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The City currently purchases 100.0 percent of its water from Zone 7. The water purchase
<br />costs are projected to increase by 3.8 percent in FY 2025/26 and 5.5 percent in FY 2026/27.
<br />Other operating expenses are projected to increase by 14.9 percent in FY 2025/26 and 12.7
<br />percent in FY 2026/27. The overall increase is primarily due to three positions added in FY
<br />2025/26, including an Associate Engineer and two Utilities Operators, and five positions
<br />added in FY 2026/27 including two Associate Engineers and three Utilities Operators, to
<br />support operations and the delivery of capital projects identified as part of the Water
<br />System Management Plan. Total expenses for the Water Fund are projected to increase by
<br />7.8 percent in FY 2025/26 and 8.2 percent in FY 2026/27. Table 10 below summarizes
<br />revenues and expenditures for the four years ending FY 2026/27.
<br />Table 10: Water & Recycled Water Operating Fund Summary
<br />$34,188,450
<br />$1,023,557
<br />($22,458,043)
<br />($12,636,090)
<br />($35,094,132)
<br />$117,874
<br />Sewer Fund
<br />$40,894,429
<br />($890,885)
<br />($23,310,000)
<br />($12,921,205)
<br />($36,231,205)
<br />$3,772,339
<br />$42,956,003
<br />($1,592,636)
<br />( $24,194,417)
<br />($14,848,862)
<br />($39,043,279)
<br />$2,320,088
<br />$45,173,285
<br />( $2,084,136)
<br />($25,525,110)
<br />($16,737,463)
<br />($42,262,573)
<br />$826,576
<br />Sewer revenues are expected to increase by 3.1 percent in FY 2025/26 and an additional 3.2
<br />percent in FY 2026/27. A rate study is scheduled to begin at the end of 2025, following
<br />completion of the Sewer System Management Plan (SSMP) and the Long -Term Sewer
<br />Capital Improvement Plan (CIP). In the interim, sewer rates will be adjusted based on the
<br />Consumer Price Index (CPI) until the study is complete.
<br />Like the Water Utility Program, the Sewer Utility Program also lacks funding for
<br />infrastructure investment. Although the Sewer Fund reserve is projected at 36.8 percent at
<br />the end of FY 2025/26, which meets the 35.0 percent reserve target. This was the result of
<br />reduced or no annual transfers to the sewer capital fund for capital improvement projects
<br />and reduced repair and replacement funding in prior fiscal years. For FY 2026/27, the
<br />reserve level is expected to go down to 28.3 percent. The rate study is expected to address
<br />the funding needs to support critical capital projects, supplement operational needs, and
<br />restore the reserve level.
<br />A majority of the customers' sewer fees are the regional sewer fees charged by DSRSD. The
<br />Budget assumes DSRSD fees will increase by 3.0 percent in FY 2025/26 and FY 2026/27.
<br />Other operating expenses are projected to increase by 11.7 percent in FY 2025/26 and 2.5
<br />percent in FY 2026/27. The increase is primarily due to new positions to meet compliance
<br />requirements and operational needs, including an Environmental Specialist and two Utility
<br />Operators starting in FY 2025/26. Total expenses for the Sewer Fund are projected to
<br />increase by 6.1 percent in FY 2025/26 and 2.8 percent in FY 2026/27. Table 11 below
<br />summarizes revenues and expenditures for the four years ending FY 2026/27. The projected
<br />deficits are expected to be eliminated with rate increases.
<br />37
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