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City of Pleasanton <br />Sewer Rate Study Report <br /> <br />Water Resources Economics <br />6 <br />Sewer O&M and Replacement Funds (Funds 430 and 434)4. Prior to any revenue <br />adjustments, the District projected O&M and Replacement Fund balances are below the <br />operating reserve target in FY 2026. <br /> <br />Table 1-2: Adopted Reserve Policy and FY 2026 O&M and Replacement Fund Balance <br />Line Adopted Reserve Policy Description FY 2026 <br />1 Operating Reserve Target 35% of annual O&M expenses $7,367,794 <br />2 Ending O&M and Replacement Fund <br />Balance (Before Rate Adjustments) $6,961,548 <br /> <br />1.8 STATUS QUO FINANCIAL PLAN <br />The first step in evaluating the City’s financial performance is to develop a “status quo financial <br />plan,” which is the scenario in which the City does not increase its sewer rate revenues. This <br />exercise is to determine whether the City’s current sewer rates are sufficient to meet key financial <br />performance metrics. This section shows Sewer O&M and Replacement fund balances. <br /> <br />Table 1-3 shows the revenue adjustments, debt issuance, and debt proceeds for CIP related to <br />the status quo scenario. This scenario assumes no revenue adjustments above the City’s existing <br />sewer rates and no new proposed debt. <br /> <br />Table 1-3: Financial Plan Scenario (Status Quo) <br />Line Fiscal Year Effective Date Revenue <br />Adjustments Debt Issuance Debt Proceeds <br />for CIP <br />1 FY 2027 1/1/2027 0.0% $0 $0 <br />2 FY 2028 7/1/2027 0.0% $0 $0 <br />3 FY 2029 7/1/2028 0.0% $0 $0 <br />4 FY 2030 7/1/2029 0.0% $0 $0 <br /> <br />Figure 1-1 shows the projected fund balances under the status quo scenario. The green bars <br />represent the ending fund balances for the O&M and Replacement reserves (Funds 430 and 434), <br />and the dashed line represents the operating reserve policy target. In this scenario, the City will <br />not meet its operating reserve target starting in FY 2026, indicated by the alert balance (red <br />circles). Projected fund balances will be negative starting in FY 2028. <br /> <br /> <br />4 The Sewer O&M Fund (Fund 430) supports the utility’s ongoing O&M costs while the Sewer Replacement Fund (Fund <br />434) supports routine repair and replacement of existing sewer system infrastructure, excluding CIP. <br />Page 158 of 923