Recommended FY 2022-2024 Operating Budget and CIP

subsidized services. These activities need to be supplemented by other funding sources, mainly the General Fund. The Recommended Budget reflects the support provided by the General Fund to the Development Services Fund by a reduced General Administrative charge back of approximately $0.4 million annually. This is in addition to an interfund loan of approximately $1.0 million in the current year. It is worth noting that the interfund loan of approximately $2.9 million was envisioned in the FY 20-21 and FY 21-22 budget. However, with higher revenue collection coupled with conservative spending, this fund did not need an interfund loan from the General Fund until now. 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 current water rate adjustment is proceeding through the Proposition 218 process with the anticipation of Council approval of the new rates on June 1, 2022. The rate adjustments provide proper reserve levels in accordance with Council policy, continue meeting legally required debt coverage, and ensure sufficient funds are available for capital projects. The City’s Water revenue is forecast to increase from $15.2 million projected for current FY 21 -22 to $17.6 million in FY 22-23 and $19.8 million in FY 23-24. As mentioned previously, the City is currently going through the Proposition 218 process to increase the water rates for the next five years. The projected revenues for the Recommended Biennial Budget reflect the increase in water rates to meet the minimum reserve levels set by the Council, ensure sufficient funds are available for the much needed capital projects, keep pace with the expenditures, and to ensure the City’s water system integrity and reliability. On May 1, 2019, the Council approved the wastewater rate update which includes a five-year annual rates adjustment plan to address the 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 Plant expansion are included in the six-year CIP and are expected to be funded by impact fees and through bonds funding. Capital Improvement Program (CIP) Water and Wastewater Funds Water Fund Wastewater Fund

24 BUDGET MESSAGE