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1 RiversideCA.gov1
RiversideCA.gov
FISCAL AND CASH RESERVE POLICYCity CouncilDecember 2, 2025Riverside Public Utilities RiversideCA.gov2
PURPOSE OF THE RESERVE POLICIESProperly designed reserve policies:1. Send a positive signal to ratepayers, investors, and regulatory and credit rating agencies that the Board and City Council are committed to maintaining the long-term fiscal strength of RPU.2. Are strong and transparent financial policies, including maintaining prudent reserves for emergencies, rate stability, working capital, capital improvements, and debt service, are consistent with best practices in the utility industry.1 2 11/20/2025
2 RiversideCA.gov3
PURPOSE OF THE RESERVE POLICIESThe policies are essential to the long-term financial health of RPU to:1. Maintain the short-term and long-term financial health of RPU.2. Maintain stable rates for customers and help ensure manageable rate increases.3. Fund unanticipated cost contingencies.4. Ensure funds exist for system improvements.5. Ensure cash exists for the timely payment of bills.6. Act as a significant positive credit factor in bond ratings.
RiversideCA.gov4
POLICY HISTORY•Approved policies documented and adopted financial goals for RPU utilities and established policies for long-term, as well as day-to-day operations of both utilities.•The policies cover areas including financial reporting, cash reserves, operating and capital budgeting, debt management, investments, risk management, financial planning, and others.20162017 •Approved the Dark Fiber Leasing Program, established uniform lease rates for the use of the dark fiber infrastructure, physical and cyber security policies, a master fiber lease license agreement, and a new cost center within the Electric Fund for related expenses.• Approved the Dark Fiber designated reserve fund for leased fiber activities. 3 4
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POLICY HISTORY•City Council approved rates that include the use of a Line of Credit (LOC) as part of the 5-Year Rate proposal to keep utility rates as low as possible. Approved adding use of LOC into RPU’s Cash Reserve Policy.•Utilizing a LOC reduced the electric and water rates by approximately 1% and 3%, respectively.•Satisfied SB 1029 by incorporating City’s Debt Management Policy. 20182020 • The Board received an update on RPU’s Cash Reserve Policy, funds, and use of funds.• At this meeting, the Board requested a comparative analysis of RPU’s cash reserve policies and the credit ratings compared to other similarly sized utility organizations in the region, as well as an analysis of potential impacts of the Covid-19 pandemic to RPU’s cash reserve.
RiversideCA.gov6
POLICY HISTORY•Increased annual funds to the SONGS Additional Decommissioning Liability Reserve; •Removed calculation of operating and maintenance expenses from the Undesignated Reserves for Working Capital; •Revised calculation to include a three-year average for Undesignated Reserves for System Improvement Capital;•Removed capital improvement expenditures funded with restricted or designated reserves from Undesignated Reserves for System Improvement Capital; and•Updated definitions to simplify reserve terminology.20215 6 11/20/2025
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POLICY HISTORY2022
• January 10, 2022: Introduction on how RPU uses bond financing and the role of the fiscal policy.•Ad Hoc Committee (AHC) created to review and evaluate RPU and the City fiscal policies related to the use of bond financing to fund internal staff labor used to design, construct, and administer capital projects, and report back to the Board.2023 •Board received a report from the AHC regarding their review, evaluation, and recommended changes to fiscal policies related to the use of bond financing to funding internal staff labor used to design, construct, and administer capital projects. After discussion with the AHC, the Board did not change the fiscal policies.• On June 26, 2023, the Board received an update on RPU’s Cash Reserve Policy, as it related to the Water and Electric Five-Year Rate plans.
RiversideCA.gov8
POLICY HISTORY2024
• Board and City Council received an update on the Cash Reserve Policy and approved reducing the annual funding to the San Onofre Nuclear Generating Station Additional Decommissioning Liability Reserve from $2.0M to $1.0M, beginning in fiscal year 2024/25.2025 • Board and City Council approved establishing a Water Treatment Designated Reserveto set aside proceeds from PFAS settlements to fund capital costs for water treatment plants.7 8 11/20/2025
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RESERVE CATEGORIES1. Restricted Reserves are established and utilized for narrowly defined purposes as specified by legal restrictions, bond covenants, and other regulations or ordinances.2. Designated Reserves meet specific purposes set aside by the Board and City Council. a. Ensure stable service delivery, meet future needs, and protect against financial instability. b. May be held for specific capital and operating purposes.3. Undesignated Reserves are the remaining unrestricted reserves that may be used for any lawful purpose and have not been designated for specific capital and operating purposes. a. Maintaining a proper level of undesignated reserves is critical to ensure the utility can meet its fluctuating cashflow demands and mitigate financial volatility.
RiversideCA.gov10
RESTRICTED RESERVESWaterElectricRestricted ReserveXXUnspent Bond Proceeds (to fund capital projects)XXBond Redemption Reserve (for debt service)XXPrefunding Section115 Pension Trust – Unfunded Accrued Liability (Proposed)XSan Onofre Nuclear Generating Station (SONGS) Decommissioning FundXRegulatory Requirements Reserve (Cap and Trade auction and LCFS Credit sale proceeds)XElectric Public Benefit FundXWater Conservation Fund 9 10
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DESIGNATED RESERVESWaterElectricDesignated ReserveXXCustomer DepositsXXCapital Repair/ReplacementXAdditional Decommissioning LiabilityXElectric ReliabilityXMission Square ImprovementXDark FiberXRecycled WaterXPropertyXWater Treatment (Proposed) RiversideCA.gov12
UNDESIGNATED RESERVESWaterElectricUndesignated ReserveXXOperating (Working Capital)XXRate StabilizationXXEmergency CapitalXXSystem Improvements CapitalXXDebt Service11 12 11/20/2025
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RESERVE ACCOUNT BALANCES – ELECTRICUnaudited June 30, 2025Audited June 30, 2024Unrestricted cash and cash equivalents:$152,507,000$135,963,000Undesignated reserve6,042,0005,014,000Customer deposits reserve2,406,0002,336,000Capital repair/replacement reserve95,418,00095,689,000Electric reliability reserve3,408,0002,757,000Mission Square improvement reserve12,226,00010,885,000Additional decommissioning liability reserve4,767,0005,556,000Dark fiber reserve$276,774,000$258,200,000Total unrestricted cash and cash equivalents:
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RESERVE ACCOUNT BALANCES – ELECTRICUnaudited June 30, 2025Audited June 30, 2024Legally restricted cash and cash equivalents:$21,916,000$23,981,000Reserved for debt service35,859,00029,846,000Reserved for regulatory requirements5,903,0004,414,000Reserved for low carbon fuel standard34,710,00032,033,000Reserved for Public Benefit Programs$98,388,000$90,274,000Total legally restricted cash and cash equivalents13 14 11/20/2025
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RESERVE ACCOUNT BALANCES – ELECTRICUnaudited June 30, 2025Audited June 30, 2024Legally restricted cash and investments at fiscal agent:$41,536,000$45,009,000Reserved for decommissioning liability2,552,00011,000Reserved for other cash at fiscal agent3,853,0003,510,000Reserved for Prefunding Section 115 Pension Trust –unfunded accrued liability97,958,000127,743,000Reserved for bond construction$145,899,000$176,273,000Total legally restricted cash and investments at fiscal agent$521,061,000$524,747,000Total Electric Utility Reserve Accounts:•Unrestricted cash and cash equivalents•Legally restricted cash and cash equivalents•Legally restricted cash and investments at fiscal agent RiversideCA.gov16
RESERVE ACCOUNT BALANCES – WATERUnaudited June 30, 2025Audited June 30, 2024Unrestricted cash and cash equivalents:$49,890,000$43,241,000Undesignated reserve916,000778,000Recycled water reserve6,325,0006,135,000Property reserve959,000858,000Customer deposits reserve2,511,0002,437,000Capital repair/replacement reserve$60,601,000$53,449,000Total unrestricted cash and cash equivalentsUnaudited June 30, 2025Audited June 30, 2024Legally restricted cash and cash equivalents:$10,446,000$9,246,000Reserved for debt service3,124,0003,747,000Water Conservation Programs$13,570,000$12,993,000Total legally restricted cash and cash equivalents15 16 11/20/2025
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RESERVE ACCOUNT BALANCES - WATERUnaudited June 30, 2025Audited June 30, 2024Legally restricted cash and investments at fiscal agent:$1,461,000$683,000Reserved for other cash at fiscal agent1,270,0001,157,000Reserved for Prefunding Section 115 Pension Trust –unfunded accrued liability25,482,00034,555,000Reserved for bond construction$28,213,000$36,395,000Total legally restricted cash and investments at fiscal agent$102,384,000$102,837,000Total Water Utility Reserve Accounts:•Unrestricted cash and cash equivalents•Legally restricted cash and cash equivalents•Legally restricted cash and investments at fiscal agent RiversideCA.gov18
MINIMUM RESERVE TARGET CALCULATIONSElectricFormulaTargetSourceAnnual Operating Expense365 days×6060 daysOperating (Working Capital)Operating Revenues×10%10%Rate StabilizationDepreciable Assets×1%1%Emergency CapitalPrev FY actual CIP exp + Current FY CIP+Next FY CIP3 (years for average CIP exp)3−year average CIP exp12 months×66 monthsSystem Improvements CapitalAnnual payment for principal+6 months of interest1 paymentDebt ServiceSum of aboveTotal 17 18
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MINIMUM RESERVE TARGET CALCULATIONSWaterFormulaTargetSourceAnnual Operating Expense365 days×6060 daysOperating (Working Capital)Operating Revenues×7%7%Rate StabilizationDepreciable Assets×1%1%Emergency CapitalPrev FY actual CIP exp + Current FY CIP+Next FY CIP3 (years for average CIP exp)3−year average CIP exp12 months×66 monthsSystem Improvements CapitalAnnual payment for principal+6 months of interest1 paymentDebt ServiceSum of aboveTotal RiversideCA.gov20
ELECTRIC UNDESIGNATED TARGET MINIMUM$53.7$54.0$56.6$57.7$55.2$56.9$41.6 $46.1 $47.0 $48.7 $48.1 $49.0 $12.2$13.2$14.3$15.2$16.3$17.5$24.2$30.3$32.2$30.9$32.4$33.5$35.3$31.5$32.1$37.4$39.9$44.5$167.0$175.2$182.2$190.0$191.8$201.3 $- $50 $100 $150 $200 $250FY 23-24ActualFY 24-25ProjectedFY 25-26ProjectedFY 26-27ProjectedFY 27-28ProjectedFY 28-29Projected (in millions)Debt ServiceSystem ImprovementsCapitalEmergency CapitalRate StabilizationOperating19 20 11/20/2025
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$136.0$152.5$156.3$171.8$206.8$234.2$35.0$35.0$35.0$35.0$35.0$35.0$0$50$100$150$200$250$300FY 23-24ActualFY 24-25UnauditedFY 25-26ProjectedFY 26-27ProjectedFY 27-28ProjectedFY 28-29Projected (in millions)Undesignated Cash ReservesLine of CreditTarget MinimumELECTRIC UNDESIGNATED CASH RESERVES RiversideCA.gov22
WATER UNDESIGNATED TARGET MINIMUM$8.4$9.7 $9.8$10.5$10.9$11.2$5.6$6.8$8.5$7.9$8.0$8.0$7.6$7.6$8.1$8.6$9.1$9.6$15.7$17.7$19.3$19.5$19.1$19.5$13.6$13.6$15.4$19.0$19.3$20.9$50.9$55.4$61.1$65.6$66.4$69.2 $- $10 $20 $30 $40 $50 $60 $70 $80FY 23-24ActualFY 24-25ProjectedFY 25-26ProjectedFY 26-27ProjectedFY 27-28ProjectedFY 28-29Projected (in millions)Debt ServiceSystem ImprovementsCapitalEmergency CapitalRate StabilizationOperating21 22 11/20/2025
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$43.2$49.9$56.6$56.4$59.3$61.0$25.0$25.0$25.0$25.0$25.0$25.0$0$10$20$30$40$50$60$70$80$90$100FY 23-24ActualFY 24-25UnauditedFY 25-26ProjectedFY 26-27ProjectedFY 27-28ProjectedFY 28-29Projected (in millions)Undesignated Cash ReservesLine of CreditTarget MinimumWATER UNDESIGNATED CASH RESERVES RiversideCA.gov24
WITHDRAWAL AND REPLENISHMENT OF RESERVES 1. RPU treats the targeted reserves as practical minimums and allow reserves to increase or decrease as necessary within the minimum and maximum prescribed levels.2. To the extent that undesignated reserves are above the target and below the maximum, the Board and City Council have the flexibility to direct staff to:a. utilize those available funds to pay for capital projects (reducing the need for future debt),b. pay down unfunded liabilities such as pension obligations,c. defease outstanding debt, ord. fund other strategic objectives.3. No other action by RPU would be required if reserves are between the minimum and maximum level unless directed by the Board and City Council.4. Reserve levels below the minimum targeted reserves will leave RPU exposed to significant operational risks. Should RPU draw down reserves below the minimum targeted level, RPU will implement plans to return reserves to their minimum targeted levels within three years. Such plans will be provided within 12 months. 23 24
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REPORTING AND OVERSIGHT 1. Reserve levels are monitored throughout the fiscal year and reported in the monthly and quarterly financial reports.2. Reserve target (minimum) and maximum levels are analyzed annually, and an over/under-reserve determination is made in conjunction with year-end financial results.3. These results are reported to the Board and City Council as part of the year-end financial report presentation.4. Should designated or undesignated reserve levels need adjustment due to new risk factors due to changes in the industry, these will be brought to the Board and City Council as part of the year-end report.5. The Policy is to be reviewed annually and updated (at a minimum of every three years) if there are material changes in the risk exposures or new conditions that require changes in reserve levels.
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UPDATE TO CASH RESERVE POLICYRestricted Reserves:1. Update to clarify that the Regulatory Requirements Reserve includes LowCarbon Fuel Standard (LCFS) funds.•Regulatory Requirements Reserve (Cap and Trade auction proceedsand LowCarbon Fuel Standards-LCFS)2. Add the Prefunding Section 115 Pension Trustas a reserve to finance anyunfunded accrued pension liability related to the cost of pensionbenefits earned by employees during the year.•Prefunding Section 115 Pension Trust – Unfunded Accrued Liability25 26 11/20/2025
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UPDATE TO CASH RESERVE POLICYDesignated Reserves:1. Capital Repair/Replacement Reserve– Add clarification to the examples for which the reserve may be used.•Capital Repair/Replacement Reserve(electric and water funds) – Established toaccumulate amounts for repairs and replacement of facilities, vehicles, andtechnology outside of the Capital Improvement Program. Examples would be roofreplacement, vehicle replacementto meet zero emission State of CaliforniaRequirements, desktop technology replacement, etc. Funding for this reserve willbe accumulated over a three-year period based on a historical 10-year averagesof replacement costs.
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UPDATE TO CASH RESERVE POLICYDesignated Reserves:1. Add the Water Treatment Reserve (water fund only)to set aside funds forwater treatment operating and capital costs, including water treatmentplants, and that funding for the reserve will be from legal settlementsfrom responsible parties.•Water Treatment Reserve (water fund only) – Established to set aside funds for watertreatment operating and capital costs including water treatment plants. Fundingwill be from legal settlements from responsible parties.27 28 11/20/2025
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That the City Council approve the updated RiversidePublic Utilities Fiscal and Cash Reserve Policy to establishthe Section 115 Pension Trust – Unfunded AccruedLiability Reserve, include the approved Water TreatmentReserve (water fund only), and to clarify certain existingpolicy definitions.RECOMMENDATION29