JOINT POWERS FINANCING AUTHORITY AGENDA PACKET 9-15-26

32 Discount Program with a new program that offers a 30% discount on eligible water and sewer charges for income-qualified households enrolled in the PG&E CARE Program. This new program reduced the qualification threshold from 30 ccf to 24 ccf, and has an annual program budget of $425,000. The discount program applies to the City’s water fixed and variable charges. Rate Setting Process. The City is required to annually review water sales revenue as part of the budgetary process. In May every odd numbered year, the City Manager submits to the City Council a two-year proposed operating budget for the fiscal year commencing the following July 1. The operating budget includes proposed expenditures and expenses and the means of financing them. Separate rate studies and public hearings for utility rates are conducted to comply with the requirements of Proposition 218 and obtain citizen comments. The City Council adopts utility rates by ordinance. On October 7, 2025, the Council adopted rates for the next four years (2026 through 2029), following a two-year emergency rate increase which was in effect in 2024 and 2025. The budget is adopted, prior to June 30, through passage of appropriate resolutions. The final adopted budget is subject to amendment to reflect any significant changes in expenditures or revenues due to State or federally mandated programs, emergencies, or other unforeseen occurrences. The City’s budget guidelines state that: • Water customer rates and fees will be reviewed and adjusted every two to five years, if necessary. • All utility enterprise funds will be operated in a manner similar to private enterprise, and as such, the City will set fees and user charges at a level that fully supports the total direct and indirect cost of the activity, including depreciation of assets, overhead charges, and reserves for unanticipated expenses and capital projects. • The City’s General Fund reimburses the Water Enterprise Fund for the utility discount programs as described above. • The City will maintain a working capital reserve in the Water Fund of approximately 30% to 40% of the annual operating and maintenance expenses with a reserve target of 35%. See “BOND OWNERS’ RISKS – Proposition 218” for information about the City’s compliance with Proposition 218 in connection with adopting rates for the Water System. 2024 Water System Management Plan. The City recently adopted its first Water System Management Plan (“2024 WSMP”), outlining its water system assets, recommended capital improvement needs, and operational and maintenance requirements for the next 20 years. Building on this plan, the City conducted a financial analysis to explore how to proceed with these future investments. The City approved an enhanced delivery method that balances the urgency of critical infrastructure upgrades while minimizing long-term risks to the City. These steps set the foundation and financial framework for conducting a comprehensive water rate study that align with the 2024 WSMP’s needs and the funding priorities outlined in the Financial Analysis to ensure that rates adequately reflect the City’s cost of service. The 2024 WSMP is intended to serve as the foundation for future rate-setting and financial planning. Page 160 of 205