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Task 2. Ten -Year Financial Plan Objective: RDN will review City data to develop a 10-year financial plan for each utility system. RDN will determine the future revenue requirements to sufficiently fund the City's operation and maintenance (O&M) and capital replacements and refurbishment (R&R) program. We will analyze the City's annual reports, capital improvement programs, interest earnings, background information for the system including existing regulatory requirements, bond covenants and other contractual requirements, historical revenues, operating expenses, debt service requirements, reserve policies, approved rates and charges, customer billing and usage data, minimum operating reserve balances, master plans, and any other pertinent information. As appropriate, and as discussed with City staff, we will consider various financing options, or a combination of options, such as operating revenue, new debt issuances, and miscellaneous fees. Task 2.1. Demand Projections/Revenue Analysis RDN will conduct detailed demand and growth projections to ensure the City's revenue forecast and cash flow analysis are accurate. Water consumption is influenced by price signals, weather/rainfall, high -efficiency technologies, drought mandates, and conservation programs. We will first evaluate how the City's customers' water consumption patterns have changed historically, and then incorporate City growth and redevelopment trends and the elasticity of customer demand in response to various rate increase scenarios to project future water demand. Based on the demand projections, we will forecast revenue using the existing rates. We will also identify any changes to other revenues such as miscellaneous charges, property taxes, and investment income. Task 2.2. Operation and Maintenance Expenses Using the City's budgetary documents, we will project operating and maintenance (C&M) expenses and develop reasonable inflationary factors for relevant itemized expenses using reliable published sources or the City's historical data. We also incorporate any known changes to personnel, level of service, or projected growth. Each expense item will be categorized as either fixed orvariable and direct or indirect to ensure that costs are allocated to the correct rate structure components when designing future rates. RDN will also review the 2019 financial plan used for the previous rate study and analyze the adequacy of the current plan. Task 2.3. Capital Improvement Funding RDN will review the Citys capital projects plan and explore financing options based on the timing of proposed revenue adjustments and scheduled repairs and replacements. Funding sources may include cash reserves, grant funding, debt proceeds, or PAYGO (pay as you go), each with different financial impacts. The City may also consider changes in capital expenditure timing to mitigate short-term financial impacts and smooth revenue requirements. Task 2.4. Review Reserve Policies RDN will review the City's current reserve levels and provide recommendations based on the City's policy objectives. Once recommendations are established, we will develop an implementation plan that maintains recommended balances for each fund consistent with the City's financial goals, risk tolerance, and capital improvement projects. Reserve balances will be consistent with industry standards and the City's desire to appropriately address risk associated with various factors, including emergency expenditures or revenue shortfalls.