FY 2021 2122 ADOPTED OPERATING AND FY 2021 2526 CIP BUDGETS

The Water and Wastewater Utilities are enterprise funds that derive all of their operating revenue from customer charges. As a result of the January 2016 comprehensive rate studies, followed by the 2019 wastewater rate update, the Council approved a five-year annual rates adjustment plan to ensure that public safety and health remain a priority, the integrity and reliability of these essential community assets can be maintained, and aging and inefficient infrastructure can be addressed. In addition, the approved rate adjustments provide proper reserve levels in accordance with Council policy and continue meeting legally required debt coverage. Water Fund The City’s Water revenue is forecasted to steadily increase from $15.6 million projected for FY 2020-21 to $16.3 million in FY 2021-22. January 1, 2020 was the last rate increase from the 2016 Council approved five-year rate adjustment plan. The projected revenues for the adopted Biennial Budget include the CPI adjustment factor of 2.5 percent to keep pace with the expenditures and to ensure the City’s water system sustainability. Wastewater Fund On May 1, 2019, the Council approved the wastewater rate update which includes a five-year annual rates adjustment plan to address significant shortage in funding for the legally required repairs and improvements to the existing system. With the approved rates plan, the wastewater fund operationally is forecasted to be able to maintain appropriate reserve levels, including rate stabilization and system replacement fund reserves and fund much needed capital projects associated with the repair of the aging system. Other capital projects such as a second Relief Trunk Line to the Treatment Plant and Treatment Plan expansion in the six-year CIP are expected to be funded by impact fees and/or financed through bonding against future impact fees. Capital Improvement Program (CIP) The adopted FY 2020-21 through FY 2025-26 CIP totals $190.8 million. The primary project categories include 1) Parks and Recreation ($17.9 million), 2) Public Facilities ($6.4 million), 3) Storm Drainage ($13.9 million), 4) Streets & Roads ($40.1 million), 5) Wastewater ($93.8 million), and 6) Water ($18.7 million). As the unsettling time lies ahead and there’s a need to preserve cash, it seems to be counter - intuitive that we would have a “bloated” CIP; but there might not be a better time to embark on capital improvements than during an economic downturn. When the economy comes back, prices are going to skyrocket as we have experienced recently. During the downturn, there would be a slowdown in construction, and builders and contractors will bid for projects at bargain rates. All projects adopted in the CIP are funded by designated funding sources with no General Fund money except $250,000 General Fund contribution to Pavement Rehabilitation, a significant reduction from $1,000,000 annual funding in the past due to fiscal constraints.

18 ADOPTED BUDGET MESSAGE