CITY COUNCIL REGULAR MEETING AGENDA PACKET 7-21-26

City of Pleasanton Sewer Rate Study Report Water Resources Economics 20 2. FINANCIAL PLAN 2.1 FINANCIAL PLAN OVERVIEW The purpose of a financial plan is to project revenues, expenses, cash flows, reserve balances, and debt coverage over a multi-year period to assess financial sufficiency and performance and to determine the amount of required rate revenue. For this study, the planning period is from FY 2026 through FY 2030; data for FY 2025 is shown when needed to represent actual data inputs. The key steps in developing a financial plan include: • Revenue projections: Annual revenues from rates and other miscellaneous sources are projected over the planning period. Rate revenues are projected based on current rates to establish baseline revenues from which the need for additional rate increases can be evaluated. • Expense projections: Annual expenses are projected over the study period, including O&M expenses, debt service, and CIP costs. CIP funding options (grants, debt, etc.) are evaluated. • Financial policy evaluation: Key financial policies include debt coverage requirements and reserve targets. Debt coverage requirements are typically explicitly stated in official agreements on outstanding debt issuances. Reserve targets are typically set by an agency’s elected officials and may need to be periodically evaluated and updated. • Status quo financial plan projections: Cash flow, reserve balances, and debt coverage are projected over the study period in the absence of additional rate increases (this scenario is called the “status quo”). Projected reserve balances and debt coverage are then compared to the agency’s financial policy requirements and targets. The status quo financial plan provides a baseline to evaluate the need for rate increases. • Proposed financial plan projections: The magnitude and timing of annual proposed revenue increases over the study period are evaluated and determined based on the agency’s financial policies, financial performance, and policy objectives. Proposed rate increases (referred to as “revenue adjustments”) should generate sufficient revenue to recover the agency’s expenses, maintain adequate reserves, and meet all debt coverage requirements. The proposed financial plan determines the total annual rate revenue requirement over the study period. 2.2 REVENUES CURRENT SEWER RATES Table 2-1 shows the City’s current sewer collection rates based on the rate structure devised in the most recent sewer rate study from 2022, with rates for following years annually adjusted based on CPI. Page 172 of 923