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City of Pleasanton Operating Budget • FY 2023/24 - FY 2024/25C - 12 The City of Pleasanton recognizes the importance of sound financial management of its water 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 Water Utility funds. POLICY - The City shall operate the Water Utility on an enterprise basis, whereby the costs of service are borne entirely by the users. The City shall maintain adequate reserves in the Water Maintenance and Operations (M&O) Fund to meet cash flow requirements and contingencies. The City shall perform a water rate study at least bi-annually which determines water rates based on a cost of service analysis. Additionally, an annual cursory review shall be performed. The water rate structure shall be designed to provide a balance between revenue stability and water conservation. Water 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 Water Expansion Fund and a Water Capital Replacement Fund. The Water Expansion Fund shall be funded primarily by connection fees, and will provide for future expansion of the water system. The City shall perform a water connection fee review at least bi-annually to ensure that future water customers contribute fairly and equitably towards expansion projects necessary to serve their needs. Reviews may be necessary within a shorter duration due to changing conditions or facility needs. The Water Capital Replacement Fund shall be funded primarily by replacement accruals charged to existing users through the water 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 Water enterprise funds are subject to the “Financial Policies of the City of Pleasanton” which were adopted by Resolution No. 90-131. Water Enterprise Financial Policy (Adopted by Resolution No. 91-30)