Los Gatos City Council
June 16, 2026

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1D6- 2ABE915A0C1C Town of Los Gatos, CA
Jasper Andrade
Lead Analyst
Education
Mr. Jasper Andrade is an Analyst II and will serve as the lead analyst for this fiscal analysis Accounting,
Mt. San Jacinto p ro ect. His role includes data gatheringand research, report preparation, p p peer reviews, and College fiscal analysis to support the evaluation of revenues, expenditures, and long-term funding strategies.

Areas of Expertise
Community Facilities Mr. Andrade possesses experience with various special tax financing mechanisms, including Districts Community Facilities Districts ( CFDs), fire taxes, parcel taxes, landscape and lighting districts, and standby charges. His responsibilities have included updating Engineer' s Reports, preparing Landscaping and resolutions for hearings, maintaining and analyzing parcel data, researching parcel changes, Lighting Districts
reviewing exemptions, and developing applied reports. These assignments have provided him Standby Charges with direct experience evaluating fiscal conditions, modeling tax and assessment impacts, and supporting decision- making through accurate financial reporting.

Assessment
Mr. Andrade regularly coordinates with title companies, real estate agencies, appraisal firms, Districts
and public agencies. Leveraging Willdan' s proprietary MuniMagic+ system, he efficiently Geographic
accesses ownership records, assessed values, and parcel tax data, which enhances his ability to perform accurate fiscal analysis and deliver timely project support.

Information
System Relevant Project Experience
6 Years' Experience Mr. Andrade currently works with the following agencies encompassing various annual administration services including 1972 Act Districts, Community Facilities Districts, Assessment Districts and Standby Charges.

City of Coachella, CA
Desert Recreation District, CA ( Indio, CA)
Valley Sanitary District, CA ( Indio, CA)
City of Arcadia, CA
City of Artesia, CA
City of Brea, CA
City of California City, CA
City of Indian Wells, CA
City of Irwindale, CA
City of La Puente, CA
City of Lafayette, CA
City of Lancaster, CA
City of McFarland, CA
City of Reed ley, CA
City of Rialto, CA
City of San Fernando, CA
City of Santa Fe Springs, CA
West Contra Costa Healthcare District, CA
WWI LLDAN Fiscal Impact Analysis for Proposed and Planned Growth 9

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Los GATOS- PROPOSAL FOR STUDY 1( FISCAL CONDITION) AND STUDY 2( FISCAL IMPACT) APPENDIX D: WAUKESHA COUNTY WI BUDGET TASK FORCE REPORT N HA I ADVISORS Financial& Policy Strategies.

Delivered.

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C 1 C Waukesha
County ,
Budget Task Force Analysis and Facilitation
Report / August 2024

R RAFTELIS

ITEM NO. 7.

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WAUKESHA COUNTY, WI BUDGET TASK FORCE ANALYSIS AND FACILITATION Page 288 ITEM NO. 7.

Docusign Envelope ID: 8463 BA3 F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C

RAFTELIS
August 27, 2024
Paul Farrow
Waukesha County Executive
Waukesha County Administrative Center
515 W. Moreland Blvd.

Room 320
Waukesha, WI 53188
Subject: 2024 County Budget Task Force
Dear Paul Farrow:

We are pleased to present this final report summarizing the County fiscal health assessment results and the 2024 Budget Task Force. This report includes a detailed review of the County' s current financial condition and financial management practices, future financial projections for the County' s operating budget, and a summary of the key themes and topics discussed during the Task Force facilitation sessions.

The fiscal health assessment included in this report provides both historical and future financial trend analysis designed to provide an objective review and context for the work of the Task Force. The assessment included development of an independent financial model projecting anticipated budget needs and gap closure scenarios for the County to consider. Applicable industry standards and best practices were used with input and information provided by County staff to inform the financial trend analysis. Key themes from the four Task Force sessions, including values and policy priorities, are also provided to help guide and inform the County Executive and the Board of Supervisors in future policy decisions.

We are confident that this report can serve as a framework for informing policy recommendations to you and the County Board. The Task Force provided invaluable insight regarding community priorities and strategies for the County to consider when making future budgetary decisions.

Thank you for the opportunity to work with Waukesha County. We enjoyed engaging with County staff and Task Force members throughout this project.

Sincerely,
4-4Nrir
Jonathan Ingram
Vice President- Organizational Assessment
19 Garfield Place, Suite 500 Cincinnati, OH 45202
www. raftelis. com

ITEM NO. 7.

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WAUKESHA COUNTY, WI BUDGET TASK FORCE ANALYSIS AND FACILITATION Page 290 ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Table of Contents
EXECUTIVE SUMMARY 1
INTRODUCTION 3
BACKGROUND AND METHODOLOGY 3
ABOUT WAUKESHA COUNTY, WI 3
Structure 4
Budget 5
Core Services Matrix 8
Staffing 10
FISCAL HEALTH ASSESSMENT 11
FINANCIAL CONDITION ASSESSMENT 11
General Fund Historical Overview 15
Peer Benchmarking 16
FINANCIAL TREND ANALYSIS 19
Key Assumptions 19
Future Projections 20
GAP CLOSURE SCENARIOS 22
Expenditure Reductions 22
Revenue Enhancements 24
BUDGET TASK FORCE 31
Composition 31
Session 1: Setting the Stage — Developing Values and Service Priorities 32 Session 2: Service Level Reductions 35
Session 3: Revenue Generating Options 39
Session 4: Guidance for County Executive and Board of Supervisors 42 CONCLUSION 47
WAUKESHA COUNTY, WI BUDGET TASK FORCE ANALYSIS AND FACILITATION Page 291 ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C List of Tables
Table 1: Waukesha County Demographic Characteristics, 2022 3 Table 2: Budgeted Expenditures by Functional Area, All Funds, FY2020 - FY2024 7 Table 3: ARPA Allocation by Functional Area 7
Table 4: County Core Services 9
Table 5: Authorized Staffing Level by Functional Area, FY2010 and FY2024 10 Table 6: County Operating Revenues by Category, FY2019 - FY2023 12 Table 7: County Expenditures by Category FY2019 - FY2023 15 Table 8: General Fund Budget to Actual Expenditures, FY2019 - FY2023 16 Table 9: Peer Counties Demographic Comparison 17
Table 10: Peer Counties Spending Per Capita 17
Table 11: Base Annual Change Assumptions for Operating Expenditures by Category 19 Table 12: Base Annual Change Assumptions for Non- Tax Operating Revenues by Category 20
Table 13: Projected Operating Expenditures by Category, FY2024 - FY2030 ($ M) 21 Table 14: Projected Operating Revenues by Category, FY2024 - FY2030 ($ M) 21 Table 15: Results of Levy Increase Referendums in 2024 24 Table 16: County Wheel Tax Rates in 2024 26
Table 17: Sales Tax Revenue in Benchmark Counties 28
Table 18: Average Taxable Expenditures by Category per Midwest Household, 2022 29 Table 19: County Budget Task Force Members 32
Table 20: Task Force Service Priority Voting Results 35 Table 21: Value- added Service Level Reductions 37
Table 22: Advantages and Disadvantages of New Tax Revenue Options 40 Table 23: Summary of Sales Tax Structure Considerations 42 List of Figures
Figure 1: Waukesha County, WI 2024 Budget Task Force Timeline 2 Figure 2: Waukesha County, WI Organizational Chart, FY2024 5 Figure 3: 2023 Property Tax Rates by County 6
Figure 4: Waukesha County Property Tax Rates and Property Value, 2015- 2024 13 Figure 5: 2024 Tax Levy Allocation by Function, as $ 1 13 Figure 6: 2024 Revenue Sources for Counties That Budget with Comparable Categories18 Figure 7: Projected Operating Expenditures and Revenues Under Base Scenario, FY2024 FY2030 22
Figure 8: Scope of Expenditure Reductions 23
Figure 9: Scope of Expenditure Reductions by Functional Area 24 Figure 10: Estimated Levy Increase Revenue, FY2025 - FY2030 25 Figure 11: Estimated Wheel Tax Revenue, FY2025 - FY2030 27 Figure 12: Task Force Value Voting Results 34
WAUKESHA COUNTY, WI BUDGET TASK FORCE ANALYSIS AND FACILITATION Page 292 ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Figure 13: Service Level Adjustment Pyramid 36
Figure 14: Task Force Service Prioritization and County Tax Levy Spending 38 Figure 15: Sales and Wheel Tax Timeline — Adoption by Year 41 Figure 16: Average Task Force Agreement Rating by Strategy to Address Budget Gap 43 Figure 17: Average Task Force Agreement Rating by Revenue Option 44 Figure 18: Average Task Force Agreement Rating by Revenue Option 45 Figure 19: Task Force Agreement Rating on New Revenue 50 Figure 20: Task Force Agreement Rating on Service Reductions 50 Figure 21: Task Force Agreement Rating on New Revenue and Service Reductions 51 Figure 22: Task Force Agreement Rating on the Current Budget 51 Figure 23: Task Force Agreement Rating on a 9- 1- 1 Fee 52 Figure 24: Task Force Agreement Rating on a Levy Increase Referendum 52 Figure 25: Task Force Agreement Rating on a Wheel Tax 53 Figure 26: Task Force Agreement Rating on a Sales Tax that Funds Property Tax Relief 53 Figure 27: Task Force Agreement Rating on a Sales Tax of Less Than 0. 5% 54 Figure 28: Task Force Agreement Rating on a Sales Tax that Funds Property Tax Relief and General Municipal Aid 54
Figure 29: Task Force Agreement Rating on a Sales Tax that Funds Property Tax Relief and Municipal Aid for Infrastructure 55
Figure 30: Task Force Agreement Rating on a Sales Tax that Funds Property Tax Relief and Municipal Aid for Public Safety 55
Figure 31: Task Force Agreement Rating on a Sales Tax that Funds Property Tax Relief and Municipal Aid for Economic Development 56
Figure 32: Task Force Agreement Rating on a Sales Tax that Funds Property Tax Relief and Economic Development 56
Figure 33: Task Force Agreement Rating on the Effectiveness of the Task Force Process 57 List ofAppendices
APPENDIX A: 49
APPENDIX B: 59
WAUKESHA COUNTY, WI BUDGET TASK FORCE ANALYSIS AND FACILITATION Page 293 ITEM NO. 7.

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WAUKESHA COUNTY, WI BUDGET TASK FORCE ANALYSIS AND FACILITATION Page 294 ITEM NO. 7.

Docusign Envelope ID 8463 BA3 F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Executive Summary
Property tax levy is the largest local revenue source to fund services provided by Waukesha County. Like other counties in the state of Wisconsin, the annual growth for this revenue is capped based on the growth in net new construction. Over the past several years, net new construction has grown at a rate of less than 2% each year.

Meanwhile, and especially after the Global Pandemic, the cost to continue providing services to County residents has increased, on average, between 3- 4%. In order to meet balanced budget requirements, the County has had to identify efficiency gains, maximize other revenue sources where possible, and trim staffing levels. Recent economic trends, including above-average inflation, rising wages, and supply chain disruptions, have placed significant financial constraints on County operations.

The County engaged Raftelis to provide an independent fiscal health assessment and facilitate multiple sessions for a Budget Task Force comprised of community leaders. The Task Force was asked to advise the County Executive and County Board of Supervisors on policy actions in the near term that will help shape the County' s financial future by ensuring resources are allocated in a manner that best serves the community.

The fiscal health assessment included a financial condition assessment comprised of a historical review of past revenue and expenditure trends, interviews with County staff across each major department to understand core service functions and budgetary challenges, as well as peer benchmarking analysis for similar demographic counties in the state to assess revenue sources and budgetary practices. The financial condition assessment provided relevant context to inform the financial trend analysis. This analysis included developing a six- year financial forecast for the County' s operating budget that reflected an annual gap ( e. g., budget gap) between projected revenues and estimated expenditures required to maintain services provided today. The forecast model relied upon key assumptions for revenue growth and cost of service inputs. Raftelis' financial model yielded similar results to the County' s long-term forecast disclosed in the annual budget document. This financial backdrop was then used to develop and understand potential solutions to address future budget gaps, considering both service level reductions and revenue- generating options.

Raftelis facilitated four in-person Budget Task Force sessions from May to July 2024. The County' s Budget Task Force comprised of more than 30 community leaders charged with quickly understanding the County' s fiscal health and engaging in discussions and exercises that aimed to provide direction and guidance to the County Executive and County Board of Supervisors regarding the County' s financial future. A summary ofthe Task Force timeline and session topics is provided below.

BUDGET TASK FORCE ANALYSIS AND FACILITATION 1

ITEM NO. 7.

Docusign Envelope ID 8463 BA3 F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C 0-0- 0-
O O O
I
0- 00-
7/*/*
0-a
N

SERVICE LEVEL REVENUE

DEVELOP VALUES REDUCTION GENERATING TASK FORCE

AND PRIORITIES SCENARIOS SCENARIOS GUIDANCE
Major Activities Major Activities Major Activities Major Activities Share fiscal context Connect values and Recap service level Recap themes from and build mutual priorities to County reduction prioritization each of the Task understanding resource allocation Present revenue- Force sessions Work together to set Share service level generating scenarios Review scenario values that will guide reductions that Work together to voting results decision- making address the budget prioritize optimal Develop guidance for Understand Task gap scenario( s) that the County Executive Force priorities as it Work together to address the budget and Board of relates to core prioritize reductions gap Supervisors
services provided by
the County
Tuesday, May 14 Wednesday, May 29 Tuesday, June 4 Tuesday, July 30 Figure 1: Waukesha County, WI 2024 Budget Task Force Timeline Details of the Task Force discussions and individual and group exercises are captured in this report. The density of financial information to review and understand during this short time horizon was challenging; nevertheless, the Task Force did a remarkable job of absorbing all the details, engaging in productive conversation, and ultimately crafting meaningful guidance for the County' s elected officials. This process also provided the County an opportunity to assess and confirm that current resource allocation aligns with community values and priorities.

Engaging the public regularly regarding policy priorities as part of the budget development process is both a best practice and a vehicle for maintaining trust among local governments and the residents they serve. Task Force members learned how well the County staff have navigated these fiscal challenges in the past and their ongoing dedication to prudent financial management oftaxpayer resources.

Given the complexity and competing interests of individual Task Force members, reaching a consensus about addressing future budgetary challenges was unrealistic. Instead, the group reached a shared agreement regarding the values, priorities, and areas of focus over the next few years to provide sound guidance for elected officials as they navigate difficult policy decisions. The key themes that emerged from the work of the Budget Task Force are reflected below. The report provides more details regarding each ofthese themes.

Importance of fiscal responsibility
Targeted budgetary service level reductions and enhancements Desire to explore revenue options
Support for infrastructure and economic development
Evaluate shared services and shared revenue
2 WAUKESHA COUNTY, WI

ITEM NO. 7.

Docusign Envelope ID: 8463 BA3 F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Introduction
Background and Methodology
In March 2024, Waukesha County engaged Raftelis to conduct a fiscal health assessment and facilitate the work of a Budget Task Force charged with providing guidance and policy priorities to the Board of Supervisors to inform how the County can navigate short and long-term financial challenges.

To accomplish this, the project team held a kickoff meeting with key members of the County' s leadership and finance team to discuss the engagement. The project team then conducted individual and small group interviews with each of the major departments in the County to understand service level expectations, resourcing requirements, fiscal challenges, workload drivers, and opportunities to adjust resource allocation.

The project team reviewed and analyzed a variety of financial data and information provided by the County to understand organizational structure, authorized staffing levels, the budget development process, and core services provided by the County. As part of the financial condition assessment, historical financial data was analyzed to inform trends and key assumptions used to develop an independent financial model projecting estimated revenues and expenditure requirements to continue providing the same level of service today over the next several years.

Benchmarking analysis of peer counties selected based on geographic or demographic similarity was also conducted to provide important context during the Task Force sessions.

Members of the project team then developed and led four in-person Task Force sessions from May to July 2024 to discuss the results of the fiscal health assessment, viable gap closure scenarios, and guidance for how County elected officials should navigate the financial challenges to achieve fiscal sustainability over the next decade.

About Waukesha County, WI
Waukesha County is Wisconsin' s third- largest county, located directly west of Milwaukee and 70 miles east of Madison, the state capital. The County population is 411, 538, according to the Wisconsin Demographic Services Center' s 2023 population estimates, which represents a 5. 6% increase from the 2010 Census. Relative to the state at large, Waukesha County has higher median income, median home values, and educational attainment levels.

Table 1: Waukesha County Demographic Characteristics, 20221 Demographic Category Waukesha County State of Wisconsin Median age 43. 8 40. 4
Median household income 98, 849 70, 996
Median home value 379, 700 252, 800
Below federal poverty level 5. 2% 10. 7%
Homes owner-occupied 76. 9% 68. 1%
High school graduate equivalent or higher 97. 8% 93. 5% Bachelor' s degree or higher 48. 7% 33. 2%
Graduate or professional degree( 25+) 17. 8% 11. 6%
1 2022 American Community Survey, U. S. Census Bureau.

BUDGET TASK FORCE ANALYSIS AND FACILITATION 3

ITEM NO. 7.

Docusign Envelope ID 8463 BA3 F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Waukesha has a County Executive form of government, and the legislative body consists of a 25- member Board of Supervisors ( Board). The County Board is elected for two- year terms to represent separate geographic districts with populations of around 16, 500 each. The Board of Supervisors sets policy by adopting ordinances and resolutions, including reviewing and adopting the annual budget. The County Executive, who is elected to a four- year term, oversees the day-to-day operations of the County and appoints the heads of all County departments except those led by elected officials or state statutory boards and commissions. Elected positions in the County beyond legislative and executive roles include the Circuit Court Judges, Clerk of Courts, County Clerk, District Attorney, Register of Deeds, Sheriff, and Treasurer.

STRUCTURE
Waukesha County' s operations are organized by six functional areas depicted in the chart below. Departments led by an elected position are shown in grey. Attorneys in the District Attorney' s Office and judges within the Circuit Court are state employees, while support staffwithin these departments are funded by the County. The other departments are led by members of the County Executive' s cabinet. Law enforcement services are provided by the Sheriffs Office for unincorporated areas of the County and by contract for select municipalities. The County operates a regional 911 dispatch center providing Police, Fire, and Emergency Medical( EMS) dispatch service to 34 of the 37 municipalities in the County. The Extension— Waukesha County is administered through county and state shared governance, and the Bridges Library System— a state- funded, combined two-county system with neighboring Jefferson County— is governed by a Board of Trustees composed of each county' s residents? 2 As part of library system funding required under state statute, the County administers a separate library property tax levy applied on non-library municipalities that is used to reimburse library communities for non-resident use. 4 WAUKESHA COUNTY, WI

ITEM NO. 7.

Docusign Envelope ID: 8463 BA3 F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Waukesha County

I I I I I I
Parks,
Justice and Public Health and Human Environment, General Safety Services
Public Works
Education,& Land Administration
Non- Departmental
Use
Corporation
Sheriff Counsel: Child Register of Deeds Canty Executive Support
Emergency Health and Human Bridges Library _
Preparedness Services System County Board
District Attorney UW- Extension — County Clerk
and
Circuit Court
Parks
Use
Land
County Treasurer
Medical ExaminerF Corporation
Counsel
Department of
Administration
Figure 2: Waukesha County, WI Organizational Chart, FY2024 BUDGET
Each year, at the beginning of budget development, the Budget division estimates tax levy revenue and makes recommendations to the County Executive for allocating new levy among departments. The allocation is based on the County' s Strategic Plan and service priorities, with Public Safety typically receiving the largest allocation oftax levy dollars. The Budget division also factors in anticipated spending growth and the ability of departments to generate non-tax levy revenues ( e. g., user fees) to offset programmatic costs. From there, departments prioritize their estimated revenue and tax dollars to support core operations.

BUDGET TASK FORCE ANALYSIS AND FACILITATION 5

ITEM NO. 7.

Docusign Envelope ID: 8463 BA3 F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C The County' s budget philosophy is to " balance spending with people' s ability to pay," and County management indicates that it has traditionally strived to keep taxes low, resulting in Waukesha County consistently maintaining one of the lowest property tax rates among the 72 Wisconsin counties. At the beginning of this assessment, Waukesha County was one of four counties that had not enacted a 0. 5% sales tax. Recently, Manitowoc County adopted the 0. 5% sales tax to take effect on January 1, 2025. Waukesha has the lowest property tax rate among counties without a sales tax.
2023 Property Tax Rates by Wisconsin County

9. 00
0 $ 8. 00
N_
To $ 7. 00
W $ 76 6. 00
0 o $ 5. 00
0 74 $ 4. 00 1 i-• ----• -• ----• -• ----• -• - - •

3. 00
H $ 1. 00 1111111111111111.' 0. 00 i : iiiiilllllllllll 1))MC tlN NJNXAON CY'-'
UN O

OC N CC CN'' O,
1NOY_,StlflCuCnON Rtl' Oe`, 32 - 21°-21 Y p
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CvgO7 jNR25%1 a N QU pdU
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R 0 E er lace uFigure 3: 2023 Property Tax Rates by County3 The County' s conservative budget approach was further affected by state- imposed property tax levy limits.

Wisconsin State law caps counties' annual property tax levy increase at the percent increase in equalized property value due to new construction, with the exception of levy used to fund debt service. 4 The 2005 Wisconsin Act 25 limited the ability of localities to increase property tax, the single largest local revenue source. The initial legislation included minimum growth of at least 2%; however, the legislation was modified in 2011 ( after the Great Recession) to lower the minimum growth to 0%. Additional details and analysis regarding this state policy are included in the financial condition assessment; nevertheless, it is worth noting the impact of the revenue cap for annual budget development purposes.
3 Property tax rates shown include library system and other special taxing authorities. 4 Wisconsin Statutes§ 66. 0602( 3).
6 WAUKESHA COUNTY, WI

ITEM NO. 7.

Docusign Envelope ID: 8463 BA3 F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Budgeted expenditures by functional area are illustrated in the table below. Data is presented based on financial information disclosed in the County' s Budget Document. It is important to highlight that the figures include all funds, including funds supplemented through user fees and other non- tax revenue sources. For example, included in the amounts below is the County' s special purpose grant fund, which was set up to accept and budget for the

78. 5 million of one- time funding received from the American Rescue Plan Act (ARPA). As a result, expenditure trends reflect the temporary boost in budget levels from these one- time sources provided following the onset of the pandemic. Additional details regarding the allocation ofARPA funds by functional area are provided below.

Table 2: Budgeted Expenditures by Functional Area, All Funds, FY2020— FY2024 FY2020 FY2021 FY2022 FY2023 FY2024 Average
Functional Area Adopted Adopted Adopted Adopted Adopted Annual Budget Budget Budget Budget Budget Change
Justice and Public Safety $ 66, 932, 509 $ 68, 341, 029 $ 71, 650,398 $ 76, 479, 249 $ 78,062, 531 4% Health and Human
88, 837, 237 $ 89, 612, 129 $ 92, 065,962 $ 101, 654,563 $ 105, 559,022 4% Services
Parks, Environment,
35, 063, 785 $ 33, 498, 114 $ 38, 723, 077 $ 44, 724, 903 $ 43, 620, 188 6% Education, and Land Use
Public Works 33, 905, 037 $ 34,413, 700 $ 34, 827,094 $ 36, 510,406 $ 37,733, 516 3% General Administration $ 23, 270, 556 $ 23, 362, 925 $ 25, 294, 740 $ 26, 125, 174 $ 27, 302, 374 4% Non- Departmental 29, 531, 600 $ 30, 749, 479 $ 31, 245, 776 $ 29, 715, 040 $ 29, 329, 791 0% Debt Service( General) 14, 944, 779 $ 14, 873, 594 $ 15, 081, 796 $ 16, 135, 115 $ 16, 839, 088 3% Total Operating Budget $ 292, 485, 503 $ 294, 850, 970 $ 308, 888, 843 $ 331, 344, 450 $ 338, 446, 510 4% ARPA Allocation
Waukesha County, like other local governments around the country, received one- time federal ARPA funds to help offset impacts of the C OVID- 19 pandemic. The County' s allocation of ARPA funds totaled $ 78. 5 million, to be spent or obligated by December 31, 2024, and completed by December 31, 2026. The County generally manages ARPA funds in the Special Purpose Grant fund. ARPA projects were chosen by prioritizing a number of long-term County objectives, addressing both near- term pandemic impacts and investments in infrastructure. The budgeting of ARPA funds by functional area is captured in the table below.

Table 3: ARPA Allocation by Functional Area
Functional Area Total
Justice and Public Safety 44, 371, 355
Health and Human Services 8, 045, 870
Parks, Environment, Education, and Land Use 10, 235,000 Public Works 1, 327, 164
General Administrations 14, 531, 334
Grand Total 78, 510, 723
5 Includes multiple allocations that fund countywide initiatives but are recognized in " General Administration" for simplified reporting.

BUDGET TASK FORCE ANALYSIS AND FACILITATION 7

ITEM NO. 7.

Docusign Envelope ID 8463 BA3 F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C In general, following best practices, the County used one- time ARPA funds for one- time expenses. At times though, and because it was authorized by the federal government, ARPA funds were strategically used to support ongoing costs in order to avoid major service impact on residents. Short- term use of one- time funds for ongoing expenses has its place; however, prolonged reliance on such funds increases financial risk. The County appropriately developed a phased- in approach where ARPA funds would be replaced by ongoing levy revenue over a multi- year window to avoid structural imbalance. Structural imbalance refers to ongoing operational costs that are not supported by ongoing revenues. Some examples of ARPA funding used to avoid major operational disruption( e. g., ongoing operating costs) in the short run include:

1. 3 million to support recommendations outlined in the compensation study

2. 5 million to phase in Sheriff Department sworn officer pay increases o Funding spans three years, with a budget of$720, 000 in 2024

1. 6 million to phase in higher fuel, utility, and vehicle parts o Funding spans three years with a budget of$327, 000 in 2024 The Justice and Public Safety functional area received the largest total share of ARPA funds: more than $ 44 million. Most of this, $ 36 million, supported the Courthouse renovation project with an additional$ 2. 5 million for renovations to the Medical Examiner' s Office. Additionally, a civil court was converted to a sixth criminal court to help address the pandemic- driven backlog, with nearly$ 2. 5 million of ARPA funds supporting Circuit Court and District Attorney costs. Finally, $ 2. 5 million supported increases in Public Safety personnel costs to maintain competitive wages and avoid service disruptions.

An additional $ 14. 5 million supported countywide initiatives and is categorized as " General Administration" for simplicity purposes because of its effect on multiple county departments. This category includes about$ 4. 8 million for implementation of an Enterprise Resource Planning( ERP) system, $ 4. 3 million for recovery of administrative costs carrying out the grant initiatives, $ 3. 0 million for salary and benefit adjustments to improve worker retention e. g., phasing in the compensation study, mentioned previously), and $ 1. 6 million in higher fuel, utility, and vehicle parts( mentioned previously).

Parks, Environment, Education, and Land Use share of funding was $ 10. 2 million, including$ 7. 5 million used to expand the County' s revolving loan GROW fund to promote economic development by retaining, expanding, and attracting businesses, as well as to increase workforce housing stock to meet projected employment growth in Waukesha County. Health and Human Services received more than $ 8 million for programs and infrastructure investments that supported response to emerging public health services. ARPA- funded initiatives in both areas were generally one- time, rather than ongoing, with the exception of a Crisis Services in Law Enforcement project that added positions to a grant-funded pilot of embedded mental health clinicians in public safety agencies. Finally, ARPA funded$ 1. 3 million of one-time costs related to projects in Public Works.

CORE SERVICES MATRIX
The following table provides an overview of the County' s core services by functional area. It is meant to provide a high-level summary and is not inclusive of all County services. The programs outlined below provide a basis for understanding potential service level reductions or enhancements, including estimated fiscal and constituent impact.
8 WAUKESHA COUNTY, WI

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Table 4: County Core Services
Functional Area Department Programs
Radio Services
Emergency Communication Center
Preparedness
Emergency Planning
Prosecution/ Administrative Services
District Attorney • VictimlWtness Program
VOCA Grant Program
Clerk of Circuit Court Office
Justice and Public Circuit Court Juvenile/ Probate Division Safety Court Commissioners and Family Court Services
Medical Examiner • Medical Examiner Services
Administrative Services
General Patrol
Sheriff
Investigation
Inmate Security and Services
Court Security
Process Service
Corporation Counsel'
Child Support
Child Support
Administrative/ Information Services
Children and Family Services
Health and Human Adolescent and Family Services
Services Health and Human • Clinical Services
Services Public Health
Aging and Disability Resource Division
Criminal Justice Collaborating Council
Veterans' Services
Administrative Services
Register of Deeds
Land Records
Recording
Vital Records
Extension—
Strengthening County Citizens, Families, and Communities Waukesha County Administrative Services
Resource Sharing
Bridges Library • Education and outreach
Parks, Environment, System Automation Technology
Education, and Land Payments to Member Libraries/ Systems Use CAFE Shared Automation Fund
Parks
Administrative Services
Golf Courses
Ice Arenas
Parks and Land Use • Workforce Innovation and Opportunity Planning and Zoning
Land Resource
Environmental Health
Community Development
Airport Operations
Engineering Services
Highway Operations
Public Works Public Works Transit Services
Central Fleet
Facility Operations
Administration
BUDGET TASK FORCE ANALYSIS AND FACILITATION 9

ITEM NO. 7.

Docusign Envelope ID: 8463 BA3 F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Functional Area Department Programs
Advisory Boards
County Executive • County Administration
Customer and Community Services
County Board County Board and Committee Operations
Legislative Support
Licensing
County Clerk Legislative Support and Administrative Services Elections
Tax Collections
General County Treasurer • Investments
Administration Administrative Services
Human Resources
Budget Management
Department of Purchasing and Risk Management
Administration Information Technology/ Communications
Accounting Services
Administrative and Business Services
American Job Center
Corporation Counsel • General Legal Services
General
Non- Departmental Non- Departmental • Health and Dental Insurance Contingency

STAFFING
Personnel-related costs are a key expenditure driver for the County' s budget. Salaries and benefits represent nearly half ofthe County' s annual spending. The table below provides a historical overview of funded positions before the state- imposed levy limits and funded positions in 2024. The data reflects staffing resources, where ongoing revenue is needed to support the position cost. Sunset positions, such as grant- funded or project- based, are excluded from the summary. Four of the County' s five Functional Areas with authorized positions experienced a decrease in staffing from FY2010 to FY2024. Health and Human Services, which is the only functional area that experienced a staffing increase, is shown separately because it receives more than 70% of its funding from non- tax levy sources, such as user fees and state pass- through revenue. Position growth in this area is correlated with higher revenue reimbursement.

Table 5: Authorized Staffing Level by Functional Area, FY2010 and FY2024 FY2010 FY2024 Total Change Total Change
Functional Area
Budget Budget Positions) o )o
Justice and Public Safety 539 527 12) 2%
Parks, Environment,
214 171 43) 20%
Education, and Land Use
Public Works 161 142 19) 12%
General Administration 139 128 11) 8%
Subtotal
Health and Human Services 399 426 27 7%
Total Regular Positions 1, 452 1, 394 58) 4%
10 WAUKESHA COUNTY, WI

ITEM NO. 7.

Docusign Envelope ID 8463 BA3 F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Fiscal Health Assessment
As part of the annual budget development process, County staff conduct a comprehensive long-term forecast to inform future policy decisions based on anticipated revenue and spending levels. As part of the project scope, Raftelis conducted an independent, objective review of the County' s forecast model to determine future budget needs.

The Financial Condition Assessment reviewed five- year historical financial data( 2019— 2023) for all County funds to establish a financial baseline. It is important to note that the analysis excluded enterprise funds that are funded entirely through user fees or other non-tax sources as well as the capital budget except as it relates to debt service expenditures and financial policies dictating the percentage of cash contribution for bond- financed capital projects.

Raftelis also conducted a benchmarking analysis by identifying peer counties in Wisconsin based on similar demographic indicators. The analysis reviewed revenue sources and budgetary practices to help inform the County' s financial context.

The Financial Trend Analysis draws upon the findings of the Financial Condition Assessment, as well as other factors explained later in this section, to project future revenue and expenditure trends for the next five fiscal years.

The following sections summarize key historical findings and the financial trends anticipated to impact future budget needs for the County.

Financial Condition Assessment
The examination of Waukesha County' s financial condition spanned budgeted and actual staffing, spending, and revenues from fiscal years 2019 through 2023, as well as the 2024 adopted budget. The data considered included published budgets, internal and audited financial reports, and interviews with County leadership. Part of the fiveyear analysis reflects the economic and service impacts of the COVID- 19 Global Pandemic, which began in March 2020 and ended in May 2023. This period was characterized by suspending or altering many private and public services and stimulus funding from the federal government to avoid economic recession. As a result, the actual financial data during this period experienced greater variation than previous historical averages.

Summary of County Funds
More than 55% of the County' s budget is organized within the General Fund. The three largest revenue sources comprising the General Fund are, in order, the property tax levy, intergovernmental contracts/ grants, and charges for services. The County also maintains Debt Service and Capital Projects funds, distinct from the General Fund.

Debt Service is the third-largest recipient of tax levy, and capital projects are funded through a combination of available operating revenues ( cash) and bond issuances( debt).

County operations include five Enterprise Funds where operating and capital costs are entirely or mostly recovered through user charges. As of 2024, these include a fund for two golf courses, a fund for two indoor ice arenas, a fund for a materials recycling facility managed by the Department of Parks and Land Use, a fund for the airport managed by the Department of Public Works, and a Radio Services Fund managed by the Department of Emergency Preparedness. Two relevant changes occurred in 2020 when the airport became self- sustaining without property tax levy support, and the County sold a third golf course.

BUDGET TASK FORCE ANALYSIS AND FACILITATION 11

ITEM NO. 7.

Docusign Envelope ID: 8463 BA3 F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Finally, the County manages financing for interdepartmental goods and services through Internal Service Funds.

The Vehicle/ Equipment Replacement, Central Fleet Maintenance, and Collections Management funds manage respective services for all County departments, who are then charged a usage- equivalent fee for service. The Risk Management, Health and Dental Insurance, and End User Technology Funds allocate most costs to departments or users, with certain centralized subsidies.

Major Revenue Sources and Recent Trends
The following table summarizes County revenues by category for the past five fiscal years.

Table 6: County Operating Revenues by Category, FY2019— FY20236 Average
Revenue Category FY19 Actual FY20 Actual FY21 Actual FY22 Actual FY23 Actual' Annual Change
Tax Levy- General
89 338,540 $ 90, 609, 579 $ 92, 062,880 $ 93, 696, 377 $ 95, 635,790 2% Operations8
Tax Levy- Library 3, 523, 524 $ 3, 538, 749 $ 3, 659, 778 $ 3, 706, 706 $ 3, 999, 607 3% Intergovernmental9 II $ 61, 730,518 $ 75,515, 929 $ 82,069, 763 $ 84, 115, 231 $ 92, 208, 134 11% Fines, Licenses, and
Charges for 36, 427, 997 $ 35, 484, 735 $ 40, 605, 130 $ 37, 985, 293 $ 38, 001, 986 1% Services
Interdepartmental
37,284,088 $ 38, 086, 965 $ 40, 828, 287 $ 41, 708, 475 $ 42, 163, 746 3% Charges
Other10 17, 296, 583 $ 23, 185, 832 $ 17, 989, 986 $ 21, 109, 417 $ 23, 957, 337 11% Total 245, 601, 251 $ 266, 421, 789 $ 277, 215, 823 $ 282, 321, 499 $ 295, 966, 600 5% The County currently levies tax through property values. As mentioned previously, state statute limits annual property tax levy increases to the prior year' s change in value owing to net new construction, which incorporates both new and demolished buildings. There is some flexibility beyond the limit, primarily for unused tax levy from the prior year and to support debt service obligations. The County apportions the levy across taxable properties based on their equalized values. With the state- imposed cap on levy growth, the effective tax rate has decreased in recent years. The County' s total equalized property value has consistently increased, often at a much higher rate than the rate of tax levy growth. From 2019 to 2024, equalized property value rose from $ 55 billion to nearly $ 83 billion, while the effective tax rate per$ 1, 000 of equalized value fell 26%, from$ 1. 89 to$ 1. 39.

The following figure illustrates trends in property value and property tax rates over the past 10 years. 6 Excludes enterprise funds, debt, and capital.

Preliminary unaudited figures
Does not include levy dedicated to capital or debt service. 9 FY 2021— FY 2023 included ARPA funding for operations. 1° Market value adjustment on investment income is excluded. 12 WAUKESHA COUNTY, WI

ITEM NO. 7.

Docusign Envelope ID 8463 BA3 F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Waukesha County Property Tax Value and Tax
Rate, 2015- 2024
90 2. 50
80 $ 2. 08
70 2. 00
60 1. 39
50 1. 50
m
40 1. 00
30 20 0. 50
10 0 0. 00
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Total Equalized Value .— Effective County Tax Rate
Figure 4: Waukesha County Property Tax Rates and Property Value, 2015- 2024 Justice and Public Safety receive the greatest share oftax levy (41. 3% in 2024). The Sheriffs Office receives nearly two-thirds of the levy allocated to this area, with the remaining allocated to the District Attorney, Emergency Preparedness, Circuit Court Services, and Medical Examiner. Tax levy supports the majority of service delivery costs for each of these five departments. Public Works is equally reliant on intergovernmental funds( most of which is funding for maintenance of state highways) as it is tax levy, followed by interdepartmental funding for vehicles and equipment. Tax levy is only the third largest revenue source for Parks, Environment, Education, and Land Use, as nearly two-thirds of services are funded by intergovernmental and service charge revenues. Lastly, less than 10% of the General Administration budget is funded through tax levy, with the balance supported by interdepartmental and other sources. Total tax levy allocation by functional area, as a share of one dollar, is reflected in the figure below.
9¢
47¢ 24¢
Parks, Env.,
Justice and Public Health and 24¢
Safety Human Services Infrastructure Educ. and Other
Land Use
11 yw o c. nea - a: avc. yuM
L 11180916 G G• i`
L{ 1'. HING' CO1{'. QC
fl I v, 12
r.
iuI' ten,,
I !.

L11180916G
12 uw..
4/
g
z. 0 - 12
Figure 5: 2024 Tax Levy Allocation by Function, as$ 1
BUDGET TASK FORCE ANALYSIS AND FACILITATION 13

ITEM NO. 7.

Docusign Envelope ID 8463 BA3 F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Intergovernmental revenue increased by 10. 6%, on average, over the past five years, the largest among each ofthe revenue categories. Much of this growth is driven by pandemic- era federal funding that cannot be relied upon in future budgets. County departments try to maximize state and federal funding resources to meet County priorities.

However, nearly all the funding— whether from grants, contracts, or aid— is restricted to specific purposes. Shared revenue from the state is the only major unrestricted intergovernmental funding available, and it generally comprises less than two percent of funding countywide ( and even a portion of this is restricted to transportation and certain public safety functions). The state appropriation comes through a combination of programs and is derived from state taxes. Other intergovernmental funding includes federal entitlement programs like the Community Development Block Grant from the Department of Housing and Urban Development, state support for mandated services like the Courts, and grants that County staff pursue. State funding for mandated services is often flat or grows minimally, not keeping up with the cost of providing services. As a result, approximately 40% of local tax levy in the 2024 budget was used to meet state- mandated service obligations.

Interdepartmental revenues are primarily associated with the internal service funds described earlier for End User Technology, Vehicle/ Equipment Replacement, Central Fleet Maintenance, Risk Management, Collection Management, and Health and Dental Insurance. Other interdepartmental revenues are also for internally provided goods and services, such as Court Security supplied by the Sheriff and paid from the Circuit Court budget.

Recognizing the fiscal constraints that many user departments are facing, most of these charges have been limited to 2- 3% increases each year, despite the growing costs of providing these services. This has required significant subsidies to artificially lower interdepartmental charges through the use of internal service and general fund balance, including$ 613, 000 in the End User Technology Fund and$ 268, 000 in the Risk Management Fund in the 2024 budget. The use of one- time funds to bridge the gap between the cost of services and charges to departments will not be sustainable in the long term. From 2019 to 2023, these interdepartmental revenues increased by 3. 1% on average, which still exceeds the average growth in the allowable property tax levy to support them.

Fines, licenses, and charges for services capture user-based revenue, whether they are imposed for compliance, authorization to operate, or in exchange for accessing a program or activity. Excluding Enterprise Funds, this revenue source has grown 4% from 2019 to 2023. Certain user fees are set by the state or an external agency with limited ability to change as operating costs evolve. Other fees that the County exerts greater control over— like golf course fees— are carefully balanced between cost recovery needs and remaining competitive in the regional market.

Where possible, the County has prioritized increasing user fee revenues to keep pace with the cost ofproviding the service. For example, Parks and Land Use, where a majority of programs are discretionary, achieves 77% cost recovery across all of its funds. This minimizes the reliance on tax levy support. Additionally, the outpatient clinic from Health and Human Services, which receives governmental reimbursement for eligible Medicaid patients, is able to charge patients who can pay higher commercial insurance reimbursement rates, increasing revenue to support other programs where cost-recovery is more challenging.

Expenditure Trends
The following table shows County expenditures by category for the past five fiscal years. 14 WAUKESHA COUNTY, WI

ITEM NO. 7.

Docusign Envelope ID 8463 BA3 F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Table 7: County Expenditures by Category FY2019 — FY2023 Expenditure
FY19 Actual FY20 Actual FY21 Actual FY22 Actual
FY23 Average
Category Actual Annual Change
Salaries 94, 861, 283 $ 99, 997, 477 $ 101, 143, 489 $ 101, 500, 262 $ 107, 139, 325 3% Benefits 32, 385, 290 $ 33, 956, 966 $ 35, 705, 532 $ 34, 486, 102 $ 36, 234, 191 3% Operating 1FIr 76, 998, 367 I $ 85, 984, 344 $ 78, 553, 630 $ 87, 890, 381 Expenses
Contracted
31, 550, 677 $ 32, 136, 358 $ 32, 748, 678 $ 34, 850, 104 $ 37, 929, 098 5% Services
Debt Service $ 13, 904, 500 $ 14, 254, 500 $ 14, 312, 719 $ 14, 520, 921 $ 15, 842, 737 Utilities 2, 943, 744 $ 2, 837, 667 $ 3, 226, 256 $ 3, 523, 124 $ 3, 535, 724 5% Interdept. 21, 032,319 $ 21, 115,483 $ 22,375, 468 $ 24,290,762 $ 24, 265, 908 4% Total 272, 330, 829 $ 281, 296, 818 $ 295,496, 486 $ 291, 724, 905 $ 312, 837, 364 4% The modest average annual increase in expenditure primarily reflects the increasing cost of providing existing services and increased temporary federal funding. The County has had limited- service expansion over the past five years. High- quality service delivery relies on talented staff, and the County has worked diligently to remain a competitive employer. As previously discussed, salary and benefit costs have risen nationwide, and municipal employers are facing competitive pressure from not only private sector jobs but also neighboring localities. The County strives for cost- effective and competitive employee benefits by self-insuring health and dental insurance coverage and participating in the Wisconsin Municipal Mutual Insurance Company for eligible liability coverage.

For an organization with more than 1, 000 employees, this is a best practice12; however, managing healthcare costs within a constrained revenue generating capacity is a challenge. Nationwide medical inflation was 7% in 2023, and the County has effectively managed to stay at or below this threshold. 13 Non- personnel operation costs increased between 15% to 20% over the past five years, well above the 7% growth in property tax levy revenue over the same period. Historically, the County has relied on a contract- based service model to increase efficiency and effectively manage resources. As large contracts have come due for renewal, the underlying labor and supply costs impacting contract pricing have resulted in significant renewal increases. For example, the jail medical services budgeted contract costs increased 25% between 2019 and 2024. The County' s utility costs jumped up 20% from FY2019 to FY2023, largely driven by a 14% increase in 2021 and a 9% increase in 2022. Finally, interdepartmental spending increased by approximately 4% per year on average, reflecting growing costs for essentials like software licenses, risk management charges, and bailiff services. One key contributor to rising costs is inflation.

GENERAL FUND HISTORICAL OVERVIEW
Budgeted and actual General Fund expenditures both increased, on average, between 3- 4% each year over the past five years. A summary of actual revenue and expenditures by fiscal year is illustrated in the table below. The relatively small variance between these amounts is indicative ofthe County' s ability to both accurately forecast and adjust as needed based on revenue collections throughout the year. 11 Preliminary unaudited.
12 Sammer, Joane. Is Self-Insurance for you? Society for Human Resources Manager ( SHRM). May 2011. https:// www. shrm. org/ topics-tools/ news/ hr-magazine/ self-insurance 13 Kaiser Family Foundation ( KFF). Employer Health Benefits; 2023 Summary of Findings. hops:// files.kff.org/ attachment/ Employer-Health-Benefits-Survey-2023-Annual-Survey-Summary uf-Findings.pdf BUDGET TASK FORCE ANALYSIS AND FACILITATION 15

ITEM NO. 7.

Docusign Envelope ID 8463 BA3 F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Table 8: General Fund Budget to Actual Expenditures, FY2019— FY2023 Favorable/ Variance to
Year Actual Revenues Actual Expenditures Unfavorable Variance Modified Budget(%)
2019 174, 375, 559 174, 943, 194 567, 635 0. 3%
2020 183, 677, 936 189, 168, 729 5, 490, 793 2. 7%
2021 189, 565, 729 195, 778, 871 6, 213, 142 3. 2%
2022 187,959, 054 195, 545, 024 7, 585, 970 3. 8%
2023 199,356,512 206, 591, 220 7, 234,708 3. 4%
Average 5, 418, 450 2. 7%

PEER BENCH MARKING
The project team compared Waukesha County' s financial profile to that of other Wisconsin counties to help provide context to the County' s financial position. Given the unique nature of local governments within each state, the benchmarking analysis focused on other counties in Wisconsin. Benchmarking can be a useful tool to identify shared challenges and opportunities. However, it is important to note that any municipal entity can vary significantly from its neighbors or similarly sized counties due to a variety of social and economic factors, and benchmarking should be considered as one data point in a more holistic analysis.

For this analysis, counties in Wisconsin were first reviewed based on population size. Waukesha is the third largest County in the state, within the top tier range of population size from around 170,000 in Kenosha County to more than 930, 000 in Milwaukee. Population is a useful comparative metric because a County' s size typically impacts the resources available from the tax base, as well as the service level demands. Other comparative factors that were analyzed included whether the County had adopted the 0. 5% sales tax; median income and house value; percent of the population below the federal poverty level; and crime rates. These factors were important given Waukesha' s strong property tax base, conservative financial policies, and prioritization of public safety services by residents.

The analysis also considered geographic proximity to Waukesha, as Wisconsin' s population tends to be concentrated in its southern region where the County is located.

As captured in the table below, Waukesha' s population size is closest to Brown County, which is located in northern Wisconsin near Green Bay. Although further north, Green Bay has both a major professional sports team and Lake Michigan waterfront, attributing similar socioeconomic characteristics to Waukesha. Waukesha' s median income and home values aligned closest to Dane County, where the state capital of Madison is located.

When examining the prevalence of poverty and crime, Waukesha ranks closer to Racine, which also happens to be the only other benchmark peer without a county sales tax. 16 WAUKESHA COUNTY, WI

ITEM NO. 7.

Docusign Envelope ID: 8463 BA3 F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Table 9: Peer Counties Demographic Comparison14
Adopted Median %
Below Violent Property
County
2023
Sales
Median
House
Federal Crimes per Crimes per
Population15
Tax
Income
Value Poverty 1, 000 1, 000
Level Residents16 Residents17
Brown 273, 333 1986 71, 127 251, 900 9. 9%0 8
i 12
Dane 590, 056 1991 84, 831 373,500 10. 4% 7 16
Kenosha 170, 243 MIEM1 ! 253, 200 dilliME a Jicri
Milwaukee 937, 259 1991 58, 214 216, 900 17. 1% 20 29
Racine 197, 422 No 238,200 8. 0% 7 10
Waukesha 411, 538 None 98, 849 379, 700 5. 2% 3 7
To gauge the overall resource allocation and spending of taxpayer dollars, the table below compares the budget, property tax levy, and state- shared revenue per capita for each of the peer counties. Among peer counties, Waukesha has the lowest per capita amounts across all three categories ( although Dane County receives similar shared revenue per capita). To meet resident service level expectations with fewer resources year after year requires persistent operational efficiency.

Table 10: Peer Counties Spending Per Capita
County
Total 2024 Budget Per 2024 Tax Levy Per 2024 Shared Revenue Ca• ita Ca. ita Per Ca• ita
brown 1, 702 347 $ 17
Dane 1, 641 431 10
Kenosha 7

1. 1 $ 1, 657 457 MI $16
Milwaukee 1, 464 311 58
Racine 1, 233 327 IMP $19
Waukesha 916 279 10
Comparison of Revenue Sources
The primary revenue source for all Wisconsin counties is tax revenue. All counties collect property taxes, and they also have the option to collect vehicle registration fees( also known as a wheel tax) and/ or a 0. 5% sales tax. Four of the five benchmark counties collect sales tax, as illustrated in Table 9. Milwaukee County also received special approval from the state legislature to increase its county sales tax and add a city sales tax beginning in January 2024. 18
14 Unless otherwise specified, all data is from 2022 ( most recent available) and the 2022 U. S. Census American Community Survey.
15" Demographic Services Center' s 2023 Population Estimates." Wisconsin Department ofAdministration, https:// doa.wi. gov/ DIR/ Final Ests Summary 2023. pdf. 16" UCR Offense Data." Wisconsin Department ofJustice, https:// www.doj. state.wi.us/ dles/ bjia/ ucr-offense-data. 17 Ibid.
18" Tax Rates." Wisconsin Department ofRevenue, https:// www.revenue. wi. gov/ Pages/ FAOS/ pcs- taxrates. aspx# txratell.

BUDGET TASK FORCE ANALYSIS AND FACILITATION 17

ITEM NO. 7.

Docusign Envelope ID 8463 BA3 F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Waukesha, at the beginning of this assessment, was one of only four counties, out of 72 total, without the county sales tax. Recently, Manitowoc County adopted the sales tax with an effective collection date of January 1, 2025.

Among the remaining three counties without sales tax, Waukesha is certainly not alone in experiencing growing fiscal pressure. In the previous three other counties without the sales tax— Manitowoc, Racine, and Winnebago— the FY2024 budget development processes identified an average shortfall of$ 8. 3 million. Further, in the 2024 budget messages for both Winnebago and Racine counties, the respective County Executive took the opportunity to highlight their mounting constraints and foreshadow seeking additional revenues. 19 Waukesha has maintained its Aaa/ AAA bond ratings despite fiscal constraints. The bond rating agencies acknowledge the availability of the additional revenue source( sales tax) and spending growth that has outpaced restricted revenue growth, noting they expect spending to grow in line with, to slightly above, revenue growth in the absence of policy action." 2° The chart below illustrates the distribution of major revenue sources among each ofthe peer counties. 21 Ofthe four counties with comparable data, 22 not surprisingly, Waukesha relies the most on a property tax levy and other revenues ( including user fees). The addition of sales tax in the other three counties contributes to less reliance on the property tax levy. Intergovernmental revenue is a significant source ofrevenue for all counties in the state, with similar proportions among the four counties shown below. As mentioned previously, much of this revenue is restricted in use to support specific, often mandated, services provided by the County.

Waukesha 30%
Intergovernmental
Milwaukee 14% Property Tax Levy
Kenosha i/M
8% 8% Sales Tax
Dane 26% 9% MI7% I Other Revenues
0% 100%
Figure 6: 2024 Revenue Sources for Counties That Budget with Comparable Categories 19" Racine County 2024 Budget." Racine County,
racinecounty.com/ home/ showpublisheddocument/ 46848/ 638428279760830000; " 2024 Approved Budget Book." Manitowoc County, https:// manitowoccountywi. gov/ wp-content/ uploads/ 2024/ 05/ 2024-Approved- Budget-Book.pdf; Adopted Budget 2024." Winnebago County, https:// www. co. winnebago. wi.us/ sites/ default/ files/ uploadedfiles/ 2024% 20ADOPTED% 20Budget. pdf. 20 " Fitch Rates Waukesha County, WI' s Series 2023A GO Notes ` AAA'; Outlook Stable." Fitch Ratings, https:// www.fitchratings. com/ research/ us- public-finance/ fitch-rates-waukesha- county-wi-series- 2023a- go- notes- aaaoutlook-stable- 12- 04- 2023. 21 " 2024 Adopted Operating Budget." Milwaukee County, https:// county. milwaukee. gov/ files/ county/ administrativeservices/ PS B/ BudgetsCopy- 1/ 2024- Budget/ 2024- Adopted-Budget/ 2024- Operating-Budget2025. pdf; " 2024 Budget." Kenosha County, https:// www. kenoshacounty. org/ DocumentCenter/ View/ 17819/ 2024- County-Budget; " 2024 Adopted Budget." Dane County, https:// admin.danecounty. gov/ documents/ pdf/ Budget/ 2024/ Adopted-Budget-Report.pdf. 22 Counties are only shown if their revenue categories align with Waukesha closely enough for comparison. 18 WAUKESHA COUNTY, WI

ITEM NO. 7.

Docusign Envelope ID: 8463 BA3 F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Financial Trend Analysis
After reviewing historical financial results for revenue and expenditures, the project team created a financial model incorporating the historical trends along with anticipated future trends to forecast budget needs over the next six years, FY2025 — FY 2030. This independent analysis provided an objective review of the County' s annual forecasting process, and it began to identify some of the key challenges associated with achieving a balanced budget in future years.

KEY ASSUMPTIONS
The adopted FY2024 budget was used as the base year of data for the financial model. The financial model excluded Enterprise Funds and the Capital Improvement Fund, focusing on operating budget requirements for all other funds, including Special Revenue and Internal Service Funds. Key assumptions used in the model are detailed below.

Fund Balance
The starting fund balance for FY2024 is assumed to be $ 60. 9 million, based on the adopted FY2024 County budget, and the starting fund balance for FY2025 is assumed to be$ 57. 4 million, based on County staff projections.

These figures represent the unassigned fund balance for General and Special Revenue Funds only.

The annual target fund balance is assumed to be 15% of annual General and Special Revenue Fund expenditures, and the minimum is assumed to be 11% ofannual expenditures, based on adopted County financial policies. 23 Operating Expenditures
The model identifies assumptions for annual changes in base operating expenditures based on expenditure category. These assumptions were developed based on historical trends and input from County staff. The list of assumptions by category is shown in the table below.

Table 11: Base Annual Change Assumptions for Operating Expenditures by Category Category
Assumed Annual
Percent Change
Salaries24 5%
Benefits 5%
Operating Expenses 4%
Capital Assets 5%
Contracted Services 8%
Utilities 10%
Interdepartmental Charges 4%
A total of 98% of budgeted operating expenditures are projected to be spent per year. Historically, the number has been closer to 97%, but this is largely due to high vacancy rates, and the model assumes a lower vacancy rate going forward.
23" Financial Management Policies." Waukesha County.
24 Includes across- the- board salary range adjustments, progression through step ranges, and performance pay, similar to recent years.

BUDGET TASK FORCE ANALYSIS AND FACILITATION 19

ITEM NO. 7.

Docusign Envelope ID 8463 BA3 F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Capital Expenditures
Assumptions for annual capital expenditures, as well as revenue offsetting the cost of these expenditures, are based on the County' s adopted capital plan. Based on past County practice, the model assumes that the County will pay for at least 20% of all capital costs directly( as down payment) and that the rest of the cost, aside from any offsetting revenue, will be financed through 10- year bonds. The annual interest rate for the bonds is assumed to be 4%, based on standard County assumptions.

Non- Tax Revenues
The model identifies assumptions for annual changes in base non-tax operating revenues based on revenue category. These assumptions were developed based on historical trends and input from County staff. The list of assumptions by category is shown in the table below.

Table 12: Base Annual Change Assumptions for Non- Tax Operating Revenues by Category Category
Assumed Annual
Percent Change
Intergovernmental 2%
Fines, Licenses, and
30/0
Charges for Services
Interdepartmental Revenues 4%
Other Revenues 3%
Tax Revenues
The model assumes that all debt service will be paid for via property tax levy, and that the remaining portion ofthe tax levy, which is subject to state restrictions on the annual increase, will increase by 1. 4% per year. The 1. 4% figure is based on County projections of future development and is supported by historical trends. Property appreciation has increased significantly, while net new construction is limited by the availability of developable properties and is affected by the economic cycles.

FUTURE PROJECTIONS
Based on the assumptions detailed in the previous section, projected operating revenues and expenditures are shown in the tables below. Numbers are rounded to the nearest million. 20 WAUKESHA COUNTY, WI

ITEM NO. 7.

Docusign Envelope ID: 8463 BA3 F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Table 13: Projected Operating Expenditures by Category, FY2024- FY2030 ($ M) 25 Category FY24 FY25 FY26 FY27 FY28 FY29 FY30
Average
Annual Change
Salaries 111. 7 $ 116. 9 $ 122. 7 $ 128. 8 $ 135. 3 $ 142. 0 $ 149. 1 5% Benefits 40. 2 $ 42. 0 $ 44. 1 $ 46. 3 $ 48. 6 $ 51. 0 $ 53. 6 5% Operating Expenses 92. 1 $ 90. 9 $ 94. 6 $ 98. 4 $ 102. 3 $ 106. 4 $ 110. 6 3% Capital Assets 1. 8 $ 1. 9 $ 2. 0 $ 2. 0 $ 2. 2 $ 2. 3 $ 2. 4 5% Contracted Services 37. 8 $ 40. 8 $ 44. 1 $ 47. 6 $ 51. 4 $ 55. 5 $ 60. 0 8% Utilities 3. 3 $ 3. 7 $ 4. 0 $ 4. 4 $ 4. 9 $ 5. 4 $ 5. 9 10% Interdept. Charges 24. 2 $ 25. 0 $ 25. 9 $ 26. 8 $ 27. 8 $ 28. 7 $ 29. 8 4% Transfers to Other Funds26 $ 1. 0 $ 0. 9 $ 1. 0 $ 1. 1 $ 1. 2 $ 1. 3 $ 1. 4 6% Debt Service 16. 8 $ 17. 3 $ 19. 8 $ 21. 4 $ 22. 0 $ 22. 4 $ 21. 8 5% Total 328. 9 $ 339. 4 $ 358. 1 $ 376. 9 $ 395. 6 $ 415. 0 $ 434. 6 5% Table 14: Projected Operating Revenues by Category, FY2024 - FY2030 ($ M) 27 Category FY24 FY25 FY26 FY27 FY28 FY29 FY30
Average
Annual Change
Tax Levy 119. 0 $ 122. 4 $ 126. 3 $ 129. 5 $ 131. 5 $ 133. 5 $ 134. 4 2% Intergovernmental 85. 9 $ 88. 2 $ 90. 0 $ 91. 8 $ 93. 6 $ 95. 5 $ 97. 4 2% Fines, Licenses, and

41. 6 $ 42. 8 $ 44. 1 $ 45. 4 $ 46. 8 $ 48. 2 $ 49. 6 3% Charges for Services
Interdept. Revenues 46. 3 $ 47. 9 $ 49. 6 $ 51. 3 $ 53. 1 $ 55. 0 $ 56. 9 3% Dedicated Fund Balance 8. 9 $ 7. 1 $ 7. 3 $ 7. 5 $ 7. 7 $ 7. 9 $ 8. 1 1% ARPA 8. 8 $ 0. 0 $ 0. 0 $ 0. 0 $ 0. 0 $ 0. 0 $ 0. 0 N/ A Other Revenues 18. 5 $ 19. 0 $ 19. 6 $ 20. 2 $ 20. 8 $ 21. 4 $ 22. 0 3% Carryforward28 0. 0 $ 6. 8 $ 7. 2 $ 7. 5 $ 7. 9 $ 8. 3 $ 8. 7 N/ A Total 328. 9 $ 334. 2 $ 344. 0 $ 353. 2 $ 361. 4 $ 369. 7 $ 377. 1 2% Operating expenditures are projected to outpace earnings each year, based on the base model assumptions. The gap is also expected to grow over time, as illustrated in the figure below. 25 Figures may not sum due to rounding.
26 Levy transferred to capital projects as part of down payment. 27 Figures may not sum due to rounding.
28 The model assumes that 2% of budgeted operating expenditures in 2025 onward are not expended, based on past trends, and these funds are carried forward.

BUDGET TASK FORCE ANALYSIS AND FACILITATION 21

ITEM NO. 7.

Docusign Envelope ID 8463 BA3 F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Total Projected Operating Revenues and
Expenditures
Base Scenario ($ Millions)
358 377 396 415 435
329 339
329 334 344 353 361 370 377
0 5 14 24 34 45 58
2024 2025 2026 2027 2028 2029 2030
Funding Gap Total Operating Expenditures
Total Operating Revenues
Figure 7: Projected Operating Expenditures and Revenues Under Base Scenario, FY2024 — FY2030 The baseline forecast provided above aligns with the County' s financial forecast provided in the budget document as part of budget development each year. The results indicate a structural deficit, where primary ongoing revenue sources are growing at a rate that is below the cost to continue providing the same level of service residents receive now over the next six years. Structural deficits can lead to decreased reserve balances, limit capacity for future capital investment, and require significant service level reductions to meet balanced budget requirements.

Gap Closure Scenarios
The difference between estimated revenue and cost to continue providing services ( baseline) is referred to as the budget gap. As part of the financial analysis, Raftelis worked with County staff to identify gap closure options that either reduce services ( expenditure savings) or increase revenue ( revenue- generating options). Collectively these options will be needed to address the projected budget gap over the next several years. It is important to note that the structural imbalance experienced by the County is not new. Since 2019, the County has faced preliminary base budget gaps ranging from$ 3 to$ 8 million annually.

EXPENDITURE REDUCTIONS
Under the state- imposed levy limits, the " new" revenue provided through tax levy growth is usually insufficient to cover the increasing cost of providing core services, often resulting in staff reductions and other expenditure cuts.

As such, departments have identified cost savings by reducing non- mandated services and trimming support for mandated services. The anticipated budget gap starts at approximately $ 5 million in 2025. It grows to approximately$ 58 million in six years as inflationary pressure for operational costs increases an average of 3— 5%, higher than historical averages of 2 — 3%. The financial model included a targeted analysis of needed expenditure reductions or revenue enhancements to solve for the next six years. The estimated savings target is approximately 30 million, which would help mitigate the inflationary impact that results in the$ 58 million gap. 22 WAUKESHA COUNTY, WI

ITEM NO. 7.

Docusign Envelope ID 8463 BA3 F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C To assist with identifying potential expenditure reduction scenarios, the project team leveraged the County' s program- based budget. This data allowed for easier translation of estimated savings amounts and service level impact. This relationship is critical for policymakers to have a clear understanding of the trade- offs associated with no longer providing a service or reducing the current service level. Given a much shorter time horizon for the financial analysis and Task Force facilitation( three months) compared to traditional budget development ( nine or more months), the savings estimates required simplified assumptions and instead focused on understanding what programs might be feasible to reduce ( e. g., are not mandated) and the net tax levy support that could be realized as potential savings. This information was then used to help guide the Task Force discussion around service level priorities and willingness to reduce certain services.

The figure below provides the scope of service level reductions following the logic described above, beginning with the adopted FY2024 Budget to the approximately $ 38 million of discretionary services where tax levy savings could be achieved. Nearly all of these services would need to be reduced/ eliminated to achieve the $ 30 million of targeted expenditure reductions that solve the County' s projected budget gap over the next six years. Discretionary is a subjective term. Many of the programs included in this amount still include core services that may have mandated components. For example, law enforcement is mandated for unincorporated areas of the County and, based on resident priorities, would likely not be classified as " discretionary;" however, tax levy support is highest among this functional area, and as such, resource allocation could be reduced by adjusting staffing levels, which may in turn increase response time or limit availability to respond to non- violent calls for service. What constitutes a core service is unique to each locality. Core services are the essential functions and services provided to ensure the well- being, safety, and effective functioning of the community. r-$
391. 4 M 119. 0 M 37. 6 M
General Fund
Enterprise Funds
Special Revenue
Local Tax Levy Discretionary programs
Funds
supported programs Potential tax levy
Internal Service Funds
Includes both savings, after
mandated and considering other lost
Debt Service& Capital discretionary services revenue
Projects
Bridges Library System
I
Figure 8: Scope of Expenditure Reductions
The nearly$ 38 million of potential service reductions was also broken down by functional area, as shown below.

This was based on underlying program budget data. The proportion of savings is correlated with how the County spends tax levy revenue by functional area.

BUDGET TASK FORCE ANALYSIS AND FACILITATION 23

ITEM NO. 7.

Docusign Envelope ID: 8463 BA3 F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Justice & Public', Health& Huma IGeneral
Safety Services Administration

78. 1M Budget S105. 6M Budget $ 43.6M Budget 37. 7M Budget 27.3M Budget

49. 2M Levy 28.4M Levy 10. 1 M Levy 12.4M Levy 2. 5M Levy

11. 9M 11. 2M 6.4M 7.OM 1. 2M
Discretionary Discretionary Discretionary Discretionary Discretionary Figure 9: Scope of Expenditure Reductions by Functional Area

REVENUE ENHANCEMENTS
The County has three tax-related revenue enhancements it could consider to address the budget gap. There are also non-tax revenue enhancements, though many are less impactful on the $ 30 million target based on the scale of fees or charges that the County has the authority to adjust. Each available revenue option is described in greater detail below.

Exceed Allowable Levy Increase
Waukesha County staff estimate that the value of new construction will increase by approximately 1. 4% annually between 2024 and 2030, which means that the County' s levy increase is estimated to be capped at 1. 4% per year per State law. However, counties do have the option of increasing their levy limit if a resolution is approved by the County Supervisors, and then voters approve the increase in a referendum. Referendums must specify the amount ofthe increase, whether the increase is one- time or ongoing, and the purpose for the increase. 29 Other counties in the state have requested levy increases in public referendums, with mixed responses from voters.

The following table lists examples of four recent referendums, along with the results of the votes.

Table 15: Results of Levy Increase Referendums in 2024
County
Requested Funding Duration Purpose Adopted?
Increase
Forest 2 million ( 32% of levy) Ongoing
Fund ongoing NO; failed 70/ 30
operations
Green 800, 000 ( 5%) Through 2030
Fund County- owned
YES; passed 65/35 nursing home
St. Croix 900, 000 ( 2%) Ongoing
Fund public safety YES; passed 54/ 46
positions
Washington 4 million ( 10%) Ongoing Fund Anti- Crime Plan NO, failed 56/ 44 29 Wisconsin Statutes§ 66. 0602( 4).
24 WAUKESHA COUNTY, WI

ITEM NO. 7.

Docusign Envelope ID 8463 BA3 F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Estimated Revenue
The basic rule of thumb for new levy growth in the County is a 1% increase which equals approximately$ 1 million in new revenue. Based on the expenditure and revenue trends discussed in the Financial Trend Analysis section, the County would need to increase total tax levy by approximately$ 30 million above allowable levy growth under state levy limits to close the budget gap between 2025 and 2030. Even with the infusion of additional levy dollars through a referendum, the underlying limits on levy growth would likely yield future budget gaps.

With a noteworthy history of managing budgets and minimizing taxpayer impact, the County would likely request a levy increase between 2% and 10%. The structure of the requested increase would be ongoing and cite a specific policy purpose. It is worth noting that the calculated amount of increase for the referendum would remain the same each year until ended by the Board of Supervisors or until a new amount was approved by voters in a referendum.

The base levy, inclusive of the additional ongoing referendum amount, would be subject to the net new construction growth factor each year. The following table illustrates what the estimated revenue would be with an increase of$ 3 million per year in 2025 ( 3% increase over the 2024 levy) or$ 6 million per year( 6% increase).

Revenue Generated by a 3% and 6% Increase,
2025 — 2030
160
140
120
o $ 100
80 60
40 20
2025 2026 2027 2028 2029 2030
Figure 10: Estimated Levy Increase Revenue, FY2025— FY2030 Impact on Taxpayers
The median home value in Waukesha County is estimated to be approximately $ 417, 000 in 2025, based on past trends. If the levy is increased by $ 3 million ( 3%) in 2025, the median homeowner is projected to pay $ 566 in County property taxes, which is $ 14 more than they would pay without the levy increase. Ifthe levy is increased by 6 million, the median homeowner' s taxes are projected to increase by$ 28 per year.

Vehicle Registration Fee ( Wheel Tax)
Another revenue generation option afforded to counties by the legislature is a vehicle registration fee, known colloquially as a wheel tax. The state allows counties and municipalities to enact an annual flat fee via ordinance affecting most vehicles weighing 8, 000 pounds or less. 30 There is no limit to the fee charged, but funds may only be used for transportation- related purposes.
3° Wisconsin Statutes§ 341. 35.

BUDGET TASK FORCE ANALYSIS AND FACILITATION 25

ITEM NO. 7.

Docusign Envelope ID: 8463 BA3 F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C As of June 2024, 13 Wisconsin counties along with 41 municipalities have adopted wheel taxes. The counties with wheel tax are listed below, along with their annual fee. Fees range from $ 15 to $ 30, with an average fee of$ 23.

None of the municipalities that have enacted wheel tax are in Waukesha County.

Table 16: County Wheel Tax Rates in 2024
County Wheel Tax Amount
Langlade AL $ 15
Crawford 20
Dunn M $20
Green 20
Iowa 20
Richland 20
Marathon 25
Vernon
Dane 28
Eau Claire1111111. 30
Milwaukee 30
PortageM$30
Estimated Revenue
According to the Wisconsin Department of Transportation, Waukesha County had approximately 341, 000 registered vehicles eligible for a wheel tax, as of 2023, and the number of vehicles increased by an average of 0. 7% per year between 2013 and 2023. 31 Based on these factors, a $ 30 wheel tax would generate the County approximately$ 10. 5 million per year, as illustrated in the following figure. 31 " Vehicle Registrations." Wisconsin DOT, https:// wisconsindot. gov/ Documents/ dmv/ shared/ rpt- 12- cal- 23. pdf. 26 WAUKESHA COUNTY, WI

ITEM NO. 7.

Docusign Envelope ID 8463 BA3 F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Estimated Wheel Tax Revenue, 2025 — 2030
12 10. 4 $ 10. 4 $ 10. 5 $ 10. 6 $ 10. 6 $ 10. 7
10 8
6 4
2 0
2025 2026 2027 2028 2029 2030
Figure 11: Estimated Wheel Tax Revenue, FY2025— FY2030
It is important to note that this figure assumes that the County would have at least$ 10. 5 million in transportation expenditures per year that could be funded by the wheel tax. The County' s FY2024 Transportation Fund budget is

18. 1 million, but only$ 3. 6 million is funded through levy. However, this figure does not consider capital spending on transportation projects or any deferred maintenance needs that could be funded with the new revenue.

Impact on Taxpayers
Waukesha County vehicle owners already pay$ 85 per year in state fees. If the County imposed a wheel tax of$ 30, the total cost would rise to $ 115 per vehicle. There is also the potential for costs to further increase if any Waukesha County municipalities opt to enact a wheel tax.

Sales Tax
Another option for generating additional revenue is for the County to adopt a sales tax. Wisconsin state law allows counties to adopt a 0. 5% sales tax via an ordinance passed by the County Board of Supervisors. Per state law, the tax may only be used " for the purpose of directly reducing the property tax levy," 32 which can be implemented in multiple ways, including replacing property tax levy in the operating budget; reducing borrowing for capital projects, which lowers levy- funded debt principal and interest payments in the future; or defraying the cost of budgetary items that otherwise would be funded with property tax levy. However, state law also allows for counties to " distribute all or a portion of the amount it receives to the towns, villages, cities, and school districts in the county." 33 The county sales tax rate is fixed at 0. 5% and would require state legislation to enact a different amount.

Recently the state allowed Milwaukee County to increase its tax to 0. 9% and the City of Milwaukee to enact a sales tax of 2%. 34 As of August 2024, 69 of the 72 Wisconsin counties have adopted the sales tax, including Manitowoc County' s recent adoption. The three counties that have not adopted the tax are Racine, Winnebago, and Waukesha.
32 Wisconsin Statutes§ 77. 70( 1).
33 Wisconsin Statutes§ 77. 76( 3).
34" Tax Rates." State of Wisconsin Department ofRevenue, https:// www. revenue. wi.gov/ Pages/ FAQS/ pcs- taxrates. aspx.

BUDGET TASK FORCE ANALYSIS AND FACILITATION 27

ITEM NO. 7.

Docusign Envelope ID: 8463 BA3 F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C The sales tax has been a significant source of revenue for the counties that have adopted it. The following table illustrates revenue for some benchmark counties, chosen because they have adopted the 0. 5% sales tax and because they have a population of at least 150, 000 and/ or are in the Milwaukee metropolitan area. Benchmark counties' sales tax revenue increased by between 6. 9% and 7. 7% per year between 2019 and 2023 Table 17: Sales Tax Revenue in Benchmark Counties
County
2023 Sales Tax Revenue Average Annual Change,
M 2019— 2023
Brown 38. 0 7. 5%
Dane 83. 3 7. 5%
Kenosha

11. 11 20. 4 6. 9%
Outagam ie35 25. 8 7. 6%
Ozaukee 11= 11. 6 7. 3
Rock 19. 4 6. 9%
Washington

11. 11M_$ 16. 8

11. 111.

Estimated Revenue
If Waukesha County adopted a 0. 5% sales tax and revenue trends were similar to its peers, Raftelis analysis indicates the tax could be expected to generate approximately $ 50 to $ 60 million in revenue in 2025, enough to close the projected budget gap. Alternatively, the County could petition the legislature to adopt a lower sales tax rate. This action may result in the state transitioning to a range of allowable sales tax, given the recent legislative adjustment for Milwaukee County and the City of Milwaukee.

Impact on Taxpayers
The average Waukesha County household is estimated to spend approximately $32,00036 on taxable purchases in 2025, based on Bureau of Labor Statistics ( BLS) data on purchasing patterns in the Midwest. The following table illustrates taxable expenditures by category for the median household in 2022, per the BLS. 3s Outagamie County did not adopt a sales tax until 2020. 36 Total expenditures were $ 32, 178 for the median household. in 2022; the model increases the figure to $ 35, 000 to account for inflation.
28 WAUKESHA COUNTY, WI

ITEM NO. 7.

Docusign Envelope ID: 8463 BA3 F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Table 18: Average Taxable Expenditures by Category per Midwest Household, 202237 Category Expenditures
Percent of Taxable Percent of Total
Expenditures Expenditures
Alcohol 667 2% 1%
Apparel and services 1, 757 5% 3%
Entertainment 3, 688 11% 5%
Food away from home 3, 128 10% 5%
Household furnishings and equipment 2, 754 9% 4%
Household operations 1, 592 5% 2%
Housekeeping 773 2% 1%
Personal care 813 3% 1%
Reading 111 0% 0%
Tobacco/ smoking 435 1% 1%
Transportation 11, 059 34% 16%
Utilities, fuels, and public services 1, 021 3% 2%
Miscellaneous other taxable spending 4, 380 14% 7%
Total Taxable Spending38 32, 178 100% 48%
Other non-taxable expenditures( e. g., 35, 149 N/ A 52% housing, healthcare, groceries)
If a household makes 85% ofits purchases in the County, this would translate to approximately$ 142 in additional sales tax cost per year for a 0. 5% sales tax. However, this figure does not account for the cost savings associated with property tax relief. It is also important to note that this is a general estimate based on expenditure data for the Midwest overall, not specifically Waukesha County or the Milwaukee metropolitan area.

Economic Analysis
A portion of the sales tax generated would come from non-residents spending money in the County. The exact portion contributed by non- residents is difficult to quantify, but the United States Census reports that as of 2021, 151, 673 individuals, the equivalent of approximately 37% of the County population, live outside of Waukesha County but come into the County to work. Additionally, the Wisconsin Department of Tourism estimates $ 852. 2 million in direct tourism spending in Waukesha County in 2022. 39 Ifthe sales tax had been in place, this would have translated to approximately$ 4. 3 million in sales tax revenue, or 7% of the estimated total sales tax revenue. 37" Consumer Expenditure Surveys." Bureau ofLabor Statistics, www. bls. gov/ cex/ tables/ geographic/ mean. htm. 38 Figures may not sum due to rounding.
39 " Economic Impact." Wisconsin Department of Tourism, www.industry.travelwisconsin.com/ research/ economicimpact/.

BUDGET TASK FORCE ANALYSIS AND FACILITATION 29

ITEM NO. 7.

Docusign Envelope ID 8463 BA3 F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Other Potential Revenue Generating Options
There may be other potential non-tax options to generate revenue. One consideration is opportunities to raise or implement fees to offset service costs. The County provides police and/ or fire/ EMS dispatch services for 34 communities and the Sheriff' s Department, with a budgeted operating cost of$ 7. 6 million in FY2024. The vast majority of support for this service comes from a tax levy of$ 6. 6 million. One option for generating revenue would be to apply cost- sharing obligations for participating municipalities. While this would shift some operating costs onto municipalities, the municipalities would still be benefiting from the cost savings of having a shared regional 911 center rather than having to establish and operate a standalone service. However, several municipalities entered into County dispatch understanding that it would be more efficient for taxpayers to consolidate and that no fees would be charged. Implementing a fee at this stage would be complicated.

There may also be one- time revenue opportunities available, such as selling land, facilities, or equipment. Some Wisconsin governments also generate funding by selling naming rights to County facilities. For example, in 2020, Dane County sold 10- year naming rights to its exposition center for $4. 8 million40 and Brown County sold 20- year naming rights to its exposition center for$ 10. 0 million. 41 However, these facilities are much larger than anything in Waukesha County, so the revenue generated from Waukesha County naming rights would likely not be as significant.
40 " Approving Renewal of Alliant Energy Center Naming Rights Agreement." Dane County, Dec. 18, 2019, https:// dane. legistar.com/ View.ashx?M=F& ID= 7975410& GUID= F43DB352- 9972-487D-8067- 9F6D4D2E3 2D1. 41 " Resch Secures Naming Rights for New Brown County Expo Center." WBAY, Feb. 12, 2020, www.wbay.com/ content/ news/ Sponsor-buys-naming-rights-to-Brown-County-Expo-Center-567816221.html. 30 WAUKESHA COUNTY, WI

ITEM NO. 7.

Docusign Envelope ID 8463 BA3 F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Budget Task Force
The Fiscal Health Assessment section of this report speaks to a strong history of prudent financial management by the County as well as the current and future budgetary challenges as the cost to continue operations outpace annual revenue growth. The County' s budget is rooted in resident priorities gathered as part of the Strategic Planning process. However, the budget shortfalls projected in the coming years point to a clear need to make revenue and expenditure policy decisions to help secure the County' s financial future. The County convened a Budget Task Force to advise the Board of Supervisors on how to proceed.

The Budget Task Force was comprised of a representative group of County and municipal elected officials, business leaders, and engaged residents convened to provide valuable input and direction for the future of County resourcing and service delivery expectations. The 34 members met four times in the spring and summer of 2024 to gain a better understanding of the County' s financial position, engage in meaningful conversation with fellow Task Force members that offered unique perspectives, and ultimately provide strategic direction and prioritization for the next five to 10 years for the County. A summary of the Task Force composition, topics and discussions from each session, and member recommendations for the County' s future is captured below.

COMPOSITION
The Budget Task Force was appointed by the County Executive with the goal of achieving broad representation from backgrounds, experiences, perspectives, and geographic balance across the County. Public members and business leaders brought expertise in public safety, construction and development, non-profit community organizations, and many other relevant industries. Mayors from four municipalities within the County as well as six County Supervisors, were also part ofthe Task Force and brought expertise in governance and municipal and County financial decision- making. A complete list of Task Force members is provided below.

BUDGET TASK FORCE ANALYSIS AND FACILITATION 31

ITEM NO. 7.

Docusign Envelope ID: 8463 BA3 F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Table 19: County Budget Task Force Members
Mem bers
Supervisor Larry Bangs
Supervisor Wayne Euclide
Supervisor Brian Meier
County Supervisors
Supervisor Chris Mommaerts
Supervisor Gary J. Szpara
Supervisor Jeremy Walz
Mayor Bob Magnus— Oconomowoc
Mayor Rick Petfalski— Muskego
Municipal Elected Officials
Mayor Steve Ponto— Brookfield
Mayor Shawn Reilly— Waukesha
Pete Bacon
Lisa Bruce Mark Nelson
Mary Dietz Amanda Payne
Matt Fennig Heather Pfalz
Dean Frederick Renne Ramirez
Public Members/ Business
Jeff Hoffmann Joe Reider
Leaders
Buck Jurken Jeffery Searle
Laura Krohn Jeremy Smith
Bonnie Lee Stan Sugden
Angela Mancuso Tom Schreibel
Germaine McKenna John Siepmann
Danny Merkt Susan Van Aartsen
Matt Moroney
SESSION 1: SETTING THE STAGE - DEVELOPING VALUES AND SERVICE PRIORITIES The first Task Force session focused on setting the stage for the group' s work to inform and make recommendations about the County' s future, given the budgetary challenges. Before providing relevant financial and economic context, Task Force members introduced themselves and shared one word that captured their sentiment about participating in the Task Force. Member one- word responses are captured below, with bolded words shared by multiple members.

Open Ready
Interested Intrigued
Excited Eager
Humbled Unbreakable
Curious Lead
Optimistic Confident
Future Hopeful
Expectant Learning
After introductions, Raftelis provided an overview of the Task Force timeline and budgetary challenges facing the County. As described in greater detail in the Fiscal Health Assessment section, the Task Force was brought together to understand the County' s financial outlook over the next five to 10 years. The County' s budget outlook projects a budget gap, where anticipated revenue collections are not expected to cover the anticipated cost to continue providing the same level of services provided by the County today. The theme ofthe discussion was " the solution is not complicated, but the decisions are hard." 32 WAUKESHA COUNTY, WI

ITEM NO. 7.

Docusign Envelope ID 8463 BA3 F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C As part of the project scope, Raftelis developed an independent financial model using the County' s financial data.

We evaluated the County' s financial management policies against industry best practices and the firm' s experience providing financial services for local government and public- sector utilities across the Country. Task Force Members were provided relevant context that emphasized how well managed the County' s finances are and the underlying economic conditions that have created the fiscal challenges that lie ahead.

Property taxes are the single largest local tax source to fund service delivery, and the largest driver of the County' s financial challenges is state restrictions on property tax levy growth. While the revenue tax base is among the strongest in Wisconsin, state policy ties the amount of property tax revenue growth that can occur annually to the growth in net new construction. Since the Great Recession, historically, this growth has averaged less than two percent per year. In comparison, the BLS reports that inflation grew by an average of 3% per year between 2010 and 2024. 42 Further, many of the County' s cost drivers exceed the Consumer Price Index reported by the BLS, including health insurance and the cost of software contracts.

Based on recent trend analysis, the financial model assumes growth of 1. 4% annually. This growth curve is far less than the underlying property value growth over the same period. Capped revenue growth requires prudent expenditure control; however, recent inflationary and wage pressure has resulted in a growing divide between revenue generation and cost to continue. As a result, the County has faced budget gaps annually as part of the budget development process that has required service- level reductions or strategic use of one- time funds to meet balanced budget requirements.

After level setting the County' s financial condition, the primary objective of the first session was to understand the Task Force member values and service area priorities. This important framework would then be used in subsequent sessions to help guide discussion and inform recommendations.

Values
Members were given a handout of 11 common values from Raftelis with space to add new values. The discussion began with determining whether any values were missing. The group agreed the 11 values largely captured what they would expect and discussed the sequencing ofvalues versus desired outcomes like quality oflife and customer satisfaction. In small groups members discussed the criteria they used to select values and which values best align with the County' s future. After the discussion, each member was given three dot stickers to indicate their values.

The top four values, all earning more double- digit votes, are reflected below.

Consumer Price Index Inflation Calculator." BLS, hups:// data.b1s. gov/ cgibin/ cpicak.pl?costl= 1. 00& vearl= 20100 1& year2= 202401.

BUDGET TASK FORCE ANALYSIS AND FACILITATION 33

ITEM NO. 7.

Docusign Envelope ID: 8463 BA3 F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Public Safety 26
Infrastructure Stability 17
Quality of Life 17
Fiscally Responsible and Financially Viable 15
Sustainable Infrastructure 4
Fairness = 2
Sustainability = 2
Operational Optimization ( or Efficiency) 1
Customer Satisfaction 0
Flexibility 0
Transparency 0
Figure 12: Task Force Value Voting Results
Service Area Priorities
After discussing and voting on values, the Task Force evaluated potential service level reductions to help mitigate the funding shortfall. Raftelis discussed at a high level how the $ 391 million budget breaks down into service areas that the County can impact or effect change to meet balanced budget requirements. The largest source of revenue— intergovernmental revenue from the state— is almost entirely designated for specific mandated services. Tax levy revenue of$ 115 million is where the County has greater control; however, more than one- third supports mandated services. This leads to approximately$ 38 million in service level costs that could be reduced in order to address the projected budget gap.

Ahead of Session 2, members were given a list of common service areas for the County and asked to discuss in small groups how they might prioritize some of these services for reduction, along with any services they would like to see additional resources allocated. Each group provided a summary of their conversation. Then individual members were asked to vote on their service priorities, using six red stickers for services to reduce and six green stickers for services to enhance. Members were required to use all of their service level reduction votes but did not have to use all of the service level enhancement votes. The results of the voting are captured in the table below, sorted by " net" votes. A negative Q net vote indicates greater prioritization for service level reduction compared to a positive net vote indicating prioritization for service level enhancement. 34 WAUKESHA COUNTY, WI

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Table 20: Task Force Service Priority Voting Results
Service Area Votes to Reduce
Votes to
Net" Votes
Enhance
County- wide Communication Ell (21) 0
iMIII
Land Use 18) 0 18)
Grounds Maintenance mile. ( 17) 1 if
Substance Abuse Treatment 16) 0 16)
Talent Acquisition ( Recruiting) ( 13) iJ 71I
Public Health 12) 1 11)
Drug Prevention MI (13) it it
Emergency Preparedness 11) 2 9)
Debt Borrowing1 J HI ii ri
Parks and Open Space 6) 2 4)
911 Communications Mll ii
Employee Benefits 3) 1 2)
Law Enforcement( Patrol
Operations) 19i1= ii ri
Traffic Safety 4) 3 1)
Crime Investigations ii ri
Maintaining County Facilities 2) 2 0
Corrections( Jail) II iJ`:

Mental Health Support 3) 8 5
Well- maintained Roads
Including in the Winter)
Court Operations 1) 8 7
Support for Vulnerable
9 Populations( Elderly, Disabled)
Infrastructure Development 3) 12 9
Economic Development mow 14 13
SESSION 2: SERVICE LEVEL REDUCTIONS
The second Task Force session focused on expenditure reductions as a strategy to close the projected budget gap.

The values and service reduction priorities developed during the first session were used to help guide discussion for service level reductions. The Task Force was presented with their target goal of achieving approximately $ 30 million in expenditure savings to close the projected budget gap through 2030. The consulting team worked with County staff to identify $ 12. 7 of potential expenditure reductions to initiate the exercise and get feedback on the prioritization of cuts.

BUDGET TASK FORCE ANALYSIS AND FACILITATION 35

ITEM NO. 7.

Docusign Envelope ID: 8463 BA3 F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Service Level Adjustments
Before diving into the details of potential service reductions, the facilitators provided context about the various layers of service level reductions. The process of identifying expenditure reductions can be nuanced and timeconsuming. For this reason, annual budget development takes at least nine months of the year. When assessing service reductions there are multiple layers, with most organizations opting to choose reductions that result in the least amount of impact on residents or constituents. Most of the 200+ programs/ subprograms and services provided by the County contain value- added, core, and mandated components. Often service- level reductions focus on community prioritization of value- added services and avoid core service reductions. Mandated services are legally required and cannot be eliminated, though they may be trimmed to levels that make carrying out the services increasingly difficult. The pyramid of service level adjustments is used to identify and consider required versus desired service levels for County residents within the finite pool of resources available. The figure below provides definitions for each of the service- level components.

Service Level Adjustments
Supplementary services provided in addition to `,.
core functions. designed to enhance quality of
life, improve efficiency, and support economic
development Value- added
I
F
Essential functions and services
provided to ensure well- being. safety,
and effective functioning of the
community Core -1
Legally required to
provide, established
through law, regulations,
Mandate d
or directives from higher
levels of government/
Figure 13: Service Level Adjustment Pyramid
Value- Added Service Level Reductions
To begin evaluation of service level reductions, the Task Force was provided a handout that summarized their prioritization of the service areas presented in Session 1 with potential service level impact for further reductions and estimated value- added cost savings. The table below summarizes each of the service areas considered for reduction, sorted by net score, where a negative value indicates greater prioritization for reduction and a positive value indicates prioritization for additional resource allocation to enhance existing service levels. The estimated cost savings for all value- added service reductions was approximately $ 12. 7 million, or 42% of the budget savings target of$ 30 million.
36 WAUKESHA COUNTY, WI

ITEM NO. 7.

Docusign Envelope ID: 8463 BA3 F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Table 21: Value- added Service Level Reductions
Net Estimated
Service Reduction
Score
Service Level Impact
Savings
County- wide Communication ( 21) Messaging, lack of coordination, reactive communication, minimal $ 270, 000
community engagement, emergency comms
Land Use 18)
Delayed development permitting and customer satisfaction and 415, 000
increased cost to applicants
Grounds Maintenance 17) Aesthetic decline, health hazards, decreased property values 370, 000 Drug PreventionlSubstance
14)
Higher healthcare costs, overcrowded treatment facilities, public 220, 000
Abuse Treatment43 safety impacts
Talent Acquisition 12)
Longer vacancies, poor candidate quality, broad decline in public $ 100, 000 service delivery
Public Health 11)
Health disparities for vulnerable populations, inadequate health 1, 000,000
surveillance and emergency response
Emergency Preparedness 9) Delayed crisis management response, prolonged recovery 160, 000 Parks and Open Space 4)
Limited access, lower quality of life, reduced air quality, removes $ 110, 000
community meeting space, Muskego Park closure
911 Communications 3)
Higher overall cost to taxpayers due to loss of economies of scale $ 4, 800,000
and duplication at the municipal level
Fewer sworn staff resulting in less traffic enforcement and Public Safety Staffing44 1) investigation, decreased quality of life, reduced deterrent, 2, 000,000 increased OT, and deputy quality of life decline
Infrastructure Maintenance Higher taxes due to interest expense on higher debt levels and and Development45
5 significant increases in asset life cycle cost
3, 000, 000
Economic Development 13
Business growth stagnates, fewer job creation and business 250, 000
retention initiatives
Task Force members spent time individually reviewing the value- added service level reductions and then joined small groups to discuss and evaluate which reductions they would like to propose toward the budget gap target of 30 million. To guide the conversation, members were provided a scorecard with three of the four Task Force values: public safety, infrastructure stability, and quality of life. The fourth value, fiscally responsible/ financially viable, was omitted since any cost savings would contribute to this value. For the remaining three values, members were asked to evaluate each reduction using that value lens and assign a ranking of one to three. One indicated low impact, two indicated neutral impact, and three indicated high impact. The scale ofranking for a given reduction could range from three ( scoring one on all three values) to nine( scoring three on all three values), with a higher total value score reflecting less desire to pursue the reduction. A high-level summary of the service level reduction exercise is provided below:
44 Services were combined from Session 1 with an average net score reflected.. Public safety staffing includes law enforcement, traffic safety, and crime investigation services. 45 Infrastructure maintenance and development includes maintaining County facilities, well- maintained roads, and infrastructure development.

BUDGET TASK FORCE ANALYSIS AND FACILITATION 37

ITEM NO. 7.

Docusign Envelope ID: 8463 BA3 F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C There are low-priority service areas that could be reduced, such as County-wide communications, land use, grounds maintenance, drug prevention and substance abuse, and talent acquisition.

Some reductions like 911 dispatch services may help the County' s budget but merely shift ( and likely increase) costs to municipalities.

The County should evaluate where duplicative services with municipalities happen to assess opportunities for consolidation or reimagining service delivery.

The service level prioritization exercises in Session 1 and Session 2 provided an opportunity to compare how the County spends tax levy revenue with the Task Force priorities. The figure below depicts how one dollar of tax levy is spent across each of the functional areas in the County and includes the prioritization ( net score total) for services that fall within that functional area. Overall, the Task Force routinely prioritized service areas where the County allocates most of its tax levy dollars, showing strong alignment between County operations and community priorities.
240 9e
410 Health and 240 Parks, Env., Educ., 2C
Justice and Public Safety Human Services Infrastructure Land Use Other F ' t, IMUNI E I) STATES O1'.% NI I1. 1? ,'
1 y 16 G 1
d w^
fff
4 - L11180916G
ii
t, -
12 rae.. , su
o 12
1 p ON 16I0 4 C--1
i 4 1
15" net" votes 13" net" votes 24" net" votes 39 net votes 35 net votes. to reduce to reduce to enhance to reduce to reduce
Figure 14: Task Force Service Prioritization and County Tax Levy Spending It is important to note that participants used all their reduction votes but not all of their enhanced votes, so the sum of net votes is negative. Justice and Public Safety and Health and Human Services had lower net reductions than other categories, indicating prioritization.
38 WAUKESHA COUNTY, WI

ITEM NO. 7.

Docusign Envelope ID 8463 BA3 F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Core Service Level Reductions
After the value- added service level reduction exercise, the conversation moved to Core services, the next layer of the pyramid. The County has faced preliminary budget gaps since at least the Great Recession and state- imposed revenue caps on levy growth. The exercise the Task Force went through to identify service level reductions or opportunities to achieve greater efficiencies mirrored the work of the County over the past decade. The underlying structural imbalance between revenue and expenditure growth patterns means that opportunities for value- added expenditure reduction options continue to diminish, leading to core service area reductions to meet balanced budget requirements. While economic conditions will continue to shift over time, the current environment has placed significant cost pressures on service delivery. To mitigate otherwise immediate and adverse impacts for highly prioritized services like public safety and infrastructure maintenance and development, the County has relied on one- time revenue sources in the short run to balance the budget with plans to phase in future ongoing revenue support after one- time sources are no longer available. However, the ability to phase in costs is getting more difficult as scarce levy growth is needed to meet other budget gaps.

Session 2 wrapped up with a discussion about the difficulty of having adequate context and details to inform service level reductions in a short period of time. This is especially true for core services that have mandated requirements. The session ended with a preview of the revenue- generating options to be considered in Session 3.

SESSION 3: REVENUE GENERATING OPTIONS
The third Task Force session focused on revenue- generating options to close the projected budget gap. The project team, along with County staff, assessed available options for new revenue allowed under state law and presented the Task Force with important context and analysis for each option. This included requirements to enact new revenue sources, benchmarking analysis of various counties or municipalities in Wisconsin that have enacted such sources, and fiscal impact to the County and taxpayers. Details of each revenue- generating option are included in the Gap Closure Scenario section above.

Revenue Generating Options —Advantages and Disadvantages After presenting each of the revenue- generating options to the Task Force, members engaged in a discussion regarding the advantages and disadvantages of each option, with a particular focus on exceeding the levy limit and wheel tax options. While the group exercise for sales tax focused on structure, key themes from Task Member group discussions and individual voting related to this tax option are also captured in the table below.

BUDGET TASK FORCE ANALYSIS AND FACILITATION 39

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Table 22: Advantages and Disadvantages of New Tax Revenue Options Revenue
Estimated
Rpt
ev
Revenue Advantages Disadvantages
Generated, 2025
Would not be likely to fully
Taxpayers have a say in whether
address the budget gap
Referendum would be required
to increase revenue
for any changes— unlikely to Raises awareness of County achieve broad support, high risk budget issues
3 to$ 6 million Use of funds can be specifically
of failure
targeted Frequency of school referendums
Referendum for might detract voter support
Levy Increase ongoing lump More stable source of revenue, sum
All funding would be contributed levy once approved would remain in increase) place
by property owners, with limited
Nocontribution restriction on the amount of from non- residents who use County services increase( pending voter approval) Would require significant
or on how the funding is used
information campaign ahead of
Low per- household impact
the vote about a topic that can be
hard to message
Could be enacted by the County
Board
Can only be used for
No restriction on fee amount,
transportation purposes
though typical annual amounts
Would not fully address the
are relatively small ( i. e.,
budget gap ( minimal impact)
affordable)

10. 5 million
Raises revenue from more
Revenue does not grow with
Wheel Tax inflation ( tied to population and
people than property owners 30 per vehicle) number of vehicles) e. g., user tax)
Unpopular" tax" among residents, Creates higher funding potential mandated by the government for road/ infrastructure No out-of-County taxpayers maintenance, a high priority of the Task Force No voter say
Easy for public to understand
Sales taxes are regressiveAllows non- residents who take larger impact on lower- income
individuals
advantage of County services to
contribute to the cost of those
The amount of the sales tax is
fixed and cannot be increased or
services
50 to$ 60 million Would generate enough revenue
decreased ( without a legislative
Sales Tax to fully address the budget
change)

0. 5% sales tax) shortfall
Adverse impact to the business
Would allow for some property
community
tax relief
Brings in more revenue than is
Could be enacted by the County
needed
May lose sight of other revenues Board
or operational efficiencies over
time
40 WAUKESHA COUNTY, WI

ITEM NO. 7.

Docusign Envelope ID 8463 BA3 F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Before breaking into small groups to discuss the sales tax structure, Raftelis shared additional context related to enacting a sales and/ or wheel tax among other counties in the state. The chart below shows the historical timeline of when counties throughout the state chose to enact a sales and/ or wheel tax. Many counties moved forward with a sales tax as soon as the option was made available to them by the state( 1986- 1995). During the economic boom of the early 2000s, little activity occurred, followed by more counties exercising a wheel tax after the 2011 state legislation limiting property tax levy growth and the fiscal challenges associated with the Great Recession and Global Pandemic. The ability of Waukesha County to have weathered the recent economic challenges without either of these new revenue- generating options, when nearly all counties elected one if not both, speaks to their level of operational efficiency.
12 tilt
10 8
6 c
4 2
0 1111 AII I
S'
ry `' ' ' c4°$ 5S d ° `' 50 hc4, Pa^oo,, o`" oApiao``'a oeo`era dyo&' d0' g ti ti ti ` L ti ti ti ti n. ' L ti ti ti ti ti ti ti ti ti ti ti ti ti ti ti Sales Tax - Wheel Tax
Figure 15: Sales and Wheel Tax Timeline- Adoption by Year Sales Tax Structure
The Task Force then spent time in small groups discussing how they might structure a 0. 5% sales tax, knowing that it would generate revenue for the County beyond what is needed to close the budget gap over the next few years.

As required by the state and prioritized among County officials, some of the revenue would be used to directly reduce the property tax levy for residents. Beyond that, Task Force members were asked to brainstorm and discuss other opportunities that aligned with the values and service level priorities developed in Session 1.

Two somewhat competing themes emerged from this activity:

While there is general understanding and support for new revenue, there is a preference not to collect more than the County' s estimated budget gap. Throughout the project team' s review of County financial practices and then during conversations with County staff and Task Force members, there is great pride in the County' s ability to efficiently deliver services with the lowest impact possible to taxpayers. Low percapita spending rates and continuing to " sharpen the pencil" are valued characteristics of the County' s financial management policies. Many Task Force members did not like that the sales tax amount is currently fixed at 0. 5% by state law. They understood it would require lobbying the state for greater autonomy over how much sales tax to enact but acknowledged such a preference.

BUDGET TASK FORCE ANALYSIS AND FACILITATION 41

ITEM NO. 7.

Docusign Envelope ID: 8463 BA3 F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Municipalities in the County face similar budgetary challenges and would support the County' s desire to enact a sales tax. The funding mechanisms for municipalities in Wisconsin follow a similar pattern to County revenue sources. As such, municipalities continue to face significant fiscal constraints with limited ability to increase the property tax levy. This is especially true for municipalities that are largely built out and focused on redevelopment because of the net new construction limitations. Municipal and County leaders on the Task Force informed members of the inherent challenges of lobbying the state for higher Shared Revenue when they had not yet enacted other revenue options available to them. They also added that a new revenue source might actually encourage greater economic development and improvements to the housing stock.

A summary of each group' s discussion regarding a sales tax structure is provided below.

Table 23: Summary of Sales Tax Structure Considerations Group How to Use or Structure Additional Revenue Generated from 0. 5% Sales Tax Economic Development— small business grants, facade improvements, Group 1
municipal downtown revitalization
Waukesha County Technical College Public Safety Academy to assist with recruiting pipeline and public safety operations
Seems like too easy of a fix
Lose sight of other revenues and efficiencies— ability to sharpen the pencil Group 2 A nice structure might be 60% to County, 40% to municipalities Within the County' s 60%, does as needed but includes direct property tax relief
Acknowledged the group had different perspectives
Municipal leaders in the group like 60% to the County and 40% to the Group 3 municipalities
Other emphasized the importance of a direct property tax offset and not inventing new things to spend money on
Many in the group were not favorable of raising more dollars than needed Group 4
Additional revenue could pay down debt, which also lowers property tax levy Investment in public safety, infrastructure, and amenities like bike and walking paths
Shouldn' t tax for more than is needed, would prefer a process that looks at expenditure reductions, user fees, surplus carryover, reforms, excess property sales, and then revenue enhancements
Group 5 If revenue enhancement is required, they agreed sales tax was the preferred method but would like to ask for only what is needed
Acknowledged the business community would not like the impact of a sales tax
Preferred requesting something less, realizing the odds of achieving this with the state legislature and other counties would be difficult Group 6
A shared revenue with municipalities tied to public safety, expansion of the jail knowing it is reaching capacity, and infrastructure investments Opportunities for assisting municipalities with transitioning to full- time firerescue services.

SESSION 4: GUIDANCE FOR COUNTY EXECUTIVE AND BOARD OF SUPERVISORS The goal of the last Task Force session was to provide the County Executive and County Board of Supervisors guidance on how to navigate the County' s fiscal challenges over the next decade. Raftelis led a review of the key themes that emerged from the first three sessions and shared with the Task Force the scenario voting results from Session 3.
42 WAUKESHA COUNTY, WI

ITEM NO. 7.

Docusign Envelope ID: 8463 BA3 F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Scenario Prioritization Voting Results
Task Force members who were not present at the third meeting were also able to offer feedback on the same questions via an online survey. A total of 29 individuals provided comment, including 27 who were present at the meeting and two who were not present. The following sections summarize the results of these polls. More detailed responses by statement are included as Appendix A.

Feedback on the County' s Overall Strategy Moving Forward Participants were given several statements about Waukesha County' s overall strategy to address the budget shortfall moving forward. They were asked to rate their level of agreement on a scale from one( least agreement) to 10( most agreement). The statements were as follows:

Service Reductions: The County should focus on service reductions and expenditure cuts to address the budget shortfall.

New Revenue: All revenue options available to the County should be explored.

Service Reductions and New Revenue: The County should explore new revenue options and continue to reduce ongoing expenditures.

All three strategies had strong support from participants, with an average agreement rating of more than seven out of 10. The service reduction strategy had the lowest average approval, and the balanced strategy had the highest, as illustrated in the figure below.

Average Agreement Rating by Strategy
9 8 7. 52

7. 86

7. 21
7 6
5 4
3 2
1 0
Service Reductions New Revenue New Revenue and Service
Reductions
Figure 16: Average Task Force Agreement Rating by Strategy to Address Budget Gap Participants were also asked about their agreement with the statement, " The County' s current budget is aligned with my funding priorities." The average rating was 6. 69, with only two participants( 7%) rating their agreement as less than a five out of 10.

BUDGET TASK FORCE ANALYSIS AND FACILITATION 43

ITEM NO. 7.

Docusign Envelope ID 8463 BA3 F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Feedback on Revenue Generation Options
Participants were asked to rate their agreement with the following options for generating additional revenue:

Implementing a 9- 1- 1 fee
Putting forth a referendum to raise the levy limit
Implementing a sales tax
Implementing a wheel tax
Of the four options, only the sales tax had an average agreement rating of more than five out of 10, as illustrated in the figure below. The sales tax agreement represents the maximum level of agreement- specific sales tax options are discussed in the subsection below.

Average Agreement Rating by Revenue
Generation Option
6 - 5. 55
5 - 4. 55
4 -

3. 04
3 2. 55
2 1
0 Referendum Wheel Tax 9- 1- 1 Fee Sales Tax
Figure 17: Average Task Force Agreement Rating by Revenue Option Sales Tax Strategy Options
Participants were asked to react to a series of statements with options for a sales tax if implemented. Options included:

Petitioning the State Legislature to allow the County to enact a sales tax of less than 0. 5% Using the sales tax for property tax relief
Using the sales tax for property tax relief and economic development in the County Using the sales tax for property tax relief and aid to municipalities for economic development Using the sales tax for property tax relief and aid to municipalities for infrastructure Using the sales tax for property tax relief and aid to municipalities for public safety Using the sales tax for property tax relief and general aid to municipalities Two options, offering general aid to municipalities and petitioning the Legislature to allow a lower sales tax, had average levels of agreement of more than 6. 5, as illustrated in the figure below. The lowest average levels of agreement were with options that would provide funding for economic development efforts. 44 WAUKESHA COUNTY, WI

ITEM NO. 7.

Docusign Envelope ID: 8463 BA3 F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Average Approval Rating by Sales Tax Option
8 7

6. 59 6. 72
6 5. 48 5. 55

5. 07
5 4.14
4 3. 68
3 2
1 0
County Economic Infrastructure Public safety Sales tax with General aid to Less than 0. 5% economic development aid to aid to property tax municipalities development aid to municipalities municipalities relief municipalities
Figure 18: Average Task Force Agreement Rating by Revenue Option It is important to note that there were significant levels of disagreement among participants on many of these options. For example, while 45% of respondents generally agreed( rating of six or higher) with the statement, " The County should consider implementing a 0. 5% sales tax that funds local property tax relief and provides aid to local municipalities for infrastructure," another 41% generally disagreed ( rating of four or lower). Additionally, 48% agreed with the statement, " The County should consider implementing a 0. 5% sales tax that funds local property tax relief.," while 38% disagreed. The specific agreement by statement is illustrated in Appendix A.

Task Force Key Themes
After reviewing the takeaways from the first three sessions, Raftelis identified the key themes that emerged from the facilitated sessions and asked members of the Task Force to review and identify if anything was missing or should be changed. Members in attendance agreed that the five themes presented below largely captured the group' s work.

After reaching a consensus on each key theme, Task Force members were asked to write down on a sticky note the most important message they would like to convey to the County Executive and Board for each theme. Individual thoughts were then collected and grouped by theme. After that, members broke into groups, with one group per theme, tasked with reviewing the individual notes from fellow Task Force members and then drafting a statement that reflected the message for that theme. Individual notes are reflected in Appendix B, and the group statements for each key theme are provided below.

Importance of fiscal responsibility
Continue to focus on measurable cost- cutting, and efficiency improvements and publicize wins.

Push the state for equitable funding and release of some portion of surplus funds to counties and municipalities.

Continue actions to maintain Aaa/ AAA bond rating and other fiscal processes and checks and balances.

BUDGET TASK FORCE ANALYSIS AND FACILITATION 45

ITEM NO. 7.

Docusign Envelope ID 8463 BA3 F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Targeted budgetary service level reductions and enhancements Allocate funds to preserve the services most valued by the community:
o Public safety
o Infrastructure
o Potential shared services
Eliminate the expansion of services for the sake of spending projected surplus from sales tax, etc.

Desire to explore revenue options
There is an appetite for a sales tax of 0. 5% to a minimum of what is needed to balance the budget.

The " Waukesha Way" needs to be honored by utilizing grants, collaboration, and all other revenue options and savings that are currently being used during tight budget times.

There is recognition that extra sales tax revenue can be shared with local municipalities to address similar budgetary issues.

Support for infrastructure and economic development
All commenters but 2 indicated it is an essential priority. 1 indicated infrastructure development should favor commercial development. 1 indicated that if the sales tax went to debt reduction, then the future of infrastructure development would be more economical.

Overall, the answers were that infrastructure development is something that should not be reduced but that it needs to be maintained or increased.

Evaluate shared services and shared revenue
There is support for the concept of shared services among similarly sized communities, recognizing that larger communities like Brookfield have higher service expectations due to their advanced infrastructure.

This difference in service levels can present challenges in partnerships with smaller communities. As an example, the City of Brookfield can respond to an accident within five minutes of notice at any location within the city.

Shared revenues are also essential to address the universal structural funding challenges faced by local municipalities. While a sales tax is a short- term solution, it is the most viable alternative to raise revenue in the current environment. It is imperative that the state legislature develops a sustainable funding model that provides local governments with more flexibility.

At the conclusion of the Task Force session, the County Executive thanked each of the members for their commitment and dedication to this important work. Members were notified that Raftelis would present the results of the fiscal health assessment and Task Force work to the County Board of Supervisors at the end of August at which time the final report would be shared with the Board and Task Force. 46 WAUKESHA COUNTY, WI

ITEM NO. 7.

Docusign Envelope ID 8463 BA3 F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Conclusion
Waukesha County has a longstanding history of prudent financial management and efficient use of taxpayer resources to provide valued services to residents. County staff are to be commended for their ability to accurately forecast service needs alongside available resources. State- imposed growth restrictions on the largest local revenue source— property tax levy— have led to increased fiscal constraint, especially in the past five years as the County has grappled with an increasing cost to continue providing services that exceed annual revenue growth. Despite these challenges, the County has effectively managed to meet service level expectations with the lowest per capita spending levels in the state. 46
Future financial projections indicate the need for more extensive policy actions to balance resident service priorities with fewer available resources. The Budget Task Force was created to provide guidance and direction for the County' s financial future over the next decade. The work they conducted over the course of four in-person sessions reflects their dedication and commitment to the County' s future success. The key themes that emerged from the Task Force helped to both build awareness within the community about the fiscal realities the County faces and provide invaluable policy guidance for the County Executive and County Board of Supervisors as they weigh critical policy decisions in the near term that will chart a path to financial sustainability in the long- term. 46 Forward Analytics, The Green Book, A Book of County Facts, 6th Edition. 2023. https:// www. forwardanalytics.net/ wp _ Atent/ uploads/ 2023/ 09/ Waukesha-County-Insert.pdf.

BUDGET TASK FORCE ANALYSIS AND FACILITATION 47

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C This page intentionally left blank to facilitate two- sided printing. 48 WAUKESHA COUNTY, WI

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C APPENDIX A.

Scenario Prioritization
Voting Results

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C The following figures illustrate the distribution of responses for statements about options for addressing the budget gap. A total of 29 individuals provided feedback. All statements are rated on a scale from one ( least agreement) to 10( most agreement).

Feedback on the County' s Overall Strategy Moving Forward I believe all revenue options available to the
County should be explored.
10 9
8 7
6 5
4 3
2 0
1 2 3 4 5 6 7 8 9 10
Figure 19: Task Force Agreement Rating on New Revenue
The County should focus on service reductions
and expenditure cuts to address
the budget shortfall.
12 10
8 6
4 1
1 2 3 4 5 6 7 8 9 10
Figure 20: Task Force Agreement Rating on Service Reductions 50 WAUKESHA COUNTY, WI

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C The County should explore new revenue options
and continue to reduce ongoing
expenditures.
12 10
8 6
4 Mil III ;
1 2 3 4 5 6 7 8 9 10
Figure 21: Task Force Agreement Rating on New Revenue and Service Reductions The County' s current budget is aligned with my
funding priorities.
8 7
6 5
4 3
2 1 2 3 4 5 6 7 8 9 10
Figure 22: Task Force Agreement Rating on the Current Budget BUDGET TASK FORCE ANALYSIS AND FACILITATION 51

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Feedback on Revenue Generation Options
The County should explore implementing an
annual service fee to fund 9- 1- 1 dispatch
operations.
8 7
6 5
4 3
2 1 2 3 4 5 6 7 8 9 10
Figure 23: Task Force Agreement Rating on a 9- 1- 1 Fee The County should consider proposing a
referendum to exceed the levy limit in
order to address the budget shortfall.
12 10
8 6
4 2I 0 I • I
1 2 3 4 5 6 7 8 9 10
Figure 24: Task Force Agreement Rating on a Levy Increase Referendum 52 WAUKESHA COUNTY, WI

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C The County should consider implementing a
wheel tax to address the budget
shortfall.
9 8
7 6
5 4
3 2
1 0
1 2 3 4 5 6 7 8 9 10
Figure 25: Task Force Agreement Rating on a Wheel Tax
Feedback on Sales Tax Strategy Options
The County should consider implementing a . 5%
sales tax that funds local
property tax relief.
6 5
4 3
1 0
1 2 3 4 5 6 7 8 9 10
Figure 26: Task Force Agreement Rating on a Sales Tax that Funds Property Tax Relief BUDGET TASK FORCE ANALYSIS AND FACILITATION 53

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C The County should lobby the state legislature to
allow for a sales tax less than . 5%.
16 14
12 10
8 6
4 2
0 II
1 2 3 4 5 6 7 8 9 10
Figure 27: Task Force Agreement Rating on a Sales Tax of Less Than 0. 5% The County should consider implementing a . 5%
sales tax that funds local
property tax relief and provides general aid to
local municipalities.
9 8
7 6
5 4
3 2
1 2 3 4 5 6 7 8 9 10
Figure 28: Task Force Agreement Rating on a Sales Tax that Funds Property Tax Relief and General Municipal Aid
54 WAUKESHA COUNTY, WI

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C The County should consider implementing a . 5%
sales tax that funds local
property tax relief and provides aid to local
municipalities for infrastructure.
9 8
7 6
5 4
3 2
0 1 2 3 4 5 6 7 8 9 10
Figure 29: Task Force Agreement Rating on a Sales Tax that Funds Property Tax Relief and Municipal Aid for Infrastructure
The County should consider implementing a . 5%
sales tax that funds local
property tax relief and provides aid to local
municipalities for public safety.
8 7
6 5
4 i
3 2
1 1 2 3 4 5 6 7 8 9 10
Figure 30: Task Force Agreement Rating on a Sales Tax that Funds Property Tax Relief and Municipal Aid for Public Safety
BUDGET TASK FORCE ANALYSIS AND FACILITATION 55

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C The County should consider implementing a . 5%
sales tax that funds local property tax relief and
provides aid to local municipalities for economic
development.
10 9
8 7
6 5
2 . i . iiii
1 2 3 4 5 6 7 8 9 10
Figure 31: Task Force Agreement Rating on a Sales Tax that Funds Property Tax Relief and Municipal Aid for Economic Development
The County should consider implementing a . 5%
sales tax that that funds
local property tax relief and assists with
economic development.
9 8
7 6
5 4
3 1
0 1 2 3 4 5 6 7 8 9 10
Figure 32: Task Force Agreement Rating on a Sales Tax that Funds Property Tax Relief and Economic Development
56 WAUKESHA COUNTY, WI

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Feedback on the Process
This process has helped me better understand
the County' s financial
picture.
8 7
6 5
4 3
2 1
1 2 3 4 5 6 7 8 9 10
Figure 33: Task Force Agreement Rating on the Effectiveness of the Task Force Process BUDGET TASK FORCE ANALYSIS AND FACILITATION 57

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C This page intentionally left blank to facilitate two- sided printing. 58 WAUKESHA COUNTY, WI

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C APPENDIX B:

Task Force Member Comments
by Key Theme

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C The following table captures the individual Task Force member comments for each of the five key themes identified. The comments are transcribed verbatim from the last session.

Task Force Member Comments by Theme
Importance of Fiscal Responsibility
Use shared revenue to pay down debt and reduce County property tax. Leads to County budget that will not grow as fast due to inflation and increased costs as debt payment will significantly decrease.

First and foremost[ value] in running the County and formulating budgets.

County should not collect more than needed to close critical services gap. Need to continue to lobby state to fix shared revenue and modernize property[ tax] caps.

I believe the County is already fiscally responsible.

Push Madison for more funding.

How best to address budget excesses— Why do they occur, can budgets be more precise, how best to use excess dollars at end of year.

Maintain existing standard of fiscal responsibility, which allows us to provide/ maintain a high level of services.

The County should" sharpen the pencil" as required.

Elected messaging; inherent by past decisions; current State communication; our County versus other similar county.

Caution— The relief created by Sales Tax option could take focus off of need to constantly look for reduction options.

Do not grow government.

I believe County and municipal service levels are generally appropriate and would try to avoid major cuts.

What does the future look like when we experience another budget shortfall in spite of a sales tax? The] Waukesha Way is to emphasize fiscal restraint and only introduce a new tax as a last resort and only to the extent needed. Tools to use first: 1) use previous surplus; 2) sell surplus property; 3) increase user fees; 4) cut in shortage; 5) look for efficiencies( shared services).

Maintain the AAA bond rating. Continue to be prudent with taxpayer resources.

The Waukesha Way is to solve our fiscal problems through responsible spending. Sharpen the pencil.

Should always be a priority under every revenue generation scenario.

Focus on fiscal responsibility doesn' t include generating more revenue than needed.

How do we control size of government with so much money available? Maintain.

Targeted Budgetary Service Level Reductions and Enhancements Have municipalities pay the cost of shared dispatch.

Big on collaboration of shared services. Is it the County' s job to provide revenue to municipalities? Would like to see each department heads] ideas on cost reductions. Also need administrative infrastructure across County organization. For example: telephones; does every department need marketing, communications, administrators, etc.

Deep dive on service statistics,# and $ impact related to cost.

The services that can be reduced currently; one year fix?[ or] more than [ that].

Do not reduce services that enhance quality of life— Keep Waukesha County as a desirable place to live, etc.

This is the first tool to use to balance the budget after use of the surplus.

We must continue to provide a safe and secure place to live.

Invest in maximum impact— safety, infrastructure, government functions.

With 37 municipalities each responsible for their own public safety, why do we need to expand County Sheriff' s department?
Continue the important work of adjusting service levels and finding efficiencies— despite any revenue options.

Explore reduction of Health & Human Services spending.

I favor sharing services where feasible and more efficient. I believe the Y2% sales tax revenue should be: 40% County, 2O% Real estate tax reduction, 40% local governments.

Think creatively about spending. There is room in all budgets to reduce spending. We should use a holistic approach taking all opportunities into account.

Increase funding for services supporting families, veterans, and victims of domestic violence/ abuse or trafficking.

Some departments are fully funded by the services they offer, leave these alone. Some departments are fully tax level funding; if core service, leave alone. If partially funded by tax levy, focus some reduce.

Clean up public safety budgeting issues.
60 WAUKESHA COUNTY, WI

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Desire to Explore Revenue Options
Approve sales tax at 0. 5%. 40% to municipalities, 20% to property tax relief, 20% to County budget, 20% to paying down debt.

Consider increasing taxes for all who use County services( e. g., include non- residents).

I would suggest a referendum first— if voted down, propose sales tax 5. 3%. Sales tax is regressive hitting low income hardest and businesses. Would be head wind to economic development.

Increased sales tax seems to be the only option that" solves" the problem. 1) Sales tax 0. 5%. 2) Legislature work on shared revenues.

Sales tax is the only responsible revenue increase option — collects revenue from other county' s residents which we pay to them when we shop there.

Implement a'/ 4% sales tax, increase so we do not collect more than we need.

Explore grants in all areas. Donations and sponsorships to Parks& Health and Human Services. Last option sales tax at less than'/ 2%.

New revenue source as the last resort and then only take what is necessary to solve the budget issue. Taking more than needed is not responsible or the Waukesha Way. Plus eats at future needs. Partial sales tax is better.

The conservative approach in this County necessitates communicating impact to educate residents, regardless of which option is selected.

Explore state change to allow for less than 0. 5%.

Fees, naming rights, sponsorships, property tax, grow economy. Infrastructure and development best- in- class.

Sustainability prediction, time implications.

Each revenue option should be taken seriously. The wheel tax will provide some revenue although it is obviously not enough to offset the entire deficit.

I believe the best revenue option is the'/ 2% sales tax and I would not attempt to reduce that.

Tough decision equals long- term solutions.

If a sales tax is necessary and the state is essentially forcing the County' s hand, think big. This is about a lot more than just a sales tax.

Explore sale of County lands to resolve short- term deficits and allow expansion of tax increment.

Exceed [ property tax] levy: No. Vehicle registration fee: No. Sales tax: Yes, if... 1) reduce property taxes, 2) county ordinance has flexibility to adjust property tax levy, general fund, build a buffer into the plan.

Support for Infrastructure and Economic Development
Paying down debt with sales tax$' s allows for future where infrastructure can become paid for with incoming dollars. Big win for all property owners.

Most important responsibility for County and Government. We are behind in this area.

Though not rated as high as Public Safety, extremely important to value to keep this County growing, attractive.

Continue ( or increase) focus on Economic Development to increase tax revenue on commercial ( versus residential).

Focus more on innovation. Waukesha Version 2. 0.

This area should be a strong priority.

Infrastructure, Public Safety, and Health Services should be protected to the greatest extent possible.

Think creatively about where we are able to reduce funding to Infrastructure and Development by identifying risk and proportionally addressing reductions.

Maintaining existing infrastructure and focusing on new development will translate to economic growth, as strong infrastructure attracts business.

I believe County and municipal expenditures on infrastructure and development are currently appropriate and would avoid major changes.

Necessities now. 5 years from now.

Roads are very important to residents and commerce. Investment here is usually appreciated and often noticed by taxpayers.

Visibility to residents and visitors speaks volumes about our County.

Continue economic development but maintain the character of the county— preserve the reason people moved here!
High priority to continue to maintain and expand infrastructure allowing for housing/ building development to expand. Creates an avenue for revenue growth under current state statutes.

Roads are critical. Shared revenue if implemented needs to account for differences in infrastructure from cities, villages, and rural towns. For example, no public pools in the Town of Oconomowoc or Town of Eagle.

Boost business and housing market growth. Draw businesses and homeowners from surrounding communities.

BUDGET TASK FORCE ANALYSIS AND FACILITATION 61

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Evaluate Shared Services and Shared Revenue
All municipalities in County are not cities. Most towns in County do not want shared revenue but are very interested in shared services.

Continue working on sharing services. Sales tax ( 40%) shared with municipalities based upon population.

Look for strategies and cuts with the least reduction in core service to citizens.

Explore all options to realize efficiencies by sharing services.

Advantages and impacts, time implications.

Encourage and explore opportunities to consolidate services among the County and municipalities.

Shared services and revenues will help the cities with their own budget issues.

I believe the County and municipal governments are currently fiscally responsible, and I would try to avoid major cuts.

Share revenue to encourage municipalities to cooperate. Municipalities using 911 Dispatch should pay for service. Use shared revenue to encourage Fire& Rescue consolidation.

Think creatively to combine services and reform to identify savings possibilities.

Shared Revenue [ from] 0.5% [ sales tax], 50% County, 35% Municipalities, 15% Tax Relief.

Budget issues impact local municipalities same as County— great opportunity to get property tax relief for County and local tax bills.

Brainstorm more options for shared services— e. g., public road plowing and maintenance, mowing near roads, charging for 911.

Remain committed to intentional, creative eye to consolidate services whenever possible.

Focus on shared services, collaboration, and consolidated services.

Shared Services and Revenue 3 Slippery slope, what happens if County needs to grow? Benefits to municipalities, directly benefits residents, making tough revenue decisions more palatable Believe there is limited ( small amount) revenue to be shared. Likely some communities will be uncooperative recall 9- 1- 1 consolidation). Overall a great idea.

Yes, to splitting excess revenue to communities with simple ordinance, but vigorous accounting calculations. 62 WAUKESHA COUNTY, WI

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Los GATOS- PROPOSAL FOR STUDY 1( FISCAL CONDITION) AND STUDY 2( FISCAL IMPACT) APPENDIX E: RICHARDS RANCH FISCAL IMPACT REPORT
N HA I ADVISORS Financial& Policy Strategies.

Delivered.

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1C

CITY OF SANTA MARIA AND

COUNTY OF SANTA BARBARA

RICHARDS RANCH FISCAL IMPACT STUDY

ADMINISTRATIVE REVIEW DRAFT
J U LY 24, 2025
WW

FINANCIAL SERVICES
Oakland Office Corporate Office Other Regional Offices
66 Franklin Street 27368 Via Industrie Orlando, FL
Suite 300 Suite 200 Plano, TX
Oakland, CA 94607 Temecula, CA 92590 Washington, DC
Tel: ( 510) 832- 0899 Tel: ( 800) 755- 6864
Fax: ( 951) 587- 3510
www. willden. com

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1D6- 2ABE915A0C1C This page intentionally left blank.

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915AOC1 C Table of Contents
EXECUTIVE SUMMARY.............................................................................

Background and Study Objectives i
Summary of Re i
1 . INTRODUCTION.................................................................................... I............................. 1

2. METHODOLOGY.................................................................................. 4........................ 4

3. FISCAL IMPACTS................................................................................... 5.........................................................5 Revenues 5
Project Demographics 9
Santa Maria Revenue Projections 9
Santa Maria Expenditures 11
County of Santa Barbara Revenues 12
County of Santa Barbara Expenditures 13
Sales Tax Revenues 14
Property Tax Revenues 18
wrw,LLDAN

FINANCIAL SERVICES

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915AOC1 C Executive Summary
This report identifies the estimated fiscal and economic impacts of the Richards Ranch Project on the City of Santa Maria and the County of Santa Barbara. background ai , study ( Jojectives
The project proponent, MD3 Investments, proposes to construct a mixed- use project on the border of the City of Santa Maria in the unincorporated community of Orcutt. The project proponent and the County have proposed annexing the project into the City of Santa Maria. The Santa Barbara County Local Agency Formation Commission requires that a proposed annexation consider the fiscal impacts of an annexation to ensure that municipal services can be provided to the project. A fiscal impact study considers the costs and revenues to the City and County associated with the project, especially tax revenues and services such as public protection.

The project proponent had a prior fiscal impact study prepared by the Natelson Dale Group, Inc. This analysis relies heavily upon data from that study, but Willdan has made its own judgments regarding methodology and assumptions and has modified the analysis accordingly. The analysis assumes that the project will be annexed into the City of Santa Maria, which has implications ( most notably, services are provided by the City of Santa Maris, tax and fee revenues accrue to the City, and the municipal property tax allocation is shared between the City and the County). As part of the evaluation process, the City and the County have engaged Willdan Financial Services to evaluate the Natelson report and prepare an independent fiscal impact analysis.

Summar,
w
Results
Following is a summary of the analysis, also included below in Table 1, explained in further detail in the body of the report.

The projected impact to the City of Santa Maria general fund is a fiscal surplus of 93,000 annually.

The projected impact to the County of Santa Barbara general fund is a fiscal surplus of$ 276,000 annually.

Additionally, the report calculates the rate of property tax sharing at which the City and County would have an estimated fiscal impact of approximately zero. For the City this figure is 30 percent, and for the County 33 percent. 1 1 Consistent with the Natelson report, the Willdan analysis assumes that the City receives fifty percent of the fire district revenue and twenty-five percent of general fund property tax revenue generated by the project, for an overall share of approximately thirty- eight ( 38. 4) percent. This calculation is explained in further detail in Table 19.
wiwi LLDANFINANCIAL SERVICES

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1D6- 2ABE915AOC1C City of Santa Maria and County of Santa Barbara Richards Ranch Fiscal Impact Study Table 1
Summary of Results
Richards Ranch Fiscal Impact Analysis
Item Amount
City Net Fiscal Surplus( at 25/ 50% share, 38% overall) 92, 989 City" breakeven" propertytax share 30%
County Net Fiscal Impact( at 75/ 50% share, 62% overall) 275, 823 County" breakeven" propetytax share 33%
Willdan Financial Services, 2025
ww,LLDAN

FINANCIAL SERVICES
ii Page 362
ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915AOC1 C 1 . Introduction
MD3 Investments has proposed construction of a mixed residential and commercial project in Orcutt, an unincorporated community adjacent to the City of Santa Maria. The City and County are considering annexation of the project into the City. The City and County have engaged Willdan to prepare a report that estimates the fiscal impacts of the project after annexation, building on a prior report prepared by the Natelson Dale Group, Inc., for the project proponent. The proposed project will consist of 484 multi- family rental and single- family for-sale residential units and 195, 000 square feet of commercial development, including a retail center and mini storage. Tables 2 and 3, on the following pages, detail the residential and commercial elements of the project, and estimate the assessed value ( based on sales price) and expected residents and employees for the project.

WTLtNAL SERVICES

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1D6- 2ABE915AOC1C City of Santa Maria and County of Santa Barbara Richards Ranch Fiscal Impact Study In Table 2, Willdan has increased the estimated residents in each development type to more closely match the average household size of 3. 7 in Santa Maria. Willdan has also reduced the estimated monthly rent and townhome sales price based on its evaluation of the Santa Maria market.

Table 2
Residential Project Description
Richards Ranch Fiscal Impact Analysis
Type Units Value/ DU TotaLVaLue HH Size Tot Residents
Apartments
1- BR 120 410, 032 49,203, 819 1. 5 180
2- BR 176 503, 221 88, 566, 875 2. 5 440
3- BR aa 615, 048 54, 124, 201 3-5 308
Total/ Mean 384 499, 726 191, 894, 895 2.42 928
Townhomes 100 600, 000 60, 000, 000 3. 75 375
Grand Total/ Mean 484 520, 444 251, 894, 895 2.69 1303
Sources: Willdan Financial Services, Inc.; The Natelson Dale Group, Inc.

Willdan Financial Services, 2025
ww,LLDAN

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915AOC1 C City of Santa Maria and County of Santa Barbara Richards Ranch Fiscal Impact Study Table 3 provides detail regarding the commercial component of the project, including 94,000 square feet of commercial strip center and a 101, 000 square foot mini storage facility.

Table 3
Commercial Project Description
Richards Ranch Fiscal Impact Analysis
Employees/ Assessed
Type Sq. Feet 1K sf Employees AV/ sf Value
CommercialStrip Center 93, 863 2 188 410 38, 483, 830
Mini Storage 101, 265 N/ A a 150 15, 189, 750
Total/ Mean 195, 128 191 53, 673, 580
Source: The Natelson Dale Group, Inc.

Willdan Financial Services, 2025
WTLtNAL SERVICES

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915AOC1 C

2. Methodology
Willdan has prepared a model based in broad terms on the analysis prepared by Natelson.

In broad terms, the fiscal analysis uses two basis methods of estimating revenues and expenditures. For most categories the model assumes that revenues and expenditures will increase in proportion to the project, by using the existing per capita figures for the City and County and applying the expected new residents and employees in the project to estimate the impact on each item. For certain items Willdan uses a " case study" approach, in which the details of the project are used to estimate certain items. For example, Willdan uses estimated taxable sales to project sales tax revenue and expected assessed value to estimate property tax revenue.

WTLtNAL SERVICES

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915AOC1 C

3. Fiscal Impacts
Revenues
Table 4 provides a more detailed summary of the expected revenues and expenditures expected from the project for the City of Santa Maria. As shown in Table 4, the major revenue sources are taxes, including Measure U, and the major expenditure categories are public safety. Willdan has adjusted these from the Natelson methodology. The most notable change in Table 4 is the exclusion from the analysis of the County Measure A revenue, which is administered separately used primarily for capital projects ( and therefore not a general fund revenue to the City and not generally available to fund services). As shown in Table 4, Willdan projects a surplus of$ 93,000 annually for the City.

WTtNAL SERVICES

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915AOC1 C City of Santa Maria and County of Santa Barbara Richards Ranch Fiscal Impact Study Table 4
City Net Fiscal Impacts( annual recurring)
Richards Ranch Fiscal Impact Analysis
Fund Amount
General Fund
Property Tax 368,217
Property Tax In Lieu of VLF 288, 926
Sales and Use Tax 186, 435
Public Safety Tax 641
Franchises 41, 380
Business Licenses 2, 602
Property Transfer Tax 11, 467
Licenses, Permits& Fees 1, 310
Revenue from Other Agencies 2, 326
Recreation Programs 1, 850
Recreation Income 2, 964
Aquatics 2, 697
Other Misc. 713
Measure U Transaction and Use Tax 164, 260
Total General Fund Revenue 1, 075,787
Other Revenues
County Measure A N/ A
State Gas Tax 51, 503
Total Other Revenues 51,503
Total Revenues 1, 127,290
Expenditures
Police 552, 015
Fire 243,617
Public Works 31, 980
Recreation and Parks 141, 087
Community Development 16, 108
General Government 49,493
Total Expenditures 1, 034, 301
Net 92,989
Sources: The Natelson Dale Group, Inc.; Willdan Financial Services Willdan Financial Services, 2025
ShicWI LLDAN

FINANCIAL SERVICES

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915AOC1 C City of Santa Maria and County of Santa Barbara Richards Ranch Fiscal Impact Study Table 5 details the estimated revenues and expenditures from the project for the County of Santa Barbara. Although the analysis assumes annexation ( and therefor provision of primary services by the City of Santa Maria), there are still County expenditures that reflect County services provided to all residents within the County ( as opposed to certain County services, such as public protection, that are provided primarily to residents of unincorporated areas). As shown in Table 5, Willdan projects a surplus to the County of 276,000 annually, primarily from the retention of significant property tax revenues and the public safety sales tax.
10,( WI LLDAN

FINANCIAL SERVICES

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1D6- 2ABE915AOC1C City of Santa Maria and County of Santa Barbara Richards Ranch Fiscal Impact Study Table 5
County Net Fiscal Impacts( annual recurring)
Richards Ranch Fiscal Impact Analysis
Fund Amount
General Fund
Property Tax 588, 439
Property Tax In Lieu of VLF 205, 683
Property Transfer Tax 11, 467
Fines, Forfeitures& Penalties 11, 265
Use of Money and Property 7, 619
Intergovernmental Revenue State 704
Intergovernmental Revenue Federal
Public Safety Sales Tax 80, 077
Total General Fund Revenue 905, 253
Expenditures
Policy and Executive 32,434
Public Safety 324, 151
Health and Human Services 109, 469
Community Resources and Public Facilties 84, 259
General Government and Support Services 75, 636
General County Programs 3, 481
Total Expenditures 629, 430
Net 275, 823
Sources: The Natelson Dale Group, Inc.; Willdan Financial Services Willdan Financial Services, 2025

W I LLDAN

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915AOC1 C City of Santa Maria and County of Santa Barbara Richards Ranch Fiscal Impact Study Project Demographics
Table 6 details the estimated residents and employees for the project. The model uses two different measures of population for the purposes or estimating fiscal impacts. The first, residents, is simply the number of residents living in the new units. This figure is used to estimate revenues that are allocated by population, such as gas tax, and for services that are primarily for residents, such as parks and recreation ( for the City) or health and human services ( for the County). As second measure, " service population," is the sum of residents and 50 percent of the estimated new employees. This measure is used for proportional estimates for revenues and expenditures that are expected to be impacted by both new residents and new businesses, such as police and fire protection. Willdan has increased the resident estimate from the Natelson report but the employee estimate remains unchanged.

Table 6
Project Population
Richards Ranch Fiscal Impact Analysis
Item Amount
Residents 1, 303
Empoyees 191
Employee Weighting Factor 50%
Total Service Population 1, 398
Sources: The Natelson Dale Group, Inc.; Willdan Financial Services Willdan Financial Services, 2025
Santa Maria Revenue Projections
Table 7 below details the revenue calculations for the City of Santa Maria. The table summarizes the City budget and provides an estimation methodology where appropriate.

In many cases the model assumes proportional growth in revenue, using the current ratio of revenue to population in the City to estimate the additional revenue from new development. In some case the methodology is " case study" in which case the calculation is provided on a subsequent table.

ShicWI LLDAN

FINANCIAL SERVICES

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915AOC1 C City of Santa Maria and County of Santa Barbara Richards Ranch Fiscal Impact Study Table 7
City of Santa Maria Revenue Calculation
Richards Ranch Fiscal Impact Analysis
Non- Recurring Methodology/ Units of Unit Revenue Projected Percent Item Revenue Recurring Not Projected Projected Measure Amount Factor Units Variable Amount Taxes
Property Secured 14, 304, 503 $ - $ - $ 14, 304, 503 Case Study N/ A N/ A N/ A N/ A 368, 217 Property Unescured 506, 424 - 506, 424 Not Projected N/ A N/ A N/ A N/ A N/ A In Lieu of VLF 10, 884, 750 10, 884, 750 Case Study N/ A N/ A N/ A N/ A 288, 926 Sales& Use 31, 793, 709 - 31, 793, 709 Case Study N/ A N/ A N/ A N/ A 186, 435 Sales& Use- Safety 394, 157 - 394, 157 Case Study N/ A N/ A N/ A N/ A 641 Franchises 4, 979, 094 - 4, 979, 094 Per Service Population 134, 608 36. 99 1, 398 80% 41, 380 Transient Occupancy 4, 273, 426 - 4, 273, 426 Not Projected N/ A N/ A N/ A N/ A N/ A Busincess License 818, 500 818, 500 Per Employee 48, 000 17. 05 191 80% 2, 602 Property Transfer 310, 896 - 310, 896 Case Study N/ A N/ A N/ A N/ A 11, 467 Subtotal Taxes 68, 265, 459 $ - $ 4, 779, 850 $ 63, 485, 609 899, 668 Licenses, Permits& Fees
Construction Permits 3, 070, 974 $ - $ 3, 070, 974 $ - Not Projected N/ A N/ A N/ A N/ A N/ A Taxi& Mobile Home Fees 24, 700 24, 700 Not Projected N/ A N/ A N/ A N/ A N/ A Criminal Fines& Penalties 157, 660 157, 660 Per Service Population 134, 608 1. 17 1, 398 80% $ 1, 310 Subtotal 3, 253, 334 $ - $ 3, 070, 974 $ 182, 360 1, 310 Revenue from Use of Money and Property
Interest Earned 2, 285, 796 $ - $ 2, 285, 796 $ - Not Projected N/ A N/ A N/ A N/ A N/ A Rental Income 673, 717 - 673, 717 Not Projected N/ A N/ A N/ A N/ A N/ A Subtotal 2, 959, 513 $ - $ 2, 959, 513 $ -
Revenue from Other Agencies
Motor Vehicle License Fees $ 112, 660 $ - $ - $ 112, 660 Per Capita 110, 608 1. 02 1, 303 1 1, 062 Homeowners' Tax Relief 50, 416 - 50, 416 Per Capita 110, 608 0. 46 1, 303 1 475 Property Tax In Lieu 94, 900 94, 900 Per Service Population 134, 608 0. 71 1, 398 1 789 Mandated Costs 43, 401 43, 401 Not Projected N/ A N/ A N/ A N/ A N/ A P. O. S. T. 43, 773 - 43, 773 Not Projected N/ A N/ A N/ A N/ A N/ A Other Subventions 141, 336 - 141, 336 Not Projected N/ A N/ A N/ A N/ A N/ A Subtotal 486, 486 87, 174 $ 399, 312 2, 326
Charges for Service
Recreation Programs 196, 260 $ - 196, 260 Per Capita 110, 608 1. 77 1, 303 1 1, 850 Recreation Income 314, 478 - 314, 478 Per Capita 110, 608 2. 84 1, 303 1 2, 964 Aquatics 286, 200 286, 200 Per Capita 110, 608 2. 59 1, 303 1 2, 697 Zoning& Subdivision Fees 690, 950 690, 950 Not Projected N/ A N/ A N/ A N/ A N/ A Law Enforcement 979, 921 979, 921 Not Projected N/ A N/ A N/ A N/ A N/ A Fire Services 1, 686, 005 - 1, 686, 005 Not Projected N/ A N/ A N/ A N/ A N/ A Engineering Reimbursements 677, 699 - 677, 699 Not Projected N/ A N/ A N/ A N/ A N/ A Comm. Dev. Reimbursements 312, 400 312, 400 Not Projected N/ A N/ A N/ A N/ A N/ A Weed Abatement Not Projected N/ A N/ A N/ A N/ A N/ A
Services Rendered Other Agencies 1, 085 - 1, 085 Not Projected N/ A N/ A N/ A N/ A N/ A Eng. Plan Check& Inspections 853, 981 853, 981 Not Projected N/ A N/ A N/ A N/ A N/ A Impacted Soils 100, 000 100, 000 Not Projected N/ A N/ A N/ A N/ A N/ A Subtotal 6, 098, 979 $ 1, 544, 931 $ 3, 757, 110 $ 796, 938 7, 511 Other Revenue
Prior Year& Damage Recovery $ 3, 000 $ - $ 3, 000 Not Projected N/ A N/ A N/ A N/ A N/ A Sale of Real Property 4, 250 4, 250 Not Projected N/ A N/ A N/ A N/ A N/ A Sale of Maps, Plans and& Other 134, 660 134, 660 Not Projected N/ A N/ A N/ A N/ A N/ A Other Misc. Revenue 85, 746 - 85, 746 Per Service Population 134, 608 0. 64 1, 398 1 713 OperatingTransfers In 4, 627, 624 - 4, 627, 624 Not Projected N/ A N/ A N/ A N/ A N/ A Cost Allocation Transfers 4, 917, 037 - 4, 917, 037 Not Projected N/ A N/ A N/ A N/ A N/ A Subtotal 9, 772, 317 $ - $ 9, 686, 571 $ 85, 746 713
Measure U
Measure U Tax 26, 715, 000 $ - $ - 26, 715, 000 Case Study N/ A N/ A N/ A N/ A 164, 260 Interest Income 171, 354 - 171, 354 Not Projected N/ A N/ A N/ A N/ A N/ A Subtotal 26, 886, 354 $ - $ 171, 354 $ 26, 715, 000 164, 260 Total General Fund 117, 722, 442 $ 1, 544, 931 $ 24, 512, 546 $ 91, 664, 965 1, 075, 787 Other Fund Revenues
County Measure ASales Tax 7, 456, 129 - 7, 456, 129 Not Estimated N/ A N/ A N/ A N/ A N/ A State Gas Tax 5, 464, 920 5, 464, 920 Per Capita 110, 608 49. 41 1, 303 80% 51, 503 Total Other Fund Revenues 51, 503
Grand Total Revenues 1, 127, 290
Source: The Natelson Dale Group, Inc.; Willdan Financial Services Willdan Financial Services, 2025

WILLDAN

FINANCIAL SERVICES

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915AOC1 C City of Santa Maria and County of Santa Barbara Richards Ranch Fiscal Impact Study Santa Maria Expenditures
Table 8 estimates the expenditures by the City of Santa Maria. For each expenditure item the model calculates the future expenditures from the current ratio of costs on a per capita or per service population basis.

Table 8
City of Santa Maria Expenditure Calulation
Richards Ranch Fiscal Impact Analysis
Methodology/ Units of Unit Revenue Projected Percent
Item Expenditures Measure Amount Factor Units Variable Amount Public Safety
Police 53, 137, 621 Per Service Population 134, 608 395 1, 398 100% 552, 015 Fire 23, 450, 833 Per Service Population 134, 608 174 1, 398 100% 243, 617 Subtotal Public Safety 76, 588, 454 795, 632
Public Works 3, 848, 022 Per Service Population 134, 608 29 1, 398 80% 31, 980 Recreation& Parks 14,970, 631 Per Capita 110, 608 135 1, 303 80% 141, 087 Community Development 1, 938, 203 Per Service Population 134, 608 14. 40 1, 398 80% $ 16, 108 Subtotal 20, 756, 856 189, 175
General Government
Mayor& Council 210, 816 Per Service Population 134, 608 1. 57 1, 398 25% 548 City Attorney 1, 816, 868 Per Service Population 134, 608 13. 50 1, 398 25% 4,719 City Manager 13, 045, 242 Per Service Population 134, 608 96. 91 1, 398 25% 33, 880 Finance 3, 984, 369 Per Service Population 134, 608 29. 60 1, 398 25% 10, 348 SubtotalGeneralGovernment $ 19, 057, 295 49,494
Grand Total Expenditures 116, 402, 605 1, 034, 301
Source: The Natelson Dale Group, Inc.; Willdan Financial Services Willdan Financial Services, 2025
ShicWI LLDAN

FINANCIAL SERVICES

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915AOC1 C City of Santa Maria and County of Santa Barbara Richards Ranch Fiscal Impact Study County of Santa Barbara Revenues
Table 9 below details the revenue calculations for the County of Santa Barbara. The table summarizes the County budget and provides an estimation methodology where appropriate. In many cases the model assumes proportional growth in revenue, using the current ratio of revenue to population in the County to estimate the additional revenue from new development. In some case the methodology is " case study" in which case the calculation is provided on a subsequent table.

Table 9
County of Santa Barbara Revenue Calculation
Richards Ranch Fiscal Impact Analysis
Methodology/ Units of Unit Revenue Projected Percent
Item Revenue Measure Amount Factor Units Variable Amount Property Tax 333, 963, 000 Case Study N/ A N/ A N/ A N/ A 805, 589 Licenses, Permits and Franchises 3, 597, 600 N/ A( unincorporated only) N/ A N/ A N/ A N/ A N/ A Fines, Forfeitures& Penalties 5, 554, 000 Per Service Population 551, 543 10. 07 1, 398 80. 00% 11, 265 Use of Money and Property 3, 756, 500 Per Service Population 551, 543 6. 81 1, 398 80. 00% 7, 619 Intergovernmental Revenue- State
Motor Vehicle In Liue In Excess $ 300, 000 Per Capita 444, 500 0. 67 1, 303 80% 704 Homeowners' Tax Relief 685, 000 Not Estimated N/ A N/ A N/ A N/ A N/ A Stat Off Hwy Mtr. Veh LF 1, 000 Not Estimated N/ A N/ A N/ A N/ A N/ A Subtotal 986, 000 704
Intergovernmental Revenue- Federal 2, 159, 300 Not Estimated N/ A N/ A N/ A N/ A N/ A Charges for Services 21, 972, 700 Not Projected N/ A N/ A N/ A N/ A N/ A Misc Revenue 95, 000 Not Estimated N/ A N/ A N/ A N/ A N/ A Total General Fund Revenue 372, 084, 100 825, 176
Prop 172- Public Safety Sales Tax 48, 831, 700 Case Study N/ A N/ A N/ A N/ A 80, 077 Total Revenues 420, 915, 800 905, 253
Source: The Natelson Dale Group, Inc.; Willdan Financial Services Willdan Financial Services, 2025
ShicWI LLDAN

FINANCIAL SERVICES

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C City of Santa Maria and County of Santa Barbara Richards Ranch Fiscal Impact Study Countyof Santa Barbara Expenditures
Table 10 estimates the expenditures p itu res for the Countyof Santa Barbara. For each expenditure p itu re item the model calculates the future expenditures from the current ratio of costs on aper ca p ita orper servicepopulation basis.

Table 10
County of Santa Barbara Expenditure Calculation
Richards Ranch Fiscal Impact Analysis
Operating Recurring Methodology/ Units of Unit Revenue Projected Percent Item Expenditures Revenues Revenue Measure Amount Factor Units Variable Amount Policy& Executive
Board of Supervisors 4, 142, 600 $ 4, 142, 600 Per Service Population 551, 543 7. 51 1, 398 50% 5, 252 County Executive Office 62, 815, 700 53, 620, 700 9, 195, 000 Per Service Population 551, 543 16. 67 1, 398 50% 11, 656 County Counsel 12, 614, 200 366, 600 12, 247, 600 Per Service Population 551, 543 22. 21 1, 398 50% 15, 526 Subtotal General Government $ 79, 572, 500 $ 53, 987, 300 $ 25, 585, 200 32, 434 Public Safety
District Attorney 34, 344, 300 $ 13, 224, 100 $ 21, 120, 200 Per Capita 444, 500 47. 51 1, 303 50% 30, 956 Probation 70, 195, 300 44, 969, 700 25, 225, 600 Per Capita 444, 500 56. 75 1, 303 50% 36, 973 Public Defender 20, 289, 300 557, 200 19, 732, 100 Per Capita 444, 500 44. 39 1, 303 25% 14, 461 Court Special Services 12, 916, 000 5, 289, 300 7, 626, 700 Per Capita 444, 500 17. 16 1, 303 25% 5, 589 Fire 120, 928, 100 44, 103, 500 76, 824, 600 Per Service Population 551, 543 139. 29 1, 398 50% 97, 389 Sheriff( non custody ops) 109, 045, 400 49, 665, 600 59, 379, 800 Not Estimated N/ A N/ A N/ A N/ A N/ A Sheriff( custody ops) 90, 894, 900 22, 471, 000 68, 423, 900 Per Service Population 551, 543 124. 06 1, 398 80% 138, 784 Subtotal Public Safety 458, 613, 300 $ 180, 280, 400 $ 278, 332, 900 324, 151 Health& Human Services
Public Health 102, 583, 200 $ 87, 758, 600 $ 14, 824, 600 Per Capita 444, 500 33. 35 1, 303 100% 43, 457 Behavioral Wellness 175, 660, 900 171, 167, 600 4, 493, 300 Per Capita 444, 500 10. 11 1, 303 100% 13, 172 Social Services 222, 738, 400 205, 562, 700 17, 175, 700 Per Capita 444, 500 38. 64 1, 303 100% 50, 349 Child Support Services 11, 272, 000 11, 272, 000 Per Capita 444, 500 - 1, 303 100% - First 5, Children& Families 3, 723, 900 2, 873, 600 850, 300 Per Capita 444, 500 1. 91 1, 303 100% 2, 493 Subtotal Health& Human Services $ 515, 978, 400 $ 478, 634, 500 $ 37, 343, 900 109, 469 Community Resources& Public Facilities
Agricultural Commissioner/ W& M $ 7, 912, 800 $ 5, 804, 400 $ 2, 108, 400 Not Estimated N/ A N/ A N/ A N/ A N/ A Community Services 74, 837, 200 41, 925, 000 32, 912, 200 Per Service Population 551, 543 59. 67 1, 398 50% 41, 722 Planning& Development 29, 853, 200 22, 524, 600 7, 328, 600 Per Service Population 551, 543 13. 29 1, 398 50% 9, 290 Public Works 173, 327, 200 147, 100, 900 26, 226, 300 Per Service Population 551, 543 47. 55 1, 398 50% 33, 247 Subtotal Community Resources& P $ 285, 930, 400 $ 217, 354, 900 $ 68, 575, 500 84, 259 General Government& Spport Services
Auditor- Controller 10, 674, 500 $ 1, 407, 000 $ 9, 267, 500 Per Service Population 551, 543 16. 80 1, 398 50% 11, 748 Clerk- Recorder- Assessor 21, 695, 100 7, 042, 600 14, 652, 500 Per Service Population 551, 543 26. 57 1, 398 50% 18, 575 Debt Service 1, 246, 900 1, 384, 900 Not Estimated N/ A N/ A N/ A N/ A N/ A General Services 49, 964, 100 29, 303, 300 20, 660, 800 Per Service Population 551, 543 37. 46 1, 398 50% 26, 191 Human Resources 10, 572, 600 2, 598, 300 7, 974, 300 Per Service Population 551, 543 14. 46 1, 398 50% 10, 109 Information Technology 28, 240, 200 27, 232, 100 1, 008, 100 Per Service Population 551, 543 1. 83 1, 398 50% 1, 278 Treasurer- Tax Collector 9, 579, 200 3, 477, 800 6, 101, 400 Per Service Population 551, 543 11. 06 1, 398 50% 7, 735 Subtotal General Government $ 131, 972, 600 $ 72, 446, 000 $ 59, 664, 600 75, 636 General County Programs
General County Programs 11, 090, 700 8, 345, 100 2, 745, 600 Per Service Population 551, 543 4. 98 1, 398 50% 3, 481 Subtotal General Government $ 11, 090, 700 $ 8, 345, 100 $ 2, 745, 600 3, 481 Total Expenditures 1, 483, 157, 900 $ 1, 011, 048, 200 $ 472, 247, 700 629, 430 Source: The Natelson Dale Group, Inc.; Willdan Financial Services Willdan Financial Services, 2025
yfWi LLDAN

FINANCIAL SERVICES

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915AOC1 C City of Santa Maria and County of Santa Barbara Richards Ranch Fiscal Impact Study Sales Tax Revenues
Willdan has estimated the sales tax revenue that could be generated by the project, detailed in Table 11. For this analysis Willdan has calculated only the revenue from the commercial center. The Natelson analysis estimated both this revenue and the new taxable sales generated by new residents. Willdan believes this approach is too aggressive, as new stores do not themselves necessarily generate new sales and to any new sales to the City would come in significant part from the new residents. As a result, Willdan' s approach to sales tax in mixed- use projects is to calculate both the on- site sales and the resident- generated sales and use the higher figure in its analysis, but not both.

Table 11
Onsite Taxable Sales
Richards Ranch Fiscal Impact Analysis
Land Use Square Feet Sales/ SF Total Sales % Taxable( 1) Taxable Sales Commercial Center 93, 863 250 23,465,750 70. 00% 16, 426, 025 Mini Storage 101, 265 0 0 0 0
Total 195, 128 23,465,750 16,426,025
1) Not all establishments will sell goods, and not all goods sold will be taxable.

Source: The Natelson Dale Group, Inc.; Willdan Financial Services Willdan Financial Services, 2025

WI LLDAN

FINANCIAL SERVICES

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915AOC1 C City of Santa Maria and County of Santa Barbara Richards Ranch Fiscal Impact Study Table 12 calculates the revenue resulting from the onsite sales, both directly from the City' s one percent share of sales tax collections and an allocation of countywide pools.

Table 12
Estimated Sales Tax Revenue
Richards Ranch FiscaL Impact AnaLysis
Item Total
Total Taxable Sales 16, 426, 025
Local Sales Tax Rate 1. 0%
Sales Tax Revenue 164, 260
On- Site Sales Tax Revenue as a Shareo of Total Sales& Use Tax( 1) 86. 5% Estimated Sales Tax Revenue Allocation Generated by Base Sales Tax 22, 175 Total Revenue 186, 435
1) Accordingto HdL and Natelson, 12- 15% of a local jurisdiciton' s total sales and use tax revenue are derived from their share of countywide pools.

Source: The Natelson Dale Group, Inc.; Willdan Financial Services Willdan Financial Services, 2025
INIV1WILLDAN FINANCIAL SERVICES

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1D6- 2ABE915AOC1C City of Santa Maria and County of Santa Barbara Richards Ranch Fiscal Impact Study The City of Santa Maria also has a local tax measure, Measure U, that collects an additional one percent of local taxable sales. Table 13 calculates the Measure U revenue generated by the project.

Table 13
Estimated Measure U Sales Tax Revenue
Richards Ranch Fiscal Impact Analysis
Item Total
Total On- Site Taxable Sales 16, 426, 025
Total Resident Santa Maria Taxable Expenditures
TotalTaxable Sales 16, 426, 025
Measure USalesTax Rate 1. 0%
Total Measure U Sales Tax Revenue 164, 260
Source: The Natelson Dale Group, Inc.; Willdan Financial Services Willdan Financial Services, 2025

W I LLDAN
FINANCIALSEaVICEs

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915AOC1 C City of Santa Maria and County of Santa Barbara Richards Ranch Fiscal Impact Study Table 14 calculates the 0. 5% public safety tax collected and the allocation between the County and the City.

Table 14
Estimated Public Safety Sales Tax Revenue
Richards Ranch Fiscal Impact Analysis
Item Total
Total On- Site Taxable Sales 16,426,025
Total Resident Santa Maria Taxable Expenditures
Total Taxable Sales 16,426, 025
Public Safety Sales Tax Rate 0. 5%
Total Public Safety Sales Tax Revenue 82, 130
County Revenue
County Share of Public SafetyTax 97.5%
County Public Safety Tax Revenue 80, 077
City Revenue
City Share of Public Safety Tax 0.8%
City Public Safety Tax Revenue 641
Source: The Natelson Dale Group, Inc.; Willdan Financial Services Willdan Financial Services, 2025
WfWI LLDAN

FINANCIAL SERVICES

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915AOC1 C City of Santa Maria and County of Santa Barbara Richards Ranch Fiscal Impact Study Property Tax Revenues
The most significant source of revenue from the development of the project is property tax revenue, which is calculated in the following tables. Table 15 details the allocation of the basis ad valorem tax of one percent of assessed value for the proposed project parcel, tax rate area 080-041. The two allocations relevant to the analysis are the Santa Barbara County General Fund, 0001, and the SB County Fire Protection District, 2280. As shown in Table 15, the analysis assumes that twenty-five percent of the general fund tax and fifty percent of the fire district tax will be allocated to the City, with the remainder retained by the County.

Table 15
PropetyTaxAllocation Factors
Richards Ranch Fiscal Impact Analysis
Post Annexation City County Share Post
District Name TRA 080- 041( 1) Allocation( 2) Annexation 0001 Santa Barbara County General Fund 0. 144139 25% 0. 10810425 2140 CSA5 0. 006563
2280 SB County Fire Protecton District 0. 168935 50% 0. 08446750 2400 SB County Flood Cntrl/ Wtr Cnsry 0. 002668
2510 Orcutt Flood Zn 3 0. 005465
2670 North County Lighting District 0. 008701
3050 Santa Barbara County Wtr Agency 0. 003431
3210 Santa Maria Public Airport Dist 0. 011144
3320 Santa Maria Cemetary Dist 0. 005800
4160 SB Mosquito/ Vector Dist 0. 000186
4500 Cachuma Resource Cnsry Dist 0. 000479
7401 Orcutt Union Elem Dist General 0. 235767
8301 Santa Maria Jt HS Dist General 0. 195338
9401 Allen Hancock CC Dist General 0. 051965
9801 County School Srvc Fund 0. 035912
9802 ERAF 0. 123508
Total( 3) 1. 000001 0. 19257175
1) Tax Rate Area
2) Analysis assumes that 25 percent of GF revenue and 50 percent of fire revenue go to City. 3) Figures from Natelson and should add up to exactly 1. Willdan has not had the opportunity to reconcile this number given the compressed time frame of the analysis. The difference is de minimus.

Source: The Natelson Group, Inc.; Santa Barbara CountyAuditor- Controller' s Office Willdan Financial Services, 2025
yfWi LLDAN

FINANCIAL SERVICES

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915AOC1 C City of Santa Maria and County of Santa Barbara Richards Ranch Fiscal Impact Study Table 16 calculates the property tax revenues for the project for the City and County based on the assessed value from Tables 2 and 3 and the allocation factors in Table 15.

Table 16
Estimated Property Tax Revenue
Richards Ranch Fiscal Impact Analysis
Item Amount
Estimated Project Assessed Value 305, 568,475
Base Ad Valorem Tax 1. 00%
Base Ad Valorem Revenue 3, 055,685
City General Fund Revenue, Post Annexation
CityGeneralFundPostERAFShareofAVlax 3.6%
Total City Property Tax Post Annexation 110, 111
City Fire District Revenue, Post Annexation
City Fire District Post ERAF Share 8.45%
City Fire District Property Tax Post Annexation 258, 106 County General Fund Revenue, Post Annexation
County General Fund Post ERAF Share of AVTax 10. 8%
Total County Property Tax Post Annexation 330, 333
County Fire District Revenue, Post Annexation
County Fire District Post ERAF Share of AVTax 8.45%
County Fire District Property Tax Post Annexation 258, 106 Source: The Natelson Dale Group, Inc.; Willdan Financial Services Willdan FinancialServices, 2025
WfWILLDAN FINANCIAL SERVICES

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915AOC1 C City of Santa Maria and County of Santa Barbara Richards Ranch Fiscal Impact Study In addition to the property tax factors, each jurisdiction receives additional revenue in lieu of vehicle license fee (VLF) revenue. This amount is calculated as a proportion of incremental additional assessed value applied to the previous year's VLF revenue. Table 17 calculates the incremental additional VLF swap revenue resulting from the development of the project for the City and the County.

Table 17
Estimated Vehicle License Fee( VLF)/ Propertylax Revenue Richards Ranch Fiscal Impact Analysis
Item Amount
Santa Barbara County
County VLF Swap Revenue( 2024) 74, 128, 000
County AV, FY2023- 24 110, 126, 900, 000
Project Value 305, 568, 475
Percentage Increase over Base AV 0. 28%
IncrementalAdditionalVLFSwapRevenue 205, 683
City of Santa Maria
City VLF Swap Revenue( 2024) 10, 884, 750
CityAV, FY2023- 24 11, 511, 734, 000
Project Value 305, 568, 475
Percentage Increase over Base AV 2. 65%
IncrementalAdditionalVLFSwapRevenue 288, 926
Source: The Natelson Dale Group, Inc.; Willdan Financial Services Willdan Financial Services, 2025
ShicWI LLDAN

FINANCIAL SERVICES

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915AOC1 C City of Santa Maria and County of Santa Barbara Richards Ranch Fiscal Impact Study The City and County collect transfer tax upon the sale of real estate, $ 1. 10 per$ 1, 000 of valuation, divided equally. The fiscal model assumes that for sale residential units will be sold every seven years, and the commercial properties (including rental apartments) every twenty years. Table 18 calculates the average annual revenue that would be received from these transactions.

Table 18
Estimated Property Transfer Tax Revenue
Richards Ranch Fiscal Impact Analysis
Item Residential( TH) Residential( APT) Commercial Total Estimated Property Value 60, 000, 000 191, 894, 895 53, 673, 580 305, 568, 475 Mean holding period( years) 7 20 20
Tax Rate( 1) 0. 055% 0. 055% 0. 055%
Annual Revenue 4,714 5, 277 1, 476 11, 467
1) The City and County Share a transfer tax of$ 1. 10 per$ 1, 000 of valuation.

Source: The Natelson Dale Group, Inc.; Willdan Financial Services Willdan Financial Services, 2025
Integral to the projection of the fiscal impacts of the project to the City and County is an assumption regarding the allocation of the property tax generated by the project. Consistent with the Natelson study, this analysis assumes a split between the City and County of 25%/ 75% for the general fund revenue and 50% each for the fire district revenue, for an overall allocation of 38%/ 62%. These calculations are included in Table 16, above. Additionally, Willdan has estimated the minimum property tax revenue needed for each municipality to be fiscally neutral ( a net impact of approximately $ 0, or " breakeven"). Table 19 calculates the minimum property tax allocation for the City and County to achieve breakeven. As shown in Table 19, City must receive at least 30 percent of the property tax revenue to remain fiscally neutral, and the County must receive at least 33 percent of the property tax revenue to remain fiscally neutral. yfWi LLDAN

FINANCIAL SERVICES

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915AOC1 C City of Santa Maria and County of Santa Barbara Richards Ranch Fiscal Impact Study Table 19
Property Tax" Breakeven" Analysis
Richards Ranch Fiscal Impact Analysis
Item Amount
Estimated Project Assessed Value 305, 568, 475
Base Ad Valorem Tax 1. 00%
Base Ad Valorem Revenue 3, 055, 685
GF Allocation TRA 080- 041 14. 41%
Revenue 440,443
Fire District Allocation TRA 080- 041 16. 89%
Revenue 516,212
Total Combined GF and FD Allocation TRA080- 041 31. 31% Revenue 956, 655
CityBreakeven Estimate
City General Fund Revenue, Post Annexation
City General Fund Post ERAF Share of AV Tax 4. 32%
Total City Property Tax Post Annexation 132, 133
City Fire District Revenue, Post Annexation
City Fire District Post ERAF Share 5. 07%
City Fire District Property Tax Post Annexation 154,864 Resulting City Fiscal Impact 11, 769
Percentage Allocation of Project Property Tax Revenue 30% CountyBreakeven Estimate
County General Fund Revenue, Post Annexation
County General Fund Post ERAF Share of AV Tax 4. 76%
Total County Property Tax Post Annexation 145,346
County Fire District Revenue, Post Annexation
County Fire District Post ERAF Share of AV Tax 5. 57%
County Fire District Property Tax Post Annexation 170,350 Resulting County Fiscal Impact 3,081
Percentage Allocation of Project Property Tax Revenue 33% Source: The Natelson Dale Group, Inc.; Willdan Financial Services Willdan Financial Services, 2025
ShicWI LLDAN

FINANCIAL SERVICES

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Los GATOS- PROPOSAL FOR STUDY 1( FISCAL CONDITION) AND STUDY 2( FISCAL IMPACT) APPENDIX F: NHA' s REQUIRED MUNICIPAL ADVISOR DISCLOSURES N HA I ADVISORS Financial& Policy Strategies.

Delivered.

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Los GATOS— PROPOSAL FOR STUDY 1( FISCAL CONDITION) AND STUDY 2( FISCAL IMPACT) Fiduciary Duty
NHA Advisors, LLC (" NHA") is registered as a Municipal Advisor with the U. S. Securities and Exchange Commission (" SEC") and Municipal Securities Rulemaking Board (" MSRB"). As such, NHA has a fiduciary duty to the Town and must provide both a Duty of Care and a Duty of Loyalty that entail the following.

Duty of Care:
a) exercise due care in performing its municipal advisory activities; b) possess the degree of knowledge and expertise needed to provide the Town with informed advice;
c) make a reasonable inquiry as to the facts that are relevant to the Town' s determination as to whether to proceed with a course of action or that form the basis for any advice provided to the Town; and
d) undertake a reasonable investigation to determine that NHA is not forming any recommendation on materially inaccurate or incomplete information; NHA must have a reasonable basis for:
i. any advice provided to or on behalf of the Town;
ii. any representations made in a certificate that it signs that will be reasonably foreseeably relied upon by the Town, any other party involved in the municipal securities transaction or municipal financial product, or investors in the Town securities; and iii. any information provided to the Town or other parties involved in the municipal securities transaction in connection with the preparation of an official statement.

Duty of Loyalty:

NHA must deal honestly and with the utmost good faith with the Town and act in the Town' s best interests without regard to the financial or other interests of NHA. NHA will eliminate or provide full and fair disclosure ( included herein) to the Town about each material conflict of interest ( as applicable). NHA will not engage in municipal advisory activities with the Town as a municipal entity, if it cannot manage or mitigate its conflicts in a manner that will permit it to act in the Town' s best interest.

Conflicts of Interest and Other Matters Requiring Disclosures As of the commencement date of the Project, there are no actual or potential material conflicts of interest, other than those potential conflicts noted below, that NHA is aware of that might impair its ability to render unbiased and competent advice or to fulfill its fiduciary duty. If NHA becomes aware of any material potential conflict of interest that arises after this disclosure, NHA will disclose the detailed information in writing to the Town in a timely manner.

Pursuant to MSRB Rule G- 42, on Duties of Non- Solicitor Municipal Advisors, Municipal Advisors are required to make certain written disclosures to clients which include, amongst other things, Conflicts of Interest and any Legal or Disciplinary events of NHA and its associated persons.

The following are potential conflicts of interest to be considered.

NHA represents that in connection with the issuance of municipal securities, NHA may receive compensation from the Town for services rendered, which compensation is contingent upon the successful closing of a transaction and/ or is based on the size of a transaction. Consistent with the NHA I ADVISORS Financial& Policy Strategies.

Delivered.

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Los GATOS— PROPOSAL FOR STUDY 1( FISCAL CONDITION) AND STUDY 2( FISCAL IMPACT) requirements of MSRB Rule G- 42, N HA hereby discloses that such contingent and/ or transactional compensation may present a potential conflict of interest regarding NHA' ability to provide unbiased advice to enter into such transaction. The contingent fee arrangement creates an incentive for NHA to recommend unnecessary financings or financings that are disadvantageous to the Town, or to advise the Town to increase the size of the issue. This potential conflict of interest will not impair NHA' ability to render unbiased and competent advice or to fulfill its fiduciary duty to the Town.

NHA' fees under this potential agreement may be based on hourly fees of NHA' personnel, with the aggregate amount equaling the number of hours worked by such personnel times an agreedupon hourly billing rate. This form of compensation presents a potential conflict of interest because it could create an incentive for NHA to recommend alternatives that would result in more hours worked. This conflict of interest will not impair NHA' ability to render unbiased and competent advice or to fulfill its fiduciary duty to the Town.

NHA' fees under this potential agreement may be a fixed amount established at the outset of this potential agreement. The amount is usually based upon an analysis by the Town and NHA of, among other things, the expected duration and complexity of the transaction and the scope of services to be performed by NHA. This form of compensation presents a potential conflict of interest because, if the transaction requires more work than originally contemplated, NHA may suffer a loss. Thus, NHA may recommend less time- consuming alternatives, or fail to do a thorough analysis of alternatives. This conflict of interest will not impair NHA' ability to render unbiased and competent advice or to fulfill its fiduciary duty to the Town.

The fee paid to NHA increases the cost of investment to the Town. The increased cost occurs from compensating NHA for municipal advisory services provided.

NHA serves a wide variety of other clients that may, from time to time, have interests that could have a direct or indirect impact on the interests of another NHA client. For example, NHA serves as municipal advisor to other municipal advisory clients and, in such cases, owes a regulatory duty to such other clients just as it does to the Town. These other clients may, from time to time and depending on the specific circumstances, have competing interests. In acting in the interests of its various clients, NHA could potentially face a conflict of interest arising from these competing client interests. NHA fulfills its regulatory duty and mitigates such conflicts through dealing honestly and with the utmost good faith with the Town.

Gerald Craig Hill, the Managing Principal of NHA is currently serving as an outside director for the HdL Companies based in Diamond Bar, CA. HdL Companies is a software and professional services consulting company providing revenue data and collections information to local governments, potentially including NHA' s clients. HdL Companies have affiliates including, but not limited to, HdL Coren & Cone. From time to time, NHA utilizes the services of HdL Coren & Cone for its clients. NHA is mindful of this conflict of interest and fulfills its regulatory duty and mitigates such conflicts through dealing honestly and with the utmost good faith when this situation arises.

NHA does not have any affiliate that provides any advice, service, or product to or on behalf of the Town that is directly or indirectly related to the municipal advisory activities to be performed by NHA.

NHA has not made any payments directly or indirectly to obtain or retain NHA' municipal advisory business.

NHA has not received any payments from third parties to enlist NHA' recommendation to the Town of its services, any municipal securities transaction, or any municipal finance product.

NHA has not engaged in any fee- splitting arrangements involving NHA and any provider of investments or services to the Town.

NHA I ADVISORS Financial& Policy Strategies.

Delivered.

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C S14, 1
Los GATOS— PROPOSAL FOR STUDY 1( FISCAL CONDITION) AND STUDY 2( FISCAL IMPACT) NHA does not have any legal or disciplinary event that is material to the Town' s evaluation of the municipal advisory or the integrity of its management or advisory personnel.

NHA does not act as principal in any of the transaction( s) related to this potential agreement.

Legal Events and Disciplinary History
NHA does not have any legal events and disciplinary history on its Form MA and Form MA-I, which includes information about any criminal actions, regulatory actions, investigations, terminations, judgments, liens, civil judicial actions, customer complaints, arbitrations and civil litigation. The Town may electronically access NHA' most recent Form MA and each most recent Form MA- I filed with the Commission at the following website:
www. sec. gov/ edgar/ searchedgar/ companysearch. html
There have been no material changes to a legal or disciplinary event disclosure on any Form MA or Form MA- I filed with the SEC.

Recommendations
If NHA makes a recommendation of a municipal securities transaction or municipal financial product or if the review of a recommendation of another party is requested in writing by the Town and is within the scope of the engagement, NHA will determine, based on the information obtained through reasonable diligence of NHA whether a municipal securities transaction or municipal financial product is suitable for the Town. In addition, NHA will inform the Town of:
the evaluation of the material risks, potential benefits, structure, and other characteristics of the recommendation;
the basis upon which NHA reasonably believes that the recommended municipal securities transaction or municipal financial product is, or is not, suitable for the Town; and whether NHA has investigated or considered other reasonably feasible alternatives to the recommendation that might also or alternatively serve the Town objectives.

If the Town elects a course of action that is independent of or contrary to the advice provided by NHA, NHA is not required on that basis to disengage from the Town.

Municipal Securities Rulemaking Board Rule G- 10 Disclosure Pursuant to MSRB Rule G- 10, on Investor and Municipal Advisory Client Education and Protection, Municipal Advisors are required to provide certain written information to their municipal entity and obligated person clients which include the following:

NHA is currently registered as a Municipal Advisor with the SEC and MSRB.

Within the MSRB website at www. msrb. org, the Town may obtain the Municipal Advisory client brochure that is posted on the MSRB website. The brochure describes the protections that may be provided by the MSRB Rules along with how to file a complaint with financial regulatory authorities.

NHA I ADVISORS Financial& Policy Strategies.

Delivered.

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Los GATOS- PROPOSAL FOR STUDY 1( FISCAL CONDITION) AND STUDY 2( FISCAL IMPACT) Record Retention
Effective July 1, 2014, pursuant to the SEC record retention regulations, NHA is required to maintain, in writing, all communication and created documents between NHA and the Town for five ( 5) years.

If there are any questions regarding the above, please do not hesitate to contact NHA.

NHA I ADVISORS Financial& Policy Strategies.

Delivered.

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C SEPTEMBER 22, TOWN OF LOS GATOS
2025
PROPOSAL FOR STUDY 3:

ASSET LIABILITY MANAGEMENT STUDY

PROVIDED IN RESPONSE TO
REQUEST FOR PROPOSALS DATED AUGUST 20, 2025:

FISCAL CONDITION ANALYSIS WITH FIVE- YEAR AND LONGTERM FORECAST, FISCAL IMPACT ANALYSIS, AND ASSET

LIABILITY MANAGEMENT STUDY
C‘
tNo
x , i
r
ILM603SUBMITTED BY
ill I
NHAjADVISORS
Financial & Policy Strategies.

Delivered.

ITEM NO. 7.

Docusign Envelope ID: 8463 BA3 F- D38D- 4CDC- A1 D6- 2ABE915AOC1 C i Los GATOS— PROPOSAL FOR STUDY 3( ALM) AND OPTIONAL STUDY 4( WILDFIRE RISK MITIGATION) Table of Contents

1. COVER LETTER 1

2. COMPLETED CERTIFICATION FORMS 1

3. SCOPE COMMENTS AND METHODOLOGY 6

4. EXPERIENCE AND EXPERTISE 11

5. KEY PERSONNEL AND RESUMES 14

6. TIMELINE AND WORK PLAN 16

7. SAMPLES OF COMPARABLE PROJECTS 16

8. DISCLOSURE OF ABSENCE OF LITIGATION OR DISCIPLINE OVER LAST FIVE YEARS 17

9. REFERENCES 18

10. PRELIMINARY FEE SCHEDULES 20

11. STATEMENT OF INSURANCE COVERAGE 22

12. TOOLS, DATA SOURCES, AND USE OF AI 22
APPENDIX A: SAMPLE OF PENSION EXPENSE MODELING FOR THE CITY OF WALNUT CREEK APPENDIX B: SAMPLE OF WILDFIRE BUFFER ZONE BUDGET MODELING FOR THE GREATER PARADISE AREA APPENDIX C: RESUMES FOR ASSIGNED NHA TEAM
APPENDIX D: NHA' S REQUIRED MUNICIPAL ADVISOR DISCLOSURES NHA IADVISORS Financial& Policy Strategies,
Delivered.

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C 114,
Los GATOS— PROPOSAL FOR STUDY 3( ALM) AND OPTIONAL STUDY 4( WILDFIRE RISK MITIGATION)

1. COVER LETTER
September 22, 2025
Attn: Gitta Ungvari, Finance Director
Fi na nce@losgatosca. gov
Town of Los Gatos
110 E. Main Street
Los Gatos, CA 95030
RE: Request for Proposals for Study 3: Asset Liability Management Dear Ms. Ungvari,
NHA Advisors, LLC(" N HA") is pleased to submit this proposal to provide municipal advisory services to the Town of Los Gatos (the " Town") in relation to its Asset Liability Management (" ALM") Study requested as Task 3/ Study 3 in your August 20th RFP. Please note that NHA Advisors has also submitted as part of a team including Raftelis and Willdan for Task 1/ Study 1 and Task 2/ Study 2. Our role in that proposal is a Team Manager. For Task 3/ Study 3, NHA is the sole service provider. In addition to the scope requested in the Town' s RFP, we are also submitting an unsolicited proposal in this document for what we call Task 4- a funding plan for long- term wildfire risk mitigation for the Town.

NHA, as a registered municipal advisor and has an extensive practice in advising public agencies in California on asset/ liability issues for CalPERS, and for the long-term management of debt. We are also familiar with OPEB management issues for our client base.

With respect to our proposed Task 4/ Study 4, NHA is a leader statewide in the development of funding plans for climate change adaptation, including wildfire risk. Detailed background on our experience in CalPERS and debt management, as well as wildfire risk reduction funding, is contained in this proposal.

Collaboration is key to our approach: As with our proposal for Study 1 and Study 2, collaboration is key to our approach for Study 3. We see a key output of Study 3 as framing key scenarios to be analyzed by the completed Study 1 fiscal condition model. The future performance of CaIPERS can have a major impact, good or bad, on the fiscal condition of the Town. Major new development, including its infrastructure needs can have an equivalent impact. Finally, we see the use of the Study 1 model as a key tool in determining whether the Town' s current and future projected cash reserves are sufficient to handle Black Swan" events.

As noted in our cover letter for the combined Study 1 and Study 2 Proposal, NHA team staff have extensive and long-term experience in translating complex Cal PERS and debt burden analysis into decision support packages that are clear, actionable and accessible to governing bodies and the public. We have deep experience in multi-lateral negotiations between multiple stakeholders over both debt funding and financial management issues.

As requested in the RFP, we accept the provisions of the sample contract contained in the RFP. While we emphasize our team commitment to collaboration, we also will accommodate the Town individually selecting one of our team members for a particular task but not selecting other team members for their assigned tasks.

NHA I ADVISORS Page1
Financial& Policy Strategies.

Delivered.

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Los GATOS— PROPOSAL FOR STUDY 3( ALM) AND OPTIONAL STUDY 4( WILDFIRE RISK MITIGATION) We are very pleased to deliver this proposal for the kind of integrated financial management work that we see as integral and pivotal for the future of Los Gatos, as well as so many other local governments in our teams collective client base.

We are proud of the reputation we have earned as a trusted municipal advisor and are excited about the potential to work with the Town.

As requested in the RFP, NHA provides the following statements as part of this cover letter:

Mark Northcross is the primary contact authorized to bind the firm.

NHA Advisors confirms acceptance of the Town' s Sample Consultant Services Agreement Please feel free to contact us directly with any questions regarding this proposal.

Thank you for your consideration.

Mark Northcross Mike Meyer
Principal Vice President
Mark@NHAadvisors. com Mike@NHAadvisors. com
415) 785- 2025 x2002 415) 785- 2025 x2004
NHA Advisors, LLC
4040 Civic Center Drive, Suite 200, San Rafael, CA 94903 NHA I ADVISORS Paget
Financial& Policy Strategies.

Delivered.

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1D6- 2ABE915A0C1C LOS GATOS— PROPOSAL FOR STUDY 3( ALM) AND OPTIONAL STUDY 4( WILDFIRE RISK MITIGATION)

2. COMPLETED CERTIFICATION FORMS
Conflict of Interest Statement
ATTACHMENI 1 - C: ONFLICT OF INTEREST STATEMENT

THIS FORM MIL- ST BE PRINTED OUT, COMPLETED AND SUBMITTED WITH THE

PROPOSAL

FISCAL CONDITION ANALYSIS WIIH FIVE- YEAR AND LONG- TERM FORECAST,

FISCAL IMP ACT ANALYSIS, AND ASSET LLABILITY MANAGEMENT STUDY The undersigned declares:
1We NHA Advisors LLC Insert Name) have the following financial, business, or other relationship with Town of Los Gatos that may have an impact upon the outcome of the contract. If none, please specify that no other relationships may have an impact on this contract or Project.

No other relationships may have an impact on this contract or Project.

LWe NHA Advisors LLC Insert Name) have the following current clients who may have a financial interest in the outcome of this contract. If none, please specify that no other clients may have a financial interest with an impact on this contract or Project.

To our knowledge, no other clients have a financial interest with an impact on this contract or Project.

Pursuant to Government Code section 1090 and any other laws, rules and regulations that may apply. the Proposer covenants that neither it, its subcontractors nor employees presently have an interest, and shall not acquire any interest, direct or indirect, financial or otherwise that would conflict in any manner or degree with contract awarded from this RFP. Proposer certifies that to the best of its knowledge, no one who has or will have any financial interest in the contract awarded from this RFP is an officer or employee ofthe Town. Through its submittal of a proposal. Proposer acknowledges that it is familiar with Section 87100 et seq. and Section 1090 et seq. of the Government Code of the State of California and will immediately notify the Town ifit becomes aware of any facts concerning the contract to be awarded that constitute a violation of said provisions.

Furthermore, ifthere is reason to believe that collusion exists among the Proposers. the Town may refuse to consider proposals from participants in such collusion. No person, firm, or corporation under the same or different name, shall make, file, or be interested in more than one proposal for the same work unless alternate proposals are called for. A person, firm, or corporation who has submitted a subproposal to a Proposer, or who has quoted prices on materials to a Proposer, is not thereby disqualified from submitting a sub- proposal or quoting prices to other Proposers. Reasonable ground for believing that any Proposer is NHA I ADVISORS Page1
Financial& Policy Strategies.

Delivered.

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Los GATOS— PROPOSAL FOR STUDY 3( ALM) AND OPTIONAL STUDY 4( WILDFIRE RISK MITIGATION) interested in more than one proposal for the same work will cause the rejection of all proposals for the work in which a Proposer is interested. Ifthere is reason to believe that collusion exists among the Proposers_the Town may refuse to consider proposals from participants in such collusion. Proposers shall submit as part of their proposals documents the completed Non- Collusion Declaration provided herein.

L on behalf of the Proposer, declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct and that this declaration is executed on September 22, 2025 date]. at San Rafael city]. California state].

NHA Advisors LLC Principal
Proposer Name Person. Firm. Corp.) Title ofAuthorized Representative 4040 Civic Center Drive, Suite 200 Mark Northcross
Address Name ofAuthorized Representative
San Rafael, CA 94903
City. State. Zip
l
JIyP
9/ 22/ 2025
Date) Signed)
NHA I ADVISORS Page2
Financial& Policy Strategies.

Delivered.

ITEM NO. 7.

Docusign Envelope ID: 8463 BA3 F- D38D- 4CDC- A1 D6- 2ABE915A0C1C Los GATOS— PROPOSAL FOR STUDY 3( ALM) AND OPTIONAL STUDY 4( WILDFIRE RISK MITIGATION) Non- Collusion Declaration
ATTACHMENT 2— NON-COLLUSION DECLARATION

THIS FORM MUST BE PRESTED OUT, COMPLETED AND SUBMITTED WITH THE

PROPOSAL

FISCAL CONDITION ANALYSIS WITH FIVE-YEAR AND LONG-TERM FORECAST,

FISCAL IMPACT ANALYSIS, AND ASSET LLABILITY MANAGEMENT STUDY The undersigned declares:

I am the Principal Insert Title] of NHA Advisors LLC Insert name of company, corporation, LLC, partnership or joint venture] the party making the foregoing proposal.

The proposal is not made in the interest of or on behalf of any undisclosed person, partnership, company. association, organization. or corporation. The proposal is genuine and not collusive or sham.

The Respondent has not directly or indirectly induced or solicited any other respondent to put in a false or sham proposal. The Respondent has not directly or indirectly colluded, conspired, connived, or agreed with any bidder or anyone else to put in a sham proposal, or to refrain from responding. All statements contained in the proposal are true.

Anyperson executing this declaration on behalf of a respondent that is a corporation. partnership, joint venture, limited liability company, limited liability partnership, or any other entity, hereby represents that he or she has full power to execute, and does execute, this declaration on behalfofthe respondent.

I declare under penalty of perjury under the laws ofthe State ofCalifornia that the foregoing is true and correct and that this declaration is executed on 912212025[ date]: at San Rafael [ city]. CA[ state].

By:

Name: Mark Northcros
Title: Principal
NHA I ADVISORS Page3
Financial& Policy Strategies.

Delivered.

ITEM NO. 7.

Docusign Envelope ID: 8463 BA3 F- D38D- 4CDC- A1 D6- 2ABE915A0C1C Los GATOS— PROPOSAL FOR STUDY 3( ALM) AND OPTIONAL STUDY 4( WILDFIRE RISK MITIGATION) References
ATTACHMENT 3- REFERENCES

THIS FORM MUST BE PRINTED OUT, COMPLETED AID SUBJIITTED WITH THE

PROPOSAL

FISCAL CONDITION ANALYSIS WITH FIVE-YEAR AND LONG-TERM FORECAST,

FISCAL IMPACT ANALYSIS, AND ASSET LIABILITY MANAGEMENT STUDY List three( 3) references for work of a similar nature to the Services performed within the last five( 5) rears. Use additional sheets as necessary.
l
City of Ukiah 300 Seminary Avenue, Ukiah CA 95482
Name ofAgency Agency Address
Dan Buffalo Finance Director
Contact Name Contact Title
707) 463- 6220 dbuffalo@cityofukiah. com
Contact Telephone Contact Email Address
July 2016- Present One Time Bond Financing:$ 112, 500; Annual Updates$ 7,500 Contract Period Contract Amount
CaIPERS Pension Stakeholder Education. Cost Management Strategy Evaluation, UAL Restructuring( Lease Revenue Bond), Internal Pension Reserve Policy Analysis, ADP/ Fresh Start Analysis, Ongoing Stakeholder Updates Workshops Description of services performed including costs.

City of Walnut Creek 1666 North Main Street, Walnut Creek CA 94596 Name ofAgency Agency Address
Kirsten LaCasse Administrative Services Director
Contact Name Contact Title
925) 943- 5810 Iacasse@walnut- creek. org
Contact Telephone Contact Email Address
October 2024— March 2025 15, 000
Contract Period Contract Amount
CaIPERS Pension Stakeholder Education, Cost Management Strategy Evaluation, Customized Section 115 Trust Model, 115 Trust Deposit/Withdrawal Analysis, Policy Recommendations Description of services performed including costs.
3- City of Riverside 3900 Main Street, Riverside, CA 92522 Name ofAgency Agency Address
Edward Enriquez Assistant City ManagerfCFO and Treasurer Contact Name Contact Title
951) 826- 5553 eenriquez@riversideca. gov
Contact Telephone Contact Email Address
2018 to Present Pft- Futortang ccer.enasssaw,: an. TM. tin• na. cs12s, m,, w.raaXimp, soa- s1sC Contract Period Contract Amount
CaIPERS Pension Stakeholder Education. Cost Management Strategy Evaluation,$ 430 Million POB, Pension Policy Cevlopment, Customized Section 115 Trust Model, 115 Trust Depcsttlwithdrawal Analysis. Annual Stakeholder Updates. POB Performance Comparison.

CAPERS Challenge' Assistance( Ca1PER S Challenge I City Manager' s Office) N HA I ADVISORS Page4
Financial& Policy Strategies.

Delivered.

ITEM NO. 7.

Docusign Envelope ID: 8463 BA3 F- D38D- 4CDC- A1 D6- 2ABE915A0C1C Los GATOS— PROPOSAL FOR STUDY 3( ALM) AND OPTIONAL STUDY 4( WILDFIRE RISK MITIGATION) See previous page
Description of services performed including costs.

I hereby certify that the Proposer performed the work fisted above.

Mark Northcross, Principal 9/ 222025
Signature ofProposer Name Date
Statement Regarding Insurance Coverage and Worker' s Compensation Insurance Acknowledgement Certificate
ATTACHMENT 4- STATEMENT REGARDING INSURANCE COVERAGE AND

WORKER' S COMPENSATION INSURANCE ACKNOWLEDGMENT CERTIFICATE

THIS FORM MUST BE PRINTED OUT, COMPLETED AND SUBMITTED WITH THE

PROPOSAL

FISCAL CONDITION ANALYSIS WITH FIVE- YEAR AND LONG- TERM FORECAST,

FISCAL IMPACT ANALYSIS, AND ASSET LIABILITY MANAGEMENT STUDY PROPOSER HEREBY CERTIFIES that the Proposer has reviewed and understands the insurance coverage requirements specified in the RFP. Should the Proposer be awarded a contract for Services, Proposer further certifies that the Proposer can meet the specified requirements for insurance, including insurance coverage of any subcontractors, and agrees to name the Town as additional insured for the Services specified.

By certifying this form. the Proposer also understands the Worker' s Compensation insurance requirement per the California Labor Code. Sections 1860 and 1861:

I am aware of the provisions of Section 3700 of the Labor Code. which require every employer to be insured against liability for worker' s compensation or to undertake self-insurance in accordance with the provisions of that code. and I will comply with such provisions before commencing the performance of the work of this contract.

Mark Northcross, NHA Advisors LLC
Name of Proposer( Person. Finn, or Corporation)
614/14h16,, c,--
Signature of Proposer' s Authorized Representative
Mark Northcross, Principal
Name& Title of Authorized Representative
September 22, 2025
Date of Signing
NHA I ADVISORS Page5
Financial& Policy Strategies.

Delivered.

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C wi Los GATOS— PROPOSAL FOR STUDY 3( ALM) AND OPTIONAL STUDY 4( WILDFIRE RISK MITIGATION)

3. SCOPE COMMENTS AND METHODOLOGY
As noted in our cover letter, we believe that the collaborative partnership of NHA Advisors, Raftelis and Willdan will ensure a truly comprehensive approach to executing all three requested studies in an integrated manner for the Town of Los Gatos. While NHA has similar experience to Raftelis in developing the type of long-range forecasting model that will be a core component for Study 1, the experience required for Study 3 is most in line with the qualifications of NHA, specifically related to debt management bonds, pension, OPEB) and capital funding strategies. As the # 1 ranked municipal advisor to California cities for bond funded capital projects, while also having served over 100 CalPERS members on pension cost management strategy and policy, NHA is well suited to carrying out Study 3, while seamlessly weaving in the various scenario impacts to the work being completed in Studies 1 and 2.

Study 3: ALM Study Scope Comments and Methodology
For our engagement related to the scope of services identified under Section E of the RFP, specifically under the " Study 3— Asset Liability Management ( ALM) Study" heading, NHA proposes the approach and timeline described below. As required by the RFP, this material can be considered as a stand- along proposal for NHA to prepare Study 3, should the Town choose to retain NHA, but not Raftelis and/ or Willdan.

Task 3. 1: Inventory& Evaluate Liabilities
Data Collection and Review— Review last 10 years of CalPERS actuarial reports, Section 115 Trust statements, and other internal documentation related to the Town' s recent track record of Additional Discretonary Payments and policy driven set asides ( as discussed here: Town Pension and OPEB Plans Information ( updated 10- 18- 2022) I The Los Gatos CA Official Site!) Model Development— Using data taken directly from CalPERS actuarial reports and the Cal PERS Pension Outlook Tool, NHA will develop a customized model for the Town that includes detailed amortization base analysis as well as a customized Section 115 Trust smoothing model. These models will assist in quickly analyzing the impacts of various ADP and/ or Section 115 trust strategies, with simple excel outputs that can be easily incorporated into the Long- Range Financial Modeling occu ring in Study 1.

CaIPERS ALM Study Update—The Town' s proposed schedule for this project dovetails perfectly with the CalPERS ALM study that will be completed this November. New actuarial assumptions discount rate, inflation, mortality, etc.) will be announced and by Deceember, should be able to be modeled out which will proviee the most accurate long term picture of the Town' s future pension liabilities.

Task 3. 2: Funding Needs and Risk Reduction Analysis:

Cost Management Strategy Analysis— once the " baseline" has been established using the fresh results of the CaIPERS ALM study, a variety of cost management strategies will be analyzed, including ADPs, Section 115 Smoothing and Fresh Start accelerated payment options. These scenarios will necessarily be informed by the results of the long-range forecasting model to better understand financial resources and constraints.

NHA I ADVISORS Page6
Financial& Policy Strategies.

Delivered.

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Los GATOS— PROPOSAL FOR STUDY 3( ALM) AND OPTIONAL STUDY 4( WILDFIRE RISK MITIGATION) Funding Needs and Risk Reduction Analysis — as part of the cost management strategy evaluation, multiple scenarios related to future " downside risk" will be incorporated to see how these strategies might play out in the future if various assumptions aren' t met. NHA will frame scenarios for analysis using the Task 1/ Study 1 fiscal conditions model. These include potential recessionary scenarios, poor investment returns by CaIPERS, and significant changes to future actuarial assumptions, like the discount rate. The ability of new development to support infrastructure needs, as forecast by Willdan and the Task 1/ Study 1 model, will be evaluated.

Where appropriate, NHA will recommend potential revenue enhancements to address projected shortfalls. NHA is flexible as to what these scenarios look like and beyond our own recommendations, will be collaborating with Town Staff, Raftelis and Willdan to ensure cohesion between the 3 studies.

Stakeholder Engagement and Feedback( Optional)— NHA will be available to meet with staff and stakeholders as much as needed during the process. It may be helpful to have multiple meetings, with the initial ones focused on educating stakeholders about how the pension liability works, how the Town has been tackling it in the past, and what things might be impacting these costs moving forward. After" setting the table" with this basic education, subsequent meetings can be focused on the pros/ cons of various cost management strategies and the impact they might have on other key variables being assessed in these studies: namely, capital funding opportunities and reserve levels.

Task 3. 3: ALM Modeling:

ALM modeling for Fund Balance sustainabcility and Risk Exposure: NHA will work with Raftelis and Willdan to frame scenarios for " Black Swan" events to test fund balance sustainability and risk exposure. NHA will recommend mitigation measures, including revenue enhancements, for scenarios where the Town' s cash reserves are projected to be inadequate. For the start of a discussion about " Black Swan" scenarios, we offer the following suggestions:
o Sustained national economic downturn
o Major natural disaster, such as an earthquake or wildfire. Consider modeling fiscal impact with minimal FEMA support, based on current proposals from the Trump administration. o Sustained weak financial performance from CalPERS
o A reduction in the CaIPERS actuarial discount rate
We see two key elements for ALM modeling, both of which need to inform the Task 1 fiscal condition model:
o Potential long term cash flow impacts from the Town' s CalPERS obligations. Our task here, as we see it, is to develop a range of scenarios for such variable as CalPERS financial performance an a potential lowering of the CaIPERS actuarial discount rate for scenario analysis through the Task 1 fiscal condition model. As part of this analysis, NHA will offer options for revenue enhancements/ tax increases legally available for cities in California.

Capacity of the General Fund to fund or finance major future infrastructure needs. For this deliverable we will ( 1) discuss with Town staff their existing CIP and ( 2) and discuss with Town NHA I ADVISORS Pagel
Financial& Policy Strategies.

Delivered.

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Los GATOS— PROPOSAL FOR STUDY 3( ALM) AND OPTIONAL STUDY 4( WILDFIRE RISK MITIGATION) staff the potential infrastructure needs for new development. Note that Activity 2 under the Task 1 Raftelis proposal includes analysis of the Town' s CIP. Based on the Task 2 Willdan fiscal impact model, we will determine how much of the infrastructure needs for new development can reasonably be expected to be funded through( 1) impact fees or( 2) directly by developers or (3) any long term fiscal surplus arising from new development. Where there are gaps, we will design scenarios, in conjunction with the Town' s current CIP, to run under the Task 1 fiscal condition model. We will look at both pay- go and long-term lease revenue bond financing options. As part of this analysis, NHA will offer options for revenue enhancements/ tax increases legally available for cities in California.

Task 3. 4 Reserve Guidance:

Reserve guidance, recommendations and policy refinements: Based on the results of the prior work, and feedback from staff and the Town' s stakeholders, NHA will provide strategy and policy recommendations that aim to secure long term sustainablity and risk mititgation, using future cash reserves as projected by the Task 1/ Study 1 model as a key metric.

We will use the outcomes from the Study 1 Fiscal Condition Analysis with Five-Year Forecast to determine the adequacy of the Town' s current cash reserves to meet the defined " Black Swan" events, and offer suggestions for increased reserved levels, if so indicated.

Task 3. 5 Execution ( As Needed)
To the extent that the Town needs assistance from NHA to help execute on a preffered strategy, NHA can spearhead those efforts on the Town' s behalf working directly with CalPERS, the Town' s Section 115 Trust provider and investment advisor, actuaries, and others.

Optional Study 4: Wildfire Risk Mitigation Consulting Scope Comments and Methodology
The following material is provided by NHA for an optional Study 4 as an unsolicited proposal. We believe that NHA can deliver a major value to the Town through developing a realistic funding plan for wildfire risk mitigation, primarily through the long-term reduction of what are called " ladder fuels" along the Town' s wildland urban interface (" WUI") with the Santa Cruz Mountains. As required by the RFP, this material can be considered as a stand- along proposal for NHA to prepare Study 4, should the Town choose to retain NHA, but not Raftelis and/ or Willdan.

Specific NHA Qualifications for Study 4- NHA is the leading municipal advisor in the State of California on funding for climate change adaptation. Since 2017 we have prepared funding plans for the following adaptation projects:

Resilient by Design, a nine Bay Area county-wide collaboration to develop sea level rise adaptation and funding plans, funded by the Rockefeller Foundation.

Funding Pathways for Adaptation to Climate Change in California. Describes public finance funding options for wildfire risk reduction, sea level rise adaptation, drought and extreme heat in California.

Prepared under a grant from the Resources Legacy Fund.

NHA I ADVISORS Page8
Financial& Policy Strategies.

Delivered.

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Los GATOS— PROPOSAL FOR STUDY 3( ALM) AND OPTIONAL STUDY 4( WILDFIRE RISK MITIGATION) Municipal Advisor to the Town of Paradise. Assist the Town in funding recovery through funding wildfire risk mitigation at the parcel, community and regional levels. Developing a funding strategy for the recovery of downtown Paradise.

Oakland Alameda Adaptation Committee. Prepared a funding and governance plan for long term funding for sea level rise for the section of San Francisco Bay stretching from the Bay Bridge to the Oakland Airport.

Illustrative Statewide Budget for Wildfire Risk Mitigation. Prepared an illustrative budget for combined state, regional and local government intervention to reduce wildfire risk statewide, including cost estimates and potential public finance funding mechanisms. Prepared under a grant from the Resources Legacy Fund.

Paradise Recreation and Parks District. Preparing a funding plan for full implementation of a 30, 000- acre wildfire buffer zone around the greater Paradise community. The plan includes funding for acquisition of easements and/ or fee title for high priority parcels, as well as treatment costs. Polling for a parcel tax is part of the program, as well as grant applications to both FEMA and Cal Fire. The work is funded under a grant from the Governor' s Office of Planning& Research.

Framing Our Approach - The key element in our approach is to address the major disconnect between good wildfire risk reduction practices by both public agencies and property owners in California and the insurance industry. The bottom line and increasingly intense, political issue is tax payers and property owners losing coverage or receiving huge premium increases despite doing good risk mitigation work.

From our experience both in Paradise, and statewide, we see two major reasons for this:
a. There is a difference of opinion between the important " local knowledge" of community level fire safety professionals and the catastrophe modelers (" cat modelers") used by the insurance industry to determine risk from a windstorm-driven wildfire. The primary risk driving non-renewals and premium increases in California is that of a windstorm driven wildfire. To deliver not only more public safety to the Los Gatos community, but better insurance availability as well, the local knowledge is ideally supplemented by data from a cat model of a windstorm driven wildfire igniting in the Santa Cruz Mountains.
b. The information on wildfire risk mitigation work needs to be made available to cat modelers in a fully curated" way. That means it is regularly updated and verified as being accurate. It also means, ideally, that the data is available through a GIS on a parcel specific level. This needs implies two other major needs: regular inspections of parcels and a curated " data commons" for wildfire risk mitigation information. The biggest challenge for the data commons is maintaining confidentiality for homeowners.

Based on our extensive experience in Paradise in particular, we offer the following scope of services:

Task 4.1 Identify Treatment Areas of Highest Priority: Work with local fire safety professional to identify the areas in the Santa Cruz Mountains south of the Town that have the highest priority for treatment for wildfire fuel reduction on a long term basis. Support any ongoing work regarding Zone Zero", or a 5' defensible space zone around structures. Retrofit home hardening work for structures in the Town we believe to beyond the scope of this analysis. Both the scale and the N HA I ADVISORS Page9
Financial& Policy Strategies.

Delivered.

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C wi Los GATOS— PROPOSAL FOR STUDY 3( ALM) AND OPTIONAL STUDY 4( WILDFIRE RISK MITIGATION) level of funding needed, in our opinion, are beyond what is plausible for a public funding intervention.
o Task 4. 1a ( optional): Retain a " cat modeler" ( catastrophe modeler used by insurance companies) to model windstorm driven wildfire pathways from an ignition point south of Town into the Town. This work identifies priority parcels for treatment that might differ from local fire safety professionals.

Task 4. 2 Develop Annual Treatment Budget for Wildfire Risk Mitigation: Work with local fire safety professional to develop an annual budget for treatment for priority parcels. Local fire safety professionals will provide guidance on likely costs per acre for different types of treatment in the greater Santa Clara County area, types of treatment recommended and the appropriate recurrence interval for such treatment. In addition, based on work being done in other jurisdictions, such as the Marin Wildfire Prevention Authority and the Town of Paradise, prepare a budget for funding annual inspections of parcels within the proposed buffer zone, as well as parcels within the Town.

Task 4. 3 Present Preliminary Results: Present the preliminary results of Task 2 to senior management at the Town, and with approval from the Town, present the preliminary results to senior management at neighboring cities, such as the Cities of Monte Sereno, Saratoga, Los Altos Hills and San Jose. Based on NHA' s work on climate change adaptation in both the wildfire and sea level rise space, we believe regional collaboration between vulnerable public entities is the best pathway to success. Our goal would be to use the preliminary results of Task 2 as an illustration of what could be accomplished through regional collaboration for a wildfire buffer zone for Santa Clara County' s WUI along the Santa Cruz Mountains. o Task 4. 3a ( optional): If Task 3 results in strong interest from other neighboring cities, we will work with staff at all stakeholders to develop a non binding MOU on collaboration to develop a funded regional entity to deliver long term wildfire fuel reduction in the cities collective WUI with the Santa Cruz Mountains
Task 4.4 Funding Plan Development: Develop a funding plan to deliver the Task 2 budget. We will look at Prop 3 grants, FEMA Hazard Mitigation Grants, any potential General Fund support, and then solve for the level of a parcel tax required to fully fund the budget. o Task 4. 4a: ( optional). Develop both the cost analysis, similar to Task 2, and the funding analysis, as in Task 4.4, for other cities party to the potential non- binding MOU.

Task 4. 5 Present Refined Cost & Funding Plan: Present the combined cost and revenue budget to the Town and any parties to a potential non- binding MOU.

Task 4. 6 ( optional): Work with the Town and other stakeholders to determine how a " data commons" for wildfire risk mitigation work by the Town and/ or parties to the MOU could be established.

N HA I ADVISORS Page10
Financial& Policy Strategies.

Delivered.

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Iltt
4_ci Los GATOS— PROPOSAL FOR STUDY 3( ALM) AND OPTIONAL STUDY 4( WILDFIRE RISK MITIGATION) Task 4. 7 ( optional): Retain a polling consultant to gauge the feasibility of any parcel tax required to deliver full funding for the wildfire buffer zone.

4. EXPERIENCE AND EXPERTISE
Firm Qualifications
NHA Advisors, LLC is an Independent Registered Municipal Advisor registered with the SEC and MSRB and headquartered in San Rafael, California. NHA has been providing municipal advisory services ( like the size and scope requested by the Town' s RFP) to California cities, special districts, and other public agencies since 2000 ( formerly known as Northcross Hill & Ach, Inc. from 2000-2011). NHA has provided comprehensive financial and consulting services to over 175 public agencies throughout California, with a primary focus on California cities. NHA' s bond and
consulting groups are currently working with public NHA Clients Served* agencies to develop project funding solutions,
financial policies, pension liability, fiscal sustainability and climate adaptation strategies.

NHA' s experience with California cities spans from
w BONDS
rural, small cities to major metropolitan agencies, CONSULTING o
which informs NHA of the problems facing public A •, ' BOTH agencies across the State and allows NHA to bring g
creative examples and solutions to our clients. We et • understand the time and staff resource constraints i
o
0 required to develop funding strategies and financing 94) plans and believe our holistic approach allows us to be 3 an " extension of staff" that will integrate with Town o staff to provide the best solution and process for t°
projects. Combined, the NHA team has over 190 years
of individual experience of providing these services.

V ii I
Regarding special consulting projects, NHA has A
1 I
developed eight specialized practice groups that focus
on key areas within municipal finance. These groups
enable us to provide guidance on a wide range of * Dots represent client engagements from 2012- Present M 4
k
w:..

Infrastruct. l Utilities
i;. -,
Hit i Continuing Disclosure
Oates I: I 1 Compliance
IIIII II 1
110114 '1; 1111 I
ItIli
i
Economic Energy& Climate
policy Development
Voter Approved
Development& P3 Change Revenue Measures
4 NHAIADVISORS Page11
Financial& Policy Strategies.

Delivered.

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Los GATOS— PROPOSAL FOR STUDY 3( ALM) AND OPTIONAL STUDY 4( WILDFIRE RISK MITIGATION) municipal finance issues. Of particular note is our Pension and Fiscal Sustainability Practice Group, which has been actively engaged with agencies across California. A summary of this work is also included below.

Beyond bond financings, many clients rely on N HA for strategic financial planning, policy advice, and crosscollaboration with other engineers and consultants to support Town staff on a wide range of issues. NHA' s eight practice groups address critical financial expertise like revenue measures ( ad valorem, special tax, assessment and parcel taxes), voter- approval processes, budgetary projection work, as well as climate change impacts ( e. g., wildfire risks), pensions, P3/ economic development negotiations, and post- issuance compliance ( continuing disclosure and arbitrage rebate) to provide meaningful ideas and advice to our clients when those issues arise. Since 2018, NHA staff has completed over 400 advisory projects, many of which did not result in a financing. Our " extension of staff' style has become a core component of our services and a critical benefit to many of our public agency clients NHA has eight registered municipal advisors dedicated to California cities and special districts. NHA is led by Principals Craig Hill, Mark Northcross, and Eric Scriven, each of whom have 30+ years of public finance experience. The Principals are supported by three Vice Presidents, an Associate, and three Analysts (two of whom are in process of passing their Series 50 Licensing examination to become licensed Municipal Advisors). NHA professionals maintain their Series 50 License in good standing. NHA' s services to the Town will be provided through NHA' s sole office in San Rafael, California.

Pension Consulting and Community Engagement
Over the past 10 years, NHA' s Pension Group, led by Mike Meyer, has worked with more than 100 California public agencies, to help develop strategies and policy to better manage CalPERS liabilities.

The table below highlights some of the agencies we have recently worked with, and the type of services requested. Our expertise and services include technical quantitative analysis on historical trends and projected costs, sensitivity/ risk analysis and scenario modeling, translating options to address rising costs i. e., Section 115 Trust, UAL pay- downs ( ADPs), Hard and Soft Fresh Starts, pension bonds, etc.), and presenting findings and alternatives to elected officials, staff, and union representatives at public and informal meetings. NHA' s ability to translate complex information and be agile in meeting our clients' needs is one of our strongest attributes ( based on comments from existing clients). We expect that our skill in translating information will be helpful in properly engaging with the Los Gatos community during the duration of this project.

Mike Meyer has been a frequent speaker ( recently for CDIAC, CSMFO, Govinvest) on the subject of pension liability management and our Pension Group consistently publishes newsletters, called NHAlerts" when there is pertinent information that we feel our local agency clients and their stakeholders should be aware of. You can find our most recent NHAlert here: CaIPERS Beats Expectations Again I NHA Advisors.

Recent Work Product( Appendix A): NHA worked with the City of Walnut Creek in early 2025 to( 1) educate stakeholders about their CaIPERS pension liability, (2) provide stress testing scenario modeling to account for potential changes to the discount rate in the future, ( 3) develop a customized model that helped optimize the timing and amounts of Section 115 Trust deposits and withdrawals, and ( 4) review and support potential changes to the City' s pension funding policy. The presentation in Appendix A showcases our ability to translate the complex world of CalPERS and develop dynamic tools that allow for prudent, long term decision making by stakeholders.

NHA I ADVISORS Page12
Financial& Policy Strategies.

Delivered.

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Los GATOS— PROPOSAL FOR STUDY 3( ALM) AND OPTIONAL STUDY 4( WILDFIRE RISK MITIGATION) NHA Pension Group Experience
NHA Pension Report( 8- Cost Management Strategy FOB Workshops/ Page Report Distilling Evaluation Process/ Evaluation Process CaIPERS Education/ Budget Historical Actuarial Report Workshops( Section 115 ( Pros/ Cons, Options and Workshops Trends) Trust, ADPs) Risks) POB( UAL Restructuring) Alameda, City of
Arcata, Cityof
Auburn, City
Calaveras Cnty. Water Dist.

Carmel- by-the- Sea, City of
Chico, aty of
Chula Vista, City of
Corcoran, City of
Corte Madera, Town of
El Cerrito, City of
El Monte, City of
Farmersville, City of
Fort Bragg, City of
Gilroy, City of
Grass Valley, City of
Grover Beach, City of
Hanford, City of
Hayward, City of
Lakeport, City of
Lancaster, Cityof
Lincoln, City of
Lompoc, City of
Martinez, City of
Monterey, City of
Morro Bay, City of
National City, City of
Newark, City of
North County Fire Prot. Dist.

Novato Sanitary District
Oroville, City of
Oxnard, City of
Palos Verdes Library District
Paso Robles, City of
Pittsburg, Cityof
Rialto, Cityof
Richmond, City of
Riverbank, City of
Riverside, City of
Salinas, City of
Sausalito, City of
San Carlos, City of
San Miguel Fire
Scotts Valley, City of
Sebastopol, City of
Selma, City of
Stanislaus Consolidated FPD
Torrance, City of
Ukiah, City of
Walnut Creek, City of
West Covina, City of
Winters, City of
Top- Ranked Municipal Advisor to Cities
Over the past five years ( since 2020), NHA has been the # 1 municipal advisor, by number of bond transactions for California cities ( Source: California State Treasurer as of July 15, 2025; excludes commercial paper and conduit financings; January 2020-present). Financing amounts have ranged from below $ 1, 000, 000 to over $ 400, 000, 000 and have included all methods of sale ( competitive sale, negotiated sale, and private placement). Our work in developing holistic funding plans to meet the infrastructure needs of our local agency clients will be extremely useful with helping the Town of Los Gatos evaluate the pros and cons or various capitalfunding tools available.

NHA I ADVISORS Page13
Financial& Policy Strategies.

Delivered.

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C 1: 19711
Los GATOS— PROPOSAL FOR STUDY 3( ALM) AND OPTIONAL STUDY 4( WILDFIRE RISK MITIGATION)

MUNICIPAL ADVISOR RANKINGS FOR CALIFORNIA CITIES
Transactions( January 2020- Present) 1
21 19
17 15
N H A
Urban PRAG Fieldman PFM KNN CSGAdvisors Wulff Harrell& Kosmont

ADVISORS
Futures Rolapp Group Public Finance Hansen Company Companies Source: California State Treasurer as of 7/ 15/ 2025; excludes commercial paper and conduit financings

5. KEY PERSONNEL AND RESUMES
NHA Team Assigned to the Town
NHA' s proposed project team will
consist of the following advisors: Mark
NHA Advisors, LLC
Northcross ( Principal), Mike Meyer Mark Northcross* Craig Hill Eric Scriven Vice President), and Matt DeFilippis Principal Managing Principal Principal Senior Analyst). Mark Northcross will
serve as the day-to- day relationship
Rob Schmidt Mike Meyer* Christian Sprunger
manager for the Town. An
Vice President Vice President Vice President
organization chart of the NHA team Matt DeFilippis*
identifying the staff assigned to the Associate
Town is shown to the right. Additional
members of NHA can be made
Adrian Gonzalez Kevin Ellis Mohamed Maxamed
available as expert resources to the
Analyst Analyst Analyst
Town as needed.

Assigned to Support The Town for this Engagement
All advisors providing financial
advisory services to the Town will be managed out of the San Rafael, CA office. All advisors providing financial advisory services to the Town will be available for the full duration of the contract. Information regarding each team member' s experience and qualifications is described below. Full resumes are included as Appendix C.

NHAIADVISORS Page14
Financial& Policy Strategies.

Delivered.

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C 14,
1 ,. 1
Los GATOS— PROPOSAL FOR STUDY 3( ALM) AND OPTIONAL STUDY 4( WILDFIRE RISK MITIGATION) Mark Northcross, Principal. Role: Lead Advisor
3 ) A -
lib
Mr. Northcross has more than 40 years of public finance experience in California. He is a leading advisor on climate change infrastructure and leads NHA' s alternative financing practice that focuses on " holistic" funding solutions, with special emphasis on SRF, WIFIA, Federal and State grants. Mr. Northcross has also managed the formation of CFDs for P3' s throughout the State since 1987 and is a leader in California in negotiating both public- private partnerships for both land- secured debt and redevelopment. He holds a B.A. in Social Sciences from the University of California, Irvine. He maintains his MSRB Series 50 License.

Mike Meyer, Vice President. Role: Project Manager
rl' igMr. Meyer has worked in public finance for 21 years, with over half of his time spent as an underwriter. Mr. Meyer manages NHA' s Pension and Fiscal Sustainability Group and has analyzed pensions and POB structuring solutions since 2006. He has worked on each of the firm' s pension consulting and POB engagements over the last five years, totaling $1. 7 billion in par. Mike is also an experienced generalist, having completed over 200 bond financings using all types of structures, including utility revenue, lease revenue, sales tax and transportation revenue, TABs, and land secured. Mr. Meyer holds a B. S. in Management Science, from the University of California, San Diego. He maintains his MSRB Series 50 License.

Matt DeFilippis, Senior Analyst. Role: Quantitative Support& Project Support Mr. DeFilippis will provide credit, quantitative, and research support to the assigned NHA team. Mr. DeFilippis has worked in public finance since 2021. Since then, he has ow s
1, provided project management and deal support on a variety of California financings totaling over $ 450 million in par. Mr. DeFilippis' recent projects have included educational workshops on pension cost management, general fund forecasting, and credit rating analysis. Mr. DeFilippis holds a B. A. in Applied Mathematics, from the University of California, Berkeley. He maintains his MSRB Series 50 License.

Subcontractors for Study 3 ( ALM Study)
None.

Subcontractors for Optional Study 4 ( Wildfire Risk Mitigation) Other than the potential of retaining a Geographic Information System (" GIS") mapping consultant for managing the parcel database as part of the wildfire buffer zone analysis and consulting, NHA does not plan to use any subcontractors for this engagement. NHA does not have a pre- selected GIS mapping consultant for this engagement and would coordinate with the Town for engaging any future consultant to ensure we comply with the Town' s bidding practices.

NHA I ADVISORS Page15
Financial& Policy Strategies.

Delivered.

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Los GATOS— PROPOSAL FOR STUDY 3( ALM) AND OPTIONAL STUDY 4( WILDFIRE RISK MITIGATION)

6. TIMELINE AND WORK PLAN
Study 3 ( ALM Study) Timeline
Based on the scope of services identified in the Town' s RFP for Study 3( ALM Study), NHA proposes the following realistic schedule. This schedule assumes that the Town enters into contract negotiation and execution the week of September 29, 2025, as outlined in the RFP.

Task Estimated Completion Date

3. 1: Inventory & Evaluate Liabilities December 2025

3. 2: Funding Needs & Risk Reduction Analysis March 2026

3. 3: ALM Modeling March 2026

3. 4: Reserve Guidance April 2026

3. 5: Execution ( As Needed) TBD based on Desired Strategy Optional Study 4 ( Wildfire Risk Mitigation) Timeline
Based on the proposed Scope of Services identified in Section 3 of this Proposal for the Optional Study 4, we propose the following schedule for delivery of NHA' s services. This schedule assumes that the Town enters into contract negotiation and execution the week of September 29, 2025, as outlined in the RFP.

Task Estimated Completion Date

4. 1: Identify Areas of Highest Priority November 2025

4. 2: Develop Annual Treatment Budget for Wildfire Risk Mitigation December 2025

4. 3: Present Preliminary Results February 2026

4. 4: Funding Plan Development March 2026

4. 5: Present Refined Cost & Funding Plan April 2026
Consequently, we estimate that completion of the non- optional tasks will take about 6 months from the date of engagement. Below is a summary of the estimated timeline for the additional optional services identified under Study 4:

Optional Task 4. 1a ( Retain Cat Modeler) will take about S weeks, not counting going out to RFP.

Optional Task 4. 3a ( Develop MOU for Collaboration Across Cities) will take approximately S weeks from start to finish.

Optional Task 4. 4a ( Funding Plan for Other Cities pursuant to MOU) can proceed concurrently with Task 4.4.

Optional Task 4. 6 ( Data Commons Work) will take an additional 16 weeks, in our experience.

Optional Task 4. 7 ( Polling Consultant Engagement) will take an additional 12 weeks

7. SAMPLES OF COMPARABLE PROJECTS
Sample 1: Pension Expense Modeling for the City of Walnut Creek As mentioned above under Section 4, NHA worked with the City of Walnut Creek in early 2025 to ( 1) educate stakeholders about their CaIPERS pension liability, (2) provide stress testing scenario modeling to account for potential changes to the discount rate in the future, ( 3) develop a customized model that helped optimize the timing and amounts of Section 115 Trust deposits and withdrawals, and ( 4) review and support potential changes to the City' s pension funding policy. The presentation in Appendix A N HA I ADVISORS Page16
Financial& Policy Strategies.

Delivered.

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Los GATOS— PROPOSAL FOR STUDY 3( ALM) AND OPTIONAL STUDY 4( WILDFIRE RISK MITIGATION) showcases our ability to translate the complex world of CalPERS and develop dynamic tools that allow for prudent, long-term decision making by stakeholders.

Sample 2: Wildfire Buffer Zone Budget Modeling for the Greater Paradise Area NHA prepared a detailed budget for annualized treatment costs and other expenses for a 30,000- acre community wildfire buffer zone for the greater Paradise area. Appendix B includes a slide deck prepared by NHA on funding the proposed Paradise Community Wildfire Buffer Zone.

8. DISCLOSURE OF ABSENCE OF LITIGATION OR DISCIPLINE OVER LAST FIVE YEARS There have been no instances in the last five years where a client terminated NHA Advisors midway through a contract for providing advisory/ consulting services.

There are no pending legal actions alleging violations of law against the firm, any partner of the firm, or any employee of the firm by any Federal or State regulatory agency.

No Conflicts of Interest and other Disclosures
NHA has not engaged in any finder' s fees, fee splitting, payments to consultants, or other contractual arrangements which would constitute a real or perceived conflict of interest.

NHA does not have an affiliation or relationship with any broker-dealer, nor has any NHA personnel who would provide advice to the Town been has associated with a broker-dealer firm within the two years preceding this RFP.

NHA has no known conflicts of interest in serving as the municipal advisor to the Town. NHA has no financial, business or other relationship with the Town. NHA has no current clients who may have a financial interest in the outcome of this contract. NHA is not suspended from practice in the State of California. Further, NHA, focused upon cities as our core mission / business, does not serve any other public entities and so are free from those potential direct conflicts of interest that some of our competitors have from serving two different public agencies with differing goals or direct conflicts.

NHA, under its fiduciary duty as a SEC- Registered Municipal Advisor, must deal honestly and with the utmost good faith with the Town and act in the Town' s best interests without regard to the financial or other interests of NHA. NHA will eliminate or provide full and fair disclosure to the Town about each material conflict of interest (as applicable). NHA will not engage in municipal advisory activities with the Town if it cannot manage or mitigate its conflicts in a manner that will permit it to act in the Town' s best interests.

As a general statement, NHA represents that in connection with the issuance of municipal securities, NHA may receive compensation from the Town for services rendered. If this compensation is contingent upon the successful closing of a transaction and/ or is based on the size of a transaction then, consistent with the requirements of MSRB Rule G- 42, NHA hereby discloses that such contingent and/ or bond sizedetermined transactional compensation may present a potential conflict of interest regarding NHA' s ability to provide unbiased advice to Town to enter into such transaction. This conflict of interest will not impair NHA' s ability to give unbiased and competent advice or to fulfill its fiduciary duty to the Town. If NHA becomes aware of any additional potential or actual conflict of interest after this disclosure, NHA will disclose the detailed information in writing to the Town in a timely manner. NHA will never be NHA I ADVISORS Page17
Financial& Policy Strategies.

Delivered.

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Los GATOS— PROPOSAL FOR STUDY 3( ALM) AND OPTIONAL STUDY 4( WILDFIRE RISK MITIGATION) compensated based upon the size of a transaction. NHA has a duty to reasonably establish its fees in relation to metrics that are fair and understandable to our clients such as amount of firm resources deployed, complexity of the deal, breadth of services rendered, risks associated with completion, among many other considerations.

9. REFERENCES
NHA' s references will provide the Town with a frank, detailed evaluation of our approach and processes.

We encourage you to reach out for more information about how NHA approaches projects with a goal of providing an unparalleled level of municipal advisory and consulting services.

References for Study 3 ( ALM)
Reference: City of Ukiah
Contact: Dan Buffalo, Finance Director
Contact Address: 300 Seminary Avenue, Ukiah, CA 95482
Contact Phone& Email Address: ( 707) 463- 6220 I dbuffalo@citvofukiah. com Start & End Date of Services: July 2016- Present
CaIPERS Pension Stakeholder Education, Cost Management
Strategy Evaluation, UAL Restructuring ( Lease Revenue Bond), Internal Pension Reserve Policy Analysis, ADP/ Fresh Start Analysis, Ongoing Stakeholder Updates/ Workshops
Description of Services:

Fees Charged:

Pension Education, Stress Testing + Lease Revenue UAL
Restructuring Bond: $ 112, 500
Ongoing Annual Pension Update/ Cost Management Strategy Analysis: $ 5, 750-$ 7, 500
NHA I ADVISORS Page18
Financial& Policy Strategies.

Delivered.

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Los GATOS— PROPOSAL FOR STUDY 3( ALM) AND OPTIONAL STUDY 4( WILDFIRE RISK MITIGATION) Reference: Walnut Creek
Contact: Kirsten LaCasse, Administrative Services Director Contact Address: 1666 North Main Street, Walnut Creek, CA 94596 Contact Phone& Email Address: ( 925) 943- 5810 1 lacasse@walnut- creek.org Start & End Date of Services: October 2024— March 2025
CaIPERS Pension Stakeholder Education, Cost Management
Strategy Evaluation, Customized Section 115 Trust Model, 115 Trust Deposit/ Withdrawal Analysis, Policy Recommendations Description of Services:

Fees Charged:
15, 000
Reference: Riverside
Contact: Edward Enriquez, Assistant City Manager/ CFO and Treasurer Contact Address: 3900 Main Street, Riverside, CA 92522
Contact Phone& Email Address: ( 951) 826-55531 [email protected] Start & End Date of Services: 2018 to Present
CaIPERS Pension Stakeholder Education, Cost Management
Strategy Evaluation, $ 430 Million POB, Pension Policy
Development, Customized Section 115 Trust Model, 115 Trust Deposit/ Withdrawal Analysis, Annual Stakeholder Updates, POB Performance Comparison, " CaIPERS Challenge" Assistance CaIPERS Challenge I City Manager's Office)
Description of Services:

Fees Charged:

Pension Obligation Bond ( POB): $ 125, 000
Pre- POB Consulting: $ 25, 000
Annual Pension Update/ Cost Management Strategy
Recalibration: $ 7, 500 to$ 15, 000
N HA I ADVISORS Page19
Financial& Policy Strategies.

Delivered.

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Los GATOS— PROPOSAL FOR STUDY 3( ALM) AND OPTIONAL STUDY 4( WILDFIRE RISK MITIGATION) Reference for Study 4 ( Wildfire Risk Mitigation)
Reference: Paradise Recreation and Park District
Contact: Dan Efseaff, District Manager
Contact Address: 6626 Skyway, Paradise CA 95969
Contact Phone& Email Address: ( 530) 872- 6393 I [email protected] Start & End Date of Services: 2023 to Present
Community Wildfire Buffer Zone Funding Plan for the Greater Paradise Region
Description of Services:

Fees Charged:
85, 000 (funded in part through OPR Grant)

10. PRELIMINARY FEE SCHEDULES
Fee Schedule for Study 3 ( ALM Study):

For work described in this proposal' s Section 3 ( Scope Comments and Methodology) for Study 3 ( ALM Study), NHA proposes to a compensation structure based on time and materials required at the hourly rate schedule shown below. We propose a not-to-exceed budget for these services of$ 50,000. The table below provides the itemized fee proposal as requested in the RFP and provides a " low-end" estimate and a " high- end" estimate based on our experience on other projects.

Study 3( ALM Study)- Budget Worksheet
Blended Estimated Hours Estimated Budget Estimated Hours Estimated Budget Task
Hourly Rate* ( Low End) Low End) High End) High End)

3. 1: Inventory& Evaluate Liabilities 285 35. 0 9, 975 45. 0 12, 825

3. 2: Funding Needs& Risk Reduction Analysis 285 35. 0 9, 975 60. 0 17, 100

3. 3: ALM Modeling 285 35. 0 9, 975 45. 0 12, 825

3. 4: Reserve Guidance 285 18. 0 5, 130 25. 0 7, 125

3. 5: Execution( As Needed) TBD TBD TBD TBD TBD
Total Low- End $ 35, 055 Total High- End $ 49, 875
Estimate Estimate
Blended hourly rate assumes the following approximate allocations of work among NI-IA staff.:principal20% vice president 30%,support staff 50% In- Person Meetings ( Upon Request) — NHA will be available to attend virtual meetings and conference calls at the hourly rates shown above and the budget shown above factors in the time for virtual meetings and conference calls in order to deliver the study to the Town. In the event that the Town requests inperson meetings, NHA proposes a travel fee of$ 1, 500 ( per attendee) for each in- person meeting.

Fixed Fee Fee
Engagement/ Administrative Setup
Contract, Insurance, etc.)
500
NHA I ADVISORS Page20
Financial& Policy Strategies.

Delivered.

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Los GATOS— PROPOSAL FOR STUDY 3( ALM) AND OPTIONAL STUDY 4( WILDFIRE RISK MITIGATION) Professional Services ( Hourly)
2025
Rates( 1) c2a
Principal 360
Director J Senior Vice President 335
Vice President 310
Assist. Vice President I Sr. Associate 285
Associate 260
Senior Analyst 230
Analyst 205
Administrative 130
1) Hourly rates will escalate by 3% annually each January 1st( rounded to the nearest five dollars based on the
prior year' s rounded amount).
2) Effective hourly rates shown in invoices may be reduced to incorporate non- billable time.

Fee Schedule for Optional Study 4 ( Wildfire Risk Mitigation):

For work described in this proposal' s Section 3 ( Scope Comments and Methodology) for Optional Study 4 Wildfire Risk Mitigation Consulting), NHA proposes to be compensated based on time and materials required at the hourly rates shown in the section directly above. We propose a not-to- exceed budget for these services of $ 45, 000. This budget is specific the Tasks 4. 1, 4. 2, 4. 3, 4. 4 and 4. 5 discussed in that section and excludes the optional tasks in that scope. Should the Town desire the optional tasks, below is a summary of the budget for those tasks:

Optional Task 4. 1a ( Retain Cat Modeler): The cost to retain a cat modeler would be a separate budget, based on the proposals received from cat modeling firms.

Optional Task 4. 3a ( Develop MOU for Collaboration Across Cities): Time and Materials, subject to a fee cap of$ 15,000
Optional Task 4.4a ( Funding Plan for Other Cities Pursuant to MOU): Time and Materials, subject to a fee cap of$ 10,000
Expenses for Optional Study 4
Our$ 45, 000 fee cap for the non-optional tasks already includes$ 6, 000 potential expenses for retaining a consultant to prepare GIS layers for parcels within the proposed wildfire buffer zone, including priority treatment parcels.

NHA I ADVISORS Page21
Financial& Policy Strategies.

Delivered.

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Los GATOS— PROPOSAL FOR STUDY 3( ALM) AND OPTIONAL STUDY 4( WILDFIRE RISK MITIGATION)

11. STATEMENT OF INSURANCE COVERAGE
As summarized in the table below, NHA meets the insurance requirements in the Town' s Sample Consultant Services Agreement. NHA will maintain this coverage for the term of the contract if selected by the Town for this engagement.

Coverage Type
Town' s Requirements
NHA' s Coverage
in Sample CSA
Valley Forge Insurance Company
Carriers N/ A
Hartford Casualty Insurance Company
Underwriters at Lloyd' s, London
General Liability
per occurrence)
2M 2M
General Liability
Not specified 4M
aggregate)
Auto Liability 1M ( per accident) 1M ( per accident)
Worker' s Comp (per
occurrence)
1M 1M
Professional Liability 1M per occurrence 1M per occurrence/$ 2M aggregate

12. TOOLS, DATA SOURCES, AND USE OF Al
Our pension advisory practice utilizes multiple data sources, including data taken directly from CaIPERS actuarial reports and the CaIPERS Pension Outlook Tool. This data provides inputs into our proprietary models that we have developed over years of pension consulting and advisory experience. Validation of the accuracy of these tools is extremely important to us and we review the output of these models regularly as part of each engagement.

As noted above, we will retain a consultant to prepare GIS layers for priority treatment parcels. Here is a link to the GIS layers website our consultant prepared for Paradise:
https:// experience. arcgis. com/ experience/ 767e8d 6173de49efb4978e142b00c523 NHA uses an Enterprise Artificial Intelligence(" Al") in a limited capacity. We use an enterprise subscription vs Open Web Al) to maintain privacy of our documents and control on the outputs. To date, we have not used Al as a tool to generate or develop any of our models, since most of our models were developed years before the advent of Al. Generally speaking, we approach the use of AI in any consulting or financing engagements with healthy dose skepticism while also seeking strategic ways we can benefit our clients through improving our efficiency on projects. We recognize that there is a concerted marketing effort underway across the globe to promote widespread Al adoption, but we also recognize that Al is a tool, not a replacement for an experienced advisory staff. Any outputs of Al must be thoroughly vetted and reviewed before being incorporated into any body of work to minimize the impact from any hallucinations" in Al outputs producing a flawed product.

NHA I ADVISORS Page22
Financial& Policy Strategies.

Delivered.

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1 D6- 2ABE915A0C1 C Los GATOS— PROPOSAL FOR STUDY 3( ALM) AND OPTIONAL STUDY 4( WILDFIRE RISK MITIGATION) APPENDIX A: SAMPLE OF PENSION EXPENSE MODELING FOR THE CITY OF

WALNUT CREEK
N HA I ADVISORS Page23
Financial& Policy Strategies.

Delivered.

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1D6- 2ABE915A0C1C 3/ 20/ 2025

PENSION TRUST & RESERVE ANALYSIS AND USE POLICY

CITY COUNCIL
MARCH 18, 2025
1 Pension Trust& Reserve Use Strate
Considerations
nsion Program Review
Historical and Projected CaIPERS Costs

TODAY' S
DISCUSSION ost Management Strategy Overview
Section 115 Trust Analysis
Scenarios
Takeaways and Recommendation
Proposed Policy Language
2 1

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1D6- 2ABE915A0C1C 3/ 20/ 2025

REQUESTED ACTION
Accept the report and adopt a
Provide Feedback Resolution establishing the Pension
Trust and Reserve Use Policy
3 THINGS TO CONSIDER....

When do we use?
How much do we use?
What latitude should the policy provide?
How can we be mindful of using one- time dollars for ongoing costs? How do we balance use with other reserves?
4 2

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1D6- 2ABE915A0C1C 3/ 20/ 2025 Michael Meyer
Vice President
Pension Group Manager
THE NHA Craig Hill
ADVISORSManaging
Principal
TEAM Matt DeFilippis
Senior Analyst
Adrian Gonzalez
Analyst
5 CITY OF WALNUT CREEK CITY OF
CALPERS PENSION PROGRAM REVIEW AND IC "
r "'°
WALNUT
t CREEK

COST MANAGEMENT STRATEGY ASSESSMENT

NHAIADVISORS
Financial& Policy Strategies.

Delivered.

MARCH 18, 2025
6 3

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1D6- 2ABE915A0C1C 3/ 20/ 2025 Today' s Discussion
I. Background on CaIPERS Costs
II. Historical and Projected CaIPERS Costs
III. Cost Management Strategy Overview
Iv. City' s Section 115 Trust
I. Overview
II. Objectives
III. Analysis
AT 7 NHA I ADVISORS
7 I. BACKGROUND ON CALPERS COSTS
s
4

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1D6- 2ABE915A0C1C 3/ 20/ 2025 City of Walnut Creek CaIPERS Summary
The City has a $ 155M CaIPERS Unfunded Accrued Liability ( UAL), as of 6/ 30/ 2024, per the CaIPERS Pension Outlook Tool projections Miscellaneous Plan: $ 82M I Safety Plan: $ 73M
City has been proactive in addressing rising pension costs

28. 7M in the Section 115 Trust as of 9/ 30/ 2024

1. 9M in the General Fund Pension Reserve
Effective funded ratio increases when including these assets The City makes two types of payments to CaIPERS: Normal Cost & UAL wCREALL. r
9 NHAIADVISORS
CREEK
a„
9 Normal Cost = Annual Cost for Current Employees
Amount needed to fund
future retirement benefits
Employee
based on actuarial Contributions
calculations ( life expectancy,
payroll increases, etc.) Employer Assumptions
ontributions Used
Benefits are funded as they
are earned
Normal
Maintains the long- term Cost
stability of the pension
Calculation
system
CREE
wni
K::
r 10

NHAIADVISORS
e wiN: oe' µeo.
10 5

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1D6- 2ABE915A0C1C 3/ 20/ 2025 Unfunded Accrued Liability (UAL)
Shortfall between the promised City of Walnut Creek
pension benefits and the funds CaIPERS Pension Funded Status currently available in the CaIPERS $ sso
system to pay for those benefits ° $ soo
2 $
450
Shortfall( UAL):

Increases or decreases based on
400
155 Million
CaIPERS investment returns
350
Impacts amortized over 20 years 300
Accrued
Irregular payment shape as UAL 250 521Liability:
comprised of over 30 layers; each with $
200
Market Value of
Million
its own term/ shape CaIPERS Assets:
150 367 Million
Funded Ratio 100
Market Value of Assets 50
70 3%
Accrued Liability 0
Source: Ca? 4ERS Lenslm Outlook Tool. Assumes9. 3% Investment returns In N20L3- 24.

CEpK 11

NHAIADVISORS
11 Discount Rate & Asset Liability Management (" ALM")
An assumed rate of return; a way to assess the risk of
Discount Rate CaIPERS' investment portfolio
The interest rate charged on the City' s UAL debt
Occurs every four years to balance the expected cost of pension payments with the expected investment returns Asset Liability • Review of CaIPERS' investment portfolios and retirement Management plan liabilities ( based on demographic& economic factors, including membership, payroll growth,
retirement ages, inflation, and life expectancy) —,
gar 2025 ALM Study in progress 12

NHAIADVIISORS
Da—
cxsr
12 6

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1D6- 2ABE915A0C1C 3/ 20/ 2025 Historical PERS
Returns
5- Year: 6. 6%
Why CaIPERS Costs Have Trended Higher 10- Year: 6. 2%
20- Year: 6. 7%
Then ( late 1990s)... Now ... 30- Year. 7. 7%
Robust investment returns ( 10%+) Sluggish investment returns ( not meeting assumptions)
Retirement plans were" SuperAssumptions have changed/ grown Funded" through the late 1990s more conservative
Earnings on funds were more than Discount Rate: 8. 25% 7. 00% -3 6.80% adequate to cover retirement costs
Inflation rate( prices going up)
Super funded status induced
Mortality rates ( people living longer) widespread retirement benefits enhancements.... Shorter, more conservative
amortizations
Past funding policies led to
contribution holidays and " free"
benefit improvements
g cwxeex
13 NHAIADVISORS
13 CaIPERS Historical Preliminary Investment Returns ( Time- Weighted)

25. 0%

20. 7% 21. 3%

20. 0%
18 8% 18A%

15. 0% 12. 2% 11. 9%

11. 1% Ell 10. 0%

9. 3%

5. 0%

1. 0% 0. 6%

5. 0% 2. 9%

10. 0%

15. 0%

6. 1%
AnnuaI Return - Target Discount Rate

20. 0%

25. 0%

23. 6%

30. 0%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 ArNUT 14

NHAIADVISORS
Da-.
14 7

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1D6- 2ABE915A0C1C 3/ 20/ 2025 How CaIPERS Benefits Get Funded
Pre- 2008
Ca! PERS CaIPERS CaIPERS
Investment
earnings used to investment earnings employers members
make up a higher
percentage of
total contributions
UNITED s'1'. 1' 1' 1111 As investments
underperform
assumptions,
employers must
make up the
difference, unless
the additional
CaIPERS Pension Buck: a 20- year Average( as of June 30, 2024) costs are
negotiated with
employees
15 NHAIADVISORS
15 City' s CaIPERS Retirement Plans
2 Main CaIPERS plans; Miscellaneous & Safety
Miscellaneous: 1, 352 covered members; $ 82M UAL
Safety: 285 covered members; $ 73M UAL
PEPRA ( effective 2013) helpful to manage long term pension costs for new employees
Enacted revised benefit levels for new plan members
Higher employee contribution rates mean more normal cost is being paid by the employee
However, 98% of current UAL comes from Classic plans and is not impacted by PEPRA
16 NHAIADVISORS
16 8

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1D6- 2ABE915A0C1C 3/ 20/ 2025 Historical & Projected PEPRA Transition
Classic vs. PEPRA % of Payroll
60 4 Total Classic Payroll Total PEPRA Payroll
2 $ 50

79. 6%
40 33. 0%

27. 696
I II
WALM19'
CREEK
soum:
eeporm.
zou- 203aprojections
zmzzouzoz4parrouaam
z¢= 4 paassu
assume
aamrlmI OON
the
Asouraagom
is
PEPRA
sourrea
9S
hom
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me
me
ays
to
N
grow
stapes
grow at
vennon
a
Aetaanm
o6mnmi
ounoox
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average
iiIJL1JJJI roux 17
Projected NHAIADVISORS
inane!
V
O
Poi
i
enw, m.
zozo- zoz4) of aeerommateb 4.? percentage eomts per year. 17 II. HISTORICAL AND PROJECTED CALPERS COSTS
1s
9

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1D6- 2ABE915A0C1C 3/ 20/ 2025 History of the City' s UAL Balance & Funded Ratio
Funded Ratio includes Section 115 Trust Assets& General Fund Pension Reserve UAL eFunded Ratio( Includes Section 115 Trust Assets& General Fund Pension Reserve) 180
160
159 164 155
138 U
140
s

73. 7% 7c. o
120 129 123
100
s0
102
60 40
20 2018 2019 2020 2021 2022 2023 2024
Ca1PER5 Returns: 8. 4% 6. 5% 5. 0% 22. 4% 7. 5% 6. 1% 9. 3%( Prelim) sp eprFFin 19

NHAIADVISO RNS
19 CaIPERS Funded Ratio Comparison ( As of June 30, 2023) Funded Ratio Includes Trust Assets & Pension Reserves
80%

70. 1% 71. 1% 72. 9%
70%
60%

60. 6% 164M UAL
176M UAL 294M UAL
261M UAL 166M UAL
50% Assets:

Assets: Assets: Section 115
40q
Assets: Assets: Section 115 Section 115 Trust($ 25M)
Section 115 Section 115 Trust($ 0) Trust($ 46M) Pension 30%
Trust($ 0) Trust($ 0) Reserve

1. 9M)
20%
10%
0%
Concord Antioch Livermore Pleasanton Walnut Creek
arNUT Source Camees Act..? RePo. andatyaun« edfnannm. mrernenm 20

NHAIADVISO RS
20 10

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1D6- 2ABE915A0C1C 3/ 20/ 2025 Historical & Projected CaIPERS Payments ( UAL + Normal Cost) UAL+ Normal Cost 25
payments projected to
increase from $ 18M to 20
23M (+ 24%) by FY 2032
City' s UAL payments rising $ 15 — 1 I
to$ 16. 6M by FY 2032 Hypothetical UAL Payments*
28% higher than FY 2025 $ 10
93% FY 2023- 24 Returns)
UAL payment($ 13M) 1111 IlIlIllIllIll 11111 Annual Normal Cost 5 contributions going Normal Cost
forward projected to range
A
between$ 5. 4M and 0
CO m o + N CO V In to N CO al 0 + N CO v In to N CO al 0 + N CO v In

7. 5 M through FY 2045 00 NNNNNNNNNN 0 0 0 0 0 0 0 0 0 0 0 0•zr 0•zr 0•zr 0•zr 0

N N N N N N N N N N N N N N N N N N N N N N N N N N N N Source: Cd4FRSAQua1d Vduuhc Repo25& Cd4FRS Pension OUHook Tool CRE.EKf etusth <
v2OL3- za nvesouene. em. ne of s3% and 6. 8% m asouene
21 NHA ADVISORS
CREEK returns thereafter. o,,,,,,, e
21 III. COST MANAGEMENT STRATEGY OVERVIEW
22 11

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1D6- 2ABE915A0C1C 3/ 20/ 2025 Pension Cost- Management Strategies — Not Mutually Exclusive Prepay UAL early in Fiscal Year (= 3. 3% discount) 3 City Does This Negotiate Cost Sharing With Employees
New employees already governed by lower cost/ benefit PEPRA plans Negotiate cost sharing of the City' s share
Use Cash Reserves to Pay Extra
Section 115 Pension Trust— Separate trust solely dedicated to pension City' s annual UAL cost and Normal Cost can be supplemented with the Section 115 Trust
Additional Discretionary Payments (" ADPs")— direct payments to CaIPERS to reduce UAL Can be funded with Section 115 or annual surplus ( not recommended at this time given City' s projected budget deficits)
wALNCF 23 NHAI ADVISORS
CRF: F 1:
23 IV. CITY' S SECTION 115 TRUST

OVERVIEW, OBJECTIVES & ANALYSIS
24 12

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1D6- 2ABE915A0C1C 3/ 20/ 2025 Section 115 Pension Trust - Overview
What is it? Restricted Account for pension
Advantages:

Potential Higher Investment Returns in Managed Account
Longer- Term Benefit: Trust funds can grow over time and pay off a large% of UAL in the future Shorter-Term Benefit: Apply funds to " smooth" payment spikes in UAL and/ or Normal Cost Flexibility— more investment options than CaIPERS and the City can decide when and how to use
Potential shock absorber for volatility from CaIPERS investment performance & assumption changes
Disadvantages:

Doesn' t directly reduce UAL until funds are transferred to CaIPERS Requires reserves/ surplus contributions to build account balance Investment risk( dependent on type of investment portfolio)

NHAIADVISORS
g
WNW 25
25 Section 115 Trust — City' s Objectives
VOLATILITY MITIGATION: Mitigate budgeting impacts of
increasing/ fluctuating pension costs
LEVEL LOWER ANNUAL PAY e Trust judiciously to
flatten the pension curve (" mountain peak")
LIQUIDITY: Maintain (don' t fully deplete) minimum trust balance to protect against future unknowns
26 NHAIADVISORS
Da-.
26 13

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1D6- 2ABE915A0C1C 3/ 20/ 2025 Section 115 Pension Trust & Pension Reserve
City' s Section 115 Pension Trust has$ 28. 7 million of assets as of 9/ 30/ 2024 Balanced investment objective: 50% Equity/ 50% Fixed Income

10. 89% investment return for FY 2024; 5. 87% investment return since inception( FY 2019) Historical Contributions: Total =$ 19, 876, 600
August 2018:$ 13, 895, 400
April 2019:$ 2, 989,000
July 2019:$ 2, 992, 200
General Fund Pension Reserve has$ 1. 9M
Key Considerations for City
Is it time to stop growing trust?
Timing and size of optimal withdrawals
How would a discount rate change or recession change the strategy? fNHAIADVISORS Auur 27
27 Section 115 Trust — Customized Modeling & Analysis
Using a customized model that can be updated periodically Model out various scenarios using CaIPERS Pension Outlook Tool Estimating withdrawals from the Trust to create different payment smoothing strategies
Scenarios
1— STATUS QUO; 9. 3% FY 2023- 24 Returns, 6. 8% Returns After, No Assumption Changes
2— DISCOUNT RATE REDUCTION; CaIPERS lowers discount rate from 6. 8% to 6. 5% 3— DEFICIT MITIGATION; Withdrawals from Trust to mitigate City' s forecasted deficits
p° rr 28

NHAIADVISORS
28 14

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1D6- 2ABE915A0C1C 3/ 20/ 2025 Scenario # 1 — STATUS QUO
18 Assumptions:
16 i- •` •` CaIPERS Discount Rate: 6. 8%
t\ \ kt\ x
no change)
14 \`\\-\ 1 \\\ N7
N •• ' ` IS CaIPERS Investment Returns:
12 1 1 1 1 1 1 1 1 1 • 9. 3% in FY 2023- 24; 6. 8%
slo
Net Payments thereafter
Smoothing Level:$ 12. 1M
8 6 I

I I I I I I

I I I I I I I
Beginning Trust Balance:

28. 7M ( as of 9/ 30/ 2024)
4 I I I
LIe
IeItsI I I I I I I I I
r
Additional Trust Contributions:

IIIIIIIII IIIIII 1 Trust Annual Investment 2
s- 111111111 I I I I I I I ' Earnings: 5. 28%
Ending Trust Balance: $ 0
AI.NROT 29 NHAIADVISORS
29 Scenario #2 — DISCOUNT RATE REDUCTION

6. 5% CaIPERS Discount Rate — UAL Increase from $ 155M to$ 175M 20 Assumptions:
0 18 1 `„ CaIPERS Discount Rate: 6. 5%
16 —\- :- - `•
CaIPERS Investment Returns:
14 =
N. `
I I I\ • ' •

9. 3% in FY 2023- 24; 6. 5%
thereafter
12 Net Payments
sl0
Smoothing Level:$ 13. 7M Trust Balance: $ 28. 7M ( as of 8 I

I I I I I I
I .• II II 9/ 30/ 2024)
6 I i
L' Pa'
ments I I . II Additional Trust Contributions:
4 2
I I I I I I I • I • I I I I % Trust Annual Investment
I I I I I II Ili Earnings: 5. 28%
C C
C
C
C C C C C C C . Ending Trust Balance: $ 0
ArN T 30

NHAIADVISORS

0.-.
30 15

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1D6- 2ABE915A0C1C 3/ 20/ 2025 Scenario #3 — DEFICIT MITIGATION
Withdrawals from Trust to Mitigate City's Forecasted Deficits ( Moderate Recession) Assumptions:

Moderate Recession FY2027
Net Operating Results After Funding Reserves (% ot GF Expenditures) Assumes net operating results 3000%
um% from City' s Moderate Recession
9A0% financial forecast
6U0%

3. DD% FY 2026- 27 Recession: 18- month
spar
j $

18. 9) • 513. 5) Ell 1111 s0.5) WO

50. 3 52. 3 $ 3. 4 , downturn; 3- year recovery

3. Wx

3. DD% 2% Property Tax; - 6. 25% Sales
Tax& TOT; - 5% Other Revenues
3100% Assumes Trust offsets 100% of
FY3026 R3037 K1028 FY2029 FY2D30 FY3033 FV2033 FY2033 P0034 FY3035 deficits through FY 2034 and a
portion of the deficit in FY
2035, before exhausted
REE T
31 NHAI AD VISO RNS
31 Comparison of Trust Deposits and Withdrawals
Scenario# 1( Status Quo) Scenario# 2( Discount Rate Reduction) Scenario# 3( Deficit Mitigation) Fiscal Year Deposits to Trust Withdrawals from Trust Deposits to Trust Withdrawals from Trust Deposits to Trust Withdrawals from Trust 2026 0 1, 317, 707 0 0 0 3, 100, 000
2027 0 2, 124, 510 0 2, 306, 566 0 6, 800, 000
2028 0 2, 724, 510 0 2, 896, 566 0 8, 900, 000
2029 0 4, 164, 510 0 4, 306, 566 0 7, 800, 000
2030 0 4, 344, 510 0 4, 496, 566 0 3, 500, 000
2031 0 4, 484, 510 0 4, 636, 566 0 0
2032 0 4, 454, 510 0 4, 606, 566 0 0
2033 0 4, 334, 510 0 4, 486, 566 0 0
2034 0 3, 734, 510 0 3, 886, 566 0 3, 500, 000
2035 0 3, 384, 510 0 3, 546, 566 0 723, 598
2036 0 2, 784, 510 0 2, 956, 566 0 0
2037 0 1, 704, 510 0 1, 886, 566 0 0
2038 0 0 0 0 0 0
2039 0 0 0 0 0 0
2040 0 0 0 0 0 0
2041 0 0 0 0 0 0
2042 0 0 0 0 0 0
2043 0 0 0 0 0 0
2044 0 0 0 0 0 0
Total 0 39, 557, 314 0 40, 012, 229 0 34, 323, 598
WALNUT 32

NHA ADVISORS
32 16

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1D6- 2ABE915A0C1C 3/ 20/ 2025

QUESTIONS
7 aobi
i
re1 lie
t1
I
a •
4 n /Alp
wnTiL' NHAIADVISORS
33 KEY TAKEAWAYS
The trust is intended to be used.

Pension costs are projected to increase through 2033;
decrease beginning in 2034.

City's healthy Section 115 Trust balance and reserve can be leveraged over the next 10- 12 years.

Staff recommends adopting a policy for the use of
pension resources.
34 17

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1D6- 2ABE915A0C1C 3/ 20/ 2025

PROPOSED POLICY KEY PROVISIONS
Only using the
Balance use of the Avoid relying on one- Pension Resources Pension Resources time funds for
during deficit years to
with other reserves
maintain ongoing expenses service levels
General Fund Continue pre- paying Take steps to ensure
surpluses may be pension liabilities that the Pension
deposited into the when feasible to Resources last until at trust achieve cost savings least FY 2034
35 RECOMMENDED ACTION
Accept the report and
adopt a Resolution
Provide Feedback establishing the
Pension Trust and
Reserve Use Policy
36 18

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1D6- 2ABE915A0C1C 3/ 20/ 2025 421±.4
4,
1 m1011 AO
kicr AR‘' 01, 4111
t
QUESTIONS? V.

II\
IIII)
r ft
r
air
37 BACK-UP SLIDES

BEYOND THIS
POINT
38 19

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1D6- 2ABE915A0C1C 3/ 20/ 2025

OBJECTIVES, POLICIES AND PRINCIPALS
Objectives:

Mitigate budget impacts of increasing and fluctuating pension costs in a sustainable manner.

Use the pension resources judiciously to flatten the curve of rising pension costs.

Ensure the trust lasts at least until pension costs are projected to begin decreasing( estimated by CaIPERS to be 2034 perAttachment I)
Be mindful of using one-time funds for ongoing costs; minimize withdrawals with a long-term plan for• the use of the trust.

Balance the use of the trust with other reserves during challenging economic conditions, when appropriate.
39 OBJECTIVES, POLICIES AND PRINCIPALS ( CONTINUED)
Policies and Guiding Principles:

The Pension Resources may be utilized during fiscal years in which a structural deficit is present to ensure the continuation of existing service levels, and not to enhance or increase services.

The trust would not be used to offset pension costs in years in which there is a structural surplus.

Pension Resources will be used in a fiscally responsible manner.While the pension resources would be budgeted as a funding source, the amount withdrawn from the trust will be determined at year-end based on actual revenues compared to actual expenditures in the General Fund. To maximize investment earnings and ensure judicious use of the funding, only the amount budgeted, or actual amount needed to close the gap, whichever is less, would be withdrawn from the trust.

In any fiscal year in which there is a year-end surplus in the General Fund, Council may choose to deposit some or all of the year-end surplus in the trust. 40 20

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1D6- 2ABE915A0C1C 3/ 20/ 2025

OBJECTIVES, POLICIES AND PRINCIPALS ( CONTINUED)
Policies and Guiding Principles:

The Pension Resources are intended to be used under this policy through FY2034, when pension costs are projected to begin to decrease. At that time, all remaining funds, if any, would remain in the trust to offset future pension costs or until the City Council provides further direction.

The City will continue to pre- pay the Unfunded Actuarial Liability( UAL) payment annually, when feasible, to achieve budgetary savings from the discount offered by CaIPERS ( half of the discount rate percentage).

In any fiscal year in which there is a year-end surplus in the General Fund, Council may choose to deposit some or all of the year- end surplus in the trust
The Pension Resources are intended to be used under this policy through FY2034, when pension costs are projected to begin to decrease. At that time, all remaining funds, if any, would remain in the trust to offset future pension costs or until the City Council provides further direction.

The City will continue to pre- pay the Unfunded Actuarial Liability( UAL) payment annually, when feasible, to achieve budgetary savings from the discount offered by CaIPERS ( half of the discount rate percentage). 41 mos

APPENDIX - ADDITIONAL RESOURCES
42 21

ITEM NO. 7.

Docusign Envelope ID: 8463BA3F- D38D- 4CDC- A1D6- 2ABE915A0C1C 3/ 20/ 2025 Classic vs. PEPRA Pension Example Comparison
Employee# 1 is a Classic member and Employee# 2 is a PEPRA member— both have served for 25 years and have a final average compensation of$ 125K
Employee# 2 will have a lower pension than Employee# 1 due to a lower benefit factor, and will also retire at 57 years old instead of 50 years old like the Classic member The City will save money from PEPRA' s lower pension amount and because PEPRA' s pension may be paid out for a shorter amount of time due to retirement occurring 7 years later compared to Classic The difference in pension between Classic and PEPRA is even more apparent at higher compensation levels, as there is a pensionable compensation limit of approximately$ 175K for PEPRA and$ 330K for Classic Service XBenefit Final Annual
Credit Factor Compensation ! Pension
Employee# 1( Classic}
25 Years x 3. 0% @ 50 x 125, 000 93, 750
Employee# 2 ( PEPRA}
25 Years x 2. 7% @ 57 X 125, 000 84,375
C\ istr 43

N HA ADVISORS
xt. ti ras
43 Cost of PEPRA vs. No PEPRA
PEPRA is projected to lower Normal Cost and UAL costs for the City Projected Normal Cost Projected UAL Balance
u, $
14 u,$ 180
0 0 $160 12
140
10 IL$
120 -
Cn
0 w
0 w
m0 0
w
0 w
0 w w w w w w w w w w w w
MNo PEPRA . . PEPRA MNo PEPRA , PEPRA
ppgrAr souA.: Comeas Pe on outlook root assumes no PEPRA implementation 44 NHA IADVISORS CREEK 009E bo. P. o/ mom.
l•..`" s...
44 22