REDDING CITY COUNCIL SPECIAL MEETING
BUDGET WORKSHOP
Civic Center Council Chambers
777 Cypress Avenue, Redding, CA
TUESDAY, MAY 20, 2025, 2:00 P.M.
NOTICE AND AGENDA
NOTICE IS HEREBY GIVEN that a Special Meeting of the Redding City Council is hereby called by the undersigned and under the authority vested in him by Section 54956 of the Government Code of the State of California. The meeting is to take place at the date, time, and location listed above.
Business to be transacted at said meeting, and the only business to be transacted is as follows:
1. See Attached Agenda
_______________________
Jack Munns, Mayor
Dated: May 19, 2025
Redding City Council May 20, 2025
Agenda
Special Meeting - Budget Workshop
Redding City Council
Council Chambers (Doors open 30 minutes prior)
777 Cypress Avenue, Redding, CA
May 20, 2025
2:00 PM
1. CALL TO ORDER - MAYOR JACK MUNNS
2. ROLL CALL
3. CITY OF REDDING BUDGET WORKSHOP NO. 3
3.1. Consider preliminary dr aft General Fund and Internal Service Fund budgets for Fiscal Years ending 2026-27.
Recommendation:
Approve the preliminary draft General Fund and Internal Service Fund budget s for Fiscal Years ending 2026 and 2027.
3.2. Consider presentations regarding the current budget development of the biennial budget for Fiscal Years ending 2026 and 2027 for the Enterprise Funds.
Recommendation:
Accept presentation regarding the current budget development of the City of Redding’s Biennial 20 25-27 Budget for th e Enterprise Fund Departments (Redding Electric, Public Works & Airports); and provide direction to staff as needed.
4. ADJOURNMENT
If anyone wishes to address the City Council on any item considered at this meeting before or during Council’s consideration of that item, please enter your name in the electronic kiosk located i n the lobby. The City Council will allocate up to a maximum of three minutes per speaker for each agenda item. Staff reports are available on -line at the City’s web site at www.cityofredding.gov or in the Public View binder located on the podium at the north side of the Chambers.
PLEASE SILENCE YOUR CELL PHONES. THANK YOU.
Redding City Council May 20, 2025
Pursuant to the Brown Act, non -confidential materials related to an item on this agenda submitted to the City Council after distribution of the agenda packet are available for inspection during normal business hours at the Office of the City Clerk, 3 rd Floor, City Hall, 777 Cypress Avenue, Redding, California.
In compliance with Title II of the Americans with Disabilities Act, the City of Redding will make available to persons with disabilities modifications or accommodations including auxiliary aids or services necessary to participate in public meetings. A person needing assistance should contact the Redding City Clerk by telephone at (530) 225 -4447 or in person, or by mail at 777 Cypress Avenu e, 3 rd Floor, Redding, California 96001 at least three (3) working days in advance.
The City of Redding will ensure that no person shall be excluded from participation in, denied the benefits of, or otherwise be subjected to discrimination under any of its projects, activities, services, or business opportunities on the basis of race, color, national origin, age, sex, or disability, as afforded by Title VI of the Civil Rights Act of 1964 and related statutes as amended. All persons, regardless of their citizenship status, are covered under this regulation.
Questions, complaints, or requests for accommodations or additional information may be forwarded to the ADA & Title VI Coordinator at 777 Cypress Avenue, Attn: Personnel Dept., Redding, California 96001, Phone (530) 225-4065.
CITY OF REDDING
REPORT TO THE CITY COUNCIL
Recommendation
Approve the preliminary draft General Fund and Internal Service Fund budgets for Fiscal Years ending 2026 and 2027.
Fiscal Impact
The presented preliminary budget forecasts revenues in excess of expenses for the General F und in Fiscal Year Ending (FYE) 2026 and expenses slightly over revenues in FYE 2027. Minor changes in these figures are expected as refinements are made to the final budget.
Alternative Action
The City Council (Council) could provide alternative direction on how to balance the budget.
Background/Analysis
On May 6, 2025, the Council received a presentation regarding the proposed draft General Fund (GF) and Internal Service Fund (ISF) budgets. The GF budget presented was summarized in the following table:
Table from 5/6/25 presentation
MEETING DATE: May 20, 2025
ITEM NO. 3.1
FROM:
***APPROVED BY***
[email protected]
[email protected]
SUBJECT: 3.1--Consider preliminary draft General Fund and Internal Service Fund budgets for Fiscal Years ending 2026-27.
Barry Tippin, City Manager
Packet Pg. 4
Report to Redding City Council May 19, 2025
Re: 3.1---Consider Approving the Preliminary Draft GF and ISF Budgets for 25-27 Page 2
As shown, th is proposed budget resulted in revenues exceeding expenditures by approximately $2 million in the first year and $200,000 in the second year of the budget. After considerable discussion, the Council directe d staff to reduce revenue projections for sales tax by one -half of one percent in each of the FYE 2026 and 2027. The resulting budget is summarized in the following table:
The change in revenue assumptions results in a surplus in year one of the budget of $1.9 million and a surplus of $61,000 in year two. In order to achieve these results some General Fund capital expenses were reduced and it is assumed that four officer positions will be eliminated through attrition due to the elimination of American Rescue Plan Act funding in December 2026.
The Council also requested that the ten -year plan be presented in order for the Council to consider the future years projected reserve amounts should the budget as presented ultimately be approved. The ten-year plan is attached and the projected reserves for the first six years is shown below. It should be noted that the reserve amounts are based on the projected reserve cash available at the end of the current year and deviations from that are likely based on exp enditures in the next month, the new financial system projection process and final revenues . It should also be noted that the budget only covers years 2025-26 and 2026-27 and the future years in the ten - year plan will change with any modifications to revenues and expenditures in the budgeted years.
As can be seen the reserves are projected to be below ten percent in the second through sixth year of the ten -year plan and then it returns to ten percent or higher. In the out years, staff has forced the number to ten percent through assumed cost increases.
While the ten -year plan is a good tool to forecast future fiscal conditions, it should not be construed to represent future budgets as those will be developed biennially considering all of the changes that occur over the two-year budget period. While the goal is always to have reserves projected to be more than ten percent in the future years , the reality is there are time when this may not be accomplished due to various financial conditions. The Council is advised to consider carefully the service levels provided in the budget years while determining any actions to correct future years where the reserve is less than ten percent. In other words, the Council should consider whether or not a reduction in current service levels, or an increase in risk liability, is a prudent decision to alter a future condition based on speculative information.
Packet Pg. 5
Report to Redding City Council May 19, 2025
Re: 3.1---Consider Approving the Preliminary Draft GF and ISF Budgets for 25-27 Page 3
As shown, the reduction in the revenue in the first two years has created a need for some additional expense reduction to balance. It is likely that additional expenses will be adjusted as the final budget takes shape. However, s hould the Council wish to make modifications to the proposed draft budget there are a few things to keep in mind:
• The percent reserves is different than cash as it will fluctuate based on expense and could be a higher or lower cash number dependent on various factors such as grants and other items included in expense.
• Operations/Maintenance and Capital Budgets have been reduced to margina lly acceptable limits already. More reductions could bring significant risk and/or unanticipated facility failures.
• The ten -year plan assumes a reduction of an additional four police officers in 2027 due to grant reductions. Obviously , other changes (mor e grants or higher/lower revenues), will impact this future decision and should be dealt with in future budget discussions. • City of Redding (City) staff contacted labor units that are in current contracts and have impact on the General Fund. Staff inquired whether or not they were interested in negotiating concessions to assist with the budget difficulties. The respectful response from all units was consistent that they were not interested at this time.
• There is an assumed increase in certain revenues for s ervices provided by the City. These increases will only be realized should the Council approve the increased fees which will be presented to the Council in June at a public hearing.
• In addition to the much discussed eight Police Officer and 12 Firefighter positions, seven more positions have been eliminated as well as $100,000 in temporary help for parks maintenance and $100,000 in funding for cadets in the Police Department; • Reductions in the Fire Department would be restricted to Administration and Preven tion Divisions which would limit and reduce inspections, arson investigations, development plan check review, training, further reduction in administrative duties, and other functions; • Further reductions in the Police Department would be to non -sworn posit ions and would impact officer efficiency and productivity;
• Should additional officer positions be returned to the budget the cost of each officer is approximately $180,500 per year when including the salary, benefits and equipment; • Other General Fund employees have lessor costs and they charge to other departments. As an example, the position that has been eliminated from Communications & Marketing costs, in total, $110,000 but the cost to the General Fund is $ 46,200 as only 42 percent of the cost is attributable to the General Fund. Therefore, you would need a reduction of three and one -half of these positions to retain one police officer position; and • Similarly, for the positions in Parks Maintenance Division that charge directly to the General Fund, the all-in cost is estimated at $90,000 requiring two of these positions to be reduced to retain one officer. And for context, this group performs l andscape maintenance at all City - owned buildings and facilities, maintenance of approximately 480 acres of comm unity and neighborhood parks, 38 miles of trails, pool and equipment maintenance at the Redding Aquatic Center, Fantasy Fountain and seven commercial fountains, 24,000 street trees and 65,000 open space and park trees, 38 playgrounds, 800 acres of natural open space, 18 special purpose sites, and landscape design support to the Planning and Engineering Divisions, landscape maintenance support to Redding Electric Utility, Housing, Public Works, and more.
Packet Pg. 6
Report to Redding City Council May 19, 2025
Re: 3.1---Consider Approving the Preliminary Draft GF and ISF Budgets for 25-27 Page 4
In conclusion, the preliminary General Fund Biennial Budget has been difficult to develop, not only because of the added expenses in 2022 and 2023 but because of the sluggish economy and the uncertain future resulting in conservative and uncertain revenue projections. However, staff absolutely has the ability to navigate the future and monitor and adjust the budget , as needed, with Council approval . The massive reductions during the Great Recession and the pension crisis of 2017 were strategically navigated and managed by staff . Those periods of time exemplify, firsthand, that City staff have the ability to adjust budgets when needed and the fortitude to do it, rapidly if necessary.
It is recommended that the City Council approve the preliminary draft General Fund and Internal Service budgets as recommended.
Environmental Review
This item is not a project as defined under the California Environmental Quality Act, and no further action is required.
Council Priority/City Manager Goals
• Budget and Financial Management – “Achieve balanced and stabl e 10-year Financial Plans for all funds.”
Attachments
^Budget Workshop 050625 Handouts
^Ten Year Plan 25-26 & 26-27 5.20.25 Draft
Packet Pg. 7
Packet Pg. 8
Attachment: ^Budget Workshop 050625 Handouts (3.1---Consider Approving the Preliminary Draft GF and ISF Budgets for 25-27) Packet Pg. 9
Attachment: ^Budget Workshop 050625 Handouts (3.1---Consider Approving the Preliminary Draft GF and ISF Budgets for 25-27) Packet Pg. 10
Attachment: ^Budget Workshop 050625 Handouts (3.1---Consider Approving the Preliminary Draft GF and ISF Budgets for 25-27) Packet Pg. 11
Attachment: ^Budget Workshop 050625 Handouts (3.1---Consider Approving the Preliminary Draft GF and ISF Budgets for 25-27) Packet Pg. 12
Attachment: ^Budget Workshop 050625 Handouts (3.1---Consider Approving the Preliminary Draft GF and ISF Budgets for 25-27) Packet Pg. 13
Attachment: ^Budget Workshop 050625 Handouts (3.1---Consider Approving the Preliminary Draft GF and ISF Budgets for 25-27) Packet Pg. 14
Attachment: ^Budget Workshop 050625 Handouts (3.1---Consider Approving the Preliminary Draft GF and ISF Budgets for 25-27) Packet Pg. 15
Attachment: ^Budget Workshop 050625 Handouts (3.1---Consider Approving the Preliminary Draft GF and ISF Budgets for 25-27) Packet Pg. 16
Attachment: ^Budget Workshop 050625 Handouts (3.1---Consider Approving the Preliminary Draft GF and ISF Budgets for 25-27) Packet Pg. 17
Attachment: ^Budget Workshop 050625 Handouts (3.1---Consider Approving the Preliminary Draft GF and ISF Budgets for 25-27) Adopted Adopted
2025-26 2026-27 2027-28 2028-29 2029-30 2030-31
Beginning Cash Balance 9,000 10,869 10,929 10,565 10,552 10,624 Revenues 101,505 103,435 105,703 108,890 112,180 115,574 Net Transfers 7,992 8,044 8,286 8,534 8,790 9,054 Total Revenues 109,497 111,479 113,988 117,424 120,970 124,628 Personnel Costs (76,482) (80,286) (81,908) (84,025) (86,521) (88,747) Operating Costs (25,175) (25,753) (26,526) (27,335) (28,156) (29,014) Capital Outlay (5,959) (6,104) (6,287) (6,476) (6,670) (6,870) Debt Service (1,965) (1,318) (1,314) (1,313) (1,310) (1,309) Savings 1,953 2,042 1,682 1,713 1,759 1,808 Net Expenditures (107,628) (111,418) (114,353) (117,437) (120,898) (124,132) Ending Cash Balance 10,869 10,929 10,565 10,552 10,624 11,120 Projections toward Council Objectives
Ending Cash as Percentage of
Expenditures 10.1% 9.8% 9.2% 9.0% 8.8% 9.0%
Projected Personnel Percentage69.8% 70.8% 70.6% 70.5% 70.5% 70.5% Fiscal Year
City of Redding
General Fund Ten Year Plan (in thousands)
Fiscal Year Ending 2026 & 2027
Packet Pg. 18
Attachment: ^Ten Year Plan 25-26 & 26-27 5.20.25 Draft (3.1---Consider Approving the Preliminary Draft GF and ISF Budgets for 25-27) 2031-32 2032-33 2033-34 2034-35 2035-36
Projected Cash Balance 11,120 12,660 13,218 13,563 14,008 Projected Revenues 119,079 122,705 126,434 130,279 134,245 Projected Net Transfers 9,326 9,605 9,894 10,190 10,496 Total Projected Revenues 128,405 132,310 136,328 140,469 144,741 Projected Personnel Costs (90,512) (92,218) (93,472) (94,974) (96,511) Projected Operating Costs (29,824) (32,886) (35,924) (38,491) (41,087) Projected Operating Costs (7,076) (7,289) (7,507) (7,732) (7,964) Projected Debt Service (1,311) (1,315) (1,132) (966) (963) Projected Savings 1,858 1,955 2,052 2,140 2,230 Net Projected Expenditures (126,865) (131,752) (135,983) (140,023) (144,295) Projected Ending Cash 12,660 13,218 13,563 14,008 14,455 Projections toward Council Objectives
Ending Cash as Percentage of
Expenditures 10.0% 10.0% 10.0% 10.0% 10.0%
Projected Personnel Percentage70.3% 69.0% 67.7% 66.8% 65.9% Fiscal Year
City of Redding
General Fund Ten Year Plan (in thousands)
Fiscal Year Ending 2026 & 2027
Packet Pg. 19
Attachment: ^Ten Year Plan 25-26 & 26-27 5.20.25 Draft (3.1---Consider Approving the Preliminary Draft GF and ISF Budgets for 25-27)
CITY OF REDDING
REPORT TO THE CITY COUNCIL
Recommendation
Accept presentation regarding the current budget development of the City of Redding’s Biennial Budget for Fiscal Years 2025-26 (FY26) and 2026 -27 (FY27) f or the Enterprise Fund Departments (Redding Electric, Public Works & Airports) ; and provide direction to staff as needed.
Attachments
^REU Off Agenda Memo Biennial Budget Final 05.15.2025
2025-27 Budget Workshop - Electric Department v5
MEETING DATE: May 20, 2025
ITEM NO. 3.2
FROM:
***APPROVED BY***
[email protected]
[email protected]
SUBJECT: 3.2--Consider presentations regarding the current budget development of the City of Redding's Biennial Budget for Fiscal Years 2025-26 and 2026-27 for the Enterprise Funds.
Barry Tippin, City Manager
Packet Pg. 20
OFF-AGENDA MEMO
1 To Honorable Mayor and City Council
From
Through
Date
Subject
Nick Zettel, Electric Utility Director
Barry Tippin, City Manager
05/15/2025
FY2026-2027 Biennial Budget
SUMMARY
The Redding Electric Utility ’s (REU) biennial budget for fiscal years 2025-26 (FY26) and 2026-27 (FY27) has been developed to align resources with the City Council’s strategic priorities and long - term financial goals. The proposed budget reflects extensive divisional input, financial forecasting, interdepartmental engagement, and guidance from the Council p rovided during the budget development process. This budget is based on current information and assumptions and may be adjusted as financial and operational data are further refined.
Total revenue is projected to increase by $1 3.6 million (9.0%) for FY26, followed by an increase of $10.2 million (6.2%) for FY27. This growth is largely driven by the continued electrification of key industries, increases in customer volume, and approved rate adjustments.
The table below categorizes the expenditure budget based on primary functions: Electric Generation and Distribution, Customer Service, and Field Services.
BACKGROUND
Every effort is made to manage and contain costs despite external challenges, including rising power supply costs due to regulatory mandates and market conditions, inflation, and increased demand. In addition to addressing the repair and replacement of aging, critical utility infrastructure , and to ensure the continued financial stability of the utility , as well as to protect public he alth and safety, the following rate adjustments are incorporated into the Utility’s five-year plan:
Packet Pg. 21
Attachment: ^REU Off Agenda Memo Biennial Budget Final 05.15.2025 (3.2--City of Redding Budget Workshop No. 3)
OFF-AGENDA MEMO
2 Rate Adjustments
FY2022-23
Actual
FY2023-24
Actual
FY2024-25
Actual
FY2025-26
Financial
Plan
FY2026-27
Financial
Plan
2025 Financial Plan 2.00% 4.00% 4.00% 5.00% 5.00%
2023 Financial Plan 2.00% 4.00% 4.00% 4.00% 4.00%
The following table presents the Department’s budget allocations, categorized by principal expenditure classifications:
ANALYSIS
The following paragraphs provide an overview of key budget components, including personnel, operations and maintenance, debt service, capital outlays funded by revenue and bonds, major plant maintenance, and rolling stock replacement.
Significant Issues
Leadership remains focused on proactively addressing the following complex and potentially costly challenges outlined in the 2021-2026 Strategic Plan: wildfire risk and safety compliance; grid reliability and resource adequacy; cybersecurity and grid modernization; state clean energy mandates; rising energy costs and market volatility; electrification demands, equity and affordability; and supply chain disruptions, including tariffs on materials and equipment. Tariffs on imported equipment, such as transformers, steel, and components, pose a financial risk to utilities by Packet Pg. 22
Attachment: ^REU Off Agenda Memo Biennial Budget Final 05.15.2025 (3.2--City of Redding Budget Workshop No. 3)
OFF-AGENDA MEMO
3 increasing project costs, delaying infrastructure upgrades, and complicating efforts to meet clean energy goals and maintain stable rates.
Personnel
The proposed budget maintains the current staffing level of 202 full-time equivalent (FTE) positions and does not include any new position requests. Leadership remains committed to identifying opportunities to optimize staffing and achieve cost savings within the existing budget . Electric personnel costs for FY26 have increased by only 3.8% when adjusted in line with the assumptions outlined in the 2023 financial plan. While the FY26 budget reflects an 18.1% increase over the FY25 adopted budget, followed by a modest 1.9% increase in FY27, these variances are primarily driven by key personn el-related changes that were not anticipated during the development of the FY25 budget in 2023 . I t did not capture Council -approved changes in negotiated Memoranda of Understanding (MOUs) and the implementation of a more competitive salary structure to support employee retention and market alignment. The largest portion of the unfunded liability with Public Agency Retirement Services (PARS) has been fully paid off in FY24. This means that the previously required payments to cover that liability are no longer needed, resulting in a significant reduction in our annual costs going forward.
Operations and Maintenance (O&M)
Operation and Maintenance (O&M) expenses are categorized into two groups: (1) Specific O&M expenses, which include operating materials a nd the cost of power, and (2) Interdepartmental Charges. Interdepartmental Charges consist of fixed charges from other City departments, such as Electric’s portion of the General Fund Cost Allocation, in-lieu fees, and rent for the Corporation Yard.
O&M expenses are requested to increase by $7.6 million (9.1%) for FY26, followed by a small increase of $1. 6 million (1.7%) for FY2 7, primarily due to increased power supply costs and wildfire/vegetation management.
Power supply costs are a primary driver of operating materials expenses. In the upcoming biennial budget forecast, rising fuel expenditures are the key factor contributing to the projected increase in overall power supply costs of $3.2 million (5.6%) for FY26, followed by a minimal increase of 1.0% in FY27. Approximately 38% of the increase in power supply costs is attributed to a rise in load demand. Additionally, the cost increase is influenced by a reduced reliance on spot market purchases, as the narrowing gap between gas and energy market prices has made power plant operations more cost-effective. Importantly, the rise in load is accompanied by a corresponding increase in revenue, which is expected to offset the additional costs associated with meeting the higher demand.
In the past, t he Electric Department experienced a period of relatively stable resource portfolio, largely due to sustained and strategic investment in long -term resource planning. However, recent developments, such as changes in cust omer demand, evolving regulatory requirements and compliance, and emerging energy and capacity deficit s, now pose significant challenges to REU’s long-term resource planning strategies, regulatory compliance, and customer rates. These pressures Packet Pg. 23
Attachment: ^REU Off Agenda Memo Biennial Budget Final 05.15.2025 (3.2--City of Redding Budget Workshop No. 3)
OFF-AGENDA MEMO
4 may drive cos ts upward, but every effort will be made to mitigate the impact on customers. In response to these challenges, t he Long -Term Resource Planning team (Resources) has evaluated available resource options and development recommendations to ensure the utility continues to meet customer demand reliably and cost-effectively.
O&M also includes REU’s continued wildfire mitigation efforts through a collaborative partnership with the City of Redding Fire and Parks Departments. To ensure a timely and capable emergen cy response, REU funds 15 full -time firefighter positions to maintain appropriate coverage levels and improve fire suppression readiness, particularly in high -risk areas served by REU’s electric system.
In addition, REU funds six full -time Parks field posi tions and one Parks Superintendent to support proactive vegetation management in REU’s electric utility corridors and around substations. Key activities include mastication, weed abatement, ladder fuel removal, and utility pole wrapping to reduce the risk of wildfire ignition and improve system resilience. For the upcoming biennial budget cycle, REU will fund an additional 1/3 of a crew proposing to expand this partnership by leveraging a Cal Fire grant, which will allow REU to receive additional crew time dedicated to utility -focused vegetation work. The proposed funding for positions in the Fire and Parks Departments is approximately $4.0 million per year.
On a more positive front, an increase in hydro deliveries has been budgeted on current policy and operational changes. Additionally, participation in the Energy Imbalance Market (Spring 2021) and the Extended Day -Ahead Market (EDAM) in Spring 2027 is expected to boost wholesale market activity. While this increased wholesale activity may increase supply costs, it is projected to result in a net positive outcome that will ultimately benefit our customers.
Overall, the $749,100 (6.0%) decrease in I nterdepartmental Charges during th e first year of the proposed budget is primarily driven by a reduction in Electric’s general and payment-in-lieu-of-tax to the General Fund. In the second year of the budget request, however, Interdepartmental Charges are projected to increase by $1,456,900 (12.4%), mainly due to higher Electric’s payment-in-lieu-of- tax and increased risk management costs to the General Fund.
Debt Service
The Electric Utility Debt Service budget requests $18.8 million in FY26 and $19.6 million in FY27. For FY23 to FY2 5, Debt Service has stayed flat at approximately $14.4 million . The increase in debt service cost of approximately $4.4 million in FY26 and an additional increase of $0.8 million in FY27 is due to the issuance of $67 .175 million Electric System Revenue Bonds, 2025 Series A in March 2025. This bond issuance was for financing the additions, betterments, extensions, and improvements to the electric utility system, including significant replacement and upgrades to overhead and underground infrastructure systems, and construction of a maintenance building at the Redding Power Plant.
Packet Pg. 24
Attachment: ^REU Off Agenda Memo Biennial Budget Final 05.15.2025 (3.2--City of Redding Budget Workshop No. 3)
OFF-AGENDA MEMO
5 Capital Outlay
The table below presents the components of the Capital Outlay requests for FY26 and FY27 compared with the actual FY24 expenditures and the adopted and amended FY25 Budget (excluding carryover amounts).
Most capital outlay requests fall under the categories of Projects, Programs, Equipment, and Furnishings. General System Improvements include annual, recurring expenditures necessary to install infrastructure that ensures reliable electric service for both new developments and existing customers. These improvements are carried out by Electric utility crews and contractors and typically involve the installation of key facilities such as transformers, poles, overhead and underground conductors, trenching, con duit, and vaults. This budget cycle emphasizes the continuation of overhead/underground infrastructure, substation security, power plant renovation projects, back -up power control center relocation and enhancements, and technology upgrades/replacements. As General System Improvements, Projects, and Programs are on “existing facilities of an investor and publicly owned utilities used to provide electric power, natural gas, sewerage, or other public utility services,” these types of projects are exempt from review under the California Environmental Quality Act (CEQA) guidelines Section 15301.
General System Improvements include the continuation of REU’s meter modernization effort of approximately $500,000 per year due to the age of the utility’s mechanical me ters. As the City continues to expand and modernize its overhead and underground electric infrastructure, the need for additional materials and resources has grown. This includes increased demand for conductors, transformers, conduit, poles, switchgear, and other essential components.
The capital items for projects and programs are as follows:
FY26
Overhead/Underground Infrastructure $ 5,372,000
Power Plant Renovation $ 2,140,000
Substation Security $ 1,190,000
GIS Utility Network Upgrade/Software Replacement $ 1,500,000
Description
FY2023-24
Actual
FY2024-25
Adopted
FY2024-25
Amended
FY2025-26
Proposed
Increase
(Decrease)
FY2026-27
Proposed
Increase
(Decrease)
General System
Improvements 6,961,574$ 6,585,000$ 6,585,000$ 8,750,000$ 2,165,000$ 8,750,000$ -$ Projects, Programs, &
Equipment and
Furnishings
5,957,420 17,160,800 15,315,000 10,202,000 (5,113,000) 11,390,000 1,188,000 Total Capital Outlay 12,918,994$ 23,745,800$ 21,900,000$ 18,952,000$ (2,948,000)$ 20,140,000$ 1,188,000$ Packet Pg. 25
Attachment: ^REU Off Agenda Memo Biennial Budget Final 05.15.2025 (3.2--City of Redding Budget Workshop No. 3)
OFF-AGENDA MEMO
6 FY27
Overhead / Underground Infrastructure $ 5,200,000
Power Plant Renovation $ 2,140,000
Substation Security $ 1,190,000
Back-Up Power Control Center Relocation/Enhancements $ 1,540,000 GIS Utility Network Upgrade/Software Replacement $ 500,000 PI Implementation $ 820,000
The Utility anticipates that the majority of these projects, including General System Improvements, will be funded through bond proceeds.
Major Maintenance and Rolling Stock Funds
In addition to the regular Capital Outlay Budget , a “Special Purpose Fund” has been established for the periodic major maintenance of the Electric Utility’s power-generating equipment (Major Maintenance Fund). The annual contributions to this fund are designed to support a balanced 10 - year maintenance plan. Maintenance expenses are budgeted in the fund and recognized in the year the work is completed. For FY25, the adopted funding amount for Major Maintenance was $1 .6 million. To maintain adequate funding levels, the budget for FY26 is $3.6 million and $1.8 million in FY27. The higher funding request in FY26 is primarily due to two large planned projects on Units 5 and 6.
The Major Maintenance Fund is allocated for significant, periodic expenditures arising from the wear and tear that generating units experience due to regular use. These expenses are not included in the typical Operations & Maintenance budget because of their occasional and unpredictable nature. From a risk management perspective, it is considered sound utility practice to follow manufacturers' maintenance guidelines to ensure the continued, reliable operation of the generating units. Failure to adhere to preventive and periodic maintenance schedules could lead to catastrophic generator failures, resulting in substantial repair costs and the need for replacement power purchases, potentially amounting to millions of dollars.
The Rolling Stock Replacement Fund operates similarly to the Power Plant Major Maintenance Fund.
The adopted FY2 5 funding amount for the Rolling Stock Replacement Fund was $1, 100,000.
However, the budget proposal calls for $1,200,000 annually for FY26 and FY27 to maintain adequate funding levels . Th is increase is primarily due to hi gher-than-expected inflation in the auto and electric equipment sectors.
The Rolling Stock Replacement Fund for Field Services requests increased from $5 5,000 in FY25 to $58,000 in FY2 6 and $5 8,000 in FY2 7. The increase is primarily due to higher-than-projected replacement costs of trucks.
The request for the Rolling Stock Replacement Fund is based on the Electric Utility’s established need for the scheduled, periodic replacement and upgrade of heavy rolling stock, such as line trucks, as Packet Pg. 26
Attachment: ^REU Off Agenda Memo Biennial Budget Final 05.15.2025 (3.2--City of Redding Budget Workshop No. 3)
OFF-AGENDA MEMO
7 well as vehicles like sedans, light trucks, and trailers. Fleet maintenance has confirmed the need for these replacements as appropriate. The Rolling Stock Replacement Fund should be maintained at the proposed levels to address the demonstrated and projected needs of the Utility.
Electric is not requesting any new vehicles during this budget cycle.
Five-Year Plan
The Electric Utility’s financial plan, outlined below for the current year and the subsequent five years, is a preliminary projection. It is sub ject to change based on evolving circumstances and further analysis.
A key assumption in the previous plan was a return to the Federal Reserve's long-run inflation target of 2%. While the Fed remains committed to this target, recent economic conditions have introduced uncertainties. As of early 2025, inflation has moderated but remains slightly above the 2% target, with core Personal Consumption Expenditures (PCE) inflation at 2.8%. Consequently, the current five-year plan uses a target inflation rate of 3%. Assuming 3% for future projections is a prudent approach, consideri ng ongoing inflationary pressures and uncertainties related to global supply chains, recent tariff implementations, and geopolitical factors. Other assumptions include bond - funding capital outlay, and excluding Power Supply, only expending approximately 90% of O&M and Personnel appropriations. The days of cash on hand are projected to be 148 days in FY26 and 161 days in FY27. While both projections exceed the required minimum level of 75 days, in FY26, it falls below the goal of 150 days. The debt service coverage ratio is expected to be 1.73 times in FY26 and
1.95 times in FY27. Although the FY26 projection is below the required minimum of 1.80 times, the Financial Policy recognizes a practical range of acceptable results , balancing cash flow needs with reserve levels. The Utility’s Affordability KPI remains well within the target range throughout the five years.
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Attachment: ^REU Off Agenda Memo Biennial Budget Final 05.15.2025 (3.2--City of Redding Budget Workshop No. 3)
OFF-AGENDA MEMO
8 CONCLUSION
REU’s biennial budget reflects the City’s continued commitment to fiscal responsibility, service reliability, and strategic investment in critical infrastructure. It balances current operational needs with long -term planning priorities while addressing external challenges such as rising costs, regulatory requirements, and system modernization. Leadership will remain focused on managing resources efficiently, optimizing service delivery, and ensuring the financial health of the Utility for the benefit of all customers.
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Attachment: ^REU Off Agenda Memo Biennial Budget Final 05.15.2025 (3.2--City of Redding Budget Workshop No. 3) Budget Workshop
B i e n n i a l B u d g e t | E l e c t r i c D e p a r t m e n t May 20, 2025
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Attachment: 2025-27 Budget Workshop - Electric Department v5 (3.2--City of Redding Budget 01 PERSONNEL
• Talent Management
• Retention and
Satisfaction
02 SAFETY
• Fire Risk Mitigation
• Employee and
Customer Protection
03 OPERATIONS
• Reliability Criteria
• Resource Planning
and Capacity
04 FINANCE
• Sufficient Liquidity
• Strong Financial
Stewardship
05 CUSTOMER
SATISFACTION
• Affordable Energy
• Customer Service
and Satisfaction
Budget Development
Focus on Key Performance Indicators
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Attachment: 2025-27 Budget Workshop - Electric Department v5 (3.2--City of Redding Budget GOAL 1: Complete
Critical Wildfire
Mitigation Projects
GOAL 2: Replace Aging
Distribution System
Infrastructure
GOAL 3: Initiate
Distribution
Modernization Program
Element
GOAL 4: Implement
Distribution Risk
Management Plan
GOAL 5: Complete
Energy Trading
Modernization and
Integrated Resource
Plans
GOAL 6: Minimize
Compliance Failures
and Penalties
GOAL 7: Align Revenue
Collection with Cost-of-
Service
GOAL 8: Enhance
Communication with
Customers and the
Community
GOAL 9: Enhance
Employee
Development,
Attraction and
Retention
Budget Development
Continue to Deliver on Strategic Plan
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Attachment: 2025-27 Budget Workshop - Electric Department v5 (3.2--City of Redding Budget 2025-2027 Biennial Budget
(Highlights)
Projected Retail
Sales Increase
driven by
Electrification
Power Supply
and Wildfire
Mitigation costs
increasing
No New Positions
Significant Capital
Investment
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Attachment: 2025-27 Budget Workshop - Electric Department v5 (3.2--City of Redding Budget Revenue Assumptions
UTILITY RATES
Revenue assumptions include annual
rate increases effective January 1st
LOAD GROWTH
Increase in electricity demand driven by electrification (e.g., EVs, heat pumps) and population growth, based on a 15-year average trend
LOAD REDUCTION
Decrease in electricity demand due to energy
efficiency measures, conservation efforts, and
customer-owned distributed generation
WHOLESALE SALES
Only includes contracted sales; additional
sales would reduce rate pressure
1 2
3 4
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Attachment: 2025-27 Budget Workshop - Electric Department v5 (3.2--City of Redding Budget Fiscal Year 2026 Revenue Blend
(In Millions)
Retail ($146.7)
$74.6
$19.6
$52.4
Residential Small Commercial
Large Commercial
Wholesale ($13.4)
$4.8
$8.7
Power Natural Gas
Retail Sales account for over 80% of Electric’s Revenue over the 5-year plan.
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Attachment: 2025-27 Budget Workshop - Electric Department v5 (3.2--City of Redding Budget Retail Load Forecast
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Attachment: 2025-27 Budget Workshop - Electric Department v5 (3.2--City of Redding Budget Expenditures by Categories
(In Millions)
Fiscal Year 2026 ($192.8)
$51.7
$30.2
$61.5
$11.7
$19.0
$18.7
Fiscal Year 2027 ($198.7)
$52.6
$31.2
$62.1
$13.1
$20.1
$19.6
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Attachment: 2025-27 Budget Workshop - Electric Department v5 (3.2--City of Redding Budget Expenditures by Function
(In Millions)
Fiscal Year 2026 ($192.8)
$83.2
$27.4
$38.5
$18.7
$19.0 $6.0
Fiscal Year 2027 ($198.7)
$84.3
$28.0
$39.7
$19.6
$20.1
$6.9
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Attachment: 2025-27 Budget Workshop - Electric Department v5 (3.2--City of Redding Budget Personnel
Expenditures
• Proposed FY27 reflects only a 4.1%
increase versus FY24 Actuals; $8.9M or
20.3% increase from Adopted FY25 to
Proposed FY27
➢ No new positions are requested (205 FTEs)
➢ Captures changes to Council-approved MOUs
➢ Offset by declining retirement costs
➢ Adopted FY25 budget was developed in 2023
prior to significant changes in MOUs
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Attachment: 2025-27 Budget Workshop - Electric Department v5 (3.2--City of Redding Budget
1. About $3.8
million due to
increased power
supply costs from
higher energy &
natural gas prices
2. Wildfire
mitigation efforts
increasing by
approximately
$2.0 million
3. Cost increases
from safety
measures and
operational
changes
4. Operational
efficiencies limit
Controllable O&M
growth. $400k
increase in
insurance.
5. Customer
Programs &
Services increases
due to regulatory
requirements and
interdepartmental
allocations
O&M
Expenditures
Increasing by
$9.2 million from
FY25 to FY27
(10.9%)
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Attachment: 2025-27 Budget Workshop - Electric Department v5 (3.2--City of Redding Budget Capital Outlay
(In Millions)
$14.1 $2.7
$3.6
$2.1
$1.3
$14.0
$4.1
$1.8
$2.1
$1.3
Fiscal Year
2027 ($23.2)
Fiscal Year
2026 ($23.8)
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Attachment: 2025-27 Budget Workshop - Electric Department v5 (3.2--City of Redding Budget Debt
01 Existing Debt
Incorporates recent
bond issuance.
Direct debt had
remained flat at
$14.4 million
through Fiscal Year
2024; Fiscal Year
2025 will be $14.8
million
Direct debt is
expected to vary
from $18.6 to $19.7
million through
Fiscal Year 2030
$70 million Electric
System Revenue
Bonds in March
2025 support
infrastructure
upgrades (included
in five-year plan)
SOUND LIQUIDITY:
$25MM line of
credit is available to
ensure adequate
liquidity while
reserves are drawn
down for capital
outlay
Annual Debt Service02
Recent Bond Issuance03
Credit04
Debt Strategy
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Attachment: 2025-27 Budget Workshop - Electric Department v5 (3.2--City of Redding Budget Annual Debt Service
$0
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
$16,000,000
$18,000,000
$20,000,000
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2015 Revenue Bonds 2017 Revenue Bonds 2018 Revenue Bonds 2025 Revenue Bonds TANC Packet Pg. 42
Attachment: 2025-27 Budget Workshop - Electric Department v5 (3.2--City of Redding Budget Financial Plan
Strategic Plan Budget Five-Year Plan
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Attachment: 2025-27 Budget Workshop - Electric Department v5 (3.2--City of Redding Budget
FIVE-YEAR FINANCIAL PLAN
Fiscal Years Ending June 30
2025 2026 2027 2028 2029 2030
Rate Adjustments 4% 5% 5% 5% 5% 5%
Increase (Decrease) in Funds
($ Mil) 18.8 (0.2) 5.5 (1.8) (4.2) 2.5
Reserves
(Days of Cash on Hand) 155 148 161 145 127 128
Affordability KPI
(Target <2.5% of Median Income) 1.84% 1.84% 1.91% 1.99% 2.07% 2.16% City of Redding’s Electric Department
2025 – 2030 Financial Plan
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Attachment: 2025-27 Budget Workshop - Electric Department v5 (3.2--City of Redding Budget Five-Year Plan | Key Takeaways
Significant capital investment is
anticipated for the aging distribution
system
Assumes likely Council approval of rate
increases and ongoing affordability KPI
compliance
Meets the City’s reserve metric per
Financial Management Policy
Unplanned events may influence plan →
Potential tailwinds not included in the
plan:
➢ Significant wholesale sales:
Unanticipated increases in wholesale energy
sales may impact resource availability and
revenue projections
➢ Increased Power Supply Costs:
The Big Horn Contract could affect overall
power supply expenses and rate forecasts
➢ Federal Tax Policy Uncertainty:
Changes or penalties could alter the economics
of new energy projects and infrastructure
investments
➢ Shifting State Climate Goals:
Evolving mandates may accelerate
electrification timelines or require faster
decarbonization than anticipated
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Attachment: 2025-27 Budget Workshop - Electric Department v5 (3.2--City of Redding Budget Packet Pg. 46
Attachment: 2025-27 Budget Workshop - Electric Department v5 (3.2--City of Redding Budget Thank You
Questions?
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Attachment: 2025-27 Budget Workshop - Electric Department v5 (3.2--City of Redding Budget