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C - 11 City of Pleasanton Operating Budget • FY 2023/24 - FY 2024/25 APPENDIX C The City of Pleasanton recognizes the importance of sound financial management of its sewer system utility. Its goals include the operation of the utility on an enterprise basis, with the maintenance of adequate reserves, and with financial provisions for funding future replacement and expansion of the system. The purpose of this policy is to set forth guidelines to achieve these goals. SCOPE - This policy applies to all Sewer Utility funds. POLICY - The City shall operate the Sewer Utility on an enterprise basis, whereby the costs of service are borne entirely by the users. The City shall maintain adequate reserves in the Sewer Maintenance and Operations (M&O) Fund to meet cash flow requirements and contingencies. The City shall perform a sewer rate study at least bi-annually which determines sewer rates based on a cost of service analysis. Sewer rates shall be set at a level to meet debt service requirements and to provide adequate annual capital replacement accruals. The City shall establish and maintain a separate Sewer Capital Improvement Fund and a Sewer Capital Replacement Fund. The Sewer Capital Improvement Fund shall be funded primarily by connection fees, and will provide for future expansion of the sewer utility. The Sewer Capital Replacement Fund shall be funded primarily by replacement accruals charged to existing users through the sewer rate structure. To construct replacement and expansion facilities, the City may utilize other financing alternatives such as debt financing, and seek other funding sources such as development exactions. In addition to the specific financial policies stated above, the Sewer enterprise funds are subject to the "Financial Policies of the City of Pleasanton" which were adopted by Resolution No. 90-131. Sewer Enterprise Financial Policy (Adopted by Resolution No. 91-28)