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Financial Performance Targets <br />What is it for?How much is it?What is it?Financial Policy <br />Pay for unexpected <br />operating cost increases, <br />emergencies, etc. <br />Approximately $8.4M <br />(FY 2026) <br />35% of annual operating <br />expenses <br />Operating and Capital <br />Reserve Target <br />Avoid technical default, <br />maintain debt rating to <br />issue debt in the future <br />Net revenues (revenues <br />minus operating expenses) <br />must be 1.25x annual debt <br />service <br />125% of annual debt <br />service <br />Debt Coverage <br />Requirement <br />(for new debt only) <br />7 <br />Status Quo (Control Scenario) <br />•Assumes no adjustments to current sewer collection rates <br />•Assumes no new debt issued to fund capital improvements <br />•Reflects the same underlying O&M and CIP needs as the Maintain scenario <br />•Illustrates the long-term financial impacts of maintaining current rates <br />•What happens to the City’s sewer enterprise if we do not increase rate revenues? <br />8 <br />Page 137 of 144