Final Budget FY O&M and rate setting Capital Budget Debt Service Budget 1

Water Budget Major Assumptions 67 employees, down 1 from last year Drought Coordinator position will be filled immediately Water tiered rates will be changed January 1, 2016 Other water rates & charges will be changed July 1,

Water Operating Budget Mandatory water cutbacks beginning July 1, 2015 –Cutbacks will be based on FY sales –M&I Customers will be cut back by 15% –SAWR customers will be cut back by 15% Shortage Level 2 has been declared 3

Water Budget CWA’s CY 2016 will not be approved until June –6% overall increase to wholesale cost of water based on draft rates –New Fixed Charge-Supply Reliability Charge –SAWR has been extended to 12/31/20 4

Water Budget Major Assumptions (con’t) How much will we sell? –FY sales of 12,570 AF cut to 10,700 for FY –M&I 6,900 AF –SAWR 3,800 AF –Total 11,400 AF Purchased (6.3% loss factor) –62.2% sold July through Dec –38.8% sold Jan through June 5

Philosophies &Assumptions Water Dept. –80% of M&I fixed costs collected through Service Charges, 20% through water mark up. –100% of Ag fixed costs are collected through Service Charges. No markup on water. –Pass through all increases in MWD/CWA cost of water 6

FY Domestic & LD Water Rate Philosophy Tier 1 water (1-5units) is priced at 90% Base –(8% of D & LD sales) Tier 2 water (16-30 units) is priced at Base –(73% of D & LD sales) Tier 3 water sales is priced at 1.1*Base –(19% of D & LD sales) Shortage Level 2 revenues used to pay penalties levied on the District & conservation programs 7

FY Water Rate Philosophy Remainder of CY 2015: SAWR water is sold for exactly the price FPUD pays for it, $3.18 Commercial Ag water is sold for exactly the price FPUD pays for it, $4.28 The only markup on water is on M&I tiers 2&3 8

Operating Rate Changes effective July 1, % Increase to Ag Ops charge ($1.35 for ¾” meter) 3% Increase to M&I Ops charge ($1.14 for ¾” meter) Increase pumping charge by $.02 to $.33/kgal which is an SDG&E pass through. No change to charge of $.10/kgal for capital replacement of Harris, Donnil, Toyon & Daily pump stations. These rates are a pass through of RTS, IAC and wholesale water rate increases 9

FY Water Rate Philosophy Beginning CY 2016: SAWR water is sold for exactly the price FPUD pays for it, estimated to be $3.28, up from $3.18 Commercial Ag water is sold for exactly the price FPUD pays for it, estimated to be $4.76, up from $4.28 The only markup on water is on M&I tiers 2&3 10

FY Water Rate Philosophy Beginning CY 2016 Tier 1 M&I water is sold at a loss –Tier 1 rate is proposed to be $4.66, an increase of $.28 10% price differential between Tiers 1 & 2 –Tier 2 is proposed to be $5.13, an increase of $.31 10% price differential between Tiers 2 & 3 –Tier 3 is proposed to be $5.65, an increase of $.34 Prices updated and mailed to customers prior to 1/1/16 11

Sample 2016 Water Bill 12 CY 16 Customer Impact Domestic 3/4" meter using 15 units/month (5 units winter use) CurrentProposed Service Chg st 5 kgal (Tier 1) Tier 2 usage Tier RTS IAC Capital Improvement Total Water Bill Impact $ 5.92 % Impact4.8%

13 WATER DEPARTMENT BudgetEst. ActualBudget Revenues Water Sales 15,298,803 15,542,067 14,989,470 Service Charges 4,899,860 4,931,383 4,981,619 MWD RTS Charge 478, , ,649 SDCWA IAC Charge 380, , ,090 Sundry 200, , ,000 Total Revenues 21,258,087 21,645,135 21,107,828 Expenses Production 15,594,824 15,957,708 15,826,064 Customer Service 1,469,063 1,449,532 1,392,385 Distribution 1,623,937 1,409,696 1,693,738 Allocated Admin Expenses 2,299,986 2,181,649 2,398,956 Debt Service Transfer Total Expenses 20,987,810 20,998,587 21,311,144 Net Revenue/(Expense) 270, ,548 (203,316)

14 Water Dept BudgetEst. ActualBudget Net Revenue/(Expense) 270, ,548 (203,316) Transfer to Recycled - - Beginning Fund Balance 5,656,709 4,025,825 4,672,373 Ending Fund Balance 5,926,986 4,672,373 4,469,058 EQUITY REQUIREMENTS Water Reserve 1,384,320 1,487,748 Repair 750,000 Working Capital 1,637,879 1,538,135 Rate Stabilization 370, ,315 Total Equity Required 4,143,150 3,942,198 Unappropriated Funds 1,783, , ,860

Philosophies &Assumptions Wastewater Dept. –New methodology began FY –Single Family Residences Rate based on lowest water usage in month during 5 months of winter, November ‘14 through March ‘15 Assumed 90% of this water is returned to the sewer Median usage is 5, same as last year. Median has been 5 for 5 of the seven years Cap remains at 18 units (100% of use over 18 for irrigation) 10% lower flows into plant with water cutbacks 15

16 Single Family - FY (current year) Single Family - FY (current year) Consumptio n (1,000 gal)RTS Sewer Flow Fixed Charge Commodity Rate Consump tion ChargeTotal Bill Fixed Charge Commodity Rate Consumption ChgTotal Bill % Increase 090%0.0 $ $ 7.64 $ - $ $ $ 8.21 $ - $ % 190%0.9 $ $ 7.64 $ 6.88 $ $ $ 8.21 $ 7.39 $ % 290%1.8 $ $ 7.64 $ $ $ $ 8.21 $ $ % 390%2.7 $ $ 7.64 $ $ $ $ 8.21 $ $ % 490%3.6 $ $ 7.64 $ $ $ $ 8.21 $ $ % 590%4.5 $ $ 7.64 $ $ $ $ 8.21 $ $ % 690%5.4 $ $ 7.64 $ $ $ $ 8.21 $ $ % 790%6.3 $ $ 7.64 $ $ $ $ 8.21 $ $ % 890%7.2 $ $ 7.64 $ $ $ $ 8.21 $ $ % 990%8.1 $ $ 7.64 $ $ $ $ 8.21 $ $ % 1090%9.0 $ $ 7.64 $ $ $ $ 8.21 $ $ % 1190%9.9 $ $ 7.64 $ $ $ $ 8.21 $ $ % 1290%10.8 $ $ 7.64 $ $ $ $ 8.21 $ $ % 1390%11.7 $ $ 7.64 $ $ $ $ 8.21 $ $ % 1490%12.6 $ $ 7.64 $ $ $ $ 8.21 $ $ % 1590%13.5 $ $ 7.64 $ $ $ $ 8.21 $ $ % 1690%14.4 $ $ 7.64 $ $ $ $ 8.21 $ $ % 1790%15.3 $ $ 7.64 $ $ $ $ 8.21 $ $ % 1890%16.2 $ $ 7.64 $ $ $ $ 8.21 $ $ %

Philosophies &Assumptions Commercial Users –Based on actual monthly water usage –Strength classifications based on SIC code Strength appeals available –RTS (Return to Sewer) percentages may vary depending on outdoor irrigation & business type, such as a water store RTS appeals available –RTS categories are set at 10% intervals 17

Philosophies &Assumptions Multi family & other users such as schools, churches & government –Based on actual monthly water usage –RTS (Return to Sewer) percentages will vary 18

Sample 2016 Water & Sewer Bill 19 CY 16 Customer Impact Domestic 3/4" meter using 15 units/month (5 units winter use) CurrentProposed Service Chg st 5 kgal (Tier 1) Tier 2 usage Tier RTS IAC Capital Improvement Total Water Bill Impact $ 5.92 % Impact 4.8% CurrentProposed Sewer Svc Capital Improvement Chg Tax Takeaway 0.00 Total Sewer Sewer Bill Impact $ 2.95 Combined Impact $8.87 Impact as a percentage 4.9%

20 Wastewater Dept. Budget Summary BudgetEst. ActualBudget Revenues Service Charges 5,349,792 5,581,200 5,634,832 Class A Biosolids Sales 100 Sundry 1,000 4,081 1,000 Total Revenues 5,350,892 5,585,381 5,635,932 Expenses Collection 1,010, ,394 1,032,724 Treatment 864, , ,707 Disposal/Regulatory Compliance 895, , ,576 Allocated Admin Expenses 1,857,681 1,728,854 1,937,618 Debt Service Transfer 671, ,528 Total Expenses 5,299,703 5,184,756 5,516,153 Net Revenue/(Expense) 51, , ,779

21 Wastewater Fund Balance Summary BudgetEst. ActualBudget Net Revenue/(Expense) 51, , ,779 Beginning Fund Balance 1,534, , ,226 Ending Fund Balance 1,585, ,226 1,040,005 EQUITY REQUIREMENTS Working Capital 1,157,162 1,208,406 Catastrophic Repair 250,000 Total Equity Required 1,407,162 1,458,406 Unappropriated Funds 178,080 (486,936) (418,401)

Summary of Changes Wastewater new methodology –Increase monthly fixed charge $.13 to $14.23/month fixed charge for ¾” meter –Increase low strength $.57 to $8.21/kgal –Increase medium strength $.81 to $12.35 –Increase high strength $1.28 to $

Philosophies &Assumptions Recycled Dept. –Rates set at greater of 85% Tier 1 rate or 80% of the average T1 and T2 M&I rates. –Continue to find new recycled customers, new capital pipeline project budgeted for FY –Monitor Regional Board’s permitting requirements and fees. 23

24 Recycled Budget Summary BudgetEst. ActualBudget Revenues Water Sales 712, , ,786 Service Charges 51,791 54,162 54,867 MWD/CWA Incentive 224, , ,000 Sundry * 5,000 Total Revenues 993, ,159 1,003,653 Expenses Production 592, , ,753 Distribution 72,953 43,054 73,198 Allocated Admin Expenses 265, , ,803 Debt Service Transfer 92,400 94,248 Total Expenses 1,022, , ,002 Net Revenue/(Expense) (29,442) 94,538 16,651

FY Recycled Dept. Projected Operating Revenue $16k –MWD Rebate ended 1/31/15 Any shortfall made up by Water Dept. Increase rate by $.22 from $3.74 to $3.96 effective 1/1/16 Project to sell 675 AF for FY

Philosophies &Assumptions Administrative Dept. & Engineering Dept. –Are not revenue generating departments. –Admin & Eng costs must be allocated between Water (52%) Wastewater (42%) Recycled (6%) 26

27 Admin Dept. Budget Summary BudgetEst. ActualBudget Expense Allocation Water Department 2,299,986 2,181,649 2,398,956 Wastewater Department 1,857,681 1,728,854 1,937,618 Recycled Water Department 265, , ,803 Total Allocation 4,423,050 4,116,320 4,613,377 Expenses Administration & Financial Mgmt 2,570,320 2,512,316 2,691,278 Engineering 854, , ,117 Community Relations 249, , ,069 Personnel Support 748, , ,912 Total Expenses 4,423,050 4,116,320 4,613,377 Net Revenue/(Expense) - - -

Warehouse & Equipment Includes: –Warehouse Ops-purchases & issues of inventory –Vehicle Maintenance-fuel –Part of the costs are seen in every program under “Equipment Allocation” –Other costs are recovered through inventory markup 28

FY Capital Budget Water Wastewater Recycled Admin 29

Water Capital Funding $6.2M capital budget for water projects for FY for pipelines, pump stations & Santa Margarita Conjunctive Use project Funding: –Increase Capital Improvement Charge to $9.06/EMU from $8.59 with ENR of 2.5%+3% inflator to 2033 to bring replacement cycle to 84 years –We will receive $900k in Prop 50 funds for Conjunctive Use Project –No Increase to pumping charge $0.10/kgal to fund Harris/Donnil/Toyon & Daily capital improvements 30

Wastewater & Recycled Capital Funding $5.6M budgeted for FY to complete two year construction of WWTP rehab project. Total expected project cost $28.4M $1.7M Recyc Water Eastline extension –$800k funded by Prop 84 funding Increase Wastewater Capital Improvement Charge of $10.44/EDU to $10.70 to raise $1.075M towards $1.7M annual debt service payment and collections systems improvements. 31

FY Debt Service $7.2M QECB Solar loan at WWTP ($4.96M balance) –Sources of funding: CSI Rebate of $.32/kWh generates $752,819/yr. for 5 years, this is year 5. SDG&E offset of $393,928/yr. Sequestration has cost 8.7% of Federal Interest subsidy, $13.4k in FY $28.3M SRF loan for WWTP rehab –How to pay $1.7M debt service? Payments begin 12/2017 1% property taxes of $800,000 Transfers from WW/Recyc Ops $382,000/year Wastewater Capital Improvement Charge from $10.44 to $10.70/EDU to raise the remainder 32

FY Debt Service $6.2M Red Mtn. SRF ($5M balance) –Annual payments of $395,893 come from 1% property tax revenues. 33

Final Budget FY O&M and rate setting Capital Budget Debt Service Budget 34