La Palma City Council
September 2, 2025

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All City Management Services, Inc.

Notwithstanding the foregoing, the Parties acknowledge that persons other than the abovedesignated project manager of the Consultant may perform tasks or services under this Agreement if the performance of such tasks or services is under the supervision and control of the Consultant’s project manager. The Consultant shall not alter the assignment of the above-designated project manager without the prior written approval of the Contract Administrator.

1.11 Additional Services. If the City changes the scope of the Consultant Services to be performed by the Consultant, or if the Consultant is requested to perform services not specifically described in the Scope of Work (“Additional Services”), the Consultant shall perform such services as are necessary to complete the work, and compensation for the work performed shall be paid by the City in accordance with the Scope of Work and Fee Schedule attached hereto as Exhibit “A” and incorporated herein by this reference, or as otherwise may be agreed in writing by the City and the Consultant. It is expressly understood by the Consultant that the provisions of this Section 1.11 shall not apply to services specifically set forth in the Scope of Work or reasonably contemplated therein. The Consultant hereby acknowledges that it accepts the risk that the services to be provided pursuant to the Scope of Services may be more costly or time consuming than the Consultant anticipates and that the Consultant shall not be entitled to additional compensation therefor. Unless contradictory of this Section 1.11, all provisions in this Agreement applicable to the Consultant’s performance of the Consultant Services shall also apply to the Additional Services.

2. COMPENSATION TO CONSULTANT

2.1 Payment by the City. The City shall pay to the Consultant for the performance of the Consultant Services compensation in accordance with the Scope of Work and Fee Schedule attached hereto as Exhibit “A”.

2.2 Invoices. The Consultant shall invoice the City on a monthly basis for all work performed by the Consultant under this Agreement. Invoices shall include billings for all charges, including authorized direct costs incurred by the Consultant during the month covered by the invoice. All charges for labor or professional services shall describe with specificity the services rendered and shall set forth the number of hours worked and hourly rates in accordance with the Budget and Fee Schedule. Within thirty (30) days of receipt of an invoice, and upon determination by the City that the invoice is in order and that the Consultant has performed all requested or required services in a timely and competent manner, the City shall pay such invoice.

2.3 Record of Payment. The Consultant shall maintain records on all services for and charges to the City under this Agreement for a period of not less than twenty-four (24) months, or for any longer period required by law, after the termination of this Agreement, and make such records available for review and audit if requested by the City at any time during the term, or within twenty-four (24) months, or for any longer period required by law, after the termination of this Agreement. All such records shall be maintained in accordance with generally accepted accounting principles and shall be clearly identified and readily accessible.

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3. LEGAL RESPONSIBILITIES

3.1 Compliance with Law. The Consultant shall keep fully informed of all Federal and State laws and regional, county, and municipal ordinances and regulations which may in any manner affect those employed by the Consultant or the performance by the Consultant of any tasks or services for or on behalf of the City. The Consultant shall at all times observe and comply with all such laws, ordinances, and regulations, and shall be responsible for the compliance therewith of all work and services performed by the Consultant by or on behalf of the City.

3.2 Independent Contractor. The Consultant is retained as an independent contractor only, for the sole purpose of rendering the Consultant Services, and is not an employee of the City. The City shall have the right to control the Consultant only as to results of the Consultant’s services rendered pursuant to this Agreement, and the City shall not have the right to control the means by which the Consultant accomplishes the services performed under this Agreement.

3.3 Non-Discrimination. The Consultant shall not discriminate against any employee or applicant for employment because of any impermissible classification pursuant to Federal or State law, including, but not limited to, race, color, religion, national origin, gender, physical or mental disability, age, military status, sexual orientation, gender identity, gender expression, or marital or familial status. The Consultant shall incorporate the foregoing provisions in all subcontracts.

3.4 Proprietary Information. All proprietary information developed by the Consultant in connection with, or resulting from, this Agreement, including but not limited to inventions, discoveries, improvements, copyrights, patents, maps, reports, textual material, or software programs, shall be the sole and exclusive property of the City, without restriction or limitation upon their use. The Consultant agrees that the compensation to be paid pursuant to this Agreement includes adequate and sufficient compensation for any proprietary information developed in connection with or resulting from the performance of the Consultant Services under this Agreement. The Consultant further understands and agrees that full disclosure of all proprietary information developed in connection with, or resulting from, the performance of services by the Consultant under this Agreement shall be made to the City, and that the Consultant shall do all things necessary and proper to perfect and maintain ownership of such proprietary information by the City. The Consultant hereby agrees to deliver such proprietary information to the City upon the expiration or termination of this Agreement. It is understood and agreed that the proprietary information prepared pursuant to this Agreement is prepared specifically for the City and is not necessarily suitable for any future or other use. The Parties agree that, until final approval by the City, all data, plans, specifications, reports, and other documents are confidential and will not be released to third parties without prior written consent of both Parties unless required by law.

3.5 Patented and Copyright Materials. The Consultant shall assume all costs arising from the use of patented or copyrighted materials, including but not limited to equipment, devices, processes, and software programs, used or incorporated in the services or work performed by the Consultant under this Agreement. Pursuant to Section 3.7 herein, the Consultant shall indemnify, defend (with legal counsel acceptable to the City), and hold the City and its elected and Docusign Envelope ID: FFD216CE-8532-4097-9D6B-651289122772

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appointed boards, members, officials, officers, agents, representatives, employees, and volunteers (“City Personnel”) harmless from any and all suits, actions, or proceedings of every nature for or on account of the use of any patented or copyrighted materials.

3.6 Prevailing Wages. The Parties have determined that prevailing wage laws do not apply to this Agreement because the Consultant Services do not include construction, alteration, demolition, installation, or repair work or other otherwise exempt under California’s prevailing wage laws (Lab. Code, § 1720 et seq.). Notwithstanding the foregoing, it is agreed by the Parties that, in connection with performance of the Consultant Services, including, without limitation, any and all public works (as defined by applicable law), the Consultant shall bear all risks of payment or non-payment of prevailing wages under California law and/or the implementation of Labor Code Section 1781, as the same may be amended from time to time, and/or any other similar law. Pursuant to Section 3.7 herein, the Consultant shall indemnify, defend (with legal counsel acceptable to the City), and hold the City and City Personnel harmless from and against any liability, loss, damage, cost or expenses (including but not limited to reasonable attorneys’ fees, expert witness fees, court costs, and costs incurred related to any inquiries or proceedings) arising from or related to (i) the noncompliance by the Consultant or any party performing the Consultant Services of any applicable local, state, and/or federal law, including, without limitation, any applicable federal and/or state labor laws (including, without limitation, the requirement to pay state prevailing wages and hire apprentices); (ii) the implementation of Section 1781 of the Labor Code, as the same may be amended from time to time, or any other similar law; and/or (iii) failure by the Consultant or any party performing the Consultant Services on the Consultant’s behalf to provide any required disclosure or identification as required by Labor Code Section 1781, as the same may be amended from time to time, or any other similar law.

3.7 Indemnification.

3.7.1 Indemnification of the City. Except as set forth in subdivision 3.7.2, the Consultant shall indemnify, defend (with legal counsel acceptable to the City), and hold harmless the City and City Personnel from and against any and all actions, suits, claims, demands, judgments, attorneys fees, costs, damages to persons or property, losses penalties, obligations, expenses, or liabilities (“Claims”) that may be asserted or claimed by any person or entity arising out of the Consultant’s performance of any tasks or services for or on behalf of the City, whether or not there is concurrent active or passive negligence on the part of the City and/or any City Personnel, but excluding any Claims arising from the sole negligence or willful misconduct of the City or any City Personnel. The Consultant shall defend any action or actions filed in connection with any such claims or liabilities, and shall pay all costs and expenses, including attorney’s fees incurred in connection therewith. The Consultant shall promptly pay any judgment rendered against the City or any City Personnel for any such claims or liabilities. In the event the City and/or any City Personnel is made a party to any action or proceeding filed or prosecuted for any such Claims arising out of or in connection with the work being performed or services being provided under this Agreement, the Consultant shall pay to the City any and all costs and expenses incurred by the City or City Personnel in such action or proceeding, together with reasonable attorney’s fees and expert witness fees. Notwithstanding the foregoing, however, in the event that a court or jury determines that liability with respect to any Claims was caused or contributed to by the neglect act, error, omission or willful misconduct of the City or City Personnel, liability will Docusign Envelope ID: FFD216CE-8532-4097-9D6B-651289122772

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be appointed between Consultant on the one hand and the City on the other hand with regard to such Claims based upon the parties’ respective degrees of culpability, as determined by the court or jury, and Consultant’s duty to indemnify the City and City Personnel will be limited accordingly.

3.7.2 Design Professionals. The provisions of this subdivision 3.7.2 apply only in the event that the Consultant is a “design professional” within the meaning of the California Civil Code Section 2782.8(c). If the Consultant is a “design professional” within the meaning of Section 2782.8(c), then notwithstanding subdivision 3.7.1 above, to the fullest extent permitted by law (including, without limitation, Civil Code Sections 2782 and 2782.6), the Consultant shall defend (with legal counsel reasonably acceptable to the City), indemnify, and hold harmless the City and City Personnel from and against any Claim that arises out of, pertains to, or relates to, directly or indirectly, in whole or in part, the negligence, recklessness, or willful misconduct of the Consultant, any sub-consultant, subcontractor, or any other person directly or indirectly employed by them, or any person that any of them control, arising out of the Consultant’s performance of any task or service for or on behalf of the City under this Agreement. Such obligations to defend, hold harmless, and indemnify the City or any City Personnel, shall not apply to the extent that such Claims are caused in part by the sole negligence or willful misconduct of the City or such City Personnel. The Consultant’s cost to defend the City and/or City Personnel against any such Claim shall not exceed the Consultant’s proportionate percentage of fault with respect to that Claim; however, pursuant to Civil Code section 2782.8(a), in the event that one or more defendants is unable to pay its share of defense costs due to bankruptcy or dissolution of the business, the Consultant shall meet and confer with the City (and, if applicable, other parties) regarding any unpaid defense costs. To the extent the Consultant has a duty to indemnify the City or any City Personnel under this subdivision (b), the Consultant shall be responsible for all incidental and consequential damages resulting directly or indirectly, in whole or in part, from the Consultant’s negligence, recklessness, or willful misconduct.

3.8 Retention of Funds. The Consultant hereby authorizes the City to deduct from any amount payable to the Consultant (whether arising out of this Agreement or otherwise) any amounts the payment of which may be in dispute hereunder or which are necessary to compensate the City for any losses, costs, liabilities, or damages suffered by the City, and all amounts for which the City may be liable to third parties, by reason of the Consultant's negligent acts, errors, or omissions, or willful misconduct, in performing or failing to perform the Consultant's obligations under this Agreement. The City in its sole and absolute discretion, may withhold from any payment due to the Consultant, without liability for interest, an amount sufficient to cover such claim. The failure of the City to exercise such right to deduct or withhold shall not act as a waiver of the Consultant's obligation to pay the City any sums the Consultant owes the City.

3.9 Insurance. The Consultant shall not commence the performance of any work or services under this Agreement until the Consultant has obtained all insurance required hereunder, nor shall the Consultant allow any sub-consultant or subcontractor to commence services until all such insurance has been obtained by the sub-consultant or subcontractor. Current certification of insurance shall be kept on file with the City at all times during the term of this Agreement. The City reserves the right to require complete, certified copies of all required insurance policies, at any time. All insurance policies shall be issued by an insurance company currently authorized by the California Department of Insurance to transact business of insurance Docusign Envelope ID: FFD216CE-8532-4097-9D6B-651289122772

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or is on the List of Approved Surplus Line Insurers in the State of California, with an assigned policyholders’ Rating of A- (or higher) and Financial Size Category Class VI (or larger) in accordance with the latest edition of Best’s Key Rating Guide, unless otherwise approved by the City’s Risk Manager. The Consultant shall take out and maintain at all times during the performance of this Agreement the following policies of insurance:

3.9.1 Workers Compensation Insurance to cover the Consultant’s employees as required by law; and the Consultant shall require all subcontractors to provide such compensation insurance for all of the latter’s employees. Each such policy of worker compensation insurance shall carry the following endorsements:
(a) “The insurer waives all rights of subrogation against THE CITY OF LA PALMA, its officers, officials, agents, employees, and representatives.”
(b) “This insurance policy shall not be canceled, limited or nonrenewed by the insurer until thirty (30) days after receipt by THE CITY OF LA PALMA of a written notice of such cancellation, limitation, or reduction of coverage.”

3.9.2 Comprehensive General Liability Insurance for bodily injury, death, and property damage which may arise from the negligent performance of the Consultant, its employees, agents representatives, successors, and assigns while performing work or services under this Agreement, in an amount not less than $5,000,000 per occurrence, $6,000,000 general aggregate. Each such policy of insurance shall be in a form satisfactory to the City and shall contain the following endorsements:
(a) “THE CITY OF LA PALMA, its officers, officials,
employees, and representatives, are hereby declared to be additional insureds under the terms of this policy with respect to the operations and activities of the named insured at or from the premises of THE CITY OF LA PALMA described above.” (b) “This insurance policy shall not be canceled, limited, or not renewed until thirty (30) days after receipt by THE CITY OF LA PALMA of a written notice of such cancellation, limitation, or reduction of coverage.” (c) “This insurance policy is primary insurance and no insurance held or owned by the designated additional insureds shall be called upon or looked to cover a loss under said policy; THE CITY OF LA PALMA shall not be liable for the payment of premiums or assessments on this policy.”

3.9.3 Comprehensive Automobile Liability Insurance, including owned, non-owned, and hired automobiles, in a minimum Combined Single Limit of $1,000,000 per occurrence for bodily injury, death, and property damage. Each such policy of insurance shall be in a form satisfactory to the City and shall contain the following endorsements:

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(a) “THE CITY OF LA PALMA, its officers, officials,
employees, and representatives, are hereby declared to be additional insureds under the terms of this policy with respect to the operations and activities of the named insured at or from the premises of THE CITY OF LA PALMA described above.” (b) “This insurance policy shall not be canceled, limited, or not renewed until thirty (30) days after receipt by THE CITY OF LA PALMA of a written notice of such cancellation, limitation, or reduction of coverage.” (c) “This insurance policy is primary insurance and no insurance held or owned by the designated additional insureds shall be called upon or looked to cover a loss under said policy; THE CITY OF LA PALMA shall not be liable for the payment of premiums or assessments on this policy.”

3.9.4 Renewal of Insurance. At least thirty (30) days prior to the expiration of any policy of insurance required under Paragraph 3.9.1, 3.9.2, or 3.9.3, a signed complete certificate of insurance, with all endorsements provided herein, showing that such insurance coverage has been renewed or extended, shall be filed with the City.

3.9.5 Prohibited Insurance Provisions. Insurance policies required under Paragraph 3.9.1, 3.9.2, or 3.9.3, shall not include any limiting provision or endorsement that has not been submitted to the City for approval. By way of example, additional insured endorsements shall not be limited to “ongoing operations,” exclude contractual liability, restrict coverage to the “sole” liability of the Consultant, or contain any other limitation contrary to this Agreement.

3.9.6 Variations to Insurance Requirements. The City may, but is not required to, approve in writing a variation in the foregoing insurance requirements, upon a determination that the coverage, scope, limits, and forms of such insurance are either not commercially available, or that the City’s interests are otherwise fully protected.

3.10 Conflicts of Interest.

3.10.1 City Personnel. No City Personnel shall have any financial interest, direct or indirect, in this Agreement, or participate in any decision relating to this Agreement that affects his or her financial interest or the financial interest of any corporation, partnership, association or other entity in which he or she is interested, in violation of any federal, state or city statute, ordinance or regulation. The Consultant shall not employ any such person while this Agreement is in effect.

3.10.2 Consultant. The Consultant represents, warrants and covenants that he, she or it presently has no interest, direct or indirect, which would interfere with or impair in any manner or degree the performance of the Consultant’s obligations and responsibilities under this Agreement. The Consultant further agrees that while this Agreement is in effect, the Consultant shall not acquire or otherwise obtain any interest, direct or indirect, that would interfere with or impair in any manner or degree the performance of the Consultant’s obligations and responsibilities under this Agreement.

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(Government Code section 87100 et seq.), the City may determine the Consultant to be a “consultant” as that term is defined by the Act. In the event the City makes such a determination, the Consultant agrees to complete and file a “Statement of Economic Interest” with the City Clerk to disclose such financial interests as required by the City. In such event, the Consultant further agrees to require any other person doing work under this Agreement to complete and file a “Statement of Economic Interest” to disclose such other person’s financial interests as required by the City.

3.11 No Undue Influence. The Consultant declares and warrants that no undue influence or pressure is used against or in concert with any officer or employee of the City in connection with the award, terms or implementation of this Agreement, including any method of coercion, confidential financial arrangement, or financial inducement. No officer or employee of the City shall receive compensation, directly or indirectly, from the Consultant, or from any officer, employee, or agent of the Consultant, in connection with the award of this Agreement or any work to be conducted as a result of this Agreement. The Consultant further warrants that it has not employed or retained any company or person other than a bona fide employee working for the Consultant, to solicit or secure this Agreement and that it has not paid or agreed to pay any company or person any fee, commission, percentage, brokerage fee, gift, or any other consideration contingent upon, or resulting from, the award or making of this Agreement. For breach or violation of this warranty, the City shall have the right to annul this Agreement without liability or, in its discretion, to deduct from the Agreement price or consideration, or otherwise recover, the full amount of such fee, commission, percentage, brokerage fee, gift or contingent fee.

3.12 No Benefit to Arise to City Employees. No member, officer, or employee of the City, or their designees or agents, and no public official who exercises authority over or has responsibilities with respect to this Agreement during his/her tenure or for one (1) year thereafter, shall have any interest, direct or indirect, in any agreement or sub-agreement, or the proceeds thereof, for the Consultant Services to be performed under this Agreement.

4. RIGHTS AND REMEDIES

4.1 Termination By the City. The City reserves and has the right and privileges, at its sole discretion and with or without cause at any time during the term of this Agreement, of suspending, canceling or terminating this Agreement or any work in connection with this Agreement with or without any breach or failure to perform of the Consultant. Upon receipt of any notice of termination from the City, the Consultant shall immediately cease all services hereunder except such as may be specifically approved in writing by the Contract Administrator.

In the event of termination under this Section 4.1, all finished or unfinished data, studies, maps, reports, and other items prepared by the Consultant shall become the property of the City, and the Consultant shall promptly deliver such items to the City. In the event of termination under this Section 4.1, the City shall pay the Consultant for all authorized services performed and for all authorized and invoiced expenses incurred up to the date of termination of this Agreement, on a time and materials basis in accordance with the Scope of Work and Fee Schedule attached hereto as Exhibit “A”.

4.2 Performance to the City’s Satisfaction. The Consultant agrees to perform all work to the reasonable satisfaction of the City. If the services performed under this Agreement Docusign Envelope ID: FFD216CE-8532-4097-9D6B-651289122772

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are not satisfactory, the City has the right to take appropriate action, including but not limited to:
(i) meeting with the Consultant, its agents or subcontractors to review the quality of the work and resolve matters of concern; (ii) requiring the Consultant to have the work repeated at no additional fee until it is satisfactory; (iii) withholding payment of the City’s compensation to the Consultant for any unsatisfactory work performed; (iv) suspending delivery of work to the Consultant for an indefinite time; and/or (v) terminating this Agreement.

4.3 Default, Remedies.

4.3.1 Default of Insurance Requirements. In addition to any other remedies at law or equity the City may have if the Consultant fails to provide or maintain any insurance policies or policy endorsements to the extent and within the time required by Section 3.9 herein, the City may, at its sole option, exercise any of the following remedies, which are alternatives to other remedies the City may have and are not the exclusive remedy for the Consultant’s breach:
(a) Obtain such insurance and deduct and retain the amount of the premiums for such insurance from any sums due under this Agreement; (b) Order the Consultant to stop work under this Agreement or withhold any payment that becomes due to the Consultant hereunder, or both, until the Consultant demonstrates compliance with the insurance requirements herein; and/or
(c) Immediately terminate this Agreement.

4.3.2 Other Defaults. In addition to any other remedies at law or equity the City may have, if the Consultant materially breaches any of the terms of this Agreement, the City's remedies shall include, but not be limited to, any or all of the following:
(a) Immediately terminate this Agreement; and/or
(b) Take over the work and prosecute the same to completion by contract with another consultant or otherwise, and the Consultant shall be liable to the extent that the total cost for completion of the services required hereunder, including costs incurred by the City in retaining a replacement consultant and similar expenses, exceeds the Budget contained in Exhibit “A”.

4.4 Force Majeure. Any time period specified in this Agreement for performance of services shall be extended because of any delays due to unforeseeable causes beyond the control and without the fault or negligence of the City or the Consultant, including, but not restricted to, acts of God or of the public enemy, unusually severe weather, fires, earthquakes, floods, epidemics, quarantine restrictions, riots, strikes, freight embargoes, wars, litigation, and/or acts of any governmental agency, including the City, if the delaying Party shall within ten (10) days of the commencement of such delay notify the other Party in writing of the causes of the delay (“Force Majeure Event”). If the Consultant is the delaying Party, the City shall ascertain the facts and the extent of delay, and extend the time for performing the services for the period of the Docusign Envelope ID: FFD216CE-8532-4097-9D6B-651289122772

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enforced delay when and if in the judgment of the City such delay is justified. The City’s determination shall be final and conclusive upon the parties to this Agreement. In no event shall the Consultant be entitled to recover damages against the City for any delay in the performance of this Agreement, however caused. The Consultant’s sole remedy shall be extension of this Agreement pursuant to this section. For the avoidance of doubt, Force Majeure shall not include (a) financial distress nor the inability of either party to make a profit or avoid a financial loss, (b) changes in the market prices or conditions, or (c) a party’s financial inability to perform its obligations hereunder. The current events related to the COVID-19 pandemic are known and shall not constitute Force Majeure Event, future impacts of the COVID-19 pandemic may be considered a Force Majeure Event to the extent that they prevent the performance of a Party's obligations under this Agreement.

5. MISCELLANEOUS

5.1 Notices. All notices, invoices or other instruments required or permitted to be given under this Agreement shall be served by personal delivery or deposited in a United States mail depository, postage prepaid, and addressed as follows:

If to the City: CITY OF LA PALMA
7822 Walker Street
La Palma, CA 90623
Attn: Police Chief
If to the Consultant: All City Management Services, Inc. 10440 Pioneer Blvd., Suite 5
Santa Fe Springs, CA 90670
or such other address or person as either Party may indicate to the other in writing. Service of any instrument by mail shall be deemed effective forty-eight (48) hours after deposit in a United States mail depository, postage prepaid, and addressed as set forth above.

5.2 Integration. This Agreement represents the entire understanding of the City and the Consultant as to those matters contained herein, and no prior oral or written understanding shall be of any force or effect with regard to those matters covered by this Agreement. This Agreement may not be modified, altered, or amended except in writing signed by both the City and the Consultant. The Contract Administrator is hereby authorized to approve and effectuate amendments to this Agreement to the extent permitted by applicable law.

5.3 Construction, Venue. This Agreement shall be construed in accordance with the laws of the State of California and as if drafted by both parties hereto. The terms of this Agreement shall be construed in accordance with the meaning of the language used and shall not be construed for or against either Party by reason of the authorship of this Agreement or any other rule of construction which might otherwise apply. Legal actions concerning any dispute, claim, or matter arising out of or in relation to this Agreement shall be instituted and maintained in the Superior Courts of the State of California in the County of Orange, or in any other appropriate court with jurisdiction in such County, and the Consultant agrees to submit to the personal jurisdiction of such court.

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5.4 Rights and Remedies are Cumulative. Except as may be expressly set forth in this Agreement, the rights and remedies of the Parties are cumulative and the exercise by either Party of one or more of such rights or remedies or other rights or remedies as may be permitted by law or in equity shall not preclude the exercise by such Party, at the same or different times, of any other rights or remedies to which such Party may be entitled.

5.5 Severability. If any term or provision of this Agreement is found by a court of competent jurisdiction to be invalid, illegal or unenforceable in any jurisdiction, the invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable term or provision in any other jurisdiction. Upon a determination that any term or provision is invalid, illegal or unenforceable, the Parties shall negotiate in good faith to modify this Agreement to affect the original intent of the Parties as closely as possible in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.

5.6 Assignment. The Consultant shall not assign or otherwise transfer any of its rights or obligations under this Agreement without the prior written consent of the City; and any such assignment or other transfer without such consent shall be void.

5.7 Consultant not a City Agent. Except as the City may specify in writing, the Consultant shall have no authority, express or implied, to act on behalf of the City in any capacity whatsoever as an agent. This Agreement does not grant to the Consultant any authority, express or implied, to bind the City to any obligation whatsoever.

5.8 Attorney’s Fees. In the event any action is commenced by one Party to this Agreement against the other to enforce any of the rights or obligations arising from this Agreement, the prevailing Party in such action, in addition to any other relief and recovery ordered by the court, shall be entitled to recover all statutory costs, together with reasonable attorney’s fees.

5.9 Successors and Assigns. Subject to the provisions of Paragraphs 1.9 and

5.6 hereinabove, this Agreement, and all of the covenants, terms, and conditions hereof, shall be binding upon, and inure to the benefit of, the City, the Consultant, and their respective successors and assigns.

5.10 Authority of Signatories. The persons executing this Agreement on behalf of the Parties hereto warrant that they are duly authorized to execute this Agreement on behalf of said Parties and that by so executing this Agreement the Parties are formally bound to the provisions of this Agreement.

5.11 No Waiver. No waiver by either Party of any of the provisions of this Agreement shall be effective unless explicitly set forth in writing and signed by the Party so waiving. Except as otherwise set forth in this Agreement, no failure to exercise, or delay in exercising, any right, remedy, power or privilege arising from this Agreement shall operate or be construed as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

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5.12 No Third-Party Beneficiaries. This Agreement benefits solely the Parties to this Agreement and their respective permitted successors and assigns and nothing in this Agreement, express or implied, confers on any other person any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

5.13 Non-Liability of City Personnel. No City Personnel shall be personally liable to the Consultant, or any successor in interest, in the event of any default or breach by the City, or for any amount which may become due to the Consultant or its successor, or for breach of any obligation of the terms of this Agreement.

5.14 Execution. The persons executing this Agreement on behalf of each of the Parties hereto represent and warrant that (i) such Party is duly organized and existing, (ii) they are duly authorized to execute and deliver this Agreement on behalf of said Party, (iii) by so executing this Agreement, such Party is formally bound to the provisions of this Agreement, and (iv) that entering into this Agreement does not violate any provision of any other Agreement to which said Party is bound. This Agreement shall be binding upon the heirs, executors, administrators, successors, and assigns of the Parties.

5.15 Survival. The terms, provisions, representations and certification contained in this Agreement, or inferable therefrom, shall survive the termination of this Agreement and the payment of the compensation hereinabove provided.

5.16 Section Headings and Subheadings. The section headings and subheadings contained in this Agreement are included for convenience only and shall not limit or otherwise affect the terms of this Agreement.

5.17 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, and such counterparts shall constitute one and the same instrument.

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IN WITNESS WHEREOF, this Agreement has been executed as of the date first written above.

CITY OF LA PALMA
By:

Conal McNamara, City Manager
ATTEST:

Kimberly Kenney, CMC
City Clerk

CONSULTANT
By:__________________________________
Demetra Farwell, Corporate Secretary
By:
[Title]
APPROVED AS TO FORM:

COLANTUONO, HIGHSMITH & WHATLEY, PC
By:

City Attorney, City of La Palma
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EXHIBIT A
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EXHIBIT A
Scope of Work and Fee Schedule

1. The Consultant will provide personnel for the City equipped and trained in appropriate procedures for crossing pedestrians in marked crosswalks. Such personnel shall be herein referred to as a "Crossing Guard". The Consultant is an independent contractor and the Crossing Guards to be furnished by it shall at all times be its employees and not those of the City.

2. The City shall determine the locations where Crossing Guards shall be furnished by the Consultant. The Consultant shall provide at each designated location personnel properly trained as herein specified for the performance of duties as a Crossing Guard. The Consultant shall provide supervisory personnel to see that Crossing Guard activities are taking place at the required places and times, and in accordance with the terms of this Agreement.

3. The Consultant shall maintain adequate reserve personnel to be able to furnish alternate Crossing Guards in the event that any person fails to report for work at the assigned time and location and agrees to provide immediate replacement.

4. In the performance of its duties the Consultant and all employees of the Consultant shall conduct themselves in accordance with the conditions of this Agreement and all applicable laws of the state in which the Services are to be performed.

5. Persons provided by the Consultant as Crossing Guards shall be trained in all applicable laws of the state in which the Services are to be performed pertaining to general pedestrian safety in school crossing areas.

6. The Consultant Services shall be provided by the Consultant at the designated locations on all days in which school is in session in the area under the City's jurisdiction. The Consultant also agrees to maintain communication with the designated schools to maintain proper scheduling.

7. The Consultant shall provide all Crossing Guards with apparel by which they are readily visible and easily recognized as Crossing Guards. Such apparel shall be uniform for all persons performing the duties of Crossing Guards and shall be worn at all times while performing said duties. This apparel must be appropriate for weather conditions. The Consultant shall also provide all Crossing Guards with hand held Stop signs and any other safety equipment which may be necessary.

8. The City agrees to pay the Consultant for the Consultant Services rendered pursuant to this Agreement and as follows for the specified term:
a. July 1, 2024 to June 30, 2025: The sum of Thirty Three Dollars and Sixty-Eight Cents ($33.68) per hour, per Crossing Guard for a total of (7) Crossing Guard positions at six locations. The cost of providing 4,005 hours of service shall not exceed $134,888.40.

Docusign Envelope ID: FFD216CE-8532-4097-9D6B-651289122772

-2-

9. Consultant may request a price increase during the term as a result of any new legallymandated increases in wages or benefits imposed in the state or municipality in which the Services are to be performed and to which Consultant's employees would be subject.

Consultant shall provide the City with 60 days-notice of its request to increase pricing. The City agrees to review and respond to said notice within 30 days of receipt.

Docusign Envelope ID: FFD216CE-8532-4097-9D6B-651289122772

Agenda Item No. 10 September 2, 2025 | 1
City of La Palma
Agenda Item No. 10
MEETING DATE: September 2, 2025
TO: City Council
FROM: Interim City Manager
SUBMITTED BY: Ajit Thind, City Attorney
AGENDA TITLE: Approval of City Manager Employment Agreement RECOMMENDED ACTION:

It is recommended that the City Council take the following actions:

1. Appoint Peter L. Kim to serve as City Manager for the City of La Palma effective October 27, 2025;

2. Adopt a resolution authorizing the Mayor to sign the proposed Employment Agreement with Peter L. Kim; and

3. Adopt a resolution amending the City’s salary schedule for the City Manager consistent with the proposed Employment Agreement.

SUMMARY:

On March 20, 2025, City Manager Conal McNamara announced that he would be leaving the City of La Palma to serve as City Manager for the City of Whittier. At the meeting, the City Council directed City Manager McNamara to solicit proposals for executive recruitment services.

On April 1, 2025, during closed session, the City Council conducted interviews for Interim City Manager services pursuant to Government Code Section 54957. Following those interviews, the City Council directed that an agreement be prepared with Mr. Egan to provide Interim City Manager Services. On April 15, 2025, the City Council voted to appoint Mr. Egan as Interim City Manager while the recruitment of the permanent City Manager proceeded.

Separately, on April 15, 2025, the City Council approved a contract with Ralph Andersen & Associates for the recruitment of a new permanent City Manager. The recruitment closed on June 30, 2025 with a total of 87 applications. In July 2025, the recruiter screened all of the applications and recommended a top tier of candidates based on their professional qualifications, experience, education. The Council then held multiple closed sessions for the purposes of interviewing and narrowing down the City Manager candidates. Subsequently, at its August 12, 2025 special meeting, the Council directed the formation of an ad hoc subcommittee, composed of the Mayor and Mayor Pro Tem, to negotiate potential terms of employment with the desired candidate. After discussions between the recruiter, city attorney, the ad-hoc subcommittee, and the candidate, terms on an agreement were finalized.

Agenda Item No. 10 September 2, 2025 | 2
A longtime La Palma resident, Peter L. Kim currently serves as Chief Communications Officer at the California State Board of Equalization, where he leads and manages communications and public affairs. With nearly 20 years of public sector experience, he has also served in various roles with the California Department of Tax and Fee Administration and the California State Board of Equalization, and as Chief of Staff in the California State Assembly.

Mr. Kim has deep connections with La Palma, as he graduated from Walker Junior High and Kennedy High Schools. He has previously volunteered with many La Palma civic organizations, and as many are aware, he served as a Council Member for the City of La Palma and Director of the Orange County Sanitation District from December 2012 to 2020. He graduated from the University of California, Irvine, with a degree in Political Science and is certified in Korean by the Los Angeles Unified School District Bilingual Testing Service.

The negotiated City Manager contract sets an annual salary for the City Manager at $245,000. The City Manager would receive approved Cost of Living Adjustments (“COLA”) at the time of other unrepresented management employees and will be eligible for benefits consistent with other City Management employees. A copy of the proposed employment agreement is attached to the proposed Resolution.

If appointed, Mr. Kim would become City Manager effective October 27, 2025.

In addition to the Employment Agreement, the City Council is being asked to adopt a resolution that will amend the salary schedule for the City Manager position, consistent with the salary in the proposed Employment Agreement. (See Attachment 2)
FISCAL IMPACT:

A copy of the proposed Employment Agreement is included with Attachment 1 and has been executed by Mr. Kim. The basic terms of the Employment Agreement are similar to those in the previous City Manager’s contract and are consistent with benefits provided for all other full-time management employees. Also attached (Attachment 3) is a more detailed cost breakdown of salary and benefits for the position as compared to the Employment Agreement previously in effect. The net effect of the proposed Employment Agreement with Mr. Kim represents an approximate $24,689 savings to the City of La Palma.

ATTACHMENTS:

1. Resolution Adopting Employment Agreement

2. Resolution Revising Salary Schedule

3. Salary & Benefits Comparison

Resolution No. 2025-__

408896.2
RESOLUTION NO. 2025-39

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
LA PALMA, APPOINTING PETER L. KIM AS CITY

MANAGER AND APPROVING AN EMPLOYMENT

AGREEMENT WITH THE CITY MANAGER
WHEREAS, the City Council of the City of La Palma desires to appoint Peter L.

Kim as City Manager;
WHEREAS, the City Council has negotiated a proposed employment agreement between the City and Peter L. Kim for Mr. Kim to serve as City Manager; WHEREAS, Peter L. Kim has agreed to serve as City Manager, effective October 27, 2025, under the terms of the proposed employment agreement.

NOW, THEREFORE, the City Council of the City of La Palma hereby resolves as follows:

The City Council of the City of La Palma does hereby approve the employment agreement with Peter L. Kim for City Manager services attached hereto as Exhibit “A.” APPROVED AND ADOPTED by the City Council of the City of La Palma at a regular meeting held on the 2
nd day of September 2025.

________________________________
Mark Waldman
Mayor
ATTEST:
______________________________________
Norma I. Alley, MMC
City Clerk

Resolution No. 2025-39

408896.2

STATE OF CALIFORNIA )

COUNTY OF ORANGE ) SS

CITY OF LA PALMA )
I, NORMA I. ALLEY, City Clerk of the City of La Palma, California, DO HEREBY CERTIFY that the foregoing resolution was adopted by the City Council of said City at a regular meeting of said City Council held on the 2
nd day of September 2025, and that it
was so adopted by called vote as follows:

AYES:

NOES:
________________________________
Norma I. Alley, MMC
City Clerk

Resolution No. 2025-39

408896.2
EXHIBIT “A”
[See next page]

408443.10 1

EMPLOYMENT AGREEMENT
BETWEEN THE CITY OF LA PALMA AND PETER L. KIM
THIS AGREEMENT between the CITY OF LA PALMA (“City”) and PETER L. KIM (“Employee”) and is dated for convenience as September 2, 2025.

RECITAL

1. The City Council has selected Employee to serve as City Manager of the City and Employee accepts such employment, subject to approval of this employment agreement (hereinafter, this “Agreement”), background check, and physical examination.

Accordingly, the parties agree as follows:

AGREEMENT

2. Effective Date
This Agreement shall become effective on October 27, 2025 (the “Effective Date”), after it has been executed by Employee and duly approved by the City Council.

3. Term of Employment
Pursuant to the provisions of the La Palma Municipal Code Section 2-39, Employee shall serve at the pleasure of the City Council and on an “at will” basis and has no vested right to his employment during the term of this Agreement, subject to the terms and provisions of this Agreement as set forth below. This Agreement will remain in full force and effect until one of the parties terminates it as provided in this Agreement.

4. Duties; Hours of Work
A. Employee shall perform those functions and duties specified by State law, the La Palma Municipal Code, any applicable job description, and by formal direction of the City Council. Employee shall perform such duties in accordance with the highest professional and ethical standards of the City Manager profession. Employee shall not engage in any activity, which is, or which may become, incompatible with the office of City Manager, as provided for by State law. During the term of this Agreement, Employee shall be exclusively employed by City, unless prior authorization otherwise is received from the City Council, which authorization will not be unreasonably withheld.

408443.10 2
B. Employee is a FLSA-exempt employee but is expected to engage in those hours of work that are necessary to fulfill the obligations of the City Manager position.

Employee does not have set hours of work as he is expected to be available at all times. It is recognized that Employee must devote a great deal of time to City’s business outside of City’s customary office hours, and to that end Employee’s schedule and location of work each day and week will vary in accordance with the work required to be performed and in accordance with any specific direction provided by the City Council.

5. Compensation
A. Employee shall receive an annual gross base salary of Two Hundred FortyFive Thousand Dollars ($245,000), payable in equal bi-weekly payments in the same manner as all full time City employees, and subject to all applicable payroll taxes and withholdings.

B. At the City Council’s sole discretion, salary adjustments may be given to Employee at or around the time of the annual review and evaluation by the City Council or at other times by Resolution of the City Council. Further, it is understood that it is the intent of the City Council to increase salary, or other benefits referred to in this Agreement, during the term of this Agreement, dependent on the quality of job performance by Employee and City’s fiscal condition.

C. In the event City implements cost of living (“COLA”) increases to the compensation paid to City’s Management Employees after the year 2025, Employee will receive the same COLA increase.

D. In the event City implements cost-saving measures, such as work furloughs, salary reductions, changes to health or welfare benefits and allowances, or any other changes to the compensation or benefits paid to City’s Management Employees, Employee will receive the same downward adjustment or adhere to the same change in terms. In the event that such cost-saving measures are subsequently eliminated (i.e. former salary or benefit levels are restored) for City’s Management Employees, Employee will receive the same restoration of salary or benefits as City’s Management Employees.

6. Health Insurance
City shall pay the same package(s) of health/medical insurance benefits and dental and vision allowances as afforded to other City Management Employees.

7. Life Insurance and Long-Term Disability Plan

408443.10 3
A. City shall provide term life insurance and Accidental Death and Dismemberment (AD&D) policy in the face amount of Two Hundred Fifty Thousand Dollars ($250,000.00) on Employee’s life with a carrier selected by the City. Employee shall designate the beneficiaries of the policy.

B. City shall provide City a long-term disability plan for Employee and shall pay 100% of the costs of a long-term disability plan with a 60% benefit percentage (maximum monthly benefit of $11,667).

8. Management Administrative Leave
As of the Effective Date, Employee shall be credited with 60 hours’ management administrative leave. On each subsequent July 1, Employee shall be credited with 80 hours’ management administrative leave per year. In the event such leave is not used, Employee shallreceive equivalent cash compensation therefore, in full or part, for unused leave. Management administrative leave time may not be carried over past the end of any fiscal year (June 30).

9. Annual Vacation Leave
As of the Effective Date, Employee shall be credited with eighty (80) hours of vacation leave and provided with the same vacation accrual amounts and in the same time and manner received by Tier One Managers hired prior to July 1, 2011, with 19 years of continuous service.

Employee may receive equivalent cash compensation, in full or in part, at any time during the year for accrued but unused vacation leave. For vacation leave of more than one week at a time, Employee shall appoint an Acting City Manager in his absence.

Employee shall accrue no more than three hundred twenty (320) hours of vacation leave.

10. Other Leaves and Benefits
A. All other personal leave, family leave, funeral leave, or sick leave shall be as provided to other City Management Employees. City shall afford Employee such other benefits as are provided to other City Management Employees on the same terms as provided to those employees except as otherwise expressly provided herein.

B. City shall afford Employee with “floating holiday” hours as are provided to other City Management Employees on the same terms as provided to those employees.

408443.10 4
If Employee fails to use the floating holiday prior to June 30 of each year, the floating holiday shall be forfeited. Under no circumstances shall floating holiday hours be cashed out or carried over to the following fiscal year.

C. Employee’s wage shall not be reduced for time served on jury duty in a court action or as a witness in a deposition or court proceeding.

D. Notwithstanding Section 10.A., Employee shall be afforded eighty (80) hours of banked sick leave as of the Effective Date.

11. Automobile Allowance and Technology
A. In recognition of the fact that Employee’s normal duties require frequent use of his automobile, Employee shall be entitled to Seven Hundred Fifty Dollars ($750.00) per month as an automobile allowance. This allowance is in lieu of mileage reimbursement or other expenses that may be incurred by Employee in connection with his use of his own automobile for City purposes. In consideration for said allowance, Employee shall be responsible for all costs of maintenance and operation of his vehicle.

Employee shall at all times maintain automobile liability insurance on any vehicle used by him in the course of City employment. Such insurance shall have coverage limits acceptable in form and amounts to City. Employee shall provide a certificate or other evidence of such insurance to City. Employee acknowledges that this allowance will be subject to payroll taxes unless he maintains the records required by law to permit other treatment of this allowance.

B. City shall provide Employee with a City-owned cellular phone, data plan, laptop computer, tablet, and additional similar communications and computing equipment as deemed appropriate by City Council (excluding desktop computer equipment for use outside City Hall).

12. Professional Memberships & Meetings; Other Expenses A. City shall pay for Employee’s professional membership in the League of California Cities, International City / County Management Association, and Orange County City Managers Association. City shall pay for Employee to attend the annual League of California Cities conference. City will pay for such other professional memberships and conference attendance as may be approved and budgeted by the City Council.

408443.10 5
B. City recognizes that certain expenses of a non-personal and job-related nature may be incurred by Employee. City agrees to reimburse Employee for reasonable expenses which are authorized by City’s adopted budget; submitted to the City Council for approval; and which are supported by expense receipts, statements or personal affidavits, and audit thereof in like manner as other demands against City.

13. Retirement Program and Deferred Compensation
A. Employee shall participate in PERS in the same manner and to the same extent as available to all other full-time City employees. As permitted by statute, the City shall maintain its enrollment in CalPERS Government Code Section 21548 (pre-retirement optional settlement 2 death benefit), an optional benefit provision under PERS that protects spouses if an employee dies prior to retirement.

B. City shall contribute $550 per pay period into a qualified deferred compensation plan of Employee’s choice.

14. Annual Performance Evaluation
The City Council shall evaluate Employee’s performance at least once annually.

The City Council and Employee shall annually develop mutually agreed performance goals and criteria which the City Council shall use in reviewing Employee’s performance in the following year. It shall be Employee’s responsibility to initiate this review each year. Employee will be afforded an adequate opportunity to discuss each evaluation with the City Council.

15. Indemnification
City shall defend, hold harmless, and indemnify Employee against any claim, demand, judgment, or action of any type or kind arising within the course and scope of Employee’s employment to the extent required by Government Code Sections 825 and 995.

16. Other Terms and Conditions of Employment
A. The City Council may from time to time fix other terms and conditions of employment relating to Employee’s performance, provided such terms and conditions are not inconsistent with or in conflict with the provision of this Agreement, the La Palma Municipal Code, or other applicable law.

408443.10 6
B. The provisions of City’s Personnel Rules and Regulations (“Rules”) shall apply to Employee to the extent they explicitly apply to the position of City Manager, except that if the specific provisions of this Agreement conflict with the Rules, the terms of this Agreement shall prevail. Without limiting the generality of the exception noted in the previous sentence, however, no provision of the Rules or this Agreement shall confer upon Employee a property right in his employment or a right to be discharged only upon cause. Employee is an at-will employee serving at the pleasure of the City Council and may be dismissed at any time with or without cause, subject only to the provisions of this Agreement.

C. Employee shall be exempt from paid overtime compensation and from Social Security taxes other than the mandatory Medicare portion of such taxes.

17. Termination
A. Employee understands and agrees that he has no constitutionally-protected property or other interest in his employment with City. Employee understands and agrees that he works at the will and pleasure of the City Council, and that he may be terminated, or asked to resign, at any time, with or without cause, by a majority vote of the City Council. Notice of termination shall be provided to Employee in writing. “Termination” and its conjugations, as used in this Agreement, shall include: (i) termination with or without cause, (ii) a request to resign with actual resignation, or (iii) the elimination of the City Manager position.

B. In the event the City Council terminates Employee for any reason or no reason, City and Employee agree to work and issue a mutually acceptable announcement regarding the termination.

C. Except as provided in Section 17.E., Employee shall not be terminated during the 90-day period immediately preceding or following an election for membership on the City Council, nor during the 90-day period immediately following any change in membership of the City Council. Nothing in this paragraph alters the “at will” status of Employee’s employment with City.

D. Except as provided in Section 17.E., if Employee is terminated, he shall receive (i) a cash payment equivalent to the sum of his then-current gross base salary per month multiplied by six (6), and (ii) the cash value, as determined by City, of his monthly non-salary COBRA eligible benefits multiplied by six (6). Any such cash payment will be made on a pro-rated, monthly basis over six (6) months. Employee shall also be paid for any accrued, but unused, vacation leave. Eligibility for such severance payment is

408443.10 7
expressly conditioned upon Employee’s execution of (i) a waiver and release of any and all of his claims against City and all City employees/officials, approved as to form by the City Attorney, and (ii) a covenant not to sue City or any City employees/officials, approved as to form by the City Attorney. No severance pay shall be paid until the foregoing conditions are met and any applicable revocation rights have expired. All normal payroll taxes and withholdings as required by law shall be made with respect to any amounts paid under this section.

E. City may terminate Employee at any time and shall have no obligation to pay him as required by Section 17.D. if any of the following occur:
(i) conviction of any illegal activity involving personal gain to himself, (ii) fraud,
(iii) moral turpitude,
(iv) gross mismanagement of City affairs,
(v) use of alcohol or drugs that impedes performance of duties, (vi) a proven claim of either sexual harassment or abuse of employees in violation of law or adopted City policy,
(vii) willful and repeated failure to carry out the lawful directives or policy decisions of the City Council,
(viii) knowingly and unlawfully participating in a governmental decision in which he has a conflict of interest as defined in Government Code sections 87100, et seq., or Government Code sections 1090 et seq. (ix) conduct that is publicly insubordinate, or humiliating, or demeaning to the City or City Council;
(x) willful destruction or misuse of City property
(xi) willful disclosure of closed session confidential communications, attorney-client confidential communications, or other information whose confidentiality is privileged or protected by law.
(xii) willful abandonment of the position or continued and unexcused absence from duty, or
(xiii) willful breach of this Agreement.

F. City may terminate Employee and shall have no obligation to pay him as required by Section 17.D. if Employee is permanently disabled or is otherwise unable to perform his duties because of sickness, accident, injury, mental incapacity or health for a period of twenty-six (26) successive weeks beyond any accrued sick leave to which City Manager is entitled, or for the legal duration of the Family and Medical Leave Act (whichever is greater).

408443.10 8

18. Voluntary Termination; Death
A. Employee may voluntarily terminate his employment, by resignation or retirement, at any time during the term of this Agreement, subject to at least forty-five days’ written notice by Employee to City, unless the City Council and Employee agree otherwise. In such case, City shall have no further obligation to provide payments and benefits, including but not limited to severance benefits pursuant to Section 17.D., upon the effective date of termination of employment, other than payment of accrued vacation leave or other payments required by law.

B. In the event Employee dies while employed by City, his beneficiaries or those entitled to his estate shall be paid any earned salary and accrued vacation leave at Employee’s pay rate on the date of death.

19. Conviction of Crime Involving Abuse of Office
Pursuant to Government Code sections 53243, 53243.1 and 53243.2, if Employee is convicted of a crime involving an abuse of his office or position, all of the following shall apply: (1) if Employee is provided with paid administrative leave pending an investigation, Employee shall be required to fully reimburse City such amounts paid; (2) if City, in its sole discretion, pays for Employee’s criminal legal defense, Employee shall be required to fully reimburse City such amounts paid. For purposes of this Section, abuse of office or position means either: (1) an abuse of public authority, including waste, fraud, and violation of the law under color of authority, including, but not limited, to ; or (2) a crime against public justice, including, but not limited to, a crime described in Title 7 (commencing with Section 92) of Part 1 of the Penal Code.

20. Compliance With Law
A. This Agreement is subject to all applicable provisions of State and Federal law, the provisions of the La Palma Municipal Code, and to any other ordinances, rules, regulations, and policies of City applicable to Employee and the City Manager position.

B. Employee shall not engage in any business or transaction nor have a financial or other personal interest or association, direct or indirect, which is in conflict with the proper discharge of official duties or would tend to impair independence of judgment or action in the performance of official duties. Personal as distinguished from financial interest includes an interest arising from blood or marriage relationships or close business, personal, or political associations. Employee shall also be subject to the conflict of interest provisions of the California Government Code and any conflict of

408443.10 9
interest code applicable to Employee’s City employment. Employee is responsible for submitting to the City Clerk the appropriate Conflict of Interest Statements at the time of appointment, annually thereafter, and at the time of separation from the position.

Employee shall not engage in any employment, activity, consulting service, or other enterprise, for compensation or otherwise, which is actually or potentially in conflict with, or which interferes with the performance of Employee’s duties. Further, Employee shall not, during the term of this Agreement, individually, as a partner, joint venture, officer, or shareholder, invest or participate in any business venture conducting business in the corporate limits of the City of La Palma (except for stock ownership in any company whose capital stock is publicly held and regularly traded) without prior approval of the City Council.

21. General Provisions
A. This Agreement constitutes the entire agreement between the parties. City and Employee hereby acknowledge that they have neither made nor accepted any other promise or obligation with respect to the subject matter of this Agreement.

B. If any provision or any portion of this Agreement is held to be unconstitutional, invalid, or unenforceable, the remainder of the Agreement shall be deemed severable and shall not be affected and shall remain in full force and effect.

C. Any notice to City pursuant to this Agreement shall be given in writing, either by personal service or by registered or certified mail, postage prepaid, addressed as follows:

Mayor and City Council
City of La Palma
7822 Walker St.

La Palma, CA 90623
With a courtesy copy to the City Attorney at the following address or the address then shown in the records of the City for the City Attorney:

Ajit S. Thind, Esq.

La Palma City Attorney
7545 Irvine Center Drive, Suite 200
Irvine, CA 92618

408443.10 10
Any notice to Employee shall be given in a like manner, and, if mailed, shall be addressed to Employee at the address then shown in City’s personnel records. For the purpose of determining compliance with any time limit stated in this Agreement, a notice shall be deemed to have duly given (a) on the date of delivery, if served personally, or (b) on the second calendar day after mailing, if mailed.

D. Venue for any disputes arising from or relating to this Agreement shall lie in the Superior Court for the County of Orange, California. If an action at law or in equity is necessary to enforce or interpret this Agreement, the prevailing party shall be entitled to reasonable and actual attorneys’ fees and costs with respect to the action.

E. A waiver of any of the terms and conditions of this Agreement shall not be construed as a general waiver and either party shall be free to enforce any term or condition of this Agreement with or without notice to the other notwithstanding any prior waiver of that term or condition.

22. Amendments
This represents the entire agreement between the parties. Amendments to this Agreement may be made at such times as approved by the City Council and Employee and shall be in writing.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]

408443.10 11

CITY MANAGER
Dated:

Peter L. Kim

CITY OF LA PALMA
Dated:

Mark I. Waldman, Mayor
Approved as to form:
________________________________
Ajit S. Thind, City Attorney
Attest:
_________________________________
Norma I. Alley, MMC City Clerk
Dated:

Dated: ______________________

Resolution No. 2025-__

408897.2
RESOLUTION NO. 2025-__

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
LA PALMA, AMENDING THE FISCAL YEAR 2025/2026

PUBLICLY AVAILABLE PAY SCHEDULE UPDATING THE

CITY MANAGER SALARY RANGE
WHEREAS, all employers who contract with the California Public Employees’ Retirement System (CalPERS) must comply with the publicly available pay schedule provisions contained within California Code of Regulations title 2, section 570.5; and WHEREAS, it is necessary for the City Council to review and duly approve and adopt, in accordance with requirements of applicable public meetings laws, a publicly available pay schedule; and
WHEREAS, attached to this resolution and incorporated by reference is the City of La Palma’s publicly available pay schedule which will be made publicly available on the City’s website and made available upon request; and WHEREAS, this resolution adopts the amended publicly available salary schedule effective as of October 27, 2025, with one modification to reflect the City Manager’s salary of $245,000 yearly, as set by the City Council per existing applicable law and policies; and
NOW, THEREFORE, the City Council of the City of La Palma hereby:

1. Approves and confirms the amendment to the Fiscal Year 2025/2026 publicly available salary schedule (Exhibit A), in compliance with California Public Employees’ Retirement System (CalPERS) statutory and regulatory requirements for publicly available pay schedules. The City Manager is directed to implement and make this publicly available pay schedule available on the City’s website.

2. The City Clerk shall certify to the adoption of this Resolution.

APPROVED AND ADOPTED by the City Council of the City of La Palma at a regular meeting held on the 2nd day of September 2025.

________________________________
Mark Waldman
Mayor

Resolution No. 2025-__

408897.2
ATTEST:
______________________________________
Norma I. Alley, MMC
City Clerk

STATE OF CALIFORNIA )

COUNTY OF ORANGE ) SS

CITY OF LA PALMA )
I, NORMA I. ALLEY, City Clerk of the City of La Palma, California, DO HEREBY CERTIFY that the foregoing resolution was adopted by the City Council of said City at a regular meeting of said City Council held on the 2nd day of September, 2025, and that it was so adopted by called vote as follows:

AYES:

NOES:

________________________________
Norma I. Alley, MMC
City Clerk

Resolution No. 2025-__

408897.2
EXHIBIT “A”
Attachment “A”
Step A Step B Step C Step D Step E Step F Step G
Annual 245,000.00
Monthly 20,416.67
Biweekly 9,423.08
Hourly 117.7885
La Palma Management Employees
Classification and Salary Table
July 1, 2025 through June 30, 2026
City Manager

CM Pay Comparison
Updated 2025‐08‐27
Employee A Employee B
Annual City Costs for CM Budgeted FY26 Proposed
Salary: $ 268,216 $ 245,000
Effective Rate $129/hour $118/hour
Total Benefits: $ 41,298 $ 39,825
Dental $ 1,229 $ 1,229
Medical $ 6,780 $ 8,010
Executive Wellness $ 500 $ 500
Life/ADD/Dep Life $ 491 $ 491
LT Disability (Non-Safety) $ 777 $ 777
Medicare Contribution $ 3,889 $ 3,553
Retirement $ 27,331 $ 24,966
Vision $ 300 $ 300
Total Additional Pay $ 24,260 $ 24,260
Auto Allowance $ 9,000 $ 9,000
Cell Phone Allowance $ 960 $ 960
Deferred Comp – Mgmt $ 14,300 $ 14,300
Leave Accruals (not included in total) $ 60,911 $ 58,462 Vacation Accrual $ 20,653 $ 21,685
Sick Accrual $ 12,405 $ 11,332
Holidays ‐ 10 Days $ 12,895 $ 11,780
Mgt Admin Leave - 80 Hrs $ 10,316 $ 9,424
Floating Holidays ‐ 36 hours $ 4,642 $ 4,241
Total: $ 333,774 $ 309,085

Agenda Item No. 11 September 2, 2025 | 1
City of La Palma
Agenda Item No. 11
MEETING DATE: September 2, 2025
TO: City Council
FROM: Interim City Manager
SUBMITTED BY: Joseph Cisneros, Deputy City Manager
AGENDA TITLE: Water and Sewer Rate Study and Approval to Initiate Proposition 218 Process
RECOMMENDED ACTION:

It is recommended that the City Council receive the Water and Sewer Rate Study and proposed rate adjustments; and direct staff to initiate the Proposition 218 process for a public hearing to be held on November 4, 2025, to consider implementation of rate adjustments on January 1, 2026.

BACKGROUND:

In September 2024, staff issued a Request for Proposals (RFP) for the preparation of a Water and Sewer Rate Study. On January 14, 2025, the City Council awarded a contract to Willdan Financial Services to complete the study.

A Water and Sewer Rate Study is generally conducted every five years, in alignment with the City Council’s Goals & Objectives to create and maintain City assets, infrastructure, and neighborhoods that reflect municipal pride of ownership. The study ensures the utility system’s operational costs, capital improvements, and system maintenance remain financially sustainable. The City of La Palma last adopted utility rates in April 2022, which became effective July 1, 2022, with annual adjustments thereafter.

Due to the economic impacts of the pandemic, several cost factors were not fully accounted for in the 2021 study. As a result, adjustments were limited to water rates only, while sewer rates have remained unchanged for several years. Additionally, in the 2021 study, the City and the consultant took a cautious approach when evaluating capital projects, as many companies and businesses were in flux during this period, and reliable cost estimates were unavailable. As a result, only minor adjustments were made to the capital cost portion of the 2021 study, leaving rates significantly lower than what is necessary to adequately maintain and finance the system’s infrastructure.

DISCUSSION:

The purpose of this Study Session is to provide for an open discussion and review of the Water and Sewer Rate Study prepared by Wildan Financial Services.

Agenda Item No. 11 September 2, 2025 | 2
Water System
Since 2022, the costs of producing and purchasing water have continued to rise. Pandemic-related economic impacts, statewide drought regulations, and other financial pressures have affected revenues, while operational and importation expenses have continued to rise.

Several key factors are driving the need for water rate increases, including the replacement of the Walker Well, major utility capital projects such as water treatment design and engineering, and primary service demands such as peak flow requirements and the number and types of customers served.

Sewer System
Similar to the water system, the proposed sewer rate increase is primarily driven by capital costs and the need to strengthen reserve balances to fund future projects. It is important to note that the 2021 study concluded existing sewer rates were adequate to cover operating expenses and maintain required reserves for the subsequent years, however, it was noted an increase would be necessary in the next rate study. As a result, no rate increases were implemented in 2022, leaving the reserve balance insufficient in the FY 25 and FY 26 to support upcoming sewer projects, operational needs, and other maintenance costs increases.

Walker Well
The last two Water Master Plans identified the need to drill a new well at the Walker Street site based on current conditions and the existing well’s useful life. In consultation with professional water contractors, staff has undertaken rehabilitation efforts, including a full well rehabilitation planned for FY 2028, to extend the current well’s life until a replacement can be constructed.

The new well is targeted for 2035, with an estimated cost of $10 million. Based on current projections, capital reserve balances will not be sufficient to fund this project. The proposed rate adjustments include building the Water Capital Reserve Fund to fully finance the new well. This approach provides flexibility to revisit and adjust the funding strategy in the next rate study while simultaneously preparing a suitable reserve balance to make a significant contribution toward the replacement cost and ensure adequate reserves for the Walker Well project.

The Walker Well funding scenarios do not differ significantly. Staff recommends a fully funded approach for this five-year rate adjustment, utilizing cash and capital reserves (Scenario 1). This strategy provides the City with flexibility to revisit and adjust funding in the next rate study. Alternative scenarios include funding the project with 50% cash and reserves and 50% debt (Scenario 2), or with 25% cash and reserves and 75% debt (Scenario 3). Below is a depiction of the scenarios for an average usage bill.

Table & Graph 1: 5-Year Residential Bill Impact Under Each Scenario @ 1,600 Cubic Feet

Agenda Item No. 11 September 2, 2025 | 3
PROPOSITION 218 PROCESS:

After discussion of the draft Water and Sewer Rate Study, staff and consultant will include any changes and will proceed with sending the Proposition 218 Notice (see attachment) to all property owners and renters subject to paying La Palma utility rates. In November 1996, California voters approved Proposition 218, which requires compliance when setting utility rates. One provision requires that a noticed public hearing on utility rates be held not prior to 45 days of noticing; and that rates not be increased if a majority of affected property owners protest the increased rates in writing.

Staff is recommending that the City Council schedule a Public Hearing for November 4, 2025. Additionally there is a 120-day statute of limitations for challenging any new, increased, or extended fee or charges, commencing from the later of the effective date or the date of final passage, adoption, or approval of the Resolution. If adopted, rates would go into effect with a new billing cycle after January 1, 2026.

ENVIRONMENTAL IMPACT:

This action is exempt from the California Environmental Quality Act (CEQA) because it is not a project which has a potential for resulting in either a direct physical change in the environment or a reasonably foreseeable indirect physical change in the environment, pursuant to CEQA Guideline Section 15378.

FISCAL IMPACT:

In addition to planning for the replacement of the Walker Well, the Study concludes that La Palma’s current rates do not generate sufficient revenue to cover expenses and maintain required reserves necessary to operate and sustain the water and sewer systems in the coming years. Approval of any item related to this study session will only authorize its inclusion in the final report and proposed rates, which will be presented for adoption at the Public Hearing on November 4, 2025.

ATTACHMENTS:

1. Water and Sewer Rate Study Draft Report

2. Prop 218 Rate Notice Draft

Agenda Item No. 11 September 2, 2025 | 4

City of La Palma, CA
Comprehensive Water & Sewer
Utility Rate Study Update
Report

i Water & Sewer Rate Study
August 26, 2025

TABLE OF CONTENTS
TABLE OF CONTENTS ............................................................................................................................... i Section 1 – Executive Summary...........................................................................................................1

1.1 Introduction.........................................................................................................................................1

1.1.1 Water System Background.....................................................................................................1

1.1.2 Sewer System Background.....................................................................................................1

1.1.3 Rate Study Background ..........................................................................................................1

1.2 Overview of the Rate Study Process............................................................................................2

1.3 Summary of Proposed Rates..........................................................................................................3 Section 2 – Revenue Sufficiency Analysis ..........................................................................................6

2.1 Financial Planning Principles..........................................................................................................6

2.2 Existing Rates.......................................................................................................................................6

2.3 Revenue Sufficiency Process .........................................................................................................8

2.3.1 Budget..........................................................................................................................................8

2.3.2 Capital Improvement Plan (CIP) ..........................................................................................9

2.3.3 Debt Service .............................................................................................................................10

2.3.4 Gross and Net Revenue Requirement ..............................................................................11

2.4 Customers & Billable Flows............................................................................................................12

2.4.1 Customer Billing Analysis........................................................................................................12

2.5 Financial Projections Under Existing Rates................................................................................13 Section 3 – Cost-of-Service (COS) Analysis .....................................................................................16

3.1 General ..............................................................................................................................................16

3.2 Water Cost-of-Service....................................................................................................................16

3.2.1 Peaking Factors .......................................................................................................................16

3.2.2 Functional Unbundling of Revenue Requirements........................................................18

3.2.3 Classification of Water System Costs.................................................................................19

3.2.4 Allocation to Customer Classes and Unit Cost Development....................................21

3.2.5 Rate Design by Unit Cost.......................................................................................................23

3.2.6 Cost-of-Service and Revenue Check ...............................................................................28

ii Water & Sewer Rate Study
August 26, 2025

3.3 Sewer Cost-of-Service....................................................................................................................29

3.3.1 Functional Unbundling of Revenue Requirements........................................................29

3.3.2 Classification of Revenue Requirements..........................................................................30

3.3.3 Allocation to Customer Classes and Unit Cost Development....................................30

3.3.4 Cost-of-Service and Revenue Check ...............................................................................32 Section 4 – Proposed Test Year Rates ...............................................................................................33

4.1 General ..............................................................................................................................................33

4.2 Typical Bi-Monthly Bill Comparison .............................................................................................35

4.3 Rate Comparison with Other Utilities .........................................................................................37 Section 5 – Projected Operating Results ..........................................................................................39

5.1 General ..............................................................................................................................................39

5.2 Projected User Rate Revenues....................................................................................................39

5.3 Debt Service Coverage ................................................................................................................42

5.4 Summary of Projected Operating Results ................................................................................43 Section 6 – Conclusions and Recommendations ............................................................................45

6.1 Disclaimers...............................................................................................................................................45

6.1.1 General Disclaimer .................................................................................................................45

6.1.2 Municipal Advisory Disclaimer.............................................................................................45

6.2 Conclusions.......................................................................................................................................46

6.3 Recommendations.........................................................................................................................47

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Section 1 – Executive Summary

1.1 Introduction
Willdan Financial Services (Willdan) is pleased to submit to the City of La Palma (City) the Water and Sewer Rate Study report (Report) for your consideration. Willdan has completed the study of the City’s water and sewer rates and summarized the results of the investigations, analyses, and conclusions in this Report.

1.1.1 Water System Background
The City is responsible for providing potable water to approximately 4,379 residential and business service connections, with safe, high-quality drinking water that meets or exceeds quality standards set forth by both the state and federal government. The water utilized by the City is primarily pumped directly from the local groundwater basin that is managed by the Orange County Water District (OCWD) and supplemented by imported water purchased from the Metropolitan Water District of Southern California (MET) through the Municipal Water District of Orange County (MWDOC). The City operates two wells and two reservoirs with a total capacity of 4.5 million gallons (MGs), and also manages 39.7 miles of water mains.

1.1.2 Sewer System Background
The City only provides sewer collection services through approximately 30 miles of sewer gravity pipelines, which are virtually all constructed of vitrified-clay, and over 700 manholes.

Sewer treatment and disposal services are provided by and billed separately by Orange County Sanitation District (OCSD).

Three separate OCSD trunk sewer systems collect the City’s wastewater within Denni Street (OCSD Los Alamitos Sub-Trunk), Moody Street (OCSD West-side Relief Interceptor), and Valley View Street (OCSD Miller-Holder Trunk). The collected wastewater is then sent to the OCSD’s treatment and reclamation facility located in Fountain Valley.

1.1.3 Rate Study Background
The City has focused a significant amount of attention and effort on strategic planning measures in all areas of utility operations to ensure that it is able to maintain critical utility infrastructure, provide a stable and well-functioning water system that delivers uninterrupted service to its customers, and so that it remains prepared for the future. As part of its ongoing strategic planning efforts, the City commissioned Willdan to perform a water and sewer rate study to analyze the revenue sources and expenditures of the water and sewer utility systems and provide recommendations for proposed rate and/or rate structure adjustments to meet the financial and administrative goals and objectives of the City. The primary objectives of the rate study include:

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• Full recovery of costs related to utility operations (i.e., operating and maintenance costs, debt, and other expenditure requirements);
• Cost-based rate structures;
• Consistency with American Water Works (AWWA) and Water Environment Federation (WEF) guidelines;
• Equity among customer classes;
• Meeting substantive and procedural Proposition 218 requirements; • Administrative efficiency (i.e., easy to understand and implement); and • 5-Year capital funding plan.

1.2 Overview of the Rate Study Process
This study includes the development and presentation of a pro-forma water and sewer financial plan for a 5-year planning period, as well as the development of cost-based rates through a cost-of-service and rate design analysis. Utility rates must be set at a level such that operating, maintenance, debt, and capital expenses are funded with the revenues received from customers. In addition, the revenues generated from utility rates must only be used for this purpose and for each system separately. This is a significant point, as failure to achieve the revenues needed can lead to unacceptable service levels and inadequately maintained facilities. Therefore, a rate study typically consists of the following three interrelated analyses:

I. Financial Planning/Revenue Requirement Analysis: Creates a five-year plan to support an orderly, efficient program of on-going maintenance and operating costs, capital improvement and routine system component replacement activities. In addition, the plan should fund and maintain appropriate reserve balances based on industry standards, as well as the City’s fiscal policies and specific needs.

II. Cost-of-Service Analysis: Identifies and apportions annual revenue requirements (i.e., expenditures) to operational and functional cost components based on the demand placed on the utility system. The purpose of this analysis is to develop rates that generate revenues relatively proportionate to the share of each utility’s costs. This objective is consistent with industry standards as well as the requirements of Proposition 218 (Prop 218).

III. Rate Design: Develops an equitable and proportionate fixed/variable schedule of rates for the City’s customer base. The policy objectives are coordinated with Prop 218 requirements and cost-of-service objectives to achieve a balance between customer equity and financial stability goals. The balance of fixed and variable charges considers the need for a stable revenue source (the fixed charge) and accounts for customers placing higher costs on the system (through higher water and

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sewer use) by incurring a higher bill reflective of their impact on the system (the variable component).

This rate study utilizes generally accepted rate-making principles and standards established by industry experts such as the AWWA in its “M1 - Principles of Water Rates Fees and Charges” manual and WEF in its “Financing and Charges for Sewer Systems, Manual of Practice No. 27”. The principles established by these entities are used as guidelines in the development of the proposed rates for water and sewer. A discussion of some of the key principles of ratemaking is presented in the following subsection of this Report.

1.3 Summary of Proposed Rates
The rate study methodology applied in the development of updated water and sewer rates, outlined in this Report, consisted of reviewing the historical operating results of the water and sewer utility systems, analyzing the budget to identify the net revenue requirements to be recovered from user rate revenues, performing general cost-of-service allocations based on the rate components and functional cost categories, and revising adjusting the user rates based on the applicable costs and expenditures to be recovered. In addition, an analysis of the system customers and their usage and demand characteristics was performed to identify the cost-of-service rate determinants since they form the basis for the recommended rates, which are the primary source for generating revenues. The allocated revenue requirements were utilized in conjunction with the rate determinants and rate structure to develop the proposed water and sewer rates.

Rate Design Analysis
Considers both the level and structure of the rate design to collect the appropiate and targeted level of revenues.

Cost of Service Analysis
Allocates the revenue requirements to the fixed/variable cost components based on cost of service.

Revenue Requirement Analysis
Compares the revenues to the expenses of the utility
to determine the overall rate adjustment required.I

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The findings and conclusions of the rate analysis, as well as the resulting rate recommendations, were utilized to develop a projection of future operating results for a 5- year planning period from Fiscal Year (FY) 2026 (beginning July 1, 2025) through FY 2030 (ending June 30, 2030), herein referred to as the “Projection Period”. The purpose for developing the 5-year projections is to demonstrate the financial capability of the water and sewer revenues to support system operations, maintenance, policy goals such as accumulation and maintenance of designated reserves, and fund planned capital improvement projects. The analyses, findings and accompanying recommendations are presented in the subsequent sections of the Report.

The water and sewer rate analyses described in the Report are performed based on the general guidelines of the defined objectives, as well as common industry standards for setting utility rates. In addition to focusing on these major objectives, the rate analyses performed herein will consider other factors in designing rates. As will be discussed in detail later in the Report, such other rate considerations generally include sensitivity to the impact on existing customers, the relative comparability with neighboring utilities and the City’s existing rate structure. The proposed water and sewer rates for assumed implementation effective January 1, 2026 (or other such date as determined by the City) for FY 2025/26 (FY 2026, herein referred to as the “Test Year”) are provided in Tables 1 and 2, respectively. The existing rates are provided in Tables 3 and 4, respectively.

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Table 1 – Proposed Bi-Monthly Water Rates
Table 2 – Proposed Bi-Monthly Sewer Rates
Bi-Monthly Fixed Service Charge:
5/8 Inch $ 62.10
3/4 Inch $ 62.10

1.0 Inch $ 62.10

1.5 Inch $ 257.99

2.0 Inch $ 404.90

3.0 Inch $ 747.71

4.0 Inch $ 1,237.43

6.0 Inch $ 2,461.74

8.0 Inch $ 3,930.91

10.0 Inch $ 5,644.94
Bi-Monthly Fire Flow Fixed Service Charge:
5/8 Inch $ 16.15
3/4 Inch $ 16.15

1.0 Inch $ 16.15

1.5 Inch $ 28.25

2.0 Inch $ 37.33

3.0 Inch $ 58.51

4.0 Inch $ 88.76

6.0 Inch $ 164.39

8.0 Inch $ 255.16

10.0 Inch $ 361.05

12.0 Inch $ 663.58
Volumetric Rates Per 100 Cubic Feet:

All Flow $ 3.99
Description Rate
Description Rate
Volumetric Rates Per 100 Cubic Feet [1]:

All Flow $ 0.88
Notes:
[1] The City provides collection only services, all customers pay the same rate per 100 cubic feet of billed water flow. Page 319 of 384 6 | P a g e
Section 2 – Revenue Sufficiency Analysis

2.1 Financial Planning Principles
While the individual rates for each of the utility systems vary based on a variety of factors, rates should be consistent with common rate-making principles within the utility industry. The guiding principle is that rates designed for any utility should provide a reasonable balance between several key factors. In general, the utility rates should:
• Generate a stable revenue stream that, when combined with other sources of funds, is sufficient to meet the expenditure requirements and goals of the system; • Be based upon the proportionate cost of providing the service and not exceed the cost of providing the service – in compliance with California Proposition 218; • Be equitable – that is, they should generate revenue from customer classes in a manner which is reasonably in proportion to the cost of providing service to that customer class;
• Be easy to understand by customers; and
• Be easy to administer by the utility.

Striking the appropriate balance between the principles of ratemaking is the result of a detailed process of evaluation of revenue requirements and cost-of-service, and how those translate into the rate design alternatives which meet legal requirements and the specific objectives of the utility under the circumstances in which it operates.

2.2 Existing Rates
The City has established user rates for water and sewer service that are applied to retail customers of the system. The rates charged for water and sewer services are approved by the City Council and are not subject to administrative review or approval by any other local or state agency. The City has historically adjusted rates, as necessary, to provide for recovery of financial obligations including operating expenses, debt service, capital expenditures and any other expenses and transfers.

The existing water rates consist of 1) a bi-monthly service charge that designates the minimum amount a customer will pay regardless of their water usage, and 2) a uniform volumetric rate per 100 cubic feet. The bi-monthly fixed charge varies based on the size of the metered connection. The volumetric rates are uniform such that the rate per 100 cubic feet remains the same for all levels of metered usage. The existing rates for water service are provided in Table 3.

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Table 3 – Existing Bi-Monthly Water Rates
The existing sewer rates consist of a uniform volumetric rate component per 100 cubic feet that recovers the costs of collecting and conveying wastewater. The volumetric rate per 100 cubic feet applies to all customers based upon the amount of metered water usage. The existing rates for sewer service are provided in Table 4.

Bi-Monthly Fixed Service Charge:
5/8 Inch $ 54.52
3/4 Inch $ 54.52

1.0 Inch $ 54.52

1.5 Inch $ 224.40

2.0 Inch $ 351.82

3.0 Inch $ 649.10

4.0 Inch $ 1,073.80

6.0 Inch $ 2,135.58

8.0 Inch $ 3,409.68

10.0 Inch $ 4,896.14
Bi-Monthly Fire Flow Fixed Service Charge:
5/8 Inch $ 13.94
3/4 Inch $ 13.94

1.0 Inch $ 13.94

1.5 Inch $ 21.46

2.0 Inch $ 27.08

3.0 Inch $ 40.24

4.0 Inch $ 59.02

6.0 Inch $ 105.98

8.0 Inch $ 162.32

10.0 Inch $ 228.06

12.0 Inch $ 415.90
Volumetric Rates Per 100 Cubic Feet:

All Flow $ 3.47
Description Rate

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Table 4 – Existing Bi-Monthly Sewer Rates

2.3 Revenue Sufficiency Process
In evaluating whether the existing rates will generate sufficient revenue to meet the expenditure requirements of the water and sewer systems, the annual expenditures required for each utility (herein referred to as the “Revenue Requirements”) were developed. The Revenue Sufficiency Analysis compares the forecasted revenues for each utility system under existing rates (including customer growth) to the projected Revenue Requirements.

2.3.1 Budget
The Revenue Sufficiency Analysis performed as part of this study and summarized in this Report utilizes the City’s Adopted Budget for FY 25/26 (the “Budget” for FY ending June 30, 2026) as one variable to determine the gross Revenue Requirement to be recovered from user rates over the Projection Period. The Budget, as prepared by the City, is provided on a line-item basis, and is used for projecting the budgeted financial needs for the Test Year and the remainder of the Projection Period. In developing the rate analysis, certain adjustments are made such that expenditures are categorized into either Operating and Maintenance (O&M) expenses or non-operating expenses. In addition, only recurring costs included in the current Budget were included as part of the Revenue Sufficiency Analysis for the entirety of the Projection Period.

One-time costs were identified and evaluated in discussions with City Staff and removed if appropriate. Recurring annual costs were escalated using suitable indexes or escalation factors, again in discussion with City Staff. The O&M expenses are primarily those ongoing costs for labor, materials, chemicals, electricity, supplies, services, etc., required to manage and operate the utility system on a day-to-day basis while maintaining a dependable level of service. The O&M requirements are generally a function of a budgetary process and are directly related to the level of service provided to customers of the utility system. The nonoperating expenses include such items as capital outlay and any other expenses & transfers.

Description Rate
Volumetric Rates Per 100 Cubic Feet [1]:

All Flow $ 0.85
Notes:
[1] The City provides collection only services, all customers pay the same rate per 100 cubic feet of billed water flow. Page 322 of 384 9 | P a g e
The Budget also identifies estimated revenues to be derived from sources other than the retail water and sewer user rates. Such other revenue sources include interest earnings on investments, meter sales, the fats, oils and grease (FOG) program, and various other miscellaneous service charges. The revenues generated from the other sources are applied to the gross Revenue Requirements to reduce the amount of revenue required from user rates. The result is the net Revenue Requirement.

2.3.2 Capital Improvement Plan (CIP)
The City provided a list of anticipated capital projects to be funded over the Projection Period. These are also included in the development of the gross Revenue Requirements. The capital projects provided by and identified by the City in the CIP are required to modernize and upgrade the system to maintain uninterrupted service to customers by investing in improvements, repairs, or replacements of aging system components as they wear over time.

The CIP also includes projects necessary to maintain compliance with State mandated standards for water quality. The City provided cost estimates for the identified capital projects by the fiscal year in which they are estimated to be undertaken for each system.

The funding for these capital projects was then used in the analysis, along with O&M and non-operating expenses, to determine the gross Revenue Requirements for both the water and sewer systems.

While the Projection Period provided herein is 5 years, City staff requested the extension of the financial plan out to ten (10) years. This was done to provide additional long-term insight, since the City is anticipating the addition of a new $10,000,000 well (The Walker Well Project) to the water system in FY 2035, and that project is anticipated to be paid for with capital cash reserves. To properly prepare for funding the new well in FY 2035, the rate adjustments proposed herein factor in the accumulation and maintenance of sufficient reserve funds to fund the Walker Well project.

Taking this proactive approach will help to better prepare the City to mitigate future rate increases and reduce the likelihood and magnitude of potential rate shock to customers beyond the initial five-year Projection Period, while ensuring the water system remains in a strong financial position. The capital projects included in the 10-year CIP (represented in $1,000s), along with the assumed funding sources by fiscal year are provided in Tables 5 and 6.

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Table 5 – Water CIP ($1,000s)
Table 6 – Sewer CIP ($1,000s)

2.3.3 Debt Service
The City currently has no outstanding debt associated with either the water or sewer utility system. Based on discussions with the City, there are also no anticipated future debt issuances expected to occur over the Projection Period. Therefore, no annual debt service payments or debt service ratio calculations are included in the analysis and Projection Period.
2026 2027 2028 2029 2030 2031 2032 2033 2034 2035
Water projects
ONGOING SCADA IMPROVEMENTS Cash $ 28 $ 29 $ 31 $ 32 $ 34 $ 35 $ 37 $ 39 $ 41 $ 43 CITY YARD RESERVOIR REHAB Cash - - 386 - - - - - - -
CITY YARD WELL PUMP & MOTOR REPLACEMENT Cash - - - - 486 - - - - 621 CITY YARD & WALKER WELL RESERVOIR COATING Cash - - 187 - - - - - - - CITY YARD WELL PUMP SUCTION PROJECT Cash - 315 - - - - - - - - CITY YARD WELL SAND REMOVAL DEVICE Cash 100 - - - - - - - - - CITY YARD BOOSTER STATION METER VAULT REPAIR Cash 100 - - - - - - - - - CITY YARD BOOSTER STATION VFD UPGRADES Cash 75 - - - - - - - - - WALKER WELL PUMP & MOTOR REPLACEMENT Cash - - 331 - - - - 422 - - WALKER RESRVOIR COATING Cash - 89 - - - - - - - -
WALKER WELL RESERVOIR REHABILITATION Cash - 263 - - - - - - - - WALKER WELL BOOSTER STATION VFD UPGRADES Cash - - 110 - - - - - - - WALKER WELL REPLACEMENT Cash - - - - - - - - - 10,000
CITY YARD PAVEMENT Cash - 236 - - - - - - - -
CITY YARD STORAGE BUNKER W/ROOF Cash 27 - - - - - - - - - CITY YARD STORM DRAINS Cash - 105 - - - - - - - -
CITY YARD BUILDING PAINTING Cash - - 94 - - - - - - -
CITY YARD STALL Cash 70 - - - - - - - - -
CITY YARD ROOF REPAIRS Cash 75 - - - - - - - - -
WATER VALVES & SEWER MANHOLES Cash 20 21 22 23 24 26 27 28 30 31 RESERVOIR MIXERS Cash - - - 150 - - - - - -
WATER MASTER PLAN Cash 125 - - - - 160 - - - -
URBAN WATER MASTER PLAN Cash 55 - - - - 77 - - - -
WATER RATE STUDY Cash 50 - - - - 128 - - - -
WATER BILLING FEASIBILITY Cash - - - - - - - - 103 -
WATER SYSTEM INVENTORY & VALUATION Cash - 42 - - - 57 - - - - WATER LOSS AUDIT Cash 35 37 39 41 43 45 47 49 52 54
WATER TREATMENT PRELIM DESIGN & ENGINEERING Cash - - - 695 608 - - - - - OC 54 CONNECTION REHABILITATION Cash - - - 35 - - - - - - EMERGENCY WATER INTERCONNECT Cash - 158 - - - - - - - - LARGE METER REPLACEMENT Cash - - - 58 - - - - - -
SECURITY CAMERAS & ACCESS CONTROL Cash - - 138 - - - - - - - WATER METER AMR/AMI Cash 120 105 110 - - - - - - -
Total Water projects $ 880 $1,399 $1,447 $1,033 $1,194 $ 527 $ 111 $ 538 $ 226 $10,749 Description Funding
Source
Fiscal Year Ending June 30
2026 2027 2028 2029 2030 2031 2032 2033 2034 2035
Sewer projects
SEWER DEFICIENCY REPAIRS Cash $ 180 $ 191 $ 202 $ 214 $ 227 $ 241 $ 255 $ 271 $ 287 $ 304 WATER VALVES & SEWER MANHOLES Cash 80 85 90 95 101 107 113 120 128 135 GREASE & ENCRUSTATION REMOVAL Cash 124 131 139 147 156 166 176 186 198 209 SEWER SYSTEM EVALUATION, CCTV, & ANALYSIS Cash 60 63 66 69 73 77 80 84 89 93 CITY YARD STORM DRAINS Cash 40 - - - - - - - - -
SEWER SYSTEM INVENTORY & VALUATION Cash 30 - - - - 38 - - - - Total Sewer projects $ 513 $ 470 $ 497 $ 526 $ 557 $ 629 $ 625 $ 662 $ 701 $ 742 Description Funding
Source
Fiscal Year Ending June 30

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2.3.4 Gross and Net Revenue Requirement
The proposed water and sewer rates developed in the Report are designed for assumed implementation in FY 2025/26 (the Test Year as previously defined). The projected Test Year gross and net Revenue Requirements are estimated by utilizing the Budget, capital estimates and assumed funding sources for capital projects as provided by the City, along with anticipated transfers to reserves for funding capital projects. The Test Year Revenue Requirements that are used for developing the user rates proposed herein are detailed in Appendix A at the end of this report and summarized in Table 7.

Table 7 – Test Year Revenue Requirements – FY 2026
The projected Revenue Requirements for the water and sewer systems over the entire Projection Period are provided in Tables 8 and 9.

Table 8 – Water Revenue Requirements for the Projection Period Table 9 – Sewer Revenue Requirements for the Projection Period Description Water Wastewater Total
Total O&M $ 4,022,956 $ 398,128 $ 4,421,084
Debt Service - - -
Other Expenditures & Transfers 599,889 222,431 822,320
Gross Revenue Requirement $4,622,845 $ 620,559 $5,243,404 Less Other Revenues (41,100) (51,600) (92,700)
Net Revenue Requirement $4,581,745 $ 568,959 $5,150,704 2026 2027 2028 2029 2030
Total O&M $ 4,022,956 $ 4,269,395 $ 4,534,779 $ 4,820,770 $ 5,129,197 Existing Debt Service - - - - -
Future Debt Service - - - - -
Other Expenditures & Transfers 599,889 926,164 1,519,860 1,835,223 2,041,024 Gross Revenue Requirement $4,622,845 $5,195,559 $6,054,639 $6,655,993 $7,170,221 Less Other Revenues (41,100) (41,100) (41,100) (41,100) (41,100) Net Revenue Requirement $4,581,745 $5,154,459 $6,013,539 $6,614,893 $7,129,121 Fiscal Year Ending June 30 Description 2026 2027 2028 2029 2030 Total O&M $ 398,128 $ 412,365 $ 427,145 $ 442,491 $ 458,423 Existing Debt Service - - - - -
Future Debt Service - - - - -
Other Expenditures & Transfers 222,431 228,108 254,549 283,309 314,571 Gross Revenue Requirement $ 620,559 $ 640,473 $ 681,694 $ 725,800 $ 772,994 Less Other Revenues (51,600) (51,600) (51,600) (51,600) (51,600) Net Revenue Requirement $ 568,959 $ 588,873 $ 630,094 $ 674,200 $ 721,394 Description Fiscal Year Ending June 30

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2.4 Customers & Billable Flows
The rate study is heavily reliant upon a detailed analysis of system customers and accompanying usage and demand characteristics. The existing utility customer base and metered/billable flows provide the determinants utilized in the cost-of-service analysis, and ultimately in calculating the bi-monthly user rates and charges, which become the foundation for projecting future revenues generated by the water and sewer systems.

It is important to note that the customer and flow analysis focuses primarily on the customer classifications that will be subject to and impacted by the user rates and charges to be developed in the Report. This consists of the general service (retail) customers that currently pay for utility services pursuant to the existing user rates and charges as previously detailed.

For the purposes of the rate study, it is these customers and their accompanying usage characteristics that will generate revenues based upon the proposed user rates and charges.

2.4.1 Customer Billing Analysis
For the rate study, detailed bi-monthly billing information was provided for each customer.

This data offered a breakdown of water and sewer customers by class, usage characteristics and billed charges. The historical billing data was queried from the City’s electronic billing records. An analysis of the billing data was conducted to obtain an understanding of existing customers, customer classes, demand and usage characteristics, and metered usage per customer class. In accordance with the data, as well as discussions with the City staff, the utility system provides service to various identifiable retail customer classes consisting of:
• Residential
• Irrigation
• Fire Service, and
• Non-Residential
Each of these customer classes embodies certain common characteristics in their utility use and service demand profiles that provide the basis for establishing an equitable allocation of system costs. The billing data was utilized to identify the number of customer accounts within each class, the applicable equivalent residential units (ERUs), and the metered/billable water and sewer usage profiles.

The historical customer data was also utilized, along with other City planning data and discussions with City staff, to establish growth trends for each customer classification. The growth trends were then used to project the average number of customers within each class for the Test Year plus the remaining years of the Projection Period.

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2.5 Financial Projections Under Existing Rates
The projected customers and accompanying billable flows were applied to the existing rates to develop a projection of user revenues that would be generated under existing rates. The revenues were then compared to the projected revenue requirements/expenditures to determine if revenue adjustments would be needed to meet the calculated Revenue Requirements shown in Tables 7, 8 and 9.

Based on this comparison, it is projected that under the existing rates, only the water system would not meet its collective projected O&M financial obligations and cost of capital projects that are anticipated to be funded with cash reserves. While the sewer system is projected to be able to meet its collective O&M financial obligations over the Projection Period under existing rates, it is anticipated that without revenue increases, the system would not have sufficient cash reserves to fund capital projects beyond the Projection Period.

Therefore, revenue increases are required to generate additional cash to fund projected costs of operations, capital projects, and maintain adequate cash reserves. In addition, the City has an established policy objective of maintaining at least 90 days of operating cash reserves to help fund ongoing operations in the event of periodic fluctuations in cash flow, and to address unexpected needs that may require cash funding. The cash-flow statements outlining the projected operating results under existing rates are summarized in Tables 10 and 11 for the water and sewer systems, respectively. The proposed rates and projected financial results are addressed in the subsequent sections of this Report.

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Table 10 – Water System Projected Operating Results Under Existing Rates ($1,000s) Existing
2026 2027 2028 2029 2030
Revenues:

Water Sales $ 3,984 $ 3,984 $ 3,984 $ 3,984 $ 3,984
Other Revenues 41 41 41 41 41
Total Revenues $ 4,025 $ 4,025 $ 4,025 $ 4,025 $ 4,025
O&M Expenses (4,023) (4,269) (4,535) (4,821) (5,129)
Net Income For Debt $ 2 $ (244) $ (510) $ (796) $ (1,104) Debt Service:

Existing $ - $ - $ - $ - $ -
Future - - - - -
Total Debt Service $ - $ - $ - $ - $ -
Net Results $ 2 $ (244) $ (510) $ (796) $ (1,104)
Fund Balance Activity:

Operating Fund
Beginning Balance $ 112 $ 115 $ (130) $ (639) $ (1,435) Deposit/(Withdrawal) from Operations 2 (244) (510) (796) (1,104) Deposit/(Withdrawal) from/(to) Capital Fund - - - - -
Total Operating Fund Balance $ 115 $ (130) $ (639) $ (1,435) $ (2,539) Operating Days Cash on Hand 10 (11) (51) (109) (181)
Capital Fund
Beginning Balance $ 2,809 $ 1,929 $ 530 $ (917) $ (1,951) Net Transfers In/(Out) From Operating Fund - - - - -
Cash Funded Capital Projects (880) (1,399) (1,447) (1,033) (1,194) Total Capital Fund Balance $ 1,929 $ 530 $ (917) $ (1,951) $ (3,145) Ending Fund Balance $ 2,044 $ 400 $ (1,556) $ (3,385) $ (5,684) Debt Coverage N/A N/A N/A N/A N/A
Description
Projected for Fiscal Year Ending June 30 ($1,000s)

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Table 11 – Sewer System Projected Operating Results Under Existing Rates ($1,000s) Existing
2026 2027 2028 2029 2030
Revenues:

Wastewater Sales $ 550 $ 550 $ 550 $ 550 $ 550
Other Revenues 52 52 52 52 52
Total Revenues $ 601 $ 601 $ 601 $ 601 $ 601
O&M Expenses (398) (412) (427) (442) (458)
Net Income For Debt $ 203 $ 189 $ 174 $ 159 $ 143
Debt Service:

Existing $ - $ - $ - $ - $ -
Future - - - - -
Total Debt Service $ - $ - $ - $ - $ -
Net Results $ 203 $ 189 $ 174 $ 159 $ 143
Fund Balance Activity:

Operating Fund
Beginning Balance $ 2,243 $ 98 $ 102 $ 105 $ 109
Deposit/(Withdrawal) from Operations 203 189 174 159 143 Deposit/(Withdrawal) from/(to) Capital Fund (2,348) (185) (171) (155) (139) Total Operating Fund Balance $ 98 $ 102 $ 105 $ 109 $ 113 Operating Days Cash on Hand 90 90 90 90 90
Capital Fund
Beginning Balance $ 2,366 $ 4,201 $ 3,917 $ 3,590 $ 3,219 Net Transfers In/(Out) From Operating Fund 2,348 185 171 155 139 Cash Funded Capital Projects (513) (470) (497) (526) (557) Total Capital Fund Balance $ 4,201 $ 3,917 $ 3,590 $ 3,219 $ 2,801 Ending Fund Balance $ 4,299 $ 4,019 $ 3,696 $ 3,328 $ 2,914 Debt Coverage N/A N/A N/A N/A N/A
Description
Projected for Fiscal Year Ending June 30 ($1,000s)

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Section 3 – Cost-of-Service (COS) Analysis

3.1 General
The costs incurred by a utility system are generally driven by specific service requirements placed on the system by its customers. For water systems, the primary service requirements that drive costs include annual flow volumes, peak period flow volumes (i.e., peak day, and peak hour), the number and the types of customers served.

For sewer systems, the primary service requirements that drive costs include annual sewer volumes, sewer strength factors such as Biochemical Oxygen Demand (BOD) and Total Suspended Solids (TSS), and the number and types of customers served.

There are several different options that can be used to perform a COS analysis, and the allocation methodology depends upon the basis applied. The water COS analysis performed for this rate study utilizes a common industry approach known as the base-extra capacity method. The sewer COS analysis involves an examination of the annual sewer volumes since the City only provides wastewater collection services. Wastewater collected through City-owned facilities is conveyed to OCSD’s treatment and reclamation facility for treatment and disposal. OCSD charges the City’s customers separately for the wastewater treatment services they provide.

3.2 Water Cost-of-Service
The COS utilizes the Revenue Requirements for the Test Year as a cost basis. The Test Year Revenue Requirements, as identified in the previous section of the Report, are functionally unbundled, classified and allocated to customer classes to determine the proportionate COS by class. More detail relating to the water COS approach can be found in Appendix B.

3.2.1 Peaking Factors
System-wide peaking factors are used to derive the cost component allocation bases for Base Delivery and Max Day costs. Base Delivery represents average daily demand during the year, which has been normalized to a factor of 1.00. Based on data provided by City staff, the average water demand was 2.30 million gallons per day (MGD) and the Max Day water demand was 3.91 MGD in the most recent full year. The calculated Max Day peaking factor shows that the system-wide Max Day demand is 1.70 (3.91 Max Day MGD divided by

2.30 Base Delivery) times greater than the average daily demand. The system-wide peaking factors are shown in Table 12.

The Max Day allocations are calculated as follows:

Base Delivery: 2.30/ 3.91 x 100% = 58.82%
Max Day: (3.91-2.30) / 3.91 x 100% = 41.18%

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Table 12 – Peaking Factors System-Wide
Max Day customer-specific peaking factors were then developed, based on the maximum bi-monthly usage divided by average bi-monthly usage for each customer class. Since daily peaking statistics are not available for individual customer classes, the maximum bi-monthly peaking factor from the customer/billing data is used as a proxy for the Max Day peaking factors. Using the customer billing data, peaking factors by customer class were calculated as shown in Table 13.

Table 13 – Peaking Factors by Customer Class
Once peaking factors were determined, the Max Day demand of each customer class was calculated and is shown in Table 14. Total annual usage is derived from the customer data and then converted to an average daily usage by dividing the total annual usage by 365 days in a year. Total Max Day capacity is developed by multiplying the customer-specific peaking factor (from Table 13) by the average daily usage to arrive at the total capacity required to meet each class’s Max Day demand. The extra capacity required to meet Max Day demand is calculated by subtracting the average daily usage from the total required capacity for Max Day. The calculation of additional capacity to meet the Max Day demand for each customer class is shown is shown in Table 14.

Description Demand
(MGD) Factor Base Max Day Total
Avg Day 2.30 1.00 100.00% 0.00% 100.00%
Max Day 3.91 1.70 58.82% 41.18% 100.00%
Description
Max Day
Peaking
Factor
All Customers Excluding Fire Service
All Flow 1.13
Fire Service
All Flow 0.00 Page 331 of 384
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Table 14 – Usage and Extra Capacity

3.2.2 Functional Unbundling of Revenue Requirements
The water system costs are unbundled into functional operating components consisting of Supply/Treatment, Transmission, Distribution, Customer, and Administration functions. These are the primary functions undertaken by most water utility systems to provide end-user service their customers. A brief description of each component is as follows:
• Supply/Treatment – the costs associated with obtaining and converting raw water to potable water;
• Transmission – the costs associated with major pumping and large diameter line facilities that transmit potable water throughout the system at-large; • Distribution – the costs associated with smaller diameter lines that carry water to individual customer properties;
• Customer – the costs associated with metering, billing, and providing other services to customers (e.g., printing, delivering and collecting utility bills, recordkeeping, etc.); • Administration – various overhead and other non-operating costs.

The allocation of the functionally unbundled revenue requirements for the Test Year are summarized in Table 15.

Total
Annual
Flow (CCF)
Average
Daily Flow
(CCF)
Peaking
Factor
Total
Capacity
(CCF/Day)
Additional
Capacity
(CCF/Day)
All Customers Excluding Fire Service
All Flow 657,528 1,801.45 1.13 2,041.89 240.45
Fire Service
All Flow - - - - -
Total 657,528 1,801.45 2,041.89 240.45
Description
Flow Max Day

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Table 15 – Functionally Unbundled Cost Allocations

3.2.3 Classification of Water System Costs
As previously addressed, the functionally unbundled water system Revenue Requirements are then classified using the base-extra capacity cost allocation method. Applying this methodology, costs are classified into the following categories:
• Base Costs – capital costs and O&M expenses associated with service to customers under average demand conditions. This category does not include any costs attributable to variations in water use resulting from peaks in demand. Base costs tend to vary directly with the total quantity of water used. • Maximum Day/Extra Capacity Costs – costs attributable to facilities that are designed to meet peaking requirements. These costs include capital and operating costs for additional plant and system capacity beyond that required for average usage.

Description Test Year
2026
Total O&M $ 4,022,956
Existing Debt Service -
Future Debt Service -
Other Expenditures & Transfers 599,889
Gross Revenue Requirement $ 4,622,845
Less Other Revenues (41,100)
Net Revenue Requirement $ 4,581,745
Functional Unbundled Revenue Requirement
Treatment $ 302,150
Transmission & Distribution 415,700
Pumping 1,440,800
Customer Service 2,000
Administration 1,742,306
Source of Supply 120,000
Existing Bond DS -
New Bond DS -
CIP 879,600
Non-Rate Revenue (41,100)
Fund Balance [1] (279,711)
Total $ 4,581,745
Notes:
[1] Represents a transfer from reserves to provide
funding for capital outlay and CIP costs. Page 333 of 384 20 | P a g e
• Meter Costs - costs associated with meter maintenance, meter service, and other meter maintenance and operation-related costs.
• Customer Costs – costs associated with any aspect of customer service such as billing, collection, accounting, and recordkeeping. These costs are independent of the amount of water used and the size of the customer’s meter and are not subject to peak demand factors.

As the name would indicate, using the base-extra capacity method, the costs are separated between those attributed to providing base capacity (and demand) and those attributed to extra capacity (and demand). Components such as treatment, transmission, and distribution are allocated based on flows and peaking factors. Administrative and customerrelated costs are allocated based on ERUs.

Based on discussions with City staff, the general makeup of the customer base is not expected to change, so it is anticipated that the allocation percentages and factors will not change materially during the Projection Period. However, it is important to note that COS analyses are based on the data at a specific point in time (i.e., the most recent fiscal year).

To the extent that weather conditions, economic conditions and customer usage characteristics change during the Projection Period, the cost allocators can be impacted.

The system-wide costs by service characteristics are shown in Table 16.

Table 16 - Classification of Unbundled Revenue Requirements Component Billing &
Collection
Meters &
Services Base
Extra
Capacity
Max Day
Fire
Protection Total
Treatment $ - $ - $ 177,735 $ 124,415 $ - $ 302,150
Transmission & Distribution - - 244,529 171,171 - 415,700 Pumping - - 847,529 593,271 - 1,440,800
Customer Service 423 1,500 - - 77 2,000
Administration 368,585 1,306,730 - - 66,991 1,742,306
Source of Supply - - 120,000 - - 120,000
Existing Bond DS - - - - - -
New Bond DS - - - - - -
CIP - 353,731 525,869 - - 879,600
Non-Rate Rev & Fund Balance (24,147) (108,755) (125,356) (58,165) (4,388) (320,811) Total $ 344,861 $ 1,553,206 $ 1,790,306 $ 830,692 $ 62,680 $ 4,581,745 Page 334 of 384 21 | P a g e

3.2.4 Allocation to Customer Classes and Unit Cost
Development
The functionalized and classified Revenue Requirements are allocated to customer classes utilizing a unit cost approach as follows:
• Base Costs – Based on relative percentage of Base Annual Usage. • Maximum Day/Extra Capacity System Costs – Based on relative percentage of Extra Capacity for the entire system.
• Maximum Day/Extra Capacity Distribution Costs – Based on relative percentage of Extra Capacity for the distribution system. • System Operating/Demand Costs and Meter Maintenance – Based on the relative percentage of ERUs the system serves through the varying capacity of different water meter sizes. These are costs representing the potential demand that a respective customer class can place on the water system due to the capacity of their assigned water meters, relative to other sized meters.
• Customer Costs – Based on the relative percentage of customers being served.

The units of service for each component of cost by customer class (if applicable) are provided in Table 17. The units of service consist of the number of accounts, ERUs (the total customer accounts being served and the calculation of system ERUs based on a factor of meter-size is provided in Table 21), annual flows in 100 cubic feet (CCF), and Max Day extra capacity in CCF/Day. Accounts are based on the number of customers as provided in the customer data. ERUs are based on the number of meter equivalencies being served in accordance with AWWA standards. For reference, Table 20, showing meter equivalency factors, follows in the next section (3.2.5) of this Report. Base Delivery is the total annual usage projected for the test year based on an analysis of historical customer data. Max Day is the extra capacity demand result as previously developed in Table 14.

Table 17 – Units of Service
Description Accounts ERUs Base (CCF) Max Day
(CCF/Day)
All Customers Excluding Fire Service 4,320 5,286 657,528 240 All Flow 657,528 240
Fire Service 59 3,453 - -
All Flow - -
Total 4,379 8,739 657,528 240 Page 335 of 384
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The Revenue Requirement for each cost component is divided by its respective unit of service to calculate a unit cost. The unit cost for each cost component is demonstrated in Table 18.

Table 18 – Cost Per Unit
The allocation of the Revenue Requirement to each customer class is determined by multiplying the units of service for each customer class (from Table 17) by the cost per unit for each cost component (from Table 18). The resulting total cost to be recovered from each customer class by cost component is shown in Table 19. To calculate the account and ERU COS by Customer Class, the bi-monthly Units of Service from Table 17 are multiplied by six (6), representing the number of billing periods, to determine the total annual ERUs being served, then that result is multiplied by the Cost per Unit shown in Table 18. For the Base Delivery and Max Day Costs, the Units of Service from Table 17 are multiplied by the Costs per Unit from Table 18.

Table 19 – Cost of Service by Customer Class and Cost Component Description Billing &
Collection
Meters &
Services Base
Extra
Capacity
Max Day
Fire
Protection Total
Total Revenue Requirement $ 344,861 $ 1,553,206 $ 1,790,306 $ 830,692 $ 62,680 $ 4,581,745 Units of Service 4,379 5,286 657,528 240 3,453
Bills/BiMonthly ERU/BiMonthly CCF CCF/Day ERUs/BiMonthly Cost Per Unit $ 13.13 $ 48.9723 $ 2.72 $ 3,454.7935 $ 3.03 Bills/BiMonthly ERU/BiMonthly CCF CCF/Day ERU
Description Accounts ERUs Base (CCF) Max Day
(CCF/Day) Total Costs
All Customers Excluding Fire Service $ 340,215 $1,553,206 $1,790,306 $ 830,692 $4,514,419 All Flow $ 1,790,306 $ 830,692
Fire Service $ 4,646 $ 62,680 $ - $ - $ 67,326
All Flow $ - $ -
Total $ 344,861 $ 1,615,886 $ 1,790,306 $ 830,692 $ 4,581,745 Page 336 of 384 23 | P a g e

3.2.5 Rate Design by Unit Cost
The unit costs developed in the previous section are used to develop the proposed rates for the Test Year. The fixed rate components are based on accounts, ERUs and the allocated customer-related costs. The volumetric rate component is based on the annual usage and extra capacity requirements (Max Day).

The first component of the fixed meter charge is calculated on an ERU basis. It is common practice in the utility rate-making industry to establish a rate structure that includes an incremental service availability charge (i.e., meter charge, sometimes also called a fixed charge) such that customers placing a greater potential demand requirement on the system (those with larger meters) will pay proportionately more for the service availability component.

The methodology for increasing the service availability charge is based upon standardized meter/capacity criteria established by the AWWA relative to the size and capacity of water meters. The AWWA equivalent meter capacity criteria are commonly used to establish a standard unit of measure for customers, referred to as an ERU. Based upon established standards, an ERU is equivalent to one single-family residential connection with a 5/8-inch water meter (the typical standard meter size for a single-family residential customer in the City of La Palma). The applicable ERU factors for larger water meters are based upon the incremental increase in potential hydraulic capacity of those meters as compared to the standard meter size. These factors are derived from actual flow testing results as performed and defined by the AWWA and commonly utilized by the water and sewer utility industry.

The AWWA equivalency factors can be applied to the meter charge for a 5/8-inch meter to calculate the applicable meter charges for each meter size.

While the service availability charge (fixed charge) may be incremented based upon standardized meter/capacity criteria established by the AWWA relative to the size and capacity of the water meter, this methodology was modified for customers whose meter size is 1-inch or smaller. Due to California Code section R313.2, automatic fire sprinkler systems that can produce a minimum of 30 gallons per minute (gpm) are required for new construction. Based on meter tests, 5/8-inch and 5/8x3/4-inch meters are only rated for approximately 20-25 gpm. Also, several manufacturers who produce 3/4-inch meters have indicated that those meters cannot meet the 30-gpm requirement. Therefore, 1-inch meters are now the new standard meter being installed since these meters can meet the 30-gpm requirement under California Code section R313.2. Since a 1-inch meter is required to meet the state requirement of 30 gpm for instantaneous fire suppression purposes, and not because a 1-inch customer is necessarily placing more regular or recurring demand on the water system, relative to a 5/8-inch or 3/4-inch meter customer, these 1-inch customers are assumed to place the same demand on the water system as a 5/8-inch or 3/4-inch customer.

As such, both the 3/4-inch and 1-inch meters are normalized with a factor of 1.00 as shown in Table 20. A full summary of the AWWA and City meter-size equivalency factors, and how they are determined, is provided in Table 20.

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Table 20 - AWWA Meter Equivalency Factors
Table 21 provides an illustration of how the meter-size equivalency factors are applied to the total customer accounts by meter-size to determine the total ERUs that the water system serves.

Description AWWA
Factors [1]
City Factors
[2]
Meter Size
5/8 Inch 1.00 1.00
3/4 Inch 1.50 1.00

1.0 Inch 2.50 1.00

1.5 Inch 5.00 5.00

2.0 Inch 8.00 8.00

3.0 Inch 15.00 15.00

4.0 Inch 25.00 25.00

6.0 Inch 50.00 50.00

8.0 Inch 80.00 80.00

10.0 Inch 115.00 115.00

12.0 Inch 215.00 215.00
Notes:
[1] Meter-size equivalency factors established by the AWWA and identified in AWWA Standards C700, M1 and M22.
[2] Due to the fire suppression requirements under California Code section R313.2, it is assumed that 3/4-inch and 1-inch customers place the same demand on the system as a 5/8-inch meter. Page 338 of 384 25 | P a g e
Table 21 – Total Bi-Monthly Accounts & ERUs
The second component of the fixed charge is the customer charge. Unlike meter-related costs, customer costs do not vary based on meter size. Therefore, the customer unit cost of $13.13 is applied equally to each customer account. The two bi-monthly fixed charge components are added together to develop the proposed total bi-monthly fixed charge for each respective meter size. The proposed bi-monthly fixed charges for the Test Year are shown in Table 22.

Meter
Factor
Total
Accounts
Total
Equivalent
Residential
Units
[A] [B] [C]=[A]*[B]
All Customers Excluding Fire Service
5/8 Inch 1.00 4,137 4,137
3/4 Inch 1.00 8 8

1.0 Inch 1.00 42 42

1.5 Inch 5.00 35 175

2.0 Inch 8.00 83 664

3.0 Inch 15.00 14 210

4.0 Inch 25.00 - -

6.0 Inch 50.00 1 50

8.0 Inch 80.00 - -

10.0 Inch 115.00 - -

12.0 Inch 215.00 - -
All Customers Excluding Fire Service Total 4,320 5,286
Fire Service
5/8 Inch 1.00 - -
3/4 Inch 1.00 - -

1.0 Inch 1.00 1 1

1.5 Inch 5.00 - -

2.0 Inch 8.00 9 72

3.0 Inch 15.00 8 120

4.0 Inch 25.00 - -

6.0 Inch 50.00 19 950

8.0 Inch 80.00 12 960

10.0 Inch 115.00 8 920

12.0 Inch 215.00 2 430
Fire Service Total 59 3,453
Water System Customer Total 4,379 8,739
Meter Size

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Table 22 – Bi-Monthly Fixed Charge Calculation
The water volumetric rates are made up of two different rate components. The first component is for base usage and related costs. The second component represents peak usage and peaking costs, the Max Day cost component. The total system Max Day peak demand costs (from Table 19) are divided by the total system annual usage to calculate the peaking unit costs shown in Table 23.

Meter Size [1] Capacity
Ratio
Meter
Charge
Customer
Charge
Proposed
Fixed Charge
All Customers Excluding Fire Service
5/8 Inch 1.00 $ 48.97 $ 13.13 $ 62.10
3/4 Inch 1.00 $ 48.97 $ 13.13 $ 62.10

1.0 Inch 1.00 $ 48.97 $ 13.13 $ 62.10

1.5 Inch 5.00 $ 244.86 $ 13.13 $ 257.99

2.0 Inch 8.00 $ 391.78 $ 13.13 $ 404.90

3.0 Inch 15.00 $ 734.58 $ 13.13 $ 747.71

4.0 Inch 25.00 $ 1,224.31 $ 13.13 $ 1,237.43

6.0 Inch 50.00 $ 2,448.62 $ 13.13 $ 2,461.74

8.0 Inch 80.00 $ 3,917.79 $ 13.13 $ 3,930.91

10.0 Inch 115.00 $ 5,631.82 $ 13.13 $ 5,644.94
Fire Service
5/8 Inch 1.00 $ 3.03 $ 13.13 $ 16.15
3/4 Inch 1.00 $ 3.03 $ 13.13 $ 16.15

1.0 Inch 1.00 $ 3.03 $ 13.13 $ 16.15

1.5 Inch 5.00 $ 15.13 $ 13.13 $ 28.25

2.0 Inch 8.00 $ 24.20 $ 13.13 $ 37.33

3.0 Inch 15.00 $ 45.38 $ 13.13 $ 58.51

4.0 Inch 25.00 $ 75.63 $ 13.13 $ 88.76

6.0 Inch 50.00 $ 151.27 $ 13.13 $ 164.39

8.0 Inch 80.00 $ 242.03 $ 13.13 $ 255.16

10.0 Inch 115.00 $ 347.92 $ 13.13 $ 361.05

12.0 Inch 215.00 $ 650.46 $ 13.13 $ 663.58 Page 340 of 384 27 | P a g e
Table 23 – Peaking Unit Cost Calculation
The total system peaking unit cost of $1.26 is then added to the base unit cost of $2.72 per 100 cubic feet (as previously identified in Table 18) to calculate the proposed volumetric rate per 100 cubic feet as shown in Table 24.

Table 24 – Volumetric Rate Calculation
Peaking
Costs
Annual Use
(CCF)
Peaking Unit
Cost
[A] [B] [C]=[A]/[B]
All Customers Excluding Fire Service
All Flow $ 830,692 657,528 $ 1.26
Fire Service
All Flow $ - - $ -
Total $ 830,692 657,528
Rate Class
Base Peaking Proposed
Rate ($/CCF)
[A] [B] [C]=[A]+[B]
All Customers Excluding Fire Service
All Flow $ 2.72 $ 1.26 $ 3.99
Fire Service [1]
All Flow $ 2.72 $ 1.26 $ 3.99
[1] Since there is no usage or peaking affiliated with "Fire Service" customers, these customers will be billed at the same rate per CCF as all other customers if usage does occur. Fire Service is used on an as needed basis for fire suppression purposes only. Therefore, no usage has been included in this analysis.

Notes:

Rate Class

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3.2.6 Cost-of-Service and Revenue Check
Once the rates are developed from the unit cost analysis, as shown in Sections 3.2.4 and

3.2.5, they are then applied to the customer service units identified in Table 17. The unit cost rates are applied to the customer service units to ensure that the rates calculated under the base-extra capacity method generate revenues from each customer class proportionately and equitably, and in a manner that reflects the relative costs associated with serving them.

The revenues generated by customer class and the cost allocated to each customer class are provided in Table 25.

Table 25 – Proposed Rate Revenues vs COS
Bi-Monthly
Accounts
Bi-Monthly
ERUs
Bi-Monthly
Customer
Charge/
Account
Bi-Monthly
Meter
Charge/ERU
Total Fixed
Charge
Revenues
[A1] [B1] [C1] [D1] [E1]={[A1]*[C1]
+[B1]*[D1]}*6
All Customers Excluding Fire Service
All Flow 4,320 5,286 $ 13.13 $ 48.97 $ 1,893,421
Fire Service
All Flow 59 3,453 $ 13.13 $ 3.03 $ 67,326
Total 4,379 8,739 $ 1,960,747
Annual Use
(CCF)
Proposed
Rate ($/CCF)
Total
Volumetric
Revenues
Total
Revenues
Allocated
Costs
[A2] [B2] [C2]=[A2]*[B2] [D2]=[E1]+[C2] [E2]
All Customers Excluding Fire Service
All Flow 657,528 $ 3.99 $ 2,620,998 $ 4,514,419 $ 4,514,419 Fire Service
All Flow - $ 3.99 $ - $ 67,326 $ 67,326
Total 657,528 $ 2,620,998 $ 4,581,745 $ 4,581,745
Description
Description

29 | P a g e

3.3 Sewer Cost-of-Service
As with the water system, the COS analysis for the sewer utility utilizes the revenue requirements for the Test Year as the cost basis. The Test Year Revenue Requirements are functionally unbundled, classified and allocated to customer classes to determine the COS by class. As stated in Section 3.1, the sewer COS analysis involves an examination of only the sewer volumes since the City only provides wastewater collection services. All the City’s wastewater is conveyed to OCSD, who is the City’s wastewater treatment provider. More detail relating to the sewer COS approach can be found in Appendix C.

3.3.1 Functional Unbundling of Revenue Requirements
The sewer system costs are unbundled into Collection, Customer and Administration functions. A brief description of each component is as follows:
• Collection – costs associated with lines and facilities that transport wastewater from customer properties to treatment facilities;
• Customer – costs associated with billing, and providing other services to customers (e.g., printing, delivering and collecting utility bills, recordkeeping, etc.). • Administration – various overhead and other non-operating costs The allocation of the functionally unbundled revenue requirements for the Test Year are summarized in Table 26.

Table 26 - Functional Unbundled Cost Allocations
Description Test Year
2026
Total O&M $ 398,128
Existing Debt Service -
Future Debt Service -
Other Expenditures & Transfers 222,431
Gross Revenue Requirement $ 620,559
Less Other Revenues (51,600)
Net Revenue Requirement $ 568,959
Functional Unbundled Revenue Requirement
Collection $ 161,500
Administration 236,628
CIP 513,400
Existing Bond DS -
New Bond DS -
Non-Rate Revenue (51,600)
Fund Balance [1] (290,969)
Non-Rate Rev & Fund Balance $ 568,959
Notes:
[1] Represents a transfer from reserves to provide
funding for capital outlay and CIP costs. Page 343 of 384 30 | P a g e

3.3.2 Classification of Revenue Requirements
The functionally unbundled Revenue Requirements for the sewer system are classified into a volumetric customer cost component since the City only provides wastewater collection services. As similarly discussed for the water COS analysis, it is anticipated that the allocation percentages for the functional cost categories will not change materially during the Projection Period. However, it is important to note that COS analyses are based on the data at a specific point in time (i.e., the most recent fiscal year). To the extent that weather conditions, economic conditions and customer usage characteristics change during the Projection Period, the cost allocators can be impacted. The system-wide costs by service characteristic are shown in Table 27.

Table 27 - Classification of Unbundled Revenue Requirements

3.3.3 Allocation to Customer Classes and Unit Cost
Development
The functionalized and classified Revenue Requirements are allocated to customer classes utilizing a unit cost approach as follows:
• Collection – Based on relative percentage of annual sewer usage. • Customer – Based on relative percentage of accounts by customer class.

The units of service for each component of cost by customer class (if applicable) are provided in Table 28. The units of service consist of the number of customer accounts and annual flows in CCF. Customer accounts are based on the number of customers as provided in the customer data. Collection is the total annual sewer flows projected for the Test Year.

Component Volume Total
Collection $ 161,500 $ 161,500
Administration 236,628 236,628
CIP 513,400 513,400
Existing Bond DS - -
New Bond DS - -
Non-Rate Rev & Fund Balance (342,569) (342,569)
Total $ 568,959 $ 568,959 Page 344 of 384
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Table 28 – Units of Service
The Revenue Requirement for the collection cost component is divided by the total units of service to calculate a unit cost per CCF. The unit cost per CCF is demonstrated in Table 29.

Table 29 – Cost Per Unit
The allocation of the Revenue Requirement to each customer class is based on the unit cost multiplied by the units of service for each customer class. The total cost to be recovered from each customer class is shown in Table 30.

Table 30 – Cost of Service by Customer Class
Total CCF
Customers Flow
Residential 4,232 569,256
Non-Residential 73 77,472
Sewer System Total 4,305 646,728
Description Description Volume Total
Total Revenue Requirement $ 568,959 $ 568,959
Units of Service 646,728
CCF
Cost Per Unit $ 0.88
CCF
Rate Class Volume Total
Residential $ 500,803 $ 500,803
Non-Residential 68,156 68,156
Total $ 568,959 $ 568,959 Page 345 of 384
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3.3.4 Cost-of-Service and Revenue Check
Once the unit costs are developed and the costs associated with each customer class based on the units of service are determined in Section 3.3.3, rates can be developed to ensure that each customer class is generating sufficient revenues to cover their allocated cost of service. The proposed rate structure for the sewer rates are as follows:
• Residential Customers – For residential customers, the proposed rates will consist of a uniform volumetric rate per CCF. The volumetric rate per CCF remains the same regardless of the amount of sewer volume produced.
• Non-Residential Customers – For non-residential customers, the proposed rates will consist of a uniform volumetric rate per CCF. The volumetric rate per CCF remains the same regardless of the amount of sewer volume produced.

The revenues generated by customer class vs the cost allocated to each customer class are provided in Table 31.

Table 31 – Proposed Rate Revenues vs COS
Bi-Monthly
Customers
Proposed
Bi-Monthly
Fixed Fee
Total Fixed
Fee
Revenue
Billable
Annual
Volume
(CCF)
Proposed
Volumetric
Rate
Total
Volumetric
Rate
Revenues
Total
Calculated
Revenues
Total COS
Revenues
[A] [B] [C]=[A]*[B]*6 [D] [E] [F]=[D]*[E] [G]=[C]+[F] [H] Residential 4,232 N/A N/A 569,256 $ 0.88 $ 500,803 $ 500,803 $ 500,803 Non-Residential 73 N/A N/A 77,472 $ 0.88 $ 68,156 $ 68,156 $ 68,156 Total 4,305 $ - 646,728 $ 568,959 $ 568,959 $ 568,959
Description

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Section 4 – Proposed Test Year Rates

4.1 General
The methodology used to calculate the recommended water and sewer rates proposed herein involves applying the projected customer units of service to the user rates developed in the preceding COS and rate analyses to calculate the estimated revenues (separately for water and sewer) that would be generated. Then, these projected revenues are compared to the estimated Test Year Revenue Requirements, and the water and/or sewer rates are adjusted on a percentage basis as necessary until the revenues generated are sufficient to meet the revenue needs of each utility system, respectively.

When reviewing potential rate structure options in conjunction with the need for additional revenues, it was determined that revenue adjustments are needed. The proposed water and sewer rates for the Test Year are provided again in Tables 32 and 33, respectively. [The rest of this page is intentionally left blank]

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Table 32 – Proposed Bi-Monthly Water Rates
Table 33 – Proposed Bi-Monthly Sewer Rates
Bi-Monthly Fixed Service Charge:
5/8 Inch $ 62.10
3/4 Inch $ 62.10

1.0 Inch $ 62.10

1.5 Inch $ 257.99

2.0 Inch $ 404.90

3.0 Inch $ 747.71

4.0 Inch $ 1,237.43

6.0 Inch $ 2,461.74

8.0 Inch $ 3,930.91

10.0 Inch $ 5,644.94
Bi-Monthly Fire Flow Fixed Service Charge:
5/8 Inch $ 16.15
3/4 Inch $ 16.15

1.0 Inch $ 16.15

1.5 Inch $ 28.25

2.0 Inch $ 37.33

3.0 Inch $ 58.51

4.0 Inch $ 88.76

6.0 Inch $ 164.39

8.0 Inch $ 255.16

10.0 Inch $ 361.05

12.0 Inch $ 663.58
Volumetric Rates Per 100 Cubic Feet:

All Flow $ 3.99
Description Rate
Description Rate
Volumetric Rates Per 100 Cubic Feet [1]:

All Flow $ 0.88
Notes:
[1] The City provides collection only services, all customers pay the same rate per 100 cubic feet of billed water flow. Page 348 of 384 35 | P a g e

4.2 Typical Bi-Monthly Bill Comparison
In addition to reviewing
the effect that a change
in the rates will have on
the system revenues, it is
also important for City
utility management to
understand the impact
that a change will have
on the existing customers.

Tables 34, 35 and 36
provide a comparison of
several bi-monthly bills at
various flow levels for
water and sewer, as well as the combined utility bills under the existing and proposed rates.

A graphical illustration of a bill comparison at various units of flow is provided in Figure 1 for an average single-family residential customer with both water and sewer service. It was determined after conducting a historical billing analysis that an average single-family residential customer uses approximately 1,600 cubic feet per bi-monthly billing. Based on the proposed rates, a typical City single-family residential customer will experience an increase of $16.32 ($123.64 current bi-monthly bill vs $139.96 proposed bi-monthly bill) in their combined bi-monthly water and sewer bill, or an increase of $8.16 per month.

Table 34 – Single-Family Residential Water Bi-Monthly Bill Impact Existing Proposed
Residential
5/8 Inch, 3/4 Inch & 1.0 Inch 0 $ 54.52 $ 62.10 $ 7.58
5/8 Inch, 3/4 Inch & 1.0 Inch 100 $ 57.99 $ 66.08 $ 8.09 5/8 Inch, 3/4 Inch & 1.0 Inch 200 $ 61.46 $ 70.07 $ 8.61 5/8 Inch, 3/4 Inch & 1.0 Inch 300 $ 64.93 $ 74.06 $ 9.13 5/8 Inch, 3/4 Inch & 1.0 Inch 400 $ 68.40 $ 78.04 $ 9.64 5/8 Inch, 3/4 Inch & 1.0 Inch 500 $ 71.87 $ 82.03 $ 10.16 5/8 Inch, 3/4 Inch & 1.0 Inch 600 $ 75.34 $ 86.01 $ 10.67 5/8 Inch, 3/4 Inch & 1.0 Inch 700 $ 78.81 $ 90.00 $ 11.19 5/8 Inch, 3/4 Inch & 1.0 Inch 800 $ 82.28 $ 93.99 $ 11.71 5/8 Inch, 3/4 Inch & 1.0 Inch 1,000 $ 89.22 $ 101.96 $ 12.74 5/8 Inch, 3/4 Inch & 1.0 Inch 1,200 $ 96.16 $ 109.93 $ 13.77 5/8 Inch, 3/4 Inch & 1.0 Inch 1,400 $ 103.10 $ 117.90 $ 14.80 5/8 Inch, 3/4 Inch & 1.0 Inch 1,600 $ 110.04 $ 125.88 $ 15.84 5/8 Inch, 3/4 Inch & 1.0 Inch 2,000 $ 123.92 $ 141.82 $ 17.90 5/8 Inch, 3/4 Inch & 1.0 Inch 2,400 $ 137.80 $ 157.77 $ 19.97 Description Bi-Monthly
Flow
Bi-Monthly Charges $ Amount
Difference

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Table 35 – Single-Family Residential Sewer Bi-Monthly Bill Impact Table 36 – Single-Family Residential Combined Bi-Monthly Bill Impact Existing Proposed
Residential
5/8 Inch, 3/4 Inch & 1.0 Inch 0 $ 0.00 $ 0.00 $ 0.00
5/8 Inch, 3/4 Inch & 1.0 Inch 100 $ 0.85 $ 0.88 $ 0.03
5/8 Inch, 3/4 Inch & 1.0 Inch 200 $ 1.70 $ 1.76 $ 0.06
5/8 Inch, 3/4 Inch & 1.0 Inch 300 $ 2.55 $ 2.64 $ 0.09
5/8 Inch, 3/4 Inch & 1.0 Inch 400 $ 3.40 $ 3.52 $ 0.12
5/8 Inch, 3/4 Inch & 1.0 Inch 500 $ 4.25 $ 4.40 $ 0.15
5/8 Inch, 3/4 Inch & 1.0 Inch 600 $ 5.10 $ 5.28 $ 0.18
5/8 Inch, 3/4 Inch & 1.0 Inch 700 $ 5.95 $ 6.16 $ 0.21
5/8 Inch, 3/4 Inch & 1.0 Inch 800 $ 6.80 $ 7.04 $ 0.24
5/8 Inch, 3/4 Inch & 1.0 Inch 1,000 $ 8.50 $ 8.80 $ 0.30 5/8 Inch, 3/4 Inch & 1.0 Inch 1,200 $ 10.20 $ 10.56 $ 0.36 5/8 Inch, 3/4 Inch & 1.0 Inch 1,400 $ 11.90 $ 12.32 $ 0.42 5/8 Inch, 3/4 Inch & 1.0 Inch 1,600 $ 13.60 $ 14.08 $ 0.48 5/8 Inch, 3/4 Inch & 1.0 Inch 2,000 $ 17.00 $ 17.60 $ 0.60 5/8 Inch, 3/4 Inch & 1.0 Inch 2,400 $ 20.40 $ 21.11 $ 0.71 Bi-Monthly
Flow
Bi-Monthly Charges $ Amount
Difference Description Existing Proposed
Residential
5/8 Inch, 3/4 Inch & 1.0 Inch 0 $ 54.52 $ 62.10 $ 7.58
5/8 Inch, 3/4 Inch & 1.0 Inch 100 $ 58.84 $ 66.96 $ 8.12 5/8 Inch, 3/4 Inch & 1.0 Inch 200 $ 63.16 $ 71.83 $ 8.67 5/8 Inch, 3/4 Inch & 1.0 Inch 300 $ 67.48 $ 76.70 $ 9.22 5/8 Inch, 3/4 Inch & 1.0 Inch 400 $ 71.80 $ 81.56 $ 9.76 5/8 Inch, 3/4 Inch & 1.0 Inch 500 $ 76.12 $ 86.43 $ 10.31 5/8 Inch, 3/4 Inch & 1.0 Inch 600 $ 80.44 $ 91.29 $ 10.85 5/8 Inch, 3/4 Inch & 1.0 Inch 700 $ 84.76 $ 96.16 $ 11.40 5/8 Inch, 3/4 Inch & 1.0 Inch 800 $ 89.08 $ 101.03 $ 11.95 5/8 Inch, 3/4 Inch & 1.0 Inch 1,000 $ 97.72 $ 110.76 $ 13.04 5/8 Inch, 3/4 Inch & 1.0 Inch 1,200 $ 106.36 $ 120.49 $ 14.13 5/8 Inch, 3/4 Inch & 1.0 Inch 1,400 $ 115.00 $ 130.22 $ 15.22 5/8 Inch, 3/4 Inch & 1.0 Inch 1,600 $ 123.64 $ 139.96 $ 16.32 5/8 Inch, 3/4 Inch & 1.0 Inch 2,000 $ 140.92 $ 159.42 $ 18.50 5/8 Inch, 3/4 Inch & 1.0 Inch 2,400 $ 158.20 $ 178.88 $ 20.68 Description Bi-Monthly
Flow
Bi-Monthly Charges $ Amount
Difference

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4.3 Rate Comparison with Other Utilities
To provide the City with additional insight and context regarding the proposed rate levels, the analysis includes a comparison of both the existing and proposed user rates relative to the user rates imposed by other water and sewer utility systems located in the same region.

A summary analysis is provided comparing the cost of bi-monthly water and sewer service for a typical single-family residential customer calculated under the existing and proposed rates of the City with those of the other utilities. Since the City currently bills customers bimonthly, for purposes of a meaningful comparison, any comparison utility that does not bill their customers bi-monthly was converted into a bi-monthly bill. The rates utilized for the other neighboring utilities shown in Figure 2 were in effect as of July 2025 and are exclusive of local taxes, outside surcharges, franchise fees, regulatory fees, or other rate adjustments. A summary comparison with other utilities for a single-family residential customer receiving 1,600 cubic feet of service per bi-monthly billing is illustrated in Figure 2.

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It should be noted that when making comparisons of water and sewer service with other providers, several factors affect the level of rates and charges. Such factors may include:

1. Terms of wholesale service agreements;

2. Time since last rate update for comparison providers;

3. Level of treatment required before the distribution of water to the ultimate customers;

4. Level of treatment and effluent disposal or discharge methods of sewer service;

5. Anticipated capital improvement programs and capital financing methods;

6. Plant capacity utilization, age of facilities, and assistance in construction by federal or state grants, connection fees, developer contributions, etc.;

7. General Fund and/or administrative fee transfers made by other systems which may account for differences in the level of rates charged; and

8. Bond covenants and funding requirements of the rates.

For the utilities included in the rate comparisons, no analysis has been carried out with consideration of the above-mentioned factors as they relate to the reported water and sewer rates currently being charged.

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Section 5 – Projected Operating Results

5.1 General
As a conclusion to the study, individual pro-forma operating statements are developed for both the water and sewer systems. The statements summarize the projected financial results based on the system revenues, expenses and other Revenue Requirements anticipated in future years.

The individual operating statements cover the 5-fiscal year Projection Period through June 30, 2030, and are prepared on a cash-flow basis. In addition, the individual statements include the applicable annual percentage rate adjustments necessary to meet the projected Revenue Requirements. The annual rate adjustments are considered separately for both water and sewer and are further separated by the fixed charge and volumetric rate components. The following discussions describe the development of the major components of the projected operating results.

5.2 Projected User Rate Revenues
The user rate and charge revenues are estimated by applying the existing and proposed rates to the projected customer units of service. The revenues for the Projection Period are estimated separately for both water and sewer. The resulting revenues are then compared to the projected Revenue Requirements (i.e., O&M expenses, debt service, capital outlay, CIP, transfers, etc.) in each fiscal year to determine if the revenues are sufficient to satisfy the expenditure needs of the system. To the extent that there are revenue shortfalls in any given year of the Project Period, the water and/or sewer rates developed from the COS and Rate analyses outlined previously in Section 3 of this Report are adjusted on a percentage basis, as necessary, to generate the required level of revenues. The projected water, sewer and combined user rate revenues are provided in Table 37.

Table 37 – Projected User Rate Revenues
Existing Proposed
2026 2026 2027 2028 2029 2030
Water System
Residential $ 3,477,674 $ 3,982,791 $ 4,479,712 $ 5,226,332 $ 5,748,966 $ 6,195,878 Non-Residential 406,868 466,918 526,106 613,791 675,170 727,656 Irrigation 56,398 64,710 72,899 85,050 93,555 100,829
Fire Flow 43,185 67,326 75,742 88,366 97,202 104,758
Total Water Revenue $ 3,984,125 $ 4,581,745 $ 5,154,459 $ 6,013,539 $ 6,614,893 $ 7,129,121 Sewer System
Residential $ 483,868 $ 500,803 $ 518,331 $ 554,614 $ 593,437 $ 634,978 Non-Residential 65,851 68,156 70,542 75,480 80,763 86,416 Total Sewer Revenue $ 549,719 $ 568,959 $ 588,873 $ 630,094 $ 674,200 $ 721,394 Total Combined Revenue $ 4,533,844 $ 5,150,704 $ 5,743,332 $ 6,643,633 $ 7,289,093 $ 7,850,515 Projected Fiscal Year Ending June 30 System

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The projected revenues include the annual water and sewer rate adjustments anticipated for the remaining years of Projection Period beyond the Test Year. The proposed user rates from which the projected operating results are developed for the entire 5-fiscal year Projection Period are provided in Tables 38 and 39. The rates identified in the following tables reflect the cost of providing service to individual customer classes based on the types of customers being served, peak demand factors, and volume of metered/billable flow.

Table 38 – Proposed Bi-Monthly Water Rates
Table 39 – Proposed Bi-Monthly Sewer Rates
2026 2027 2028 2029 2030
Bi-Monthly Fixed Service Charge:
5/8 Inch $ 54.52 $ 62.10 $ 77.62 $ 85.38 $ 93.92 $ 99.32 3/4 Inch $ 54.52 $ 62.10 $ 77.62 $ 85.38 $ 93.92 $ 99.32

1.0 Inch $ 54.52 $ 62.10 $ 77.62 $ 85.38 $ 93.92 $ 99.32

1.5 Inch $ 224.40 $ 257.99 $ 322.48 $ 354.73 $ 390.20 $ 412.64

2.0 Inch $ 351.82 $ 404.90 $ 506.13 $ 556.74 $ 612.42 $ 647.63

3.0 Inch $ 649.10 $ 747.71 $ 934.64 $ 1,028.10 $ 1,130.91 $ 1,195.94

4.0 Inch $ 1,073.80 $ 1,237.43 $ 1,546.79 $ 1,701.47 $ 1,871.61 $ 1,979.23

6.0 Inch $ 2,135.58 $ 2,461.74 $ 3,077.17 $ 3,384.89 $ 3,723.38 $ 3,937.48

8.0 Inch $ 3,409.68 $ 3,930.91 $ 4,913.64 $ 5,405.01 $ 5,945.51 $ 6,287.37

10.0 Inch $ 4,896.14 $ 5,644.94 $ 7,056.17 $ 7,761.79 $ 8,537.97 $ 9,028.90 Bi-Monthly Fire Flow Fixed Service Charge:
5/8 Inch $ 13.94 $ 16.15 $ 20.19 $ 22.21 $ 24.43 $ 25.83 3/4 Inch $ 13.94 $ 16.15 $ 20.19 $ 22.21 $ 24.43 $ 25.83

1.0 Inch $ 13.94 $ 16.15 $ 20.19 $ 22.21 $ 24.43 $ 25.83

1.5 Inch $ 21.46 $ 28.25 $ 35.32 $ 38.85 $ 42.73 $ 45.19

2.0 Inch $ 27.08 $ 37.33 $ 46.66 $ 51.33 $ 56.46 $ 59.71

3.0 Inch $ 40.24 $ 58.51 $ 73.13 $ 80.45 $ 88.49 $ 93.58

4.0 Inch $ 59.02 $ 88.76 $ 110.95 $ 122.05 $ 134.25 $ 141.97

6.0 Inch $ 105.98 $ 164.39 $ 205.49 $ 226.04 $ 248.65 $ 262.95

8.0 Inch $ 162.32 $ 255.16 $ 318.95 $ 350.84 $ 385.92 $ 408.11

10.0 Inch $ 228.06 $ 361.05 $ 451.31 $ 496.44 $ 546.08 $ 577.48

12.0 Inch $ 415.90 $ 663.58 $ 829.48 $ 912.43 $ 1,003.67 $ 1,061.38 Volumetric Rates Per 100 Cubic Feet:

All Flow $ 3.47 $ 3.99 $ 4.98 $ 5.48 $ 6.03 $ 6.38
Description Existing
Rates
Projected For Fiscal Year Ending June 30
2026 2027 2028 2029 2030
Volumetric Rates Per 100 Cubic Feet [1]:

All Flow $ 0.85 $ 0.88 $ 0.94 $ 1.01 $ 1.08 $ 1.15
Notes:

Description Existing
Rates
Projected For Fiscal Year Ending June 30:
[1] The City provides collection only services, all customers pay the same rate per 100 cubic feet of billed water flow. Page 354 of 384 41 | P a g e
The projected user rates provided herein for the periods beyond the Test Year are intended for strategic planning purposes, and to provide the City with the estimated future rates that may be needed to satisfy the projected cash flow requirements. The rates are developed in accordance with the assumed customer, flow, expenditure, and revenue estimates projected in this rate study. It is important to note that, since it is necessary to utilize numerous assumptions to develop the projected operating results, to the extent that actual customers, flows and/or system expenditures differ from those assumed herein, additional rate adjustments may be required. For informative purposes, a calculation of the typical bimonthly bill for a representative City single-family residential customer using 1,600 cubic feet based on the projected rates, for each year of the Projection Period is included herein. An illustration of the projected bill path is provided in Figure 3.

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5.3 Debt Service Coverage
As stated previously in Section 2.3.3, The City currently has no outstanding debt associated with either the water or sewer utility system, and based on discussions with the City, there are no anticipated future debt issuances expected to occur over the Projection Period for either utility. Therefore, no annual debt service payments or debt service ratio calculations are included in the analysis and Projection Period.
[The rest of this page is intentionally left blank]

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5.4 Summary of Projected Operating Results
The cash-flow statements outlining the projected operating results are summarized in Tables 40 and 41 for the water and sewer systems, respectively. The results demonstrate that the proposed rates and charges along with the other respective system revenues are anticipated to be sufficient to satisfy the projected Revenue Requirements and capital needs for each respective utility system.

Table 40 – Water System Projected Operating Results
Existing
2026
Proposed
2026 2027 2028 2029 2030
Revenues:

Water Sales $ 3,984 $ 4,582 $ 5,154 $ 6,014 $ 6,615 $ 7,129 Other Revenues 41 41 41 41 41 41
Total Revenues $ 4,025 $ 4,623 $ 5,196 $ 6,055 $ 6,656 $ 7,170 O&M Expenses (4,023) (4,023) (4,269) (4,535) (4,821) (5,129) Net Income For Debt $ 2 $ 600 $ 926 $ 1,520 $ 1,835 $ 2,041 Debt Service:

Existing $ - $ - $ - $ - $ - $ -
Future - - - - - -
Total Debt Service $ - $ - $ - $ - $ - $ -
Net Results $ 2 $ 600 $ 926 $ 1,520 $ 1,835 $ 2,041
Fund Balance Activity:

Operating Fund
Beginning Balance $ 112 $ 112 $ 712 $ 1,053 $ 1,118 $ 1,189 Deposit/(Withdrawal) from Operations 2 600 926 1,520 1,835 2,041 Deposit/(Withdrawal) from/(to) Capital Fund - - (586) (1,454) (1,765) (1,965) Total Operating Fund Balance $ 115 $ 712 $ 1,053 $ 1,118 $ 1,189 $ 1,265 Operating Days Cash on Hand 10 65 90 90 90 90
Capital Fund
Beginning Balance $ 2,809 $ 2,809 $ 1,929 $ 1,116 $ 1,123 $ 1,854 Net Transfers In/(Out) From Operating Fund - - 586 1,454 1,765 1,965 Cash Funded Capital Projects (880) (880) (1,399) (1,447) (1,033) (1,194) Total Capital Fund Balance $ 1,929 $ 1,929 $ 1,116 $ 1,123 $ 1,854 $ 2,625 Ending Fund Balance $ 2,044 $ 2,642 $ 2,168 $ 2,241 $ 3,043 $ 3,889 Debt Coverage N/A N/A N/A N/A N/A N/A
Description
Projected for Fiscal Year Ending June 30 ($1,000s)

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Table 41 – Sewer System Projected Operating Results
Existing
2026
Proposed
2026 2027 2028 2029 2030
Revenues:

Wastewater Sales $ 550 $ 569 $ 589 $ 630 $ 674 $ 721
Other Revenues 52 52 52 52 52 52
Total Revenues $ 601 $ 621 $ 640 $ 682 $ 726 $ 773
O&M Expenses (398) (398) (412) (427) (442) (458)
Net Income For Debt $ 203 $ 222 $ 228 $ 255 $ 283 $ 315 Debt Service:

Existing $ - $ - $ - $ - $ - $ -
Future - - - - - -
Total Debt Service $ - $ - $ - $ - $ - $ -
Net Results $ 203 $ 222 $ 228 $ 255 $ 283 $ 315
Fund Balance Activity:

Operating Fund
Beginning Balance $ 2,243 $ 2,243 $ 98 $ 102 $ 105 $ 109 Deposit/(Withdrawal) from Operations 203 222 228 255 283 315 Deposit/(Withdrawal) from/(to) Capital Fund (2,348) (2,368) (225) (251) (280) (311) Total Operating Fund Balance $ 98 $ 98 $ 102 $ 105 $ 109 $ 113 Operating Days Cash on Hand 90 90 90 90 90 90
Capital Fund
Beginning Balance $ 2,366 $ 2,366 $ 4,220 $ 3,975 $ 3,729 $ 3,482 Net Transfers In/(Out) From Operating Fund 2,348 2,368 225 251 280 311 Cash Funded Capital Projects (513) (513) (470) (497) (526) (557) Total Capital Fund Balance $ 4,201 $ 4,220 $ 3,975 $ 3,729 $ 3,482 $ 3,235 Ending Fund Balance $ 4,299 $ 4,318 $ 4,077 $ 3,834 $ 3,591 $ 3,348 Debt Coverage N/A N/A N/A N/A N/A N/A
Description
Projected for Fiscal Year Ending June 30 ($1,000s)

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Section 6 – Conclusions and Recommendations

6.1 Disclaimers

6.1.1 General Disclaimer
In the development of the proposed user rates and charges, certain historical reviews and analyses have been performed, together with the application of assumptions based on prudent financial, operational, and ratemaking relationships. The cost criteria and customer usage characteristics associated with general ratemaking procedures are representative of averages and are not intended as indicators of any individual customer.

In the preparation of the rate study, certain assumptions have been made with respect to conditions that may occur in the future. While it is believed that these assumptions are reasonable for the purpose of this update, they are dependent upon future events and actual conditions may differ from those assumed. In addition, the study has used and relied upon certain information that was provided by other parties not associated with Willdan.

Such information includes, among other things, the City’s audited financial statements, annual operating budgets, periodic reports, and other information and data provided by the City, its independent auditors, and other sources. While the sources are believed to be reliable, there has been no independent verification of the information, and no assurances are offered with respect thereto. To the extent that future conditions differ from those assumed herein or provided by others, the actual results may vary from those projected.

6.1.2 Municipal Advisory Disclaimer
Unless the City of La Palma, California (the “City”) has a written engagement from Willdan Financial Services (“Willdan”) for municipal advisory services, Willdan is not advising or recommending any action be taken by the recipient of this information with respect to any prospective, new, or existing municipal financial products or issuance of municipal securities (including with respect to the structure, timing, terms and other similar matters concerning such financial products or issues). The City shall discuss any such information and material contained in Willdan’s work product with any and all internal and/or external advisors and experts, including its own municipal advisor, that it deems appropriate before acting on the information and material.

For the avoidance of doubt and without limiting the foregoing, in connection with any revenue projections, cash-flow analyses, feasibility studies and/or other analyses Willdan may provide the City with respect to financial, economic or other matters relating to a prospective, new or existing issuance of municipal securities of the City, (A) any such projections, studies and analyses shall be based upon assumptions, opinions or views (including, without limitation, any assumptions related to revenue growth) established by the City, in conjunction with such of its municipal, financial, legal and other advisers as it deems appropriate; and (B) under no circumstances shall Willdan be asked to provide, nor shall it

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provide, any advice or recommendations or subjective assumptions, opinions or views with respect to the actual or proposed structure, terms, timing, pricing or other similar matters with respect to any municipal financial products or municipal securities issuances, including any revisions or amendments thereto.

6.2 Conclusions
As previously addressed, the purpose of this study is to provide a review of the City’s existing utility rates to determine if rate adjustments are necessary to meet the budgeted and/or projected financial needs in future years. This Report is the result of the collaborative efforts of representatives from both the City and Willdan. City staff were diligent and cooperative in their efforts to ensure the availability and quality of source data on financial and operating matters. Based on the reviews, analyses and assumptions discussed herein, it is concluded that:

1. The proposed user rates and charges are anticipated to generate sufficient revenues to meet the Revenue Requirements of each respective system based upon the projected expenditures, capital project timing and costs, transfers, and billable customer units estimated for the Test Year. The proposed rates are based on an assumed implementation date of January 1, 2026. To the extent that the actual implementation date varies from the assumed implementation date, additional rate adjustments and/or appropriations from existing reserves may be necessary.

2. The estimated revenues and resulting rate adjustments for the remaining years of the Projection Period beyond the Test Year are developed based on the customer growth assumptions generated from the historical analyses and discussions with City staff.

3. Customer growth for the water and sewer systems is projected based on historical customer data as provided by the City as well as discussions with the City staff regarding developer activity and anticipated construction. If it turns out that the customer growth assumptions are not realized, the resulting revenues could be different than projected.

4. The projection of billable water and sewer flows is based on historical trends regarding the average flow per user for each customer class. The average water and sewer flow per account is developed from historical customer data and is assumed to remain relatively constant for the Projection Period. The historical billing data provided by the City was utilized to identify the average flow statistics for system customers. For the analyses developed herein, it is assumed that the average usage statistics for the Projection Period will be consistent with recent historical average usage levels as realized in recent years, or as otherwise assumed based on discussions with staff.

When applying the estimated average usage statistics, it is assumed that the water and sewer sales will increase with the estimated growth in customers. However, it is important to note that annual variations in rainfall and other climatological factors

47 | P a g e
may influence the level of future water demands and the accompanying billable sewer flows for the City.

5. Future capital improvement projects are assumed to occur as reported by the City in its CIP. To the extent that the timing of such projects may change from that estimated herein, the cost of such projects and resulting impact on future rates and charges may vary from those indicated.

6. The proposed rates and rate structure are consistent with industry standards for ratesetting practices, comply with Proposition 218 and conform to the City’s financial policies with respect to:
a. Equitably recovering costs;
b. Being based upon the proportionate cost of providing services; and c. Generating sufficient revenue to recover system Revenue Requirements, fund capital needs, and meet reserve requirements.

6.3 Recommendations
Based on the reviews, analyses and assumptions addressed herein, as well as the resulting conclusions provided above, it is respectfully recommended that the City:

1. Adopt the proposed water and sewer rates.

2. Enact the proposed rates to become effective as of January 1, 2026 (or other such date as determined by the City). Based on the timing of the project and the required public hearing procedures and noticing requirements, it is expected that the proposed water and sewer rates will become effective on the recommended date.

3. Readdress the COS analysis portion of this study every three to five years to ensure costs are recovered consistently with COS principles and customer characteristics.

We appreciate the opportunity to be of service to the City in this engagement. In addition, we would like to thank City staff for the valuable assistance provided during the completion of the rate study.

Respectfully Yours,

WILLDAN FINANCIAL SERVICES

City of La Palma, CA
Comprehensive Water & Sewer Utility Rate
Study Update
Appendices
A Revenue Requirement for User Rates
B Water Cost-of-Service Analysis
C Sewer Cost-of-Service Analysis

City of La Palma, CA
Comprehensive Water & Sewer Utility Rate
Study Update
Appendix A
Revenue Requirement for
User Rates

APPENDIX - A

CITY OF LA PALMA, CA
Development of Rate Revenue Requirements
[A] [B] [C]=[A]*[B] [D] [E]=[A]*[D]
FY 2026 % to Water Water % to Sewer Sewer
1 Total Operating Revenues $ 5,243,404 $ 4,622,845 $ 620,559 Less:

Other Operating Revenues
2 Water Meter Sales $ 100 100% $ 100 0% $ -
3 Interest - Investments 5,000 100% 5,000 0% -
4 Fats, Oils, And Grease Program 9,600 0% - 100% 9,600
5 Interest - Investments 16,000 0% - 100% 16,000
6 Interest - Investments 36,000 100% 36,000 0% -
7 Interest - Investments 26,000 0% - 100% 26,000
8 Total Other Operating Revenues 92,700 41,100 51,600
9 Total Rate Revenue Requirement $ 5,150,704 89% $ 4,581,745 11% $ 568,959 Test Year for Rate Revenue Requirement Line No: Description A - 1

City of La Palma, CA
Comprehensive Water & Sewer Utility Rate
Study Update
Appendix B
Water Cost-of-Service
Analysis

APPENDIX - B

CITY OF LA PALMA, CA
Allocation of Test Year Costs to Water Function
Line No: Expense Group FY 2026
1 Treatment $ 302,150
2 Transmission & Distribution 415,700
3 Pumping 1,440,800
4 Customer Service 2,000
5 Administration 1,742,306
6 Source of Supply 120,000
7 Existing Bond DS -
8 New Bond DS -
9 CIP 879,600
10 Total $ 4,902,556
Test Year Revenue Requirement

B - 1

APPENDIX - B

CITY OF LA PALMA, CA
Water Customer and Equivalent Residential Unit Calculation - Test Year FY 2026 [A - 1] [B - 1] [C - 1] [D - 1] [E - 1] [F - 1]
Class --> Commercial Roll Offs Residential FS Residential W&S Fire Service Irrigation Billing Basis--> Units Units Units Units Units Units
1 0.625 1.00 1.00 1.00 1.00 1.00 1.00
2 0.75 1.00 1.00 1.00 1.00 1.00 1.00
3 1.00 1.00 1.00 1.00 1.00 1.00 1.00
4 1.50 5.00 5.00 5.00 5.00 5.00 5.00
5 2.00 8.00 8.00 8.00 8.00 8.00 8.00
6 3.00 15.00 15.00 15.00 15.00 15.00 15.00
7 4.00 25.00 25.00 25.00 25.00 25.00 25.00
8 6.00 50.00 50.00 50.00 50.00 50.00 50.00
9 8.00 80.00 80.00 80.00 80.00 80.00 80.00
10 10.00 115.00 115.00 115.00 115.00 115.00 115.00
11 12.00 215.00 215.00 215.00 215.00 215.00 215.00
[A - 2] [B - 2] [C - 2] [D - 2] [E - 2] [F - 2]
Class --> Commercial Roll Offs Residential FS Residential W&S Fire Service Irrigation Billing Basis--> Units Units Units Units Units Units
12 0.625 3 0 3,655 476 0 3 4,137
13 0.75 3 0 2 2 0 1 8
14 1.00 10 0 25 6 1 1 43
15 1.50 14 0 0 16 0 5 35
16 2.00 34 1 0 43 9 5 92
17 3.00 6 1 0 7 8 0 22
18 4.00 0 0 0 0 0 0 0
19 6.00 0 1 0 0 19 0 20
20 8.00 0 0 0 0 12 0 12
21 10.00 0 0 0 0 8 0 8
22 12.00 0 0 0 0 2 0 2
22 Total Bi-Monthly Customers 70 3 3,682 550 59 15 4,379 [A - 1] * [A - 2] [B - 1] * [B - 2] [C - 1] * [C - 2] [D - 1] * [D - 2] [E - 1] * [E - 2] [F - 1] * [F - 2] Class --> Commercial Roll Offs Residential FS Residential W&S Fire Service Irrigation Billing Basis--> Units Units Units Units Units Units
23 0.625 3 0 3,655 476 0 3 4,137
24 0.75 3 0 2 2 0 1 8
25 1.00 10 0 25 6 1 1 43
26 1.50 70 0 0 80 0 25 175
27 2.00 272 8 0 344 72 40 736
28 3.00 90 15 0 105 120 0 330
29 4.00 0 0 0 0 0 0 0
30 6.00 0 50 0 0 950 0 1,000
31 8.00 0 0 0 0 960 0 960
32 10.00 0 0 0 0 920 0 920
33 12.00 0 0 0 0 430 0 430
33 Total Bi-Monthly Customers 448 73 3,682 1,013 3,453 70 8,739 Meter Equivalencies
Meter Size
Meter Size
Meter Size
Customer Accounts
Total Equivalent Residential Units
Line
No:

Line
No:

Line
No:

Total
Total

B - 2

APPENDIX - B

CITY OF LA PALMA, CA
Water Max Day/Hour Allocation Factors - Test Year FY 2026 [A] [B] [C] [D] [E] [F]
Flow
Peak BiMonthly Flow
(CCF)
Average BiMonthly Flow
(CCF)
Max
Day/Avg
Day Factor
Max Day
Total
Capacity
(CCF/Day)
Max Day
Extra
Capacity
(CCF/Day)
Operating Statistics: MGD Factor
1 Avg Day Flow (MGD) 2.30 1.00
2 Max Day Flow (MGD) 3.91 1.70
Cost Allocation Factors: Base Max Day Max Hour
3 Base/Max Day 58.82% 41.18% 0.00%
Peaking Factors: [B] / [C]
All Customers Excluding Fire Service
4 All Flow 120,902 106,665 1.13
Fire Service
5 All Flow 0 0 0.00
[D] x [B] [E] - [B]
Estimated Max Day Flows:

Total Annual
Flow (CCF)
Average
Daily Flow
(CCF)
Peaking
Factor
Total
Capacity
Extra
Capacity
All Customers Excluding Fire Service
6 All Flow 657,528 1,801 1.13 2,042 240
Fire Service
7 All Flow 0 0 0.00 0 0
8 Total 657,528 1,801 2,042 240
Maximum Day
Line No: Description
B - 3

APPENDIX - B

CITY OF LA PALMA, CA
Water Units of Service by Cost Component - Test Year FY 2026 [A] [B] [C] [D]
ERUs Accounts Base (CCF)
Max Day
(CCF/Day)
All Customers Excluding Fire Service
1 All Flow 5,286 4,320 657,528 240
Fire Service
2 All Flow 3,453 59 0 0
3 Total 8,739 4,379 657,528 240
Line No: Description
B - 4

APPENDIX - B

CITY OF LA PALMA, CA
Allocation of Water Costs - Test Year FY 2026
Line No: Description Water Costs Base Extra Capacity
Max Day Meters & Services Billing & Collection Fire Protection Total (Check) Allocation Factors:
1 Treatment 58.82% 41.18% 0.00% 0.00% 0.00% 100.00%
2 Transmission & Distribution 58.82% 41.18% 0.00% 0.00% 0.00% 100.00% 3 Pumping 58.82% 41.18% 0.00% 0.00% 0.00% 100.00%
4 Customer Service 0.00% 0.00% 75.00% 21.16% 3.85% 100.00% 5 Administration 0.00% 0.00% 75.00% 21.16% 3.85% 100.00% 6 Source of Supply 100.00% 0.00% 0.00% 0.00% 0.00% 100.00% 7 Existing Bond DS 0.00% 0.00% 100.00% 0.00% 0.00% 100.00% 8 New Bond DS 0.00% 0.00% 100.00% 0.00% 0.00% 100.00%
9 CIP 59.79% 0.00% 40.22% 0.00% 0.00% 100.00%
Allocation of Costs:
10 Treatment $ 302,150 $ 177,735 $ 124,415 $ - $ - $ - $ 302,150 11 Transmission & Distribution 415,700 244,529 171,171 - - - 415,700 12 Pumping 1,440,800 847,529 593,271 - - - 1,440,800
13 Customer Service 2,000 - - 1,500 423 77 2,000
14 Administration 1,742,306 - - 1,306,730 368,585 66,991 1,742,306 15 Source of Supply 120,000 120,000 - - - - 120,000
16 Existing Bond DS - - - - - - -
17 New Bond DS - - - - - - -
18 CIP 879,600 525,869 - 353,731 - - 879,600
19 Non-Rate Rev & Fund Balance (320,811) (125,356) (58,165) (108,755) (24,147) (4,388) (320,811) 20 Total $ 4,581,745 $ 1,790,306 $ 830,692 $ 1,553,206 $ 344,861 $ 62,680 $ 4,581,745 Total Units of Service 657,528.00 240.45 5,286.00 4,379.00 3,453.00 Units CCF CCF/Day ERU/Bi-Monthly Bills/Bi-Monthly ERUs/Bi-Monthly Cost Per Unit $ 2.7228 $ 3,454.7935 $ 48.9723 $ 13.1256 $ 3.0254 Units CCF CCF/Day ERU/Bi-Monthly Bills/Bi-Monthly ERU
B - 5

APPENDIX - B

CITY OF LA PALMA, CA
Water Cost of Service by Cost Component and Customer Class - Test Year FY 2026 [A] [B] [C] [D] [E]
ERUs Accounts Base (CCF) Max Day
(CCF/Day) Total
All Customers Excluding Fire Service
1 All Flow $ 1,553,206 $ 340,215 $ 1,790,306 $ 830,692 $ 4,514,419 Fire Service
2 All Flow $ 62,680 $ 4,646 $ - $ - $ 67,326
3 Total $ 1,615,886 $ 344,861 $ 1,790,306 $ 830,692 $ 4,581,745 Line
No: Description
B - 6

APPENDIX - B

CITY OF LA PALMA, CA
Water Rate Calculation - Test Year FY 2026
[A] [B] [C] [D] [E] [F]
Capacity
Ratio
Meter
Charge
Customer
Charge
Proposed
Fixed
Charge
Existing
Fixed
Charge
Difference
All Customers Excluding Fire Service
1 5/8 Inch 1.00 $ 48.97 $ 13.13 $ 62.10 $ 54.52 $ 7.58
2 3/4 Inch 1.00 $ 48.97 $ 13.13 $ 62.10 $ 54.52 $ 7.58
3 1.0 Inch 1.00 $ 48.97 $ 13.13 $ 62.10 $ 54.52 $ 7.58
4 1.5 Inch 5.00 $ 244.86 $ 13.13 $ 257.99 $ 224.40 $ 33.59 5 2.0 Inch 8.00 $ 391.78 $ 13.13 $ 404.90 $ 351.82 $ 53.08 6 3.0 Inch 15.00 $ 734.58 $ 13.13 $ 747.71 $ 649.10 $ 98.61 7 4.0 Inch 25.00 $ 1,224.31 $ 13.13 $ 1,237.43 $ 1,073.80 $ 163.63 8 6.0 Inch 50.00 $ 2,448.62 $ 13.13 $ 2,461.74 $ 2,135.58 $ 326.16 9 8.0 Inch 80.00 $ 3,917.79 $ 13.13 $ 3,930.91 $ 3,409.68 $ 521.23 10 10.0 Inch 115.00 $ 5,631.82 $ 13.13 $ 5,644.94 $ 4,896.14 $ 748.80 Fire Service
11 5/8 Inch 1.00 $ 3.03 $ 13.13 $ 16.15 $ 13.94 $ 2.21
12 3/4 Inch 1.00 $ 3.03 $ 13.13 $ 16.15 $ 13.94 $ 2.21
13 1.0 Inch 1.00 $ 3.03 $ 13.13 $ 16.15 $ 13.94 $ 2.21
14 1.5 Inch 5.00 $ 15.13 $ 13.13 $ 28.25 $ 21.46 $ 6.79 15 2.0 Inch 8.00 $ 24.20 $ 13.13 $ 37.33 $ 27.08 $ 10.25 16 3.0 Inch 15.00 $ 45.38 $ 13.13 $ 58.51 $ 40.24 $ 18.27 17 4.0 Inch 25.00 $ 75.63 $ 13.13 $ 88.76 $ 59.02 $ 29.74 18 6.0 Inch 50.00 $ 151.27 $ 13.13 $ 164.39 $ 105.98 $ 58.41 19 8.0 Inch 80.00 $ 242.03 $ 13.13 $ 255.16 $ 162.32 $ 92.84 20 10.0 Inch 115.00 $ 347.92 $ 13.13 $ 361.05 $ 228.06 $ 132.99 21 12.0 Inch 215.00 $ 650.46 $ 13.13 $ 663.58 $ 415.90 $ 247.68 Line
No: Customer Class Base Rate Peaking Rate
Proposed
Rate
($/CCF)
Existing Rate
($/CCF) Difference Tier Differential
All Customers Excluding Fire Service
1 All Flow $ 2.72 $ 1.26 $ 3.99 $ 3.47 $ 0.52 1.00
Line
No: Customer Class Peaking Costs
Annual Use
(CCF)
Peaking Unit
Cost
All Customers Excluding Fire Service
1 All Flow $ 830,692 657,528 $ 1.26
2 Total $ 830,692 657,528
Line
No: Description
B - 7

City of La Palma, CA
Comprehensive Water & Sewer Utility Rate
Study Update
Appendix C
Sewer Cost-of-Service
Analysis

APPENDIX - C

CITY OF LA PALMA, CA
Allocation of Test Year Costs to Sewer Function
Line No: Expense Group FY 2026
1 Collection $ 161,500
2 Treatment -
3 Administration 236,628
4 Existing Bond DS -
5 New Bond DS -
6 CIP 513,400
7 Total $ 911,528
Test Year Revenue Requirement
C - 1

APPENDIX - C

CITY OF LA PALMA, CA
Sewer Customer Account & Stength Characteristics by Customer Class - Test Year FY 2026 Total Total CCF
Customers Bills Flow
1 Residential 4,232 25,392 569,256
2 Non-Residential 73 438 77,472
3 Sewer System Total 4,305 25,830 646,728
Line No: Description

C - 2

APPENDIX - C

CITY OF LA PALMA, CA
Allocation of Sewer Costs - Test Year FY 2026
Line No: Description Sewer Costs Volume Total (Check)
Allocation Factors:
1 Treatment 100.00% 100.00%
2 Collection 100.00% 100.00%
3 Administration 100.00% 100.00%
4 CIP 100.00% 100.00%
5 Existing Bond DS 100.00% 100.00%
6 New Bond DS 100.00% 100.00%
Allocation of Costs:
7 Treatment $ - $ - $ -
8 Collection 161,500 161,500 161,500
9 Administration 236,628 236,628 236,628
10 CIP 513,400 513,400 513,400
11 Existing Bond DS - - -
12 New Bond DS - - -
13 Non-Rate Rev & Fund Balance (342,569) (342,569) (342,569) 14 Total $ 568,959 $ 568,959 $ 568,959
Total Units of Service 646,728
Units CCF
Cost Per Unit $ 0.88
Units CCF

C - 3

APPENDIX - C

CITY OF LA PALMA, CA
Sewer Cost of Service by Cost Component and Customer Class - Test Year FY 2026 [A] [B]
Volume Total
1 Residential $ 500,803 $ 500,803
2 Non-Residential 68,156 68,156
3 Total $ 568,959 $ 568,959
Line No: Description
C - 4

APPENDIX - C

CITY OF LA PALMA, CA
Sewer Rate Calculation - Test Year FY 2026
[A] [B] [C] [D] [E] [F] [G] [H] [I] [J]
Fixed Rate
Costs
Bi-Monthly
Customers
Proposed BiMonthly
Fixed Fee
Existing BiMonthly
Fixed Fee
Bi-Monthly
Fixed Fee
Difference
Volumetric
Rate Costs
Billable
Annual
Volume
(CCF)
Proposed
Volumetric
Rate
Existing
Volumetric
Rate
Volumetric
Rate
Difference
1 Residential N/A 4,232 N/A N/A N/A $ 500,803 569,256 $ 0.88 $ 0.85 $ - 2 Non-Residential N/A 73 N/A N/A N/A $ 68,156 77,472 $ 0.88 $ 0.85 $ - Line
No: Customer Class
C - 5

APPENDIX - C

CITY OF LA PALMA, CA
Sewer Revenue vs Cost of Service by Customer Class Check - Test Year FY 2026 [A] [B] [C]=[A]*[B]*6 [D] [E] [F]=[D]*[E] [G]=[C]+[F] [H] [I]=[H]-[G] Bi-Monthly
Customers
Proposed BiMonthly
Fixed Fee
Total Fixed
Fee Revenue
Billable
Annual
Volume
(CCF)
Proposed
Volumetric
Rate
Total
Volumetric
Rate
Revenues
Total
Calculated
Revenues
Total COS
Revenues
Difference
Calc vs COS
1 Residential 4,232 N/A N/A 569,256 $ 0.88 $ 500,803 $ 500,803 $ 500,803 $ - Non-Residential 73 N/A N/A 77,472 $ 0.88 $ 68,156 $ 68,156 $ 68,156 $ - 2 Total 4,232 N/A 646,728 $ 568,959 $ 568,959 $ 568,959 $ - Line
No: Customer Class

C - 6
27368 Via Industria, Suite 200
Temecula, CA 92590
800.755.6864 | Fax: 888.326.6864
www.willdan.com

NOTICE OF PUBLIC HEARING REGARDING

PROPOSED CHANGES TO WATER AND SEWER RATES
Hearing Date & Time: November 4, 2025, 6:30 PM
Hearing Location: La Palma City Hall Council Chambers
7822 Walker Street, La Palma, CA 90623
Why are you receiving this notice?
The City of La Palma (City) is mailing this notice to you because you are a water and/or sewer (wastewater) customer, or the owner of record of a property that receives one or both services. This notice is being provided pursuant to California Constitution Article XIIID (also known as “Proposition 218”), which requires the City to notify property owners and system users (customers) of proposed changes to property-related fees, such as those for water or sewer service. This notice describes proposed changes to the rates for these services and provides information about a public hearing to be held on November 4, 2025, at the Council Chambers at the La Palma Civic Center, 7822 Walker Street, La Palma, CA 90623. If adopted, the proposed rates for water and sewer service will be in effect for the first full billing cycle following January 1, 2026.

What do water and sewer rates fund?
The City provides water and sewer service to approximately 4,379 residential, commercial, and fire protection customers and maintains critical infrastructure that ensures quality service and safeguards the health and safety of the community. The bimonthly water and sewer rates the City charges its customers are the primary source of revenue to operate and maintain the water and sewer systems and are used solely for this purpose. Water and sewer rate revenue provides funding for system operations, maintenance, capital projects, administration, as well as costs related to prudent long-term operational or financial management of the utilities, such as maintaining adequate reserve funds and planning for contingencies.

The City provides safe, potable water that is sourced primarily from the local groundwater basin managed by the Orange County Water District (OCWD) and supplemented as needed by imported water purchased from the Metropolitan Water District of Southern California (MET) through the Municipal Water District of Orange County (MWDOC), via two wells and two reservoirs. The City also provides sewer collection services through approximately 30 miles of sewer gravity pipelines, while sewer treatment and disposal services are provided by and billed separately by Orange County Sanitation District (OCSD).

The purpose of a Water and Sewer Rate Study is to evaluate the current financial condition of both utilities, examine the costs necessary to provide service to customers and determine the level of funding required from rates over the next five years.

The result is a recommended plan that ensures each utility fund meets projected financial obligations for operations and maintenance and capital infrastructure improvements, to ensure continued safe and efficient operations, while maintaining sufficient reserves for cash flow management and emergencies. To maintain the financial viability of the utilities, the City is updating the water and sewer rates before the end of the last rate study period ending FY 2025/26 due to increased costs it has experienced for operations and maintenance as well as the need to fund future capital improvement projects. The rate structures for each utility were designed so that revenues from proposed rates do not exceed the amount of revenue required to provide the services, nor will rate revenue be used for any purposes other than those for which they are imposed.

Why are water and sewer rate changes needed?
The utility rate study and financial plan determined that the City’s current water rates are not sufficient to meet the increasing costs of system operations, maintenance and capital projects, administrative support for operations, repair and replacement of aging system components, maintenance of designated reserves, and capital projects necessary to ensure uninterrupted service and compliance with regulatory mandates. In addition, future needs for water capital improvements will require additional funding from rates. These capital projects will be funded primarily with rate revenues of the system. As a result, revenue increases are required to generate additional cash to fund the projected costs of operations and capital projects, as well as maintain adequate cash reserves.

During the last rate study, the City chose not to increase sewer rates, but costs have continued to escalate over that same period. Though the current sewer rates continue to generate sufficient revenues to meet the revenue requirements, they will not be able to do so after the projection period ending June 30, 2030. Therefore, nominal rate increases are recommended to, at a minimum, mitigate the impacts of inflation and ensure the ability of the sewer utility to meet financial obligations in the future and maintain sufficient cash reserves to fund capital projects beyond the projection period.

The proposed rates are based on a comprehensive utility rate study and financial plan completed by an independent consultant. Based on a comprehensive cost-of-service analysis, the amount of the proposed rates imposed on any parcel or person as an incidence of their property ownership will not exceed the proportional cost of the service(s) attributable to such parcel, and no rate will be imposed for service unless that service is actually used by, or immediately available to, the property owner or customer in question. The rate study report is available for review with the City Clerk.

How the water and sewer rates are determined and how they work To develop rates that generate sufficient revenue to meet the fiscal and policy objectives of the City for each utility, a determination of the annual revenue requirements from water and sewer rates was completed. As previously mentioned, revenue requirements include projected expenditures for operations, maintenance, repair and replacement of aging system components, equipment and capital projects. The revenue requirement for each utility also includes designated reserves.

Maintaining appropriate reserves is critical to the ability of the City to serve its customers and respond to unforeseen and unpredictable costs. The reserves may only be used to fund costs associated with those systems.

Revenue requirements were then compared to sources of available funds under existing rates during each year of the forecast period to determine whether projected revenues are sufficient to meet those requirements. Where a shortage of revenue was found, revenue adjustments were calculated which, if implemented, will provide revenue to meet those needs.

The City is proposing to implement new water and sewer rates as a series of annual adjustments starting on January 1, 2026, and then each January 1 thereafter until January 2030. The following sections summarize the proposed rates, which will go into effect and remain in effect until superseded by Council action.

Proposed Bi-Monthly Water Rates - January 1, 2026 through January 1, 2030 Proposed water rates consist of 1) a bi-monthly fixed charge for all customers, except fire protection accounts who have specific charges, that varies based on meter size and is the minimum amount a customer will pay regardless of the amount of water used; and 2) a uniform volumetric rate per 100 cubic feet of metered water usage (100 cubic feet = 1 unit of water = 748 gallons). The fixed charge recovers fixed costs of maintaining and operating utility infrastructure and facilities, while the volumetric rate recovers variable costs of pumping, treating, and distributing water. The rate structure was designed so that each customer will be charged an amount that represents their proportional share of the City’s cost of serving them based on their demand and usage characteristic.

Proposed Bi-Monthly Sewer Rates – January 1, 2026 through January 1, 2030 Proposed sewer rates consist of volumetric rates per 100 cubic feet (100 cubic feet = 1 unit of water = 748 gallons) for all customers based on the amount of metered water usage. The volumetric rates only recover the costs of collecting and conveying wastewater to the treatment and reclamation facility owned and operated by OCSD. Sewer treatment and disposal services are provided by and billed separately by OCSD. The rate structure was designed so each customer will be charged an amount proportional to the cost of serving them based on their usage characteristics. 2026 2027 2028 2029 2030
Bi-Monthly Fixed Service Charge:
5/8 Inch $ 54.52 $ 62.10 $ 77.62 $ 85.38 $ 93.92 $ 99.32 3/4 Inch $ 54.52 $ 62.10 $ 77.62 $ 85.38 $ 93.92 $ 99.32

1.0 Inch $ 54.52 $ 62.10 $ 77.62 $ 85.38 $ 93.92 $ 99.32

1.5 Inch $ 224.40 $ 257.99 $ 322.48 $ 354.73 $ 390.20 $ 412.64

2.0 Inch $ 351.82 $ 404.90 $ 506.13 $ 556.74 $ 612.42 $ 647.63

3.0 Inch $ 649.10 $ 747.71 $ 934.64 $ 1,028.10 $ 1,130.91 $ 1,195.94

4.0 Inch $ 1,073.80 $ 1,237.43 $ 1,546.79 $ 1,701.47 $ 1,871.61 $ 1,979.23

6.0 Inch $ 2,135.58 $ 2,461.74 $ 3,077.17 $ 3,384.89 $ 3,723.38 $ 3,937.48

8.0 Inch $ 3,409.68 $ 3,930.91 $ 4,913.64 $ 5,405.01 $ 5,945.51 $ 6,287.37

10.0 Inch $ 4,896.14 $ 5,644.94 $ 7,056.17 $ 7,761.79 $ 8,537.97 $ 9,028.90 Bi-Monthly Fire Flow Fixed Service Charge:
5/8 Inch $ 13.94 $ 16.15 $ 20.19 $ 22.21 $ 24.43 $ 25.83 3/4 Inch $ 13.94 $ 16.15 $ 20.19 $ 22.21 $ 24.43 $ 25.83

1.0 Inch $ 13.94 $ 16.15 $ 20.19 $ 22.21 $ 24.43 $ 25.83

1.5 Inch $ 21.46 $ 28.25 $ 35.32 $ 38.85 $ 42.73 $ 45.19

2.0 Inch $ 27.08 $ 37.33 $ 46.66 $ 51.33 $ 56.46 $ 59.71

3.0 Inch $ 40.24 $ 58.51 $ 73.13 $ 80.45 $ 88.49 $ 93.58

4.0 Inch $ 59.02 $ 88.76 $ 110.95 $ 122.05 $ 134.25 $ 141.97

6.0 Inch $ 105.98 $ 164.39 $ 205.49 $ 226.04 $ 248.65 $ 262.95

8.0 Inch $ 162.32 $ 255.16 $ 318.95 $ 350.84 $ 385.92 $ 408.11

10.0 Inch $ 228.06 $ 361.05 $ 451.31 $ 496.44 $ 546.08 $ 577.48

12.0 Inch $ 415.90 $ 663.58 $ 829.48 $ 912.43 $ 1,003.67 $ 1,061.38 Volumetric Rates Per 100 Cubic Feet:

All Flow $ 3.47 $ 3.99 $ 4.98 $ 5.48 $ 6.03 $ 6.38
Description
Existing
Rates
Projected For Calendar Year Beginning January 1:
2026 2027 2028 2029 2030
Volumetric Rates Per 100 Cubic Feet [1]:

All Flow $ 0.85 $ 0.88 $ 0.94 $ 1.01 $ 1.08 $ 1.15
Notes:

Projected For Calendar Year Beginning January 1:
[1] The City provides collection only services, all customers pay the same rate per 100 cubic feet of billed water Description
Existing
Rates

Impact on your water and sewer bill
Per the proposed rates effective January 1, 2026, the combined water and sewer bill for a typical single-family home using 1,600 cubic feet of water per bi-monthly billing period would increase from $123.64 currently to $139.96 per bi-monthly billing period. The accompanying graph provides a summary of existing and proposed rates under various usage scenarios.

How do you file a protest or participate in the public hearing? The City will consider new water and sewer rates at a Public Hearing on Tuesday, November 4, 2025, at 6:30 p.m. at the City Council Chambers, located at 7822 Walker Street, La Palma, CA 90623. You are invited to present oral or written testimony at the Public Hearing. Any owner, or customer of record, of a parcel subject to the proposed rates may submit a written protest against the proposed rate revisions. If written protests are filed for a majority of the affected parcels, the proposed rate revisions will not be adopted. If you do not object to the proposed rate revisions to fund the operation, maintenance, and capital improvements for City water and sewer services, you do not need to take any action.

For a written protest to be counted, it must include the following: 1) a statement indicating that the identified property owner or customer of record is in opposition to the proposed water or sewer rate changes; 2) the street address or Assessor's Parcel Number (APN) for the parcel(s) with respect to which the protest is made; and 3) the name and signature of the owner or customer. Protests may be mailed to the City Clerk at 7822 Walker Street, La Palma, CA 90623, or hand delivered to the City Clerk at the Public Hearing on November 4, 2025. To be counted, a signed written protest must be received by the City Clerk before the conclusion of the Public Hearing. Protests submitted via e-mail or other electronic means will not be accepted. For any written protest, whether mailed or submitted in person to the City Clerk, please identify on the front of the envelope that the enclosed protest is for the Public Hearing on the Proposed Rate Changes – Water and Sewer Rates.

The City Council will consider all written and oral protests related to the proposed rate changes at the Public Hearing. Oral comments at the Public Hearing will not qualify as formal protests unless accompanied by a written protest. Upon the conclusion of the Public Hearing, there will be no more written protests accepted, and no more testimony taken, and the City Council will consider adoption of the proposed rates described in this notice. If written protests, as outlined above, are not presented by a majority of property owners or customers of record, the City Council will be authorized to adopt the proposed rates. While both property owners and customers of record may submit written protests, only one protest will be counted for each parcel. If adopted, the rates for water and sewer service will be in effect beginning January 1, 2026.

In accordance with Government Code section 53759, there is a 120-day statute of limitations for challenging any new, increased, or extended fee or charge, commencing from the later of the effective date of the new rates or of the date of the final passage, adoption, or approval of the resolution adopting the new rates.