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Page 9 of 15 water services and help replenish the reserve. The City will need to explore various debt financing options in the near future should a capital project for new wells based on the PFAS alternative study moves forward. Working toward a more financially sound position with adequate reserves will ensure that the City can qualify for most favorable financing options with lowest borrowing rates. Water revenues were approximately $1.0 million or 3.4% less than an estimate included in the amended budget due to actual water and recycled water sales coming in lower than previously anticipated. On the expenditure side, water purchase costs from Zone 7 were approximately $0.1 million more than budgeted in FY 2022/23. The increase was offset by savings in other expenditure categories, including more than $1.7 million less expenditures for Repair and Replacement activities, approximately $0.4 million in attrition savings, and $0.1 million in miscellaneous other net savings. During the fiscal year, staff continuously worked to contain costs to preserve fund balance. Table 7. Water/Recycled Water O&M Funds – Amended Budget vs. Actual Sewer Operations and Maintenance (O & M) Funds. As shown in Table 8 below, the Sewer Operating Fund ended FY 2022/23 with an operating fund balance of approximately $8.3 million. This $8.3 million fund balance equals 46.7% of the Sewer Fund’s FY 2023/24 operating expenses. The operating reserve policy adopted by the City Council on June 6, 2023, requires reserves equal to between 30.0% and 40.0% of operating expenses with a target of 35.0%. While operating reserves exceed the maximum required reserve level, a series of adjustments were made in developing the FY 2023/24 and FY 2024/25 Operating Budget that involved making one-time contributions from the Sewer Capital Fund to cover operating costs in order to balance the budget. During the fiscal year, staff continuously worked to contain costs in anticipation of the budget challenges. Sewer revenues were approximately $0.4 million or 2.3% lower than an estimate included in the amended budget due to lower than anticipated utilization of the sewer services for the year. On the expenditure side, actuals were approximately $2.4 million less than the amended budget, mostly due to about $2.3 million less in expenditures for Repair and Replacement activities along with lower sewer treatment fees charged by Dublin San Ramon Service District (DSRSD) by approximately $0.1 million due to lower than estimated utilization of sewer treatment services. Page 261 of 270