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BARTLE WELLS ASSOCIATES 6 | Pag e City of San Leandro Draft 2024 Wastewater Rate Study 3 WASTE WATER FINANCIAL PLAN 3.1 Wastewater Financial Overview BWA conducted an independent evaluation of wastewater enterprise finances and concluded the previous rate increases have put the wastewater enterprise in a sound financial position. However, due to aging infrastructure, the City will need to fund a significant number of capital projects. As such, rate increases are projected to be necessary to maintain the City’s financial standing. The City relies almost entirely on revenues from wastewater rates to fund the costs of providing wastewater service. As such, wastewater rates must be set at levels adequate to fund the costs of operating and maintaining the wastewater system, fund necessary capital improvements to keep the wastewater system in good operating condition. 3.2 Key Drivers of Rate Increases The City is facing several manageable financial challenges that will drive the need for rate increases in upcoming years. Key drivers of future rate increases are summarized below. Capital Improvement Funding Needs The City takes a proactive approach to maintaining its wastewater treatment plant and collection system, which requires ongoing repair and improvement projects. Accounting for construction cost inflation, the City anticipates funding approximately $55 million of capital improvement projects over the next 5 years. The City’s detailed capital improvement costs are shown in Appendix A. The following figure visually depicts the capital improvement costs over the next five years. Figure 2 – Sewer Capital Improvements $10.4 $15.9 $14.6 $8.2 $10.1 $6.1 $0.0 $3.0 $6.0 $9.0 $12.0 $15.0 $18.0 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 FY 2028/29 FY 2029/30 City of San Leandro Sewer Capital Improvements ($ millions) Future $; includes annual construction cost inflation.