Potable Water Fund Financial Overview

Introduction of FY 2023-24 & FY 2024-25 Operating and Capital Budget May 30, 2023 1

Introduction Previously held Board budget workshop on May 4 Two-Year Budget July 1, 2023 through June 30, 2025 Multiple Funds Fire (03), Debt Service (04), Potable Water (05), Recycled Water (07) and Sewer (11) Zero-Based Budgeting Anticipate updates to Water Purchase cost information from SDCWA Draft budget will be refined and enhanced for final adoption on June 27 2

Trends and Assumptions Expense budget dominated by inflationary pressures in all areas Labor market pressures on salaries to remain competitive Benefit cost increases Material and supply cost increases due to supply chain issues and rising costs Contract and service cost increases due to labor cost increases and rising costs Utility rates for gas and electricity Sizeable projected increases to wholesale supply rates and fixed charges December to December CPI-U Percentage Change 2020 = 1.4% 2021 = 7.0% Major revenues set by 2022 Cost of Service and Water Rate Study 4.0% increases to potable water rates and service charges effective July 1, 2023 2022 = 6.5% 3

Potable Water Fund Potable Operating Revenues Potable Operating Revenues Potable Operating Expenses Potable Operating Expenses 3% 1% 22% 13% 10% 46% 5% 3% 3% 1% 64% 1% 14% 1% 0% 13% Water Purchases (Commodity) Salaries Contracts & Services Utilities Water Purchases (Fixed) Benefits Materials & Supplies Other Potable Water Sales Property Taxes Pass-Through Charges Billing Fees Other Revenue Potable Meter Service Charges Investment & Property Earnings Capital Revenues Engineering Fees 4

Potable Water Fund Revenues FY 2022-23 Approved FY 2023-24 Proposed % Diff from PY FY 2024-25 Proposed % Diff from PY Category Water Sales Water Service Charges Pass-Through Charges Property Taxes Capacity Fees / Contributions Engineering Fees Billing Fees Investment & Property Earnings Other / Miscellaneous Total Potable Water Revenue $12,900,000 $4,595,000 $370,000 $842,500 $405,000 $130,250 $170,000 $407,000 $85,000 $19,904,750 $13,600,000 $4,750,000 $540,000 $1,000,000 $300,000 $95,000 $194,000 $670,000 $95,000 $21,244,000 5.4% 3.4% 45.9% 18.7% -25.9% -27.1% 14.1% 64.6% 11.8% 6.7% $14,150,000 $4,905,000 $550,000 $1,000,000 $550,000 $100,000 $194,000 $625,000 $100,000 $22,174,000 4.0% 3.3% 1.9% 0.0% 83.3% 5.3% 0.0% -6.7% 5.3% 4.4% 5

Potable Water Fund Revenues Water Sales revenues based upon 5,044 AF of sales Meter Service Charge revenue based upon current meter counts Water Rates and Meter Service Charges scheduled for 4% increase effective with all bills sent on or after July 1, 2023 Passing through SDCWA IAC increase each January 1 Property taxes increasing due to recent market strength Capacity & Engineering Fees decreasing due to lesser development Billing Fees back to historical levels Investment & Property Earnings increasing due to improved yields Other reflects increased Fire Department Administrative Fee 6

Potable Water Fund Expenses FY 2022-23 Approved FY 2023-24 Proposed % Diff from PY FY 2024-25 Proposed % Diff from PY Category Water Purchases (Commodity) $7,928,831 $8,694,194 9.7% $9,412,974 8.3% Water Purchases (Fixed) $2,395,415 $2,437,152 1.7% $2,638,831 8.3% Salaries $2,282,452 $2,573,117 12.7% $2,732,533 6.2% Benefits $1,847,539 $2,000,609 8.3% $2,056,965 2.8% Utilities $128,000 $162,200 26.7% $173,750 7.1% Contracts & Services $2,154,600 $2,450,065 13.7% $2,521,600 2.9% Materials & Supplies $426,050 $505,500 18.6% $531,150 5.1% Other $1,126,000 ($90,000) -108.0% ($90,000) 0.0% Total Potable Water Expenses $18,288,887 $18,732,837 2.4% $19,977,803 6.6% 7

Potable Water Expenses Water Purchases based upon 5,200 AF Estimating increases of 9.0% for CY 24 and 7.5% for CY 25 for SDCWA commodity rates and fixed charges (will be updated in June) Salaries for 24.0 FTE total (21.90 Potable / 1.55 Recycled / 0.55 Sewer) Estimate 6% max annual salary increase (includes merit and class & comp) Benefits include rising medical costs and increased CalPERS UAL payments Utilities reflect rising gas and electric costs Contracts & Services and Materials & Supplies reflect inflationary pressures and several new initiatives Other reflects Internal Cost Allocation from Recycled Water Fund 8

Potable Water Expenses New Initiatives / Highlights Expanded AMI cellular network costs Increased WaterSmart functionality Lease of modular office building Increase of credit card processing costs New Information Technology Manager Development of Information Technology Strategic Plan Conducting of Cyber-Security Assessment Updating of District-wide Strategic Plan Rising insurance and benefit costs Creation of additional customer information videos Purchase of server replacement 9

Potable Water Fund Capital Projects Project Number 52103 52108 52109 52130 52132 52136 52138 52143 52144 52145 52146 52148 52149 52150 52151 TBD TBD TBD TBD TBD Project Title Advanced Meter Infrastructure I-15 Crossings Citracado Bridge Pipeline Extension (PW) Pipeline Replacement Program Vehicle and Equipment Replacement District Facility Improvements 20" Pipeline Realignment (El Norte to Lincoln) 10" Pipeline Upsizing (Johnston) Mission Road Pipeline Replacement Board Room Technology Upgrades ID-A / ID-1 System Intertie ID-A Pipeline Fire Flow Improvement Pump Station Improvements Quiet Hills Pipeline Replacement (Phase II) Solar Upgrade Project (Potable Facilities) 14" Pipeline Realignment (SDGE & Auto Park) 12" Pipeline Replacement (Bernardo Ave) 8" Pipeline Replacement (Via Rancho Pkwy) 6" Pipeline Replacement (Gretna Green) R-3 Reservoir Mixer Installation Total Potable Capital Appropriations FY 2023-24 Proposed FY 2024-25 Proposed $500,000 $(2,907,207) $300,000 $(1,000,000) $150,000 $1,000,000 $(1,000,000) $0 $0 $0 $0 $150,000 $1,000,000 $0 $0 $1,300,000 $500,000 $(89,966) $(100,000) $3,850,000 $50,000 $250,000 $250,000 $350,000 $250,000 $200,000 $75,000 $15,000 $2,642,827 $0 $0 $0 $0 $50,000 $0 $0 $350,000 $0 $0 $0 $0 $2,850,000 10

Potable Water Fund Capital Projects Carry-over unspent appropriations of $12,565,522 as of March 31, 2023 Additional funding to continue work on several existing projects New appropriations for several new projects Several transfers of funds from existing projects to mitigate the request appropriation for FY 2023-24 New appropriations of $2,642,827 in FY 23-24 and $2,850,000 in FY 24-25 Reduced appropriations from Rate Study projections ($3.6M annually) to ease budget stress 11

Recycled Water Fund Revenues FY 2022-23 Approved FY 2023-24 Proposed % Diff from PY FY 2024-25 Proposed % Diff from PY Category Water Sales $716,000 $738,624 3.2% $738,624 0.0% Water Service Charges $78,650 $117,600 49.5% $117,600 0.0% Pass-Through Charges (SDGE) $145,100 $169,800 17.0% $169,800 0.0% Capacity Fees / Contributions $0 $0 N/A $33,900 N/A Engineering Fees $75,000 $75,000 0.0% $78,800 5.1% Billing Fees $4,000 $7,500 87.5% $7,500 0.0% Total Recycled Water Revenue $1,018,750 $1,108,524 8.8% $1,146,224 3.4% 12

Recycled Water Fund Expenses FY 2022-23 Approved FY 2023-24 Proposed % Diff from PY FY 2024-25 Proposed % Diff from PY Category Water Purchases (Commodity) $278,250 $340,011 22.2% $357,210 5.1% Salaries $134,601 $214,494 59.4% $224,397 4.6% Benefits $48,225 $80,467 66.9% $83,919 4.3% Utilities $15,600 $17,100 9.6% $17,850 4.4% Contracts & Services $130,450 $139,200 6.7% $139,700 0.4% Materials & Supplies $30,000 $30,000 0.0% $30,000 0.0% Other $75,000 $100,000 33.3% $100,000 0.0% Total Recycled Water Expense $712,126 $921,272 29.4% $953,076 3.5% 13

Recycled Water Revenues and Expenses Water Purchases and Sales projected at 441 AF for both years Estimated 5% annual increase in wholesale supply costs from City of Escondido No changes in RW water rates and service charges per rate study Increased position allocation from 1.1 FTE to 1.55 FTE Utilities reflect rising gas and electric costs Projected increase of Internal Cost Allocation from recycled water fund to potable water fund 14

Recycled Water Fund Capital Projects Project Number FY 2023-24 Proposed FY 2024-25 Proposed Project Title 52004 Multi-Agency Recycled Project $30,000 $30,000 52006 Citracado Bridge Pipeline Extension (RW) $200,000 $200,000 52125 NLS-F Misc. RW Extensions / Retrofits $(400,000) $0 52140 Beethoven Pump Station Improvements $250,000 $0 52141 North Iris Pump Station Improvements $250,000 $0 TBD Solar Upgrade Project (Recycled Facilities) $0 $250,000 Total Recycled Capital Appropriations $330,000 $480,000 15

Recycled Water Fund Capital Projects Carry-over unspent appropriations of $2,183,394 as of March 31, 2023 Additional funding to continue work on several existing projects New appropriations for several new projects Transfers of funds from existing project to mitigate the request appropriation for FY 2023-24 Potential grant funding anticipated for Pump Station Improvement projects 16

Sewer Fund Revenues and Expenses FY 2022-23 Approved FY 2023-24 Proposed % Diff from PY FY 2024-25 Proposed % Diff from PY Revenue Category Sewer Service Charges Total Sewer Revenue $649,155 $649,155 $645,400 $645,400 -0.6% -0.6% $645,400 $645,400 0.0% 0.0% FY 2022-23 Approved $60,574 $19,352 $111,000 $472,100 $42,500 $705,526 FY 2023-24 Proposed $83,751 $27,029 $158,400 $470,050 $57,500 $796,730 % Diff from PY 38.3% 39.7% 42.7% -0.4% 35.3% 12.9% FY 2024-25 Proposed $87,737 $28,302 $174,240 $487,950 $57,500 $835,729 % Diff from PY 4.8% 4.7% 10.0% 3.8% 0.0% 4.9% Expense Category Salaries Benefits Utilities Contracts & Services Materials & Supplies Total Sewer Expenses 17

Sewer Fund Revenues and Expenses Revenues anticipated to remain flat due to existing cost of service study Anticipate conducting new cost of service study during upcoming two-year budget cycle to revise rates and charges Increased position allocation from 0.45 FTE to 0.55 FTE Utilities reflect rising gas and electric costs Includes costs for contract operation of wastewater treatment plant, collection system cleaning and televising, sampling, permit fees, chemicals and repair parts 18

Sewer Fund Capital Projects Project Number FY 2023-24 Proposed FY 2024-25 Proposed Project Title 52147 Sludge Bin $(10,000) $0 52198 WW PEIR and Master Plan $50,000 $50,000 TBD Wastewater Cost of Service Study $30,000 $0 TBD Solar Upgrade Project (Sewer Facilities) $250,000 $0 TBD Wastewater Master Plan $0 $50,000 Total Sewer Capital Appropriations $320,000 $100,000 Continues repayment of funds previously advanced from potable fund Provides for cost of service study, master plan, and solar upgrades 19

Fire Fund Revenues and Expenses FY 2022-23 Approved $2,064,000 $306,000 $33,000 $2,403,000 FY 2023-24 Proposed $2,271,000 $310,000 $50,000 $2,631,000 % Diff from PY 10.0% 1.3% 51.5% 9.5% FY 2024-25 Proposed $2,337,000 $310,000 $50,000 $2,697,000 % Diff from PY 2.9% 0.0% 0.0% 2.5% Revenue Category Property Taxes Voter Approved Taxes Other Fees & Charges Total Fire Revenue FY 2022-23 Approved $19,400 $2,297,600 $8,000 $78,000 $2,403,000 FY 2023-24 Proposed $21,120 $2,514,880 $10,000 $85,000 $2,631,000 % Diff from PY 8.9% 9.5% 25.0% 9.0% 9.5% FY 2024-25 Proposed $22,350 $2,574,650 $10,000 $90,000 $2,697,000 % Diff from PY 5.8% 2.4% 0.0% 5.9% 2.5% Expense Category Benefits Contracts & Services Materials & Supplies Other Total Fire Expenses 20

Fire Fund Revenues and Expenses Revenues mainly from property tax increment and special tax Expenses primarily fund payments to City of Escondido for the provision of fire services in ID-E via contract District keeps funds for an administration fee and other minor direct expenses Revenues and expenses budgeted to be equal in each year 21

Debt Service Transactions FY 2022-23 Approved $645,110 $150,472 $5,000 $800,582 FY 2023-24 Proposed $659,903 $135,680 % Diff from PY 2.3% -9.8% -100.0% -0.1% FY 2024-25 Proposed $675,035 $120,549 % Diff from PY 2.3% -11.2% 0.0% 0.0% Category Principal Payments Interest Payments Administrative Fees Total Debt Service $0 $0 $795,584 $795,585 2016 private debt financing for infrastructure improvements 15-year amortization through 2031 Proceeds have been fully expended as of FY 21-22 which provided for a variety of infrastructure projects throughout the District 22

Comparison to Water Rate Study Proposed Two-Year Potable Water Fund Budget Water Rate Study Projections FY 2023-24 FY 2024-25 FY 2023-24 FY 2024-25 Revenue $21,244,000 $22,174,000 Revenue $21,291,640 $22,328,472 Water Purchases $11,131,345 $12,051,804 Water Purchases $10,924,491 $11,458,458 Operating Expenses $7,601,491 $7,925,998 Operating Expenses $6,908,115 $7,140,970 Capital $2,642,827 $2,850,000 Capital $3,625,000 $3,475,000 Debt Service $795,584 $795,585 Debt Service $795,584 $795,585 Total Expenses $22,171,248 $23,623,388 Total Expenses $22,253,190 $22,870,013 Net Cash ($927,248) ($1,449,388) Net Cash ($961,550) ($541,542) 23

Recommendation Board of Directors receive the draft FY 2023-24 and FY 2024-25 Operating & Capital Budget, review and discuss the information presented, and provide direction to staff in anticipation of budget adoption at the June 27, 2023 Board meeting 24