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Page 5 of 7 improvements provided below) from the proceeds of tax-exempt obligations. Connection Fee Study The City collects fees from development through connection fees to cover the costs of the infrastructure needed to support improvements to the City’s infrastructure. These connection fees are designed to address the impact of new development on the existing system, and as such the fees are paid by that new development and not existing customers. The City has not updated its water and sewer connection fees since 1982 and has started the process to align with other development fee updates that will be presented to the City Council in the coming months. Near-Term Water Improvements The City has completed a complete hydraulic analysis of the water system and has identified several core system deficiencies, including turnout capacities and pipelines, to meet the current and future growth of the system. The loss of regular use of the City’s wells due to PFAS created further deficiencies in the City’s system as the wells no longer provide water at key locations within the City’s distribution system. The Water Supply Alternatives (WSA) analysis was completed to determine the best solution to address the PFAS issue, and the hydraulic model was utilized to identify the necessary distribution improvements for the various water supply alternatives. Several sections of pipelines were identified as needing upgrades in all the various alternatives which also aligned with the core system deficiencies. The model was requested to identify the essential improvements that need to be constructed to meet the forecasted system demands until the selected WSA can be put in service (an assumed date of late 2028). The results identified three segments of the pipeline (Bernal Avenue, Stoneridge Drive, and Sunol Boulevard), and improvements at Turnout No. 1 and No. 4 need to be completed and were termed “Near-Term Water Improvements.” Further identified were emergency projects completed to meet the anticipated summer demands of 2023, including temporary repairs to Turnout No. 1 to return it to service and installing a temporary rental pump at Turnout No. 4 to increase the capacity of the turnout. A condition assessment was completed on the water system and is currently being utilized in the prioritization process in the development of the 10-Year Water CIP. The condition assessment identified that water lines on Stoneridge Drive and Sunol Boulevard were near the end of their useful life. The water lines on Stoneridge Drive and Sunol Blvd will be upsized to accommodate the future removal of the older lines. The Near-Term Water Improvements were broken into three bid packages to expedite the work. Bernal Avenue Water Line & Turnout No. 1 - IN PROGRESS The first project is the Bernal Avenue 18-Inch Potable Water Main (F- 4 Line) & Turnout No. 1 Project, CIP 24172, which was awarded for construction on January 16, 2024, for $2.2 million. The project will install a new 18-inch water line in parallel to the existing 12-inch line from Turnout No. 5 at the corner of Nevada Street to the Vineyard Booster Station at the intersection of Vineyard and Bernal Avenue. The project also includes improvements at Turnout No. 1 on Santa Rita Road that will replace the interior piping and equipment to Zone 7’s current standards and include a motorized control valve, flow meter, fluoride injection, and instrumentation. The turnout was placed out of service after it was flooded, the equipment was temporarily repaired, and the leak was repaired. Construction of the project began in February, Page 156 of 228