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Home My WebLink About01. Conduct the Financial Planning WorkshopPage 1 of 23 Item 1. LICENTRAL SAN December 18, 2024 FROM: DANEA GEMMELL, PLANNING AND DEVELOPMENT SERVICES DIVISION MANAGER REVIEWED BY: GREG NORBY, DEPUTY GM - ENGINEERING & OPERATIONS PHILIP LEIBER, DEPUTYGM -ADMINISTRATION ROGER S. BAILEY, GENERAL MANAGER SUBJECT: CONDUCT THE FINANCIAL PLANNING WORKSHOP IN WHICH THE FOLLOWING WILL BE PRESENTED AND DISCUSSED: • INTRODUCTION TO PROPOSITION 218 RATE SETTING; • OVERVIEW OF INFLUENCES THAT WILL IMPACT RATES, INCLUDING NUTRIENTS; • DISCUSSION OF RATE SCHEDULE TIME HORIZON; • UPDATED FINANCIAL PLANNING ASSUMPTIONS; AND • OVERVIEW OF SEWER SERVICE CHARGE RATE AND COMPETITIVE COMPARISON TO PEERS. Central San's sewer service rates were approved through Fiscal Year (FY) 2024-25 and new proposed rates for FY 2025-26 and beyond require completion of a Cost of Service Study and initiation of a Proposition 218 rate setting process. The December 18, 2024 Board of Directors (Board) meeting is the first of two Financial Workshops to kick off that process. Staff will review the attached presentation, which provides a high-level overview and preliminary results of the 2024 Cost of Service study and a proposed long-term financial plan. Financial Workshop #1 seeks direction from the Board on the rate setting assumptions including debt issuances and rate increases. Financial Workshop #2 will provide more detailed financial assumptions for the proposed FY 2025-26 budget, based on Board direction and guidance. December 18, 2024 Special Board Meeting Agenda Packet - Page 3 of 25 Page 2 of 23 Strategic Plan Tie -In GOAL ONE: Customer and Community Strategy 1— Deliver high-quality customer service, Strategy 2 - Promote initiatives to advance affordable and equitable access to services GOAL FOUR: Governance and Fiscal Responsibility Strategy 1 - Promote and uphold ethical behavior, openness, and accessibility, Strategy 2 - Encourage and facilitate public participation, Strategy 3 - Maintain financial stability and sustainability GOAL SIX: Infrastructure Reliability Strategy 1 - Manage assets optimally, Strategy 2 - Execute long-term capital renewal and replacement program ATTACHMENTS: 1. Presentation December 18, 2024 Special Board Meeting Agenda Packet - Page 4 of 25 Page 3 of 23 December 18, 2024 Special Board Meeting Agenda Packet - Page 5 of 25 F, Today's Objectives for Board Discussion Introduction to Proposition 218 rate setting Understand influences affecting rates for the next 2 years and beyond 3. Confirm rate schedule time horizon (1, 2, or 4 years) 4. Receive direction on rates for Financial Workshop #2 to finalize rate setting assumptions Page 4 of 23 Overview of Today's Presentation ti i. Proposition 218 Rate Setting Introduction II. Nutrient Impacts on Rates III. Rate Schedule Term IV. Rate Model Assumptions V. Rate Scenarios VI. Cost of Service and Rate Structure Changes r VII General Manager Summary and Closing December 18, 2024 Special Board Meeting Agenda Packet - Page 6 of 25 Page 5 of 23 I. Proposition 218 Rate Setting Introduction Danea Gemmell, Planning and Development Services Division Manager Introduction The annual Sewer Service Charge (SSC) is Central San's largest single revenue source SSC generally funds Operations & Maintenance (O&M) and a portion of the Capital Improvement Plan (CIP) Increases and adjustments to the SSC are governed by Proposition 218, which was passed by voters in 1996 and amended the California Constitution December 18, 2024 Special Board Meeting Agenda Packet - Page 7 of 25 Proposition 218 Rate Setting Process Conduct Rate Study: Analyze revenue requirements and the cost to provide service. Allocate costs to each rate class. Public Notification: Notify property owners at least 45 days before a public hearing. Public Hearing: Receive input and tally written protests; a majority protest stops the rate change. Adopt Rates: If no majority protest, governing body may approve new rates. Rate Setting Schedule Financial Workshop #1 Financial Workshop #2 Receive draft Prop 218 Notice language DEADLINE to send Final Prop 218 Notice to printer DEADLINE to mail Final Prop 218 Notice (minimum 45 days before public hearing); Cost of Service study posted on CentralSan.org PUBLIC HEARING to review SSC rates for Fiscal Year (FY) 2025-26 through 2026-27 or 2026-29 Draft Budget Book distributed O&M and Capital Budget hearings and adoption New SSC rates effective December 18, 2024 January 16, 2025 February 7, 2025 February 28, 2025 April 17, 2025 May 16, 2025 June 5, 2025 July 1, 2025 December 18, 2024 Special Board Meeting Agenda Packet - Page 8 of 25 Page 6 of 23 Page 7 of 23 9 Applicable Proposition 218 Requirements Cost of Service: Rates may not exceed the cost of the specific service provided. Revenue Use: Revenues shall not be for any purpose other than that for which the fee was imposed. Proportionality: Rates must be proportional to the -_ service provided. Number BP 030 BP 030 Requires Regulars°r°�°� �Mh A'AIpaY Boats of Mra[mra Effi ry 7 N 6. 2017 R—d. Atgoa11. 2027 Cost of Service Review R�p,��" p'7 VOWNDeptIDN M M n1apIXVFvn e BOARD POLICY COST OF SERVICE STUDIES A new or updated cost of service study shall be prepared not less frequently��amB��, than required by California law and may be appropriate more frequently in app Gavenvnap tle•ln luEla95°[oona .,, pnppC apen[les yenmlr.,ay aMrp a certain circumstances, to be assessed by staff each time rate changes are —Ms M --Wim proposed. Staff shall report to the Board at the time of the proposed rate change ,Ie relaal� l0 �e peep la epwre on whether the most recent Cost of Service study and applicable updates remain a valid basis for the proposed rates. An administrative procedure addressing this reU Ilol Ie55 peOuenlry Ivan Yell IlepeW �a°red^a,pa assessment is maintained b the General Manager. epq epppoyea rale °nanyea wneaK Y g appcable upaal°, mma n a esus plOCWxe aadwFDp Inn a!5°sSrM^I le manlaMlea by the GBrwal iAiltapel yyllpMeraay lM <OMUCleOrM MssMmweren lire year8 TnnpolK' aW Cm 5"j M9n Aale LM V, *9Vq OW a NWI<a Cy pro*M UDKV ra b a Wm., ecMdpOmer prbcaQe —1 pen - 3.y r"IDBS 11a sore every len yearn love+gr��br an $P.IwdM oa.e December 18, 2024 Special Board Meeting Agenda Packet - Page 9 of 25 Page 8 of 23 Proposition 218 Requires Cost of Service Analysis to Ensure Cost Proportionality Determine revenue needed to meet utility costs. Project O&M, Capital, and debt expenses. Review reserve requirements. Allocate utility costs by function. Allocate revenue required to each customer class in a proportionate methodology. Design rate structure for each customer class to collect appropriate level of revenues. Each User Group is Allocated Costs Proportional to Wastewater Flow and Strength F, 7, -_- 111 � • Tota Cost BOD: Biochemical oxygen demand TSS: Total suspended solids December 18, 2024 Special Board Meeting Agenda Packet - Page 10 of 25 13 Page 9 of 23 Overall Central San Customer Profile* * Does not include Concord/Clayton ** includes Accessory Dwelling Units (ADUs) Non -Residential Customers Most non-residential customers billed based Low Medium Medium Medium High on water consumption LOW High and a standard billing Up to 350 mg/L 351 to 700 mg/L 701-1000 mg/L 100 1- 1300 mg/L Over 1300 mg/L category based on their I.tde.Commrcial business type (No Food Service) Most K-12den schools billed on student count Mixed Use Approximately 24 customers billed on actual flow, BOD, and _ TSS *50% by flow Milligrams per liter (mg/L) December 18, 2024 Special Board Meeting Agenda Packet - Page 11 of 25 W approx. 102,000 Single Family Residential 98,678 residential 60% units" Multi -family and Condos 17,542 approx. 44,780 24% residential units generally billed Non -Residential 2,822 based on water 16% consumption Total 119.042 100% * Does not include Concord/Clayton ** includes Accessory Dwelling Units (ADUs) Non -Residential Customers Most non-residential customers billed based Low Medium Medium Medium High on water consumption LOW High and a standard billing Up to 350 mg/L 351 to 700 mg/L 701-1000 mg/L 100 1- 1300 mg/L Over 1300 mg/L category based on their I.tde.Commrcial business type (No Food Service) Most K-12den schools billed on student count Mixed Use Approximately 24 customers billed on actual flow, BOD, and _ TSS *50% by flow Milligrams per liter (mg/L) December 18, 2024 Special Board Meeting Agenda Packet - Page 11 of 25 W Page 10 of 23 II. Nutrient Impacts on Rates Greg Norby, Deputy General Manager - Engineering and Operations What are Nutrients? i, Wastewater contains nutrients (nitrogen and phosphorus compounds) from human waste, , food waste, and various°p soaps/detergents While nutrients are essential to sustain life, there is a balance Too many can be too much of a good thing �J. December 18, 2024 Special Board Meeting Agenda Packet - Page 12 of 25 Page 11 of 23 Bay Area Nutrient Watershed Permit On July 10, 2024, the San Francisco Bay Regional Water Regional Water Board adopts permit requiring critical investments to protect San Francisco Bay Quality Control Board Necessary sewage treatment upgrades over next decade will limit Y threat of `red tides' that endanger water quality, aquatic species (Regional Board) adopted an July 10, 2024 Contact: Blair Robertson—Information Officer Order requiring a I I Bay Area OAKLAND — To help protect water quality and aquatic life in San Francisco Bay for wastewater agencies to reduce y generations to come, the San Francisco Bay Regional Water Quality Control Board adopted a permit today that will for the first time require nutrient reductions for all their discharge of nitrogen wastewater treatment plants discharging into the bay. by 40 percent relative to 2022 The new permit, adopted under the Clean Water Act after years of monitoring and research, will go into effect Oct. 1. It requires that 40 sewage treatment plants must by October 2034" collectively reduce nitrogen discharges by 40% compared to 2022, when a "red tide" harmful algal bloom HAB triggered a massive fish kill in the San Francisco Bay. Nutrients are discharged into the bay from sewage treatment plants' wastewater. Excessive nutrients are a major contributor to HABs, which cause a dramatic depletion in dissolved oxygen levels, killing aquatic species. Toxins from HABs can cause illnesses through direct contact, inhalation, and fish and shellfish poisoning. HABs can be particularly devastating to indigenous communities and subsistence fishers. Concerns about Nutrient Watershed Permit Concerns Proactive Mitigations 10 -year timeframe is too short for a Regional Board committed to evaluating capital project of this size State Policy on nutrient compliance timeline Science is not fully developed on Permit requires funding to further develop the nutrient impacts science Compliance costs are very high ➢ Exploring alternatives to reduce capital costs Recycled Water should be included in ➢ Recycled Water projects will be evaluated as nutrient solution, which takes time part of the nutrient reduction solution December 18, 2024 Special Board Meeting Agenda Packet - Page 13 of 25 Page 12 of 23 Conventional Nutrient Removal Project Benefits • Established and proven treatment ; s6✓iM LuurSwYvw process* Can be scaled up to address increased requirements Challenges Significant construction effort for new Al secondary clarifiers and aeration tanks $6 Million (M) - $10 M additional O&M , costs including new staff' How do we pay for it all? Conceptual estimate is $665 M 'Modified Ludzack Ettinger (MLE) process increases the solids retention time to allow bacteria who use nitrogen as a food source to grow. This requires more aeration tank volume and clarifiers to treat the same capacity. Exploring Process Technologies to Reduce Nutrient Capital Costs Conventional (i.e., MLE) Intensification Conventional + Intensification Intensification of existing infrastructure is preferred. Treatment objectives will depend on regulatory limits and technology performance. December 18, 2024 Special Board Meeting Agenda Packet - Page 14 of 25 Preliminary MABR Pilot Results are Promising Central San is piloting Membrane Aerated Biofilm Reactor (MABR) technology Highly efficient biological treatment Utilizes existing tankage for lower costs Cost effective Oxygen delivery A hollow -fiber, spaghetti -like membrane delivers oxygen directly to nitrifying bacteria growing on the membrane's surface Biofilm growth Microorganisms concentrate on the oxygen -rich membrane surface, forming a biofilm that acts as a workhorse to reduce nutrients Page 13 of 23 MABR allows nitrification and denitrification to reduce nutrients simultaneously in a single reactor ' Draft Schedule for Nutrient Reduction Compliance 2028> 2029> 2030> 2031 > 2032> 2033 December 18, 2024 Special Board Meeting Agenda Packet - Page 15 of 25 Regional Board Resolution: Extend Compliance Schedules for Nutrient Effluent Limitations The Regional Board directs staff to: (a) evaluate the feasibility of amending the Compliance Schedule Policy to provide more time for multi -benefit projects or innovative technologies; (b) compare the pros, cons, and timelines needed to pursue other available regulatory mechanisms to provide more time, as warranted, particularly for multi - benefit projects; and (c) report to the Regional Board on its findings. Adopted July 10, 2024 Page 14 of 23 December 18, 2024 Special Board Meeting Agenda Packet - Page 16 of 25 25 Central San Previously Adopted 2 -Year Rate Schedule Rate Schedule taken from FY 2024-25 Financial Workshop (April 2024) DEBTASSUMPTIONS Secured $173.1 M SRF* Loan Planned Future $170.0 M Loans 'State Revolving Fund te Schedule Term Comparison of 1-, 2-, and 4 -Year Rate Setting Schedule Page 15 of 23 Sewer Service Charge Rates 1200 2 -Year Rate 0 149 $995 5.4% 1000 $725 $944 5.4% $895 5.5% _ _ $849 5.4% _ $815 ___ f--1 $982 $754 $4%4 4% 4.2% --1 $908 I $940 I 4.5% 800 4% $6974% 85 % 1 3.5% 1 4% �— $856 $882 I 3%$718 projections $690 1_%_ �— I $746 $807 I $831 I I 3% I I I 1 $776 1 1 4% ' I 3% ' I I I I I 1 600 ' $' 4% � ' I 4% Greater cost for Prop 218 Some cost savings Reduced administrativeburden 400 II II 7 II II II II �� I I 200 0 aII--I I 1 1 11--I 'I --I I--1 I I I F I 1 1 1 rapidly changing costs and 2022-23 2023-24 2024-25 25-26 2026-27 2027-28 2028-29 2029-30 2030-31 2031-32 2032-33 iiiiiiiiiiAppmved Single -Family Rate C=1Previous Plan Proposed Plan Rate Schedule taken from FY 2024-25 Financial Workshop (April 2024) DEBTASSUMPTIONS Secured $173.1 M SRF* Loan Planned Future $170.0 M Loans 'State Revolving Fund te Schedule Term Comparison of 1-, 2-, and 4 -Year Rate Setting Schedule Page 15 of 23 December 18, 2024 Special Board Meeting Agenda Packet - Page 17 of 25 a Adaptability to changing Balances stability and Rate stability for customers conditions flexibility Enhanced accuracy for Greater accuracy for Some accuracy for projections projections projections Stakeholder transparency Predictability for customers 4: Predictability for customers a Greater cost for Prop 218 Some cost savings Reduced administrativeburden Best for volatile markets or Best for moderately stable Best for stable markets with rapidly changing costs and markets with some variability predictable costs; emphasizes long-term regulations in costs and regulations planning December 18, 2024 Special Board Meeting Agenda Packet - Page 17 of 25 Staff Recommends a 2 -Year Rate Time to complete Nutrient Road Map with more developed &71_..� cost estimate for Nutrient Management Project Flexibility after two years to adjust debt or rate -based revenue assumptions on updated Nutrient Project assumptions �. o Demonstrate repeated ability to deliver increased capital -� L budget program r O Additional time for Regional Board to revise policy on 1 compliance schedules for nutrient effluent limitations FY 2024-25 Central San Funding Sources $231.1 M Total SSC is the main "controllable" (through setting rates) revenue source, used to cover projected expenses not funded from other revenue sources Borrowing can also be used to City of cover capital funding needs Concord, $29,560,000 Capacity Fees, $S,000,C Tax Revenw $24,711,87 Debt Procu $39,000, All Other Revenue Sources, $11,532,123 Revenue provides $192.1 M of the revenue requirement; balance from SRF Loan December 18, 2024 Special Board Meeting Agenda Packet - Page 18 of 25 Page 16 of 23 Sewer Service Charges, $121,310,000 29 Page 17 of 23 Current 10 -Year CIP FY 2024-25: $1.003 Billion (B) $46,600,000 $65,250,000 $66,399,000 $66,750,000 $63,495,000 $58,400,000 $51,900,000 $46,950,000 $43,750,000 $45,250,000 $554,744,000 $300,000 $500,000 $112001000 $4,000,000 $4,000,000 $7,500,000 $9,5()0,000 $18,000,000 $19,000,000 $15,000,000 $79,000,000 $23,327,000 $34,002,000 $31,333,000 $31,625,000 $32,675,000 $29,875,000 $29,875,000 $30,030,000 $30,530,000 $30,530,000 $303,802,000 $5,235,000 $5,075,000 $4,525,000 $2,725,000 $2,725,000 $2,475,000 $2,475,000 $2,475,000 $2,475,000 $2,475,000 $32,660,()00 srm— SIOOAW,000 seoao�,oaa ScaAoo,000 Smum,om � sx0000,00a w fY mA n'm7b fY m2� nm2B nm:9 FY m90 fY to31 fY x037 r1 x033 fY m30 ■ Treatment Plant ■Nutrients ■ Collection System ■ General Improvements ■Recycled Water CIP 10 -Year Updates Operations and Engineering staff participated in 5 workshops on capital delivery to address Nutrient Management Project deadlines and ability to deliver capital infrastructure. Projects were rescheduled to achieve success, avoid construction conflicts, and address resource impacts. Total of $168 M reprogrammed in the 10 -Year Plan to address nutrient increases; Nutrient Management Project funding increased from $79 M to $499 M. Reduced Projects: Collection System Renovation Program Solids Handling Facility Improvements - Phase 1C Steam Renovations - Phase 2 Wet Weather Flow Management Standby Generator Expansion Primary Expansion (Tank 5) Cogen Replacement Filter Plant & Clearwell Improvements - Phase 1 C Reduced Budget Reduced Budget; condition assess accelerated Deferred Deferred Deferred Deferred Deferred Deferred These and previously known factors have been incorporated in ALL new financial model scenarios December 18, 2024 Special Board Meeting Agenda Packet - Page 19 of 25 e Proposed 10 -Year CIP FY 2025-26: $1.265 B Total Page 18 of 23 $71,250,000 $81,849,000 $66,150,000 $58,995,000 $57,050,000 $42,250,000 $16,750,000 $8,250,000 $8,750,000 $22,350,000 5433,644,000 $4,000,000 $5,000,000 $20,000,000 $30,000,000 $35,000,000 $55,000,000 $100,000,000 $100,000,000 $100,000,000 $50,000,000 $499,000,000 $35,502,000 $32,233,000 $27,275,000 $28,525,000 $24,375,000 $24,375,000 $24,530,000 $24,530,000 $25,030,000 $30,650,000 $277,025,000 $6,325,000 $5,975,000 $3,575,000 $3,575,000 $3,325,000 $3,325,000 $3,325,000 $3,325,000 $3,325,000 $3,325,000 $39,400,000 52za,000 mo 5140.000.000 5120,000,000 5100,000,WO $80.000.000 $fi0,000,000 590.000 m0 520,=, 0 w fY 202fi fV 202] fY 2028 FY 2029 fY 2030 FY 203] FY 2032 FY 2033 FY 2034 fY 2035 ■Treatment Plant ■ Nutrients ■Collecrion System ■General Improvements ■ Recycled water Rate Model Assumptions O&M Budget: Utilize FY 2024-25 budget as Base Year Salary: 2025-26 — 3.75% Consumer Price Index (CPI) in Memorandums of Understanding; 3.75% for the following 4 years Number of employees: 302 Retirement (CCCERA data) CalPERS Medical per current employee contract Includes UAAL (unfunded accrued actuarial liability) Certificates of Participation debt service for 5 years (0.38% overall interest) Capital Budget: 4% escalation in 2026; 3.5% escalation in 2027; 3.5% escalation in 2028; and 3% thereafter Updated 10 -Year CIP: $1.265 B with $499 M Nutrient Management Existing SRF loan at 0.9% interest Bond Interest at 4.5% over next 10 years Contingency: $5 M for first year only Reserves: Targets per Board Policy Debt Service Coverage Basis of Model: December 2024 Cost of Service Study by Raftelis December 18, 2024 Special Board Meeting Agenda Packet - Page 20 of 25 Capital Debt Assumptions Secured SRF Loan on Solids Project 1A ($173.1 M) 0.90% interest rate L 30-yearterm L Debt payments start 1 year after construction complete L Received reimbursement of $16.5 M for planning/design expenditures Construction reimbursement in progress for approximately $32 M Proposed Revenue Bond Scenarios $370 M: $215 M in FY 2030-31 (Year 6) and $155 M in FY 2033-34 (Year 9) $225 M: $150 M in FY 2030-31 (Year 6) and $75 M in FY 2033-34 (Year 9) Page 19 of 23 Rate Scenarios Rate Adjustment Scenario Overall Totalr New .. Revenue Adjustment Single Family Adjustment 2 , Baseline Scenario (FY 2023-24 Plan) $170,000,000 4.00% 4.00% 4.00% 4.00% $754 $784 Scenario A: Debt Reliance $370,000,000 3.00% 4.50% 4.50% 4.50% $758 $792 Scenario B: Balanced Approach $225,000,000 3.75% 5.25% 5.25% 5.25% $763 $803 Scenario C: Pay -As -You -Go $0 5.00% 6.50% 6.50% 6.50% $772 $822 December 18, 2024 Special Board Meeting Agenda Packet - Page 21 of 25 Page 20 of 23 Nutrient Project Timeframe Planning Design Construction 1. Annual Sewer Service Charge for Single Family customer Projected Single Family Residential.Annual Sewer Service Charge Debt Issuance Year $19011 shoo $1 WD 31100 steno 3000 SBoo -- s7oo N2025 FY 2026 FY 2021 FY 2028 FY 2029 FY 2030 rY 2031 rY 2032 FY 2033 FY 2036 FY 2035 C— Y—I Y-,2 Y-3 Y-, Y -r5 Y-,6 Y-7 Y—,6 Y—O Yea. 10 —B'—, k o," Bnlla Scere0e B: Balance-Pppeac)t 35 -- s—xa,lo c: P, -Y.co---Basauxe S--, lry XO 24 F1ax1 Rate Scenarios are Comparable to Actual Increases of Nearby Agencies 16 005. 120066 Water Agencies XL Wastewater Agencies culm.F mxFa. msT. L.xlTglY pfiRKT 10.0096 B00% 60o% 40M 200% 000% b x 6 ,lo, ° 8 1 aha ° e `��a f Q �ycm` FY 2025-26 � oya`f' �,aa 'Ile 4,c40, 0 °,a`z� yPo baa` ea�"� '0oC `e 110, 1 1: F December 18, 2024 Special Board Meeting Agenda Packet - Page 22 of 25 37 Guidance on Proposed Rate Discussion $1.400 $1.300 $1.200 $1.100 $1.000 $900 $800 $700 Projected Single Family ResidentialAnnual Sewer Service Charge FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 FY 2032 FY 2033 FY 2034 FY 2035 Current Year 1 Year 2 Year 3 Year4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Scenario A: Debt Reliance -Scenario B: Balanced Approach Scenario C: Pay -As -You -Go --- Baseline Scenario(FY 2023-2d Plan) Via Cost of Service and Rate Structure Changes Thomas Brightbill, Senior Engineer - Financial Planning Geoff Michalczyk, Management Analyst Page 21 of 23 December 18, 2024 Special Board Meeting Agenda Packet - Page 23 of 25 Page 22 of 23 39 Cost of Service Analysis Findings No changes to existing rate classes are recommended Preliminary Cost of Service calculations show a slight shift in rates New budget means new costs to allocate New wastewater flow data means new allocation of budgeted costs Rate consultant still finalizing analysis How Cost of Service Results Affect Rates* Residential — First Year Single family adjusted 5.25% 3.75% for increased revenue requirements and 1.5% to match with updated cost of providing service Multi -family and ADU rates reduced 2.3% and 3.7% respectively �! Non-residential — First Year "Low" rate class (most users) 3.7% adjustment Remaining rate classes adjusted 8.5% to 12.0% in the first year - F All rate classes — Second Year��, I = x u , Adjusted 5.25% for all�a::y,:_, *Based on Scenario B (Balanced Approach) ' December 18, 2024 Special Board Meeting Agenda Packet - Page 24 of 25 Summary of Recommendations and Closing Roger S. Bailey, General Manager M_ Summary of Key Points Central San's financial position is favorable, reflecting strong financial policies and discipline to date Cost of Service study updates allocation between residential and non-residential classes 2 -year rate allows time to monitor status of nutrients project and drivers A modest rate adjustment is needed Established framework of multi-year rate proposal with annual check -ins has worked well in the past December 18, 2024 Special Board Meeting Agenda Packet - Page 25 of 25 Page 23 of 23 k