CITY COUNCIL MEETING AGENDA PACKET

Page 3 of 4 critical infrastructure. Development of the Capital Improvement Program (CIP) includes three phased implementation scenarios that will guide the rate-setting process by balancing annual spending requirements with the risks associated with project deferrals. These scenarios were developed based on the system needs identified in the City’s Sewer System Management Plan (SSMP). The three implementation scenarios: Maintain, No Deferral, and Maximum Deferral, represent varying levels of investment in the City’s wastewater collection system. Each scenario reflects a different approach to maintaining sewer service reliability, rehabilitating aging infrastructure, improving system performance, and meeting State regulatory requirements for sanitary sewer systems. As part of the next phase of the financial plan analysis, the delivery of these scenarios will inform potential rate revenue adjustments and capital financing strategies, including the consideration of debt financing. The purpose of this analysis is to ensure the sewer enterprise continues to meet its financial performance targets, fund essential infrastructure improvements, and support the selected SSMP CIP implementation alternative. Staff plans to present the results of the financial plan analysis to the City Council in November. At that time, staff will seek City Council direction on selecting the preferred scenario that best aligns with the City’s financial capacity, infrastructure needs, and regulatory compliance obligations. See Attachment 2 for summary of all expenditure scenarios. The three scenarios are: • Scenario 1 (Maintain) - Offers a balanced approach, deferring some projects while aiming to reduce the backlog of gravity sewer with major defects. Requires 2 to 3 additional staff starting in FY 2026-27, managing an average of $8.4 million annually. Staffing requirements increase to four during FY 2031-32 and FY 2032-33 to complete major pipeline and lift station work. The scenario targets full repair/replacement of pipes with existing major defects by FY 2030-31. This scenario requires more than double the City’s current capital spending. The total funding expenditure is $130,800,000 in net present value. • Scenario 2 (No Deferrals) - Minimizes the City’s risk by proactively investing in rehabilitation and replacement of high-risk assets. Requires three to four additional staff in the first 10 years to manage up to $15 million annually. The staffing requirement decreases to two in the long term, managing an average of $6.5 million annually. This scenario aims to eliminate the backlog of pipes with severe defects by FY 2029-30. The upfront spending in the next 10 years would present significant implementation challenges due to the volume of work. The total funding expenditure is $139,200,000 in net present value. • Scenario 3 (Maximum Deferrals) - Defers projects to give the City more time to ramp up its capital spending program and hire additional staff. In doing so, this scenario presents the highest risk, since high priority projects are deferred into the long term. Requires two to three additional staff over the 20-year span. Aims to maintain or reduce the current backlog of pipes with major defects by replacing one mile of pipe per year starting in FY Page 206 of 323