JOINT POWERS FINANCING AUTHORITY AGENDA PACKET 9-15-26

Page 2 of 6 The City Council adopted new water rates on October 7, 2025, for the next four years, beginning in January 2026. The adopted rates were based on revenue adjustments of 15 percent increases in each of Calendar Year 2026 and 2027, and 8 percent increases in each of Calendar Year 2028 and 2029. The water rate increases were adopted to ensure the long- term financial sustainability of the City's water utility by providing sufficient funding for daily operations, debt service, infrastructure rehabilitation and replacement, regulatory compliance, and future capital improvements identified in the Water System Management Plan. The updated rates also support appropriate reserve levels while balancing affordability, revenue stability, and water conservation objectives. The proposed issuance of debt was incorporated into the new rate increases. On August 11, 2026, the City Council receive a presentation on debt financing regarding water improvement projects and adopted a resolution that declared its intent to reimburse itself with proceeds from the bond sale. DISCUSSION Project Overview The Authority plans to issue water revenue bonds to help the City finance the acquisition, construction, and improvements to the City’s water systems. The City will purchase those projects from the Authority pursuant to the Installment Sale Agreement. The proceeds will be used to finance all or a portion of the following improvements: • Water Meter and Advanced Metering Infrastructure (AMI) System Replacement; • Design and construction of City Groundwater Supply Project; • Completion of construction of Water System Emergency Power Improvements; • Annual Water Distribution System Improvements; and • Other water system capital improvements. As some of the projects are in active implementation using a portion of the unspent proceeds from the 2024 Water Revenue Bonds, certain costs related to the Water System capital improvement projects will be incurred before the 2026 Bonds are issued, which are expected to be reimbursed from the bond proceeds. Because of delays in the start of the design and construction of the Groundwater Supply Project, a portion of the remaining 2024 Water Revenue Bond proceeds will instead be used to advance Phase 1 of the Water Meter and Advanced Metering Infrastructure (AMI) System Replacement Program, including proof-of-concept testing and replacement of failed water meters. Phase 1 is expected to replace approximately 20 percent of the City's meter inventory by the end of 2026. With the current project delivery schedule, staff expect to expend or encumber the 2024 Water Revenue Bond in 2027. Financial Statement PFM Financial Advisors LLC (PFM), the City's Municipal Advisor, has provided estimates regarding certain financial aspects of the proposed financing based on market conditions as of Page 4 of 205