San Luis Obispo City Council
June 17, 2025

Table of Contents i
City of San Luis Obispo – Water & Wastewater Rate Study Update Table of Contents
Introduction ........................................................................................................................ 1 Overview of the Rate Study Process .................................................................................... 1 Key Water & Wastewater Rate Study Results ...................................................................... 2 Summary of the Water Revenue Requirement Analysis....................................................... 3 Summary of the Water Cost of Service Analysis................................................................... 5 Summary of the Water Rate Design .................................................................................... 5 Summary of the Water Rate Study Update .......................................................................... 6 Summary of the Wastewater Revenue Requirement Analysis ............................................. 7 Summary of the Wastewater Cost of Service Analysis ......................................................... 9 Summary of the Wastewater Rate Design ......................................................................... 10 Summary of the Wastewater Rate Study Update .............................................................. 11

2.1 Introduction ............................................................................................................ 13

2.2 Water Revenue Requirement.................................................................................. 13

2.2.1 Determining the Water Revenue Requirement ............................................. 13

2.2.2 Projecting Rate and Miscellaneous Revenues ............................................... 13

2.2.3 Projecting Operation and Maintenance Expenses ......................................... 14

2.2.4 Projection of Debt Service ............................................................................ 14

2.2.5 Projecting Rate Funded Capital ..................................................................... 15

2.2.6 Summary of the Water Revenue Requirement ............................................. 16

2.2.7 Reserve Levels .............................................................................................. 18

2.2.8 Consultant’s Conclusion of the Revenue Requirement ................................. 18

2.3 Water Cost of Service Analysis Summary ................................................................ 18

2.4 Water Rate Design .................................................................................................. 19

2.4.1 Development of Cost-Based Water Rates ..................................................... 19

2.4.2 Overview of the Water Rate Structure .......................................................... 20

2.4.3 Present and Proposed Water Rates .............................................................. 20

2.5 Summary of the Water Rate Study Update ............................................................. 21

Table of Contents ii
City of San Luis Obispo – Water & Wastewater Rate Study Update

3.1 Introduction ............................................................................................................ 23

3.2 Wastewater Revenue Requirement ........................................................................ 23

3.2.1 Determining the Revenue Requirement ....................................................... 23

3.2.2 Projecting Rate and Other Miscellaneous Revenues ..................................... 23

3.2.3 Projecting Operation and Maintenance Expenses ......................................... 24

3.2.4 Projecting Capital Funding Needs ................................................................. 24

3.2.5 Projection of Debt Service ............................................................................ 26

3.2.6 Summary of the Wastewater Revenue Requirement .................................... 26

3.2.7 Reserve Levels .............................................................................................. 27

3.2.8 Consultant’s Conclusions .............................................................................. 28

3.3 Wastewater Cost of Service Analysis Summary ....................................................... 28

3.4 Wastewater Rate Design ......................................................................................... 28

3.4.1 Development of Cost-Based Wastewater Rates ............................................ 28

3.4.2 Overview of the Wastewater Rate Structure ................................................ 29

3.4.3 Present and Proposed Wastewater Rates ..................................................... 30

3.5 Summary of the Wastewater Rate Study Update .................................................... 31

Executive Summary 1
City of San Luis Obispo - Water & Wastewater Rate Study Update Executive Summary
Introduction
HDR Engineering, Inc. (HDR) was retained by the City of San Luis Obispo (City) to conduct a comprehensive water and wastewater rate study update (2025 Update). The objectives of the 2025 Update were to:

Develop a projection of water and wastewater revenues to support the City’s operating and capital costs
Proposed cost-based and proportional rates for a multi-year time period The City owns, operates, and maintains the water and wastewater systems which provide services to its customers. The costs associated with providing water and wastewater services to City’s customers has been developed based on the provided information and is included within the development of the proposed rates.

For the 2025 Update, the cost of service results from the 2023 Comprehensive Water and Wastewater Rate Study were utilized, specifically the proportional distribution of costs. The revenues and expense of the water and wastewater utilities were updated in order to match the updated customer characteristics and costs of the utilities. It is important to note that the results shown in this report are based on information available at “a point in time”. That is to say that, if the information available at a later date has changed, then the results of the analysis would likely also change or differ from those presented in this report.

Overview of the Rate Study Process
A comprehensive rate study uses three interrelated analyses to address the adequacy and equity of each utility’s rates. These three analyses are a revenue requirement analysis, a cost of service analysis, and a rate design analysis. These three analyses are illustrated below in Figure ES - 1.

Executive Summary 2
City of San Luis Obispo - Water & Wastewater Rate Study Update Figure ES – 1
Overview of the Comprehensive Water & Wastewater Rate Analyses The above basic framework was used in the development of this study for reviewing and evaluating the City’s water and wastewater rates. For the 2025 Update, the revenue requirement and rate design analyses were updated for each utility based on current operating and capital expenses and recent customer characteristics. As noted previously, for the 2025 Update, the cost of service results from the 2023 Rate Study were utilized to establish the proportionality of the City’s water and wastewater rates.

Key Water & Wastewater Rate Study Results
The water and wastewater study’s technical analyses were developed based on the operating and capital costs necessary to provide service to City’s customers. The analyses performed resulted in the following findings, conclusions, and recommendations. „ A revenue requirement analyses were developed for the water and wastewater utilities over from FY 2024-25 through FY 2034-35
„ The City’s adopted FY 2024-25 budget was used as the starting point of the analyses for both utilities
„ Operation and maintenance expenses are projected to increase at inflationary levels „ Proposed rates were developed, for each utility reflected the proportionality as developed in the 2023 Rate Study
9 The proposed water revenue adjustment is 5.5% in FY 2025-26 and FY 2026-27 9 The proposed wastewater revenue adjustment is 6.5% in FY 2025-26 and FY 2026-27 Revenue Requirement Analysis
Cost of Service Analysis
Rate Design Analysis
Compares the revenues to the expenses of
the utility to determine the overall rate
adjustment required
Distributes the revenue requirement to the
customer classes of service in a
proportional manner
Considers both the level and structure
of the rate design to collect the target
level of revenues

Executive Summary 3
City of San Luis Obispo - Water & Wastewater Rate Study Update Summary of the Water Revenue Requirement Analysis
A revenue requirement analysis is the first analytical step in the development of the water rate study. This analysis determines the adequacy of the level of current water rates for the City. From this analysis, a determination can be made as to the overall level of water revenue adjustments needed to provide adequate and prudent funding for both operating and capital needs.

For the 2025 Update, the revenue requirement was developed based on the adopted FY 2024- 25 budget and then projected from FY 2025-26 to FY 2034-35 using a “cash basis” approach. The cash basis approach includes an analysis of O&M expenses, transfers, debt service, rate funded capital, and to/from reserve funding. The primary financial inputs in the development of the revenue requirement analysis were the City’s Water Fund Analysis, historical billed customer and consumption data, and the current water system capital improvement plan.

The operating and maintenance expenses were developed for the projected time period, based on the adopted FY 2024-25 budgeted expenses and historical inflationary factors. The next step was to develop the water capital funding plan. For the 2025 Update, the City developed a capital improvement plan based on the needs of the water system. This plan identified the projects necessary to maintain the water system as well as projects necessary to meet new growth and expansion of the system. It is important to note that the City’s development impact fees will contribute towards the growth related portions of the applicable capital improvement projects.

Provided below in Table ES - 1 is a summary of the water capital funding plan over the planning period based on the capital plan at the time of the study development.

Table ES – 1
Summary of the Water Capital Funding Plan ($000s)
FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 Total Capital Projects $24,379 $7,911 $5,470 $12,970 $6,975 $17,598 Other Funding Sources
Reserves $19,580 $4,164 $1,920 $3,770 $0 $1,198
Grants 3,517 3,748 0 0 0 0
Long-Term Debt 0 0 0 5,000 0 9,250
Total Other Funding Sources $23,097 $7,911 $1,920 $8,770 $0 $10,448 Rate Funded Capital $1,282 $0 $3,550 $4,200 $6,975 $7,150 The financial plan developed for the City’s water utility has placed the rate funded capital level at $1.3 million in FY 2024-25 increasing to $7.2 million by FY 2029-30. This level of funding was calculated based on the long-term need to prudently fund replacement and repair of the existing water system. As can be seen, the difference between annual capital needs and rate funded capital, when apparent, is being funded through other funding sources. The other funding sources include reserve funds and long-term debt issuance; however, the City prefers to limit

Executive Summary 4
City of San Luis Obispo - Water & Wastewater Rate Study Update debt issuances if at all possible. However, given the nature, and level, of the capital projects, additional long-term debt is projected during the next five-year time period. A more detailed discussion of the capital funding plan can be found in Section 2.2.5 of the report.

The revenue requirement analysis for the City’s water utility was developed to determine the necessary revenues to meet the costs of providing water service to the customers based on the specific costs of the water utility. Provided below, in Table ES – 2, is a summary of the water revenue requirement analysis (financial plan).

Table ES - 2
Summary of the Water Revenue Requirement ($000s)
FY 2024-
25 FY 2025-
26 FY 2026-
27 FY 2027-
28 FY 2028-
29 FY 2029-
30 Revenues
Rate Revenues $25,793 $25,999 $26,207 $26,417 $26,628 $26,841 Other Revenues 2,799 2,885 2,947 3,031 3,118 3,210
Total Revenues $28,592 $28,884 $29,154 $29,447 $29,746 $30,051 Expenses
Total O & M $25,838 $30,313 $27,113 $28,246 $27,030 $28,850 Net Debt Service 1,469 1,466 1,455 1,455 1,778 1,790
Rate Funded Capital 1,282 0 3,550 4,200 6,975 7,150
To / (From) Reserves 3 (1,466) (3) 2 11 4
Total Revenue Requirement $28,592 $30,314 $32,116 $33,903 $35,794 $37,794 Total Bal. / (Def.) of Funds $0 ($1,430) ($2,962) ($4,456) ($6,048) ($7,743) Balance a % of Rate Adj. Req'd 0.0% 5.5% 11.3% 16.9% 22.7% 28.8% Proposed Rate Adjustment 0.0% 5.5% 5.5% 5.0% 5.0% 5.0%
Add'l Revenue with Rate Adj. $0 $1,430 $2,962 $4,456 $6,048 $7,743 Bal. / (Def.) After Rate Adj. $0 $0 ($0) $0 $0 $0
As can be seen, the water revenue requirement has summed O&M, rate funded capital, net debt service, and transfers to / (from) reserves. It is important to note that the “net” in net debt service refers to the use of development impact fees to pay for debt service which results in a reduction in the total debt serve expense. The total revenue requirement is then compared to the total sources of funds which are the rate revenues, at present rate levels, and other miscellaneous revenues. From this comparison a balance or deficiency of funds in each year can be determined.

This deficiency of funds is then compared to the projection of rate revenues, at “normal” consumption levels, to determine the level of revenue adjustment needed to meet the costs of providing water service. It is important to note the “Bal. / (Def.) of Funds” row is cumulative. That is, any adjustments in the initial years will reduce the deficiency in the later years. Over the fiveyear projected period, rate revenues will need to be adjusted to reflect the projected operating

Executive Summary 5
City of San Luis Obispo - Water & Wastewater Rate Study Update and capital needs. For the two-year rate setting period of FY 2025-26 and FY 2026-27 rate revenues need to be increased 5.5% in each year. A more detailed analysis of the water revenue requirement can be found in Section 2.2 of this report.

Summary of the Water Cost of Service Analysis
A cost of service analysis determines the proportional distribution of the revenue requirement costs to the customer classes of service (e.g., residential, multi-family, non-residential, irrigation) and the manner to collect that revenue requirement from each class of service.

Given the development of the cost of service for the 2023 Rate Study, and the implementation of the cost of service results for the FY 2023-24 adopted water rates, the cost of service analysis was not updated as part of the effort for the 2025 Update. Based on the results of the 2023 Rate Study, the proposed water rates maintain the results of the 2023 Rate Study and are cost-based and proportional between the customer classes of service.

Summary of the Water Rate Design
The final step of the 2025 Update is the development of proposed water rates to collect the desired levels of revenue, based on the results of the previous tasks. The 2023 Rate Study established specific customer classes of service and rates based on the cost of service results for the residential, multi-family, non-residential, and irrigation customers. The rate structure adopted includes a monthly fixed charge that varies by meter size and a consumption charge established through the cost of service analysis for each customer class of service and by tier, where applicable.

Given the implementation of cost of service rates in the 2023 Rate Study, and the projection of rates for the subsequent four-year period, the 2025 Update maintained the existing rate structure and cost of service adjustments as outlined in the 2023 Rate Study, only the level of the proposed rates were revised to reflect the current operating and capital costs. Provided in Table ES - 3 is a summary of the present and proposed water rates for the next two rate setting years.

Executive Summary 6
City of San Luis Obispo - Water & Wastewater Rate Study Update Table ES - 3
Summary of the Present and Proposed Water Rates
Present
Rate
FY
2025-26
FY
2026-27
Proposed Rate Revenue Adjustment 5.5% 5.5%
Fixed Charge - $/Month
Residential $30.25 $31.91 $33.67
MF / Non-Res / Irr
3/4" & Less $30.25 $31.91 $33.67
1" 50.50 53.28 56.21
1 1/2" 100.80 106.34 112.19
2" 161.30 170.17 179.53
3" 302.60 319.24 336.80
4" 504.45 532.19 561.46
6" 1,008.60 1,064.07 1,122.59
8" 1,613.85 1,702.61 1,796.25
Usage Charge – $/Unit
Residential
0 – 5 CCF $8.54 $9.01 $9.51
5 – 12 CCF 9.84 10.38 10.95
12 + CCF 16.97 17.90 18.88
Multi-Family $9.58 $10.11 $10.67
Non-Residential $10.14 $10.70 $11.29
Irrigation $10.35 $10.92 $11.52
Note: 1 unit = 1 CCF = 748 gallons
As can be seen, the rate structure was maintained and only the level of the rates was adjusted.

Again, the updated rates reflect the cost of service analysis and proportionality developed in the 2023 Rate Study.

Summary of the Water Rate Study Update
Based on the results of the 2025 Update, HDR developed the following conclusions and recommendations.

Based on the revenue requirement, HDR concluded that the City will need to adjust the level of water rate revenues. HDR reached this conclusion for the following reasons:
„ Revenue adjustments are necessary to meet the operating and capital costs of providing water service to City’s customers

Executive Summary 7
City of San Luis Obispo - Water & Wastewater Rate Study Update „ The proposed revenue adjustments maintain the City’s financial health and provide longterm sustainable funding levels Based on the results of the cost of service analysis, HDR made the following conclusions and provided the following recommendations:
„ The 2023 Rate Study cost of service analysis reflects the current customer characteristics „ The proposed cost of service adjustments from the 2023 Rate Study are maintained in the development of the proposed FY 2025-26 and FY 2026-27 water rates Finally, HDR reached the following conclusions and provided the following recommendations for the proposed water rates:
„ The proposed water rates reflect the overall costs of providing water service (i.e., costbasis) „ The current rate structure reflects contemporary and industry standard approaches „ City should review the water rates biannually in order to assess revenue sufficiency In summary, HDR recommends the City adopt the proposed water rates for FY 2025-26 and FY 2026-27 as developed in the 2025 Update to provide to provide sufficient funding for the operating expenses and capital improvement program needs for the water utility.

Summary of the Wastewater Revenue Requirement Analysis
As with the City’s water utility, the wastewater utility revenue requirement analysis is the first analytical step in the process. The revenue requirement analysis determines the adequacy of the current wastewater rates to fund current and future operating and capital needs. From this analysis, a determination can be made as to the overall level of rate revenue adjustments needed to provide adequate and prudent funding for the wastewater system.

For the 2025 Update, the revenue requirement was developed for the time period of FY 2024-25 – FY 2034-35 using a “cash basis” approach. The “cash basis” approach is the most commonly used methodology by municipal utilities to set their revenue requirement and is composed of O&M expenses, transfers, debt service payments, rate funded capital, and to/from reserve funding. The primary financial inputs in the development of the revenue requirement were the City’s FY 2024-25 budget documents, historical billed customer and water consumption data, and the capital improvement plan. Budgeted O&M expenses were projected using inflationary factors for the City’s expenses to provide collection and treatment services over the projected time period.

The proper and adequate funding of capital projects is important to help minimize rate increases over time. As a part of the 2025 Update, and in keeping with the best practices for capital project funding approach, a concerted effort was made to increase the overall level of “pay-as-you-go” (rate) funding and to avoid debt financing to the extent practical. Pay-as-you-go funding from rates refers to spending cash on hand that the utility collects from charging the water rates to it’s customers and is specifically earmarked to fund capital projects, often those deemed as renewal

Executive Summary 8
City of San Luis Obispo - Water & Wastewater Rate Study Update and replacement. Provided below in Table ES - 4 is a summary of the wastewater capital funding plan for the five-year rate setting period.

Table ES – 4
Summary of the Wastewater Capital Funding Plan ($000s)
FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 Total Capital Projects $32,117 $8,251 $7,163 $4,581 $5,139 $6,348 Less: Other Funding Sources
Capital Reserves $31,402 $8,161 $6,188 $2,481 $1,964 $1,223 Long-Term Debt 0 0 0 0 0 0
Total $31,402 $8,161 $6,188 $2,481 $1,964 $1,223
Rate Funded Capital $715 $90 $975 $2,100 $3,175 $5,125
This financial plan has placed the City’s rate funding for capital from a low of $90,000 in FY 2025- 26 to a maximum of $5.1 million in FY 2029-30. This level of rate funded capital over the projected time prudently funds the planned capital replacement needs. Given the level of capital improvements for the wastewater system the City has assumed the need for long-term debt issuances to fund capital improvements. In developing this financial plan. The wastewater capital funding plan is described in further detail in Section 3.2.4 of the report.

Given a projection of operating and capital expenses, a summary of the revenue requirement analysis was developed. Provided below in Table ES - 5 is a summary of the revenue requirement analysis (financial plan) for the City’s wastewater utility.

Executive Summary 9
City of San Luis Obispo - Water & Wastewater Rate Study Update Table ES - 5
Summary of the Wastewater Revenue Requirement ($000s)
FY 2024-
25 FY 2025-
26 FY 2026-
27 FY 2027-
28 FY 2028-
29 FY 2029-
30 Revenues
Rate Revenues $19,141 $19,294 $19,448 $19,604 $19,761 $19,919 Other Revenues 2,092 1,216 1,256 1,260 1,269 1,345
Total Revenues $21,233 $20,510 $20,705 $20,864 $21,030 $21,264 Expenses
Total O & M $13,809 $14,994 $15,483 $16,029 $16,632 $17,260 Rate Funded Capital 715 90 975 2,100 3,175 5,125
Net Debt Service 6,706 6,799 6,790 6,788 6,787 6,170
To / (From) Reserves 3 (119) 67 23 96 80
Total Revenue Requirement $21,233 $21,764 $23,315 $24,941 $26,690 $28,635 Bal./(Deficiency) of Funds $0 ($1,254) ($2,610) ($4,077) ($5,661) ($7,372) Balance as % of Rev from Rates 0.0% 6.5% 13.4% 20.8% 28.6% 37.0% Proposed Rate Adjustments 0.0% 6.5% 6.5% 6.5% 6.5% 6.5% Add'l Revenue with Rate Adj. $0 $1,254 $2,610 $4,077 $5,661 $7,372 Bal. / (Def.) After Rate Adj. $0 $0 $0 $0 $0 $0
As can be seen, the revenue requirement has summed the O&M, rate funded capital, net debt service, and to / (from) reserves. It is important to note that the “net” in net debt service refers to the use of development impact fees to pay for debt service which results in a reduction in the total debt serve expense. The total revenue requirement is then compared to the total revenues which include the rate revenues - at present rate levels - and other miscellaneous revenues. From this comparison a balance or deficiency of funds in each year can be determined. This balance or deficiency of funds is then compared to the rate revenues to determine the level of rate adjustment needed to meet the revenue requirement. It is important to note the “Bal. / (Def.) of Funds” row is cumulative. For the two-year rate setting period of FY 2025-26 and FY 2026-27, rate revenues need to be increased 6.5% each year.

Summary of the Wastewater Cost of Service Analysis
A cost of service analysis determines the proportional distribution of the revenue requirement to the City’s customer classes of service (i.e., residential, multi-family, non-residential). The objective of the cost of service analysis is to determine the proportional manner to collect the revenue requirement based on each customer class’s wastewater characteristics.

Given the development of the cost of service for the 2023 Rate Study, and the implementation of the cost of service results for the FY 2023-24 adopted wastewater rates, the cost of service analysis was not updated. Based on the results of the 2023 Rate Study, the proposed FY 2025-26

Executive Summary 10
City of San Luis Obispo - Water & Wastewater Rate Study Update and FY 2026-27 rates maintain the results of the 2023 Rate Study and are cost-based and proportional.

Summary of the Wastewater Rate Design
The final step of the 2025 Update is the development of proposed wastewater rates to collect the desired levels of revenue, based on the results of the previous tasks. The 2023 Rate Study established specific customer classes of service and rates based on the cost of service results for the residential, multi-family, and non-residential customers. The current rate structure includes a monthly fixed charge that varies by meter size and a consumption charge established through the cost of service analysis. Residential and multi-family customers are billed the usage charge up to the customer’s average winter water use. Non-residential customers are billed the usage charge on all metered water consumption because separate irrigation meters are, or can be, installed so that the metered water consumption reflects the contributions to the wastewater system.

Given the implementation of cost of service rates in the 2023 Rate Study, and the projection of rates for the subsequent four-year period, the 2025 Update maintained the existing rate structure and cost of service adjustments as outlined in the 2023 Rate Study, and only the level of the rates were updated to reflect updated expenses and revenue projections. Provided in Table ES - 6 is a summary of the present and proposed wastewater rates for the next two rate setting years.

Executive Summary 11
City of San Luis Obispo - Water & Wastewater Rate Study Update Table ES – 6
Summary of the Present and Proposed Wastewater Rates
Present Rates FY 2025-26 FY 2026-27
Fixed Charge - $/Month
Residential $24.52 $26.11 $27.81
MF / Non-Res
3/4" & Less $24.52 $26.11 $27.81
1" 40.95 43.61 46.44
1 1/2" 81.65 86.96 92.61
2" 130.70 139.20 148.25
3" 245.21 261.15 278.12
4" 408.76 435.33 463.63
6" 817.28 870.40 926.98
8" 1,307.70 1,392.70 1,483.23
10" 1,880.02 2,002.22 2,132.36
Usage Charge - $/Unit
Residential / Multi-Family
(up to sewer cap) $9.82 $10.46 $11.14
Non-Residential (all usage) $10.27 $10.94 $11.65
Note: 1 unit = 1 CCF = 748 gallons
As can be seen, the rate structure has been maintained and only the level of the rates has been adjusted. Again, the updated rates reflect the cost of service analysis results in the 2023 Rate Study and maintain the proportional relationships. The primary difference is the higher overall revenue adjustment necessary to fund operating and capital needs for the next two-year period.

Summary of the Wastewater Rate Study Update
Based on the results of the 2025 Update, HDR developed the following conclusions and recommendations.

Based on the revenue requirement, HDR concluded that the City will need to adjust the level of wastewater rate revenues. HDR reached this conclusion based on the following:
„ Revenue adjustments are necessary to meet the operating costs of providing wastewater service to the City’s customers
„ Revenue adjustments are necessary to provide adequate funding of the City’s capital projects on a “pay-as-you-go” basis for renewal and replacement needs „ The proposed revenue adjustments maintain the City’s financial health and provide longterm sustainable funding levels Based on the results of the cost of service analysis, HDR made the following conclusions and provided the following recommendations:

Executive Summary 12
City of San Luis Obispo - Water & Wastewater Rate Study Update „ The 2023 Rate Study cost of service analysis reflects the current customer characteristics „ The proposed cost of service adjustments from the 2023 Rate Study are maintained in the development of the proposed FY 2025-26 and FY 2026-27 wastewater rates Finally, HDR has reached the following conclusions and provided the following recommendations for the proposed wastewater rates:
„ The proposed rates reflect the overall costs of providing wastewater service (i.e., costbased) „ The current rate structure reflects contemporary and industry standard approaches „ City should review the wastewater rates biannually in order to assess sufficiency In summary, HDR recommends the City adopt the proposed wastewater rates for FY 2025-26 and FY 2026-27 as developed in this report to provide sufficient funding for the operating expenses and capital improvement program needs for the wastewater utility.

Water Rate Study Update 13
City of San Luis Obispo - Water & Wastewater Rate Study Update Development of the Water Analysis

2.1 Introduction
This section describes the development of the City’s water utility 2025 Update. The basis for the study was the City’s adopted budget (FY 2024-25), current capital improvement plan, historical customer consumption data, and water system operating characteristics. Based on the City’s specific costs, and customer characteristics, cost-based water rates were developed to prudently fund the water utility. Provided in this section is the detailed summary of the 2025 Update for the City’s water utility and proposed water rates for FY 2025-26 and FY 2026-27.

2.2 Water Revenue Requirement
The City provided detailed revenue and expenses data for the water system that allowed for the development of the revenue requirement. The revenue requirement analysis is the first analytical step in the comprehensive rate study process. This analysis determines the adequacy of the City’s overall water rates at current rate levels. From this analysis, a determination can be made as to the overall level of revenue (rate) adjustment needed to provide adequate and prudent funding for operating, debt service, and capital needs over the long-term. HDR developed an independent analysis based on information provided by the City to develop the 2025 Update conclusions and recommendations.

2.2.1 Determining the Water Revenue Requirement
In developing the City’s water revenue requirement, the water utility, must financially “stand on its own” and be properly funded. That is, no rate revenues are being transferred from other City funds or enterprises in order to support the water utility. As a result, the water revenue requirement analysis assumes the full and proper funding needed to operate and maintain the water system on a financially sound and prudent basis.

2.2.2 Projecting Rate and Miscellaneous Revenues
The City receives revenue from two primary sources: water rates and other revenues. Water rate revenues are based on the current water rate structure and the current customer data. Other revenue includes items such as interest, recycled water sales, fees, and miscellaneous revenues.

The City is projected to receive approximately $25.8 million in water rate revenues in FY 2024-

25. The projection of revenue is based on the recent customer consumption levels and adopted water rates. HDR worked with the City to update the consumption levels of each customer class of service for the 2025 Update. Over the planning horizon of the 2025 Update, customer growth is expected to be around 0.8% resulting in a slight increase in the projection of water rate revenues to approximately $26.8 million by FY 2029-30.

In addition to rate revenues, the City also receives a variety of other revenues including significant sources in California Polytechnical State University (Cal Poly) and recycled water sales. Other revenues are projected to be approximately $2.8 million in FY 2024-25. Other revenues are

Water Rate Study Update 14
City of San Luis Obispo - Water & Wastewater Rate Study Update expected to increase over the review period and are projected to be approximately $3.2 million by FY 2029-30.

On a combined basis - taking into account both rate revenues and other revenues - the City’s total projected water revenues are projected to be approximately $28.6 million in FY 2024-25, increasing to approximately $30.1 million by FY 2029-30. It is important to note that these revenue projections do not include rate revenue adjustment, and the increase is the result of assumed customer growth on the water system as well as interest earned on cash reserves.

2.2.3 Projecting Operation and Maintenance Expenses
Operation and maintenance (O&M) expenses are incurred by the City to operate and maintain the water system. The costs incurred in this area are expensed during the current year and are not capitalized or depreciated. In general, O&M expenses are grouped into a number of different functional categories. To begin the process of projecting O&M expenses over the planning horizon, HDR utilized the future projected expenses from the City’s fund analysis for the water utility. Total water O&M expenses for the City are projected to be approximately $25.8 million in FY 2024-25. Water O&M expenses are projected to increase to approximately $28.7 million by FY 2029-30 as a result of estimated inflation over the time period as well as capital projects related to the source of supply at Nacimiento, Salinas, and Whale Rock that are expensed annually. The escalation of costs is based on the assumptions from the City’s fund analysis.

2.2.4 Projection of Debt Service
Debt can serve a variety of functions for the utility. For example, long-term debt can provide intergenerational equity as the assets purchased with the debt are paid for by the current customers utilizing the services over time. Additionally, issuing long-term debt can help to moderate rate impacts over time lessening the impact of capital projects by spreading the cost out over a longer time period as compared to cash, or pay as you go, financing.

The City’s water utility currently has two existing long-term debt issuances and the annual debt service for FY 2024-25 is approximately $1.9 million in total. Over the review period of FY 2024- 25 through FY 2029-30, the City has estimated the need to issue additional long-term debt to fund capital improvement projects. The total debt service increases over the review period and reaches to $2.5 million by FY 2029-30. It is important to note that there are also debt service costs related to Nacimiento that is included in the water source of supply O&M budget which reflects the City’s fund analysis approach. The 2025 Update assumes that $400,000 of annual development impact fee revenues are used to offset annual debt service payments. This is done in order to offset the impact of new customer growth on the water resources, treatment plant, and distribution system.

As a note, HDR is not acting as a municipal advisor as it relates to bonds, terms, or structures of debt issuance. Rather, the 2025 Update identifies the existing annual debt service payments and projection future funding needs based on the City’s projection of long-term borrowing terms and conditions.

Water Rate Study Update 15
City of San Luis Obispo - Water & Wastewater Rate Study Update

2.2.5 Projecting Rate Funded Capital
A key component in the development of the water revenue requirement was adequately funding capital replacement needs. One of the major issues facing many utilities across the U.S. is the amount of deferred capital projects and the funding pressure from renewal and replacement of capital infrastructure projects. The proper and adequate funding of capital projects is an important issue for all water utilities and is not just a local issue or concern of the City.

In general, there are three types of capital projects that a utility may need to fund. These include the following types:
„ Renewal and replacement projects
„ Growth / capacity expansion projects
„ Regulatory-related projects
A renewal and replacement project is a project required for maintaining the existing system that is in place today. As the existing plant or pipelines become worn out, obsolete, etc., the utility should be making continuous investments to maintain the integrity of the facilities. To address these needs, the City developed a capital improvement plan (CIP) which aides in identifying and prioritizing capital replacement of the system. The CIP also includes projects to expand the capacity of facilities to accommodate future capacity needs (customers). Finally, certain projects may be a function of a regulatory requirement in which the Federal or State government mandates the need for an improvement to the system to meet a regulatory standard.

Understanding these different types of capital projects is important because the way in which projects are funded may vary by the type of capital project. For example, renewal and replacement projects may be paid for via rates and funded on a “pay-as-you-go basis”. In contrast to this, growth or capacity expansion projects may be funded via the collection of development impact fees (i.e. growth-related charges) in which new development pays a proportional share of the cost of facilities necessary to serve their development (impact). Finally, regulatory projects may be funded by a variety of different means, which may include rates, long-term debt, grants, etc.

Provided in Table 2 - 1 is the detail of the capital funding plan for the City’s water system that is included within the development of the proposed revenue requirement.

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City of San Luis Obispo - Water & Wastewater Rate Study Update Table 2 – 1
Summary of the Water Capital Funding Plan ($000s)
FY 2024-
25 FY 2025-
26 FY 2026-
27 FY 2027-
28 FY 2028-
29 FY 2029-
30 Total Source of Supply $1,140 $2,496 $159 $164 $506 $1,681 Total Water Treatment 1,675 1,183 819 583 5,121 13,538
Total Water Distribution 4,655 4,116 4,371 12,203 748 2,295 Total Administration (40) 116 121 20 344 84
CIP Carryover 16,949 0 0 0 0 0
Unidentified Future Capital 0 0 0 0 0 0
Transfer to Cash Reserve 0 0 0 0 255 0
Total Capital $24,379 $7,911 $5,470 $12,970 $6,975 $17,598 Less: Other Funding Sources
Capital Fund Reserves $19,580 $4,164 $1,920 $3,770 $0 $1,198 Prop 1B Revenue 3,517 3,748 0 0 0 0
Assumed New Long-Term Debt 0 0 0 5,000 0 9,250
Total Other Funding Sources $23,097 $7,911 $1,920 $8,770 $0 $10,448 Rate Funded Capital $1,282 $0 $3,550 $4,200 $6,975 $7,150 As can be seen in Table 2 - 1, the funding level for projects vary from year-to-year. While the total amount required to fund a project may vary from year to year, the rate study capital funding plan has attempted to provide a consistent funding source for capital improvements. In this case, rates will annually fund an amount ranging from $0 in FY 2024-25 to $7.2 million in FY 2029-30 (as shown in Table 2 - 1). As a point of reference, the City’s annual depreciation expense is approximately $3.3 million for FY 2022-23. A desirable and recommended minimum funding target for rate funded capital is an amount equal to or greater than annual depreciation expense.

The level of capital funding through rates has been developed to reflect the capital replacement needs of the City over the review period balanced with the use of available reserves and the issuance of long-term debt. In developing this financial plan, HDR and the City have attempted to minimize rate impacts while funding the planned capital replacement projects of the water system.

2.2.6 Summary of the Water Revenue Requirement
Given the above projections of revenues and expenses, a summary of the City’s water revenue requirement analysis can be developed. In developing the revenue requirement analysis, consideration was given to the financial planning considerations of the City. In particular, emphasis was placed on minimizing rates yet still having adequate funds to support the operational activities and capital replacement needs throughout the projected time period.

Detailed exhibits of this analysis can be found in the Water Technical Appendix Exhibits 1 - 5.

Provided in Table 2 – 2 is a summary of the revenue requirement analysis performed for the City’s water utility.

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City of San Luis Obispo - Water & Wastewater Rate Study Update Table 2 - 2
Summary of the Water Revenue Requirement ($000s)
FY 2024-
25 FY 2025-
26 FY 2026-
27 FY 2027-
28 FY 2028-
29 FY 2029-
30 Revenues
Rate Revenues $25,793 $25,999 $26,207 $26,417 $26,628 $26,841 Other Revenues 2,799 2,885 2,947 3,031 3,118 3,210
Total Revenues $28,592 $28,884 $29,154 $29,447 $29,746 $30,051 Expenses
Total O & M $25,838 $30,313 $27,113 $28,246 $27,030 $28,850 Net Debt Service 1,469 1,466 1,455 1,455 1,778 1,790
Rate Funded Capital 1,282 0 3,550 4,200 6,975 7,150
To / (From) Reserves 3 (1,466) (3) 2 11 4
Total Revenue Requirement $28,592 $30,314 $32,116 $33,903 $35,794 $37,794 Total Bal. / (Def.) of Funds $0 ($1,430) ($2,962) ($4,456) ($6,048) ($7,743) Balance a % of Rate Adj. Req'd 0.0% 5.5% 11.3% 16.9% 22.7% 28.8% Proposed Rate Adjustment 0.0% 5.5% 5.5% 5.0% 5.0% 5.0%
Add'l Revenue with Rate Adj. $0 $1,430 $2,962 $4,456 $6,048 $7,743 Bal. / (Def.) After Rate Adj. $0 $0 ($0) $0 $0 $0
The revenue requirement for the City’s water utility has summed the O&M, rate funded capital, net debt service, and to / (from) reserves. It is important to note that the “net” in net debt service refers to the use of development impact fees to pay for debt service which results in a reduction in the total debt serve expense. The total revenue requirement is then compared to the total revenues which are the rate revenues, at present rate levels, and other miscellaneous revenues.

From this comparison a balance or deficiency of funds in each year can be determined. This balance or deficiency of funds is then compared to the rate revenues to determine the level of rate revenue adjustment needed to meet the revenue requirement.

The revenue requirement developed in Table 2 - 2 was developed to meet financial planning objectives of the City. More specifically, the City’s need to adequately and prudently fund water utility operating and capital needs. Table 2 - 2 also includes a set of proposed rate revenue adjustments (blue band) which, based on the study assumptions, are sufficient to meet the total revenue requirement over the projected time period. Over the next two-year period, the period for which rates are being proposed, the total deficiency of revenues is 11.3%. The proposed revenue adjustments are a function of assumed inflation over this time period, coupled with the funding of identified capital improvement needs, and meet minimum reserve and debt service coverage ratio levels. If water revenue adjustments are not implemented, the City will not have sufficient funding to prudently operate and maintain the water system.

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City of San Luis Obispo - Water & Wastewater Rate Study Update

2.2.7 Reserve Levels
A key component of determining the financial health and long-term sustainability of the City’s water utility is to review the level of available reserves after the proposed rate adjustments.

Reserves play many different purposes. For the City’s water utility, the reserve funds are in place to meet the City’s ongoing cash flow needs as well as meeting target minimum levels established by the City’s financial policies. For the operating fund, a target of 20% of annual O&M expenses is utilized and is approximately $5.2 million in FY 2024-25. There is currently no capital component of the target, however, a general rule of thumb is to set a minimum equal to the average annual capital project funding needs, excluding “one-time” major projects (e.g., water treatment plant upgrade). For the review period (FY 2024-25 through FY 2029-30), the average annual capital is approximately $9.6 million. Over the same time period, the capital fund reserve averages an ending balance of $9.9 million. The final component of the target for the reserve funds is the rate stabilization component which is 10% of rate revenues and for FY 2024-25 is $2.6 million. Over the projected time period the City meets the minimum target reserve fund balances. It is important for the City to review the reserve funds annually and maintain target minimums.

2.2.8 Consultant’s Conclusion of the Revenue Requirement HDR concludes that the City will need to adjust the level of water rate revenues as noted in Table 2-2. Provided below are the conclusions and recommendations of the water revenue requirement:
„ Revenue adjustments are necessary to meet the operating and capital costs of providing water service to City’s customers
„ The proposed revenue adjustments maintain the water utility’s financial health and provide long-term, sustainable funding levels
„ The City should review the level of water rate revenues biannually in order to assess sufficiency
The revenue requirement developed above has indicated the need for annual revenue increases to adequately fund the City’s operating, debt service, and capital needs for the water utility. The proposed increases are necessary to adequately and prudently fund the City’s needs.

2.3 Water Cost of Service Analysis Summary
The next step in the 2025 Update is the review of the cost of service analysis. A cost of service analysis proportionally distributes the costs of providing water service between the City’s customer classes of service based on the approaches outlined in the American Water Works M1 Manual. The 2023 Rate Study resulted in the establishment of customer classes of service and the City Council adopted rates that included cost of service adjustments.

Given the completion of the comprehensive analysis in the 2023 Rate Study, and the FY 2023-24 water rates adopted by the City Council being based on the cost of service results, the 2025 Update maintained the prior study cost of service relationships for the development of proposed water rates for FY 2025-26 and FY 2026-27.

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City of San Luis Obispo - Water & Wastewater Rate Study Update

2.4 Water Rate Design
The final step of the 2025 Update is the development of proposed water rates to collect the desired levels of revenue, based on the results of the previous tasks. As noted, the 2023 Rate Study established specific customer classes of service and rates based on the cost of service results for the residential, multi-family, non-residential, and irrigation customers. The 2025 Update is a continuation of the 2023 Rate Study and reflects the updated customer consumption characteristics and projection of revenue needs. Provided below is a discussion of the development of the proposed water rates for FY 2025-26 and FY 2026-27.

2.4.1 Development of Cost-Based Water Rates
Developing cost-based and proportional rates is of paramount importance in the development of the proposed water rates. While always a key consideration in developing rates, meeting the legal requirements, and documenting the steps taken to meet the requirements, has been in the forefront with the recent legal challenges in the State of California on utility rates. Given this, the City’s proposed water rates have been developed to meet the legal requirements of California constitution article XIII D, section 6 (Article XIII D), or Proposition 218. A key component of Article XIII D is the development of rates which reflect the cost of providing service and are proportionally allocated among the customer classes of service. The American Water Works Association (AWWA) M1 Manual clearly delineates various methodologies which may be used to establish cost-based rates. HDR reviewed the City’s proposed water rates based on the methodologies provided in the AWWA M1 Manual to meet the requirements of Article XIII D and an administrative record of the steps taken to establish the City’s water rates.

HDR is of the opinion that the noticed rates comply with legal requirements of Article XIII D. HDR reached this conclusion based upon the following:
x The revenue derived from water rates does not exceed the funds required to provide the property related service (i.e., water service). The proposed rates are designed to collect the overall revenue requirements of the City’s water utility. x The revenues derived from water rates shall not be used for any purpose other than that for which the fee or charge is imposed. The revenues derived from the City’s water rates are used exclusively to operate and maintain the City’s water system. x The amount of a fee or charge imposed upon a parcel or person as an incident of property ownership shall not exceed the proportional costs of the service attributable to the parcel.

The cost of service analysis in the 2023 Rate Study was specifically developed to focus on the issue of proportional assignment of costs to customer classes of service, and this study maintains the cost of service relationships and proportionality. The proposed rates have appropriately grouped customers into customer classes of service (residential, multi-family, commercial, irrigation) that reflect the varying consumption patterns and system requirements of each customer class of service. The grouping of customers and rates into these classes of service creates the equity and proportionality expected under Article XIII D by having differing rates by customer classes of service which reflect both the level of revenue to be collected by the utility, but also the manner in which these costs are incurred and

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City of San Luis Obispo - Water & Wastewater Rate Study Update equitably assigned to customer classes of service based upon their proportional impacts and burdens on the City’s water system and/or water resources. The 2025 Update has continued the results of the 2023 Rate Study cost of service results.

2.4.2 Overview of the Water Rate Structure
As mentioned, the 2023 Rate Study established the current rate structure based on the customer classes of service and cost of service results. The rate structure is based on the customer classes of service with each having a unique rate structure.

For residential customers, the structure includes a monthly flat fixed charge and a three-tier consumption charge. As part of the 2025 Update, the tiers were reviewed and compared to recent consumption patterns. It was determined the tiers established in the 2023 Rate Study continue to reflect current consumption patterns. Given this, the sizing of the tiers was maintained and only the pricing of the tiers was adjusted to reflect the overall revenue needs.

The multi-family rate structure includes a monthly fixed based on meter size and a uniform consumption charge. This rate structure reflects the customer characteristics of the multi-family customers.

The non-residential customer rate structure includes a fixed charge that varies by meter size and a uniform consumption charge. However, the consumption charge specifically reflects the characteristics of the non-residential customers and will vary from the multi-family and irrigation customer consumption charges.

Finally, the irrigation customers will have the same fixed meter charge by meter size as multifamily and non-residential but again, the uniform consumption charge will be unique to the irrigation customer class and consumption characteristics.

2.4.3 Present and Proposed Water Rates
Given the implementation of cost of service rates in the 2023 Rate Study, and the 2025 Update projection of rates for the subsequent two-year period (FY 2025-26 through FY 2026-27), the 2025 Update maintains the existing rate structure and cost of service adjustments as outlined in the 2023 Rate Study. Provided in Table 2 - 3 is a summary of the present and proposed water rates for the next two rate setting years.

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City of San Luis Obispo - Water & Wastewater Rate Study Update Table 2 - 3
Summary of the Present and Proposed Water Rates
Present
Rate
FY
2025-26
FY
2026-27
Proposed Rate Revenue Adjustment 5.5% 5.5%
Fixed Charge - $/Month
Residential $30.25 $31.91 $33.67
MF / Non-Res / Irr
3/4" & Less $30.25 $31.91 $33.67
1" 50.50 53.28 56.21
1 1/2" 100.80 106.34 112.19
2" 161.30 170.17 179.53
3" 302.60 319.24 336.80
4" 504.45 532.19 561.46
6" 1,008.60 1,064.07 1,122.59
8" 1,613.85 1,702.61 1,796.25
Usage Charge – $/Unit
Residential
0 – 5 CCF $8.54 $9.01 $9.51
5 – 12 CCF 9.84 10.38 10.95
12 + CCF 16.97 17.90 18.88
Multi-Family $9.58 $10.11 $10.67
Non-Residential $10.14 $10.70 $11.29
Irrigation $10.35 $10.92 $11.52
Note: 1 unit = 1 CCF = 748 gallons
As can be seen, the rate structure was maintained and only the level of the rates was adjusted to reflect the 2025 Update revenue needs. Again, the updated rates reflect the proportionality developed in the cost of service analysis as part of the 2023 Rate Study.

2.5 Summary of the Water Rate Study Update
Based on the results of the 2025 Update, HDR developed the following conclusions and recommendations.

Based on the revenue requirement, HDR concludes that the City will need to adjust the level of water rate revenues. HDR reached this conclusion for the following reasons:
„ Revenue adjustments are necessary to meet the operating and capital costs of providing water service to City’s customers

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City of San Luis Obispo - Water & Wastewater Rate Study Update „ The proposed revenue adjustments maintain the City’s financial health and provide longterm sustainable funding levels Based on the results of the cost of service analysis, HDR made the following conclusions and recommends:
„ The proposed cost of service adjustments from the 2023 Rate Study are maintained in the development of the proposed FY 2025-26 and FY 2026-27 water rates Finally, HDR reached the following conclusions and recommends the proposed water rates:
„ The proposed water rates reflect the overall costs of providing water service (i.e., costbased) „ The current rate structure reflects contemporary and industry standard approaches „ City should review the water rates biannually in order to assess sufficiency In summary, HDR recommends the City adopt the proposed water rates for FY 2025-26 and FY 2026-27 as developed in this 2025 Update to provide to provide sufficient funding for the operating expenses and capital improvement program needs for the water utility.

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City of San Luis Obispo – Water & Wastewater Rate Study Update Development of the Wastewater Analysis

3.1 Introduction
This section describes the development of the City’s wastewater utility 2025 Update. The basis for the study was the City’s wastewater adopted budget, current capital improvement plan, historical customer data, system operation characteristics, and 2023 Rate Study cost of service results. Based on the City’s specific costs, and customer characteristics, cost-based rates were developed to prudently fund the wastewater utility. Provided in this section is the detailed summary of the City’s wastewater rate study 2025 Update.

3.2 Wastewater Revenue Requirement
This section describes the development of the revenue requirement analysis for the City’s wastewater utility. The revenue requirement analysis is the first analytical step in the 2025 Update process. From this analysis, a determination can be made as to the overall level of rate adjustments needed to provide adequate and prudent funding for both the operating and capital needs of the wastewater utility. The primary objective of the 2025 Update is to develop costbased and proportional rates while attempting to minimize the impacts to the utility’s customers.

3.2.1 Determining the Revenue Requirement
In developing the City’s wastewater revenue requirement, the utility, must financially “stand on its own” and be properly funded. That is, revenues are not being transferred from other City enterprise or general funds to support the wastewater utility. As a result, the revenue requirement analysis assumes the full and proper funding needed to operate and maintain the wastewater system on a financially sound and prudent basis.

3.2.2 Projecting Rate and Other Miscellaneous Revenues
In total, the City’s wastewater utility is projected to receive approximately $19.1 million in rate revenue in FY 2024-25. Over the review period, the study has assumed 0.8% annual customer growth. Based on current rates, and estimated customer growth, the FY 2029-30 rate revenues are projected to be approximately $19.9 million.

In addition to rate revenues, the City also receives miscellaneous revenues. These are revenues related to interest income, Cal-Poly charges, fees, permits, etc. In total, the City is projected to receive approximately $2.1 in FY 2024-25 in miscellaneous revenues. The 2025 Update assumes no growth of other or miscellaneous revenues; however, other revenues do decrease over the review period as the revenues from Cal Poly decrease. In FY 2025-26, it is projected that the City will receive approximately $1.3 million in other revenues, a reduction of approximately $800,000 due to the decrease in Cal-Poly wastewater flows to the City.

On a combined basis - taking into account the rate revenues and the miscellaneous revenues - the City’s wastewater utility has total projected revenues of approximately $21.2 million in FY 2024-25, increasing to approximately $21.3 million by FY 2029-30 as a result of estimated growth

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City of San Luis Obispo – Water & Wastewater Rate Study Update as noted above. The assumptions used for growth can be found in Exhibit 2 of the Technical Appendix.

3.2.3 Projecting Operation and Maintenance Expenses
Operation and maintenance (O&M) expenses are incurred by the City to maintain the wastewater collection and treatment system. The starting point of the projection of O&M expenses was the adopted FY 2024-25 budget. Budgeted O&M expenses were projected over the 2025 Update time period based on the City’s wastewater fund analysis. The total O&M expenses budgeted for the wastewater utility are projected to be $13.8 million in FY 2024-25. Over the review period, the total O&M expenses are projected to increase to approximately $17.3 million by FY 2029-30 with the expected inflationary impacts.

3.2.4 Projecting Capital Funding Needs
A key component in the development of the wastewater revenue requirement was properly and adequately funding capital improvement needs. One of the major issues facing many utilities across the U.S. is the amount of deferred capital projects and the funding pressure from growth/expansion-related and regulatory improvements. The proper and adequate funding of capital projects is an important issue for all utilities and is not just a local issue or concern of the City.

In general, there are three types of capital projects that the City may need to fund. These include the following types:
„ Renewal and replacement projects
„ Growth/capacity expansion projects
„ Regulatory-related projects
A renewal and replacement project is essentially maintaining the existing system that is in place today. As the City’s existing wastewater collection system and Water Resource Recovery Facility (WRRF) reaches the end of its useful life, becomes obsolete, etc., the City should be making continuous investments to maintain the integrity of its facilities. Currently, the City has developed capital improvement plan which will help guide and prioritize capital projects over time.

Additionally, the City may make capital investments to expand the capacity of facilities to accommodate future customers. The capital improvement plan outlines the City’s strategy to address needs systematically, so that timing and necessity of improvements aligns appropriately with other projects throughout the City. Finally, certain projects may be a function of a regulatory requirement in which the Federal or State government mandates the need for an improvement to the system to meet a regulatory standard, such as that of the recent WRRF upgrade project.

Understanding these different types of capital projects is important because it helps to explain why costs are increasing and the cost drivers for any needed rate adjustment. In addition, and more importantly, the way in which projects are funded may vary by the type of capital project.

For example, renewal and replacement projects may be paid for via rates and funded on a “payas-you-go basis”. In contrast to this, growth or capacity expansion projects may be funded through the collection of connection fees (i.e., growth-related charges) in which new development pays a proportional and equitable share of the cost of improvements required as a

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City of San Luis Obispo – Water & Wastewater Rate Study Update result of their connection (impact). Finally, regulatory projects may be funded by a variety of different means, which may include rates, long-term debt, grants, etc.

While the above discussion appears to neatly divide capital projects into three clearly defined categories, the reality of working with specific capital projects may be more complex. For example, a pump may be replaced, but while being replaced, it is up-sized to accommodate greater capacity. There are many projects that share these “joint” characteristics. At the same time, projects may not be “replacement” related, but rather “improvement” related. Provided below in Table 3 - 1 is a summary of the wastewater capital funding Plan.

Table 3 – 1
Summary of the Wastewater Capital Funding Plan ($000s)
FY 2024-
25 FY 2025-
26 FY 2026-
27 FY 2027-
28 FY 2028-
29 FY 2029-
30 Total Wastewater Collection $7,487 $5,432 $5,164 $4,453 $4,654 $6,179 Total Water Resource Recovery
Facility (6,438) 2,770 1,878 55 56 128
Total Miscellaneous 65 50 121 74 429 42
CIP Carryover 31,003 0 0 0 0 0
Unidentified Future Capital Projects 0 0 0 0 0 0
Transfer to Cash Reserve 0 0 0 0 0 0
Total $32,117 $8,251 $7,163 $4,581 $5,139 $6,348
Less: Other Funding
Capital Reserves $31,402 $8,161 $6,188 $2,481 $1,964 $1,223 Add’l Long-Term Debt 0 0 0 0 0 0
Total $31,402 $8,161 $6,188 $2,481 $1,964 $1,223
Rate Funded Capital $715 $90 $975 $2,100 $3,175 $5,125
While the total amount of a project may vary from year to year, this wastewater capital funding plan has attempted to provide a consistent funding source for the replacement fund. In this case, the utility’s rates will annually fund an amount ranging from $90,000 to $5.1 million. As a point of reference, the City’s annual depreciation expense is approximately $2.8 million in FY 2022-23.

It is important that in order to minimize rate impacts, wastewater capital has been delayed for several years. A desirable funding target for rate funded capital is an amount equal to or greater than annual depreciation expense. It is important to note and understand that depreciation expense is not the same as replacement cost. Thus, funding an amount which exceeds depreciation expense is both prudent and appropriate. As noted, to help establish a prudent level of annual replacement funding through rates, HDR worked with City staff to develop a funding plan for the capital projects. In developing this financial plan, HDR and the City have attempted to minimize rate impacts while funding the planned capital replacement projects of the City.

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City of San Luis Obispo – Water & Wastewater Rate Study Update

3.2.5 Projection of Debt Service
The City’s wastewater utility currently has four outstanding long-term debt issuances, and one is retired in FY 2028-29. The existing debt service for FY 2024-25 is $7.0 million, of which $5.8M is for the City’s SRF loan for the WRRF upgrade project. As with the water utility, annual wastewater development impact fee revenues are assumed at $300,000 to offset the debt service. This is done in order to offset the impact of new customer growth on the wastewater system and results in next debt service of approximately $6.7 million in FY 2024-25. With the retirement and the addition of future long-term issuances, debt service is expected to decrease slightly and be approximately $6.5 million by FY 2029-30 with net debt service after development impact fee contribution to $6.2 million.

3.2.6 Summary of the Wastewater Revenue Requirement
Given the above projections of revenues and expenses, a summary of the wastewater revenue requirement analysis can be developed. In developing the revenue requirement analysis, consideration was given to the financial planning considerations of the City. In particular, emphasis was placed on attempting to minimize rates yet still have adequate funds to support the operational activities and capital projects throughout the projected time period. Presented below in Table 3 – 2 is a summary of the City’s projected wastewater revenue requirement.

Detailed exhibits of this analysis can be found in the Technical Appendix (Exhibits 1 – 5).

Table 3 - 2
Summary of the Wastewater Revenue Requirement ($000s)
FY 2024-
25 FY 2025-
26 FY 2026-
27 FY 2027-
28 FY 2028-
29 FY 2029-
30 Revenues
Rate Revenues $19,141 $19,294 $19,448 $19,604 $19,761 $19,919 Other Revenues 2,092 1,216 1,256 1,260 1,269 1,345
Total Revenues $21,233 $20,510 $20,705 $20,864 $21,030 $21,264 Expenses
Total O & M $13,809 $14,994 $15,483 $16,029 $16,632 $17,260 Rate Funded Capital 715 90 975 2,100 3,175 5,125
Net Debt Service 6,706 6,799 6,790 6,788 6,787 6,170
To / (From) Reserves 3 (119) 67 23 96 80
Total Revenue Requirement $21,233 $21,764 $23,315 $24,941 $26,690 $28,635 Total Bal. / (Def.) of Funds $0 ($1,254) ($2,610) ($4,077) ($5,661) ($7,372) Balance a % of Rate Adj. Req'd 0.0% 6.5% 13.4% 20.8% 28.6% 37.0% Proposed Rate Adjustment 0.0% 6.5% 6.5% 6.5% 6.5% 6.5%
Add'l Revenue with Rate Adj. $0 $1,254 $2,610 $4,077 $5,661 $7,372 Bal. / (Def.) After Rate Adj. $0 ($0) $0 ($0) $0 $0

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City of San Luis Obispo – Water & Wastewater Rate Study Update As can be seen, the revenue requirement has summed the O&M, rate funded capital, net debt service, and to / (from) reserves. It is important to note that the “net” in net debt service refers to the use of development impact fees to pay for debt service which results in a reduction in the total debt serve expense. The total revenue requirement is then compared to the total sources of funds which include the rate revenues, at present rate levels, and other miscellaneous revenues. From this comparison a balance or deficiency of funds in each year can be determined.

This balance or deficiency of funds is then compared to the rate revenues to determine the level of rate adjustment needed to meet the revenue requirement. It is important to note the “Bal. / (Def.) of Funds” row is cumulative. That is, adjustments in the initial years will reduce the deficiency in the later years.

The overall level of wastewater rate revenues should be increased to prudently fund the wastewater system operating, debt service, and capital needs. The revenue requirement developed in Table 3 - 2 has been developed to meet financial planning objectives of the City.

More specifically, the City desires to adequately and prudently fund its wastewater operating and capital needs. Table 3 - 2 has also included a set of proposed rate revenue adjustments (blue band) which are sufficient to meet the total revenue requirement over the projected time period.

Over the next two year period, the period for which rates are being proposed, the total deficiency of revenues is 13.4%. The proposed revenue adjustments are a function of assumed inflation over this time period coupled with the need to fund capital improvement needs (renewal and replacement funding) and meet minimum reserve and debt service coverage ratio levels. If wastewater revenue adjustments are not implemented, the City will not have sufficient funding to prudently operate and maintain the system or meet the financial requirements of issuing longterm debt for the WRRF Project.

3.2.7 Reserve Levels
As with the water utility, a key element of determining the financial health and sustainability of the City’s wastewater utility is to review the level of available reserve levels after the proposed revenue adjustments. The reserve funds are established by the City’s financial policies and in place to meet the wastewater utility annual cash flow needs as well as accomplishing a number of target minimum reserve levels. For the operating fund, a target of 20% of annual O&M expenses and is approximately $2.8 million in FY 2024-25. The capital fund does not currently have an established target, but prudent planning approaches often view an average year of capital expenses as a general rule of thumb. The average capital from FY 2024-25 through FY 2029-30 is approximately $6.4 million and over this time period the capital fund average balance is about $11.4 million and is trending down in the last few years. The final component is the rate stabilization fund which has a target of 5.0% of rate revenues and for FY 2024-25 is approximately $957,000. Over the projected time period the City is meeting the minimum target levels for each of the reserve funds.

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City of San Luis Obispo – Water & Wastewater Rate Study Update

3.2.8 Consultant’s Conclusions
Based on the revenue requirement, HDR concluded that the City will need to adjust the level of wastewater rate revenues over the next two-year period. HDR reached this conclusion for the following reasons:
„ Revenue adjustments are necessary to meet the operating and capital costs of providing wastewater service to City’s customers
„ The proposed revenue adjustments maintain the City’s financial health and provide longterm sustainable funding levels „ The City should review the level of wastewater rate revenues biannually in order to assess sufficiency
In reaching this conclusion, HDR recommends that the City adjust revenue levels in FY 2025-26 and FY 2026-27 to provide sufficient funding for annual O&M and the capital improvement program.

3.3 Wastewater Cost of Service Analysis Summary
The next step in the 2025 Update is the review of the cost of service analysis. A cost of service analysis proportionally distributes the costs of providing wastewater service between the customer classes of service based on the approaches outlined in the Water Environment Federation Manual of Practice No. 27 (WEF MOP #27). The 2023 Rate Study resulted in the establishment of customer classes of service and the City Council adopted rates that included cost of service adjustments.

Given the completion of the 2023 Rate Study, and the rates adopted by the City Council being based on the cost of service results, this Study maintained the prior cost of service relationships for the development of proposed wastewater rates for FY 2025-26 and FY 2026-27.

3.4 Wastewater Rate Design
The final step of the 2025 Update is the development of proposed wastewater rates to collect the desired levels of revenue, based on the results of the previous tasks. The 2023 Rate Study established specific customer classes of service and rates based on the cost of service results for the residential, multi-family, and non-residential customers. The 2025 Update is a continuation of the 2023 Rate Study and reflects the updated customer consumption characteristics and projection of revenue needs. Provided below is a discussion of the development of the proposed wastewater rates for FY 2025-26 and FY 2026-27.

3.4.1 Development of Cost-Based Wastewater Rates
Developing cost-based and proportional rates is of paramount importance in the development of the proposed wastewater rates. While always a key consideration in developing rates, meeting the legal requirements, and documenting the steps taken to meet the requirements, has been in the forefront with the recent legal challenges in the State of California on utility rates. Given this, the City’s proposed wastewater rates have been developed to meet the legal requirements of California constitution article XIII D, section 6 (Article XIII D), or Proposition 218. A key component

Wastewater Rate Study Update 29
City of San Luis Obispo – Water & Wastewater Rate Study Update of Article XIII D is the development of rates which reflect the cost of providing service and are proportionally allocated among the customer classes of service. The Water Environment Federation Manual of Practice No. 27 outlines the methodologies which may be used to establish cost-based rates. HDR reviewed the City’s proposed wastewater rates based on the methodologies provided in the WEF MOP #27 to meet the requirements of Article XIII D to provide an administrative record of the steps taken to establish the City’s wastewater rates given the results and implementation of the 2023 Rate Study.

HDR is of the opinion that the noticed rates comply with legal requirements of Article XIII D. HDR reaches this conclusion based upon the following:
x The revenue derived from wastewater rates does not exceed the funds required to provide the property related service (i.e., wastewater service). The proposed rates are designed to collect the overall revenue requirement of the City’s wastewater utility. x The revenues derived from wastewater rates shall not be used for any purpose other than that for which the fee or charge is imposed. The revenues derived from the City’s wastewater rates are used exclusively to operate and maintain the City’s wastewater system. x The amount of a fee or charge imposed upon a parcel or person as an incident of property ownership shall not exceed the proportional costs of the service attributable to the parcel.

The cost of service analysis in the 2023 Rate Study was specifically developed to focus on the issue of proportional assignment of costs to customer classes of service, and the 2025 Update maintains the cost of service relationships and proportionality. The proposed rates have appropriately grouped customers into customer classes of service (residential, multi-family, non-residential) that reflect the varying consumption patterns and system requirements of each customer class of service. The grouping of customers and rates into these classes of service creates the proportionality expected under Article XIII D by having which reflect both the level of revenue to be collected by the utility, but also the manner in which these costs are incurred and equitably assigned to customer classes of service based upon their proportional impacts and burdens on the City’s wastewater system. The 2025 Update is a continuation and based on the results of the 2023 Rate Study.

3.4.2 Overview of the Wastewater Rate Structure
As mentioned, the 2023 Rate Study established the proportionality of the current rate structure based on the customer classes of service and cost of service results. The rate structure was based on the characteristics of each customer classes of service.

For residential customers, the structure includes a monthly flat fixed charge, and a volume charge up to each individual customer’s average winter water use (also referred to as the “sewer cap”).

Since wastewater volumes are not metered, average winter water use is used to reflect the volumes, or amounts, of wastewater contributed to the wastewater system for collection and treatment. In this way, customers are billed for the contributions to the wastewater system and not for outdoor watering amounts in the summer. Annually, the City updates the average winter water consumption for each customer. These values are then used for the subsequent rate year to develop the customer bill.

Wastewater Rate Study Update 30
City of San Luis Obispo – Water & Wastewater Rate Study Update Multi-family customers includes a monthly fixed charge that varies based on meter size and a volume charge up to each individual customer’s average winter water use. Winter water consumption values for each multi-family customer are determined using the same methodology as those for residential customers.

The non-residential rate structure includes a monthly fixed charge that varies based on meter size and a uniform consumption charge based on all metered water consumption. For nonresidential customers, separate irrigation meters are, or can be, installed so that the metered water consumption reflects the contributions to the wastewater system similar to the use of average winter water for residential customers.

3.4.3 Present and Proposed Wastewater Rates
Given the implementation of cost of service rates in the 2023 Rate Study, the 2025 Update maintained the existing rate structure and cost of service relationships as outlined in the 2023 Rate Study. Provided in Table 3 - 3 is a summary of the present and proposed wastewater rates for the next two rate setting years.

Table 3 – 3
Summary of the Present and Proposed Wastewater Rates
Present Rates FY 2025-26 FY 2026-27
Fixed Charge - $/Month
Residential $24.52 $26.11 $27.81
MF / Non-Res
3/4" & Less $24.52 $26.11 $27.81
1" 40.95 43.61 46.44
1 1/2" 81.65 86.96 92.61
2" 130.70 139.20 148.25
3" 245.21 261.15 278.12
4" 408.76 435.33 463.63
6" 817.28 870.40 926.98
8" 1,307.70 1,392.70 1,483.23
10" 1,880.02 2,002.22 2,132.36
Usage Charge - $/Unit
Residential / Multi-Family
(up to sewer cap) $9.82 $10.46 $11.14
Non-Residential (all usage) $10.27 $10.94 $11.65
Note: 1 unit = 1 CCF = 748 gallons

Wastewater Rate Study Update 31
City of San Luis Obispo – Water & Wastewater Rate Study Update As can be seen, the rate structure has been maintained and only the level of the rates has been adjusted for the 2025 Update. Again, the updated rates reflect the cost of service analysis completed in the 2023 Rate Study and continue the results of the 2023 cost of service results.

3.5 Summary of the Wastewater Rate Study Update
Based on the results of the 2025 Update, HDR developed the following conclusions and recommendations.

Based on the revenue requirement, HDR concluded that the City will need to adjust the level of wastewater rate revenues. HDR reached this conclusion for the following reasons:
„ Revenue adjustments are necessary to meet the operating, debt service, and capital costs of providing wastewater service to City’s customers, of which a large portion is driven by the funding of capital projects related to the WRRF upgrades „ Revenue adjustments are necessary to provide adequate funding of the City’s capital projects on a “pay-as-you-go” basis for renewal and replacement needs „ The proposed revenue adjustments maintain the City’s financial health and provide longterm sustainable funding levels Based on the results of the cost of service analysis, HDR has made the following conclusions and recommendations:
„ The proposed cost of service adjustments from the 2023 Rate Study are maintained in the development of the proposed FY 2025-26 and FY 2026-27 wastewater rates Finally, HDR reached the following conclusions and recommendations for the proposed wastewater rates:
„ The proposed rates reflect the overall costs of providing wastewater service (i.e., costbased) „ The current rate structure reflects contemporary and industry standard approaches „ City should review the wastewater rates biannually in order to assess sufficiency In summary, HDR would recommend that the City adopt the proposed wastewater rates for FY 2025-26 and FY 2026-27 as developed in the 2025 Update to provide to provide sufficient funding for the operating expenses and capital improvement program needs for the wastewater utility.

Technical Appendix A
City of San Luis Obispo –Water & Wastewater Rate Study Update Technical Appendix A – Water Analysis

FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 FY 2031-32 FY 2032-33 FY 2033-34 FY 2034-35 Revenues
Rate Revenues $25,792,735 $25,999,077 $26,207,069 $26,416,726 $26,628,060 $26,841,084 $27,055,813 $27,272,259 $27,490,437 $27,710,361 $27,932,044 Miscellaneous Revenues 2,798,852 2,884,739 2,946,793 3,030,697 3,118,440 3,210,210 3,306,207 3,397,471 3,492,518 3,591,516 3,694,639 ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- Total Revenues $28,591,587 $28,883,816 $29,153,862 $29,447,423 $29,746,499 $30,051,294 $30,362,019 $30,669,731 $30,982,956 $31,301,877 $31,626,683 Expenses
Unfunded Liability $996,375 $959,034 $1,012,396 $1,054,947 $1,099,453 $1,146,183 $1,195,250 $1,246,771 $1,300,868 $1,357,669 $1,417,310 Water Admin / Engineering 4,588,962 5,166,098 5,264,341 5,447,540 5,684,309 5,931,856 6,185,419 6,456,069 6,739,093 7,035,076 7,344,629 Water Source of Supply 13,017,561 16,803,182 13,124,903 13,776,029 12,022,148 13,282,481 13,506,635 13,787,890 13,065,149 13,358,358 13,657,870 Water Treatment 4,292,206 4,290,068 4,497,294 4,706,882 4,864,770 5,028,226 5,197,461 5,372,690 5,554,140 5,742,045 5,936,649 Water Distribution 1,984,884 2,094,442 2,166,829 2,168,206 2,234,024 2,301,855 2,371,762 2,443,808 2,518,060 2,594,587 2,673,459 Water Resources 600,782 637,579 668,611 700,279 721,288 742,926 765,214 788,170 811,815 836,170 861,255 Utility Billing 356,834 362,957 378,706 392,540 404,316 416,446 428,939 441,807 461,559 475,406 489,668 Additional O&M 0 0 0 0 0 0 0 0 0 0 0
Total Operations & Maintenance $25,837,604 $30,313,360 $27,113,079 $28,246,424 $27,030,308 $28,849,974 $29,650,680 $30,537,205 $30,450,684 $31,399,311 $32,380,840 Rate Funded Capital $1,282,175 $0 $3,550,000 $4,200,000 $6,975,000 $7,150,000 $7,690,000 $8,175,000 $10,050,000 $11,320,000 $12,700,000 Net Debt Service 1,468,807 1,465,911 1,455,405 1,454,858 1,778,180 1,789,658 2,380,522 2,970,141 3,346,901 3,362,037 3,359,446 Total To / (From) Reserves 3,000 (1,465,506) (2,568) 2,015 10,512 4,391 188,512 271,796 258,988 291,389 318,379 Total Revenue Requirement $28,591,587 $30,313,765 $32,115,916 $33,903,297 $35,794,000 $37,794,023 $39,909,714 $41,954,142 $44,106,573 $46,372,736 $48,758,665 Bal. / (Def.) of Funds $0 ($1,429,949) ($2,962,054) ($4,455,874) ($6,047,500) ($7,742,729) ($9,547,695) ($11,284,411) ($13,123,617) ($15,070,859) ($17,131,983) Balance a % of Rate Adj. Req'd 0.0% 5.5% 11.3% 16.9% 22.7% 28.8% 35.3% 41.4% 47.7% 54.4% 61.3% Proposed Rate Adjustment 0.0% 5.5% 5.5% 5.0% 5.0% 5.0% 5.0% 4.5% 4.5% 4.5% 4.5% Add'l Revenue with Rate Adj. $0 $1,429,949 $2,962,054 $4,455,874 $6,047,500 $7,742,729 $9,547,695 $11,284,411 $13,123,617 $15,070,859 $17,131,983 Bal. / (Def.) After Rate Adj. $0 $0 ($0) $0 $0 $0 $0 $0 ($0) $0 $0 Additional Rate Adjustment Required 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Average Residential Customer Bill (Base Charge + 6 CCF) $82.79 $87.34 $92.17 $96.80 $101.63 $106.68 $112.01 $117.05 $122.32 $127.83 $133.58 Total Ending Balance $23,855,703 $18,802,287 $21,627,070 $18,434,696 $19,275,993 $18,657,715 $14,384,331 $13,964,443 $12,399,859 $12,971,122 $12,372,537 Exhibit 1
Summary of the Water Revenue Requirement
Water Rate Study
City of San Luis Obispo
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City of San Luis Obispo
Water Rate Study
Escalations
Exhibit 2
FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 FY 2031-32 FY 2032-33 FY 2033-34 FY 2034-35 Notes Revenues
As Customer Growth Customer Growth 0.8% 0.8% 0.8% 0.8% 0.8% 0.8% 0.8% 0.8% 0.8% 0.8% 0.8% As Rate Adjustment Rate Adjustment 0.0% 5.5% 5.5% 5.0% 5.0% 5.0% 5.0% 4.5% 4.5% 4.5% 4.5% As Miscellaneous Revenues Miscellaneous Revenues 0.8% 0.8% 0.8% 0.8% 0.8% 0.8% 0.8% 0.8% 0.8% 0.8% 0.8% As
Expenses
As CIPCIP 0.0% 4.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% As
Interest 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% New Debt Service
Low Interest Loans
Term in Years 30 30 30 30 30 30 30 30 30 30 30
Rate 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% Revenue Bond
Term in Years 30 30 30 30 30 30 30 30 30 30 30
Rate 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 2 of 19 03/21/2025 DRAFT

City of San Luis Obispo Page 1 of 7
Water Rate Study
Revenue Requirement
Exhibit 3
FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 FY 2031-32 FY 2032-33 FY 2033-34 FY 2034-35 Revenues
Rate Revenues
Residential $13,245,990 $13,351,958 $13,458,774 $13,566,444 $13,674,976 $13,784,376 $13,894,651 $14,005,808 $14,117,854 $14,230,797 $14,344,643 As Customer Growth Multi-Family 4,546,687 4,583,061 4,619,725 4,656,683 4,693,937 4,731,488 4,769,340 4,807,495 4,845,955 4,884,722 4,923,800 As Customer Growth Non-Residential 6,058,007 6,106,471 6,155,322 6,204,565 6,254,201 6,304,235 6,354,669 6,405,506 6,456,750 6,508,404 6,560,472 As Customer Growth Irrigation 1,942,050 1,957,587 1,973,248 1,989,034 2,004,946 2,020,985 2,037,153 2,053,450 2,069,878 2,086,437 2,103,129 As Customer Growth ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- Total Rate Revenues $25,792,735 $25,999,077 $26,207,069 $26,416,726 $26,628,060 $26,841,084 $27,055,813 $27,272,259 $27,490,437 $27,710,361 $27,932,044 Other Revenues
Interest on Investment $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 Miscellaneous Penalties 118,000 130,000 130,000 130,000 130,000 130,000 130,000 130,000 130,000 130,000 130,000 Utility Set-up Fees - Distribution 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 Utility Set-up Fees - Utility Billing 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 Cal Poly Capacity & Resilience - WTP SST Project Payment 86,267 86,267 86,267 86,267 86,267 86,267 86,267 86,267 86,267 86,267 86,267 Cal Poly Capacity & Resilience 171,175 180,589 190,522 200,048 210,050 220,553 231,580 242,001 252,891 264,272 276,164 As Rate Adjustment Other Utility Charges 0 0 0 0 0 0 0 0 0 0 0
Credit Collections 14,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 Development Review Fees 26,000 26,000 26,000 26,000 26,000 26,000 26,000 26,000 26,000 26,000 26,000 Miscellaneous Revenue 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 Cal Poly 1,183,946 1,249,063 1,317,761 1,383,649 1,452,832 1,525,473 1,601,747 1,673,826 1,749,148 1,827,859 1,910,113 As Rate Adjustment Recycled Water Sales 1,044,464 1,052,820 1,061,243 1,069,733 1,078,290 1,086,917 1,095,612 1,104,377 1,113,212 1,122,118 1,131,095 As Customer Growth Low Income Subsidy (100,000) (100,000) (100,000) (100,000) (100,000) (100,000) (100,000) (100,000) (100,000) (100,000) (100,000) Future Unidentified Other Revenue 0 0 0 0 0 0 0 0 0 0 0 Other City Licenses & Permits 25,000 25,000 0 0 0 0 0 0 0 0 0 --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- Total Other Revenues $2,798,852 $2,884,739 $2,946,793 $3,030,697 $3,118,440 $3,210,210 $3,306,207 $3,397,471 $3,492,518 $3,591,516 $3,694,639 Total Revenues $28,591,587 $28,883,816 $29,153,862 $29,447,423 $29,746,499 $30,051,294 $30,362,019 $30,669,731 $30,982,956 $31,301,877 $31,626,683 Expenses
Unfunded Liability
52003-PERS Unfunded Liability - ADP Payments $245,418 $164,840 $164,840 $164,840 $164,840 $164,840 $164,840 $164,840 $164,840 $164,840 $164,840 52003-PERS Unfunded Liability 750,957 794,194 847,556 890,107 934,613 981,343 1,030,410 1,081,931 1,136,028 1,192,829 1,252,470 --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- Total Unfunded Liability $996,375 $959,034 $1,012,396 $1,054,947 $1,099,453 $1,146,183 $1,195,250 $1,246,771 $1,300,868 $1,357,669 $1,417,310 Notes
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City of San Luis Obispo Page 2 of 7
Water Rate Study
Revenue Requirement
Exhibit 3
FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 FY 2031-32 FY 2032-33 FY 2033-34 FY 2034-35 Notes Water Admin / Engineering
51001-Salaries - Regular $738,961 $805,253 $845,515 $887,791 $914,425 $941,858 $970,113 $999,217 $1,029,193 $1,060,069 $1,091,871 51003-Salaries - Contract 67,819 71,210 74,770 78,509 80,864 83,290 85,789 88,362 91,013 93,744 96,556 51004-Salaries - Temporary 61,280 129,736 132,953 70,939 73,067 75,259 77,517 79,843 82,238 84,705 87,246 51010-Overtime 2,500 2,625 2,756 2,894 2,981 3,070 3,162 3,257 3,355 3,456 3,559 52001-Retirement Contributions 56,293 59,107 62,063 65,166 67,121 69,134 71,208 73,345 75,545 77,811 80,146 52002-Retirement PARS - 401 894 939 986 1,035 1,067 1,099 1,131 1,165 1,200 1,236 1,274 53001-Employee Group Insurance 55,897 58,692 61,627 64,708 66,649 68,649 70,708 72,830 75,014 77,265 79,583 53002-Retiree Healthcare 10,975 11,523 12,099 12,704 13,086 13,478 13,882 14,299 14,728 15,170 15,625 55001-Medicare 10,508 11,033 11,585 12,164 12,529 12,905 13,292 13,691 14,101 14,525 14,960 61001-Advertising and Public Outreach 95,000 98,800 102,752 105,835 109,010 112,280 115,648 119,118 122,691 126,372 130,163 61007-Legal Services 40,000 91,600 43,264 44,562 45,899 47,276 48,694 50,155 51,659 53,209 54,806 61008-Parking 10,910 11,346 11,800 12,154 12,519 12,894 13,281 13,680 14,090 14,513 14,948 61013-Other Contract Services 189,995 161,005 84,765 87,308 89,927 92,625 95,404 98,266 101,214 104,250 107,378 61501-City Water Service 400 416 433 446 459 473 487 502 517 532 548 61502-City Sewer Service 330 343 357 368 379 390 402 414 426 439 452 61503-Electric Service 2,800 3,136 3,293 3,457 3,630 3,812 4,002 4,203 4,413 4,633 4,865 61504-Natural Gas Service 1,100 1,144 1,190 1,225 1,262 1,300 1,339 1,379 1,421 1,463 1,507 61505-Communication Service 2,800 2,912 3,028 3,119 3,213 3,309 3,409 3,511 3,616 3,725 3,836 62002-Office Supplies 3,590 3,734 3,883 4,000 4,120 4,243 4,371 4,502 4,637 4,776 4,919 62003-Postage 200 208 216 223 229 236 243 251 258 266 274 62004-Publications and Subscriptions 800 2,656 2,762 2,845 2,930 3,018 3,109 3,202 3,298 3,397 3,499 62007-Employee Recognition 1,250 1,290 1,332 1,364 1,397 1,432 1,467 1,504 1,541 1,580 1,620 62009-Software Licensing and Maint Agreements 31,520 40,683 42,137 43,243 44,382 45,556 41,493 42,738 44,020 45,341 46,701 62010-Office Expenses - Other 0 12,500 0 0 0 0 0 0 0 0 0 62505-Machinery and Equipment 2,750 2,860 2,974 3,064 3,156 3,250 3,348 3,448 3,552 3,658 3,768 62506-Safety Materials and Supplies 400 416 433 446 459 473 487 502 517 532 548 62509-Misc Materials and Supplies 1,550 1,612 1,676 1,727 1,779 1,832 1,887 1,943 2,002 2,062 2,124 63001-Membership and Certifications 8,281 8,613 8,957 9,226 9,502 9,788 10,081 10,384 10,695 11,016 11,346 63002-Education and Training 18,250 28,980 30,139 31,043 31,975 32,934 33,922 34,940 35,988 37,067 38,179 63003-Trips and Meetings 500 520 541 557 574 591 609 627 646 665 685 65013-Credit Cards Merchant Fees 223,992 210,625 216,943 223,452 230,155 237,060 244,172 251,497 259,042 266,813 274,817 75001-Transfers - Out 1,387,992 1,568,431 1,646,853 1,729,195 1,815,655 1,906,438 2,001,760 2,101,847 2,206,940 2,317,287 2,433,151 75002-Reimbursement Transfer Out 1,559,425 1,762,150 1,850,258 1,942,771 2,039,909 2,141,905 2,249,000 2,361,450 2,479,522 2,603,498 2,733,673 --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- Total Water Admin / Engineering $4,588,962 $5,166,098 $5,264,341 $5,447,540 $5,684,309 $5,931,856 $6,185,419 $6,456,069 $6,739,093 $7,035,076 $7,344,629 4 of 19 03/21/2025 DRAFT

City of San Luis Obispo Page 3 of 7
Water Rate Study
Revenue Requirement
Exhibit 3
FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 FY 2031-32 FY 2032-33 FY 2033-34 FY 2034-35 Notes Water Source of Supply
51001-Salaries - Regular $131,504 $138,079 $144,983 $152,233 $156,800 $161,503 $166,349 $171,339 $176,479 $181,774 $187,227 51010-Overtime 400 420 441 463 477 491 506 521 537 553 569 51018-Call Back 1,000 1,050 1,103 1,158 1,192 1,228 1,265 1,303 1,342 1,382 1,424 52001-Retirement Contributions 12,641 13,273 13,937 14,634 15,073 15,525 15,991 16,470 16,964 17,473 17,998 53001-Employee Group Insurance 17,266 18,129 19,035 19,987 20,587 21,204 21,840 22,496 23,171 23,866 24,582 53002-Retiree Healthcare 2,055 2,157 2,265 2,378 2,450 2,523 2,599 2,677 2,757 2,840 2,925 55001-Medicare 1,873 1,966 2,065 2,168 2,233 2,300 2,369 2,440 2,513 2,589 2,666 61012-Water Supply 62,500 64,980 67,579 69,607 71,695 73,846 76,061 78,343 80,693 83,114 85,607 61013-Other Contract Services 16,500 17,160 17,846 18,382 18,933 19,501 20,086 20,689 21,310 21,949 22,607 61017-Nacimiento contribution for O & M 1,404,929 1,461,125 1,519,570 1,565,157 1,612,112 1,660,475 1,710,290 1,761,598 1,814,446 1,868,880 1,924,946 61018-Nacimiento contribution for Electric Service 714,503 953,303 1,273,959 1,681,627 1,765,708 1,853,993 1,946,693 2,044,028 2,146,229 2,253,540 2,366,217 61019-Nacimiento contribution for Capital Projects 2,503,607 789,896 262,500 273,000 283,920 295,277 307,088 319,371 332,146 345,432 359,249 61020-Nacimiento contribution for Debt Service 4,621,208 4,622,040 4,615,844 4,621,896 4,622,732 4,617,371 4,612,077 4,626,248 4,616,791 4,621,413 4,620,904 61021-Salinas contribution for O & M 1,420,351 1,336,541 1,390,003 1,431,703 1,474,654 1,518,893 1,564,460 1,611,394 1,659,736 1,709,528 1,760,814 61022-Salinas contribution for Electric Service 287,100 275,000 164,594 95,053 99,806 104,796 110,036 115,538 121,315 127,380 133,750 61023-Salinas contribution for Capital Projects 184,475 5,053,430 1,101,500 745,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 61024-Whale Rock contribution for O & M 721,170 735,977 758,057 780,798 804,222 828,349 853,199 878,795 905,159 932,314 960,283 61025-Whale Rock contribution for Electric Service 352,500 306,306 292,383 168,851 177,294 186,158 195,466 205,240 215,502 226,277 237,591 61026-Whale Rock contribution for Capital Projects 402,694 82,575 539,490 423,885 11,010 1,029,435 1,001,910 1,001,910 11,010 11,010 11,010 61026-Whale Rock contribution for Capital Projects - Reserves 0 762,357 762,357 1,524,714 189,922 189,922 189,922 189,922 189,922 189,922 189,922 61503-Electric Service 100,976 113,093 118,747 124,685 130,919 137,465 144,338 151,555 159,133 167,089 175,444 62501-Chemicals 14,000 14,700 15,435 16,207 16,693 17,194 17,710 18,241 18,788 19,352 19,932 62503-Equipment Maintenance Supplies 7,000 7,280 7,571 7,798 8,032 8,273 8,521 8,777 9,040 9,312 9,591 62509-Misc Materials and Supplies 35,510 30,472 31,691 32,642 33,621 34,629 35,668 36,738 37,841 38,976 40,145 63001-Membership and Certifications 1,800 1,872 1,947 2,005 2,065 2,127 2,191 2,257 2,325 2,394 2,466 ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- Total Water Source of Supply $13,017,561 $16,803,182 $13,124,903 $13,776,029 $12,022,148 $13,282,481 $13,506,635 $13,787,890 $13,065,149 $13,358,358 $13,657,870 Water Treatment
51001-Salaries - Regular $1,358,444 $1,563,097 $1,641,251 $1,723,314 $1,775,013 $1,828,264 $1,883,112 $1,939,605 $1,997,793 $2,057,727 $2,119,459 51010-Overtime 70,992 74,542 78,269 82,182 84,648 87,187 89,803 92,497 95,272 98,130 101,074 51017-Standby 19,500 20,475 21,499 22,574 23,251 23,948 24,667 25,407 26,169 26,954 27,763 51018-Call Back 12,000 5,000 5,250 5,513 5,678 5,848 6,024 6,204 6,390 6,582 6,780 52001-Retirement Contributions 131,573 138,152 145,060 152,313 156,882 161,589 166,436 171,429 176,572 181,869 187,325 53001-Employee Group Insurance 215,584 226,363 237,681 249,565 257,052 264,764 272,707 280,888 289,315 297,994 306,934 53002-Retiree Healthcare 22,322 23,438 24,610 25,840 26,615 27,414 28,236 29,083 29,956 30,855 31,780 55001-Medicare 20,095 21,100 22,155 23,263 23,961 24,680 25,420 26,183 26,968 27,777 28,610 61005-Data Processing Services 1,100 1,144 1,190 1,225 1,262 1,300 1,339 1,379 1,421 1,463 1,507 61013-Other Contract Services 461,098 438,610 456,285 470,112 484,358 499,038 514,164 529,751 545,811 562,360 579,412 61027-Control Systems 13,792 14,344 14,917 15,365 15,826 16,301 16,790 17,293 17,812 18,347 18,897 61503-Electric Service 944,179 750,000 787,500 826,875 868,219 911,630 957,211 1,005,072 1,055,325 1,108,092 1,163,496 61505-Communication Service 8,800 9,152 9,518 9,804 10,098 10,401 10,713 11,034 11,365 11,706 12,057 61506-Solid Waste Service 6,713 6,981 7,261 7,478 7,703 7,934 8,172 8,417 8,669 8,930 9,197 62002-Office Supplies 3,100 3,224 3,353 3,454 3,557 3,664 3,774 3,887 4,004 4,124 4,247 62004-Publications and Subscriptions 1,400 1,456 1,514 1,560 1,606 1,655 1,704 1,755 1,808 1,862 1,918 62007-Employee Recognition 1,100 1,144 1,190 1,225 1,262 1,300 1,339 1,379 1,421 1,463 1,507 62009-Software Licensing and Maint Agreements 183 190 198 204 210 216 223 229 236 243 251 62010-Office Expenses - Other 300 312 324 334 344 355 365 376 387 399 411 62501-Chemicals 795,819 726,974 763,322 801,488 825,533 850,299 875,808 902,082 929,145 957,019 985,730 62502-Construction Materials and Supplies 31,400 32,656 33,962 34,981 36,031 37,111 38,225 39,372 40,553 41,769 43,022 62503-Equipment Maintenance Supplies 71,948 92,964 96,683 99,583 102,571 105,648 108,817 112,082 115,444 118,907 122,475 62506-Safety Materials and Supplies 26,680 27,747 28,857 29,723 30,614 31,533 32,479 33,453 34,457 35,491 36,555 62509-Misc Materials and Supplies 49,498 85,435 88,852 91,518 94,263 97,091 100,004 103,004 106,094 109,277 112,555 63001-Membership and Certifications 3,286 3,417 3,554 3,661 3,771 3,884 4,000 4,120 4,244 4,371 4,502 63002-Education and Training 21,300 22,152 23,038 23,729 24,441 25,174 25,930 26,707 27,509 28,334 29,184 --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- Total Water Treatment $4,292,206 $4,290,068 $4,497,294 $4,706,882 $4,864,770 $5,028,226 $5,197,461 $5,372,690 $5,554,140 $5,742,045 $5,936,649 5 of 19 03/21/2025 DRAFT

City of San Luis Obispo Page 4 of 7
Water Rate Study
Revenue Requirement
Exhibit 3
FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 FY 2031-32 FY 2032-33 FY 2033-34 FY 2034-35 Notes Water Distribution
51001-Salaries - Regular $1,050,433 $1,102,954 $1,158,102 $1,216,007 $1,252,487 $1,290,062 $1,328,764 $1,368,627 $1,409,685 $1,451,976 $1,495,535 51010-Overtime 18,000 18,900 19,845 20,837 21,462 22,106 22,769 23,453 24,156 24,881 25,627 51017-Standby 19,000 19,950 20,948 21,995 22,655 23,334 24,034 24,755 25,498 26,263 27,051 51018-Call Back 45,000 47,250 49,613 52,093 53,656 55,266 56,924 58,631 60,390 62,202 64,068 52001-Retirement Contributions 101,288 106,353 111,670 117,254 120,771 124,395 128,126 131,970 135,929 140,007 144,207 53001-Employee Group Insurance 171,150 179,708 188,693 198,128 204,071 210,193 216,499 222,994 229,684 236,575 243,672 53002-Retiree Healthcare 17,052 17,904 18,800 19,740 20,332 20,942 21,570 22,217 22,884 23,570 24,277 55001-Medicare 15,072 15,826 16,617 17,448 17,971 18,510 19,065 19,637 20,227 20,833 21,458 56003-Contingency Expense 87,904 90,541 93,257 0 0 0 0 0 0 0 0 61005-Data Processing Services 9,300 9,672 10,059 10,361 10,671 10,992 11,321 11,661 12,011 12,371 12,742 61011-Maintenance 1,000 1,040 1,082 1,114 1,147 1,182 1,217 1,254 1,291 1,330 1,370 61013-Other Contract Services 133,762 139,112 144,677 149,017 153,488 158,092 162,835 167,720 172,752 177,934 183,272 61027-Control Systems 22,542 23,444 24,381 25,113 25,866 26,642 27,442 28,265 29,113 29,986 30,886 61503-Electric Service 41,580 35,000 36,750 38,588 40,517 42,543 44,670 46,903 49,249 51,711 54,296 61505-Communication Service 18,000 18,720 19,469 20,053 20,654 21,274 21,912 22,570 23,247 23,944 24,662 62002-Office Supplies 1,550 1,612 1,676 1,727 1,779 1,832 1,887 1,943 2,002 2,062 2,124 62003-Postage 150 156 162 167 172 177 183 188 194 200 206 62004-Publications and Subscriptions 500 520 541 557 574 591 609 627 646 665 685 62007-Employee Recognition 900 927 955 983 1,013 1,043 1,075 1,107 1,140 1,174 1,210 62008-Furniture and Fixtures 500 520 541 557 574 591 609 627 646 665 685 62010-Office Expenses - Other 400 416 433 446 459 473 487 502 517 532 548 62501-Chemicals 300 315 331 347 358 368 379 391 403 415 427 62502-Construction Materials and Supplies 134,212 139,580 145,163 149,518 154,004 158,624 163,383 168,284 173,333 178,533 183,889 62503-Equipment Maintenance Supplies 18,000 18,720 19,469 20,053 20,654 21,274 21,912 22,570 23,247 23,944 24,662 62506-Safety Materials and Supplies 13,590 14,134 14,699 15,140 15,594 16,062 16,544 17,040 17,551 18,078 18,620 62509-Misc Materials and Supplies 38,300 64,753 41,425 42,668 43,948 45,267 46,625 48,023 49,464 50,948 52,476 63001-Membership and Certifications 4,400 4,576 4,759 4,902 5,049 5,200 5,356 5,517 5,683 5,853 6,029 63002-Education and Training 20,500 21,320 22,173 22,838 23,523 24,229 24,956 25,704 26,475 27,270 28,088 63003-Trips and Meetings 500 520 541 557 574 591 609 627 646 665 685 --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- Total Water Distribution $1,984,884 $2,094,442 $2,166,829 $2,168,206 $2,234,024 $2,301,855 $2,371,762 $2,443,808 $2,518,060 $2,594,587 $2,673,459 6 of 19 03/21/2025 DRAFT

City of San Luis Obispo Page 5 of 7
Water Rate Study
Revenue Requirement
Exhibit 3
FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 FY 2031-32 FY 2032-33 FY 2033-34 FY 2034-35 Notes Water Resources
51001-Salaries - Regular $421,889 $442,983 $465,132 $488,389 $503,041 $518,132 $533,676 $549,686 $566,177 $583,162 $600,657 51010-Overtime 5,000 5,250 5,513 5,788 5,962 6,141 6,325 6,515 6,710 6,911 7,119 52001-Retirement Contributions 36,385 38,204 40,114 42,120 43,383 44,685 46,025 47,406 48,828 50,293 51,802 53001-Employee Group Insurance 52,068 54,671 57,405 60,275 62,083 63,946 65,864 67,840 69,875 71,972 74,131 53002-Retiree Healthcare 5,409 5,680 5,964 6,262 6,450 6,643 6,843 7,048 7,260 7,477 7,702 55001-Medicare 5,782 6,071 6,374 6,693 6,894 7,101 7,314 7,533 7,759 7,992 8,231 61001-Advertising and Public Outreach 5,250 5,460 5,678 5,849 6,024 6,205 6,391 6,583 6,780 6,984 7,193 61005-Data Processing Services 6,100 6,344 6,598 6,796 7,000 7,210 7,426 7,649 7,878 8,114 8,358 61013-Other Contract Services 8,400 16,236 16,885 17,392 17,914 18,451 19,005 19,575 20,162 20,767 21,390 61505-Communication Service 2,200 2,288 2,380 2,451 2,524 2,600 2,678 2,759 2,841 2,927 3,014 62001-Print and Reproduction 1,000 1,040 1,082 1,114 1,147 1,182 1,217 1,254 1,291 1,330 1,370 62002-Office Supplies 600 624 649 668 688 709 730 752 775 798 822 62003-Postage 2,500 2,600 2,704 2,785 2,869 2,955 3,043 3,135 3,229 3,326 3,425 62007-Employee Recognition 350 364 379 390 402 414 426 439 452 466 480 62506-Safety Materials and Supplies 1,450 1,508 1,568 1,615 1,664 1,714 1,765 1,818 1,873 1,929 1,987 62509-Misc Materials and Supplies 32,700 34,008 35,368 36,429 37,522 38,648 39,807 41,002 42,232 43,499 44,804 63001-Membership and Certifications 7,700 8,008 8,328 8,578 8,836 9,101 9,374 9,655 9,944 10,243 10,550 63002-Education and Training 5,000 5,200 5,408 5,570 5,737 5,909 6,087 6,269 6,457 6,651 6,851 63003-Trips and Meetings 1,000 1,040 1,082 1,114 1,147 1,182 1,217 1,254 1,291 1,330 1,370 --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- Total Water Resources $600,782 $637,579 $668,611 $700,279 $721,288 $742,926 $765,214 $788,170 $811,815 $836,170 $861,255 Utility Billing
51001-Salaries - Regular $87,263 $91,627 $96,208 $101,018 $104,049 $107,170 $110,385 $113,697 $117,108 $120,621 $124,240 51004-Salaries - Temporary 0 0 0 0 0 0 0 0 0 0 0
51010-Overtime 1,500 1,575 1,654 1,736 1,789 1,842 1,897 1,954 2,013 2,073 2,136 52001-Retirement Contributions 8,767 9,205 9,666 10,149 10,453 10,767 11,090 11,423 11,765 12,118 12,482 53001-Employee Group Insurance 11,738 12,325 12,941 13,588 13,996 14,416 14,849 15,294 15,753 16,225 16,712 53002-Retiree Healthcare 1,114 1,170 1,229 1,290 1,329 1,369 1,410 1,452 1,496 1,541 1,587 55001-Medicare 1,776 1,865 1,958 2,056 2,118 2,182 2,247 2,314 2,384 2,455 2,529 61005-Data Processing Services 30,250 31,460 32,718 33,700 34,711 35,752 36,825 37,930 39,067 40,240 41,447 61013-Other Contract Services 132,355 128,326 133,459 137,463 141,586 145,834 150,209 154,715 159,357 164,137 169,062 61028-Personnel Services 0 51 106 110 113 116 120 123 6,624 6,823 7,028 62001-Print and Reproduction 21,600 22,464 23,363 24,063 24,785 25,529 26,295 27,084 27,896 28,733 29,595 62002-Office Supplies 250 260 270 279 287 295 304 313 323 333 343 62003-Postage 57,470 59,768 62,159 64,024 65,945 67,923 69,961 72,060 74,221 76,448 78,741 62007-Employee Recognition 100 104 108 111 115 118 122 125 129 133 137 62505-Machinery and Equipment 375 390 406 418 430 443 457 470 484 499 514 62509-Misc Materials and Supplies 125 130 135 139 143 148 152 157 161 166 171 63001-Membership and Certifications 50 52 54 56 57 59 61 63 65 67 69 63002-Education and Training 1,500 1,560 1,622 1,671 1,721 1,773 1,826 1,881 1,937 1,995 2,055 63003-Trips and Meetings 600 624 649 668 688 709 730 752 775 798 822 --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- Total Utility Billing $356,834 $362,957 $378,706 $392,540 $404,316 $416,446 $428,939 $441,807 $461,559 $475,406 $489,668 7 of 19 03/21/2025 DRAFT

City of San Luis Obispo Page 6 of 7
Water Rate Study
Revenue Requirement
Exhibit 3
FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 FY 2031-32 FY 2032-33 FY 2033-34 FY 2034-35 Notes Additional O&M
Future O&M $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- Total Additional O&M $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Operations & Maintenance $25,837,604 $30,313,360 $27,113,079 $28,246,424 $27,030,308 $28,849,974 $29,650,680 $30,537,205 $30,450,684 $31,399,311 $32,380,840 Rate Funded Capital $1,282,175 $0 $3,550,000 $4,200,000 $6,975,000 $7,150,000 $7,690,000 $8,175,000 $10,050,000 $11,320,000 $12,700,000 $3,340,219 FY 2022-23 Dep. Exp.

Debt Service
2012 Revenue Refunding Bonds $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Debt Schedule 2018 Refunding Bond (Water Admin/Eng) 27,327 27,284 20,929 20,829 20,891 20,914 20,900 20,943 20,848 20,742 20,717 Debt Schedule 2018 Refunding Bond (Water Treatment) 888,250 887,250 885,000 886,500 886,500 900,000 891,250 881,250 870,000 887,500 887,250 Debt Schedule 2020 CIEDB (I-Bank) Loan 953,230 951,376 949,476 947,529 945,532 943,486 941,389 939,239 937,036 934,777 932,462 Debt Schedule Additional Long-Term Debt 0 0 0 0 325,257 325,257 926,983 1,528,709 1,919,017 1,919,017 1,919,017 Calculated @ 5% for 30 yrs -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- Total Debt Service $1,868,807 $1,865,911 $1,855,405 $1,854,858 $2,178,180 $2,189,658 $2,780,522 $3,370,141 $3,746,901 $3,762,037 $3,759,446 LESS: Development Impact Fees $400,000 $400,000 $400,000 $400,000 $400,000 $400,000 $400,000 $400,000 $400,000 $400,000 $400,000 -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- Net Debt Service $1,468,807 $1,465,911 $1,455,405 $1,454,858 $1,778,180 $1,789,658 $2,380,522 $2,970,141 $3,346,901 $3,362,037 $3,359,446 To / (From) Reserves
To/From Operating Reserve $3,000 ($1,465,506) ($2,568) $2,015 $10,512 $4,391 $13,512 $86,796 $58,988 $81,389 $93,379 To/From Capital Reserve 0 0 0 0 0 0 175,000 185,000 200,000 210,000 225,000 To/From Bond Reserve 0 0 0 0 0 0 0 0 0 0 0
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- Total To / (From) Reserves $3,000 ($1,465,506) ($2,568) $2,015 $10,512 $4,391 $188,512 $271,796 $258,988 $291,389 $318,379 Total Revenue Requirement $28,591,587 $30,313,765 $32,115,916 $33,903,297 $35,794,000 $37,794,023 $39,909,714 $41,954,142 $44,106,573 $46,372,736 $48,758,665 Bal. / (Def.) of Funds $0 ($1,429,949) ($2,962,054) ($4,455,874) ($6,047,500) ($7,742,729) ($9,547,695) ($11,284,411) ($13,123,617) ($15,070,859) ($17,131,983) Balance a % of Rate Adj. Req'd 0.0% 5.5% 11.3% 16.9% 22.7% 28.8% 35.3% 41.4% 47.7% 54.4% 61.3% Proposed Rate Adjustment 0.0% 5.5% 5.5% 5.0% 5.0% 5.0% 5.0% 4.5% 4.5% 4.5% 4.5% Months of Adjustment 12 12 12 12 12 12 12 12 12 12 12
Add'l Revenue with Rate Adj. $0 $1,429,949 $2,962,054 $4,455,874 $6,047,500 $7,742,729 $9,547,695 $11,284,411 $13,123,617 $15,070,859 $17,131,983 Bal. / (Def.) After Rate Adj. $0 $0 ($0) $0 $0 $0 $0 $0 ($0) $0 $0 Add'l Rate Adj. Req'd 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 8 of 19 03/21/2025 DRAFT

City of San Luis Obispo Page 7 of 7
Water Rate Study
Revenue Requirement
Exhibit 3
FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 FY 2031-32 FY 2032-33 FY 2033-34 FY 2034-35 Notes Average Residential Customer Bill $82.79 (Base Charge + 6 CCF) Customer Bill on Proposed Adjustment $87.34 $92.17 $96.80 $101.63 $106.68 $112.01 $117.05 $122.32 $127.83 $133.58 Bill Difference - Monthly 4.55 4.83 4.63 4.83 5.05 5.33 5.04 5.27 5.50 5.75 Cumulative Bill Difference 4.55 9.38 14.01 18.84 23.89 29.22 34.26 39.53 45.04 50.79 Debt Service Coverage Ratio (all debt, without DIF)
Before Rate Adjustment 1.47 0.00 1.10 0.65 1.25 0.55 0.26 0.04 0.14 0.00 0.00 After Proposed Rate Adjustment 1.47 0.00 2.70 3.05 4.02 4.08 3.69 3.39 3.64 3.98 4.36 Debt Service Coverage Ratio (all debt, with DIF)
Before Rate Adjustment 1.90 0.00 1.53 1.08 1.61 0.91 0.54 0.28 0.36 0.19 0.01 After Proposed Rate Adjustment 1.90 0.43 3.13 3.48 4.39 4.45 3.98 3.63 3.86 4.19 4.57 Reserve Funds
Total Beginning Balance $43,032,553 $23,855,703 $18,802,287 $21,627,070 $18,434,696 $19,275,993 $18,657,715 $14,384,331 $13,964,443 $12,399,859 $12,971,122 Operating Fund
Beginning Balance $5,167,521 $6,062,672 $5,422,616 $5,649,285 $5,406,062 $5,769,995 $5,930,136 $6,107,441 $6,090,137 $6,279,862 $6,476,168 20% of O&M Plus: Additions 3,000 0 0 2,015 10,512 4,391 13,512 86,796 58,988 81,389 93,379 Less: Uses of Funds 0 (1,465,506) (2,568) 0 0 0 0 0 0 0 0 Ending Balance $5,170,521 $4,597,166 $5,420,048 $5,651,300 $5,416,573 $5,774,385 $5,943,648 $6,194,237 $6,149,125 $6,361,251 $6,569,547 Capital Fund
Beginning Balance $35,110,103 $15,050,129 $10,462,758 $12,890,526 $9,761,079 $10,047,617 $9,067,228 $4,421,223 $3,812,901 $1,841,875 $1,988,551 Balance of Funds Plus: Additions 0 0 0 0 255,129 0 175,000 185,000 200,000 210,000 225,000 Plus: FEMA Reimbursement 0 0 4,171,875 0 0 0 0 0 0 0 0
Development Impact Fees 800,000 800,000 800,000 800,000 800,000 800,000 800,000 800,000 800,000 800,000 800,000 Less: Capital Project Funding (19,979,850) (4,563,567) (2,320,179) (4,170,045) (400,000) (1,598,325) (5,437,552) (1,667,340) (2,799,228) (695,782) (1,892,620) Ending Balance $15,930,253 $11,286,562 $13,114,454 $9,520,481 $10,416,208 $9,249,292 $4,604,676 $3,738,883 $2,013,673 $2,156,093 $1,120,931 Rate Stabilization
Beginning Balance $2,579,273 $2,742,903 $2,916,912 $3,087,260 $3,267,556 $3,458,381 $3,660,351 $3,855,667 $4,061,405 $4,278,122 $4,506,403 10% of Rate Revenues Plus: Additions 0 0 0 0 0 0 0 0 0 0 0
Less: Capital Project Funding 0 0 0 0 0 0 0 0 0 0 0
Ending Balance $2,579,273 $2,742,903 $2,916,912 $3,087,260 $3,267,556 $3,458,381 $3,660,351 $3,855,667 $4,061,405 $4,278,122 $4,506,403 UFL Trust
Beginning Balance $175,656 $175,656 $175,656 $175,656 $175,656 $175,656 $175,656 $175,656 $175,656 $175,656 $175,656 Plus: Additions 0 0 0 0 0 0 0 0 0 0 0
Less: Capital Project Funding 0 0 0 0 0 0 0 0 0 0 0
Ending Balance $175,656 $175,656 $175,656 $175,656 $175,656 $175,656 $175,656 $175,656 $175,656 $175,656 $175,656 Total Ending Balance $23,855,703 $18,802,287 $21,627,070 $18,434,696 $19,275,993 $18,657,715 $14,384,331 $13,964,443 $12,399,859 $12,971,122 $12,372,537 Days of O&M 337 226 291 238 260 236 177 167 149 151 139 9 of 19 03/21/2025 DRAFT

City of San Luis Obispo
Water Rate Study Page 1 of 3
Capital Improvement Plan
Exhibit 4
Capital Improvement Projects FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 FY 2031-32 FY 2032-33 FY 2033-34 FY 2034-35 Total Notes Source of Supply
Salinas Reservoir Transfer of Ownership Plan $550,000 $0 $0 $0 $0 $0 $0 $0 $0 $1,304,773 $1,343,916 $3,198,690 SGMA GSP (Groundwater Basin Management) 150,000 156,000 159,135 163,909 168,826 173,891 179,108 184,481 0 0 0 1,335,350 Groundwater Well Development Program 350,000 2,340,000 0 0 0 0 0 0 0 0 0 2,690,000 Source Water Strategic Plan 90,000 0 0 0 0 0 298,513 0 0 0 0 388,513 Future Source Water Strategy 0 0 0 0 337,653 1,507,056 1,552,268 1,598,836 0 0 0 4,995,813 --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- Total Source of Supply $1,140,000 $2,496,000 $159,135 $163,909 $506,479 $1,680,947 $2,029,889 $1,783,317 $0 $1,304,773 $1,343,916 $12,608,366 Water Treatment
Water Treatment Plant - Major Equipment Maintenance $180,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $180,000 Ozone System Maintenance 0 145,600 148,526 152,982 157,571 162,298 167,167 172,182 177,348 182,668 188,148 1,654,491 Chemical System Maintenance 0 34,320 35,010 36,060 37,142 38,256 39,404 40,586 41,803 43,058 44,349 389,987 Air Compressor and Dryer Maintenance 0 7,280 7,426 7,649 7,879 8,115 8,358 8,609 8,867 9,133 9,407 82,725 Water Treatment Plant - Asset Replacement 0 0 0 0 0 0 53,732 55,344 57,005 58,715 60,476 285,272 Contact Basin Drain Repair - Ozone System 0 39,520 0 0 0 0 0 0 0 0 0 39,520 Package Thickener 25,000 0 0 0 540,244 0 0 0 0 0 0 565,244 Actiflo Poly Blend Units 0 26,000 0 0 0 0 0 0 0 0 0 26,000 Secondary Transformers and Arc Flash 0 0 0 0 0 0 597,026 0 0 0 0 597,026 Washwater Reclamation pipe celaning 0 0 0 0 0 44,052 0 0 0 0 0 44,052 Actiflo Electrical Panel Replacement (Allen Bradley) 0 0 0 0 112,551 0 0 0 0 0 0 112,551 Cityworks Integration Plan - Implementation 0 0 0 131,127 0 0 0 0 0 0 0 131,127 Facility Master Plan 0 0 0 0 787,856 1,159,274 597,026 1,229,874 1,266,770 1,304,773 1,343,916 7,689,490 Effluent Pipe Corrosion Protection 0 52,000 0 0 0 0 0 0 0 0 0 52,000 Sludge Drying Bed Reconstruction 0 0 0 0 0 69,556 382,097 0 0 0 0 451,653 Filter Media Replacement and Underdrain Repairs 0 499,200 0 0 0 0 0 0 0 0 0 499,200 Water Plant - Roof Replacement 0 312,000 0 0 0 0 0 0 0 0 0 312,000 Water Treatment Plant - Water Meter Replacement 30,000 0 0 0 0 0 0 0 0 0 0 30,000 Salinas Water Meter 0 52,000 53,045 0 0 0 0 0 0 0 0 105,045 Drying Bed Meters 0 4,992 0 0 0 0 0 0 0 0 0 4,992
Effluent Meter Relocation 0 0 33,949 0 0 0 0 0 0 0 0 33,949 Waterline Replacement: Stenner Canyon at Reservoir 0 0 0 0 90,041 1,275,201 0 0 0 0 0 1,365,242 Raw Waterline Replacement: 30" (south of bridge) 0 0 0 0 0 0 19,105 196,780 0 0 0 215,885 Water Storage Tank Major Maintenance 0 0 0 0 0 0 1,313,458 1,352,861 1,393,447 1,435,251 1,478,308 6,973,324 Edna Tank Internal and External Coatings 0 0 0 0 3,376,526 0 0 0 0 0 0 3,376,526 Water Reservoir 1 40,000 0 0 49,173 0 0 53,732 0 0 58,715 0 201,620 Water Reservoir 2 0 0 0 49,173 0 0 53,732 0 0 58,715 0 161,620 Storage Tanks 0 10,400 10,609 0 11,255 11,593 0 12,299 12,668 0 0 68,823 T-3 Water Storage Tank Replacement - High Pressure Zone 900,000 0 530,450 0 0 10,723,285 11,044,984 0 0 0 0 23,198,719 Debt Funded Energy Efficiency Project (SST) 0 0 0 0 0 0 417,918 0 0 0 0 417,918 Remove Plant Water Generator 500,397 0 0 0 0 0 0 0 0 0 0 500,397 Fleet - WTP
1000521-14-WTP 1/2 ton Crew Cab 4X4 Pickup (1004-F150) 0 0 0 74,852 0 0 0 0 0 0 0 74,852 Service Body Truck (1644) 0 0 0 0 0 0 0 122,987 0 0 0 122,987 2000521-XX - WTP Utility Cart 0 0 0 0 0 46,371 0 0 0 0 0 46,371 Water Treatment Plant Forklift (0910) 0 0 0 81,955 0 0 0 0 0 0 0 81,955 --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- Total Water Treatment $1,675,397 $1,183,312 $819,015 $582,970 $5,121,065 $13,538,003 $14,747,740 $3,191,523 $2,957,908 $3,151,027 $3,124,606 $50,092,565 10 of 19 03/21/2025 DRAFT

City of San Luis Obispo
Water Rate Study Page 2 of 3
Capital Improvement Plan
Exhibit 4
Capital Improvement Projects FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 FY 2031-32 FY 2032-33 FY 2033-34 FY 2034-35 Total Notes Water Distribution
Waterline Replacement (General Distribution) $0 $0 $0 $0 $0 $0 $0 $3,935,596 $2,026,832 $4,175,274 $0 $10,137,703 Johnson - Iris to Bishop Water Pipeline Replacement 440,000 0 0 0 0 0 0 0 0 0 0 440,000 Santa Rosa - Stenner Creek to Highland 30" Water Pipeline Rplc 150,000 0 0 10,085,870 0 0 0 0 0 0 0 10,235,870 Debt Funded Chorro - Highland to Meinecke 24" Water Pipeline Replacement 2,620,000 104,000 0 0 0 0 0 0 0 0 0 2,724,000 Foothill - Chorro to California 24" Pipeline Inter-tie 0 0 0 0 0 0 3,892,610 0 0 0 0 3,892,610 Luneta - San Jose to Broad 12" Water Pipeline Replacement 0 0 0 0 0 0 0 0 0 391,432 6,800,217 7,191,649 Highland and UPRR at Cal Poly Water Pipeline Replacement 0 0 0 0 0 985,383 0 0 0 0 0 985,383 Rockview - Stoneridge to Broad Water Pipeline Replacement 0 0 0 0 0 0 0 159,884 1,938,158 0 0 2,098,042 Patricia, Highland, and La Entrada Water Pipeline Replacement 0 0 134,734 138,776 0 0 0 0 0 0 0 273,511 Craig, Christina, and Jaycee Water Pipeline Replacement 0 0 0 0 0 0 0 0 0 0 174,709 174,709 California - Stafford to Mill Water Pipeline Replacement 0 1,944,800 0 0 0 0 0 0 0 0 0 1,944,800 Terrace Hill Booster Pump Station 0 0 0 0 0 0 53,732 184,481 3,204,928 0 0 3,443,142 Water Distribution System - Point Repairs 0 260,000 0 273,182 0 405,746 0 430,456 443,370 456,671 470,371 2,739,794 Waterline Abandonment & Connections 50,000 0 53,045 54,636 56,275 57,964 59,703 61,494 63,339 65,239 67,196 588,890 Water Utility Trench Repair 280,000 353,600 360,706 371,527 382,673 394,153 405,978 418,157 430,702 443,623 456,932 4,298,051 Water Utility Raise Valve Covers 35,000 296,400 37,132 38,245 39,393 40,575 41,792 43,046 44,337 45,667 47,037 708,623 Water Meters and Boxes 0 0 0 27,318 28,138 28,982 59,703 61,494 221,685 228,335 235,185 890,839 AMI Water Meters 460,000 511,680 521,963 0 0 0 0 0 0 0 0 1,493,643 AMI Radio 360,000 406,640 414,812 0 0 0 0 0 0 0 0 1,181,452 AMI Meter Box Lids 75,000 78,000 79,568 0 0 0 0 0 0 0 0 232,568 Fire Hydrants 55,000 57,200 58,350 60,100 61,903 63,760 65,673 67,643 69,672 71,763 73,915 704,979 Water Distribution System Hydraulic Model & Master Plan Update 0 0 0 131,127 0 0 0 0 0 0 0 131,127 Recycled Water
UV Bulb Replacement (annual replacement) 0 0 10,609 10,927 11,255 11,593 11,941 12,299 12,668 13,048 13,439 107,778 Recycled Water Pump Station Maintenance 60,000 0 0 0 0 0 0 0 760,062 782,864 806,350 2,409,276 RW Pump Upgrade 0 0 0 0 0 52,167 0 0 0 0 0 52,167
RW Effluent Meter Replacement 0 0 47,741 0 0 0 0 0 0 0 0 47,741 Chemical Storage Tank Replacement 0 104,000 0 0 0 0 0 0 0 0 0 104,000 Recycled Water Storage Expansion 0 0 0 0 0 23,185 0 0 0 0 0 23,185 Orcutt Street - Fernwood to Laurel Pipeline 25,000 0 2,015,710 0 0 0 0 0 0 0 0 2,040,710 Recycled Waterline at Tank Farm - Long to Innovation Pipeline 0 0 0 0 0 0 29,851 2,121,532 0 0 0 2,151,384 Recycled Waterline at Broad Street - Tank Farm to Aerovista 0 0 0 0 0 0 59,703 2,631,930 0 0 0 2,691,633 Recycled Water System Retrofits (potable to recycled) 0 0 0 0 0 0 0 61,494 190,016 0 0 251,509 Ignition System for Recycled Water System 45,000 0 0 0 0 0 0 0 0 0 0 45,000 Fleet - Water Distribution
Dump Truck (0840) 0 0 0 0 0 202,873 0 0 0 0 0 202,873
Backhoe (0720) 0 0 0 273,182 0 0 0 0 0 97,858 0 371,040 Service body trucks (0846, 0847) 0 0 636,540 655,636 0 0 0 0 0 0 0 1,292,176 Medium duty truck with bed & crane 0 0 0 82,501 0 0 0 0 0 0 0 82,501 Pickup (1629) 0 0 0 0 0 0 94,330 0 0 0 0 94,330
Water Distribution Pickup (1523) 0 0 0 0 0 0 0 0 0 125,911 0 125,911 Water Distribution Pickup (1903) 0 0 0 0 0 0 0 0 0 125,911 0 125,911 Water Distribution Pickup (1908) 0 0 0 0 0 0 0 110,074 0 0 0 110,074 Trailer (0235) 0 0 0 0 0 28,982 0 0 0 0 0 28,982
Water Distribution Portable Generator (2007) 0 0 0 0 0 0 0 0 0 0 268,783 268,783 Water Distribution Portable Generator (1619) 0 0 0 0 0 0 238,810 0 0 0 0 238,810 Water Distribution Hydro Ex Trailer (1621) 0 0 0 0 168,826 0 0 0 0 0 0 168,826 --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- Total Water Distribution $4,655,000 $4,116,320 $4,370,908 $12,203,029 $748,463 $2,295,363 $5,013,826 $10,299,579 $9,405,768 $7,023,594 $9,414,134 $69,545,983 11 of 19 03/21/2025 DRAFT

City of San Luis Obispo
Water Rate Study Page 3 of 3
Capital Improvement Plan
Exhibit 4
Capital Improvement Projects FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 FY 2031-32 FY 2032-33 FY 2033-34 FY 2034-35 Total Notes Admin, IT, & Fleet
Public Works - Misc $0 $0 $0 $0 $0 $57,964 $0 $55,344 $0 $65,239 $67,196 $245,743 Mid-Higuera 45,000 0 0 0 0 0 0 0 0 0 0 45,000
Buchon/Santa Rosa (150,000) 0 0 0 0 0 0 0 0 0 0 (150,000) Overpass - Elks Lane 0 0 0 0 0 0 59,703 0 0 0 0 59,703
Prado Bridge Waterline Replacement 0 0 0 0 0 0 35,822 0 0 0 0 35,822 Pavement Management (Water Fund Contribution) 0 2,080 0 0 0 0 0 0 0 0 0 2,080 ATP - Higuera Corridor Complete Street Design (Water Fund Contribution) 0 2,080 0 0 0 0 0 0 0 0 0 2,080 Corp Yard Material Storage Stalls (Water Fund Contribution) 0 0 26,523 0 281,377 0 0 0 0 0 0 307,900 Corporation Yard Permimeter Fence Replacement (Water Fund Contribution) 0 0 0 0 0 0 0 6,149 76,006 0 0 82,156 Corporation Yard EV Charging Station (Water Fund Contribution) 0 0 84,872 0 0 0 0 0 0 0 0 84,872 879 Roofing Project 65,000 78,000 0 0 0 0 0 0 0 0 0 143,000 Fleet
Compact Pickup (1613) $0 $0 $0 $0 $0 $0 $62,688 $0 $0 $0 $0 $62,688 Shared IT
Network Firewalls $0 $0 $0 $0 $0 $22,902 $0 $0 $0 $0 $30,779 $53,681 Network Security Upgrade 0 0 0 10,690 0 0 12,765 0 0 15,242 0 38,697 Network Switch Infrastructure Repl. 0 0 0 0 39,113 0 0 0 0 52,565 0 91,678 Radio Handhelds Repl. 0 0 0 0 0 0 0 83,192 0 0 0 83,192 UB System Upgrade 0 0 0 0 0 0 0 0 0 0 135,458 135,458
Uninterruptible Power Supplies (UPS) Battery Replacement 0 0 0 2,344 0 0 2,799 0 0 3,342 0 8,485 Virtual Private Network Replacment 0 0 0 0 0 3,146 0 0 0 0 4,228 7,374 City SAN (Network Storage) 0 0 9,727 0 0 0 12,322 0 0 0 15,609 37,657 Vmware Infrastructure 0 16,455 0 0 19,459 0 0 23,235 0 0 27,744 86,893 VoIP 0 17,170 0 0 0 0 0 0 0 0 28,950 46,121
PD/City backup storage, secondary storage 0 0 0 0 3,914 0 0 0 0 0 0 3,914 Wireless System Citywide 0 0 0 7,103 0 0 0 0 9,546 0 0 16,648 --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- Total Admin, IT, & Fleet ($40,000) $115,785 $121,121 $20,137 $343,864 $84,012 $186,097 $167,921 $85,552 $136,387 $309,964 $1,530,841 CIP Carryover $16,948,799 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $16,948,799 Unidentified Future Capital Projects $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Transfer to Cash Reserve $0 $0 $0 $0 $255,129 $0 $0 $0 $0 $0 $0 $255,129 Total Capital Improvement Projects $24,379,196 $7,911,417 $5,470,179 $12,970,045 $6,975,000 $17,598,325 $21,977,552 $15,442,340 $12,449,228 $11,615,782 $14,192,620 $150,981,683 Less: Outside Funding Sources
Operating Fund Reserves $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Capital Fund Reserves 19,579,850 4,163,567 1,920,179 3,770,045 0 1,198,325 5,037,552 1,267,340 2,399,228 295,782 1,492,620 41,124,488 Prop 1B Revenue 2,860,000 3,747,850 0 0 0 0 0 0 0 0 0 6,607,850 State Grants 657,171 0 0 0 0 0 0 0 0 0 0 657,171
Assumed Debt Proceeds 0 0 0 0 0 0 0 0 0 0 0 0
Assumed New Long-Term Debt 0 0 0 0 0 0 0 0 0 0 0 0
Additional Revenue Bonds 0 0 0 5,000,000 0 9,250,000 9,250,000 6,000,000 0 0 0 29,500,000 --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- Total Funding Sources $23,097,021 $7,911,417 $1,920,179 $8,770,045 $0 $10,448,325 $14,287,552 $7,267,340 $2,399,228 $295,782 $1,492,620 $77,889,509 Rate Funded Capital $1,282,175 $0 $3,550,000 $4,200,000 $6,975,000 $7,150,000 $7,690,000 $8,175,000 $10,050,000 $11,320,000 $12,700,000 $73,092,175 12 of 19 03/21/2025 DRAFT

City of San Luis Obispo
Water Rate Study Page 1 of 3
Revenues at Present Rates
Exhibit 5
Effective 7.1.24 Nov-23 Dec-23 Jan-24 Feb-24 Mar-24 Apr-24 May-24 Jun-24 Jul-24 Aug-24 Sep-24 Oct-24 Total Residential
Base Fee $ / Acct. / Mo.
5/8" $30.25 4,353 4,353 4,343 4,306 4,300 4,290 4,288 4,279 4,473 4,360 4,284 4,225 4,225 3/4" 30.25 4,795 4,806 4,860 4,836 4,831 4,836 4,914 4,918 5,152 5,120 5,026 5,007 5,007 1" 30.25 4,391 4,399 4,424 4,426 4,429 4,463 4,474 4,521 4,677 4,610 4,593 4,582 4,582 1 1/2" 30.25 28 28 28 28 28 28 28 28 29 28 29 29 29
2" 30.25 19 19 19 19 19 19 19 19 21 20 20 20 20
3" 30.25 1 1 1 1 1 1 1 1 1 1 1 1
8" 30.25 15 15 16 15 15 16 15 15 16 15 15 16 16
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- 13,601 13,621 13,691 13,631 13,623 13,653 13,739 13,781 14,369 14,154 13,968 13,880 13,880 Volume Charge $ / CCF
0 - 5 CCF $8.54 51,288 51,126 43,455 34,672 43,392 45,388 48,087 49,926 50,117 48,122 50,579 50,141 566,292 5 - 12 CCF 9.84 25,666 22,262 9,747 4,041 9,575 11,060 15,855 21,551 23,653 22,258 26,627 22,412 214,708 12 + CCF 16.97 9,075 6,550 1,921 714 1,571 2,715 3,319 6,372 9,803 8,301 16,606 8,737 75,685 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ------------- 86,029 79,939 55,122 39,427 54,538 59,163 67,261 77,849 83,573 78,681 93,813 81,290 856,685 Revenues
Base Fee $411,430 $412,035 $414,153 $412,338 $412,096 $413,003 $415,605 $416,875 $434,662 $428,159 $422,532 $419,870 $5,012,758 Volume Charge 844,561 766,837 499,605 347,975 491,451 542,519 623,000 746,565 827,103 770,847 975,767 797,002 8,233,233 -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- ---------------- Total Residential Revenues $1,255,991 $1,178,873 $913,757 $760,313 $903,547 $955,523 $1,038,605 $1,163,440 $1,261,765 $1,199,005 $1,398,299 $1,216,872 $13,245,990 Multi-Family
Base Fee $ / Acct. / Mo.
5/8" $30.25 385 383 380 380 378 378 378 377 385 382 376 374 374 3/4" 30.25 251 253 255 255 257 256 257 259 262 263 260 259 259 1" 50.50 232 235 233 233 234 234 233 235 240 234 236 237 237 1 1/2" 100.80 132 133 132 132 132 132 134 132 135 132 132 133 133 2" 161.30 105 104 107 105 105 105 106 106 108 107 106 107 107 3" 302.60 3 3 3 3 3 3 3 3 3 3 3 3 3
4" 504.45 11 11 11 11 11 11 11 11 11 11 11 11 11
6" 1,008.60 6 6 6 6 6 5 5 5 5 5 5 6 6
8" 1,613.85 4 4 4 4 5 5 5 5 5 5 5 5 5
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- 1,129 1,132 1,131 1,129 1,131 1,129 1,132 1,133 1,154 1,142 1,134 1,135 1,135 Volume Charge $ / CCF
All Use $9.58 36,032 34,958 28,778 21,461 29,364 30,713 32,507 32,559 31,230 28,578 32,931 33,903 373,014 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ------------- 36,032 34,958 28,778 21,461 29,364 30,713 32,507 32,559 31,230 28,578 32,931 33,903 373,014 Revenues
Base Fee $80,161 $80,252 $80,504 $80,181 $81,845 $80,807 $81,149 $81,079 $82,289 $81,462 $81,129 $82,360 $973,218 Volume Charge 345,183 334,896 275,693 205,599 281,306 294,232 311,414 311,915 299,185 273,779 315,474 324,795 3,573,469 -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- ---------------- Total Multi-Family Revenues $425,344 $415,148 $356,197 $285,780 $363,151 $375,038 $392,563 $392,994 $381,474 $355,241 $396,604 $407,155 $4,546,687 13 of 19 03/21/2025 DRAFT

City of San Luis Obispo
Water Rate Study Page 2 of 3
Revenues at Present Rates
Exhibit 5
Effective 7.1.24 Nov-23 Dec-23 Jan-24 Feb-24 Mar-24 Apr-24 May-24 Jun-24 Jul-24 Aug-24 Sep-24 Oct-24 Total Non-Residential
Base Fee $ / Acct. / Mo.
5/8" $30.25 408 405 409 407 403 402 400 400 403 403 410 401 401 3/4" 30.25 561 559 565 564 564 563 567 570 563 570 569 575 575 1" 50.50 348 347 347 352 349 349 351 349 352 351 351 351 351 1 1/2" 100.80 171 172 173 172 171 173 174 173 172 174 172 173 173 2" 161.30 182 181 185 182 184 183 185 183 187 185 184 184 184 3" 302.60 21 21 21 21 22 21 21 21 21 21 22 23 23
4" 504.45 21 21 22 21 21 21 21 21 21 21 21 21 21
6" 1,008.60 7 7 7 7 7 7 7 7 7 7 7 7 7
8" 1,613.85 3 3 3 3 3 3 3 3 3 3 3 3 3
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- 1,722 1,716 1,732 1,729 1,724 1,722 1,729 1,727 1,729 1,735 1,739 1,738 1,738 Volume Charge $ / CCF
All Use $10.14 44,248 42,147 31,922 21,096 30,222 33,995 37,541 40,100 43,072 42,620 45,436 39,444 451,842 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ------------- 44,248 42,147 31,922 21,096 30,222 33,995 37,541 40,100 43,072 42,620 45,436 39,444 451,842 Revenues
Base Fee $122,329 $122,067 $123,620 $122,693 $122,945 $122,622 $123,207 $122,773 $123,348 $123,388 $123,509 $123,822 $1,476,324 Volume Charge 448,680 427,375 323,686 213,909 306,454 344,705 380,665 406,612 436,749 432,165 460,719 399,963 4,581,683 -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- ---------------- Total Non-Residential Revenues $571,009 $549,443 $447,306 $336,602 $429,399 $467,327 $503,872 $529,385 $560,097 $555,554 $584,228 $523,785 $6,058,007 Irrigation
Base Fee $ / Acct. / Mo.
5/8" $30.25 37 36 36 36 36 36 36 36 37 38 36 36 36
3/4" 30.25 175 176 176 175 176 176 177 175 175 174 175 173 173 1" 50.50 168 170 171 171 171 171 171 171 175 173 175 173 173 1 1/2" 100.80 90 92 91 91 91 90 90 91 91 90 91 91 91
2" 161.30 67 68 67 67 67 66 65 65 65 67 65 65 65
3" 302.60 1 1 1 2 1 1 1 1 1 1 1 1 1
4" 504.45 2 2 2 2 2 2 2 2 2 2 2 2 2
6" 1,008.60 2 2 2 2 2 2 2 2 2 2 2 2 2
8" 1,613.85 1 1 1 1 1 1 1 1 1 1 1 1 1
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- 543 548 547 547 547 545 545 544 549 548 548 544 544
Volume Charge $ / CCF
All Use $10.35 16,188 10,149 2,575 1,172 1,342 4,207 7,652 15,228 19,484 19,150 24,428 19,849 141,426 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ------------- 16,188 10,149 2,575 1,172 1,342 4,207 7,652 15,228 19,484 19,150 24,428 19,849 141,426 Revenues
Base Fee $39,719 $40,183 $39,971 $40,243 $39,971 $39,709 $39,578 $39,618 $39,850 $39,971 $39,820 $39,659 $478,291 Volume Charge 167,549 105,043 26,655 12,128 13,895 43,541 79,202 157,610 201,663 198,200 252,835 205,438 1,463,759 -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- ---------------- Total Irrigation Revenues $207,268 $145,226 $66,626 $52,371 $53,866 $83,250 $118,779 $197,228 $241,514 $238,171 $292,655 $245,097 $1,942,050 14 of 19 03/21/2025 DRAFT

City of San Luis Obispo
Water Rate Study Page 3 of 3
Revenues at Present Rates
Exhibit 5
Effective 7.1.24 Nov-23 Dec-23 Jan-24 Feb-24 Mar-24 Apr-24 May-24 Jun-24 Jul-24 Aug-24 Sep-24 Oct-24 Total Summary % of Total
Customers
Residential 13,601 13,621 13,691 13,631 13,623 13,653 13,739 13,781 14,369 14,154 13,968 13,880 13,880 79.8% Multi-Family 1,129 1,132 1,131 1,129 1,131 1,129 1,132 1,133 1,154 1,142 1,134 1,135 1,135 6.5% Non-Residential 1,722 1,716 1,732 1,729 1,724 1,722 1,729 1,727 1,729 1,735 1,739 1,738 1,738 10.0% Irrigation 543 548 547 547 547 545 545 544 549 548 548 544 544 3.1% Recycled Water 81 81 84 81 85 85 82 83 86 87 88 88 88 0.5% ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Total Number of Customers 17,076 17,098 17,185 17,117 17,110 17,134 17,227 17,268 17,887 17,666 17,477 17,385 17,385 Consumption
Residential 86,029 79,939 55,122 39,427 54,538 59,163 67,261 77,849 83,573 78,681 93,813 81,290 856,685 44.3% Multi-Family 36,032 34,958 28,778 21,461 29,364 30,713 32,507 32,559 31,230 28,578 32,931 33,903 373,014 19.3% Non-Residential 44,248 42,147 31,922 21,096 30,222 33,995 37,541 40,100 43,072 42,620 45,436 39,444 451,842 23.3% Irrigation 16,188 10,149 2,575 1,172 1,342 4,207 7,652 15,228 19,484 19,150 24,428 19,849 141,426 7.3% Recycled Water 12,509 8,671 2,007 865 989 3,617 6,678 13,075 14,587 17,495 17,734 13,900 112,127 5.8% ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Total Consumption 195,007 175,864 120,404 84,020 116,456 131,695 151,639 178,811 191,947 186,523 214,341 188,387 1,935,094 Revenues
Base Fee $653,639 $654,537 $658,248 $655,455 $656,857 $656,141 $659,539 $660,345 $680,150 $672,980 $666,991 $665,711 $7,940,591 29.6% Residential 411,430 412,035 414,153 412,338 412,096 413,003 415,605 416,875 434,662 428,159 422,532 419,870 5,012,758 18.7% Multi-Family 80,161 80,252 80,504 80,181 81,845 80,807 81,149 81,079 82,289 81,462 81,129 82,360 973,218 3.6% Non-Residential 122,329 122,067 123,620 122,693 122,945 122,622 123,207 122,773 123,348 123,388 123,509 123,822 1,476,324 5.5% Irrigation 39,719 40,183 39,971 40,243 39,971 39,709 39,578 39,618 39,850 39,971 39,820 39,659 478,291 1.8% Recycled Water 0 0 0 0 0 0 0 0 0 0 0 0 0 0.0%
Volume Charge 1,922,496 1,714,921 1,144,333 787,670 1,102,321 1,258,691 1,456,490 1,744,493 1,900,576 1,837,956 2,169,983 1,856,678 18,896,608 70.4% Residential 844,561 766,837 499,605 347,975 491,451 542,519 623,000 746,565 827,103 770,847 975,767 797,002 8,233,233 30.7% Multi-Family 345,183 334,896 275,693 205,599 281,306 294,232 311,414 311,915 299,185 273,779 315,474 324,795 3,573,469 13.3% Non-Residential 448,680 427,375 323,686 213,909 306,454 344,705 380,665 406,612 436,749 432,165 460,719 399,963 4,581,683 17.1% Irrigation 167,549 105,043 26,655 12,128 13,895 43,541 79,202 157,610 201,663 198,200 252,835 205,438 1,463,759 5.5% Recycled Water 116,522 80,769 18,695 8,060 9,216 33,694 62,210 121,790 135,877 162,965 165,188 129,479 1,044,464 3.9% -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- ---------------- Total Revenues $2,576,135 $2,369,458 $1,802,581 $1,443,125 $1,759,178 $1,914,832 $2,116,029 $2,404,838 $2,580,726 $2,510,935 $2,836,974 $2,522,388 $26,837,199 FY 2024-25 Budget $26,506,593
Difference $330,606
Percent 1.2%
FY 2023-24 Actual $24,884,864
Difference $1,952,335
Percent 7.8%
Prior Study Rev Req FY 2024-25 $26,878,210
Difference ($41,011)
Percent -0.2%
15 of 19 03/21/2025 DRAFT

City of San Luis Obispo
Water Rate Study
Residential Rates
Present
Rates FY 2025-26 FY 2026-27
Fixed Charge
Per Account $30.25 $31.91 $33.67
Consumption Charge
0 - 5 CCF $8.54 $9.01 $9.51
5 - 12 CCF 9.84 10.38 10.95
12 + CCF 16.97 17.90 18.88
16 of 19 03/21/2025 DRAFT

City of San Luis Obispo
Water Rate Study
Multi-Family Rates
Present
Rates FY 2025-26 FY 2026-27
Fixed Charge
3/4" & Less $30.25 $31.91 $33.67
1" 50.50 53.28 56.21
1 1/2" 100.80 106.34 112.19
2" 161.30 170.17 179.53
3" 302.60 319.24 336.80
4" 504.45 532.19 561.46
6" 1,008.60 1,064.07 1,122.59
8" 1,613.85 1,702.61 1,796.25
Consumption Charge
All Use $9.58 $10.11 $10.67
17 of 19 03/21/2025 DRAFT

City of San Luis Obispo
Water Rate Study
Non-Residential Rates
Present
Rates FY 2025-26 FY 2026-27
Fixed Charge
3/4" & Less $30.25 $31.91 $33.67
1" 50.50 53.28 56.21
1 1/2" 100.80 106.34 112.19
2" 161.30 170.17 179.53
3" 302.60 319.24 336.80
4" 504.45 532.19 561.46
6" 1,008.60 1,064.07 1,122.59
8" 1,613.85 1,702.61 1,796.25
Consumption Charge
All Use $10.14 $10.70 $11.29
18 of 19 03/21/2025 DRAFT

City of San Luis Obispo
Water Rate Study
Irrigation Rates
Present
Rates FY 2025-26 FY 2026-27
Fixed Charge
3/4" & Less $30.25 $31.91 $33.67
1" 50.50 53.28 56.21
1 1/2" 100.80 106.34 112.19
2" 161.30 170.17 179.53
3" 302.60 319.24 336.80
4" 504.45 532.19 561.46
6" 1,008.60 1,064.07 1,122.59
8" 1,613.85 1,702.61 1,796.25
Consumption Charge
All Use $10.35 $10.92 $11.52
19 of 19 03/21/2025 DRAFT

Technical Appendix B
City of San Luis Obispo –Water & Wastewater Rate Study Update Technical Appendix B – Wastewater Analysis

FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 FY 2031-32 FY 2032-33 FY 2033-34 FY 2034-35 Revenues
Rate Revenues $19,140,992 $19,294,120 $19,448,473 $19,604,061 $19,760,893 $19,918,980 $20,078,332 $20,238,959 $20,400,871 $20,564,078 $20,728,590 Miscellaneous Revenues 2,091,847 1,215,587 1,256,106 1,259,935 1,268,705 1,344,541 1,377,303 1,447,686 1,487,260 1,529,448 1,716,724 ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- Total Revenues $21,232,839 $20,509,707 $20,704,579 $20,863,995 $21,029,598 $21,263,522 $21,455,635 $21,686,645 $21,888,131 $22,093,526 $22,445,314 Expenses
Total Unfunded Liability $1,016,890 $979,538 $1,033,969 $1,077,374 $1,122,772 $1,170,440 $1,220,491 $1,273,044 $1,328,226 $1,386,166 $1,447,003 Total Finance NonDepart 87,904 90,541 93,257 0 0 0 0 0 0 0 0 Total Wastewater Admin and Engineering 5,119,918 5,776,668 5,958,158 6,176,323 6,443,656 6,723,111 7,015,258 7,320,692 7,638,771 7,972,647 8,321,774 Total Wastewater Collection 1,519,166 1,600,108 1,677,309 1,755,343 1,808,995 1,864,307 1,921,330 1,980,119 2,040,728 2,103,216 2,167,643 Total Environmental Programs 415,941 565,915 456,871 477,967 492,306 507,075 522,287 537,956 554,095 570,718 587,839 Total Water Resource Recovery 4,517,815 4,807,649 5,036,357 5,263,892 5,448,357 5,639,683 5,838,143 6,044,020 6,257,610 6,479,221 6,709,175 Total Utility Billing 377,280 384,216 400,810 415,296 427,755 440,587 453,805 467,419 487,939 502,577 517,654 Total Water Quality Lab 753,650 789,109 826,251 862,751 888,634 915,293 942,752 971,034 1,000,165 1,030,170 1,061,075 Total Additional O&M 0 0 0 0 0 0 0 0 0 0 0
Total O&M Expenses $13,808,565 $14,993,745 $15,482,982 $16,028,946 $16,632,474 $17,260,496 $17,914,066 $18,594,284 $19,307,535 $20,044,716 $20,812,165 Rate Funded Capital $715,000 $90,000 $975,000 $2,100,000 $3,175,000 $5,125,000 $5,750,000 $6,375,000 $7,000,000 $7,650,000 $8,450,000 Net Debt Service 6,705,933 6,798,607 6,790,097 6,788,453 6,786,938 6,169,600 6,168,162 6,166,740 6,165,119 6,163,437 6,161,791 Total To / (From) Reserves 3,341 (118,527) 66,971 23,253 96,016 80,174 16,947 15,796 4,337 2,261 23,017 Total Revenue Requirement $21,232,839 $21,763,825 $23,315,051 $24,940,652 $26,690,429 $28,635,271 $29,849,175 $31,151,821 $32,476,990 $33,860,413 $35,446,973 Bal. / (Def.) of Funds $0 ($1,254,118) ($2,610,471) ($4,076,657) ($5,660,831) ($7,371,749) ($8,393,540) ($9,465,176) ($10,588,859) ($11,766,888) ($13,001,659) Balance a % of Rate Adj. Req'd 0.0% 6.5% 13.4% 20.8% 28.6% 37.0% 41.8% 46.8% 51.9% 57.2% 62.7% Proposed Rate Adjustment 0.0% 6.5% 6.5% 6.5% 6.5% 6.5% 3.5% 3.5% 3.5% 3.5% 3.5% Add'l Revenue with Rate Adj. $0 $1,254,118 $2,610,471 $4,076,657 $5,660,831 $7,371,749 $8,393,540 $9,465,176 $10,588,859 $11,766,888 $13,001,659 Bal. / (Def.) After Rate Adj. $0 ($0) $0 ($0) $0 $0 $0 $0 $0 $0 $0 Additional Rate Adjustment Required 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Average Residential Customer Bill $63.80 (Base Charge + 6 CCF [4 CCF Cap]) Customer Bill on Proposed Adjustment $67.95 $72.37 $77.07 $82.08 $87.42 $90.48 $93.65 $96.92 $100.32 $103.83 Total Ending Balance $37,699,648 $29,720,133 $23,898,730 $21,740,699 $20,172,595 $19,329,278 $17,537,905 $19,486,827 $19,076,533 $20,826,840 $19,847,479 Exhibit 1
Summary of the Revenue Requirement
Sewer Rate Study
City of San Luis Obispo
1 of 17 03/21/2025 DRAFT

City of San Luis Obispo
Sewer Rate Study
Escalation Factors
Exhibit 2
FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 FY 2031-32 FY 2032-33 FY 2033-34 FY 2034-35 Notes Revenues
As Customer Growth Customer Growth 0.8% 0.8% 0.8% 0.8% 0.8% 0.8% 0.8% 0.8% 0.8% 0.8% 0.8% As Rate Revenue Adjustment Rate Revenue Adjustment 0.0% 6.5% 6.5% 6.5% 6.5% 6.5% 3.5% 3.5% 3.5% 3.5% 3.5% As Miscellaneous Revenues Miscellaneous Revenues 0.8% 0.8% 0.8% 0.8% 0.8% 0.8% 0.8% 0.8% 0.8% 0.8% 0.8% As
Expenses
As CIPCIP 0.0% 4.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% As
Interest 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% New Debt Service
Low Interest Loans
Term in Years 30 30 30 30 30 30 30 30 30 30 30
Rate 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% Revenue Bond
Term in Years 30 30 30 30 30 30 30 30 30 30 30
Rate 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 2 of 17 03/21/2025 DRAFT

City of San Luis Obispo
Sewer Rate Study Page 1 of 6
Revenue Requirement
Exhibit 3
FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 FY 2031-32 FY 2032-33 FY 2033-34 FY 2034-35 Revenues
Rate Revenues
Residential $9,426,715 $9,502,129 $9,578,146 $9,654,771 $9,732,009 $9,809,865 $9,888,344 $9,967,451 $10,047,191 $10,127,568 $10,208,589 As Customer Growth Multi-Family 3,774,251 3,804,445 3,834,880 3,865,559 3,896,484 3,927,656 3,959,077 3,990,750 4,022,676 4,054,857 4,087,296 As Customer Growth Non-Residential 5,940,026 5,987,546 6,035,447 6,083,730 6,132,400 6,181,459 6,230,911 6,280,758 6,331,004 6,381,652 6,432,706 As Customer Growth ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- Total Rate Revenues $19,140,992 $19,294,120 $19,448,473 $19,604,061 $19,760,893 $19,918,980 $20,078,332 $20,238,959 $20,400,871 $20,564,078 $20,728,590 Other Revenues
Interest on Investment $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 $50,000 Industrial User Charges 85,000 85,000 85,000 85,000 85,000 85,000 85,000 85,000 85,000 85,000 85,000 Miscellaneous Penalties 118,000 130,000 130,000 130,000 130,000 130,000 130,000 130,000 130,000 130,000 130,000 Utility Set-up Fees - Water Distribution 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 Utility Set-up Fees - Utility Billing 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 Other Utility Charges 0 0 0 0 0 0 0 0 0 0 0
Low Income Subsidy (100,000) (100,000) (100,000) (100,000) (100,000) (100,000) (100,000) (100,000) (100,000) (100,000) (100,000) Credit Collections 14,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 Development Review Related Revenue 26,000 26,000 26,000 26,000 26,000 26,000 26,000 26,000 26,000 26,000 26,000 Miscellaneous Revenues 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 Cal Poly 1,246,313 367,053 407,572 411,401 420,171 496,007 528,769 599,152 638,726 680,914 868,190 As Rate Revenue Adjustment Cal Poly Capacity & Resilience 472,534 472,534 472,534 472,534 472,534 472,534 472,534 472,534 472,534 472,534 472,534 --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- Total Other Revenues $2,091,847 $1,215,587 $1,256,106 $1,259,935 $1,268,705 $1,344,541 $1,377,303 $1,447,686 $1,487,260 $1,529,448 $1,716,724 Total Revenues $21,232,839 $20,509,707 $20,704,579 $20,863,995 $21,029,598 $21,263,522 $21,455,635 $21,686,645 $21,888,131 $22,093,526 $22,445,314 Expenses
Unfunded Liability
52003-PERS Unfunded Liability - ADP Payments $250,875 $169,419 $169,419 $169,419 $169,419 $169,419 $169,419 $169,419 $169,419 $169,419 $169,419 52003-PERS Unfunded Liability 766,015 810,119 864,550 907,955 953,353 1,001,021 1,051,072 1,103,625 1,158,807 1,216,747 1,277,584 ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- Total Unfunded Liability $1,016,890 $979,538 $1,033,969 $1,077,374 $1,122,772 $1,170,440 $1,220,491 $1,273,044 $1,328,226 $1,386,166 $1,447,003 Finance NonDepart
56003-Contingency Expense $87,904 $90,541 $93,257 $0 $0 $0 $0 $0 $0 $0 $0 ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- Total Finance NonDepart $87,904 $90,541 $93,257 $0 $0 $0 $0 $0 $0 $0 $0 Notes
3 of 17 03/21/2025 DRAFT

City of San Luis Obispo
Sewer Rate Study Page 2 of 6
Revenue Requirement
Exhibit 3
FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 FY 2031-32 FY 2032-33 FY 2033-34 FY 2034-35 Notes Wastewater Admin and Engineering
51001-Salaries - Regular $879,498 $960,153 $1,008,161 $1,058,569 $1,090,326 $1,123,035 $1,156,726 $1,191,428 $1,227,171 $1,263,986 $1,301,906 51003-Salaries - Contract 84,774 89,012 93,463 98,136 101,080 104,113 107,236 110,453 113,767 117,180 120,695 51004-Salaries - Temporary 132,494 204,510 211,466 153,378 157,980 162,719 167,601 172,629 177,807 183,142 188,636 51010-Overtime 2,500 2,625 2,756 2,894 2,981 3,070 3,162 3,257 3,355 3,456 3,559 52001-Retirement Contributions 67,856 71,249 74,811 78,552 80,908 83,335 85,835 88,410 91,063 93,795 96,609 52002-Retirement PARS - 401 1,118 1,174 1,233 1,294 1,333 1,373 1,414 1,457 1,500 1,546 1,592 53001-Employee Group Insurance 69,363 72,831 76,472 80,296 82,705 85,186 87,741 90,374 93,085 95,877 98,754 53002-Retiree Healthcare 13,099 13,754 14,442 15,164 15,619 16,087 16,570 17,067 17,579 18,106 18,649 55001-Medicare 13,123 13,779 14,468 15,192 15,647 16,117 16,600 17,098 17,611 18,140 18,684 61001-Advertising and Public Outreach 50,000 52,000 54,080 55,702 57,373 59,095 60,868 62,694 64,574 66,512 68,507 61007-Legal Services 42,058 43,740 45,490 46,854 48,260 49,708 51,199 52,735 54,317 55,947 57,625 61008-Parking 6,830 7,103 7,387 7,609 7,837 8,072 8,315 8,564 8,821 9,085 9,358 61013-Other Contract Services 155,315 176,248 100,618 103,636 106,746 109,948 113,246 116,644 120,143 123,747 127,460 61501-City Water Service 400 416 433 446 459 473 487 502 517 532 548 61502-City Sewer Service 330 343 357 368 379 390 402 414 426 439 452 61503-Electric Service 2,800 3,136 3,293 3,457 3,630 3,812 4,002 4,203 4,413 4,633 4,865 61504-Natural Gas Service 1,100 1,144 1,190 1,225 1,262 1,300 1,339 1,379 1,421 1,463 1,507 61505-Communication Service 600 624 649 668 688 709 730 752 775 798 822 62002-Office Supplies 5,363 5,578 5,801 5,975 6,154 6,338 6,529 6,725 6,926 7,134 7,348 62003-Postage 600 624 649 668 688 709 730 752 775 798 822 62004-Publications and Subscriptions 800 2,656 2,762 2,845 2,930 3,018 3,109 3,202 3,298 3,397 3,499 62007-Employee Recognition 1,250 1,280 1,311 1,343 1,376 1,409 1,444 1,480 250 250 250 62009-Software Licensing and Maint Agreements 31,857 37,244 38,931 40,099 41,302 42,541 43,818 45,132 46,486 47,881 49,317 62010-Office Expenses - Other 0 12,500 0 0 0 0 0 0 0 0 0 62505-Machinery and Equipment 2,750 2,860 2,974 3,064 3,156 3,250 3,348 3,448 3,552 3,658 3,768 62506-Safety Materials and Supplies 600 624 649 668 688 709 730 752 775 798 822 62509-Misc Materials and Supplies 1,550 1,612 1,676 1,727 1,779 1,832 1,887 1,943 2,002 2,062 2,124 63001-Membership and Certifications 16,900 17,576 18,279 18,827 19,392 19,974 20,573 21,190 21,826 22,481 23,155 63002-Education and Training 20,250 31,060 32,302 33,271 34,270 35,298 36,357 37,447 38,571 39,728 40,920 63003-Trips and Meetings 500 520 541 557 574 591 609 627 646 665 685 65013-Credit Cards Merchant Fees 223,992 230,711 237,633 244,762 252,104 259,668 267,458 275,481 283,746 292,258 301,026 75001-Transfers - Out 1,451,616 1,640,326 1,722,342 1,808,460 1,898,882 1,993,827 2,093,518 2,198,194 2,308,104 2,423,509 2,544,684 75002-Reimbursement Transfer Out 1,838,634 2,077,656 2,181,539 2,290,616 2,405,147 2,525,404 2,651,675 2,784,258 2,923,471 3,069,645 3,223,127 ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- Total Wastewater Admin and Engineering $5,119,918 $5,776,668 $5,958,158 $6,176,323 $6,443,656 $6,723,111 $7,015,258 $7,320,692 $7,638,771 $7,972,647 $8,321,774 Wastewater Collection
51001-Salaries - Regular $911,314 $956,879 $1,004,723 $1,054,960 $1,086,608 $1,119,207 $1,152,783 $1,187,366 $1,222,987 $1,259,677 $1,297,467 51010-Overtime 6,500 6,825 7,166 7,525 7,750 7,983 8,222 8,469 8,723 8,985 9,254 51017-Standby 15,000 15,750 16,538 17,364 17,885 18,422 18,975 19,544 20,130 20,734 21,356 51018-Call Back 30,300 31,815 33,406 35,076 36,128 37,212 38,329 39,478 40,663 41,883 43,139 52001-Retirement Contributions 89,068 93,522 98,198 103,108 106,201 109,387 112,669 116,049 119,530 123,116 126,809 53001-Employee Group Insurance 135,777 142,566 149,694 157,179 161,894 166,751 171,753 176,906 182,213 187,679 193,310 53002-Retiree Healthcare 12,916 13,562 14,240 14,952 15,401 15,863 16,339 16,829 17,334 17,854 18,390 55001-Medicare 13,139 13,796 14,485 15,210 15,666 16,136 16,620 17,119 17,632 18,161 18,706 61009-Regulatory Fees 5,000 5,200 5,408 5,570 5,737 5,909 6,087 6,269 6,457 6,651 6,851 61013-Other Contract Services 45,150 46,956 48,835 50,300 51,809 53,363 54,964 56,613 58,311 60,060 61,862 61027-Control Systems 12,058 12,540 13,042 13,433 13,836 14,251 14,679 15,119 15,573 16,040 16,521 61503-Electric Service 35,543 45,000 47,250 49,613 52,093 54,698 57,433 60,304 63,320 66,485 69,810 61504-Natural Gas Service 600 624 649 668 688 709 730 752 775 798 822 61505-Communication Service 9,600 9,984 10,383 10,695 11,016 11,346 11,687 12,037 12,398 12,770 13,153 62002-Office Supplies 2,500 2,600 2,704 2,785 2,869 2,955 3,043 3,135 3,229 3,326 3,425 62009-Software Licensing and Maint Agreements 30,233 31,442 32,700 33,681 34,691 35,732 36,804 37,908 39,046 40,217 41,423 62010-Office Expenses - Other 3,500 3,640 3,786 3,899 4,016 4,137 4,261 4,389 4,520 4,656 4,795 62502-Construction Materials and Supplies 71,480 74,339 77,313 79,632 82,021 84,482 87,016 89,627 92,315 95,085 97,938 62503-Equipment Maintenance Supplies 31,763 33,033 34,354 35,385 36,446 37,540 38,666 39,826 41,021 42,251 43,519 62506-Safety Materials and Supplies 12,050 12,532 13,033 13,424 13,827 14,242 14,669 15,109 15,562 16,029 16,510 62509-Misc Materials and Supplies 27,400 28,496 29,636 30,525 31,441 32,384 33,355 34,356 35,387 36,448 37,542 63001-Membership and Certifications 5,275 5,486 5,705 5,877 6,053 6,234 6,422 6,614 6,813 7,017 7,227 63002-Education and Training 12,500 13,000 13,520 13,926 14,343 14,774 15,217 15,673 16,144 16,628 17,127 63003-Trips and Meetings 500 520 541 557 574 591 609 627 646 665 685 ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- Total Wastewater Collection $1,519,166 $1,600,108 $1,677,309 $1,755,343 $1,808,995 $1,864,307 $1,921,330 $1,980,119 $2,040,728 $2,103,216 $2,167,643 4 of 17 03/21/2025 DRAFT

City of San Luis Obispo
Sewer Rate Study Page 3 of 6
Revenue Requirement
Exhibit 3
FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 FY 2031-32 FY 2032-33 FY 2033-34 FY 2034-35 Notes Environmental Programs
51001-Salaries - Regular $272,020 $285,621 $299,902 $314,897 $324,344 $334,074 $344,096 $354,419 $365,052 $376,003 $387,283 51010-Overtime 1,000 1,050 1,103 1,158 1,192 1,228 1,265 1,303 1,342 1,382 1,424 51018-Call Back 100 105 110 116 119 123 126 130 134 138 142 52001-Retirement Contributions 23,522 24,698 25,933 27,229 28,046 28,888 29,754 30,647 31,566 32,513 33,489 53001-Employee Group Insurance 31,804 33,394 35,064 36,817 37,922 39,060 40,231 41,438 42,681 43,962 45,281 53002-Retiree Healthcare 2,755 2,893 3,037 3,189 3,285 3,384 3,485 3,590 3,697 3,808 3,922 55001-Medicare 3,940 4,138 4,344 4,562 4,698 4,839 4,985 5,134 5,288 5,447 5,610 61005-Data Processing Services 11,000 11,440 11,898 12,255 12,622 13,001 13,391 13,793 14,206 14,633 15,072 61013-Other Contract Services 46,800 178,672 50,619 52,137 53,702 55,313 56,972 58,681 60,442 62,255 64,122 61505-Communication Service 2,500 2,600 2,704 2,785 2,869 2,955 3,043 3,135 3,229 3,326 3,425 62002-Office Supplies 1,750 1,820 1,893 1,950 2,008 2,068 2,130 2,194 2,260 2,328 2,398 62004-Publications and Subscriptions 250 260 270 279 287 295 304 313 323 333 343 62007-Employee Recognition 500 520 541 557 574 591 609 627 646 665 685 62010-Office Expenses - Other 2,000 2,080 2,163 2,228 2,295 2,364 2,435 2,508 2,583 2,660 2,740 62503-Equipment Maintenance Supplies 1,200 1,248 1,298 1,337 1,377 1,418 1,461 1,505 1,550 1,596 1,644 62506-Safety Materials and Supplies 1,000 1,040 1,082 1,114 1,147 1,182 1,217 1,254 1,291 1,330 1,370 62509-Misc Materials and Supplies 3,300 3,432 3,569 3,676 3,787 3,900 4,017 4,138 4,262 4,390 4,521 63001-Membership and Certifications 1,500 1,545 1,607 1,655 1,705 1,756 1,808 1,863 1,919 1,976 2,035 63002-Education and Training 8,500 8,840 9,194 9,469 9,753 10,046 10,347 10,658 10,978 11,307 11,646 63003-Trips and Meetings 500 520 541 557 574 591 609 627 646 665 685 ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- Total Environmental Programs $415,941 $565,915 $456,871 $477,967 $492,306 $507,075 $522,287 $537,956 $554,095 $570,718 $587,839 Water Resource Recovery
51001-Salaries - Regular $1,349,832 $1,417,324 $1,488,190 $1,562,599 $1,609,477 $1,657,762 $1,707,495 $1,758,719 $1,811,481 $1,865,826 $1,921,800 51010-Overtime 37,000 38,850 40,793 42,832 44,117 45,441 46,804 48,208 49,654 51,144 52,678 51017-Standby 19,500 20,475 21,499 22,574 23,251 23,948 24,667 25,407 26,169 26,954 27,763 51018-Call Back 12,500 13,125 13,781 14,470 14,904 15,352 15,812 16,286 16,775 17,278 17,797 52001-Retirement Contributions 131,754 138,342 145,259 152,522 157,098 161,811 166,665 171,665 176,815 182,119 187,583 53001-Employee Group Insurance 142,550 149,678 157,162 165,020 169,971 175,070 180,322 185,731 191,303 197,042 202,954 53002-Retiree Healthcare 23,629 24,810 26,051 27,353 28,174 29,019 29,890 30,786 31,710 32,661 33,641 55001-Medicare 19,429 20,400 21,420 22,491 23,166 23,861 24,577 25,314 26,073 26,856 27,661 61009-Regulatory Fees 68,541 71,283 74,134 76,358 78,649 81,008 83,438 85,941 88,520 91,175 93,911 61011-Maintenance 730 759 789 813 837 862 888 915 942 971 1,000 61013-Other Contract Services 698,118 726,043 755,084 777,737 801,069 825,101 849,854 875,350 901,610 928,659 956,518 61027-Control Systems 28,193 29,321 30,494 31,408 32,351 33,321 34,321 35,350 36,411 37,503 38,628 61501-City Water Service 6,600 6,864 7,139 7,353 7,573 7,800 8,035 8,276 8,524 8,780 9,043 61502-City Sewer Service 3,000 3,120 3,245 3,342 3,442 3,546 3,652 3,762 3,874 3,991 4,110 61503-Electric Service 1,075,000 1,204,000 1,264,200 1,327,410 1,393,781 1,463,470 1,536,643 1,613,475 1,694,149 1,778,856 1,867,799 61504-Natural Gas Service 18,000 18,720 19,469 20,053 20,654 21,274 21,912 22,570 23,247 23,944 24,662 61505-Communication Service 12,000 12,480 12,979 13,369 13,770 14,183 14,608 15,046 15,498 15,963 16,442 61506-Solid Waste Service 21,250 22,100 22,984 23,674 24,384 25,115 25,869 26,645 27,444 28,267 29,115 62002-Office Supplies 8,000 8,320 8,653 8,912 9,180 9,455 9,739 10,031 10,332 10,642 10,961 62004-Publications and Subscriptions 1,000 1,040 1,082 1,114 1,147 1,182 1,217 1,254 1,291 1,330 1,370 62007-Employee Recognition 2,000 2,080 2,163 2,228 2,295 2,364 2,435 2,508 2,583 2,660 2,740 62009-Software Licensing and Maint Agreements 24,196 25,084 26,087 26,870 27,676 28,506 29,361 30,242 31,149 32,084 33,046 62010-Office Expenses - Other 2,000 2,080 2,163 2,228 2,295 2,364 2,435 2,508 2,583 2,660 2,740 62501-Chemicals 583,989 613,188 643,848 676,040 696,321 717,211 738,727 760,889 783,716 807,227 831,444 62502-Construction Materials and Supplies 13,000 13,520 14,061 14,483 14,917 15,365 15,826 16,300 16,789 17,293 17,812 62503-Equipment Maintenance Supplies 142,348 148,042 153,963 158,582 163,340 168,240 173,287 178,486 183,840 189,355 195,036 62506-Safety Materials and Supplies 25,056 26,058 27,101 27,914 28,751 29,614 30,502 31,417 32,359 33,330 34,330 62509-Misc Materials and Supplies 10,600 11,024 11,465 11,809 12,163 12,528 12,904 13,291 13,690 14,100 14,523 63001-Membership and Certifications 7,000 7,280 7,571 7,798 8,032 8,273 8,521 8,777 9,040 9,312 9,591 63002-Education and Training 30,500 31,720 32,989 33,978 34,998 36,048 37,129 38,243 39,390 40,572 41,789 63003-Trips and Meetings 500 520 541 557 574 591 609 627 646 665 685 ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- Total Water Resource Recovery $4,517,815 $4,807,649 $5,036,357 $5,263,892 $5,448,357 $5,639,683 $5,838,143 $6,044,020 $6,257,610 $6,479,221 $6,709,175 5 of 17 03/21/2025 DRAFT

City of San Luis Obispo
Sewer Rate Study Page 4 of 6
Revenue Requirement
Exhibit 3
FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 FY 2031-32 FY 2032-33 FY 2033-34 FY 2034-35 Notes Utility Billing
51001-Salaries - Regular $87,263 $91,627 $96,208 $101,018 $104,049 $107,170 $110,385 $113,697 $117,108 $120,621 $124,240 51010-Overtime 1,500 1,575 1,654 1,736 1,789 1,842 1,897 1,954 2,013 2,073 2,136 52001-Retirement Contributions 8,767 9,205 9,666 10,149 10,453 10,767 11,090 11,423 11,765 12,118 12,482 53001-Employee Group Insurance 11,738 12,325 12,941 13,588 13,996 14,416 14,849 15,294 15,753 16,225 16,712 53002-Retiree Healthcare 1,114 1,170 1,229 1,290 1,329 1,369 1,410 1,452 1,496 1,541 1,587 55001-Medicare 1,255 1,318 1,384 1,453 1,496 1,541 1,587 1,635 1,684 1,735 1,787 61005-Data Processing Services 30,250 31,460 32,718 33,700 34,711 35,752 36,825 37,930 39,067 40,240 41,447 61013-Other Contract Services 132,355 128,326 133,459 137,463 141,586 145,834 150,209 154,715 159,357 164,137 169,062 61028-Personnel Services 0 51 106 110 113 116 120 123 6,624 6,823 7,028 62001-Print and Reproduction 25,024 26,025 27,066 27,878 28,714 29,575 30,463 31,377 32,318 33,287 34,286 62002-Office Supplies 250 260 270 279 287 295 304 313 323 333 343 62003-Postage 75,014 78,014 81,135 83,569 86,076 88,658 91,318 94,058 96,879 99,786 102,779 62007-Employee Recognition 100 104 108 111 115 118 122 125 129 133 137 62505-Machinery and Equipment 375 390 406 418 430 443 457 470 484 499 514 62509-Misc Materials and Supplies 125 130 135 139 143 148 152 157 161 166 171 63001-Membership and Certifications 50 52 54 56 57 59 61 63 65 67 69 63002-Education and Training 1,500 1,560 1,622 1,671 1,721 1,773 1,826 1,881 1,937 1,995 2,055 63003-Trips and Meetings 600 624 649 668 688 709 730 752 775 798 822 ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- Total Utility Billing $377,280 $384,216 $400,810 $415,296 $427,755 $440,587 $453,805 $467,419 $487,939 $502,577 $517,654 Water Quality Lab
51001-Salaries - Regular $399,792 $419,781 $440,771 $462,809 $476,693 $490,994 $505,724 $520,896 $536,523 $552,618 $569,197 51004-Salaries - Temporary 5,000 5,250 5,513 5,788 5,962 6,141 6,325 6,515 6,710 6,911 7,119 51010-Overtime 12,000 12,600 13,230 13,892 14,308 14,737 15,180 15,635 16,104 16,587 17,085 52001-Retirement Contributions 36,404 38,224 40,135 42,142 43,406 44,708 46,050 47,431 48,854 50,320 51,829 53001-Employee Group Insurance 65,696 68,981 72,430 76,051 78,333 80,683 83,103 85,596 88,164 90,809 93,533 53002-Retiree Healthcare 6,594 6,924 7,270 7,634 7,863 8,099 8,342 8,592 8,850 9,115 9,389 55001-Medicare 5,727 6,013 6,314 6,630 6,829 7,034 7,245 7,462 7,686 7,916 8,154 61009-Regulatory Fees 7,000 7,280 7,571 7,798 8,032 8,273 8,521 8,777 9,040 9,312 9,591 61013-Other Contract Services 127,372 132,467 137,765 141,898 146,155 150,540 155,056 159,708 164,499 169,434 174,517 61505-Communication Service 1,800 1,872 1,947 2,005 2,065 2,127 2,191 2,257 2,325 2,394 2,466 62002-Office Supplies 1,100 1,144 1,190 1,225 1,262 1,300 1,339 1,379 1,421 1,463 1,507 62004-Publications and Subscriptions 450 468 487 501 516 532 548 564 581 599 617 62007-Employee Recognition 600 624 649 668 688 709 730 752 775 798 822 62009-Software Licensing and Maint Agreements 9,000 9,360 9,734 10,026 10,327 10,637 10,956 11,285 11,623 11,972 12,331 62506-Safety Materials and Supplies 5,550 5,772 6,003 6,183 6,368 6,560 6,756 6,959 7,168 7,383 7,604 62509-Misc Materials and Supplies 53,589 55,732 57,962 59,701 61,492 63,336 65,236 67,194 69,209 71,286 73,424 63001-Membership and Certifications 4,877 5,072 5,275 5,433 5,596 5,764 5,937 6,115 6,299 6,488 6,682 63002-Education and Training 11,100 11,544 12,006 12,366 12,737 13,119 13,513 13,918 14,336 14,766 15,209 ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- Total Water Quality Lab $753,650 $789,109 $826,251 $862,751 $888,634 $915,293 $942,752 $971,034 $1,000,165 $1,030,170 $1,061,075 6 of 17 03/21/2025 DRAFT

City of San Luis Obispo
Sewer Rate Study Page 5 of 6
Revenue Requirement
Exhibit 3
FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 FY 2031-32 FY 2032-33 FY 2033-34 FY 2034-35 Notes Additional O&M
Future O&M $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- Total Additional O&M $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total O&M Expenses $13,808,565 $14,993,745 $15,482,982 $16,028,946 $16,632,474 $17,260,496 $17,914,066 $18,594,284 $19,307,535 $20,044,716 $20,812,165 Rate Funded Capital $715,000 $90,000 $975,000 $2,100,000 $3,175,000 $5,125,000 $5,750,000 $6,375,000 $7,000,000 $7,650,000 $8,450,000 $2,773,962 FY 2023-24 Dep. Exp.

Debt Service
WRRF Energy Efficiency Project $616,939 $616,711 $616,477 $616,236 $615,987 $0 $0 $0 $0 $0 $0 Debt Schedule Tank Farm Lift Station - I Bank 549,999 548,786 547,535 546,242 544,908 543,530 542,108 540,639 539,123 537,557 535,940 Debt Schedule 2018 Refunding Bond - Dispatch Center 30,203 30,156 23,132 23,021 23,090 23,116 23,100 23,147 23,042 22,926 22,897 Debt Schedule 2019 SRF Loan - WRRF Upgrade 5,808,792 5,902,954 5,902,954 5,902,954 5,902,954 5,902,954 5,902,954 5,902,954 5,902,954 5,902,954 5,902,954 Debt Schedule Additional Long-Term Debt 0 0 0 0 0 0 0 0 0 0 0 Calculated @ 5% for 30 yrs --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- Total Debt Service $7,005,933 $7,098,607 $7,090,097 $7,088,453 $7,086,938 $6,469,600 $6,468,162 $6,466,740 $6,465,119 $6,463,437 $6,461,791 LESS: Other Funding
Development Impact Fees $300,000 $300,000 $300,000 $300,000 $300,000 $300,000 $300,000 $300,000 $300,000 $300,000 $300,000 --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- Net Debt Service $6,705,933 $6,798,607 $6,790,097 $6,788,453 $6,786,938 $6,169,600 $6,168,162 $6,166,740 $6,165,119 $6,163,437 $6,161,791 To / (From) Reserves
To / (From) Operating Reserve $3,341 ($118,527) $66,971 $23,253 $96,016 $80,174 $16,947 $15,796 $4,337 $2,261 $23,017 To / (From) Capital Reserve 0 0 0 0 0 0 0 0 0 0 0
To / (From) Rate Stabilization Reserve 0 0 0 0 0 0 0 0 0 0 0 --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- Total To / (From) Reserves $3,341 ($118,527) $66,971 $23,253 $96,016 $80,174 $16,947 $15,796 $4,337 $2,261 $23,017 Total Revenue Requirement $21,232,839 $21,763,825 $23,315,051 $24,940,652 $26,690,429 $28,635,271 $29,849,175 $31,151,821 $32,476,990 $33,860,413 $35,446,973 Bal. / (Def.) of Funds $0 ($1,254,118) ($2,610,471) ($4,076,657) ($5,660,831) ($7,371,749) ($8,393,540) ($9,465,176) ($10,588,859) ($11,766,888) ($13,001,659) Balance a % of Rate Adj. Req'd 0.0% 6.5% 13.4% 20.8% 28.6% 37.0% 41.8% 46.8% 51.9% 57.2% 62.7% Proposed Rate Adjustment 0.0% 6.5% 6.5% 6.5% 6.5% 6.5% 3.5% 3.5% 3.5% 3.5% 3.5% Months of Adjustment 12 12 12 12 12 12 12 12 12 12 12
Add'l Revenue with Rate Adj. $0 $1,254,118 $2,610,471 $4,076,657 $5,660,831 $7,371,749 $8,393,540 $9,465,176 $10,588,859 $11,766,888 $13,001,659 Bal. / (Def.) After Rate Adj. $0 ($0) $0 ($0) $0 $0 $0 $0 $0 $0 $0 Add'l Rate Adj. Req'd 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 7 of 17 03/21/2025 DRAFT

City of San Luis Obispo
Sewer Rate Study Page 6 of 6
Revenue Requirement
Exhibit 3
FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 FY 2031-32 FY 2032-33 FY 2033-34 FY 2034-35 Notes Average Residential Customer Bill $63.80 (Base Charge + 6 CCF [4 CCF Cap]) Customer Bill on Proposed Adjustment $67.95 $72.37 $77.07 $82.08 $87.42 $90.48 $93.65 $96.92 $100.32 $103.83 Bill Difference - Monthly 4.15 4.42 4.70 5.01 5.34 3.06 3.17 3.28 3.39 3.51 Cumulative Bill Difference 4.15 8.57 13.27 18.28 23.62 26.68 29.85 33.12 36.52 40.03 Debt Service Coverage Ratio (all debt, not including DIF) Before Rate Adjustment 1.06 0.78 0.74 0.68 0.62 0.62 0.55 0.48 0.40 0.32 0.25 After Proposed Rate Adjustment 1.06 0.95 1.10 1.26 1.42 1.76 1.85 1.94 2.04 2.14 2.26 Debt Service Coverage Ratio (all debt, including DIF)
Before Rate Adjustment 1.15 0.86 0.82 0.77 0.71 0.71 0.64 0.57 0.49 0.41 0.35 After Proposed Rate Adjustment 1.15 1.04 1.19 1.34 1.50 1.85 1.94 2.03 2.13 2.23 2.36 Reserve Funds
Total Beginning Balance $53,797,920 $37,699,648 $29,720,133 $23,898,730 $21,740,699 $20,172,595 $19,329,278 $17,537,905 $19,486,827 $19,076,533 $20,826,840 Operating Fund
Beginning Balance $2,761,713 $2,998,749 $3,096,596 $3,205,789 $3,326,495 $3,452,099 $3,582,813 $3,718,857 $3,861,507 $4,008,943 $4,162,433 20% of O&M Plus: Additions 3,341 0 66,971 23,253 96,016 80,174 16,947 15,796 4,337 2,261 23,017 Less: Uses of Funds 0 (118,527) 0 0 0 0 0 0 0 0 0
Ending Balance $2,765,054 $2,880,222 $3,163,568 $3,229,043 $3,422,511 $3,532,274 $3,599,760 $3,734,653 $3,865,844 $4,011,204 $4,185,450 Capital Fund
Beginning Balance $43,991,991 $27,586,321 $19,433,424 $13,421,739 $11,055,952 $9,268,794 $8,235,705 $6,246,676 $7,988,667 $7,363,876 $8,890,729 Balance of Funds Plus: Additions 0 0 0 0 0 0 0 1,633,125 0 1,448,046 0
Plus: LTD Proceeds 15,000,000 0 0 0 0 0 0 0 0 0 0
Development Impact Fees 600,000 600,000 600,000 600,000 600,000 600,000 600,000 600,000 600,000 600,000 600,000 Less: Capital Project Funding (31,701,613) (8,460,987) (6,488,375) (2,781,284) (2,264,120) (1,523,492) (2,408,320) (300,000) (1,014,630) (300,000) (1,602,379) Ending Balance $27,890,378 $19,725,334 $13,545,049 $11,240,455 $9,391,832 $8,345,302 $6,427,385 $8,179,801 $7,574,037 $9,111,922 $7,888,350 Rate Stabilization
Beginning Balance $957,050 $1,027,412 $1,102,947 $1,184,036 $1,271,086 $1,364,536 $1,423,594 $1,485,207 $1,549,486 $1,616,548 $1,686,512 5% of Rate Revenues Plus: Additions 0 0 0 0 0 0 0 0 0 0 0
Less: Capital Project Funding 0 0 0 0 0 0 0 0 0 0 0
Ending Balance $957,050 $1,027,412 $1,102,947 $1,184,036 $1,271,086 $1,364,536 $1,423,594 $1,485,207 $1,549,486 $1,616,548 $1,686,512 UFL Trust & SRF Loan
Beginning Balance $6,087,166 $6,087,166 $6,087,166 $6,087,166 $6,087,166 $6,087,166 $6,087,166 $6,087,166 $6,087,166 $6,087,166 $6,087,166 Plus: Additions 0 0 0 0 0 0 0 0 0 0 0
Less: Capital Project Funding 0 0 0 0 0 0 0 0 0 0 0
Ending Balance $6,087,166 $6,087,166 $6,087,166 $6,087,166 $6,087,166 $6,087,166 $6,087,166 $6,087,166 $6,087,166 $6,087,166 $6,087,166 Total Ending Balance $37,699,648 $29,720,133 $23,898,730 $21,740,699 $20,172,595 $19,329,278 $17,537,905 $19,486,827 $19,076,533 $20,826,840 $19,847,479 Days of O&M 997 723 563 495 443 409 357 383 361 379 348 8 of 17 03/21/2025 DRAFT

City of San Luis Obispo
Sewer Rate Study Page 1 of 3
Capital Improvement Plan
Exhibit 4
FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 FY 2031-32 FY 2032-33 FY 2033-34 FY 2034-35 Total Notes Wastewater Collection
Upcoming Pipeline Replacement Projects $0 $0 $0 $0 $0 $0 $0 $0 $2,280,186 $0 $2,419,049 $4,699,236 Wastewater Collection System - Point Repairs 120,000 353,600 254,616 262,254 0 278,226 0 295,170 0 0 0 1,563,866 Sewer-main Replacement: Morro, Mill, Santa Rosa, and Chorro 1,100,000 46,800 0 0 0 0 0 0 0 0 0 1,146,800 Sewer-main Replacement: Henry, and Sierra Way 2,200,000 0 0 0 0 0 0 0 0 0 0 2,200,000 Sewer-main Replacement: Ocenaire - Cayucos to Froom Road 700,000 36,400 0 0 0 0 0 0 0 0 0 736,400 Sewer-main Replacement: Islay - Nipomo to Santa Rosa 0 2,184,000 0 0 0 0 0 0 0 0 0 2,184,000 Sewer-main Replacement: Taft, Hathaway, Phillips, Buena Vista, and Loomis 0 343,200 0 0 0 0 0 0 0 0 0 343,200 Sewer-main Replacement: Serrano, Bressi, Dana and Higuera (1,275,000) 0 0 0 0 2,196,824 0 0 0 0 0 921,824 Sewer-main Replacement: Murray, Chorro, and Meinecke 0 270,400 0 0 0 0 0 0 0 0 0 270,400 Sewer-main Replacement: Chorro - Boysen to Rougeot 250,000 0 2,917,475 0 0 0 0 0 0 0 0 3,167,475 Sewer-main Replacement: Buchon - Morro to Johnson 0 0 143,222 2,715,427 0 0 0 0 0 0 0 2,858,648 Sewer-main Replacement: Bee Bee from High Street to South Street 0 0 0 0 0 0 0 24,597 696,724 0 0 721,321 Sewer-main Replacement: Lincoln, Chorro, Morro, Toro 0 0 0 0 0 0 161,197 3,056,237 0 0 0 3,217,434 Sewer-main Replacement: Foothill Sewer Siphon 0 0 0 0 168,826 2,260,584 0 0 0 0 0 2,429,411 Sewer-main Replacement: Broad Street, Sacramento, Capiltolio, and Bullock 0 0 0 0 0 0 0 0 0 65,239 3,964,553 4,029,792 Sewer-main Replacement: Ocenaire - Laguna to Caycucos 0 0 0 0 0 115,927 2,364,224 0 0 0 0 2,480,151 Sewer-main Replacement: Broad, Murray, and Chorro 0 0 0 158,445 0 0 0 0 4,294,351 0 0 4,452,796 Sewer-main Replacement: San Jose, Ramona, Monte Vista, California 1,225,000 0 328,879 0 0 0 0 0 0 0 0 1,553,879 Sewer Inflow/Infiltration Reduction 470,000 436,800 445,578 458,945 281,377 289,819 298,513 307,468 0 0 0 2,988,501 Sewer Utility Trench Repair 25,000 26,000 26,523 27,318 33,765 34,778 35,822 36,896 38,003 39,143 40,317 363,566 Sewer Maintenance Cover Adjustments 30,000 114,400 31,827 32,782 39,393 40,575 41,792 43,046 44,337 45,667 47,037 510,855 Flow Study 0 0 0 0 0 0 0 0 0 0 10,536 10,536
Sewer Lift Station Maintenance 20,000 83,200 0 87,418 0 92,742 0 98,390 0 0 0 381,750 Laguna Lift Station Upgrades 0 332,800 0 0 0 0 0 0 0 0 0 332,800 Buckley Sewer Lift Station 150,000 0 0 0 0 0 0 0 0 0 0 150,000 Foothill Lift Station 0 0 0 0 0 463,710 4,179,183 0 0 0 0 4,642,893 Airport Lift Station 1,227,000 0 0 0 4,102,480 0 0 0 0 0 0 5,329,480 Silver City Lift Station 0 208,000 0 0 0 0 0 0 0 0 0 208,000 Placeholder 0 0 0 54,636 0 57,964 59,703 55,344 0 0 0 227,647 Foothill and Santa Rosa CalTrans Pipeline Replacement 350,000 0 0 0 0 0 0 0 0 0 0 350,000 Water Meters and Boxes (sewer fund contribution) 0 0 0 27,318 28,138 28,982 59,703 61,494 221,685 228,335 235,185 890,839 AMI Water Meters 460,000 511,680 521,963 0 0 0 0 0 0 0 0 1,493,643 AMI Meter Box Lids 75,000 78,000 79,568 0 0 0 0 0 0 0 0 232,568 AMI Radio 360,000 406,640 414,812 0 0 0 0 0 0 0 0 1,181,452 Fleet - WWC
Wastewater Collections Portable Generator (1620) $0 $0 $0 $0 $0 $0 $0 $245,975 $0 $0 $0 $245,975 Portable Sewage Pump (1730) 0 0 0 0 0 0 0 92,241 0 0 0 92,241 Caterpillar Mini Escavator 0 0 0 0 0 115,927 0 0 0 0 0 115,927 Wastewater Collections Truck w/Dump Bed (1811) 0 0 0 0 0 0 0 122,987 0 0 0 122,987 Wastewater Collections Truck (1631) 0 0 0 0 0 0 0 101,465 0 0 0 101,465 Wastewater Collections Service Truck (1608) 0 0 0 0 0 0 119,405 0 0 0 0 119,405 Wastewater Collections Service Truck (1810) 0 0 0 0 0 0 119,405 0 0 0 0 119,405 Wastewater Collection Van (1643) 0 0 0 0 0 0 149,257 0 0 0 0 149,257 Wastewater Collections Hydrocleaner (1407) 0 0 0 628,318 0 0 0 0 0 0 0 628,318 Wastewater Collections Concrete Trailer (1804) 0 0 0 0 0 0 0 0 63,339 0 0 63,339 Dump Truck (0840) 0 0 0 0 0 202,873 0 0 0 0 0 202,873
-------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- Total Wastewater Collection $7,487,000 $5,431,920 $5,164,461 $4,452,863 $4,653,979 $6,178,931 $7,588,202 $4,541,309 $7,638,624 $378,384 $6,716,679 $60,232,352 9 of 17 03/21/2025 DRAFT

City of San Luis Obispo
Sewer Rate Study Page 2 of 3
Capital Improvement Plan
Exhibit 4
FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 FY 2031-32 FY 2032-33 FY 2033-34 FY 2034-35 Total Notes Water Resource Recovery Facilty
WRRF - Asset Replacement $0 $208,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 $208,000 Coating Maintenance 0 0 26,523 0 0 0 0 0 0 0 0 26,523
Headworks Grit Piping and Blowers 0 0 265,225 0 0 0 0 0 0 0 0 265,225 Rebuild Influent Storm Pumps 75,000 78,000 0 0 0 0 0 0 0 0 0 153,000 Membrane Replacement 0 0 0 0 0 0 0 0 0 0 2,687,833 2,687,833 UV Bulb Replacement (annual replacement) 50,000 0 0 54,636 56,275 57,964 59,703 61,494 0 0 0 340,072 Cityworks Strategic Plan & Implementation 0 0 21,218 0 0 0 0 0 0 0 0 21,218 Sludge Drying Bed Polymer Feed and Piping 0 0 0 0 0 69,556 0 0 0 0 0 69,556 Screw Press 0 208,000 0 0 0 0 0 0 0 0 0 208,000
WRRF and Wastewater Collection Maintenance Facility (6,563,331) 0 0 0 0 0 0 0 0 0 0 (6,563,331) Lab Admin HVAC 0 156,000 0 0 0 0 0 0 0 0 0 156,000
WRRF Digester Flare Upgrade 0 0 1,564,828 0 0 0 0 0 0 0 0 1,564,828 Slurry Seal and Pavement 0 2,080,000 0 0 0 0 0 0 0 0 0 2,080,000 Fleet - WRRF
1000521-05-Sewer WRRF Compact Pickup (0851) 0 39,520 0 0 0 0 0 0 0 0 0 39,520 Compact Pick-up (0851) 0 0 0 0 0 0 94,330 0 0 0 0 94,330 -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- Total Water Resource Recovery Facilty ($6,438,331) $2,769,520 $1,877,793 $54,636 $56,275 $127,520 $154,033 $61,494 $0 $0 $2,687,833 $1,350,773 Miscellaneous
Pavement Management (Sewer Fund Contribution) $0 $8,320 $0 $0 $0 $0 $0 $0 $0 $0 $0 $8,320 ATP - Higuera Corridor Complete Street Design (Sewer Fund Contribution) 0 5,200 0 0 0 0 0 0 0 0 0 5,200 Corp Yard Material Storage Stalls (Sewer Fund Contribution) 0 0 26,523 0 281,377 0 0 0 0 0 0 307,900 Corporation Yard Permimeter Fence Replacement (Sewer Fund Contribution) 0 0 0 0 0 0 0 6,149 76,006 0 0 82,156 Corporation Yard EV Charging Station (Sewer Fund Contribution) 0 0 84,872 0 0 0 0 0 0 0 0 84,872 Environmental Compliance
Pickup $0 $0 $0 $0 $51,211 $0 $0 $0 $0 $0 $0 $51,211
Sedan 0 0 0 45,895 0 0 0 0 0 0 0 45,895
Water Quality Lab
Water Quality Lab SUV 0 0 0 0 0 0 86,569 0 0 0 0 86,569 Administration
Roofing Project (Morro Refurbishment) 65,000 0 0 0 0 0 0 0 0 0 0 65,000 Future Sewer Fund Vehicles 0 0 0 0 0 0 0 0 0 78,286 80,635 158,921 Future Water Fund Vehicles 0 0 0 0 0 0 0 0 0 130,477 0 130,477 Shared IT
Wireless System Citywide 0 0 0 14,203 0 0 0 18,532 0 0 0 32,735 Server Operating System 0 0 0 0 0 0 0 0 0 0 0 0
UB System Upgrade 0 0 0 0 0 0 0 0 0 0 135,458 135,458
Network Firewalls 0 0 0 0 0 24,063 0 0 0 0 32,338 56,401 Virtual Private Network Replacment 0 0 0 0 0 17,979 0 0 0 0 24,162 42,141 Network Switch Infrastructure Repl. 0 0 0 0 65,733 0 0 0 0 88,340 0 154,073 Network Security Upgrade 0 0 0 10,175 0 0 12,149 0 0 14,506 0 36,830 Radio Handhelds Repl. 0 0 0 0 0 0 0 83,192 0 0 0 83,192 City SAN (Network Storage) 0 0 9,727 0 0 0 12,322 0 0 0 15,609 37,657 Security Cameras 0 640 0 0 629 0 851 903 0 845 0 3,868
Facility Security Citywide Camera Storage added redundancy 0 0 0 0 629 0 0 0 0 845 0 1,474 Uninterruptible Power Supplies (UPS’s Servers and Storage) 0 0 0 3,513 0 0 4,195 0 0 5,009 0 12,716 PD/City backup storage, secondary storage 0 0 0 0 3,914 0 0 0 0 5,261 0 9,175 VM Infrastructure 0 21,455 0 0 25,372 0 0 30,296 0 0 36,175 113,298 -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- Total Miscellaneous $65,000 $49,547 $121,121 $73,785 $428,865 $42,042 $116,085 $139,073 $76,006 $323,569 $347,867 $1,782,960 10 of 17 03/21/2025 DRAFT

City of San Luis Obispo
Sewer Rate Study Page 3 of 3
Capital Improvement Plan
Exhibit 4
FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 FY 2031-32 FY 2032-33 FY 2033-34 FY 2034-35 Total CIP Carryover $31,002,944 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $31,002,944 Unidentified Future Capital Projects $0 $0 $0 $0 $0 $0 $0 $0 $0 $5,500,000 $0 $5,500,000 Delayed Capital $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Transfer to Cash Reserve $0 $0 $0 $0 $0 $0 $0 $1,633,125 $0 $1,448,046 $0 $3,081,171 Total Capital Improvement Projects $32,116,613 $8,250,987 $7,163,375 $4,581,284 $5,139,120 $6,348,492 $7,858,320 $6,375,000 $7,714,630 $7,650,000 $9,752,379 $102,950,200 Less: Outside Funding Sources
Operating Fund Reserves $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Capital Fund Reserves 31,401,613 8,160,987 6,188,375 2,481,284 1,964,120 1,223,492 2,108,320 0 714,630 0 1,302,379 55,545,200 Grants 0 0 0 0 0 0 0 0 0 0 0 0
WRRF Upgrade Debt 0 0 0 0 0 0 0 0 0 0 0 0
Assumed New Low Interest Loan 0 0 0 0 0 0 0 0 0 0 0 0
Additional Revenue Bonds 0 0 0 0 0 0 0 0 0 0 0 0
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ----------------- Total Funding Sources $31,401,613 $8,160,987 $6,188,375 $2,481,284 $1,964,120 $1,223,492 $2,108,320 $0 $714,630 $0 $1,302,379 $55,545,200 Rate Funded Capital $715,000 $90,000 $975,000 $2,100,000 $3,175,000 $5,125,000 $5,750,000 $6,375,000 $7,000,000 $7,650,000 $8,450,000 $47,405,000 11 of 17 03/21/2025 DRAFT

City of San Luis Obispo
Sewer Rate Study Page 1 of 3
Revenues at Present Rates
Exhibit 5
Effective 7.1.24 Nov-23 Dec-23 Jan-24 Feb-24 Mar-24 Apr-24 May-24 Jun-24 Jul-24 Aug-24 Sep-24 Oct-24 Total Residential
$ / Acct.

Base Fee $24.52 12,887 12,948 12,767 12,385 12,754 12,830 12,918 13,130 13,261 12,897 13,003 13,172 12,913 Total Base Fee Revenue $315,989 $317,485 $313,047 $303,680 $312,728 $314,592 $316,749 $321,948 $325,160 $316,234 $318,834 $322,977 $3,799,423 Volume Charge $ / CCF
Usage up to avg WW $9.82 52,256 52,414 45,975 36,691 46,517 48,161 50,194 51,442 49,840 44,872 46,687 47,995 573,044 Total Volume Charge Revenue $513,154 $514,705 $451,475 $360,306 $456,797 $472,941 $492,905 $505,160 $489,429 $440,643 $458,466 $471,311 $5,627,292 Total Residential Revenue $829,143 $832,190 $764,521 $663,986 $769,525 $787,533 $809,654 $827,108 $814,589 $756,877 $777,300 $794,288 $9,426,715 Multi-Family
Base Fee $ / Acct.
3/4" or Less $24.52 619 622 622 611 618 618 620 627 630 619 622 629 621 1" 40.95 230 232 228 226 228 230 230 232 228 224 228 229 229

1.5" 81.65 130 130 129 129 128 130 129 130 129 129 130 127 129 2" 130.70 104 103 104 104 104 104 104 103 104 103 104 105 104 3" 245.21 3 3 3 3 3 3 3 3 3 3 3 3 3
4" 408.76 10 10 10 10 10 10 10 10 10 10 10 10 10
6" 817.28 6 6 6 6 6 6 6 6 6 6 6 6 6
8" 1,307.70 4 4 4 4 4 4 4 4 4 4 4 4 4
10" 1,880.02 0 0 0 0 0 0 0 0 0 0 0 0 0
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ 1,106 1,110 1,106 1,093 1,101 1,105 1,106 1,115 1,114 1,098 1,107 1,113 1,106 Total Base Fee Revenue $63,761 $63,786 $63,671 $63,320 $63,492 $63,737 $63,704 $63,909 $63,868 $63,303 $63,753 $63,851 $764,156 Volume Charge $ / CCF
Usage up to avg WW $9.82 28,565 28,171 25,056 20,717 26,015 26,738 26,786 26,797 25,678 22,457 24,082 25,465 306,527 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ 28,565 28,171 25,056 20,717 26,015 26,738 26,786 26,797 25,678 22,457 24,082 25,465 306,527 Total Volume Charge Revenue $280,508 $276,639 $246,050 $203,441 $255,467 $262,567 $263,039 $263,147 $252,158 $220,528 $236,485 $250,066 $3,010,095 Total Multi-Family Revenue $344,270 $340,425 $309,721 $266,761 $318,959 $326,304 $326,743 $327,055 $316,026 $283,831 $300,238 $313,918 $3,774,251 12 of 17 03/21/2025 DRAFT

City of San Luis Obispo
Sewer Rate Study Page 2 of 3
Revenues at Present Rates
Exhibit 5
Effective 7.1.24 Nov-23 Dec-23 Jan-24 Feb-24 Mar-24 Apr-24 May-24 Jun-24 Jul-24 Aug-24 Sep-24 Oct-24 Total Non-Residential
Base Fee $ / Acct.
3/4" or Less $24.52 761 770 728 658 722 725 737 742 756 737 759 752 737 1" 40.95 315 312 306 293 304 306 317 316 312 311 313 314 310

1.5" 81.65 158 161 157 153 158 156 155 159 159 160 158 158 158 2" 130.70 177 177 174 174 174 178 178 175 181 175 174 177 176 3" 245.21 20 20 20 21 20 20 20 20 19 20 21 19 20
4" 408.76 20 20 20 20 20 21 20 20 20 20 20 20 20
6" 817.28 6 6 6 6 6 6 6 6 6 6 6 6 6
8" 1,307.70 4 3 4 3 4 4 4 4 4 4 3 4 4
10" 1,880.02 0 0 0 0 0 0 0 0 0 0 0 0 0
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ --------------- 1,461 1,469 1,415 1,328 1,408 1,416 1,437 1,442 1,457 1,433 1,454 1,450 1,431 Total Base Fee Revenue $90,807 $89,843 $89,156 $85,518 $89,009 $89,932 $90,187 $90,203 $90,921 $89,957 $89,222 $90,301 $1,075,055 Volume Charge $ / CCF
All Consumption $10.27 45,840 44,019 34,139 23,061 32,132 36,263 39,504 41,487 46,445 43,999 46,140 40,678 473,707 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------- 45,840 44,019 34,139 23,061 32,132 36,263 39,504 41,487 46,445 43,999 46,140 40,678 473,707 Total Volume Charge Revenue $470,777 $452,075 $350,608 $236,836 $329,996 $372,421 $405,706 $426,071 $476,990 $451,870 $473,858 $417,763 $4,864,971 Total Non-Residential Revenue $561,584 $541,918 $439,764 $322,355 $419,004 $462,353 $495,893 $516,274 $567,911 $541,827 $563,080 $508,064 $5,940,026 13 of 17 03/21/2025 DRAFT

City of San Luis Obispo
Sewer Rate Study Page 3 of 3
Revenues at Present Rates
Exhibit 5
Effective 7.1.24 Nov-23 Dec-23 Jan-24 Feb-24 Mar-24 Apr-24 May-24 Jun-24 Jul-24 Aug-24 Sep-24 Oct-24 Total Summary % of Total
Customers
Residential 12,887 12,948 12,767 12,385 12,754 12,830 12,918 13,130 13,261 12,897 13,003 13,172 12,913 83.6% Multi-Family 1,106 1,110 1,106 1,093 1,101 1,105 1,106 1,115 1,114 1,098 1,107 1,113 1,106 7.2% Non-Residential 1,461 1,469 1,415 1,328 1,408 1,416 1,437 1,442 1,457 1,433 1,454 1,450 1,431 9.3% ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ------------ Total Number of Customers 15,454 15,527 15,288 14,806 15,263 15,351 15,461 15,687 15,832 15,428 15,564 15,735 15,450 Consumption
Residential 52,256 52,414 45,975 36,691 46,517 48,161 50,194 51,442 49,840 44,872 46,687 47,995 573,044 42.3% Multi-Family 28,565 28,171 25,056 20,717 26,015 26,738 26,786 26,797 25,678 22,457 24,082 25,465 306,527 22.7% Non-Residential 45,840 44,019 34,139 23,061 32,132 36,263 39,504 41,487 46,445 43,999 46,140 40,678 473,707 35.0% ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ --------------- Total Consumption 126,661 124,604 105,170 80,469 104,664 111,162 116,484 119,726 121,963 111,328 116,909 114,138 1,353,278 Revenues
Base Fee $470,558 $471,114 $465,874 $452,518 $465,228 $468,261 $470,640 $476,059 $479,949 $469,495 $471,809 $477,129 $5,638,634 29.5% Residential 315,989 317,485 313,047 303,680 312,728 314,592 316,749 321,948 325,160 316,234 318,834 322,977 3,799,423 19.8% Multi-Family 63,761 63,786 63,671 63,320 63,492 63,737 63,704 63,909 63,868 63,303 63,753 63,851 764,156 4.0% Non-Residential 90,807 89,843 89,156 85,518 89,009 89,932 90,187 90,203 90,921 89,957 89,222 90,301 1,075,055 5.6% Volume Charge 1,264,439 1,243,420 1,048,132 800,583 1,042,260 1,107,929 1,161,650 1,194,378 1,218,577 1,113,041 1,168,809 1,139,140 13,502,358 70.5% Residential 513,154 514,705 451,475 360,306 456,797 472,941 492,905 505,160 489,429 440,643 458,466 471,311 5,627,292 29.4% Multi-Family 280,508 276,639 246,050 203,441 255,467 262,567 263,039 263,147 252,158 220,528 236,485 250,066 3,010,095 15.7% Non-Residential 470,777 452,075 350,608 236,836 329,996 372,421 405,706 426,071 476,990 451,870 473,858 417,763 4,864,971 25.4% -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- ---------------- Total Revenues $1,734,997 $1,714,533 $1,514,006 $1,253,101 $1,507,488 $1,576,190 $1,632,290 $1,670,438 $1,698,525 $1,582,535 $1,640,618 $1,616,270 $19,140,992 FY 2024-25 Budget $19,551,311
Difference ($410,319)
Percent -2.1%
FY 2023-24 Actual $18,613,459
Difference $527,533
Percent 2.8%
14 of 17 03/21/2025 DRAFT

City of San Luis Obispo
Sewer Rate Study
Residential Rates
Present
Rates FY 2025-26 FY 2026-27
Fixed Charge
Per Account $24.52 $26.11 $27.81
Consumption Charge
Usage up to avg WW $9.82 $10.46 $11.14
15 of 17 03/21/2025 DRAFT

City of San Luis Obispo
Sewer Rate Study
Multi-Family Rates
Present
Rates FY 2025-26 FY 2026-27
Fixed Charge
3/4" or Less $24.52 $26.11 $27.81
1" 40.95 43.61 46.44

1.5" 81.65 86.96 92.61
2" 130.70 139.20 148.25
3" 245.21 261.15 278.12
4" 408.76 435.33 463.63
6" 817.28 870.40 926.98
8" 1,307.70 1,392.70 1,483.23
10" 1,880.02 2,002.22 2,132.36
Consumption Charge
Usage up to avg WW $9.82 $10.46 $11.14
16 of 17 03/21/2025 DRAFT

City of San Luis Obispo
Sewer Rate Study
Non-Residential Rates
Present
Rates FY 2025-26 FY 2026-27
Fixed Charge
3/4" or Less $24.52 $26.11 $27.81
1" 40.95 43.61 46.44

1.5" 81.65 86.96 92.61
2" 130.70 139.20 148.25
3" 245.21 261.15 278.12
4" 408.76 435.33 463.63
6" 817.28 870.40 926.98
8" 1,307.70 1,392.70 1,483.23
10" 1,880.02 2,002.22 2,132.36
Consumption Charge
All Consumption $10.27 $10.94 $11.65
17 of 17 03/21/2025 DRAFT

R ______
RESOLUTION NO. _____ (2025 SERIES)

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN LUIS

OBISPO, CALIFORNIA, ESTABLISHING THE SEWER SERVICE RATES FOR FINANCIAL PLAN 2025-27
WHEREAS, it is the policy of the City of San Luis Obispo to review enterprise fund rates on an ongoing basis and to adjust them as required to ensure that they remain equitable and adequate to fully cover the cost of providing services; and WHEREAS, a comprehensive sewer rate study was completed in March 2025 by HDR Engineering, Inc. including analysis of Sewer Fund operating, capital, and debt service needs for fiscal years 2025-26 and 2026-27; and WHEREAS, on April 29, 2025, the City Council authorized the release of the City’s Prop 218 notice outlining preliminary sewer rates based on updated revenue and expenditure information necessary to meet system operating, capital, and debt service requirements; and
WHEREAS, the City provided all required mailed notices in compliance with Proposition 218 and the exhaustion of administrative remedies provisions of AB 2257; and
WHEREAS, a public hearing was properly noticed and held on June 17, 2025; and WHEREAS, a majority protest, as contemplated by Article XIII D of the California Constitution, was not received by the conclusion of the public hearing.

NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San Luis Obispo as follows:

SECTION 1. Recitals. The City Council finds and determines that the recitals set forth above as true and correct.

SECTION 2. Sewer Rates. The sewer rates as set forth in Exhibit A are hereby adopted, establishing sewer rates effective July 1, 2025, and July 1, 2026.

SECTION 3. California Environmental Quality Act. Modification of rates and charges by public agencies is statutorily exempt from the California Environmental Quality Act (CEQA) under Public Resources Code 21083 and 21080(b)(8) and State CEQA Guidelines Section 15273 (Rates, Tolls, Fares, and Charges) because the change in rates and charges is for the purpose of:
a) Meeting operating expenses;
b) Purchasing or leasing supplies, equipment, or materials; c) Meeting financial reserve needs and requirements;
d) Obtaining funds for capital projects necessary to maintain service within existing service areas; and

Resolution No. _____ (2025 Series) Page 2
R ______
e) Obtaining funds necessary to maintain such intra-city transfers as authorized by City Charter.

The change in fees is not intended to fund expansion of capital projects not otherwise evaluated under CEQA. Therefore, no environmental review is required for this item.

SECTION 4. Resolution Number 11428 (2023 Series) is hereby repealed and superseded to the extent inconsistent herewith effective 11:59 p.m. June 30, 2025.

Upon motion of Council Member ___________, seconded by Council Member ___________, and on the following roll call vote:

AYES:

NOES:

ABSENT:

The foregoing resolution was adopted this _____ day of _______________ 2025. ___________________________
Mayor Erica A. Stewart
ATTEST:
______________________
Teresa Purrington
City Clerk
APPROVED AS TO FORM:
______________________
J. Christine Dietrick
City Attorney
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City of San Luis Obispo, California, on ______________________. ___________________________
Teresa Purrington
City Clerk

Resolution No. _____ (2025 Series) Page 3
R ______
EXHIBIT A: 2025-27 SEWER RATES
Usage
(Variable Per Unit Cost)
Proposed Rates
Effective July 1, 2025
Proposed Rates
Effective July 1, 2026
Single Family and MultiFamily Residential Per Unit
Cost
(Up to Sewer Cap)
$10.46 $11.14
Non-Residential Per Unit
Cost
(For all Water Consumption)
$10.94 $11.65
Monthly Base Fees
(Fixed Cost)
Proposed Rates
Effective July 1, 2025
Proposed Rates
Effective July 1, 2026
Single Family Residential $26.11 $27.81
Multi-Family and Non-Residential by Water Meter Size

0.75-inch or less meter $26.11 $27.81
1-inch meter $43.61 $46.44

1.5-inch meter $86.96 $92.61
2-inch meter $139.20 $148.25
3-inch meter $261.15 $278.12
4-inch meter $435.33 $463.63
6-inch meter $870.40 $926.98
8-inch meter $1,392.70 $1,483.23
10-inch meter $2,002.22 $2,132.36

R ______
RESOLUTION NO. _____ (2025 SERIES)

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN LUIS

OBISPO, CALIFORNIA, TO AMEND THE CITY OF SAN LUIS OBISPO

LOW INCOME ASSISTANCE PROGRAM FOR CITY RESIDENTS
WHEREAS, the City Council identified the development of a program to assist low income customers in affording City utilities as a primary goal for 1991 -93; and WHEREAS, the City Council adopted a Low Income Assistance Program via Resolution 8073 in 1992; and
WHEREAS, the program consists of a 15% rate reduction for customers receiving Federal and State aid or who meet income requirements, a one-time assistance for customers who are experiencing financial difficulty, and help with retrofitting and maintaining conservative water usage within their homes; and WHEREAS, other utilities in the area now provide Low Income Rate Reduction Assistance of 20%, charges have increased, and budgets have historically been underutilized; and
WHEREAS, the City Council finds it appropriate to update the program name from the “Low Income Assistance Program” to the “Customer Assistance Program” to better reflect the purpose and eligibility of the program;
NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San Luis Obispo that the Low Income Assistance Program formally be updated to be called the Customer Assistance Program and be increased to provide a 20% water and sewer rate reduction for customers who meet the eligibility requirements.

SECTION 1. Resolution Number 8073 (1992 Series) is hereby amended and superseded to the extent inconsistent herewith.

Upon motion of Council Member ___________, seconded by Council Member ___________, and on the following roll call vote:

AYES:

NOES:

ABSENT:

The foregoing resolution was adopted this _____ day of _______________ 2025. ___________________________
Mayor Erica A. Stewart

Resolution No. _____ (2025 Series) Page 2
R ______
ATTEST:
______________________
Teresa Purrington
City Clerk
APPROVED AS TO FORM:
______________________
J. Christine Dietrick
City Attorney
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City of San Luis Obispo, California, on ______________________. ___________________________
Teresa Purrington
City Clerk

The San Luis Obispo City Council invites all interested persons to participate in a public meeting on Tuesday, June 17, 2025, at 5:30 p.m. in the Council Chambers at City Hall, 990 Palm Street, San Luis Obispo. Meetings can be viewed on Government
Access Channel 20 or streamed live from the City’s YouTube Channel at http://youtube.slo.city. Public comment, prior to the start of the meeting, may be submitted in writing via U.S.

Mail delivered to the City Clerk’s office at 990 Palm Street, San Luis Obispo, CA 93401 or by email to [email protected].

However, in order for a water or sewer rate protest to be valid, a written protest must be mailed or personally delivered to the City of San Luis Obispo Clerk’s Office, 990 Palm Street, San Luis Obispo, CA 93401, or personally delivered to the City Clerk at the noticed hearing prior to the close of the hearing. Protests submitted orally or by email, fax, or text are not considered valid and will not be counted. Mailed or delivered protests received after the close of the public hearing are not valid and will not be counted, even if postmarked prior to the date of the hearing.

Protests must state that the signer opposes the proposed increase in water rates, sewer rates, or both. If a written protest form is used, the box(es) identifying that you are protesting the water and/or sewer rates must be checked. Protests must contain the service address and an original signature by either the owner of record or a tenant directly liable to the City for the rates.

PUBLIC HEARING ITEMS:
• 2025-26 and 2026-27 Water rate ADOPTION
A Public Hearing to consider adopting a Resolution entitled, “A Resolution of the City Council of the City of San Luis Obispo, California, establishing Water Rates for Fiscal Years 2025-26 and 2026-27.”
On April 30, 2025, all property owners and account holders of record were mailed a form to protest the proposed water rates, as required under Proposition 218. Signed protests must be received by the City Clerk, 990 Palm Street, San Luis Obispo CA 93401, at or before the time of the protest hearing (June 17, 2025 at 5:30 p.m.).

For more information, please visit www.slocity.org/
utilityrates or contact the City’s Utilities Department at (805) 781-7133 or by email at [email protected].
• 2025-26 and 2026-27 Sewer rate ADOPTION
A Public Hearing to consider adopting a Resolution entitled, “A Resolution of the City Council of the City of San Luis Obispo, California, establishing Sewer Rates for Fiscal Years 2025-26 and 2026-27.”
On April 30, 2025, all property owners and account holders of record were mailed a form to protest the proposed sewer rates, as required under Proposition 218. Signed protests must be received by the City Clerk, 990 Palm Street, San Luis Obispo CA 93401, at or before the time of the protest hearing (June 17, 2025 at 5:30 p.m.).

For more information, please visit www.slocity.org/
utilityrates or contact the City’s Utilities Department at (805) 781-7133 or by email at [email protected].
• A Public Hearing to consider adopting the 2025-27
Financial Plan. After extensive community participation and several Council budget workshops and hearings beginning in October 2024, the 2025-27 Financial Plan is now ready for adoption. Key elements of the Financial Plan include:

1. Focus on long-term fiscal health, aligned with Fiscal and Budget Policies and Financial Responsibility and
Sustainability Philosophy, and incorporating recently
adopted Budget Balancing Strategies

2. Continued investment in Council adopted Major City Goals

3. Careful consideration of appropriate allocations between capital and operating expenditures
For more information, contact Emily Jackson at
(805) 781-7125 or by email at [email protected].

The City Council may also discuss other hearings or business items before or after the items listed above. If you challenge the proposed action in court, you may be limited to raising only those issues you or someone else raised at the public hearing described in this notice, or in written correspondence delivered to the City Council at, or prior to, the public hearing.

Council Agenda Reports for this meeting will be available for review one week in advance of the meeting date on the City’s website, under the Public Meeting Agendas web page:
https://www.slocity.org/government/mayor-and-city-council/ agendas-and-minutes. Please call the City Clerk’s Office at (805) 781-7114 for more information. The City Council meeting will be televised live on Charter Cable Channel 20 and live streaming on the City’s YouTube channel http://youtube.slo.city.

Teresa Purrington, City Clerk
City of San Luis Obispo
June 5, 2025

SAN LUIS OBISPO CITY COUNCIL

NOTICE OF PUBLIC HEARING

The San Luis Obispo City Council invites all interested persons to participate in a public meeting on Tuesday,
June 17, 2025, at 5:30 p.m. in the Council Chambers at City Hall, 990 Palm Street, San Luis Obispo. Meetings can be viewed on Government Access Channel 20 or streamed
live from the City’s YouTube Channel at http://youtube.slo. city. Public comment, prior to the start of the meeting, may be submitted in writing via U.S. Mail delivered to the City Clerk’s office at 990 Palm Street, San Luis Obispo, CA 93401 or by email to [email protected]. However, in order for a water or sewer rate protest to be valid, a written protest must be mailed or personally delivered
to the City of San Luis Obispo Clerk’s Office, 990 Palm Street, San Luis Obispo, CA 93401, or personally delivered to the City Clerk at the noticed hearing prior to the close of the hearing. Protests submitted orally or by email, fax, or text are not considered valid and will not be counted.

PUBLIC HEARING ITEMS:
• 2025-26 AND 2026-27 WATER RATE ADOPTION
A public hearing to consider adopting a Resolution
entitled, “A Resolution of the City Council of the City of San Luis Obispo, California, establishing Water Rates
for Fiscal Years 2025-26 and 2026-27.”
On April 30, 2025, all property owners and account
holders of record were mailed a form to protest the
proposed water rates, as required under Proposition
218. Signed protests must be received by the City
Clerk, 990 Palm Street, San Luis Obispo CA 93401, at or before the time of the protest hearing (June 17, 2025 at 5:30 p.m.).

For more information, please visit www.slocity.org/
utilityrates or contact the City’s Utilities Department at (805) 781-7133 or by email at [email protected].
• 2025-26 AND 2026-27 SEWER RATE ADOPTION
A public hearing to consider adopting a Resolution
entitled, “A Resolution of the City Council of the City of San Luis Obispo, California, establishing Sewer Rates
for Fiscal Years 2025-26 and 2026-27.”
On April 30, 2025, all property owners and account
holders of record were mailed a form to protest the
proposed sewer rates, as required under Proposition
218. Signed protests must be received by the City
Clerk, 990 Palm Street, San Luis Obispo CA 93401, at or before the time of the protest hearing (June 17, 2025 at 5:30 p.m.).

For more information, please visit www.slocity.org/
utilityrates or contact the City’s Utilities Department at (805) 781-7133 or by email at [email protected].

The City Council may also discuss other hearings or
business items before or after the items listed above. If you challenge the proposed action in court, you may be
limited to raising only those issues you or someone else raised at the public hearing described in this notice, or in written correspondence delivered to the City Council at, or prior to, the public hearing.

Council Agenda Reports for this meeting will be available for review one week in advance of the meeting date on
the City’s website, under the Public Meeting Agendas
web page: https://www.slocity.org/government/mayorand-city-council/agendas-and-minutes. Please call the City Clerk’s Office at (805) 781-7114 for more information.

The City Council meeting will be televised live on Charter Cable Channel 20 and live streaming on the City’s YouTube channel http://youtube.slo.city.

Teresa Purrington
City Clerk
City of San Luis Obispo
May 1, 2025

SAN LUIS OBISPO CITY COUNCIL

NOTICE OF PUBLIC HEARING

City of San Luis Obispo, Council Memorandum
City of San Luis Obispo
Council Agenda Correspondence
DATE: June 17, 2025
TO: Mayor and Council
FROM: Emily Jackson, Finance Director
VIA: Whitney McDonald, City Manager
SUBJECT: ITEM 6c – ADOPTION OF THE 2025-27 FINANCIAL PLAN Staff received the following questions, regarding the 2025-27 Financial Plan item. The questions are below with staff’s response shown in italics:

1. Can you provide a little more clarity regarding the $150,000 grant that was mistakenly put into the Police Grant Fund instead of the General Fund? The staff report states that this is what has allowed the additional $45,000 to be allocated in the first year of the financial plan for the CAPSLO hotel voucher program and addition of $25,000 to fully support the increased cost for the contract with County for Animal Services to be covered. How was the additional $80,000 allocated? What are the tradeoffs that staff made in order to fund the hotel voucher program at $90,000 in FY 2026-27? Response: The City maintains a Law Enforcement Grants Fund to account for certain grant funded police department expenditures. Certain other grants and expenditures are properly recorded within the General Fund. During review of the draft budget, staff identified that a $150,000 COPS SLESF grant has been budgeted in the Grant Fund, but recorded in the General Fund, for several years.

Correcting this error and appropriately for this grant in the General Fund covered the council directed cost increases in both years of the Financial Plan and the excess was used to reduce revenue risk in the forecast.

2. Can you please provide a line-item list of all the one-time and ongoing funding that is proposed to provide to CAPSLO, annually during the 2025-27 Financial Plan, whether it is through a larger agreement or through individual grants? How does this compare to the funds provided to them in each of the two years of the current financial plan (by line item, again, if possible)? Response: A CAPSLO funding history by line-item is included in Attachment A to this agenda correspondence. The summary includes proposed one-time and ongoing funding for CAPSLO during the 2025-27 financial plan, as well as prior investments from FY 2014-15 through FY 2024-25.

ITEM #6C – ADOPTION OF THE 2025-27 FINANCIAL PLAN Page 2

3. Do we receive any data from CAPSLO on the number of families that are provided shelter with the hotel voucher funds? And, do they report how many of these families annually receive permanent housing after being sheltered in a hotel?
Response: CAPSLO submits quarterly funding reports with data on each of the City-funded programs they provide through 40 Prado Homeless Services Center.

Data on the Hotel Voucher Program is included in the quarterly reports including individuals and families served and successful housing placements. In the first two quarters of FY 2024-25, CAPSLO utilized the City’s funding allocation for the Hotel Voucher Program (Motelling Program) to serve 15 families and 8 individuals, with 15 permanent housing placements for a 65% housing placement rate.

4. In the Significant Operating Budget Change (SOBC) table on page 630 of the packet, it is noted that staff recommends providing CAPSLO with approximately $81,000 in FY 2025-26 and approximately $30,000 in FY 2026- 27 for the rotating safe parking program. The Homeless Services Oversight Committee (HSOC) recently recommended that CAPSLO receive a grant to fund the rotating safe parking program for $293,000 and this recommendation will go to the Board of Supervisors on June 17th. Is staff’s recommendation on page 630 still necessary given this new funding? Response: In September 2024, SLO County released a request for proposals for an overnight parking program with supportive services for individuals living in their vehicles. The funding opportunity utilized earned interest generated from the Homeless Housing, Assistance and Prevention (HHAP) Program Rounds 1 and 2 from both the CoC and County allocations. The RFP outlined eligible and noneligible expenses for the funding opportunity and due to the State’s HHAP funding requirements, only personnel and services costs were eligible grant expenses while operational costs (e.g. portable restrooms, trash receptacles, insurance, etc.) were ineligible. The City’s funding allocations for FY 2025-26 and FY 2026-27 are intended to cover the operating expenses that are ineligible to be covered by the HHAP funding. As such, staff’s recommendation remains the same.

5. Page 571, includes the following workplan items. Is there a timeline for when the “ongoing” activities related to item 1d will be completed, or started:

ITEM #6C – ADOPTION OF THE 2025-27 FINANCIAL PLAN Page 3 Response: Following the study session identified in item 1.c. of the work plan shown above, a number of code amendments will be needed to implement pieces of the State Fire Hazard Severity Zone updates, in addition to the potential development and implementation of inspection and enforcement programs depending in the direction received during the study session.

The California Building Code, California Fire Code and the new California WUI Code will be released on July 1st to local jurisdictions. This release is part of the 3- year code cycle for the respective codes (except the WUI code, for which this will be the first time California has adopted the WUI code). During the code adoption process, Building and Fire will assess their respective codes and review collaboratively the WUI code. In the WUI code, staff expects to see further clarification on a host of questions relevant to the hazard maps, specifically defensible space, but also with regards to restrictions around development and other areas. During the code adoption cycle, staff will also be reviewing opportunities for local amendments to the code based on specific concerns within the San Luis Obispo community. It is anticipated that the new code, with amendments, will take effect January 1, 2026. Additionally, the Zone 0 (0-5' from a structure) ember resistant zone regulations are currently scheduled to take effect January 2026 and would be addressed in the proposed code amendments.

In addition to code development and adoption, significant outreach and education efforts will be undertaken on what is necessary for compliance with the new requirements within the Fire Hazard Severity Zones, which will be ongoing throughout the Financial Plan period. If inspection and enforcement programs are directed during the study session that will be held in Fall 2025, those programs will also be developed and implemented over the course of the Financial Plan, with additional information presented as part of the 2026-27 Budget Supplement if resources are needed at that time.

6. Can you explain a little more about what the Debt Service Fund is. Where do the revenues come from for this fund and how often are additions made to the fund, or expenditures made?
Response: The Debt Service Fund was established to account for payment and accumulation of resources related to long-term debt incurred by the General Fund.

The Debt Service Fund’s sole revenue source is the annual transfer in from the General Fund. Expenditures from this fund are made according to the various debt service schedules for each issuance, generally in June and December.

7. On page 593, it is indicated that a substantial increase in Local Revenue Measure (LRM) allocation toward Creek and Flood Protection is recommended for FY 2026-27 over FY 2025-26. Can you provide some context on this large increase?

ITEM #6C – ADOPTION OF THE 2025-27 FINANCIAL PLAN Page 4 Response: The significant increase in Creek and Flood Protection funding in FY 2026-27 compared to FY 2025-26 reflects the Capital expenditure transition from design to construction on several major projects. Year 1 of the Financial Plan (FY 2025-26) focuses primarily on design, while Year 2 (FY 2026-27) includes construction activities for four substantial projects in this category. Some of these, like the Mitigation Planting effort, are required by state mandates.

8. There doesn’t appear to be any funds set aside in this financial plan for Below Market Rate (BMR) housing production. Are funds currently set aside for this objective?
Response: The City has an Affordable Housing Fund (AHF) that is used to assist in the production of BMR housing units. The AHF is funded through revenue incurred from the inclusionary housing in-lieu fee and commercial linkage fee that are charged to new residential and commercial development projects. One-time funds from state and federal sources, are also placed in the AHF. The AHF is used to pay the City’s Below Market Rate Administrator, fund a regular yearly contribution to the SLO Housing Trust Fund, cover administrative costs of the AHF, and then to assist affordable housing projects through loans approved by Council.

Due to a decline in in-lieu and commercial linkage fee revenue, as well as the lack of new federal and state funding sources, the AHF is not in a position to make any new loans to BMR housing projects at this time. The Prohousing Incentive Program funding, which is a reimbursement program from the state is being used to assist several BMR housing projects.

9. On page 601 of the packet, the General Fund Long-Term Forecast appears to be projecting a deficit of $376,000 in FY 2025-26 and $246,000 in FY 2026-

27. Do we anticipate having the fund balance to cover these deficits, or will we require the use of reserves or another funding source? Response: This variance between revenue and expenditures is not considered a deficit since it is offset by cancellation of assigned fund balances. The $376,000 in FY 2025-26 and $246,000 in FY 2026-27 are included as budgeted operating expenditures in the Long-Term Forecast, but are not proposed to be funded with the general purpose revenues (tax and franchise revenue or user fees) that support most programs and services budgeted in the General Fund. The forecast reflects that expenditures exceed revenues by the amounts noted above, and the “use of fund balance” reflects that fund balance from the Economic Development designation and Development Services designation will be used to offset the cost of Significant Operating Budget Changes from the Administration & IT and Creek and Flood Protection $ 294 $ 4,833
Mitigation Planting $ 100 $ 1,583
Pismo Street Retaining Wall Adjacent to Vista Grande $ 100 $ 1,900 Bridge Maintenance $ 94 $ -
Drainage Infrastructure Replacement $ - $ 750
Laguna Lake Golf Course Bridge Replacement $ - $ 600

ITEM #6C – ADOPTION OF THE 2025-27 FINANCIAL PLAN Page 5 Community Development departments on a one-time basis. In both cases, these assigned fund balances are being used for their originally intended purpose.

10.On page 669, there notes an SOBC for a Heavy Equipment Mechanic. Is that proposed to be funded 100% via General Fund or can some of it be offset by enterprise funds to account for work on heavy equipment required for those purposes.

Response: This position is entirely funded by the General Fund. To the extent that this position works on fleet assets operated by the Enterprise Funds, the General Fund will be reimbursed through the Cost Allocation Plan.

11.On page 849, it seems that there is more funding allocated to ATP implementation in some years than others, but it seems inconsistent (FY 2028-29, FY 2030-31, FY 2031-32, FY 2033-34). Are there particular projects this extra funding is being planned for? If so, what?
Response: The additional ATP funding in FY 2028-29, FY 2032-33, and FY 2033- 34 ($200,000 each year) is allocated to the Complete Streets components of the City’s Pavement Maintenance Projects. This supports the integration of ATP elements—such as enhanced pedestrian and bicycle infrastructure—into paving projects.

In FYs 2030-31 and 2031-32, the additional funding ($150,000 each year) is directed toward the implementation of the Tier 1 Active Transportation Plan Network. These funds support planning and scoping for future ATP projects not yet identified in the current 10-Year CIP.

12.The memo states that there is significant uncertainty over sales tax receipts so we will not be using the consultant’s projection of an additional loss of about $1 million in revenue. Can you say more about this decision and implications for end of the year finances if its turns out to be correct? Response: The sales tax forecast for the upcoming financial plan was prepared by the City’s consultants in February. Since then, changes to Federal trade and immigration policies have created significant uncertainty for the global economy that staff believe will impact the City’s budget, including its sales tax revenue.

Because policy has changed so frequently, staff do not feel confident forecasting revenue impacts based on policies currently in effect.

While there is risk to the sales tax forecast, other revenue lines are generally forecasted more conservatively and could offset the shortfall. Staff will monitor all revenue streams and, if staff believe an overall shortfall is to be expected, amend the budget mid-year. In a worst case scenario, the General Fund is well capitalized and maintains a $2 million revenue stabilization reserve which could be utilized to offset any shortfalls.

ITEM #6C – ADOPTION OF THE 2025-27 FINANCIAL PLAN Page 6

ITEM #6C – ADOPTION OF THE 2025-27 FINANCIAL PLAN Page 7

13.It appears the City is currently below the General Fund debt policy limit (staff report page 713-714). As the City anticipates additional debt for large scale capital projects, how would that effect the debt ratio and how might it effect the bond rating?
Response: Currently, the Prado Road Interchange is the only project identified in the 10-year Capital Improvement Plan requiring debt financing. The total cost of the project, availability of other funding sources, marketability of the City’s securities, and interest rates at the time of issuance are unknown. Based on a set of reasonable assumptions, the General Fund’s pro-forma debt ratio after financing the Prado Road Interchange would be roughly 5% of revenue, well below the 15% policy threshold.

It is difficult to predict any specific impact on the City’s credit ratings, but it is generally true that higher debt levels lead to lower ratings.

14.Under the Diversity, Equity and Inclusion Major City Goal, task 4e states that staff will report out on demographic data for City job applicants (staff) and paid advisory body members and use that information to address potential equity gaps. Won’t a portion of this work also happen as a part of the scope for the Council Compensation Committee?
Response: Correct. Staff currently plans to include demographic data for City job applicants as a part of the required AB 2561 public hearings where vacancy data is also reported. Those hearings are planned for Q3 of each year.

At the May 20th Council meeting, Council also provided direction to create a Council Compensation Committee to review compensation for City Council and Advisory Body members. That committee’s work will include equity considerations for advisory body members as it relates to compensation. As such, staff proposes to modify task 4e to also include the work of the Council Compensation Committee as follows:

15. Staff recommends modifying the completion date of task 3d of the Open Space, Climate Action and Resilience Major City Goal regarding a study session to consider options for funding stormwater and / or creek maintenance and flood preparedness in support of CASE programs. Currently this work item is proposed to occur in FY 2026 Q2. Staff recommends modifying this timeframe to FY 2027 Q3 to better align with timelines for other projects.

ITEM #6C – ADOPTION OF THE 2025-27 FINANCIAL PLAN Page 8

16.Community Development’s performance measure related to customer service (below) includes targeted performance in 2025-27 that is significantly lower than FY 2023-23 actuals and what is projected for FY 2024-25.

Shouldn’t the department be targeting to continue to maintain existing customer satisfaction rates, rather than a decrease?
Objective: Provide Excellent Customer Service
Strategic Goal: Other Department Objectives
2023-24
Actual
2024-25
Projected
2025-26
Target
2026-27
Target
Measure: Customer survey response positivity rate 90% 91% 85% 85% Notes: Customers in Community Development are provided with a survey to gauge satisfaction and collect feedback to inform continual improvement efforts.

Response: Staff agrees that the target should be adjusted upward to reflect a goal to maintain the approximately 90% customer satisfaction levels that the department achieved in FY 2023-24 and is on track to achieve in the current year.

The table below will be included in the adopted 2025-27 Financial Plan.

Objective: Provide Excellent Customer Service
Strategic Goal: Other Department Objectives
2023-24
Actual
2024-25
Projected
2025-26
Target
2026-27
Target
Measure: Customer survey response positivity rate 90% 91% 90% 90% Notes: Customers in Community Development are provided with a survey to gauge satisfaction and collect feedback to inform continual improvement efforts.

ATTACHMENT
A – CAPSLO Funding History by Line Item

FY14-15 FY17-18 FY19-20 FY20-21 FY21-22 FY22-23 FY23-24 FY24-25 FY25-26 FY26-27 40 Prado Homeless Services Center -
Design and Construction Costs $250,000
40 Prado Safe Parking Program $10,000.00 $10,000.00 $10,000.00 $65,424.00 $10,000.00 $17,000.00 $17,000.00 $26,000.00 $26,000.00 Operational Support $123,500.00 $123,500.00 $63,826.00 $ 187,326.00 $ 186,826.00 $186,826.00 $186,826.00 $186,826.00 Warming Center $10,000.00 $10,000.00 $64,633.00 $10,000.00 $10,000.00 $10,000.00 $10,000.00 $10,000.00 Railroad Safe Parking Program
40 Prado Hotel Voucher Program $25,000.00 $45,000.00 $90,000.00 $90,000.00 Strategic Planning & Organizational
Assessment (Koble Collaborative) $30,000.00
Rotating Overnight Safe Parking Program $80,984.00 $29,864.00 HRC - GIA $7,500.00 $9,000.00 $12,000.00 $20,000.00 $10,000.00 HRC - HSG $10,000.00 $10,000.00 $20,000.00 TBD
Childcare Grant $54,000.00 $54,000.00 $50,000.00 $50,000.00 TBD CDBG $68,054.00 $74,453.00 $70,963.00 $74,132.00 $63,614.18 $58,220.00 $64,357.00 TBD ANNUAL TOTAL $250,000.00 $17,500.00 $220,554.00 $229,953.00 $338,846.00 $345,458.00 $362,440.18 $357,046.00 $528,167.00 $342,690.00 Key
* Amounts in Red Pending Council Approval
TBD Grant allocations still to be determined for FY26-27 CAPSLO Funding History by Line-Item

Item 6c
Department: Finance
Cost Center: 2002
For Agenda of: 6/17/2025
Placement: Public Hearing
Estimated Time: 30 min
FROM: Emily Jackson, Finance Director
Prepared By: Riley Kuhn, Principal Budget Analyst
SUBJECT: ADOPTION OF THE 2025-27 FINANCIAL PLAN

RECOMMENDATION
Adopt a Draft Resolution entitled, “A Resolution of the Council of the City of San Luis Obispo, California, approving the 2025-27 Financial Plan and Fiscal Year 2025-26 Budget.”

POLICY CONTEXT
Although the City adopts a two-year Financial Plan (Attachment A), the budget is adopted annually. Pursuant to Section 804 of the City Charter, the City Council must adopt the FY 2025-26 Budget by June 30, 2025, for the appropriations to be in place when the next fiscal year begins. This action is accomplished by Resolution, which is provided as Attachment B.

Development of the 2025-27 Financial Plan was guided by the City’s Fiscal Policies and Budget Balancing Strategies, both of which were approved by the City Council as part of the Budget Foundation item in January 2025.

DISCUSSION
Background
The purpose of this Public Hearing is to adopt the 2025-27 Financial Plan and appropriate the FY 2025-26 budget (Attachment A). The resolution (Attachment B) also adopts the appropriation limit as required under Article XIII B of the California Constitution.

The 2025-27 Financial Plan and FY 2025-26 Budget were developed following extensive community participation and several Council budget workshops and business items beginning in October 2024 including:
 October 1, 2024: Council provided input on the Financial Planning Calendar and community outreach survey.
 November 12, 2024: The Community Priorities Survey was sent to community members to share their feedback on budget priorities. The survey was open for

Item 6c
one month and widely advertised in utility bills, on social media, at advisory body meetings, and shared with community groups.
 December 10, 2024: Staff presented “Setting the Stage for the 2025-27 Financial Plan” which included information on the regulatory environment and state laws that impact how cities operate, macroeconomic conditions, and the budgetary implications of the community’s growth.
 January 14, 2025: Staff presented the “Budget Foundation,” which included additional economic information, a review of the City’s unfunded pension obligations, updated fiscal policies, and an overview of the long-term Capital Improvement Plan. Council provided input on the Community Forum and Goal Setting Workshop and shared feedback relative to existing Major City Goals.  January 23, 2025: The City Council and Citizens Revenue Enhancement Oversight Commission held a joint meeting, “Community Forum,” which provided an opportunity for community members to share their priorities for the upcoming budget.
 February 8, 2025: The City Council conducted a Goal Setting Workshop, during which Council developed the 2025-27 Major City Goals.
 April 15, 2025: Staff presented “Strategic Budget Direction,” which included a draft budget, draft work plans based on the 2025-27 Major City Goals, and during which Council directed staff to make changes to the draft budget and the draft work plans prior to budget adoption in June.

The proposed 2025-27 Financial Plan includes Citywide expenditures by fund as follows:

Changes to the Preliminary Financial Plan
During the Strategic Budget Direction item on April 15, 2025, Council directed staff to increase funding for Community Action Partnership of San Luis Obispo (CAPSLO’s) hotel voucher program from $45,000 per year to $90,000 based on the understanding that the $45,000 allotted in the current year was fully spent within six months and is expected to be spent down at a similar rate in the future. The proposed final budget also includes an additional $25,000 in the Police Department budget to accommodate an increased annual contribution to the County’s Animal Services program that was unknown at the time that the preliminary budget numbers were presented to the City Council.

These expenditure increases were offset through correction of an identified error. In the Actuals Budget Financial Plan
Citywide FY 2023-24 FY 2024-25 FY 2025-26 FY 2026-27
General Fund $118,691,743 $126,511,337 $117,607,178 $120,844,660 Water Fund 29,876,176 40,870,113 40,025,257 33,548,476
Sewer Fund 38,716,328 35,805,101 29,034,524 28,106,201
Parking Fund 28,922,763 52,855,425 11,514,113 10,101,970 Transit Fund 6,560,413 17,220,676 9,615,713 14,236,283
Other Funds 8,315,742 9,378,496 9,817,626 10,224,310
Total $231,083,164 $282,641,147 $217,614,410 $217,061,901 YoY Change 22% -23% 0%

Item 6c
draft budget, $150,000 in grant revenue was budgeted in the Police Grant Fund but belongs in the General Fund. Adding this revenue to the General Fund budget more than offset the increased expenditures.

At the April 15, 2025 Strategic Budget Direction meeting, the City Council also provided feedback to the City Manager on the proposed Major City Goal Workplan, resulting in the addition of new items and clarification of existing tasks. Staff also identified and incorporated a few items that were unintentionally omitted from the original draft. In addition, minor administrative edits were made to improve clarity and consistency. All updates have been incorporated into the final Workplan included in the 2025–27 Financial Plan (Attachment A). Additionally, to support ongoing progress reporting, each task now includes an estimated completion date. The list below reflects both Council-directed updates and items added by staff for completeness.

Cultural Vitality, Economic Resilience, and Fiscal Sustainability Updated – 3a: Clarified to support all childcare options and evaluate approaches such as permit streamlining for childcare businesses.

Added – 5f: Complete a fiscal analysis of golf operations at Laguna Lake Golf Course and conduct a Council Study Session to evaluate fiscal impacts, capital needs, and potential reuse options prior to major infrastructure investments.

Added – 5g: Develop a strategic framework that connects existing strategic plans, incorporates the City’s mission and vision, and outlines core services to support a longer-term planning approach beyond the two-year Financial Plan.

Housing and Neighborhood Livability – Healthy, Safe, and Affordable Updated – 2e: Revised to indicate that the RFP will be presented to Council alongside a Study Session regarding potential scoping of a Land Use and Circulation Element (LUCE).

Infrastructure and Sustainable Transportation
Updated – 3e: In collaboration with the Avila Ranch contractor, pursue the design and construction of interim Fire Station 5, targeting a projected opening date of 2028.

As noted during presentation of the draft budget, the sales tax revenue forecast was prepared prior to significant new tariffs. The precise impact of these tariffs is unknown, but at a macro-economic level they can be expected to cause higher prices and slower growth in the near term. During a May meeting, the City’s sales tax consultant provided a forecast approximately $1 million lower than this budget assumes. Staff have not incorporated their revised estimate since frequent rapid changes to tariffs make accurately forecasting their impacts on sales tax impossible but will closely monitor results and adjust the budget mid-year if necessary.

Previous Council or Advisory Body Action
The draft budget was presented to Council during the Strategic Budget Direction meeting on April 15, 2025. Council’s direction from that meeting was incorporated into the attached

Item 6c
proposed Financial Plan. The Planning Commission reviewed the Capital Improvement Plan on May 28, 2025, and confirmed the plan’s conformity with the General Plan. The Revenue Enhancement Oversight Commission reviewed the proposed use of Local Revenue Measure funds on May 8, 2025, and recommended staff’s proposal to the City Council for adoption.

Public Engagement
As described above, development of the Financial Plan incorporated public engagement at each step, including community surveys, outreach to community groups, a community forum, and several public hearings prior to adoption.

CONCURRENCE
All departments participated in the development of the 2025-27 Financial Plan and concur with the staff recommendation.

ENVIRONMENTAL REVIEW
The California Environmental Quality Act (CEQA) does not apply to the recommended action in this report, because the action does not constitute a “Project” under CEQA guidelines.

FISCAL IMPACT
Budgeted: Yes Budget Year: 2024-25
Funding Identified: Yes
Fiscal Analysis:

As outlined in detail in the Financial Plan, the City is appropriating $217,614,410 (all funds) in the FY 2025-26 budget. All funds budgets are balanced and projected to maintain adequate reserves as called for by policy.

ALTERNATIVES
Council could direct modifications to the proposed Financial Plan and adopt the modified budget. Should Council pursue this option, direction on specific modifications would need to be provided.

Council could choose to not adopt the budget and provide direction on desired changes. Should Council pursue this option, direction on specific modifications would need to be provided and the hearing would need to be continued until the June 24th meeting at which point the modified budget could be adopted.

ATTACHMENTS
A - Draft 2025-27 Financial Plan
B - Draft Resolution Adopting FY 2025-26 Budget

Financial Plan
2025-27
2 2025-26 Proposed BudgetPage 545 of 1018

Table of Contents
Introduction
Reader’s Guide 4
Budget Message from City Manager 5
City Profile
City Council 14
Community Overview 15
The City at a Glance 16
Highlights of City Services 17
Organizational Chart 18
Organizational Values 19
Financial Plan Framework
Framework and Policies 21
Budget Balancing Strategies 24
Strategic Planning
Financial Planning Process 32
Strategic Priorities/ Major City Goals 37
Financial Plan Overview
Fund Structure   47
All Funds Budget Summary 52
General Fund Summary 54
Local Revenue Measure 62
Long Term Forecast 71
Operating Budget
Introduction 73
Significant Operating Budget Changes 74
Employee Summary 81
Administration & IT 83
City Attorney 82
Community Development 92
Finance 97
Fire 106
Human Resources 118
Parks & Recreation 122
Police 130
Public Works 138
Utilities 154
Non‐Departmental 171
Operating Budget (Special Revenue & Other Funds)
Avila Ranch CFD 173
Boysen Ranch Fund 175
Downtown SLO 176
Insurance Fund 177
Public Safety Equipment Fund 178
San Luis Ranch CFD 179
TBID 181
Debt 182
Capital Improvement Plan
Overview 186
Project Summary List 210
Project Details/Narratives 224
Reference Material
Basis of Budgeting and Accounting 391
CalPERS Pension Obligations 392
Fiscal Policies 396
Glossary 416
Acronym Glossary 425
Appropriation Limit 427
Appendix 429
Financial Plan Page 3

Financial Plan Reader’s Guide
Financial Plan Reader’s Guide
The Financial Plan Reader’s Guide is intended to provide a basic understanding of the structure and contents of the Financial Plan document. The document is divided into the following sections:

Introduction
This section includes a message from the City Manager giving an overview of the budget highlights. The message also provides the financial context for the City’s Financial Plan and outlines some key initiatives and investments in the plan.

City Profile
This section introduces the Mayor, Vice Mayor, and the three City Councilmembers and provides the reader with a brief overview of the City of San Luis Obispo, its location, population, interesting community information, as well as highlights of the services available to citizens and businesses. This section also includes the City of San Luis Obispo’s organizational structure.

Financial Plan Framework
This section includes the City Council’s adopted Budget Policies and Budget Balancing Strategies, which work together to provide a framework to guide staff in the development of the two‐year Financial Plan and annual budgets.

Strategic Planning
This section provides an overview of the City’s public engagement and budget development process. It also provides a summary of survey responses and input from the Community Forum that the City Council considers when developing its goals for the two‐year Financial Plan.  The Council’s adopted Major City Goals and staff’s proposed workplan to make progress on the Major City Goals are also included in this section.

Financial Plan Overview
This section provides a high‐level overview of all the components presented in the following sections of this document, in more detail. Included in this section is an overview of the City’s fund structure and description of the major funds to help the reader to understand how the overall budget in structured. This section also provides a summary of the ‘All Funds’ budget and more detailed information for the General Fund, including a description of funding sources and uses. Information about transfers between funds, capital investments, debt obligations and beginning and ending fund balances for all funds is also included.  Also included is information about the use of Local Revenue Measure (the City’s 1.5% sales tax approved by voters in November 2020).  Finally, this section provides a consolidated long‐term financial outlook for the General Fund, including a discussion of the factors influencing the forecast for the coming two years as well as the 2027‐29 Financial Plan.

Operating Budgets
This section provides a summary of each department’s budget compared to the prior year as well as the employee summary.

Further details provide a greater understanding about department operations, key highlights, and financial line‐item summaries comparing the current budget to prior year budgets and the proposed budget for the coming two years. Performance measures are also included in this section to highlight the work being done to address key objectives within each department.  In addition to providing details on department budgets, this section also provides information for other, non‐operating City funds.  Finally, this section also outlines the City’s debt capacity and considerations given when looking at issuing debt. It outlines the City’s creditworthiness and comments from the last rating review. Information on current debt for all the major funds including outstanding principal, the annual debt payment, and the year the debt will be retired is also included.

Capital Improvement Plan
This section provides an overview of the ten‐year Capital Improvement Plan (CIP) including information about the CIP development process and an overview of project funding sources.  The following information about each project proposed to be funded in the ten‐year period is also included in this section: a description of each project, project cost, source of funding and the amount of funding to be allocated in each of the next ten years, and operating impacts of the projects.

Financial Plan Page 4

Reference Material
This section includes additional information to help the reader gain a better understanding of the budget, including:
identification of the basis of budgeting and accounting, information about the City’s pension obligations, City Council‐ adopted Fiscal Policies, a glossary and acronym glossary, and the appropriation limit calculation.

Financial Plan Page 5

CITY MANAGER’S MESSAGE
Honorable Mayor and Members of the City Council,
I am pleased to present the City’s balanced 2025‐27 Financial Plan. This overall $217.6 million budget ($117.6 million General Fund) for Fiscal Year 2025‐26 reflects current economic realities, and significant input from our community, advisory bodies, and the City Council.  We have worked collaboratively to develop a financial plan that reflects our shared priorities and steels us against some short‐term and long‐ term challenges.

With this budget, we find ourselvesin a time of transition.  Revenue growth isslowing and costs are rising.

There is growing uncertainty resulting from a rapid shift in national economic policy via tariffs, and potential significant state and federal budget cuts.  And for the first time in many years, we are facing a structural imbalance in the General Fund.

But this is not a budget of retreat.  It reflects a thoughtful, forward‐looking approach.  The proposed budget protects the City’s current services, invests in City infrastructure, continues progress on long‐ standing Major City Goals, and aligns with our community’s values of responsibility, equity, and sustainability.

The proposed decisions that make up this plan were not arrived at lightly.  City staff, under the guidance of the City Council, looked carefully at how to adapt to a new fiscal reality while still moving the City forward.   We have prioritized thoughtfully, and made tradeoffs. Where we have chosen to enhance investments, we have done so with the intention to focus on areas of greatest need.

While the circumstances are different than years past, our approach should be familiar for San Luis Obispo. Our community and organization have long prioritized disciplined financial management, collaborative governance, and proactive planning. These values have carried us through prior economic downturns, natural disasters, and a global pandemic – and they guide us once again today.

Understanding the Shift: A New Economic Reality
The City has seen strong revenue growth in recent years.  Sales Tax and Transient Occupancy Tax (TOT) revenue surged as the economy recovered from COVID‐19 and as the community supported the passage of the Local Revenue Measure (LRM) in November 2020.  During the same time period, development activity increased significantly as the City permitted several large‐scale developments to meet housing targets set by the State.  This has resulted in an increase in development‐related fee revenues over the last several years.  The City has used this revenue growth to advance capital projects and expand key services.

Unfortunately, that revenue growth has slowed.  Our current economic reality reflects broader statewide and national trends, with inflation cooling consumer spending locally and interest rate hikes chilling development activities.  And while our economy remains fundamentally strong, the pace of revenue growth has clearly slowed.

Over the past year, we have seen:
 Flattening sales tax revenues, including LRM receipts, which were previously expected to grow more significantly but are now trending below what was forecasted last year by at least $2.4 million annually.

Financial Plan Page 6

CITY MANAGER’S MESSAGE
 Declining development‐related revenue – As noted in prior budget reports, due to a slowing of development activity, we are seeing a decrease in development services revenue of approximately $2 million in FY 2024‐25 and are forecasting a continuation of this decrease into the two years of the 2025‐27 Financial Plan.
 Rising personnel and project delivery costs, including increases in the cost of construction materials, insurance, utilities, and employee compensation to recruit and retain a talented workforce.
 Ongoing inflationary pressures, which continue to influence consumer behavior, project costs, and labor market dynamics.

As a result of what we have seen in the current year, I activated the City’s established Fiscal Health Contingency Plan (FHCP) in mid‐April of this year in an effort to control expenditures and provide flexibility to address the structural deficit.  Activation of the plan includes both a hiring and travel chill.  Under the FHCP, departments must seek permission of the FHCP committee and the City Manager to fill vacant positions and proceed with training‐related travel.  Neither are prohibited entirely, but the hiring chill and travel chill force us to prioritize our expenditures to ensure that we are addressing critical needs.

Development of the 2025‐27 Financial Plan
When we set out to develop the 2025‐27 Financial Plan, the long‐term forecast showed a General Fund deficit of $2.5 million in FY 2025‐26 due to slowed revenue growth and increasing costs.  Staff took the following actions to bring the budget into balance for the upcoming year:
 Departments were directed to constrain their non‐staffing budgets to FY 2024‐25 adopted levels.

Typically, non‐staffing budgets grow by the rate of inflation, matching the increase in costs for things like fuel, office supplies, training, and travel.   So, holding those non‐staffing costs flat represents a cut in expenses. To ensure that this exercise does not significantly impact service levels in the 2025‐27 Financial Plan period, departments were asked to identify the impacts of keeping non‐staffing costs at FY 2024‐25 levels.  Most noted that the constrained base budget exercise would result in little to no flexibility to address unanticipated items that may arise over the course of the next two years.   Three departments identified a need to restore budget to address priority items.  These include:
o $45,000 to the Police Department to cover the cost of the Animal Services contract with the County and other contract increases for critical public safety supports; o $20,000 to the Public Works Department to continue sidewalk scrubbing in the downtown area; and
o $20,000 to the Administration/IT Department to support ongoing tree and vegetation fuel management.

The constrained base budget exercise reduced non‐staffing expenditures by $1.6 million compared to what was forecasted for FY 2025‐26, based on prior trends.  LRM‐funded capital expenditures were reduced by approximately $1.0 million in FY 2025‐26 and $1.5 million in FY 2026‐27 compared to what was initially forecasted and were transferred to the operating budget.   The impacts of this transfer are expected to be minimal.   The decreased funding for capital expenditures will help to address staff capacity constraints to deliver the ambitious Capital Improvement Plan that has almost tripled in size due to the passage of the LRM Financial Plan Page 7

CITY MANAGER’S MESSAGE
in 2020.  In FY 2024‐25, 70% of the LRM collected is supporting capital expenditures.  For FY 2025‐ 26, that amount decreases to 69% and in FY 2026‐27 to 67%.  The Financial Plan assumes that the LRM will generate $33.6 million overall in FY 2025‐26 and $34.8 million overall in FY 2026‐27.  The staffing savings assumption for the General Fund was increased from 3% to 4%, based on historical trends.  This resulted in a $600,000 decrease to staffing costs and is not expected to have a noticeable impact due to natural attrition rates and the time that it takes to fill vacant positions.
 More than $10.0 million in Significant Operating Budget Changes (SOBCs) were requested by departments. Of that amount, $4.2 million was requested from the General Fund, but only $741,199 of new expenditures are proposed for the General Fund in this budget to address the mostsignificant organizational needs, while reflecting community priorities.  Detailed information about proposed SOBCs can be found in the ‘Operating Budgets’ section of this Financial Plan.

Though they might appear modest, actions taken to close the forecasted deficit for FY 2025‐26 reflect our deep commitment to accomplishing the community’s priorities. These targeted reductions allow usto live within our means, preserve service levels, and remain nimble in the face of economic change and uncertainty.   This two‐year Financial Plan includes measured, proactive steps to close the immediate deficit and chip away at the long‐term structural issues, all while upholding our values and strategic commitments.

Consistent with the City’s new Budget Balancing Strategies approved by the City Council earlier in the budget development process, the actions taken to balance the budget for FY 2025‐26, and the triggering of the FHCP, are largely short‐term in nature.  While short‐term strategies do not solve structural issues, using them wisely provides time to allow us to develop thoughtful long‐term solutions that restore structural balance, while still preserving our ability to make progress on the Council’s adopted Major City Goals and maintain the essential services residents rely on every day.

Building the Future, Together:  Strategic Investments in Community Priorities Despite the economic uncertainty and budgetary constraints we are currently facing, this Financial Plan makes strategic investments in the City Council’s adopted Major City Goals and other community priorities.  The ‘Financial Planning Process’ section of this document provides detailed information about the workplans that staff has developed to help advance the following Major City Goals over the coming two fiscal years:
 Cultural Vitality, Economic Resilience, and Fiscal Sustainability  Diversity, Equity, and Inclusion
 Homelessness Response
 Housing and Neighborhood Livability‐ Healthy, Safe, and Affordable  Infrastructure and Sustainable Transportation
 Open Space, Climate Action, and Resilience
In addition to our planned progress on Major City Goals, this Financial Plan also funds other important priority areas including:
 Planning for the development of a fifth fire station, a critical addition that will improve response times and resilience in growing neighborhoods in the southern part of our community.

Financial Plan Page 8

CITY MANAGER’S MESSAGE
 Implementation of a communications plan to provide information about the Citywide Single Vote method for electing City Councilmembers to advance fair, diverse representation in local elections.
 Continuing public outreach and engagement training for City employees, including ways to better reach underserved and underrepresented communities.  Continuing to support innovative partnerships with the County to provide mental health support through our Community Action Team and Mobile Crisis Unit  Construction of the first phase of the Righetti Community Park, bringing new recreational amenities and green space to families and residents in the Orcutt Area and throughout the city.  Investments in open space stewardship, trail maintenance, and native habitat restoration continue to reflect our community’s deep connection to the natural environment.  Investments in major mobility improvements, including the Prado Road Bridge replacement, Prado Road/Highway 101 interchange, Broad Street Corridor enhancements, and multiple complete streets projects.
 Implementation of Tier 1 projects from the City’s Active Transportation Plan and expand safe walking and biking options citywide.
 Continuing to implement the Lead by Example Work Program to reduce municipal emissions and improve energy efficiency across City operations.
 Investments in water and sewer projects to strengthen our ability to deliver clean water, support future smart growth, and adapt to climate extremes such as prolonged droughts.  Supporting the expansion of the Prado Safe Parking Program, family shelter access, and hotel voucher programs to address housing insecurity.
 Using existing resources, we will begin implementation planning for new renter protection policies, a strategic plan for safe housing, and neighborhood livability standards, with Council study sessions beginning in fall 2025.
 Continuing to provide support for SLO Restaurant Month, Buy Local Bonus, and new implementation steps for the Economic Development Strategic Plan.

These are not just budget lines. They are commitments to safety, connection, equity, resilience, quality of life and the sustainability of all of the programs and services that the City provides. They reflect the very best of what local government can do when guided by clear community goals and shared values.

Moving Forward‐ Strategic Restraint
While the proposed budget is in balance for the two‐year Financial Plan, the long‐term forecast for the General Fund identifies a structural deficit of almost $3 million in FY 2027‐28 and $2 million in FY 2028‐

29. The deficit is driven largely by the City’s obligation to bring a fifth fire station online in FY 2027‐28, but also acknowledges increased expenditures and slowed revenue growth due to general economic conditions.  The purpose of the City’s long‐standing process of developing and maintaining a long‐term forecast is to look beyond the current budget year so that we have the time to develop thoughtful and sustainable strategies to bring the budget back into balance.  If left undressed, the forecasted deficit will only grow more challenging in future years.

Despite the positive investmentsincluded in this Plan,several requestsfor new or expanded services were not able to be funded at this time. Departments submitted more than $10.0 million ($4.2 million from the General Fund) in Significant Operating Budget Changes (SOBCs), many of which responded to important community needs, workload demands, or increasing state mandates.

Financial Plan Page 9

CITY MANAGER’S MESSAGE
After careful analysis, only $4.1 million ($741,199 from the General Fund) is included in this proposed budget. Some of the needs that were not included in this budget are:
 New externally‐facing staff positions across multiple departments that would have helped to address existing deficits or expanded service delivery.   These requested positions would have required  cuts elsewhere or new revenue, and would ultimately result in a further widening of the structural deficit in future years. Examples include but are not limited to staff resources for urban forestry, maintenance, dispatch services, and recreation and aquatic programs.  Additional enhancementsto homelessness and housing response, beyond what can be supported with current partnerships and allocations.
 Expanded public programming, community engagement, and special events services that would have required ongoing resources without offsetting revenues.  Internal staffing and support roles that would improve efficiency or capacity, but which were ultimately determined to be less urgent than core operational needs.

On the capital side, we have also made strategic decisions to fund the projects, or phases of projects, that can realistically be completed each year, also taking into account the important commitments, plans, and identified safety and maintenance needs of our assets and infrastructure. This resulted in a decrease in the total number of projectsidentified for funding each year. However, we have also presented a ten‐year plan to show where projects will be phased in over a longer time horizon or where design work will be delayed until work can realistically be completed. For example:
 Projects with limited near‐term readiness or without clear external funding sources were deprioritized in favor of those that can be implemented more efficiently or that leverage grant dollars.
 Citywide initiatives, such as downtown revitalization concepts or significant City facility upgrades, are moving forward in planning phases but are not yet fully funded for construction.  Some Tier 1 Active Transportation projects are not individually itemized in the CIP but are instead supported through a general implementation account to allow for more flexible, scalable delivery based on staff and grant resources.

These decisions were not easy, but they were necessary. Rather than overextending ourselves and making the challenge in future yearsthat much harder to address, we chose to prioritize what we can deliver well.

We focused funding on maintaining existing services, addressing critical workload gaps, and preserving organizational stability.

While we have developed this balanced proposed spending plan for the coming two years, we acknowledge the many uncertainties ahead of us.  The decisions we have made in this financial plan are not just about this two‐year period; they are about preparing for what will come next. The City will continue to monitor economic trends, revenue performance, and workload demandsthroughout the plan period, and use the FHCP currently in place to increase our flexibility to address the forecasted deficit.

Staff willsoon begin the hard work of developing a plan to thoughtfully and methodically bring the budget into balance in the long‐term.  The community’s priorities and City Council’s Major City Goals will guide us in this work. Addressing the structural deficit will include:

Financial Plan Page 10

CITY MANAGER’S MESSAGE
 Re‐examining service delivery models to enhance efficiency and equity.  Prioritizing the programs and services that we are mandated to carry out, ensure the safety of our community and help to advance our Major City Goals and community priorities.  Exploring opportunities to maximize collection of revenues that are due to the City.  Leveraging grants, partnerships, and one‐time funds to maximize impact without committing to unsustainable cost growth.

In short, we are planning not just for today, but for the years ahead. And we are doing so in a way that reflects San Luis Obispo’s tradition of community engagement, long‐term thinking and responsible financial management. By holding off now in some areas, we are preserving the capacity to say “yes” later—when the time, resources, and conditions are right.

A Word of Thanks
We developed this proposed Financial Plan in partnership with the people we serve.  This plan wasshaped by input from thousands of residents, through surveys and comment letters, and with engagement at meetings and forums. We heard from longtime stakeholders and new voices alike who brought thoughtful and insightful ideas to the table. Thank you to everyone who shared their ideas, concerns, and hopes for our City.  Together, we will continue to strive toward an equitable and responsive public process, one where people feel heard, and where government reflects the diversity of the people it serves.

I am incredibly grateful for the leadership and guidance provided by the City Council in developing this financial plan. Your dedication to serving our community, broadening community participation in the budget process, and doggednessin finding a way to both balance our budget in tough economic conditions and maintain an ambitious and achievable work plan is inspiring. Thank you to the advisory bodies, including the Revenue Enhancement Oversight Commission for their review of the LRM proposed budget, and the Planning Commission for reviewing the draft CIP budget.  Last, but certainly not least, I want to thank Finance staff, Department Heads, managers, fiscal officers and other participating City staff for their heavy lift to develop the operating and CIP budgets. It was a true team effort, and I am sincerely appreciative for your contributions to our collective success.  Though this budget reflects the efforts of all those mentioned above, this budget simply would not be possible without the strategic leadership and the innumerable hours put in by our Finance Director, Emily Jackson and Principal Budget Analyst, Riley Kuhn.  I am deeply grateful for their commitment to keeping our City Council and community informed of our financial condition throughout the year,such that there really are no surprises.  Their approach allows us to be proactive in meeting the moment.

Looking Ahead: A Path Forward, Together
The 2025‐27 Financial Plan is built for stability. It is a product of cautious optimism and pragmatic stewardship – of both our dollars and our community’s values. It does not solve every challenge, but it does the most important thing‐ it protects what we have built, responds to today’s needs, and creates room for continued progress on our Major City Goalsfor all members of our community.  We do not know what the future holds. But we do know how we will meet it: together, with clarity, resilience, and a shared sense of purpose.

Financial Plan Page 11

CITY MANAGER’S MESSAGE
In closing, I want to again thank our staff, City Council, and community for being part of this important process.  Your partnership and your perspective have made this a better plan and has made San Luis Obispo a more resilient city.

With gratitude and resolve,
Whitney McDonald
City Manager
City of San Luis Obispo
Financial Plan Page 12

CITY PROFILE
Financial Plan Page 13

CITY PROFILE
City Council
The City of San Luis Obispo is a charter city and operates under the "Council‐Mayor‐City Manager" form of municipal government. The five‐member City Council consists of the directly‐elected Mayor, a Vice Mayor and three City Council Members. The Mayor is elected to a two‐year term and the Council Members are elected to four‐year terms.

The City Council is the legislative authority and sets the policies under which the City operates. The City Council has the power to adopt ordinances and resolutions, make appointments to the City's advisory bodies, establish policies and approve programs, appropriate funds, adopt budgets, and approve contracts. The Mayor presides at all meetings of the City Council and is recognized as the official head of the City for all ceremonial purposes.

Once a Financial Plan has been adopted, the Council's focus moves to 1) advocacy for its major initiatives at the Federal, State, County and Community Partner level  ‐  2) Leadership for Community Partnerships, Regionalism, Governance ‐ 3) Monitor the impact and outcomes of work programs and direct appropriate adjustments.

Michelle Shoresman
Vice Mayor
Emily Francis
Councilmember
Erica A. Stewart
Mayor
Jan Howell Marx
Councilmember
Michael R. Boswell
Councilmember
City Council Vision
The City of San Luis Obispo is a dynamic community embracing its future while respecting its past with core values of civility,sustainability, diversity, inclusivity, regionalism, partnership, and resiliency.

Financial Plan Page 14

CITY PROFILE
Community Overview
Located mid‐way between San Francisco and Los Angeles, San Luis Obispo is the County seat and a number of federal and state regional offices and facilities are located here, including Cal Poly State University, Cuesta Community College, the regional Water Quality Board, California Highway Patrol Dispatch Center, and Caltrans District 5 Offices. The City’s ideal weather and natural beauty provide numerous opportunities for outdoor recreation at nearby City and State Parks, lakes, beaches, and wilderness areas.

One of California’s oldest communities, the historical
roots of San Luis Obispo run deep, anchored by the
enduring presence of Indigenous Peoples dating back at
least 15,000 years ago in the Diablo Canyon region.

These first peoples hunted and shore‐picked shellfish.

The Yak titʸu titʸu Yak tiłhini Northern Chumash Tribe, who have called the region home for over 10,000 years,
have been integral in the historical development of the city. By 1504, coastal land exploration took place by
Spanish vessels, which carried members of the Filipino
community. Spanish invasion and colonization in 1769
led to the establishment of missions throughout
California. The San Luis Obispo de Tolosa Mission was
founded in 1772, the fifth mission in the California chain of 21 missions, around which the City of San Luis Obispo developed. It was first incorporated in 1856 as a General Law City and became a Charter City in 1876. As a Charter City, San Luis Obispo has more local authority than cities that incorporate under the general laws of the State of California. The Charter is the City’s governing document, and any changes must be approved by the voters. The
City’s Charter has been amended several times since its adoption, most recently in August 2011.

The City’s distance from major metropolitan areas to the north (San Francisco) and south (Los Angeles) have
allowed it to retain its historic and scenic qualities, which contribute to the superb quality of life residents enjoy and that attract visitors from all over the world. In fact, in 2010, the City was dubbed the “Happiest City in North America” by National Geographic author Dan Buettner.

Another key feature contributing to the City’s great
quality of life is its delightful downtown. The heart of which is the Mission Plaza. With its wonderful creek side setting and beautifully restored mission and parish
church, Mission Plaza is the community’s cultural and
social center.

This historic plaza is complemented by a bustling
downtown offering great shopping, outdoor and indoor
dining, night life, and its famous Thursday Night Farmers’ Market, where you can buy locally grown fresh produce
and enjoy an outdoor BBQ.

This unique blend of history, culture, commerce, and
entertainment make San Luis Obispo’s downtown one of
the most attractive, interesting, and economically vibrant downtowns in America.

San Luis Obispo is a full‐service city that provides police, fire, water, sewer, streets, transit, parking, planning, building, engineering, and parks and recreation service to the community. The City operates under the Council‐
Mayor‐City Manager form of government. The City
Council appoints the City Manager and City Attorney. All other department heads are appointed by the City
Manager.

Financial Plan Page 15

CITY PROFILE
City at a Glance
Financial Plan Page 16

CITY PROFILE
City Services Highlights
Financial Plan Page 17

CITY PROFILE
Organizational Chart
Financial Plan Page 18

CITY PROFILE
Organizational Values
Financial Plan Page 19

FINANCIAL PLAN FRAMEWORK
Financial Plan Page 20

FINANCIAL PLAN FRAMEWORK
Budget Policies
Financial Plan Purpose and Organization
A. Financial Plan Objectives.  Through its Financial Plan, the City will link resources with results by:

1. Identifying community needs for essential services.

2. Organizing the programs required to provide these essential services.

3. Establishing program policies and goals, which define the nature and level of program services required.

4. Identifying activities performed in delivering program services.

5. Proposing objectives for improving the delivery of program services.

6. Integrate climate risk and climate action considerations throughout all financial decisions.

7. Integrate Diversity, Equity, and Inclusion (DEI) considerations throughout all financial decisions.

8. Identifying and appropriating the resources required to perform program activities and accomplish program objectives.

9. Setting standards to measure and evaluate the:
a. Output of program activities.
b. Accomplishment of program objectives.
c. Expenditure of program appropriations.

B. Two‐Year Budget.  Following the City's favorable experience, the City will continue using a two‐year financial plan, emphasizing long‐range planning and effective program management.  The benefits identified when the City's first two‐year plan was prepared for 1983‐85 continue to be realized:

1. Reinforcing the importance of long‐range (“strategic”) planning in managing the City's fiscal affairs.

2. Concentrating on developing and budgeting for the accomplishment of significant goals and objectives.

3. Establishing realistic timeframes for achieving goals and objectives.

4. Creating a pro‐active budget that provides for stable operations and assures the City's long‐term fiscal health.

5. Promoting more orderly spending patterns.

6. Reducing the amount of time and resources allocated to preparing annual budgets.

C. Measurable Objectives.   The two‐year financial plan will establish measurable program and performance objectives and allow reasonable time to accomplish those objectives.

D. Second Year Budget.  Before the beginning of the second year of the two‐year cycle, the Council will review progress during the first year and approve appropriations for the second fiscal year.

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FINANCIAL PLAN FRAMEWORK
E. Operating Carryover.  Operating program appropriations not spent during the first fiscal year may be carried over for specific purposes into the second fiscal year with the approval of the City Manager.

F. Goal Status Reports.   The status of major program objectives will be formally reported to the Council on an ongoing, periodic basis.

G. Mid‐Year Budget Reviews.  The Council will formally review the City’s fiscal condition, and amend appropriations if necessary, six months after the beginning of each fiscal year.

Long‐Term Financial Planning
A. Balanced Budget.   The City will maintain a balanced budget over the two‐year period of the Financial Plan.  This means that:

1. Operating revenues must fully cover operating expenditures, including debt service.

2. Ending fund balance (or working capital in the enterprise funds) must meet minimum policy levels.  For the general and enterprise funds, this level has been established at 20% of operating expenditures. Additionally, it includes the revenue and rate stabilization reserves as set forth in the City’s fiscal policies under the Fund Balances and Reserves section.

3. Under this policy, it is allowable for total expenditures to exceed revenues in a given year; however, in this situation, beginning fund balance can only be used to fund capital improvement plan projects, or other “one‐time,” non‐recurring expenditures.

B. Long‐Term Liabilities and Maintenance of Infrastructure. The City will give priority to applying unassigned fund‐balance due to one‐time expenditure savings or one‐time increase in revenue to pay down long‐term unfunded liabilities and invest in infrastructure and equipment.

C. Consideration of Climate Risk and Climate Action. The City is aware of the increasingly severe and frequent natural, economic, and social disruptions presented by a rapidly changing climate. The City is also aware of the financial benefits (e.g., reduced operational costs, prudent asset management, access to green bonds, etc.) of managing climate risk and orienting towards a carbon neutral municipal operations and community. The City will include climate risk and climate action considerations in its long‐term financial planning.

D. Consideration of Diversity, Equity, and Inclusion (DEI). On June 18th, 2020, the City Council took action to affirm racism as a public health crisis and committed to making San Luis Obispo a welcoming, inclusive, and safe community for everyone (R‐11132). The City Council also set a vision of a community with core values of diversity and inclusivity in the adoption of its 2019‐21 Major City Goals.  The City is committed to supporting diversity, equity, and inclusion in is operations and in the community. The City will include DEI considerations in its long‐term financial planning.

E. Revenue Stabilization Reserve – General Fund. As outlined in the City’s Fund Balance and Reserve policy, the City Council can activate a Revenue Stabilization Reserve in its General Fund to counteract any adverse revenue forecast during a period of economic uncertainties pertaining to the City’s largest tax revenue sources. For the 2023‐25 Financial Plan, this reserve has been set at $2 million and is included in the long‐term forecast.

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FINANCIAL PLAN FRAMEWORK
Financial Reporting and Administration
A. Annual Reporting.  The City will prepare annual financial statements as follows:

1. In accordance with Charter requirements, the City will contract for an annual audit by a qualified independent certified public accountant.   The City will strive for an unqualified auditors’ opinion.

2. The City will use generally accepted accounting principles in preparing its annual financial statements and will strive to meet the requirements of the GFOA’s Award for Excellence in Financial Reporting program.

3. The City will issue audited financial statements within 180 days after year‐end.

B. Interim Reporting.  The City will prepare and issue timely interim reports on the City’s fiscal status to the Council and staff.  This includes on‐line access to the City’s financial management system by City staff; monthly reports to program managers; more formal quarterly reports to the Council and Department Heads; mid‐year budget reviews; and interim annual reports.

C. Budget Administration.  As set forth in the City Charter, the Council may amend or supplement the budget at any time after its adoption by majority vote of the Council members.  The City Manager has the authority to make administrative adjustments to the budget as long as those changes will not have a significant policy impact nor affect budgeted year‐end fund balances.

D. Development Services Revenue. The City Manager may allocate or designate 75% of over‐realized Development Services revenues exceeding adopted budget for the current fiscal year for temporary Development Services expenditures for the purpose of timely processing of development permit applications in the current fiscal year or throughout life of applicable projects. Any and all City Manager authorized allocations and funds set aside in a designation for future use, shall be reported to the Council on a semi‐annual basis.

For a comprehensive list of the City’s financial policies, please see the reference section.

Fiscal Policy Compliance
The City of San Luis Obispo has
created policies and
procedures that guide effective
government management.

Adopting these as formal
policies endures that they
outlive staff changes,
promoting stability and
continuity. The City is currently
in compliance with all policies
as summarized in the chart
below and in the details within
the reference section of this
report.

Fiscal Policy (linked to policy detail) Compliant?

1. General Revenue Management 

2. User Fee Cost Recovery 

3. Enterprise Fund Fees & Rates 

4. Revenue Distribution 

5. Investments 

6. Appropriations Limitation 

7. Fund Balances and Reserves 

8. CalPERS and Unfunded Liabilities 

9. Capital Improvement Management 

10. Capital Financing and Debt Management 

11. Human Resource Management 

12. Contracting for Services 

13. Productivity 
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FINANCIAL PLAN FRAMEWORK
Budget Balancing Strategies
The City’s Fiscal Policies guide staff in the management of the City’s finances and provide a foundation for budget balancing strategies to ensure the long‐term financial sustainability of City operations, regardless of financial condition. In July 2014, the City Council adopted the Fiscal Responsibility Philosophy to ensure a focus on the long‐term health of the organization.   The components of the Philosophy provide clear guidance for ensuring fiscal responsibility, and the Budget Balancing Strategies serve to operationalize that guidance. These budget balancing strategies are subject to at least bi‐annual review and are approved by the City Council with adoption of the two‐year Financial Plan every other June.

Consistent with adopted fiscal policies, staff provides quarterly budget updates to the City Council which provides the opportunity to identify budgetary issues and implement corrective measures if needed.

These strategies guide both development and management of the budget, both in times of budgetary growth and contraction. One of the overarching objectives of the City’s Budget Balancing Strategies is to strike a balance between ensuring fiscal sustainability and continuing to provide programs and services to the community.

This section provides an overview of the City’s Budget Balancing Strategies and is divided into two parts outlining the City’s preferred strategies and approaches in times of (1) budgetary contraction and (2) budgetary growth.

In Times of Financial Difficulty
When faced with financial difficulty, the City should identify budget balancing strategies that address both short and long‐term budget gaps, while also minimizing the impact of budget reductions to the community and employees. It also becomes increasingly important to focus on employee retention as the cost of turnover can outweigh savings produced by vacancies. Focusing on creative and cost neutral or low‐cost options to keep turnover at sustainable levels is crucial for maintaining and delivering core services to the public during challenging times.

Depending on the level or type of financial difficulty being experienced, short and long‐term budget balancing strategies may be needed over multiple years. An important consideration in developing and implementing budget balancing strategies is identifying the timeframe for fixing the problem and bringing about structural balance. Utilizing reserves and other short‐term budget balancing solutions can soften the impact of reductions to programs and services. However, it is imperative that these short‐ term solutions be used judiciously to maintain the City’s overall fiscal health. Relying too heavily on short‐term solutions can delay implementation of strategies to address budget deficits and may increase deficits in the long‐term.

Following is an outline of the City’s preferred budget balancing strategies and approaches in times of financial difficulty:

Long‐Term Budget Balancing Strategies

1. Priority Driven‐ Development of recommendations to balance the budget should be based upon consideration of legal mandates, community health and safety, basic service needs, Council’s Financial Plan Page 24

FINANCIAL PLAN FRAMEWORK
identified Major City Goals and other identified priorities.  Proposed budget reductions should take into consideration funding requests for programs that are discretionary and for programs that are mandated by state, federal, or local legal requirements and/or health and safety needs.

2. All Departments Participate‐ While departmental budgets vary significantly due to the services provided, identified priorities, expected levels of service, and departmental revenue sources (amongst many other variables), all departments should participate in the closing of a budget gap. More specifically, no department should be exempt from consideration of budget reductions.

3. Long‐Term Budget Reductions‐ At the guidance of the City Manager, the Finance Department should require departments to incorporate a prioritized list of expenditure reductions into their annual budget submittals. Potential reductions submitted by departments should not impact the City’s ability to meet legal mandates, and should reflect consideration of basic service needs, community expectations and the Council’s identified Major City Goals. If reductions are necessary, targeted reduction amounts should be included as part of the detailed budget instructions provided to departments. If needed, reduction lists will generally be required during development of the two‐year Financial Plan or Supplemental Budgets,

4. Mid‐Year Budget Reductions‐ Mid‐year reductions may be necessary in any given fiscal year depending upon general economic conditions, recently passed legislation, or unanticipated action by other levels of government at any particular point in time. The intent of the mid‐year reductions is to help keep the current year budget in balance and to create additional unassigned fund balance at year‐end for use as a funding source in the subsequent budget year.

5. City Share of Cost‐ Some City programs are funded wholly or in part by external funding sources including Federal allocations, grants, and user fees. These funding sources may not cover the entirety of program expenditures, requiring a contribution from the City. Staff should carefully monitor external funding sources over time to ensure that they keep pace with the cost of providing the related service to ensure that the City’s share of cost does not increase over time.

If external funding sources decrease or are eliminated, the associated expenditures should be considered for reduction or elimination as well. If staff believes that continuation of externally funded programs should continue despite a loss of funding, staff should inform the City Council of the loss of external funding sources and request appropriation of identified City dollars and funding sources to continue the program in full or in part.

6. Engage Employees and Employee Associations‐ Labor costs account for the majority of the City’s operating budget. City staff and negotiators are obligated to meet and confer in good faith with employee associations to negotiate labor agreements that are fiscally sustainable and aligned with the Council adopted Compensation Philosophy and Labor Relations Objectives.

7. Revenue Generation‐ Addressing budget shortfalls requires an evaluation of both revenues and expenditures. While the City is limited in its ability to generate new revenue, there is opportunity within existing City processes to ensure that the City is able to maximize existing revenues. In order to do this, the City should:

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FINANCIAL PLAN FRAMEWORK
 Conduct fee studies at least every three years, consistent with Section 2 of the City’s Fiscal Policies related to User Fee Cost Recovery Goals to ensure that the cost of services that provide an individual benefit are offset by fees for those services. As a part of the regular fee studies, Council should also consider policies around fee cost recovery and make adjustments if needed.
 Focus on enforcement of requirements in the City’s Municipal Code to ensure that the City is recovering its costs for providing services. It should be noted that proactive enforcement of Municipal Code requirements requires a considerable investment of staff time which may limit the City’s ability to make significant progress in this area.  Revisit existing agreements with outside agencies to ensure that the City is maximizing recovery of costs for specific services provided through those agreements.  Explore opportunities to increase rates for specific taxes, where the tax rate being charged is under the maximum authorized by the City Council.

The City should carefully consider the impact on the community when taking any action to increase revenue, as general economic conditions impacting the City’s budget also impact members of the community.

8. Revisit Capital/Operating Split of Local Revenue Measure Expenditures. In November 2020, City voters passed a Local Revenue Measure (LRM), authorizing a 1.5% local sales tax to protect and maintain services and public infrastructure.  The sales tax that the City collects due to the LRM funds both capital and operating expenses. Historically, the City has allocated 75% of LRM revenues to capital costs and 25% to operating costs. Staff should revisit the capital/operating split to ensure that the City is able to use LRM dollars to fund priority needs and minimize operating budget reductions to the greatest extent possible.

Short‐Term Solutions That Do Not Address a Long‐Term Structural Budget Gap:

1. Hiring “Chill”‐ The purpose of a hiring “chill” is two‐fold: to contain costs in the current year by slowing the recruitment of vacant positions or holding certain positions vacant so that additional unassigned fund balance is available for the subsequent budget year and to allow for attrition with respect to the reduction of positions (i.e. reduce or eliminate the need for layoffs). The decision about which positions to hold vacant or slow recruitments for should also be based upon priority and need, which a focus on minimizing impacts to the community to the extent possible. Attrition is a helpful tactic but should not be the driving strategy in reducing costs.

2. Defer capital improvement and   information technology projects that rely on the General Fund‐ This option saves money in the near‐term but if these types of projects are continuously deferred, City facilities and systems may deteriorate and the cost of repairs may increase over time.

3. Minimize building and information technology maintenance expenditures‐ Similar to deferring capital improvement and automation projects that require General Fund, this option saves General Fund in the near‐term. However, over time, if maintenance is deferred, City facilities and automation may deteriorate, leading to higher repair costs.

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FINANCIAL PLAN FRAMEWORK

4. Early Retirement‐ Early retirement programs may be offered on a case‐by‐case basis. The intent of an early retirement program is to reduce the number of potential layoffs by enticing individuals who are considering retirement to retire sooner rather than later in order to create attrition opportunities. Depending upon the specifics, an early retirement program may or may not provide cost savings. In instances where the program does not provide a cost savings (or is cost neutral), the sole benefit would be to reduce layoffs.

5. Use of One‐Time Reserves‐ The City has set aside money in reserves, some of which is not designated for a specific purpose. This money is budgeted every year and has historically been used to help pay for unexpected costs or to help fund one‐time projects. Some of these reserves are available to help address a budget gap. However, since reserves are one‐time in nature, the use of reserves to fund ongoing operational expenditures should be limited and not considered to be a long‐term operational funding source.

Other Unlikely Strategies

1. Furloughs‐ This approach has not historically been used by the City because it is challenging to implement without significant impacts to services provided to the community.

2. Eliminate Training‐ Maintaining a skilled workforce is important for every organization, especially one as labor intensive as the City. This approach should not be included in the budget balancing strategies because in times of budget reductions, additional demands are placed upon employees and, during these times, it will be more important than ever to maintain and enhance the performance of the workforce in order to successfully manage an increased workload. While training plans and expenditures may be cut back in times of financial difficulty, they should not be eliminated.

In Times of Financial Recovery and Growth
The goal of the recovery process is to assure that the City remains adaptable to changing conditions. To ensure long‐term fiscal stability, the City must prioritize funding existing financial and operating deficits over the addition of new programs and projects.

In times of financial recovery and growth, the City aims to strike a balance in the following areas:
 Financial security
 Programs and services
 Employee compensation and workforce investment
Following is an outline of the City’s approach:

Financial Security
In times when the City has funds available to support expansion of the budget, there should be a balance between the restoration of programs and services and the funding of the reserves, contingencies and designations that have been reduced to balance the budget in prior years. The City aims to maintain healthy reserves and low debt levels in order to allow for future organizational stability and continuity of services. Consideration of financial security includes a review of the following:

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