 6,000 6,000 6,184 6,374 6,569 700 7520 700 -75-7520-000-52710 Permits 2 39,747 25,000 25,000 25,767 26,557 27,371 700 7520 700 -75-7520-000-53135 Improvements 2 - - - - - - 700 7520 700 -75-7520-000-53142 Capital Improvement Plan See Exh 2 - - - - - - Subtotal - Sewer Operations $ 8,474,336 $ 10,875,351 $ 11,277,363 $ 11,634,460 $ 12,003,637 $ 12,387,818 Basis 5-Year Projected Rate Period FUND DIVISION ACCOUNT DESCRIPTION Prepared by NBS
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Exhibit 1 (O&M), 9 of 34
Agenda Item 11.1 Page 268 of 308
CITY OF GILROY Exhibit 1 - O&M

SEWER RATE STUDY
Operating Revenue and Expenses
TABLE 8 : OPERATING EXPENSE FORECAST, cont.1
Projected Actuals
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 Fund 700 - Sewer Operations
Additional Expenditures
700 7520 700-75-7520-000-53120 one-time vehicle purchases One-Time - 404,450 404,450 - - - Subtotal - Additional Expenditures $ - $ 404,450 $ 404,450 $ - $ - $ - GRAND TOTAL: SEWER EXPENSES $ 14,535,695 $ 16,704,836 $ 17,211,879 $ 17,338,506 $ 17,887,153 $ 18,456,467 TABLE 9 : FORECASTING ASSUMPTIONS
Basis 2023 2024 2025 2026 2027 2028
Customer Growth41 -- 1.50% 1.50% 1.50% 1.50% 1.50%
General Cost Inflation52 -- 3.07% 3.07% 3.07% 3.07% 3.07% Labor Cost Inflation63 -- 3.50% 3.50% 3.50% 3.50% 3.50% Energy74 -- 7.44% 7.44% 7.44% 7.44% 7.44%
Fuel & Utilities85 -- 5.24% 5.24% 5.24% 5.24% 5.24%
No Escalation 6 -- 0.00% 0.00% 0.00% 0.00% 0.00%

1. Revenue and expenses for FY 2022/23 through FY2024/25 provided by the City. Revenues and expenses for all other years are escalated based on the forecasting assumptions in Table 9. Source file: FY23 Budgets.xlsx .

2. These expenses are costs related to the ownership, operation, maintenance and use of the South County Regional Wastewater Authority (SCRWA) jointly owned by the City of Morgan Hill. Based on the JPA agreement, Gilroy is responsible for approx. 60% of these costs which are based on actual annual flow.

3. Expenses are inflated each year by the following annual inflation factor categories.

4. Customer growth is based on estimated service area population growth through FY 2044/45. Source file: Gilroy 2020 UWMP.pdf , page 3-9.

5. General cost inflation is based on the 5-year average annual change in the Consumer Price Index for all Urban Consumers in the San Francisco-Oakland-Hayward, CA area.

6. Labor cost inflation is based on the 5-year average annual change in the Quarterly Census of Employment and Wages for San Francisco County, CA.

7. Energy cost inflation is based on the 5-year average annual change in the Consumer Price Index for all Urban Consumers in the San Francisco-Oakland-Hayward, CA area.

8. Fuel & Utilities cost inflation is based on the 5-year average annual change in the Consumer Price Index - Average Price Data for Fuels and related products and power. This factor is used for utility costs other than electricity.
5-Year Projected Rate Period Basis
INFLATION FACTORS3

FUND DIVISION ACCOUNT DESCRIPTION
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Exhibit 1 (O&M), 10 of 34
Agenda Item 11.1 Page 269 of 308
CITY OF GILROY Exhibit 2 - CIP

SEWER RATE STUDY
Capital Improvement Plan Expenditures
TABLE 10 : CAPITAL FUNDING SUMMARY
CAPITAL FUNDING FORECAST Budget
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 Grants $ - $ - $ - $ - $ - $ -
Use of Capacity Fee Reserves (to Fund Impact Fee Projects) - 75,401 335,906 211,300 755,038 2,840,381 Use of 2021 Revenue Bond Proceeds 1,130,904 4,000,000 - - - - Use of Capital Rehabilitation and Replacement Reserve - 94,914 2,909,287 3,719,540 1,623,527 1,500,000 Rate Revenue - 75,401 335,906 211,300 755,038 1,334,115 Total Sources of Capital Funds $ 1,130,904 $ 4,245,716 $ 3,581,099 $ 4,142,140 $ 3,133,603 $ 5,674,496 Uses of Capital Funds:

Total Project Costs $ 1,130,904 $ 4,245,716 $ 3,581,099 $ 4,142,140 $ 3,133,603 $ 5,674,496 Capital Funding Surplus (Deficiency) $ - $ - $ - $ - $ - $ - 2021 Revenue Bond Proceeds (Per Capital Improvement Program) 1 $ 1,130,904 $ 4,000,000 $ - $ - $ - $ -
Remaining 2021 Bond Proceeds $ 4,000,000 $ - $ - $ - $ - $ - New Revenue Bond Proceeds (If needed) $ - $ - $ - $ - $ - $ -

1. Source file: 11. Adopted-CIP-FY21-FY25.pdf , page 77.

CAPITAL IMPROVEMENT PROGRAM FUNDING OPTIONS
2 Policy Choice (CIP & Master Planned Project ONLY) 2023 2024 2025 2026 2027 2028 1 Full Funding of CIP, at actual cost & timing $1,130,904 $5,560,420 $4,326,924 $5,241,120 $3,171,420 $3,778,820 2 75% Funding of CIP, at actual cost & timing $1,130,904 4,170,315 3,245,193 3,930,840 2,378,565 2,834,115 3 50% Funding of CIP, at actual cost & timing $1,130,904 2,085,158 1,622,597 1,965,420 1,189,283 1,417,058 4 No CIP - - - - - -
Total Planned CIP through FY 2027/28 $ 16,559,028
Capital Improvement Program Funding Choice 2023 2024 2025 2026 2027 2028 Effective Annual Funding Amount $ 1,130,904 $ 4,170,315 $ 3,245,193 $ 3,930,840 $ 2,378,565 $ 2,834,115 TABLE 11 : CAPITAL IMPROVEMENT PROGRAM COSTS (in Current-Year Dollars ) - 5% inflation added to these projects (per Harjot) Project No. Description 2023 2024 2025 2026 22027 2028
Capital Improvement Program - Fiscal Year 2021 to Fiscal Year 2025 1 800490 Annual Citywide Sewer Repair and Rehabilitation $ 250,000 $ 250,000 $ 250,000 $ 250,000 $ 250,000 800510 Asbestos Cement Sewer Pipe Replacement Citywide - 265,629 1,008,600 - - 800530 Large Diameter Sewer Rehabilitation Citywide - 273,105 1,081,100 - - EN2403 Corporation Yard EV and EV Charging -
800550 Old Gilroy - Chestnut to Forest Sewer Upgrade 50,999 251,600 - - - SW2402 Joint Morgan Hill-Gilroy Trunk Line Repairs - 1,938,671 - 900720 Old Gilroy Street at Railroad Crossing Sewer Replacement - - - - 587,400 7520-53120 Vehicles/Equipment (operations budget transferred to CIP by NBS) - 404,450 404,450 - - - Subtotal - Capital Improvement Program $ - $ 2,644,120 $ 1,444,784 $ 2,339,700 $ 250,000 $ 837,400 Subtotal - Master Plan Projects $ - $ 2,511,420 $ 2,511,420 $ 2,511,420 $ 2,511,420 $ 2,511,420 Total - CIP & Master Plan Projects (Current Year Dollars) $0 $5,155,540 $3,956,204 $4,851,120 $2,761,420 $3,348,820 * Morgan Hill Contribution for the SCRWA expansion is approximately is $31.5M (FY 21-25). 5-Year Projected Rate Period
Funding Sources:

Insert policy choice in box to right, based on options listed above:

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Exhibit 2 (CIP), 11 of 34
Agenda Item 11.1 Page 270 of 308
CITY OF GILROY Exhibit 2 - CIP

SEWER RATE STUDY
Capital Improvement Plan Expenditures
TABLE 12 : CAPITAL IMPROVEMENT PROGRAM COSTS (in Future-Year Dollars ) Inflation removed because 5% inflation already Included Project No. Description 2023 2024 2025 2026 22027 2028
Capital Improvement Program - Fiscal Year 2021 to Fiscal Year 2025 1 800490 Annual Citywide Sewer Repair and Rehabilitation $ - $ 250,000 $ 250,000 $ 250,000 $ 250,000 $ 250,000 800510 Asbestos Cement Sewer Pipe Replacement Citywide - - 265,629 1,008,600 - - 800530 Large Diameter Sewer Rehabilitation Citywide - - 273,105 1,081,100 - - EN2403 Corporation Yard EV and EV Charging - - - - - -
800550 Old Gilroy - Chestnut to Forest Sewer Upgrade - 50,999 251,600 - - - SW2402 Joint Morgan Hill-Gilroy Trunk Line Repairs - 1,938,671 - - - - 900720 Old Gilroy Street at Railroad Crossing Sewer Replacement - - - - - 587,400 7007520-54114TRF OUT SCRWA CIP (Transferred from Operations to CIP by NBS) 1,130,904 404,880 370,720 390,000 410,000 430,000 7520-53120 New Vehicles (operations budget transferred to CIP by NBS) - 404,450 404,450 - - - Subtotal - Capital Improvement Program (in Future Year Dollars) $ 1,130,904 $ 3,049,000 $ 1,815,504 $ 2,729,700 $ 660,000 $ 1,267,400 Sewer System Master Plan Projects 3
Gravity Main Improvements
Santa Teresa - Long Meadow Subtrunk
SLP-1 Santa Teresa Boulevard $ - $ 223,980 $ 223,980 $ 223,980 $ 223,980 $ 223,980 Welburn Subtrunk
WP-1 Welburn Avenue - 188,040 188,040 188,040 188,040 188,040 WP-2 Welburn Avenue - 82,980 82,980 82,980 82,980 82,980 Forest-Swanston Subtrunk
FP-1 Loof Avenue - 127,200 127,200 127,200 127,200 127,200 FP-2 Forest Street - 225,220 225,220 225,220 225,220 225,220 Old Gilroy Subtrunk
OP-1 Old Gilroy Street - 11,120 11,120 11,120 11,120 11,120 OP-2 Old Gilroy Street - 90,100 90,100 90,100 90,100 90,100 Uvas Park Subtrunk
UP-1 Uvas Park Drive - 262,680 262,680 262,680 262,680 262,680 UP-2 Hoxett Street / ROW - 200,940 200,940 200,940 200,940 200,940 UP-3 Yorktown Drive - 223,600 223,600 223,600 223,600 223,600 UP-4 Greenwich Drive - 74,560 74,560 74,560 74,560 74,560 UP-5 Orchard Drive - 25,960 25,960 25,960 25,960 25,960 UP-6 W. 10th Street - 175,020 175,020 175,020 175,020 175,020 Thomas Subtrunk
TP-1 London Place - 387,200 387,200 387,200 387,200 387,200 TP-2 Monterey Road - 212,820 212,820 212,820 212,820 212,820 Subtotal - Master Plan Projects (in Future Year Dollars) $ - $ 2,511,420 $ 2,511,420 $ 2,511,420 $ 2,511,420 $ 2,511,420 Total - CIP & Master Plan Projects (in Future Year Dollars) $ 1,130,904 $ 5,560,420 $ 4,326,924 $ 5,241,120 $ 3,171,420 $ 3,778,820 Impact Fee Projects 4 (in Future Year Dollars)
800520 Carmel-Dowdy Alley - Sixth to Seventh Sewer Replacement $ - $ 75,401 $ 273,200 $ - $ - $ - 800540 Monterey and Princeville Sewer Network - - - - 755,038 2,840,381 800560 Seventh St - Carmel-Dowdy to Hanna-Rosanna Alleys Sewer Repl. - - 62,706 211,300 - - 800570 Wastewater Treatment Plant Expansion (SCRWA)* - - - Subtotal - Impact Fee Projects (in Future Year Dollars) $ - $ 75,401 $ 335,906 $ 211,300 $ 755,038 $ 2,840,381 Estimated Future Projects (Impact Fee Funded)
Future Projects5 - - - - - -
Total: Impact Fee Funded CIP (Future-Year Dollars) $ - $ 75,401 $ 335,906 $ 211,300 $ 755,038 $ 2,840,381 Total - All (Impact Fee, CIP & Master Plan Projects) (Future Year Dollars) $1,130,904 $5,635,821 $4,662,830 $5,452,420 $3,926,458 $6,619,201 * City contribution - SCRWA TP Construction (bond funded) $17,840,994 $15,719,810 $1,867,896 (Bond-Funded)
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Exhibit 2 (CIP), 12 of 34
Agenda Item 11.1 Page 271 of 308
CITY OF GILROY Exhibit 2 - CIP

SEWER RATE STUDY
Capital Improvement Plan Expenditures
TABLE 13 : FORECASTING ASSUMPTIONS
Economic Variables 2023 2024 2025 2026 2027 2028

0.00% 4.00% 4.00% 4.00% 4.00% 4.00%
Cumulative Construction Cost Multiplier from 2023 1.00 1.04 1.08 1.12 1.17 1.22

1. Capital project costs provided by City Staff. Source file: 11. Adopted-CIP-FY21-FY25.pdf , pages 43, 60-77.

3. Capital project costs are from the City's Draft Sewer System Master Plan (May 2022). Source file: Draft Water Master Plan.pdf , Table 8.2, pages 100-101.

4. Capital projects funded by impact fees. Source file: City of Gilroy Water_Sewer Operations and Impact FundsFY24_25.xlsx, CIP Worksheet. April 2023.

5. Future project costs beyond FY 2029/30 were calculated based on the City's 5-year average (FY24-28).

6. The project costs in future-year dollars have been inflated by 4% annually.

7. For reference purposes, the annual Construction Cost Inflation percentage is the 5-year average change in the Construction Cost Index for September 2017-2022 (4.0%). Source:

Engineering News Record website (http://enr.construction.com ).

Annual Construction Cost Inflation, Per Engineering News Record7 Prepared by NBS
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Exhibit 2 (CIP), 13 of 34
Agenda Item 11.1 Page 272 of 308
CITY OF GILROY Exhibit 3 - Debt

SEWER RATE STUDY
Debt Service
TABLE 14 : SEWER UTILITY EXISTING DEBT OBLIGATIONS
EXISTING DEBT OBLIGATIONS Budget
Annual Repayment Schedules: FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 Wastewater Revenue Bonds, Series 2021A - Loan Amount $47,080,000 Principal Payment $ - $ 725,000 $ 755,000 $ 785,000 $ 815,000 $ 850,000 Interest Payment 1,533,500 1,519,000 1,489,400 1,458,600 1,426,600 1,393,300 Subtotal: Annual Debt Service $ 1,533,500 $ 2,244,000 $ 2,244,400 $ 2,243,600 $ 2,241,600 $ 2,243,300 Coverage Requirement ($-Amnt above annual payment)2
$ 1,840,200 $ 2,692,800 $ 2,693,280 $ 2,692,320 $ 2,689,920 $ 2,691,960 Reserve Requirement (total fund balance)3$ - $ - $ - $ - $ - $ - Grand Total: Existing Annual Debt Service $ 1,533,500 $ 2,244,000 $ 2,244,400 $ 2,243,600 $ 2,241,600 $ 2,243,300 Grand Total: Existing Annual Coverage Requirement $ 1,840,200 $ 2,692,800 $ 2,693,280 $ 2,692,320 $ 2,689,920 $ 2,691,960 Grand Total: Existing Debt Reserve Target $ - $ - $ - $ - $ - $ -

1. Revenue bonds issued to finance the City's obligations for the capital improvements of the SCRWA Treatment Facility. Source file: 08. Official Statement.pdf .

2. The City must have net revenues that are at least equal to 1.2 times the annual debt service payment. Source file: 08. Official Statement.pdf.

4. Per the Official Statement, the City is not required to fund a debt service reserve.

TABLE 15 : EXISTING ANNUAL DEBT OBLIGATIONS TO BE SATISFIED BY SEWER RATES Annual Obligations 2023 2024 2025 2026 2027 2028
Existing Annual Debt Service $ 1,533,500 $ 2,244,000 $ 2,244,400 $ 2,243,600 $ 2,241,600 $ 2,243,300 Existing Annual Coverage Requirement $ 1,840,200 $ 2,692,800 $ 2,693,280 $ 2,692,320 $ 2,689,920 $ 2,691,960 Existing Debt Reserve Target $ - $ - $ - $ - $ - $ -
5-Year Projected Rate Period
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Exhibit 3 (Debt), 14 of 34
Agenda Item 11.1 Page 273 of 308
CITY OF GILROY Exhibit 4 - Current Rates

SEWER RATE STUDY
Projected Sewer Rates Under Existing Rate Schedule
TABLE 16 : CURRENT WASTEWATER RATE SCHEDULE
Residential - Monthly Fixed Rate
Single Family Residence $39.66 $46.64 $51.07 9% 29%
Multi-Family Residence $28.17 $33.13 $34.39 4% 22%
Non-Residential - Volumetric Monthly Charge ($/1,000 Gallons) Low Strength $6.30 $7.41 $8.36 13% 33%
Domestic Strength $7.83 $9.21 $9.51 3% 21%
Medium Strength $10.27 $12.08 $13.15 9% 28%
High Strength $15.84 $18.63 $21.56 16% 36%
Non-Residential - Monitoring & Pretreatment Program Base Rate Monthly Charges Significant/Categorical $210.00 $240.95 $287.19 19% 37% Non-Significant/Categorical $83.00 $95.22 $114.64 20% 38% Other Non-Residential $10.00 $11.47 $15.47 35% 55%

1. City Website: https://www.cityofgilroy.org/DocumentCenter/View/8664/Water---Wasterwater-Rates-7-1-19pdf . % Change
from 2015
to Proposed
Wastewater Rate Schedule1
Current Rates
(Adopted
7/1/2019)
Rates from
2015 Rate
Study
Proposed
Rates
% Increase
from Current
to Proposed
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CITY OF GILROY

SEWER RATE STUDY
Cost-of-Service Analysis
TABLE 17 : CLASSIFICATION OF EXPENSES FOR COST OF SERVICE ANALYSIS Classification of Expenses
FY 2023/24 (VOL) (BOD) (TSS) (DA) (CA) (VOL) (BOD) (TSS) (DA) (CA) Fund 700 - Sewer Operations
7500 - Sewer Administration
Pension Expense $ - $ - $ - $ - $ - $ - 40.0% 25.0% 25.0% 0.0% 10.0% Professional Support - - - - - - 40.0% 25.0% 25.0% 0.0% 10.0% Audit Services - - - - - - 40.0% 25.0% 25.0% 0.0% 10.0% Contractual Services 5,288 2,115 1,322 1,322 - 529 40.0% 25.0% 25.0% 0.0% 10.0% Contra Capital Outlay - - - - - - 40.0% 25.0% 25.0% 0.0% 10.0% Interfund Transfer Out - - - - - - 40.0% 25.0% 25.0% 0.0% 10.0% Fleet Service Charge 77,139 30,856 19,285 19,285 - 7,714 40.0% 25.0% 25.0% 0.0% 10.0% Facility Service Charge 216,418 86,567 54,105 54,105 - 21,642 40.0% 25.0% 25.0% 0.0% 10.0% Info Tech Service Charge 550,530 495,477 - - - 55,053 90.0% 0.0% 0.0% 0.0% 10.0% Overhead Charges 847,532 339,013 211,883 211,883 - 84,753 40.0% 25.0% 25.0% 0.0% 10.0% Liability Insurance Charges 430,902 172,361 107,726 107,726 - 43,090 40.0% 25.0% 25.0% 0.0% 10.0% Loss On Disposal Of F/A - - - - - - 40.0% 25.0% 25.0% 0.0% 10.0% Amortization Expense - - - - - - 30.0% 35.0% 35.0% 0.0% 0.0% Depreciation - - - - - - 50.0% 25.0% 25.0% 0.0% 0.0%
Debt Redemption 725,000 362,500 181,250 181,250 - - 50.0% 25.0% 25.0% 0.0% 0.0% Debt Interest 1,519,000 759,500 379,750 379,750 - - 50.0% 25.0% 25.0% 0.0% 0.0% Share Joint Venture Loss - - - - - - 40.0% 25.0% 25.0% 0.0% 10.0% Claims 15,750 6,300 3,938 3,938 - 1,575 40.0% 25.0% 25.0% 0.0% 10.0% Cash Over Short - - - - - - 40.0% 25.0% 25.0% 0.0% 10.0% Subtotal - Sewer Administration $ 4,387,559 $ 2,254,689 $ 959,257 $ 959,257 $ - $ 214,356 51.4% 21.9% 21.9% 0.0% 4.9% Strength Customer Basis of Classification
Direct Alloc.
(Monitoring,
Pretreat., etc.)
Budget Categories
Total Revenue
Requirements Flow
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Funct. & Classification, 16 of 34
Agenda Item 11.1 Page 275 of 308

CITY OF GILROY

SEWER RATE STUDY
Cost-of-Service Analysis
TABLE 18 : CLASSIFICATION OF EXPENSES FOR COST OF SERVICE ANALYSIS, cont.

Classification of Expenses
FY 2023/24 (VOL) (BOD) (TSS) (DA) (CA) (VOL) (BOD) (TSS) (DA) (CA) Fund 700 - Sewer Operations
7510 - Finance Sewer Utility Billing
Salaries $ 617,543 $ 185,263 $ 123,509 $ 123,509 $ - $ 185,263 30.0% 20% 20% 0% 30% Utility Billing Supervisor (Split: Water/Sewer) - - - - - - 30.0% 20% 20% 0% 30% Wages/Part Time 33,750 10,125 6,750 6,750 - 10,125 30.0% 20% 20% 0% 30% Overtime 10,000 3,000 2,000 2,000 - 3,000 30.0% 20% 20% 0% 30% Overtime Meals - - - - - - 30.0% 20% 20% 0% 30%
Compensated Absences - - - - - - 30.0% 20% 20% 0% 30%
Workers Comp 2,563 769 513 513 - 769 30.0% 20% 20% 0% 30% Retirement (Full Time) 73,492 22,048 14,698 14,698 - 22,048 30.0% 20% 20% 0% 30% Deferred Compensation 2,070 621 414 414 - 621 30.0% 20% 20% 0% 30% UAL Retirement 94,578 28,373 18,916 18,916 - 28,373 30.0% 20% 20% 0% 30% Retirement (Part Time) 759 228 152 152 - 228 30.0% 20% 20% 0% 30% Medicare 9,595 2,879 1,919 1,919 - 2,879 30.0% 20% 20% 0% 30% Health Insurance Benefits 115,262 34,579 23,052 23,052 - 34,579 30.0% 20% 20% 0% 30% Life Insurance Benefits 794 238 159 159 - 238 30.0% 20% 20% 0% 30% Employee Assistance Prog 1,116 335 223 223 - 335 30.0% 20% 20% 0% 30% Unemployment Insurance 971 291 194 194 - 291 30.0% 20% 20% 0% 30% Misc Disability Insurance 1,307 392 261 261 - 392 30.0% 20% 20% 0% 30% Employee Training 3,400 1,020 680 680 - 1,020 30.0% 20% 20% 0% 30% Employee Travel, Food, Lodge 1,250 375 250 250 - 375 30.0% 20% 20% 0% 30% Telecommunications - - - - - - 30.0% 20% 20% 0% 30%
Postage 100 30 20 20 - 30 30.0% 20% 20% 0% 30%
Professional Support - - - - - - 30.0% 20% 20% 0% 30%
Contractual Services 66,025 19,808 13,205 13,205 - 19,808 30.0% 20% 20% 0% 30% Office/Computer Supplies 2,000 600 400 400 - 600 30.0% 20% 20% 0% 30% Repairs & Maintenance - - - - - - 30.0% 20% 20% 0% 30%
Earned Leave Cashout - - - - - - 30.0% 20% 20% 0% 30%
Tuition - - - - - - 30.0% 20% 20% 0% 30%
Subtotal - Finance Sewer Utility Billing $ 1,036,577 $ 310,973 $ 207,315 $ 207,315 $ - $ 310,973 30% 20% 20% 0% 30% Strength Customer Basis of Classification Budget Categories Total Revenue
Requirements Flow
Direct Alloc.
(Monitoring,
Pretreat., etc.)
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Funct. & Classification, 17 of 34
Agenda Item 11.1 Page 276 of 308

CITY OF GILROY

SEWER RATE STUDY
Cost-of-Service Analysis
TABLE 19 : CLASSIFICATION OF EXPENSES FOR COST OF SERVICE ANALYSIS, cont.

Classification of Expenses
FY 2023/24 (VOL) (BOD) (TSS) (DA) (CA) (VOL) (BOD) (TSS) (DA) (CA) Fund 700 - Sewer Operations
7520 - Sewer Operations
Salaries $ 1,826,894 $ 858,640 $ 456,724 $ 456,724 $ 54,807 $ - 47% 25% 25% 3% 0% FT Engineer I/II - - - - - - 47% 25% 25% 3% 0%
Wages/Part Time 60,000 28,200 15,000 15,000 1,800 - 47% 25% 25% 3% 0% Overtime 50,000 23,500 12,500 12,500 1,500 - 47% 25% 25% 3% 0% Overtime Meals 1,000 470 250 250 30 - 47% 25% 25% 3% 0% Compensated Absences - - - - - - 47% 25% 25% 3% 0%
Workers Comp 66,947 31,465 16,737 16,737 2,008 - 47% 25% 25% 3% 0% Retirement (Full Time) 218,375 102,636 54,594 54,594 6,551 - 47% 25% 25% 3% 0% Retirement (Part Time) 1,350 635 338 338 41 - 47% 25% 25% 3% 0% Medicare 28,106 13,210 7,027 7,027 843 - 47% 25% 25% 3% 0% Health Insurance Benefits 375,906 176,676 93,976 93,976 11,277 - 47% 25% 25% 3% 0% Life Insurance Benefits 2,241 1,053 560 560 67 - 47% 25% 25% 3% 0% Employee Assistance Prog 3,097 1,456 774 774 93 - 47% 25% 25% 3% 0% Unemployment Insurance 2,915 1,370 729 729 87 - 47% 25% 25% 3% 0% Misc Disability Insurance 3,733 1,754 933 933 112 - 47% 25% 25% 3% 0% RETIREE MEDICAL 1,800 846 450 450 54 - 47% 25% 25% 3% 0% Employee Training 40,000 18,800 10,000 10,000 1,200 - 47% 25% 25% 3% 0% Employee Travel, Food, Lodge 15,000 7,050 3,750 3,750 450 - 47% 25% 25% 3% 0% Telecommunications 2,500 1,175 625 625 75 - 47% 25% 25% 3% 0% Postage - - - - - - 47% 25% 25% 3% 0%
Professional Support 15,000 7,050 3,750 3,750 450 - 47% 25% 25% 3% 0% Contractual Services 806,000 378,820 201,500 201,500 24,180 - 47% 25% 25% 3% 0% Office/Computer Supplies 1,500 705 375 375 45 - 47% 25% 25% 3% 0% Department Supplies 10,000 4,700 2,500 2,500 300 - 47% 25% 25% 3% 0% Repairs & Maintenance 100,000 47,000 25,000 25,000 3,000 - 47% 25% 25% 3% 0% Equipment Rental 10,000 4,700 2,500 2,500 300 - 47% 25% 25% 3% 0% Equipment/Furniture - - - - - - 47% 25% 25% 3% 0%
Interfund Transfer Out2 390,000 234,000 78,000 78,000 - - 60% 20% 20% 0% 0% SCWRA Oper. Costs (less Monit., Sampl., Pre-Tr.Costs) 6,146,815 2,889,003 1,536,704 1,536,704 184,404 - 47% 25% 25% 3% 0% Monitoring, Sampling, Pretreatment (Non-Resid. Costs) 365,700 - - - 365,700 - 0% 0% 0% 100% 0% Earned Leave Cashout - - - - - - 47% 25% 25% 3% 0%
Deferred Compensation 5,742 2,699 1,436 1,436 172 - 47% 25% 25% 3% 0% UAL Retirement 284,730 133,823 71,182 71,182 8,542 - 47% 25% 25% 3% 0% Apparel, Boots, Ppe 9,000 4,230 2,250 2,250 270 - 47% 25% 25% 3% 0% Utilities 6,000 2,820 1,500 1,500 180 - 47% 25% 25% 3% 0% Permits 25,000 11,750 6,250 6,250 750 - 47% 25% 25% 3% 0% Improvements - - - - - - 47% 25% 25% 3% 0%
Subtotal - Wastewater Environmental Compliance $ 10,875,351 $ 4,990,236 $ 2,607,913 $ 2,607,913 $ 669,290 $ - 46% 24% 24% 6% 0% Budget Categories
Total Revenue
Requirements Flow Strength Customer Basis of Classification Direct Alloc.
(Monitoring,
Pretreat., etc.)
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Funct. & Classification, 18 of 34
Agenda Item 11.1 Page 277 of 308

CITY OF GILROY

SEWER RATE STUDY
Cost-of-Service Analysis
TABLE 20 : CLASSIFICATION OF EXPENSES FOR COST OF SERVICE ANALYSIS, cont.

Classification of Expenses, cont.

FY 2023/24 (VOL) (BOD) (TSS) (DA) (CA) (VOL) (BOD) (TSS) (DA) (CA) Debt Service Payments
Outstanding Debt 2,244,000 1,029,676 538,112 538,112 138,100 - 46% 24% 24% 6% 0% New Debt Issue - SRF Loan - - - - - - 50% 25% 25% 0% 0% New Debt Issue - Revenue Bond - - - - - - 50% 25% 25% 0% 0% Total Debt Service Payments $ 2,244,000 $ 1,029,676 $ 538,112 $ 538,112 $ 138,100 $ - 46% 24% 24% 0% 0% Capital Expenditures
Rate Funded Capital Expenses $ 75,401 $ 34,598 $ 18,081 $ 18,081 $ 18,081 $ - 46% 24% 24% 0% 0% TOTAL REVENUE REQUIREMENTS $ 18,618,887 $ 8,620,172 $ 4,330,678 $ 4,330,678 $ 825,471 $ 525,329 46% 23% 23% 4% 3% Less: Non-Rate Revenues
Other Revenue:

Misc. Revenue & Interest Earnings2 $ (649,871) $ (298,198) $ (155,839) $ (155,839) $ (39,994) $ - 46% 24% 24% 6% 0% Interfund Transfer In (2,244,000) (1,346,400) (448,800) (448,800) - - 60% 20% 20% 0% 0% NET REVENUE REQUIREMENTS $ 15,725,016 $ 6,975,574 $ 3,726,039 $ 3,726,039 $ 785,476 $ 525,329 Allocation of Revenue Requirements 100.0% 44.4% 23.7% 23.7% 5.0% 3.3% 100.0% 44.0% 24.0% 24.0% 5.0% 3.0%
TABLE 21 : NET REVENUE REQUIREMENTS INCLUDING RATE INCREASE Adjustment to Current Rate Level: Total (VOL) (BOD) (TSS) (DA) (CA) Projected Rate Revenue at Current Rates $ 13,512,000
FY 2023/24 Projected Rate Increase 4%
Additional Rate Revenue from Rate Increase $ 540,480
Adjusted Net Revenue Req'ts $ 14,052,480 $ 6,183,091 $ 3,372,595 $ 3,372,595 $ 702,624 $ 421,574 FY 2023/24 Target Rate Rev. After Rate Incr. (From Fin. Plan) $ 14,052,480 Percent of Revenue 44.0% 24.0% 24.0% 5.0% 3.0%
Strength Customer Basis of Classification
Direct Alloc.
(Monitoring,
Pretreat., etc.)
Allocations of COSA (Rounded)
Flow Budget Categories
Total Revenue
Requirements
Prepared by NBS
www.nbsgov.com | Toll-Free: 800.676.7516
Funct. & Classification, 19 of 34
Agenda Item 11.1 Page 278 of 308

CITY OF GILROY

SEWER RATE STUDY
Cost-of-Service Analysis
TABLE 22 : DEVELOPMENT OF THE FLOW ALLOCATION FACTOR
Customer Class
Consumption
(TG/year)1
Number of
Dwelling Units
/ Accounts2
Winter
Consumption
(Dec-Feb '21)3
Annualized
Winter
Consumption
Adjusted
Annual Volume
(gallons)3
Percentage
of Adjusted
Volume
Residential Customers
Single-Family Residence 1,135,486 12,330 201,429 805,715 805,715,371 61.6% 5.4 TG/mo.

Multi-Family Residence4218,620 4,585 49,505 198,022 198,021,843 15.1% 3.6 TG/mo.

Non-Residential Customers
Low Strength 77,640 427 77,640,000 5.9%
Domestic Strength 98,610 253 98,610,000 7.5%
Medium Strength 53,149 55 53,149,000 4.1%
High Strength 74,067 128 74,067,000 5.7%
Total: 1,657,571 17,778 250,934 1,003,737 1,307,203,214 100.0%

1. Consumption data for residential customers is not available. Calculation of estimated consumption available in source file:

FY 2021-22 Billing Journal Totals by Service v7.xlsx.

2. SFR and MFR customers are based on the number of dwelling units and all other customers are based on the number of accounts.

3. Annual consumption for all customer classes based on 12 months of water consumption.

4. MFR dwelling units provided by the City. Source file: MFR Units.xlsx .

TABLE 23 : DEVELOPMENT OF THE STRENGTH ALLOCATION FACTOR 205 Customer Class
Average
Strength
Factor (mg/l)1
Calculated
BOD (lbs./yr.)
Adjusted BOD
(lbs./yr.)
Percent
of Total
Average
Strength
Factor (mg/l)1
Calculated
TSS (lbs./yr.)
Adjusted BOD
(lbs./yr.)
Percent
of Total
Residential Customers
Single-Family Residence 805,715,371 205 1,377,532 2,755,063 51.4% 205 1,377,532 1,744,176 51.4% Used strength for Residential from Appendix G Multi-Family Residence 198,021,843 205 338,558 677,116 12.6% 205 338,558 428,669 12.6% Used strength for Residential from Appendix G Non-Residential Customers
Low Strength 77,640,000 167 108,135 216,271 4.0% 167 108,135 136,917 4.0% Used strength for Residential from Appendix G Domestic Strength 98,610,000 225 185,042 370,083 6.9% 225 185,042 234,293 6.9% Used strength for Residential from Appendix G Medium Strength 53,149,000 400 177,305 354,610 6.6% 400 177,305 224,497 6.6% Used strength for Hotel/Motel without Dining from Appendix G High Strength 74,067,000 800 494,175 988,350 18.4% 800 494,175 625,705 18.4% Used strength for Industrial Laundry from Appendix G Total: 1,307,203,214 2,680,747 5,361,493 100.0% 2,680,747 3,394,256 100.0% Total Annual from WWTP Data 5,361,493 BOD (lbs./yr.) 3,394,256 TSS (lbs./yr.)

2.00 BOD Adj. Factor 1.27 TSS Adj. Factor

1. Avg. strength factors for BOD and TSS are from the CA State Water Resources Control Board, Revenue Program Guidelines (Appendix G), March 1998 Edition.

Annual Flow
(gallons)
Biochemical Oxygen Demand (BOD) Total Suspended Solids (TSS) Prepared by NBS
www.nbsgov.com | Toll-Free: 800.676.7516
Allocation Factors, 20 of 34
Agenda Item 11.1 Page 279 of 308

CITY OF GILROY

SEWER RATE STUDY
Cost-of-Service Analysis
TABLE 24 : DEVELOPMENT OF THE CUSTOMER ALLOCATION FACTOR Customer Class
Number of
Dwelling Units
/ Accounts
Percent
of Total
Residential Customers
Single-Family Residence 12,330 66.2%
Multi-Family Residence 4,585 24.6%
Non-Residential Customers - Strength Classes
Low Strength 427 2.29%
Domestic Strength 253 1.36%
Medium Strength 55 0.30%
High Strength 128 0.69%
Non-Residential Customers - Categorical Classes
Significant/Categorical 6 0.03%
Non-Significant/Categorical 458 2.46%
Other Non-Residential 387 2.08%
Total: 18,628 100.0%
Prepared by NBS
www.nbsgov.com | Toll-Free: 800.676.7516
Allocation Factors, 21 of 34
Agenda Item 11.1 Page 280 of 308

CITY OF GILROY

SEWER RATE STUDY
Cost-of-Service Analysis
TABLE 25 : ALLOCATION OF SEWER REVENUE REQUIREMENTS
Add Alt. 1 and 2
Commodity-Related Costs $ 6,183,091 44.0%
Capacity-Related Costs 6,745,190 48.0%
Monit., Sampl., Pretreat. (Non-Resid. Costs) 702,624 5.0% Customer-Related Costs 421,574 3.0%
Net Revenue Requirement $ 14,052,480 100.0%

1. Reflects COSA calculation of the fixed and volumetric charges. See Funct. & Classification tab.

TABLE 26 : ALLOCATION OF NET REVENUE REQUIREMENTS TO CUSTOMER CLASSES COSA Results - Net Revenue Requirement (Including Rate Increases) $ Alloca. %
Residential Customers
Single-Family Residence $ 3,811,046 $ 1,733,046 $ 1,733,046 $ 279,038 $ 7,556,175 53.8% Multi-Family Residence 936,646 425,933 425,933 103,762 1,892,275 13.5% Non-Residential Customers
Low Strength $ 367,238 $ 136,043 $ 136,043 $ 9,663 $ 648,988 4.6% Domestic Strength 466,427 232,797 232,797 5,726 937,747 6.7% Medium Strength 251,396 223,064 223,064 1,245 698,768 5.0% High Strength 350,338 621,712 621,712 2,897 1,596,659 11.4% Non-Residential Customers (Monitoring, Sampling, Pretreatment Costs Only) Fixed Charge Rev. Reqts.

Significant/Categorical $20,542 2.9% 136 $20,678 0.1%
Non-Significant/Categorical $619,036 88.1% 10,354 $629,390 4.5% Other Non-Residential $63,046 9.0% 8,754 $71,800 0.5%
Total $ 6,183,091 $3,372,595 $3,372,595 $ 702,624 $ 421,574 $ 14,052,480 100.0%

1. Non-Residential Customers (Monitoring, Sampling, Pretreatment Costs are allocated on the basis of current/historical share of this program. -
Cost of
Service Net
Rev. Req'ts.
% of COS
Net
Revenue
Req'ts.

Classification Components
COSA Results -
Net Rev. Reqts.
(49% Fixed / 51% Vol.)
Cost Classification Components
Direct Allocation
(Monitoring, Pretreat., etc.)

BOD TSS
Customer Class
Commodity Customer
Capacity
Prepared by NBS
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COSA - Sewer Rates, 22 of 34
Agenda Item 11.1 Page 281 of 308

CITY OF GILROY

SEWER RATE STUDY
Cost-of-Service Analysis
TABLE 27 : CALCULATION OF PROPOSED SEWER RATES Rate Alt. 1 (COSA Fixed Rev. = 26%) Total Fixed Volumetric
Residential - Monthly Fixed Rate
Single-Family Residence 12,330 805,715,371 $ 7,556,175 $ 7,556,175 $51.07 Multi-Family Residence 4,585 198,021,843 1,892,275 1,892,275 $34.39 Non-Residential Customers
Low Strength 427 77,640,000 $ 648,988 $ 648,988 $8.36
Domestic Strength 253 98,610,000 937,747 937,747 $9.51
Medium Strength 55 53,149,000 698,768 698,768 $13.15
High Strength 128 74,067,000 1,596,659 1,596,659 $21.56 Total 17,778 ############ $ 13,330,612 $ 9,448,450 $ 3,882,162 Non-Residential Customers (Monitoring, Sampling, Pretreatment Costs Only) Significant/Categorical3
6 $20,678 $ 20,678 $287.19
Non-Significant/Categorical3
458 629,390 629,390 $114.64
Other Non-Residential3
387 71,800 71,800 $15.47
Percent of Non-Resid . Rev. from Fixed vs. Vol. Charges 100.0% 0.0% 100.0%

1. SFR and MFR customers are based on the number of dwelling units and all other customers are based on the number of accounts.

2. Residential customer consumption is the annualized average winter water consumption. Non-residential customers is total annual consumption.

3. Number of accounts estimated by dividing the annual fixed charge revenues by the current fixed charges ($/account/month). Also, the Significant, Non-Significant and Other Non-Residential accounts are included in the non-residential strength classes. They are shown here only for the calculation of the Monitoring, Sampling, and Pre-Treatment fixed charges.

Volumetric
Charge
($/1,000 Gal.)
Customer Class
No. of
Dwelling
Units /
Accounts1
Annualized
Consumption
(Gallons)2
Annual Revenue Requirement Mo. Fixed Charge
Per EDU (Resid.)
or Account (NonResid)
Prepared by NBS
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COSA - Sewer Rates, 23 of 34
Agenda Item 11.1 Page 282 of 308

CITY OF GILROY

SEWER RATE STUDY
Cost-of-Service Analysis & Rate Design
TABLE 28 : CURRENT VS. PROPOSED SEWER RATES
Rate Alt. 1 (COSA Fixed Rev. = 26%)
FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
Monthly Fixed Charge
Residential (100% Fixed)
Single-Family Residence $46.64 $51.07 $53.11 $55.24 $57.45 $59.74 Multi-Family Residence $33.13 $34.39 $35.77 $37.20 $38.69 $40.23 Non-Residential Volumetric Rates
Low Strength $7.41 $8.36 $8.69 $9.04 $9.40 $9.78
Domestic Strength $9.21 $9.51 $9.89 $10.29 $10.70 $11.12 Medium Strength $12.08 $13.15 $13.67 $14.22 $14.79 $15.38 High Strength $18.63 $21.56 $22.42 $23.32 $24.25 $25.22 Non-Residential - Monitoring & Pretreatment Program Base Rate Monthly Charges Significant/Categorical $240.95 $287.19 $298.68 $310.63 $323.05 $335.98 Non-Significant/Categorical $95.22 $114.64 $119.22 $123.99 $128.95 $134.11 Other Non-Residential $11.47 $15.47 $16.09 $16.73 $17.40 $18.09 Note: The City recently transitioned from July1-June 30 fiscal years to calendar years (January to December).

Sewer Rate Schedule Current
Rates
Proposed Sewer Rates
Prepared by NBS
www.nbsgov.com | Toll-Free: 800.676.7516
Current & Proposed Rates, 24 of 34
Agenda Item 11.1 Page 283 of 308
Prepared by NBS
www.nbsgov.com | Toll-Free: 800.676.7516 SFR 5-Yr, 25 of 34 $46.64 $46.64 $46.64 $46.64 $46.64
$51.07
$53.11
$55.24
$57.45
$59.74
$0
$10
$20
$30
$40
$50
$60
$70
FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
Monthly Bill
Monthly Water Consumption (HCF)
SFR - Sewer Bill Comparison
Current vs. Proposed Rates
SFR Bill - Current Rates
SFR Bill - Proposed Rates
Agenda Item 11.1 Page 284 of 308
Prepared by NBS
www.nbsgov.com | Toll-Free: 800.676.7516 MFR Bill 5-Yr, 26 of 34 $33.13 $33.13 $33.13 $33.13 $33.13
$34.39
$35.77
$37.20
$38.69
$40.23
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
$50
FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
Monthly Bill
Monthly Water Consumption (HCF)
Multi-Family Residential Sewer Bill Comparison
Current vs. Alternative Rates (3.6 TG/Mo.)
MFR Bill - Current Rates
MFR Bill - Proposed Rates
Agenda Item 11.1 Page 285 of 308
Prepared by NBS
www.nbsgov.com | Toll-Free: 800.676.7516 Low-Strngth 1-Yr, 27 of 34 $29.64 $66.69 $105.96 $148.20 $222.30 $33.44 $75.23 $119.53 $167.18 $250.77 $0
$50
$100
$150
$200
$250
$300
4 hcf 9 hcf 14 hcf 20 hcf 30 hcf
Monthly Bill
Monthly Water Consumption (HCF)
Low-Strength Commercial Sewer Bill Comparison
Current vs. Alternative Rates FY'23/24 (14.3 TG/Mo.)
Current Rates Proposed Rates
Agenda Item 11.1 Page 286 of 308
Prepared by NBS
www.nbsgov.com | Toll-Free: 800.676.7516 Low-Strength 5-Yr, 28 of 34 $106.31 $106.31 $106.31 $106.31 $106.31
$119.92
$124.72
$129.71
$134.90
$140.29
$0
$20
$40
$60
$80
$100
$120
$140
$160
FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
Monthly Bill
Monthly Water Consumption (HCF)
Low-Strength Commercial Sewer Bill Comparison
Current vs. Proposed Rates (28 TG/Mo.)
Current Rates Proposed Rates
Agenda Item 11.1 Page 287 of 308
Prepared by NBS
www.nbsgov.com | Toll-Free: 800.676.7516 Dom-Strngth 1-Yr, 29 of 34 $73.68 $165.78 $257.88 $349.98 $442.08 $76.08 $171.17 $266.27 $361.37 $456.46 $0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
8 hcf 18 hcf 28 hcf 38 hcf 48 hcf
Monthly Bill
Monthly Water Consumption (HCF)
Domestic-Strength Commercial Sewer Bill Comparison
Current vs. Alternative Rates FY'23/24 (14.3 TG/Mo.)
Current Rates Proposed Rates
Agenda Item 11.1 Page 288 of 308
Prepared by NBS
www.nbsgov.com | Toll-Free: 800.676.7516 Dom-Strength 5-Yr, 30 of 34 $260.83 $260.83 $260.83 $260.83 $260.83 $269.31
$280.09
$291.29
$302.94
$315.06
$0
$50
$100
$150
$200
$250
$300
$350
$400
FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
Monthly Bill
Monthly Water Consumption (HCF)
Domestic-Strength Commercial Sewer Bill Comparison
Current vs. Proposed Rates (28 TG/Mo.)
Current Rates Proposed Rates
Agenda Item 11.1 Page 289 of 308
Prepared by NBS
www.nbsgov.com | Toll-Free: 800.676.7516 Med Strength 5-Yr, 31 of 34 $868.37 $868.37 $868.37 $868.37 $868.37
$945.10
$982.90
$1,022.21
$1,063.10
$1,105.63
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
Monthly Bill
Monthly Water Consumption (HCF)
Medium-Strength Commercial Sewer Bill Comparison
Current vs. Proposed Rates (72 TG/Mo.)
Current Rates Proposed Rates
Agenda Item 11.1 Page 290 of 308
Prepared by NBS
www.nbsgov.com | Toll-Free: 800.676.7516 Med-Strength 23-24, 32 of 34 $265.76 $567.76 $869.76 $1,171.76 $1,473.76 $289.24 $617.93 $946.61 $1,275.29 $1,603.98 $0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
22 hcf 47 hcf 72 hcf 97 hcf 122 hcf
Monthly Bill
Avg. Winter Consumption
Medium-Strength Commercial Sewer Bill Comparison
Current vs. Rate Alternatives (FY'23/24)
Current Rates Proposed Rates
Agenda Item 11.1 Page 291 of 308
Prepared by NBS
www.nbsgov.com | Toll-Free: 800.676.7516 High-Strength 5-Yr, 33 of 34 $812.78 $812.78 $812.78 $812.78 $812.78
$940.48
$978.10
$1,017.22
$1,057.91
$1,100.23
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28
Monthly Bill
Monthly Water Consumption (HCF)
High-Strength Commercial Sewer Bill Comparison
Current vs. Proposed Rates (43 TG/Mo.)
Current Rates Proposed Rates
Agenda Item 11.1 Page 292 of 308
Prepared by NBS
www.nbsgov.com | Toll-Free: 800.676.7516 High-Strength 23-24, 34 of 34 $260.82 $540.27 $819.72 $1,099.17 $1,378.62 $301.80 $625.15 $948.51 $1,271.86 $1,595.21 $0
$250
$500
$750
$1,000
$1,250
$1,500
$1,750
14 hcf 29 hcf 44 hcf 59 hcf 74 hcf
Monthly Bill
Avg. Winter Consumption
High-Strength Commercial Sewer Bill Comparison
Current vs. Rate Alternatives (FY'23/24)
Current Rates Proposed Rates
Agenda Item 11.1 Page 293 of 308
RESOLUTION NO. 2023-XX

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF GILROY

DECLARING ITS INTENTION TO ADJUST WATER AND WASTEWATER
RATES; SETTING THE TIME AND PLACE FOR A PROPOSITION 218 MAJORITY PROTEST PUBLIC HEARING; AND AUTHORIZING THE

CITY ADMINISTRATOR OR DESIGNEE TO PROVIDE THE RELATED

NOTICE IN COMPLIANCE WITH STATE-MANDATED TIMING

REQUIREMENTS
WHEREAS, the City of Gilroy has identified ongoing operational and capital needs associated with the City’s water and wastewater utility system; and WHEREAS, in order to fund the identified water and wastewater system’s operational and capital costs, it will be necessary to adjust the City’s current water and wastewater rates; and
WHEREAS, the City of Gilroy engaged NBS Government Finance Group, a firm with expertise in the analysis of costs relating to utilities, to conduct a rate study of the City’s water and wastewater utilities; and
WHEREAS, the City Council received the report prepared by NBS Government Finance Group at the August 21st, 2023 City Council meeting and heard from staff on this matter; and
WHEREAS, on November 5, 1996, California voters approved Proposition 218, requiring specific procedures be followed with regard to “property-related” fee increases, including the need to provide written notice at least 45 days in advance of a public hearing; and
WHEREAS, on July 24, 2006, the California Supreme Court confirmed that charges for water and wastewater (sewer) are subject to Proposition 218 procedures (Bighorn-Desert View Water Agency v. Verjil (2006) 39 Cal. 4th 205); and WHEREAS, on April 20, 2015, the California Court of Appeal ruled that water rate surcharges and by analogy, wastewater surcharges may be charged as long as they are based upon the actual cost of service to the ratepayers receiving the surcharge. (Capistrano Taxpayers Association, Inc. v. City of San Juan Capistrano (2015) 235 Cal.App.4th 1493; and
WHEREAS, the City Council believes it is in the public interest to and desires to proceed through the requisite processes pursuant to the provisions of Proposition 218 in order to consider adjustments to the City of Gilroy's fees, rates, and charges related to its water system.

Agenda Item 11.1 Page 294 of 308
Resolution No. 2023-XX
Adjust Water and Wastewater Rates with Proposition 218 Hearing and Notice Authorization City Council Regular Meeting | August 21, 2023

Page 2 of 2 ends

Gilroy City CouncilAugust 21, 2023

Gilroy City Council
August 21, 2023