CITY COUNCIL REGULA MEETING AGENDA PACKET _Revised_ 6-2-26

City of Pleasanton Sewer Rates & Connection Fees Technical Memo Water Resources Economics Page 6 SEWER CONNECTION FEE METHODOLOGY New customer connections to the City’s sewer system are subject to a connection fee, which is necessary to ensure that existing users are not unfairly burdened by costs incurred to provide capacity for new users. The overall purpose of a connection fee is to equitably recover capital costs incurred by the agency to provide sewer system capacity to new users. Connection fees in California are typically developed based on one of three common methodologies. The three methodologies include: 1. Buy-In Method: The Buy-In Method establishes connection based on the value of the system’s existing capital assets and is typically most appropriate when a system’s current capacity is sufficient to serve both short-term and long-term projected demands. The rationale underlying the Buy-In Method is that new customers should pay to “buy-in” to existing system capacity funded by past and current users. 2. Incremental Cost Method: The Incremental Cost Method establishes connection fees based on the cost of planned capital expenditures required to expand system capacity and is typically most appropriate when a system’s current capacity is already fully utilized by existing users. The rationale underlying the Incremental Cost Method is that new users should fund planned capital projects that are necessary to accommodate growth. 3. Hybrid Method: The Hybrid Method establishes connection fees based on a combination of the Buy-In Method and the Incremental Cost Method. The Hybrid Method is typically most appropriate when some existing capacity is available to new users, but capacity expansion is still necessary to accommodate long- term demands. WRE recommends the Buy-In for the City’s sewer connection fees as the existing sewer system has remaining capacity to serve new customers. The Buy-In fee calculates the value of the existing sewer system and its remaining capacity based on the audited value of fixed assets provided by staff as of June 30, 2025 (end of FY 2025) and projected cash balances as of June 30, 2026 (end of FY 2026). Once the value of the existing system is calculated, the total system value is divided by the existing demand on the system, measured in EDUs (Equivalent Dwelling Unit). One EDU represents the average annual wastewater flow for one Single Family account, and EDUs were calculated based on account and wastewater flow information provided by staff. Page 363 of 617