2026-06-08_item_5.1_public_hearing_to_consider_adoption_of_the_2026_consolidated_treatment_facility_capacity_charge_report_and_the_capacity_charge_recommended_therein

ITEM 5. 1

CITY MANAGER' SREPORT
JUNE 8, 2026 CITY COUNCIL REGULAR MEETING
ITEM: PUBLIC HEARING ( PUBLISHED NOTICE) TO

CONSIDER ADOPTION OF THE CITY OF LATHROP
2026 CONSOLIDATED TREATMENT FACILITY ( CTF)

CAPACITY CHARGE REPORT AND THE CAPACITY

CHARGE RECOMMENDED THEREIN
RECOMMENDATION: Council to Consider the Following:

1. Hold a Public Hearing; and

2. Adopt a Resolution to Approve the City of
Lathrop 2026 Consolidated Treatment
Facility ( CTF) Capacity Charge Report and
the Capacity Charge Recommended Therein
SUMMARY:

Staff requests that City Council hold a public hearing, consider all information and public testimony, and, if determined to be appropriate, adopt a resolution to approve the City of Lathrop 2026 Consolidated Treatment Facility ( CTF) Capacity Charge Report, included as Attachment B, and the maximum cost -justified Capacity Charge of $ 33. 64 per gallon per day recommended therein.

BACKGROUND:

The City of Lathrop owns and operates the CTF, which provides wastewater treatment services for development within the City. The City has historically financed the construction and expansion of the CTF largely through contributions from major developers. As the City approaches planned Phases 3 and 4 expansions, staff retained Goodwin Consulting Group, Inc. to prepare the 2026 CTF Capacity Charge Report Charge Report) to calculate and support adoption of a formal, cost -based capacity charge, consistent with Government Code Section 66013.

The Charge Report calculates a wastewater capacity charge for purchases of wastewater treatment capacity for new projects and existing facilities requiring additional capacity. The CTF provides secondary treatment, tertiary membrane filtration, and disinfection of wastewater. Between 2015 and 2018, the City completed expansions to the CTF bringing its designed treatment capacity to 2. 5 MGD average dry weather flow ( ADWF). Due to increased biological oxygen demand resulting from water conservation efforts, the actual realized capacity of the CTF following the Phase 2 expansion was approximately 2. 0 MGD ADWF. Planned Phases 3 and 4 expansions will bring total CTF treatment capacity to 6. 2 MGD ADWF.

Together with the City' s 14. 7% contractual share of the Manteca -Lathrop Water Quality Control Facility ( MWQCF), which provides 1. 45 MGD, total system capacity will reach 7. 65 MGD ADWF.

CITY MANAGER' S REPORT PAGE 2
JUNE 8, 2026 CITY COUNCIL REGULAR MEETING

PUBLIC HEARING ( PUBLISHED NOTICE) TO CONSIDER ADOPTION OF THE CITY OF LATHROP 2026 CONSOLIDATED TREATMENT FACILITY ( CTF)

CAPACITY CHARGE REPORT AND THE CAPACITY CHARGE RECOMMENDED

THEREIN
The Charge Report allocates the total estimated cost of the wastewater treatment system, including existing Phases 1 and 2 facilities with costs escalated to 2026 dollars using the Engineering News - Record Construction Cost Index ( ENR CCI), the City' sshare of the MWQCF, and the present value of anticipated financing costs for Phases 3 and 4. In total, the estimated cost of the system is $ 257, 336, 555. Dividing this total by the system' s 7. 65 MGD of treatment capacity yields a system -wide average cost of $ 33. 64 per gallon per day, which is the proposed maximum Capacity Charge. This is approximately 2.0% higher than the City' s prior informal estimate of

32. 98 per gallon per day, primarily due to financing cost assumptions for the planned Phases 3 and 4 expansions.

Individual capacity charges will be calculated by multiplying the City' s applicable wastewater generation rate for each land use, expressed in gallons per day per dwelling unit or per acre, by the adopted Capacity Charge. The fee will be collected prior to approval of a final subdivision map or parcel map, or prior to issuance of a building permit where no map is required. The Charge Report also estimates that up to approximately $ 31. 5 million may be available for pro -rata reimbursement to the City and prior developer participants, if any, who contributed to the construction of CTF Phases 1 and 2 above the system -wide average cost, after Capacity Charge revenues are first applied to repay the debt for Phases 3 and 4.

Staff requests that City Council hold a public hearing, consider all information and public testimony, and, if determined to be appropriate, adopt a resolution approving the City of Lathrop 2026 CTF Capacity Charge Report, included as Attachment B, and the capacity charge recommended therein.

REASON FOR RECOMMENDATION:

The City of Lathrop does not currently have a formally adopted wastewater capacity charge. Instead, the City has historically collected required payments from developers through development agreements. Adopting the Capacity Charge establishes a clear, cost - based mechanism to ensure that new connections to the wastewater system pay their fair and proportionate share of the capital cost of existing and planned treatment facilities, consistent with Government Code Section 66013. As planned development proceeds and new connections are made, having an adopted Capacity Charge in place ensures the City can recover the costs of the system in an equitable and defensible manner.

FISCAL IMPACT:

There is no general fund budget impact to the City. Adoption of the CTF Capacity Charge will establish a restricted revenue source from new connections to fund the capital costs of the City' s
wastewater treatment system, including repayment of
anticipated debt for CTF Phases 3 and 4. The Capacity Charge will be collected from CITY MANAGER' S REPORT PAGE 3
JUNE 8, 2026 CITY COUNCIL REGULAR MEETING

PUBLIC HEARING ( PUBLISHED NOTICE) TO CONSIDER ADOPTION OF THE CITY OF LATHROP 2026 CONSOLIDATED TREATMENT FACILITY ( CTF)

CAPACITY CHARGE REPORT AND THE CAPACITY CHARGE RECOMMENDED

THEREIN
new development prior to approval of a final subdivision map or parcel map, or prior to issuance of a building permit where no map is required, and used to fund or reimburse the cost of the wastewater treatment facilities identified in the Charge Report.

ATTACHMENTS:

A. Resolution to Approve the City of Lathrop 2026 Consolidated Treatment Facility CTF) Capacity Charge Report and the Capacity Charge Recommended Therein B. City of Lathrop 2026 Consolidated Treatment Facility ( CTF) Capacity Charge Report, dated March 31, 2026
CITY MANAGER' SREPORT PAGE 4
JUNE 8, 2026 CITY COUNCIL REGULAR MEETING

PUBLIC HEARING ( PUBLISHED NOTICE) TO CONSIDER ADOPTION OF THE CITY OF LATHROP 2026 CONSOLIDATED TREATMENT FACILITY ( CTF)

CAPACITY CHARGE REPORT AND THE CAPACITY CHARGE RECOMMENDED

THEREIN
APPROVALS:

GA / 2c.

Bellal Nabizadah Date
Assistant Engineer
Bra Taylor
Publi Works Director / City Engineer
Cari Ja s
Financ Director
6// 1/ 07. 4.

Date
Date
Vi/ Zo Z o
Thomas Hedegard Date
Deputy City Manager
Gs• 3• 2024
Michael King Date
Assistant City Manager
Salvador Navarrete Date
City Attorney
t •2(o
Stephen J. Salvatore Date
City Manager
RESOLUTION NO. 26-

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LATHROP TO APPROVE THE CITY OF LATHROP 2026 CONSOLIDATED TREATMENT

FACILITY ( CTF) CAPACITY CHARGE REPORT AND THE CAPACITY CHARGE

RECOMMENDED THEREIN
WHEREAS, the City of Lathrop ( City) owns and operates the Consolidated Treatment Facility ( CTF), a wastewater treatment system that provides secondary treatment, tertiary membrane filtration, and disinfection of wastewater for development within the City. The CTF was originally constructed beginning in 2004 and was subsequently expanded between 2015 and 2018 to a total designed capacity of approximately 2. 5 million gallons per day ( MGD) average dry weather flow ADWF). Due to increased biological oxygen demand resulting from water conservation efforts, the actual realized capacity of the CTF following the Phase 2 expansion was approximately 2. 0 MGD ADWF; and
WHEREAS, the City also holds a 14. 7% contractual share of the Manteca - Lathrop Water Quality Control Facility ( MWQCF), providing an additional 1. 45 MGD of wastewater treatment capacity. Together with the planned Phases 3 and 4 expansions of the CTF, which will bring total CTF treatment capacity to 6. 2 MGD ADWF, the City' stotal integrated system capacity will reach 7. 65 MGD ADWF; and WHEREAS, the City has historically financed the construction and expansion of the CTF largely through contributions from major developers pursuant to development agreements. As the City approaches planned Phases 3 and 4 expansions and new connections to the system continue, it is necessary to establish a formal, cost - based wastewater capacity charge to ensure that all new connections pay their fair and proportionate share of the capital cost of the system, consistent with Government Code Section 66013; and
WHEREAS, the City retained Goodwin Consulting Group, Inc. to prepare the City of Lathrop 2026 CTF Capacity Charge Report ( Charge Report), dated March 31, 2026, which is included as Attachment B to the June 8, 2026 City Manager' sReport accompanying this Resolution and incorporated herein by this reference; and WHEREAS, the Charge Report uses a system - plan methodology consistent with Government Code Section 66013, allocating the total capital cost of the City' s existing and planned wastewater treatment facilities across the total system capacity to derive a uniform cost per gallon per day applicable to new connections. The Charge Report estimates the total cost of the wastewater treatment system at $ 257, 336, 555, including existing Phases 1 and 2 facilities with costs escalated to 2026 dollars using the Engineering News - Record Construction Cost Index ( ENR CCI), the City' sshare of the MWQCF, and the present value of anticipated financing costs for Phases 3 and 4.

Dividing this total cost by the system' s7. 65 MGD of treatment capacity yields a system - wide average cost of $ 33. 64 per gallon per day, which is the maximum cost - justified Capacity Charge; and
WHEREAS, the proposed Capacity Charge of $ 33. 64 per gallon per day is approximately 2.0°/higher than the City' s prior informal estimate of $ 32. 98 per gallon per day, primarily due to financing cost assumptions for the planned Phases 3 and 4 expansions; and
WHEREAS, the Charge Report estimates that up to approximately $ 31. 5 million may be available for pro -rata reimbursement to the City and prior developer participants, if any, who contributed to the construction of CTF Phases 1 and 2 above the system -wide average cost, after Capacity Charge revenues are first applied to repay the anticipated debt for Phases 3 and 4; and
WHEREAS, a duly noticed public hearing was held before the City Council on June 8, 2026, at which time the City Council considered the Charge Report, all written and oral testimony submitted at or prior to the hearing, and all other information in the record, consistent with the notice and hearing requirements of Government Code Section 66016; and
WHEREAS, the City Council finds that the Capacity Charge does not exceed the reasonable cost of providing wastewater treatment capacity to new connections, as demonstrated by the cost allocation methodology set forth in the Charge Report, and that the charge is consistent with the requirements of Government Code Section 66013.

NOW, THEREFORE, BE IT RESOLVED, that the City Council of the City of Lathrop does hereby approve the City of Lathrop 2026 Consolidated Treatment Facility ( CTF) Capacity Charge Report, dated March 31, 2026, included as Attachment B to the City Manager' sReport that accompanied this Resolution and incorporated herein by this reference, and the Capacity Charge of $ 33. 64 per gallon per day recommended therein, consistent with Government Code Section 66013, based on the following findings:

1. The purpose of the Capacity Charge is to fund the capital costs of the City' s wastewater treatment system, including the existing CTF, the City' s contractual share of the MWQCF, and the planned Phases 3 and 4 expansions of the CTF, as identified in the Charge Report. Revenues collected shall be used for no other purpose.

2. New connections to the City' swastewater system generate additional demand for wastewater treatment capacity. The Capacity Charge ensures that new connections pay their fair and proportionate share of the capital cost of providing that capacity, consistent with Government Code Section 66013.

3. The amount of the Capacity Charge does not exceed the estimated reasonable cost of providing wastewater treatment capacity to new connections. The charge is calculated on a cost -per -gallon - per -day basis using a system -plan methodology that allocates the total capital cost of existing and planned treatment facilities across the total system capacity, as set forth in the Charge Report.

4. A reasonable relationship exists between the amount of the Capacity Charge and each new connection' sdemand on the wastewater treatment system, as each connection' s charge is calculated by multiplying its estimated wastewater generation rate in gallons per day by the adopted per -gallon Capacity Charge rate.

BE IT FURTHER RESOLVED, that the Capacity Charge Report and the Capacity Charge recommended therein are approved; and
BE IT FURTHER RESOLVED, that the Capacity Charge established herein shall become effective sixty ( 60) days following adoption of this Resolution.

PASSED AND ADOPTED by the City Council of the City of Lathrop this 8th day of June 2026 by the following vote:

AYES:

NOES:

ABSTAIN:

ABSENT:

Paul Akinjo, Mayor
ATTEST: APPROVED AS TO FORM:

Teresa Vargas, City Clerk Salvador Navarrete, City Attorney Attachment
II

GCG GOODWIN CONSULTING GROUP
g
II

CITY OF LATHROP

CONSOLIDATED TREATMENT FACILITY
CTF)

CAPACITY CHARGE REPORT
March 31, 2026
655 UNIVERSITY AVE, SUITE 200 • SACRAMENTO, CA 95825
PHONE: ( 916) 561- 0890 • FAX: ( 91 6) 561- 0891

CITY OF LATHROP

CONSOLIDATED TREATMENT FACILITY ( CTF)

CAPACITY CHARGE REPORT

TABLE OF CONTENTS
Section Page
Executive Summary i

1. Introduction 1

2. Capacity Charge Methodology 4

3. Capacity Charge Calculation 6

4. Capacity Charge Administration 19

EXECUTIVE SUMMARY

PURPOSE OF THE CONSOLIDATED TREATMENT FACILITY ( CTF) CAPACITY CHARGE REPORT The City of Lathrop (" City") provides wastewater treatment and conveyance services to properties within its service area. As new connections are made to the wastewater system, additional demand is placed on overall system capacity, including treatment facilities and related components. In order to ensure that the cost of providing this capacity is recovered in a fair and equitable manner, the City has prepared this wastewater capacity charge study (" Charge Report").

The capacity charge (" Capacity Charge") is designed to recover a proportionate share of the capital costs associated with providing wastewater service capacity, including planned expansions, to new users of the system. The charge is based on a cost - of -service methodology that allocates system costs in proportion to each user' s demand on wastewater system capacity, measured in gallons per day (" GPD"). This approach ensures that each user pays a share of system costs that is reasonably related to their use of the system.

The City retained Goodwin Consulting Group, Inc. to assist in calculating a charge for wastewater treatment capacity from the City' s
Consolidated Treatment Facility (" CTF").

BACKGROUND
The first phase of the CTF, known initially as the Wastewater Recycling Plant (" WRP"), was constructed in early 2004. The City also contractually owns 14. 7% of the capacity ofthe Manteca - Lathrop Water Quality Control Facility (" MWQCF"). The two facilities provide wastewater treatment to customers within the City limits. The CTF provides secondary treatment, tertiary membrane filtration, and disinfection of wastewater and initially had a total capacity of 0. 75 MGD average dry weather flow (" ADWF"). Between 2015 and 2018, the City completed a number of expansions to the CTF to accommodate increased wastewater flows from the Central Lathrop Specific Plan (" CLSP"), Mossdale, and River Islands developments.

Together with the 1. 45 MGD of capacity from the MWQCF, the total treatment capacity of the system will increase to 7. 65 MGD.

The City has historically financed the construction and expansion of the CTF largely with contributions from major developers. Based on input from City staff and its contractors, the total cost of the CTF, its expansions, and the capacity from the MWQCF is over $ 257 million. This Charge Report proposes a Capacity Charge that the City may collect from new connections to ensure that the costs of the City' s
wastewater treatment system can be recovered as additional demands for wastewater treatment are placed on the system. Additionally, the Charge Report estimates the amount that can be reimbursed to the City and participating developers for a portion of the facilities.

CHARGE COMPARISON
As mentioned above, the City has previously received contributions from developers to partially cover the costs of the CTF. Historically, City staff has calculated the average cost of treatment capacity to be $ 32. 98 per gallon per day. For the reasons set forth in Section 3 below, this Charge Report proposes a maximum Capacity Charge of $33. 64 per gallon per day, which is 2.0% higher than the previous estimate.

ANNUAL ADJUSTMENTS
The Capacity Charge may be adjusted in future years to reflect revised facility standards, receipt of funding from alternative sources ( i.e., state or federal grants), revised costs, or changes to assumed financing parameters. Any such adjustments that would result in a Capacity Charge higher than the proposed maximum herein should be adopted with a revised Charge Report. In addition to such adjustments, the Capacity Charge will be adjusted annually by updating the cost escalation and present value calculations included in Tables 2 and 3 of Section 3, as further described in Section 4.

GOVERNMENT CODE SECTIONS
Pursuant to California Government Code (" Government Code") Section 66013, a " capacity charge" means a charge for public facilities in existence at the time a charge is imposed or charges for new public facilities to be acquired or constructed in the future that are of proportional benefit to the person or property being charged, including supply or capacity contracts for rights or entitlements, real property interests, and entitlements and other rights of the local agency involving City of Lathrop ii 2026 CTF Capacity Charge Report
capital expense relating to its use of existing or new public facilities. A " capacity charge" does not include a commodity charge. Such a charge " shall not exceed the estimated reasonable cost of providing the service for which the fee or charge is imposed, unless a question regarding the amount of the fee or charge imposed in excess of the estimated reasonable cost of providing the services or materials is submitted to, and approved by, a popular vote oftwo-hirds of those electors voting on the issue." Notably, a capacity charge is separate from a connection fee, which is defined as a fee for the physical facilities necessary to make water or sewer connections, such as meters and pipelines. Pursuant to Government Code Section 66013( h), capacity charges are not subject to the provisions of Government Code Chapter 5 ( commencing with Section 66000) but are subject to Sections 66016, 66022, and 66023.

Government Code Section 66016 establishes procedures for levying or increasing a fee or charge.

Pursuant to this Section, a local agency shall hold at least one public hearing to consider the fee or charge. At least 10 days prior to the meeting, the local agency shall make available to the public data indicating the amount of cost, or estimated cost, required to provide the service for which the charge is levied and the revenue sources anticipated to provide the service, including general fund revenues.

Government Code Section 66022 outlines how a fee or service charge may be judicially challenged. Such a challenge shall be commenced within 120 days of the ordinance or resolution adopting it. Or, if the charge is subject to an automatic increase, the challenge must occur within 120 days of the adjustment.

Government Code Section 66023 establishes how a person may request an audit of the fee or charge. Such an audit will determine whether a fee or charge exceeds the amount reasonably necessary to cover the costs, when the revenue is scheduled to be expended, and when the improvements are to be completed. If the audit finds that the fee or charge is not in compliance, then the fee shall be adjusted accordingly.

Government Code Section 66013 authorizes local agencies to impose fees for water and sewer connections or capacity charges, provided that such charges do not exceed the reasonable cost of providing service. The Capacity Charge is designed to recover a proportionate share of the capital costs associated with providing wastewater treatment capacity to new connections. The methodology is based on a cost -of -service approach that allocates system costs in proportion to each user' sdemand on system capacity.

City ofLathrop iii 2026 CTF Capacity Charge Report
This charge is not a development impact fee under Section 66000. It does not allocate costs based on land use or development -related impacts. Costs are allocated on the use of utility system capacity.

City of Lathrop iv 2026 CTF Capacity Charge Report

1. INTRODUCTION

BACKGROUND
The City of Lathrop is located in the Central Valley, approximately 58 miles south of Sacramento and 80 miles east of San Francisco. When the City incorporated in 1989, its population was approximately 6, 500; as of January 2025, the California Department of Finance estimates the City' s population is 38, 596.

The City provides wastewater services to an area that is generally contiguous with the City limits.

Currently, wastewater is treated at two facilities. Wastewater from the areas east of I-5 and north of Louise Avenue is currently sent to the MWQCF, of which the City contractually owns 14. 7%.

Other areas in the City, primarily the Central Lathrop Specific Plan, Mossdale, and River Islands areas, are served by the City' s
CTF. The Crossroads Industrial Park was initially served by a separate facility known as the Crossroads Wastewater Treatment Facility, but wastewater from that area is now treated at the CTF after the Crossroads facility was decommissioned in late 2015.

Currently, there are no plans to purchase or expand any capacity from the MWQCF, and it is assumed that the City has no remaining unused capacity there. The City has established an intertie between the MWQCF and the CTF, and it intends to redirect flows from the MWQCF to the CTF in 2026. With the intertie, the service area for the CTF will cover the entire City limits. Since the MWQCF capacity is currently a part ofthe City' s overall wastewater treatment system, its capacity and estimated cost is included in the calculation of the Capacity Charge. According to City staff, the City may retain its share of the MWQCF capacity following the redirection of flows to provide capacity for future users.

The first phase of the CTF, known initially as the WRP, was constructed in early 2004. The City also contractually owns 14. 7% of the capacity of the MWQCF. The two facilities provide wastewater treatment to customers within the City limits. The CTF provides secondary treatment, tertiary membrane filtration, and disinfection of wastewater, and initially had a total capacity of

0. 75 MGD ADWF. Between 2015 and 2018, the City completed a number of expansions to the CTF to accommodate increased wastewater flow from the CLSP, Mossdale, and River Islands developments. These expansions brought its total capacity to 2. 5 MGD ADWF. Due to increased biological oxygen demand or strength from water conservation efforts, the actual realized capacity of the CTF following the Phase 2 expansion was approximately 2. 0 MGD. The City previously discharged treated wastewater to a series of ponds and spray fields. In 2022 and 2023, the City completed its NPDES permitting and construction of its River Outfall facility to be able to City ofLathrop 1 2026 CTF Capacity Charge Report
discharge highly treated wastewater to the San Joaquin River. This eliminated the need for the large ponds and spray fields required for land disposal of the treated wastewater.

In September 2022, the City adopted its General Plan Update, which included changes to the zoning and land uses planned in the City. More specifically, this included substantial new development in Phase 2 of CLSP and Phase 2 of River Islands. As a result, the anticipated population and jobs in the City at buildout were increased. In the Draft Environmental Impact Report for the Lathrop General Plan Update, dated May 2022, De Novo Planning Group prepared estimates of potential population and jobs in the City at buildout. The existing population was estimated to be 28, 503 and there were an estimated 9, 153 jobs in the City. At full buildout, which is anticipated to occur in 2040, the population is estimated to grow to 95, 065 and the number of jobs is expected to grow to 58, 403. The resulting increased wastewater flow will naturally lead to a greater need for wastewater treatment within the City. Anticipating this demand, the City has added Phases 3 and 4 expansions to the CTF to its CIP. The two new phases are projected to bring the total treatment capacity of the CTF to 6. 2 MGD ADWF. Together with the 1. 45 MGD of capacity from the MWQCF, the total treatment capacity of the system will increase to 7. 65 MGD.

The City has historically financed the construction and expansion of the CTF largely with contributions from major developers. This Charge Report proposes a Capacity Charge to ensure that new connections to the wastewater system pay their fair share of the total system capacity and to provide prior participants with reimbursement for a portion of their contributions above the system -wide average. This report establishes a wastewater capacity charge that reflects the reasonable cost of providing wastewater treatment to new connections to the City' ssystem. As additional users connect to the wastewater system, incremental demand for treatment capacity is created. The City must ensure that sufficient infrastructure is in place to serve this demand. The capacity charge provides a mechanism to recover the capital costs associated with this capacity.

This analysis is based on a utility cost -of -service framework in which costs are allocated based on wastewater flow demand, rather than land use or development characteristics.

CAPACITY CHARGES
Pursuant to Government Code Section 66013, a " capacity charge" means a charge for public facilities in existence at the time a charge is imposed or charges for new public facilities to be acquired or constructed in the future that are of proportional benefit to the person or property being charged, including supply or capacity contracts for rights or entitlements, real property interests, and entitlements and other rights of the local agency involving capital expense relating to its use of existing or new public facilities. A " capacity charge" does not include a commodity charge.

City of Lathrop 2 2026 CTF Capacity Charge Report
Such a charge " shall not exceed the estimated reasonable cost of providing the service for which the fee or charge is imposed, unless a question regarding the amount of the fee or charge imposed in excess of the estimated reasonable cost of providing the services or materials is submitted to, and approved by, a popular vote of two-hirds of those electors voting on the issue." Notably, a capacity charge is separate from a connection fee, which is defined as a fee for the physical facilities necessary to make water or sewer connections, such as meters and pipelines. Pursuant to Government Code Section 66013( h), capacity charges are not subject to the provisions of Government Code Chapter 5 ( commencing with Section 66000) but are subject to Sections 66016, 66022, and 66023.

Government Code Section 66013 authorizes local agencies to impose fees for water and sewer connections or capacity charges, provided that such charges do not exceed the reasonable cost of providing service. The Capacity Charge is designed to recover a proportionate share of the capital costs associated with providing wastewater treatment to new connections. The methodology is based on a cost -of -service approach that allocates system costs in proportion to each user' s demand on system capacity. This charge is not a development impact fee under Section 66000. It does not allocate costs based on land use or development -related impacts. Costs are allocated on the use of utility system capacity.

The purpose of this Charge Report is to demonstrate that the charge calculated herein complies with the requirements of the Government Code. The assumptions, methodologies, facility standards, costs, and cost allocation factors that were used to develop the Capacity Charge are summarized in subsequent chapters of this report.

ORGANIZATION OF REPORT
The remainder of this report has been organized into the following sections:

Section 2. Provides an explanation of the methodology used to calculate the Capacity Charge.

Section 3. Provides a
summary of the Capacity Charge calculations. The summary is followed by a series of tables showing the calculations in full.

Section 4. Addresses implementation of the Capacity Charge, future adjustments, and administrative duties required by the Government Code.

City ofLathrop 3 2026 CTF Capacity Charge Report

2. CAPACITY CHARGE METHODOLOGY
The Capacity Charge is calculated using a proportional cost allocation approach in which total system costs are distributed across total system capacity, and individual users are charged based on their proportional demand. Costs are allocated based on wastewater flow demand, expressed in gallons per day ( GPD). Average wastewater flow factors are applied to residential and nonresidential uses solely for purposes of estimating wastewater generation. Costs are not allocated based on land use characteristics.

Specifically, the system plan methodology is used in this Charge Report. This methodology is used when planned facilities are part of an integrated system which benefits both existing and new connections to the wastewater system. This methodology is used for facilities that must be designed based on future demand projections within a geographic location and when the benefit of those facilities cannot be delineated between existing and future development. Typically, a formal plan such as a specific plan, facilities needs assessment, or master plan identifies and supports the level of facilities required to serve the existing and future development. This plan would typically consider the existing facilities already in place and determine what additional facilities would be necessary to accommodate new development. This information is analyzed in conjunction with a projection of the amount and location of future development in the plan area to determine the adequacy of existing facilities and the demand for new improvements that will be required. The steps to calculate a charge under the system plan -based capacity charge methodology include the following:

Step 1 Identify existing facilities and estimate future demand for facilities based on the capacity required at buildout of the plan area.

Step 2 Estimate the gross cost of existing and planned facilities needed to serve the existing and future connections to the wastewater system in the plan area.

Step 3 Subtract revenues available from alternative funding sources, if any, to identify a net facilities cost that will be recovered via the charge.

Step 4 Identify the service capacity of the existing and planned facilities ( e.g., gallons per day).

Step 5 Calculate the cost per unit of demand by dividing the total cost of existing and future facilities by the total service capacity.

City ofLathrop 4 2026 CTF Capacity Charge Report
Step 6 Apply the cost per unit of demand proportionately to the additional demand for treatment capacity ( e.g. GPD).

Applying the steps above, the capacity charge is calculated as follows:

Total Allocable System Cost
Capacity Charge = x User Demand ( GPD)
Total System Capacity ( GPD)
Where:

Total Allocable System Cost = cost of capacity -related infrastructure Total System Capacity = total wastewater system capacity ( GPD) User Demand = estimated wastewater generation ( GPD)
City ofLathrop 5 2026 CTF Capacity Charge Report

3. CAPACITY CHARGE CALCULATION
This section of the report identifies the costs and the Capacity Charge rates required to fund the planned expansions to the City' s
wastewater treatment system. Only facilities that contribute to wastewater system capacity are included in the cost basis for the capacity charge. The analysis incorporates existing system capacity and planned future capacity improvements. This blended approach ensures that all users pay a proportional share of total system capacity. Administrative or non -capacity -related facilities are excluded from the cost basis unless directly required to support wastewater system capacity.

FACILITY COST ESTIMATES
Table 1 at the end of this section shows the total cost of the existing and planned wastewater treatment facilities. As mentioned earlier in this Charge Report, the CTF was originally known as the WRP. Based on actual costs paid by the City, the total cost of the original treatment plant and its initial expansions was $ 26. 4 million. Previously, as part of normal operations, the facility discharged its treated wastewater to a system of ponds and spray fields for storage and irrigation.

The total cost of the ponds and spray fields was approximately $21. million, which includes the cost of the facilities, but excludes the cost of the land on which they were constructed. According to City staff, the land was never purchased by the City, but instead was either leased by the City or was dedicated to the City then reverted back to the developer once the City stopped using the sites. To be conservative, any cost paid to lease the land for the spray fields and ponds is assumed to be unrecoverable and is not included in the total cost of the facilities. All costs for the existing facilities are based on the actual costs incurred at the time of each expenditure, with no adjustments for inflation.

The City also owns 14. 7% of the capacity of the MWQCF. Since the City currently uses this capacity, the estimated cost of the 14. 7% share is included in the total cost of the system. City staff estimates that the current cost ofthis share is $ 48. 9million. Since it is a part of the existing system, this cost is grouped together with the Phase 1 and 2 CTF facilities.

City of Lathrop 6 2026 CTF Capacity Charge Report
The City contracted with PACE Advanced Water Engineering to design the upgrades to the CTF.

The cost estimates for the planned facilities were developed by the City' s contractor for the
expansions, GSE Construction. The cost of the CTF facility, its planned Phases 3 and 4 expansions, and the capacity of the MWQCF is estimated to be $ 213. 3 million. Of this total, 123. million is for the existing Phases 1 and 2 facilities, and the remaining $ 90. 2 million is for the planned Phases 3 and 4 facilities. These totals do not include the costs of sewer collection facilities. According to the City Engineer, there are no system deficiencies associated with the existing facilities.

PHASES 1 AND 2 COSTS
The cost to construct the facilities for Phases 1 and 2 were either paid by the City directly or were partially paid by contributions from developers. The costs were paid over a number of years between 2004, when the initial facilities were constructed, and June 2018, when the Phase 2 expansion was completed. Because these costs were paid in the past and were not covered by other outside funding sources, they need to be adjusted to current values to fairly value the facilities.

Table 2 at the end of this section presents the calculation of the current cost of the Phases 1 and 2 facilities. The actual costs at completion of each component are escalated to 2026 dollars using the Engineering News Record Construction Cost Index (" ENR CCI"). More specifically, the total cost of the WRP is escalated from March 2015 to January 2026, while the costs of the ponds, spray fields, and Phase 2 expansions are escalated from June 2018 to January 2026. This conservatively estimates the current costs by only escalating costs after the completion of each component rather than from the point of each expenditure. The estimated cost of the MWQCF capacity was based on a current estimate, so no escalation is applied to this cost. Following the escalation of each component' scost, the total current estimated cost of Phases 1 and 2 facilities is $ 147. 6 million.

PHASES 3 AND 4 COSTS
The Phase 3 and 4 expansions were designed to meet the needs of the anticipated development in the City and to realize economies of scale that come with having a larger -capacity facility. This
means that the actual cost for the larger expansions must be paid up front as opposed to doing a series of smaller expansions. That presents a
timing issue for Capacity Charge revenues since
revenues will not be collected until development moves forward. If the wastewater capacity needs to be in place before development can progress, then the cost of the Phases 3 and 4 expansions need to be borne by someone until revenues can be collected to repay those costs. For this reason, City of Lathrop 7 2026 CTF Capacity Charge Report
City staff has indicated that the City will likely need to finance the costs of the Phases 3 and 4 expansions to the CTF. The upfront cost will be paid from the proceeds of the financing, and Capacity Charge revenues will be used to repay the debt over time as they are collected. Because the financing will result in additional costs, an estimate of those costs are included in the overall cost for the Capacity Charge. Table 3 presents an estimate of the annual debt service costs needed to finance the $ 90. 2 million cost of the Phase 3 and 4 expansions.

It is assumed the City will issue a bond or other debt instrument to pay or reimburse itself for the cost of the Phases 3 and 4 expansions. The term, structure, and interest rate of that debt cannot be predicted as they will depend on market conditions at the time of issuance. Therefore, in order to calculate a maximum charge, assumptions had to be made about the financing.

The useful life of the individual items in the facility list ranges from 6 to 50 years, with an average life of 31. 5 years weighted based on estimated cost. However, since the City' s General Plan
contemplates full buildout by 2040, it must be assumed that the bonds would be repaid in full by that date given that all wastewater treatment capacity would be allocated at that point. Therefore, a term of 15 years was chosen to estimate the debt service costs since it fits within the useful life and reflects the City' s planning documents. It was also assumed that: (i) the interest rate would average 6.0% per year; (ii) 5% ofthe proceeds would be used to pay for costs of issuance, and ( iii) the debt would not require a reserve fund held in cash and funded by proceeds.

Based on the assumptions outlined above, the City will need to pay $ 9. 8 million per year in debt service to finance the $ 90. 2 million cost. These future debt service payments are discounted back to present value figures at 3. 87% per year, which is the 3 -year average of the monthly yields in the California Pooled Money Investment Account. This results in a total present value cost of $109. 8 million for the Phase 3 and 4 facilities.

FACILITY COST BY PHASE AND CAPACITY CHARGE CALCULATION
Table 4 shows the breakdown of the estimated cost by phase and as a total for the entire system.

Phases 1 and 2 cost an estimated $ 147. 6 million and had a total treatment capacity of 3. 45 MGD, resulting in an average cost per gallon of capacity of $42. 77. Phases 3 and 4 are estimated to cost 109. 8 million and have an estimated capacity of 4. 2 MGD, resulting in an average cost of $26. 14 per gallon. The lower average cost of the planned capacity in Phases 3 and 4 is due to economies of scale and improved technology planned for Phases 3 and 4. Overall, the total cost of the wastewater treatment system is estimated to be $ 257. 3 million, which will result in an average cost of $33. 64 per gallon of treatment capacity. All developments will benefit from the additional City ofLathrop 8 2026 CTF Capacity Charge Report
wastewater treatment capacity provided by the upgrades to the CTF. Additionally, with the completion of the intertie, the CTF and the MWQCF can serve all new developments in the City as an integrated system. It is not feasible to try to separate the cost between existing and future developments. Therefore, the proposed maximum Capacity Charge is the average system -wide cost of $33. 64 per gallon of treatment capacity.

ESTIMATED REIMBURSEMENT AVAILABLE
As noted above, the unit cost of capacity for Phases 1 and 2 was higher than the estimated unit cost for Phases 3 and 4. This represents a substantial overpayment into the system by prior participants, and this overpayment should be reimbursed to the extent that funds are available.

Table 5 at the end of this section shows an estimate of potential reimbursement that the proposed Capacity Charge could generate. The total available amount is estimated to be $ 31. 5 million, based on the difference between the proposed maximum Capacity Charge and the marginal cost of completing the Phase 3 and 4 expansions. It is important to note that this reimbursement does not increase the Capacity Charge beyond the system - wide average. Instead, it represents a benefit that new developers will receive from investments already made into the system by others. This amount is an estimate only and is subject to change based on the future financing for Phases 3 and 4 and the timing of Capacity Charge payments. As contemplated, the Capacity Charge revenues would need to be used first for repayment of the debt and only after debt service payments were satisfied pursuant to the terms of an indenture could they be used for reimbursement.

Reimbursements would be made pro -rata based on the share of costs paid by each party.

CHARGE COMPARISON
The City does not have an existing charge for wastewater treatment capacity. Instead, it has received required payments from developers via development agreements. Additionally, the City itself has contributed funds to pay for a share of the facilities. Historically, City staff has calculated the average cost of treatment capacity to be $ 32. 98 per gallon per day. This Charge Report proposes a maximum Capacity Charge of $33. 64 per gallon per day, which is 2.0% higher than the previous estimate. This difference is largely due to the various financing assumptions noted above ( interest rate, discount rate, etc.). Given the uncertainty around the future financing, many of these assumptions were made to be somewhat conservative in order to establish a maximum Capacity Charge. To the extent that these assumptions change when the financing occurs, the Capacity Charge may be modified to reflect the actual costs of the facilities.

City ofLathrop 9 2026 CTF Capacity Charge Report

CHARGE CALCULATION AND COLLECTION
For new developments, the proposed maximum Capacity Charge will be collected prior to approval of a final subdivision map. If no map is required ( ex: infill development or expansions not requiring a map), the Capacity Charge will be collected prior to issuance of a building permit.

The maximum Capacity Charge is based on the total allocable system costs and divided by total system capacity to determine a unit cost per gallon per day ( GPD). Individual charges are then calculated based on each user' s estimated wastewater generation. This approach ensures that users with higher demand pay proportionately more, charges are directly tied to system usage, and costs are allocated equitably across users.

At the time the Capacity Charge is collected, the City will calculate the total to be charged based on the estimated wastewater treatment demand of the proposed development. That demand will be calculated by multiplying the proposed amount of each land use by its applicable wastewater generation rate. City staff will use the latest wastewater generation rates estimated for the City according to the City standards. Table 6 provides the current wastewater generation rates as of the date of this Charge Report. The total charge shall be the Capacity Charge per gallon multiplied by the estimated total demand. For example, the current wastewater generation rate for medium density residential units is 200 gallons per day per dwelling unit. If a new development was proposed for 100 medium density residential units, the total Capacity Charge would be 100 units times 200 gallons per day, or 20, 000 gallons per day of total demand, times the Capacity Charge rate of $33. 64 (or other rate, based on future changes) for a total charge of $672, 800. The calculated amount of the Capacity Charge represents each user' s proportional share of wastewater system capacity.

According to City staff, the costs of the Phases 3 and 4 facilities will have already been expended and/ or appropriated. Therefore, the Capacity Charge may be charged to residential developments prior to the issuance of a certificate of occupancy or final building inspection.

Adjustments may be made on an ad hoc basis if the City Engineer determines that a particular wastewater flow factor does not accurately reflect the total demand of a given project. For example, if a particular use is not accurately represented in the City standard wastewater generation rates, then the City Engineer may adjust the demand factor to better estimate the total demand for that use.

City ofLathrop 10 2026 CTF Capacity Charge Report
Under certain circumstances, the Capacity Charge may be charged to accessory dwelling units ADUs") and Junior ADUs. Any Capacity Charge for ADUs or Junior ADUs shall be consistent with the City' s Municipal Code Chapter 17. 80 and Government Code Section 66311. 5in effect at the time the permit is issued for such unit.

FINDINGS
This report provides a defensible, cost -based methodology for establishing wastewater capacity charges that ensure the fair and equitable recovery of infrastructure costs. The Capacity Charge reflects each user' sproportional share of system capacity and is structured in a manner consistent with utility rate -setting principles. The wastewater Capacity Charge established in this report: (i) does not exceed the reasonable cost of providing wastewater service, (ii) is proportionate to each user' s demand on system capacity, ( iii) is based on a cost -of -service methodology, and ( iv) allocates costs equitably among system users. Accordingly, the charge is consistent with the requirements of Government Code Section 66013.

Section 4 of this Charge Report discusses future updates to the Capacity Charge.

City ofLathrop 11 2026 CTF Capacity Charge Report
Table 1
City of Lathrop
Consolidated Treatment Facility (CTF) Capacity Charge
Cost Data
Facility Description Cost'
Wastewater Recycling Plant ( WRP)
WW 01- 21
WW 10-5
WW 11- 06
WW 12- 07
WW 15- 20
WW 06- 24
WW 06-7
WW 06-8
WW 06- 11
Subtotal
Ponds / Sprayfields
LAA A30, A31, A35
LAA A34
Pond S5
Pond S16
RW Pipe to S16
LAA A36
Pond S28
PB- 1
LAA Axx
Subtotal
WRP- 1 0. 75 MGD Expansion
WRP- 1 Expansion 0. 75 to 1. 5 MGD Expansion
Crossroads WW Expansion
Sewer Plan Upgrades
Crossroads Decommissioning
WRP # 1 Schreiber Aeration Blower
WRP # 1 Phase 2
WRP # 1 Phase 1 Construction
WRP # 1 Permitting
180 Acres ( Includes Recycled Water Infrastructure)
48 Acres
10 Acres
30 Acres
Connect CTF to S16 for RW Discharge
8 Acres
8 Acres
23 Acres
20 Acres
Manteca - Lathrop Water Quality Control Facility ( MWQCF) Lathrop - Owned Portion
2 13, 482, 226
7, 880, 272
520, 016
1, 211, 746
511, 870
705, 211
1, 358,93
47, 961
720,68
26, 438,63
5, 794, 000
107, 000
1, 001, 800
4, 083, 716
886, 000
829, 10
5,83, 073
1, 435, 514
1, 471, 874
21, 192,67

1. 45 MGD Capacity ( 14. 7% share) $ 48, 879, 000
Unless otherwise noted, reflects actual costs at the time of each expenditure. 2 Estimated current cost of the City' sshare of the facility.

Sources: City of Lathrop
City ofLathrop 12 2026 CTF Capacity Charge Report
Table 1
City of Lathrop
Consolidated Treatment Facility (CTF) Capacity Charge
Cost Data ( Continued)
Facility Description Cost 12
Consolidated Treatment Facility ( CTF)
Administration Building
Mechanical Building Phase 2
Mechanical Building Phase 3
EQ tank ( Upgraded)
Storm Drain Retention Basin
McKinley Header to Feed Both Headworks
Headworks 1 & 2 ( Existing)
Headworks 3 & 4 ( Not Built Yet)
Process Train 1 & 2 ( Ph 2)
Process Train 3 & 4 ( Ph 3)
Process Train 5 & 6 ( Ph 4)
Mixing Pumps ( All 6 Trains, 9 Pumps)
RAS Pumps ( AII 6 Trains, 9 Pumps)
Membranes 1, 2 3, 4, 5,6,7 & 8 ( Includes, Permeate Pumps, Piping) Membrane Blowers ( 6 each)
Airation Blowers (5 each)
Control Air Compressors ( 2 each)
MCC - Mech 1
MCC - Mech 2
West Chlorine Basin
East Chlorine Basin
Chlorine tanks ( 1 & 2) (Supporting Pumps and Analyzers) DE Chlorination Processing ( Supporting Pumps and Analyzers) River Discharge Pump Station ( 2 Pumps, Upgraded)
RW Booster Pumps ( 2 each)
WAS Booster Tank ( 1 each)
WAS Booster Pumps ( 2 each)
Dewatering Building
Including 2 -Screw Presses, 3- Palimer Skids & Pumps
Winter Drying Building ( 85' X 235')
Summer Drying Pad w/ Bunkers
Maintenance Shop Building ( 30' x 60')
Cat Loader
Cat forklift
Cat Generator ( Built w/ Phase 2)
Cat Generator ( Built w/ Phase 1)
Recycled Water River Discharge
1 Mega Watt Solar Offset Project
Subtotal
1, 862, 206
6, 211, 065
6, 211, 065
5,00, 000
90, 700
450, 00
1, 234, 890
6, 000,00
15, 000,00
15, 000,00
15, 000,00
450, 00
1, 000,00
8,00, 000
1, 400, 000
1,00, 00
125, 000
1, 000,00
1, 000,00
2, 000,00
2, 000,00
375, 000
300, 00
400, 00
180, 00
2, 000,00
100, 00
670, 00
1, 500, 000
600, 00
1, 200, 000
350, 00
90, 000
52, 000
538, 750
650, 00
12, 586, 279
3, 800, 000
116, 826, 955
Total $ 213, 36, 585
Unless otherwise noted, reflects actual costs at the time of each expenditure.

For Phases 3 and 4 facilities, costs developed by the City' s contractor, GSE Construction.

Sources: City of Lathrop
City of Lathrop 13 2026 CTF Capacity Charge Report
Table 2
City of Lathrop
Consolidated Treatment Facility (CTF) Capacity Charge
Total Phases 1 and 2 Cost ( 2026 $)
Description
Cost Estimated Month ENR CCI at ENR CCI Cost
At Completion of Completion Completion Jan 2026 ( 2026 $) 1 Wastewater Recycling Plant ( WRP)
Ponds / Sprayfields
Phase 2 Expansion
Manteca - Lathrop WQCF
26, 438,63 March 2015 9,72. 00 14,18. 53 $ 37, 432, 033 21, 192,67 June 2018 11, 013.0 14,18. 53 $ 27, 168, 096 26, 588,47 June 2018 11, 013.0 14,18. 53 $ 34, 086, 189 N/ A N/ A N/ A N/ A $ 48, 879, 000
2 Total Phases 1 and 2 Cost (2026 $) $ 147, 565, 319
Cost escalated using the Engineering News Record Construction Cost Index (CCI) from the month of completion of each facility to January 2026.
2 Current cost estimate, not escalated.

Sources: City of Lathrop, Engineering News Record
City of Lathrop 14 2026 CTF Capacity Charge Report
Table 3
City of Lathrop
Consolidated Treatment Facility (CTF) Capacity Charge
Estimated Phases 3 and 4 Financing Cost
Fiscal
Year
Total
Estimated
Debt Service 1
Present Value of
Estimated
Debt Service 2 3
2026-7
2027-8
2028-9
2029- 30
2030- 31
2031- 32
2032- 33
2033- 34
2034- 35
2035- 36
2036- 37
2037- 38
2038- 39
2039- 40
2040- 41
9, 780, 433
9, 780, 433
9, 780, 433
9, 780, 433
9, 780, 433
9, 780, 433
9, 780, 433
9, 780, 433
9, 780, 433
9, 780, 433
9, 780, 433
9, 780, 433
9, 780, 433
9, 780, 433
9, 780, 433
9, 416,25
9, 065, 965
8, 728, 549
8, 403, 690
8, 090, 922
7,89,95
7, 499, 874
7, 220, 744
6, 952, 003
6,93, 264
6, 444, 154
6, 204, 316
5, 973, 404
5, 751, 086
5,37, 043
Total 146, 706, 494 $ 109, 771, 236
Phases 3 and 4 Estimated Costs ( Net Proceeds)
Costs of Issuance
Total Principal
4 Interest Rate
Discount Rate
Net Interest Rate
Term ( Years)
90, 238, 408

5.0%
94,90, 000

6. 00`)/

3. 87%

2. 13%
15 1 Estimated annual debt service costs based on the term, interest rate, and total principal amounts shown in the table. To be updated with actual debt service once financing is completed.
2 Future debt service costs are discounted at 3. 87% per year, which is the 3 -year average of the May 2023 - May 2025 monthly yields in the Calif. Pooled Money Investment Account ( PMIA).
3 Once applicable, past debt service costs will be present - valued based on prior years' PMIA yields.
4 Assumes no cash -funded reserve will be required.

Sources: City of Lathrop, CA State Treasurer' sOffice
City ofLathrop 15 2026 CTF Capacity Charge Report
Table 4
City of Lathrop
Consolidated Treatment Facility (CTF) Capacity Charge
Total Cost by Phase
Description Cost ( 2026 $)
Total Phases 1 and 2 Cost $ 147, 565, 319
Total Phases 3 and 4 Cost $ 109, 771, 236
Capacity Cost per
MGD) Gallon/ Day

3. 45 $ 42. 77

4. 2 $ 26. 14
Total System -Wide Cost' $ 257, 336, 555 7. 65 $ 33. 64 1 Includes total estimated cost of facilities and Phases 3 and 4 estimated financing costs.

Sources: City of Lathrop
City ofLathrop 16 2026 CTF Capacity Charge Report
Table 5
City of Lathrop
Consolidated Treatment Facility ( CTF) Capacity Charge
Estimated Reimbursement Available
Description Cost
Proposed Fee per Gallon of Treatment Capacity
Net Cost per Gallon to Complete Phases 3 and 4
Difference

33. 64

26. 14

7. 50
Estimated Additional Capacity ( Gal/ Day)' 4, 200, 000
Estimated Amount Available for Reimbursement
2 $
31, 511,78
1 Assumes no capacity has been purchased yet from the Phases 3 and 4 expansions.
2 Estimated amount available based on the proposed charge and additional capacity to be sold from Phases 3 and 4. Amounts will only be available after charges are paid. Subject to change based on the actual financing for Phases 3 and 4 and the timing of capacity charge payments.

Sources: City of Lathrop
City ofLathrop 17 2026 CTF Capacity Charge Report
Table 6
City of Lathrop
Consolidated Treatment Facility (CTF) Capacity Charge
Wastewater Flow Factors
Land Use'
Wastewater
Flow Factor
Low Density Residential
Medium Density Residential
High Density Residential
Commercial
Limited Industrial
Dry Warehouse
240 gpd/ du
200 gpd/ du
110 gpd/ ac
755 gpd/ ac
240 gpd/ ac
172 gpd/ ac
1 Land use categories are used solely to estimate wastewater generation ( GPD) and are not used to allocate costs based on development characteristics. Each user' s charge reflects their proportionate share of total system capacity based on estimated wastewater flow.

Sources: City of Lathrop
City of Lathrop 18 2026 CTF Capacity Charge Report

4. CAPACITY CHARGE ADMINISTRATION

CAPACITY CHARGE IMPLEMENTATION
According to the Government Code, prior to levying a new fee/ charge or increasing an existing fee/ charge, a public agency must hold at least one open and public meeting. At least 10 days prior to this meeting, the agency must make data on facility costs and funding sources available to the public. Notice of the time and place of the meeting, and a general explanation of the matter, are to be published in accordance with Section 6062a of the Government Code, which states that publication of notice shall be posted over a 10 -day period in a newspaper regularly published once a week or more. Two publications, with at least five days intervening between the dates of the first and last publication, not counting such publication dates, are sufficient. The Charge Report and Capacity Charge established herein will be adopted through a City ordinance and resolution.

Once the Capacity Charge is adopted by the Lathrop City Council, it will become effective no sooner than sixty days after the final legislative action.

CAPACITY CHARGE ADJUSTMENTS
The Capacity Charge will be adjusted in future years to reflect revised facility standards, receipt of funding from alternative sources ( i.e., state or federal grants), revised costs, or changes in wastewater generation as a result of changes to land uses or development plans. The Capacity Charge has been calculated assuming debt will be issued in the near future to pay the costs of the Phases 3 and 4 expansions. When the financing is completed, the Capacity Charge should be updated to reflect the actual costs and structure ofthe financing. Ifthe actual financing costs would result in a charge that is higher than the maximum proposed in this Charge Report, then an updated report should be adopted to fully document the increased charge.

Additionally, the Capacity Charge may be adjusted annually by updating the cost estimates and present value calculations shown in Tables 2 and 3, respectively. The current cost calculation for Phases 1 and 2 facilities will be updated by inflating the costs using the ENR CCI. Each update will be based on the increase, if any, in the ENR CCI from January of the last update to the most recently passed January. The present value calculation will be updated by: (i) updating the debt service schedule for any changes, (ii) present valuing the prior debt service payments based on the actual PMIA yields, (iii) recalculating the 3 - year average of PMIA yields, and ( iv) applying that 3 -year average to discount the future debt service payments back to the year of the update. These City of Lathrop 19 2026 CTF Capacity Charge Report
updates are in -lieu of applying a simple escalator such as the ENR CCI to the Phases 3 and 4 facilities since these construction costs are anticipated to be paid from proceeds of the financing.

ANNUAL ADMINISTRATIVE DUTIES
The Government Code requires a public agency to report, every year and every fifth year, certain financial information regarding their impact fees. Within 180 days after the last day of each fiscal year the public agency must make the following information available for the past fiscal year:
a) A brief description of the type of fee in the account or fund. b) The amount of fee revenue.
c) The beginning and ending balance of the account or fund. d) The amount of fee revenue collected, and interest earned. e) An identification of each public improvement on which fees were expended and the amount of expenditures on each improvement, including the total percentage of the cost of public improvement that was funded with fees. f) An identification of an approximate date by which time construction on the improvement will commence if the local agency determines that sufficient funds have been collected to complete financing on an incomplete public improvement. g) A description of each interfund transfer or loan made from the account or fund, when it will be repaid and at what interest rate.
h) The amount of any refunds made once it is determined that sufficient monies have been collected to fund all projects.

The public agency must make this information available for public review and must also present it at the next regularly scheduled public meeting not less than 15 days after this information is made available to the public.

FIFTH - YEAR ADMINISTRATIVE DUTIES
For the fifth year following the first deposit into the fee account and every five years thereafter, the public agency must make the following findings with respect to any remaining funds in the fee accounts:
a) Identify the purpose to which the fee is to be put.
b) Demonstrate a reasonable relationship between the fee and the purpose for which it is charged.
c) Identify all sources and amounts of funding anticipated to complete financing City of Lathrop 20 2026 CTF Capacity Charge Report
incomplete improvements.
d) Designate the approximate dates on which funding is expected to be deposited into the appropriate accounts or funds.

As with the annual report, the five- year report must be made public within 180 days after the end of the public agency' s
fiscal year and must be reviewed at the next regularly scheduled public meeting. The public agency must make these findings; otherwise, the law states that the City must refund the fee revenue to the then current owners of the development project.

City of Lathrop 21 2026 CTF Capacity Charge Report

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Lathrop City CouncilJune 8, 2026

Lathrop City Council
June 8, 2026