Combined_Budget_Book_FY27.pdf

TABLE OF CONTENTS 2 0 2 6 / 2 0 2 7 B u d g e t

BUDGET MESSAGE

DISTRICT OVERVIEW

BUDGET GUIDE

Purpose of the Budget

Budget Process and Strategy

Budget Development

Basis of Budgeting

Fiscal Policies

Current Debt Obligations

FUND SUMMARY

Financial Management

Fund Balance

Revenue by Source

Revenue Summary

Expense by Category

Expense Summary

PERSONNEL SUMMARY

Valley Sanitary District Organizational Chart

Staffing Range Assignments

Wage Schedule

Position Count by Department

BUDGET BY DEPARTMENT

Department Description

Expense Summary by Department

Budget Allocation

Wages and Benefits

California Public Employees’ Retirement System (CalPERS)

Other Post-Employment Benefits

BOARD OF DIRECTORS

Board of Directors Organizational Chart

Board of Directors Department Description

District Divisions Map

Board of Directors Metrics

Board of Directors Accomplishments

Board of Directors Goals

Board of Directors Personnel Summary

Board of Directors Expense Budget Summary

ADMINISTRATION

Administration Organizational Chart

Administration Department Description

Administration Metrics

Administration Accomplishments

Administration Goals

Administration Personnel Summary

Administration Expense Budget Summary

SANITATION COLLECTIONS

Sanitation Collections Organizational Chart

Sanitation Collections Department Description

Sanitation Collections Metrics

Sanitation Collections Accomplishments

Sanitation Collections Goals

Sanitation Collections Personnel Summary

Sanitation Collections Expense Budget Summary

ENGINEERING AND DEVELOPMENT SERVICES

Engineering Organizational Chart

Engineering Department Description

Engineering Metrics

Engineering Accomplishments

Engineering Goals

Engineering Personnel Summary

Engineering Expense Budget Summary

ENVIRONMENTAL COMPLIANCE SERVICES

Environmental Compliance Services Organizational Chart

Environmental Compliance Services Administration Department Description

Environmental Compliance Services Metrics

Environmental Compliance Services Accomplishments

Environmental Compliance Services Goals

Environmental Compliance Services Personnel Summary

Environmental Compliance Services Expense Budget Summary

MAINTENANCE

Maintenance Organizational Chart

Maintenance Department Description

Maintenance Metrics

Maintenance Accomplishments

Maintenance Goals

Maintenance Personnel Summary

Maintenance Expense Budget Summary

OPERATIONS

Operations Organizational Chart

Operations Department Description

Operations Metrics

Operations Accomplishments

Operations Goals

Operations Personnel Summary

Operations Expense Budget Summary

CAPITAL BUDGET

Capital Improvement Program

Prioritization of Capital Improvement Projects

CIP Budget Overview

Fiscal Year 2026/27 Capital Budget

Reoccurring/Non-reoccurring Projects

Funding Summary

Twenty-Year Capital Improvement Program

Capital Project Justification Worksheets

GLOSSARY

ACRONYMS

RESOLUTION 2026-1208

BUDGET MESSAGE 2 0 2 6 / 2 0 2 7 B u d g e t

General Manager’s Budget Message

July 1, 2026

Honorable Board of Directors, It is my pleasure to present the Valley Sanitary District’s Fiscal Year (FY) 2026/27 Operating and Capital Budget.

This budget reflects the collaborative efforts of the entire Valley Sanitary District (VSD) team and the continued leadership and guidance of the Board of Directors. It has been developed through thoughtful prioritization of resources, alignment with strategic objectives, prudent financial planning, and a continued commitment to long-term sustainability.

The District remains steadfast in its mission to protect public health, preserve environmental resources, maintain operational excellence, and deliver reliable wastewater services to the communities we serve. Our core values, Transparency, Responsibility, Respect, and Integrity continue to guide our decisions, operations, and organizational priorities.

MAJOR ORGANIZATIONAL PRIORITIES FY 2026/27

A primary focus for FY 2026/27 is maintaining fiscal responsibility through disciplined budgeting, strategic resource allocation, and ongoing evaluation of expenditures. The District remains committed to strengthening its financial position while supporting operational needs, capital improvements, and long-term strategic initiatives.

Another significant initiative is the implementation of the District’s new five-year wastewater rate structure. This updated framework is intended to provide greater transparency, financial stability, and sustainable funding for essential wastewater services.

The revised rate plan will support critical infrastructure investments while balancing affordability for customers.

Strategic planning efforts are also underway for the development of a new District campus.

This initiative reflects the District’s commitment to modernization, operational efficiency, and future growth. Planning efforts will address long-term space requirements, technological advancements, and sustainable facility design to ensure the District is well-positioned to meet future operational demands.

In addition, succession planning remains a key organizational priority. The District recognizes the importance of workforce development and leadership continuity. Through targeted training, professional development, and leadership preparation, the District aims to cultivate a resilient and adaptable workforce capable of sustaining high levels of service and operational performance.

A notable distinction between this year’s priorities and prior planning cycles is the inclusion of the new campus initiative. This strategic investment represents a significant step toward organizational growth and modernization and reflects the District’s long-term vision for operational sustainability.

MAINTAINING SERVICE LEVELS

No significant reductions or changes to service levels are anticipated during FY 2026/27.

The District remains committed to maintaining current service standards while advancing key initiatives and infrastructure projects.

Efforts continue to expand the use of recycled water for irrigation purposes in support of sustainability and resource conservation goals. Additionally, the District continues to advance its biosolids conversion initiative, which is intended to provide local agricultural users with an alternative fertilizer source while promoting environmental stewardship and sustainable waste management practices.

ADDRESSING POLICY AND ECONOMIC ISSUES

Policy Issues

The District remains committed to continuously updating and strengthening its policies and governance practices. A key focus for FY 2026/27 is the implementation and administration of the newly adopted Board of Directors Policy Manual.

This effort includes ensuring Board members and staff are fully familiar with updated policies and procedures and integrating those standards into day-to-day operations.

Ongoing training, periodic policy reviews, and feedback mechanisms will support effective implementation and promote consistency, accountability, transparency, and regulatory compliance throughout the organization.

Economic Factors

The District utilizes economic forecasts from the State of California and budget projections from the City of Indio to evaluate broader economic trends and support strategic financial planning. Key economic indicators, including unemployment rates, projected job growth, real personal income forecasts, development activity, and departmental funding trends, are analyzed to assess the overall financial environment.

This information supports the development of a comprehensive financial plan that includes projected revenues, expenditures, reserve balances, staffing needs, and capital investment requirements.

Although economic volatility continues to present challenges, the District remains well-positioned to navigate uncertain conditions due to its strong financial foundation and conservative fiscal practices. This stability enables the District to adapt to changing economic conditions while minimizing impacts on operations and service delivery.

Additionally, grant funding continues to provide important financial support for capital improvement projects and infrastructure investments. These external funding sources help offset project costs and reinforce the District’s commitment to long-term fiscal sustainability.

The District remains committed to prudent financial management through ongoing monitoring of economic conditions, strategic forecasting, and disciplined resource allocation.

Regulatory Issues

Potential regulations related to per- and polyfluoroalkyl substances (PFAS) continue to pose significant challenges for wastewater agencies throughout California and the nation.

If implemented, PFAS regulations could require substantial investments in advanced treatment technologies, specialized equipment, enhanced monitoring programs, and additional reporting requirements.

Compliance with PFAS regulations may significantly increase operational and capital costs while impacting the District’s ability to fund and prioritize other infrastructure improvements. Additionally, these emerging regulatory requirements may necessitate expanded public communication efforts related to environmental and public health considerations.

The District will continue monitoring regulatory developments and evaluating operational strategies necessary to maintain compliance while preserving reliable wastewater operations.

Legislative Issues

The District is monitoring new legislation related to “flushable wipes,” which is intended to reduce system blockages, maintenance costs, and operational disruptions caused by improper disposal practices.

Additionally, evolving Accessory Dwelling Unit (ADU) regulations continue to affect wastewater service planning, connection demands, and infrastructure capacity considerations. The District remains committed to supporting responsible community growth while maintaining operational reliability and financial sustainability.

Proposed limitations to the plan check process, including restrictions to two (2) review iterations, may streamline project approvals but could also require more comprehensive initial submissions from applicants and agencies alike.

Furthermore, ongoing affordable housing initiatives may impact the District’s ability to collect capacity fees necessary to fund infrastructure expansion and system improvements required to support new development.

BUDGET IN BRIEF

The FY 2026/27 Budget is comprehensive, balanced, and strategically aligned with the District’s operational and capital priorities. The budget provides transparency while funding essential services, protecting environmental resources, and supporting the communities we serve.

For FY 2026/27, the District’s operating budget totals $22.3 million, while the capital budget totals $19.9 million.

The operating budget funds essential day-to-day activities, including personnel costs, CalPERS contributions, Unfunded Accrued Liability (UAL) payments, debt service obligations, insurance premiums, utilities, and other operational expenses.

The capital budget supports the District’s Capital Improvement Program (CIP), which includes 29 capital projects planned for FY 2026/27. Major projects include:

• Recycled Water Project – Phase II Design

• Digester No. 2 Cleaning and Equipment Maintenance

• New District Campus Design and Construction

• Biosolids Conversion Project

BUDGET CHALLENGES

The District continues to face rising costs associated with utilities, aging infrastructure replacement, retirement obligations, healthcare premiums, post-employment benefits, and evolving regulatory requirements. Over the past several years, inflationary pressures and escalating construction costs have required the District to reprioritize major initiatives and capital investments.

In FY 2025/26, the District completed a comprehensive Wastewater Rate Study to address long-term operational and infrastructure funding needs. Following the required Proposition 218 notification process, the Board of Directors approved the District’s wastewater rate adjustments during a public hearing held on May 12, 2026.

The approved rate structure will help maintain financial stability, preserve operational and emergency reserves, and support future infrastructure financing needs. These investments are essential to ensuring reliable wastewater services, protecting environmental resources, supporting future growth, and maintaining compliance with increasingly stringent regulatory requirements.

The Board remains committed to balancing affordability with operational excellence. To support this objective, the District continues pursuing alternative funding opportunities, including grants and strategic partnerships, to help offset both operational and capital expenditures.

FY25 FY26 FY26 FY27 Budget Budget Actual Budget Projected Budget Variance Variance (%)

Operating Budget & Debt Service 15,612,711$ 22,577,813$ 17,593,822$ 22,278,069$ (299,744)$ -1.3% Capital Budget 33,217,515 22,829,494 18,706,124 19,855,000 (2,974,494) -13.0% Grand Total 48,830,226$ 45,407,307$ 36,299,946$ 42,133,069$ (3,274,238)$ -7.2%

REVENUE AND EXPENDITURE OVERVIEW

District staff developed a five-year financial plan that includes detailed revenue and expenditure projections. These forecasts incorporate anticipated changes in operating costs, staffing levels, reserve targets, debt obligations, and capital improvement needs. The financial plan serves as the foundation for the development of the annual operating and capital budgets.

Revenue Sources – Where the Money Comes From

Total projected revenue for FY 2026/27 is approximately $30.7 million, representing an increase of $3.5 million, or 13.0%, over the FY 2025/26 adopted budget.

The increase is primarily attributable to scheduled sewer rate adjustments established under the District’s newly adopted five-year Sewer Use Charge (SUC) rate plan, effective July 1, 2026, through June 30, 2031. Sewer use charges continue to represent the District’s primary revenue source, accounting for approximately 84.3% of total revenues.

Connection fee revenues are projected to decrease by approximately $103,000, or 9.2%, based on anticipated development activity within the service area. Interest income is also projected to decline due to lower market interest rates.

The table below provides a breakdown of projected revenue by source.

FY25 FY26 FY27 Budget Actual Budget Budget Change

Sewer Use Charges 21,916,973 21,695,832 22,779,044 25,937,248 4,241,416 19.5% Service Fees 4,397,480 1,761,560 1,205,046 1,383,262 (378,298) -21.5% Property Taxes 1,580,816 1,399,019 1,171,368 1,500,916 101,897 7.3% Other 2,207,956 2,379,920 1,501,392 1,944,830 (435,090) -18.3% Total 30,103,225 27,236,331 26,656,852 30,766,256 3,529,925 13.0%

FY26

Projected

Percent

Revenue Summary

Revenue By Source

Expenditures – What the Money is Spent on

The expenditures are broken down into four (4) major categories:

• Capital Improvement Program (CIP)

• Supplies, Services, Utilities, & Other Overhead Costs

• Salaries and Benefits

• Debt Service

Capital Improvement Program (CIP)

The FY 2026/27 CIP is budgeted at approximately $19.8 million, representing a decrease of $2.9 million, or 13.0%, compared to FY 2025/26. This decrease is primarily due to the completion of Recycled Water Project Phase I.

To balance the budget, the District will utilize approximately $866,813 from capital replacement and improvement reserves.

Sewer Use Charges 84.3%

Service Fees 4.5%

Property Taxes 4.9%

Other 6.3%

Despite projected revenue growth, increasing construction and operational costs continue to place pressure on available resources, reinforcing the importance of strategic planning and disciplined financial management.

Supplies, Services, Utilities, & Other Overhead Costs

Operational costs for FY 2026/27 are projected to decrease by approximately $299,744, or 1.3%.

The budget reflects the District’s continued commitment to maintaining reliable operations, investing in critical infrastructure, and ensuring long-term financial sustainability.

Key cost drivers include:

• A 4.5% wage increase tied to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-U)

• Increased healthcare and fringe benefit costs

• Rising insurance premiums due to market conditions and higher property valuations

• Ongoing CalPERS Unfunded Accrued Liability payments

Debt service obligations will decrease following the final payment of the 2015 Wastewater Revenue Refunding Bonds scheduled for June 30, 2026.

Salaries and Benefits

Salaries and benefits are projected to increase by approximately $273,376, or 3.8%, compared to the FY 2025/26 budget.

Salary adjustments primarily reflect a 4.5% Cost-of-Living Adjustment (COLA) based on the 2025 annual average Consumer Price Index for the Riverside region.

Fringe benefit increases are driven by:

• An 8% increase in health insurance contributions

• A 2.7% increase in PEMHCA contributions

• An 8% increase in vision and dental insurance costs

The District’s current Unfunded Accrued Liability (UAL) balance is approximately $2.1 million. In September 2023, the Board approved a five-year Fresh Start payoff strategy to fully eliminate the UAL obligation.

Debt Service

Debt service expenditures will decrease by approximately $742,665 due to the completion of the Wastewater Revenue Refunding Bonds, Series 2015, with final payment scheduled for June 30, 2026.

The table below provides a detailed breakdown of expenditures by source for FY 2026/27.

Your Dollars at Work

The dollar image is divided into visual sections to illustrate how constituent funds are distributed across the District’s various operations and services.

Capital Improvement Program 33,217,515$ 22,829,494$ 18,706,124$ 19,855,000$ (2,974,494)$ -13.0%

Supplies, Services, Utilities, & Other Overhead Costs 8,152,019 9,235,646 5,148,106 9,387,334 151,688 1.6%

Salaries and Benefits 6,845,185 7,692,176 6,795,725 7,983,409 291,233 3.8%

Debt Repayment 4,590,650 5,649,991 5,649,991 4,907,326 (742,665) -13.1% Grand Total 52,805,369$ 45,407,307$ 36,299,946$ 42,133,069$ (3,274,238)$ -7.2%

FY25

Actual

FY26

Budget

FY26

Projected

FY27

Budget

Budget Variance

Budget Variance (%)

Capital Improvement Program 47.1%

Supplies, Services, Utilities, & Other Overhead

Costs 22.3%

Salaries & Benefits 18.9%

Debt Repayment

11.7%

ACKNOWLEDGMENTS

The development of the FY 2026/27 Budget required extensive collaboration and careful evaluation across all District departments. Staff worked diligently to analyze revenue trends, establish expenditure priorities, and identify opportunities for operational efficiencies while maintaining the high level of service expected by our community.

Although economic uncertainty remains, the assumptions and projections contained within this budget are aligned with current economic indicators and reflect the District’s long-standing commitment to conservative and responsible fiscal management.

The District will continue to closely monitor budget performance throughout the fiscal year and provide regular updates to the Board of Directors to ensure operational and financial objectives remain aligned.

I would like to extend my sincere appreciation to the Board of Directors for their continued leadership and support. I also thank our community for their ongoing trust and understanding as we navigate complex financial and regulatory challenges.

Special recognition is extended to the Administration Department for their dedication in preparing this budget document, as well as to the managers and supervisors throughout the organization for their collaboration and contributions during the budget development process. Finally, I would like to thank all District employees for their continued professionalism, commitment, and hard work in supporting the District’s daily operations and long-term success.

Respectfully submitted, JASON DAFFORN, PE

General Manager

OVERVIEW 2 0 2 6 / 2 0 2 7 B u d g e t

INDIO, CALIFORNIA “CITY OF FESTIVALS”

In 1876, the City of Indio was a railroad town with a rest area between Los Angeles, California, and Yuma, Arizona. Soon, the Southern Pacific Depot Station and Hotel were built to help retain workers in the area. The City began to grow and became an agricultural region producing dates, onions, citrus, and cotton (Indio City of Festivals, 2021). On May 16, 1930, Indio became the first incorporated City in the Coachella Valley. Today, Indio is home to over 90,000 residents, and an estimated 1.4 million people visit annually to attend the Coachella Valley Music and Arts Festival and Stagecoach Country Music Festival (Indio City of Festivals, 2021). Nicknamed the "City of Festivals," Indio has fast become a great community that offers a variety of exceptional dining, shopping, golfing, art, and entertainment experiences.

Indio is part of Riverside County, located 75 miles east of Riverside, 127 miles east of Los Angeles, and 148 miles northeast of San Diego. The City covers roughly 29 square miles and is 99.97% land and 0.03% water, (U.S. Department of Commerce, 2021). Indio lies just three (3) miles from the San Andreas Fault, one of the most prominent faults in the world.

The high mountain ranges contribute to Indio's warm climate year-round.

Image borrowed from the Riverside County 2021 webpage3

1. Indio City of Festivals. (2021). https://www.indio.org/about/history.htm

2. Food truck Fridays | Indio, CA. Indio.org. (n.d.). https://www.indio.org/our-city/food-truck-fridays

3. Riverside County. (2021). Riverside County. https://rivco4.org/Cities/Indio

4. U.S. Department of Commerce. QuickFacts Indio City, California. http://Indio City of Festivals. (2021).

https://www.indio.org/about/history.htm https://www.indio.org/about/history.htm https://rivco4.org/Cities/Indio https://www.indio.org/about/history.htm

Points of Attraction

Adorned with a gorgeous desert backdrop, Indio has over 348 days of sunshine per year, perfect for outdoor activities. The City of Indio offers world-class golf courses, unique restaurants, a mix of retail stores, outdoor adventures, and renowned music festivals. The City of Indio has something for everyone.

Food Truck Fridays is Indio's beloved weekly tradition, held every Friday from 5 p.m. to 10 p.m. The vendor lineup changes regularly, featuring returning favorites and introducing new ones. This event is family—and pet-friendly and is held at the corner of Towne Street and Bliss Avenue in Downtown Indio.

Image borrowed from the Indio.org webpage2

Climate

Due to its unique geographical location and high mountain ranges, Indio has some of the warmest winters on the West Coast. The City has a warm winter and hot summer climate primarily due to its desert climate. There is very little rainfall throughout the year. The average annual temperature in Indio is 75.5 °F, with an estimated 3.44 inches of yearly precipitation, (Indio City of Festivals, 2021).

5. U.S. Climate Data. (2021). U.S. Climate Data.

https://www.usclimatedata.com/climate/indio/california/united-states/usca0512

Climate Indio - California Jan Feb Mar Apr May Jun Average high in °F 72 75 81 87 96 103 Average low in °F 45 48 55 61 68 74 Average precipitation in inch 0.56 0.64 0.43 0.05 0.07 0.01

Climate Indio - California Jul Aug Sep Oct Nov Dec Average high in °F 107 107 102 92 80 71 Average low in °F 80 80 74 64 52 44 Average precipitation in inch 0.04 0.54 0.04 0.26 0.18 0.62 https://www.usclimatedata.com/climate/indio/california/united-states/usca0512

City of Indio Statistical Information

The table below depicts a snapshot of the City of Indio's demographics that portray the characteristics of the population and the City.

6. United States Census Bureau. (n.d.). U.S. Census Bureau quick facts: Indio City, California. Indio City, California. https://www.census.gov/quickfacts/fact/table/indiocitycalifornia/POP815221

7. Van Horn, C. (2023). Transforming Downtown Indio: A Vibrant Oasis in The Desert. VISION Greater Palm

Springs, (2023–2024), 60–63.

Population Population as of July 1, 2025 94,269 Population growth since April 1, 2020 5.6% Housing Owner-occupied housing unit rate, 2020-2024 67.1% Median value of owner-occupied housing units, 2020-2024 458,400$ Median selected monthly owner costs -with a mortgage, 2020-2024 2,344$ Median selected monthly owner costs -without a mortgage, 2020-2024 807$ Median gross rent, 2020-24 1,437$ Gender (% of population) Female 50.5% Male 49.5% Age (% of population) Under 18 Years 24.8% 65 years and over 18.6% Education (% of Population) Highschool graduate or higher 75.2% Bachelor's Degree or Higher 20.5% Income Median Household income 76,431$ Employment (% of Population) Retail Trade 12.0% Healthcare/Social Assistance 11.9% Accommodation/Food Services 10.2% Construction 10.8% Admin/Support/Waste Management Services 7.7% Educational Services 6.9% Arts/Entertainment/Recreation 5.8% Transportation/Warehousing 5.7% Manufacturing 3.7% Professional/Scientific/Tech Services 2.9% Real Estate/Rental/Leasing 2.5% Agriculture 1.6% Finance/Insurance 2.3% https://www.census.gov/quickfacts/fact/table/indiocitycalifornia/POP815221

ECONOMIC INDICATORS

State Economy

The District utilizes the state of California's economic forecasts to help understand the state's financial health and strategize business decisions. The District reviews the unemployment rate, projected job growth, the real personal income forecast, future development projections, and state departmental budgets to understand California's overall economic outlook.

California’s Fiscal Year 2026/27 budget reflects a cautious but balanced fiscal approach amid a period of economic uncertainty and moderating growth. The State’s May 2026 Revision projects that California and the national economy will continue to expand, although at a slower pace in the near term due to inflationary pressures, elevated energy costs, tariffs, and continued uncertainty in global markets.

The State projects California personal income growth to slow to 4.1 percent in 2026, with inflation expected to temporarily increase to 4.1 percent before moderating in future years. Employment growth is also expected to remain modest, with labor market growth concentrated primarily in healthcare, education, technology, and professional services sectors. Despite these challenges, California’s long-term outlook remains stable, supported by continued investment in infrastructure, artificial intelligence, and productivity improvements.

The State budget remains structurally balanced for Fiscal Years 2026/27 and 2027/28 through a combination of updated revenue projections, reserve management, and measured spending controls. The May Revision projects General Fund revenues from major tax sources to exceed earlier estimates by approximately $16.5 billion over the three-year budget window, largely driven by higher-than-anticipated personal income tax revenues and capital gains activity. The State also continues to maintain substantial reserves, with combined reserve balances approaching $29.9 billion in Fiscal Year 2026/27.

Additionally, the State continues to prioritize investments in climate resiliency, water quality, environmental protection, infrastructure, and public health programs. The May 2026 Revision includes significant funding for environmental and natural resource initiatives, including water quality programs, environmental restoration, climate adaptation, and recycling infrastructure improvements.

Impacts to the Wastewater Industry

The economic forecast presents several important considerations for the wastewater and public utility sector. Continued inflationary pressures, elevated energy costs, and higher interest rates are expected to increase operational and capital costs for utilities throughout California. Wastewater agencies will likely continue experiencing increased costs associated with chemicals, fuel, power, construction materials, equipment procurement, and contracted services.

Additionally, tariffs and global supply chain uncertainty may continue to impact the availability and pricing of treatment equipment, electrical components, pumps, vehicles, and infrastructure materials necessary for capital improvement projects and ongoing maintenance activities. Higher borrowing costs and restrictive monetary policy may also increase financing costs for future infrastructure investments.

At the same time, the State’s continued emphasis on environmental protection, water quality, recycled water, climate resilience, and infrastructure investment may create additional grant and funding opportunities for wastewater agencies pursuing capital improvement and sustainability initiatives. State investments in environmental programs and water-related infrastructure demonstrate an ongoing policy focus that aligns closely with the mission of wastewater utilities.

Impacts to the District

For the District, the current economic environment reinforces the importance of long-term financial planning, strategic capital investment, and prudent fiscal management.

Rising inflation and operational cost pressures are expected to impact the District’s expenditures across utilities, maintenance supplies, equipment replacement, contracted services, construction costs, and employee compensation.

The District’s proactive financial planning efforts, including the completion of the Wastewater Rate, Capacity, and Fee Study and the update of the District’s 10-Year Financial Plan, position the organization to better manage these economic challenges while maintaining reliable wastewater services and regulatory compliance.

Additionally, continued state and federal emphasis on environmental sustainability, recycled water, climate adaptation, and infrastructure investment may provide future funding opportunities for projects such as the District’s Recycled Water Program, Biosolids Conversion Project, Tertiary Treatment Expansion, and other capital improvement initiatives.

Although economic uncertainty remains, Valley Sanitary District continues to maintain a strong financial position through conservative budgeting practices, reserve management, long-range planning, and strategic investment in critical infrastructure. The District remains committed to balancing operational reliability, regulatory compliance, environmental stewardship, and financial sustainability while continuing to provide essential public health and wastewater services to the community.

8. California Department of Finance. "Economic Outlook." California State Budget 2026-27 May Revision, State of California, 2026, https://ebudget.ca.gov/2026-27/pdf/Revised/BudgetSummary/EconomicOutlook.pdf.

Accessed 18 May 2026.

9. California Department of Finance. "Introduction." California State Budget 2026-27 May Revision, State of California, 2026, https://ebudget.ca.gov/2026-27/pdf/Revised/BudgetSummary/Introduction.pdf. Accessed 18 May 2026.

10. California Department of Finance. "Natural Resources and Environment." California State Budget 2026-27 May Revision, State of California, 2026, https://ebudget.ca.gov/2026- 27/pdf/Revised/BudgetSummary/NaturalResourcesandEnvironment.pdf. Accessed 18 May 2026.

11. UCLA Anderson Forecast. "U.S. Economy Poised to Reaccelerate in 2026 as Fiscal Stimulus and AI Investment Intensify; California Growth Outpaces Nation Despite Ongoing Employment Weakness." UCLA Anderson School of Management, 4 Mar. 2026, https://www.anderson.ucla.edu/news-and-events/us-economy-poised-reaccelerate-2026-fiscal-stimulus-and-ai-investment-intensify. Accessed 18 May 2026.

LOCAL ECONOMY

The City of Indio is undergoing exciting development, with significant enhancements to public spaces, including a new Civic Center Campus, a library, and a public plaza. The Lights at Indio Golf Course, the only night-lit course in the Coachella Valley, now features a new clubhouse offering dining and a pro shop. Housing options are expanding with the addition of Skyline, a 64-unit apartment complex with 5,000 square feet of ground-floor retail and office space in Downtown Indio, and Desert Retreat, a 55+ community in North Indio that will add 1,500 homes in 2026.

The City of Indio is experiencing a major period of residential growth and housing expansion driven by population increases, rising housing demand, and state housing mandates. City officials, nonprofit organizations, and private developers are actively pursuing a range of projects focused on affordable housing, mixed-use communities, and large-scale residential developments.

Housing Affordability Challenges

One of the biggest issues facing Indio is housing affordability. Reports indicate that nearly 60% of renters in the city are considered rent burdened, meaning a large portion of their income goes toward housing costs. In response, the city has prioritized the construction of affordable housing developments aimed at working families, seniors, and farmworker communities.

Major Affordable Housing Projects

• Sonora Homes: A proposed 203-unit affordable housing community that includes residential buildings, a community center, and an early childhood education facility.

The project was approved by the Indio Planning Commission and is intended to help the city meet California housing requirements.

• JFM Villas: A development bringing 150 affordable homes to Indio, including housing for farmworker families and seniors. The project includes childcare services, computer labs, community facilities, and recreational areas.

• Additional Affordable Housing Financing: The city approved financing support for developments including the Avenue 44 Apartments, JFM Villas Senior Apartments, and JFM Villas Family Apartments.

Large-Scale Urban Development

One of the largest proposed developments is The Oasis at Indio, a mixed-use master-planned community near Avenue 42 and Interstate 10. The project could add up to 3,240 residential units along with commercial and light industrial development. The plan is intended to create walkable neighborhoods, expand employment opportunities, and support long-term economic growth.

Growth and Future Planning

City planning data shows that residential development activity has accelerated rapidly. In 2025, Indio issued more than 700 housing permits, significantly higher than previous years. Officials attribute the increase to post-pandemic recovery and growing investment in residential construction. The city is working toward meeting its Regional Housing Needs Allocation (RHNA), which requires planning for more than 7,800 housing units by 2029 across multiple income levels.

Impacts to the District

The City of Indio’s ongoing investment in development and business support continues to drive moderate growth, reflected in the steady increase in annual permits. This growth directly benefits the District through the collection of connection fees from new developments or changes in the use of existing buildings. For Fiscal Year 2026/27, the District anticipates collecting $1.0 million in connection fees.

Additionally, the approved five-year Sewer Use Charge (SUC) rate model, effective beginning in FY 2026/27, will remain in place through July 2031. For Fiscal Year 2026/27, SUC revenue is projected at $25.9 million, representing an increase of $4.2 million, or 19.5%, over the prior year. This increase reflects the scheduled rate adjustment under the approved five-year rate model, along with continued growth in system connections. These revenues are essential to sustaining current service levels, advancing high-priority infrastructure improvements identified in the District’s 20-Year Master Plan, and meeting ongoing debt service obligations.

In Fiscal Year 2025/26, the District exceeded total revenue projections by $194,511, or approximately 1%, which remained within budget expectations. Sewer use revenue performed above projections primarily due to higher-than-anticipated Sewer Use Charge (SUC) revenues attributed to the increase in active connections and water use. The SUC rate structure consists of a 70% fixed charge based on Equivalent Dwelling Units (EDUs) and a 30% volumetric charge tied to water consumption by customer class. However, tax appropriations and interest income were lower than projected, reflecting current market conditions, including declining interest rates and reduced home sales activity associated with higher borrowing costs.

12. “150 New Affordable Homes Coming to Coachella Valley Farmworker Families and Seniors.” Riverside County Housing and Workforce Solutions, Riverside County, https://rivcohws.org/news/150-new-affordable-homes-coming-coachella-valley-farmworker-families-seniors. Accessed 18 May 2026.

13. “Indio Approves New Affordable Housing Project as Rent Burden Grows.” NBC Palm Springs, 30 May 2025, https://nbcpalmsprings.com/2025/05/30/indio-approves-new-affordable-housing-project-as-rent-burden-grows. Accessed 18 May 2026.

14. “Indio Council Approves Tax-Exempt Bond Measures to Finance Three Affordable Housing Projects.”

CitizenPortal.ai, https://citizenportal.ai/articles/6649898/california/riverside-county/indio-city/california/riverside-county/indio-city/Indio-City/Riverside-County/California/Indio-council-approves-taxexempt-bond-measures-to-finance-three-affordable-housing-projects. Accessed 18 May 2026.

15. “Indio Issued 706 Housing Permits in 2025, Far Outpacing Recent Years.” The Indio Post, https://theindiopost.com/indio-issued-706-housing-permits-in-2025-far-outpacing-recent-years/. Accessed 18 May 2026.

16. The Oasis at Indio. https://theoasisatindio.com/. Accessed 18 May 2026.

NEW RATES

The Valley Sanitary District’s wastewater rate adjustments were approved at a scheduled Public Hearing on May 12, 2026, following the distribution of a Proposition 218 Notice and completion of a comprehensive Wastewater Rate Study. The study evaluated the District’s long-term operational, financial, and infrastructure needs to ensure the continued delivery of reliable wastewater services to the community. The approved rate increases are necessary to ensure continued reliable wastewater collection and treatment services for more than 90,000 residents throughout the Eastern Coachella Valley. Much of the District’s infrastructure dates back to the 1930s, with some components having exceeded their useful life. The new rates will provide critical funding for essential system rehabilitation, replacement of aging sewer infrastructure, regulatory compliance improvements, and major capital projects designed to protect public health and the environment.

The approved rates will also help the District maintain financial stability, preserve emergency and operational reserves, and secure favorable financing for future infrastructure investments. By proactively investing in system upgrades now, the District can reduce the likelihood of costly emergency repairs, sewer system failures, and service disruptions in the future. Planned improvements include sewer main rehabilitation, treatment facility modernization, equipment replacements, and operational facility upgrades that will improve efficiency, reliability, and sustainability for decades to come.

These investments will directly benefit residents and businesses by ensuring safe, dependable wastewater services, protecting environmental resources, supporting future community growth, and maintaining compliance with increasingly stringent state and federal regulations. The District’s long-term financial plan was developed to balance affordability with infrastructure sustainability while minimizing impacts to ratepayers over time.

The table below depicts the new rate structure commencing July 1, 2026 through July 1, 2030.

DISTRICT GOVERNANCE

Valley Sanitary District is a California special district that operates under the authority of the Health and Safety Code, Sanitary District Act of 1923, § 6400 et seq. The District was formed on June 1, 1925, and is governed by a five (5) member Board of Directors. Each Director is elected through a ward-based election system. Each Director represents a specific geographic area within the District known as a ward. Under California law, the Board of Directors establishes and implements policies for the operation of the District.

The Board of Directors establishes goals and objectives, manages sound fiscal policy and control, sets rates and fees, approves the annual operating and capital budget, approves capital improvement plans, maintains strong communication between the Board of Directors and General Manager, and advocates for the District. The Board of Directors makes decisions to serve the community's best interests. The District's Board of Directors meets on the second and fourth Tuesdays of each month. Meetings are publicly noticed, and citizens are encouraged to attend.

Annul Sewer Service Rate Schedule July 1, 2026 July 1, 2027 July 1, 2028 July 1, 2029 July 1, 2030 Fixed Service Charge

Single Family 557.47$ 624.37$ 649.34$ 675.31$ 702.32$ Multi-Family 243.98$ 273.26$ 284.19$ 295.56$ 307.38$ Mobile Home 294.86$ 330.24$ 343.45$ 357.19$ 371.48$ RV Park 229.76$ 257.33$ 267.62$ 278.32$ 289.45$ Commercial - Low/Med Strength 323.75$ 362.60$ 377.10$ 392.18$ 407.87$ Commercial - High Strength 987.35$ 1,105.83$ 1,150.06$ 1,196.06$ 1,243.90$ Volumetric Rate

Single Family 1.60$ 1.79$ 1.86$ 1.93$ 2.01$ Multi-Family 1.60$ 1.79$ 1.86$ 1.93$ 2.01$ Mobile Home 1.60$ 1.79$ 1.86$ 1.93$ 2.01$

RV Park 1.77$ 1.98$ 2.06$ 2.14$ 2.23$ Commercial - Low/Med Strength 1.43$ 1.60$ 1.66$ 1.73$ 1.80$ Commercial - High Strength 3.26$ 3.65$ 3.80$ 3.95$ 4.11$

Rates per Equivalent Dwelling Unit

$ per Cubic Feet (HCF) winter average water consumption

$ per Cubic Feet (HCF) annualized water consumption

The U.S. Environmental Protection Agency, the California Regional Water Quality Control Board, the California Health Service Department, and other regulatory agencies provide the permits and standards the District must meet to collect, treat, recycle, reuse, and dispose of wastewater.

DISTRICT SERVICES

Mission

Valley Sanitary District serves and benefits Indio and the surrounding communities by collecting, treating, and recycling wastewater to ensure a healthy environment and sustainable water supply.

Vision

Valley Sanitary District will support the Coachella Valley as an environmental steward, a model employer, and a leader in the wastewater industry known for its excellence and exceptional service. We will:

• Provide exceptional service to our customers.

• Provide a healthy work environment, cutting-edge equipment, and exceptional training opportunities for staff, our most important asset.

• Provide leadership in protecting our shared environment and safely reuse or recycle wastewater, energy, biosolids, and other valuable byproducts.

• Serve as a trusted participant in the community through our collaboration, open communication, and educational programs.

Values

• Transparent. We provide the public with information in a complete, understandable, and timely form that is readily available.

• Responsible. We consider our environment, community, customers, and ratepayers in everything we do.

• Respectful. We value diverse viewpoints, teamwork, and active listening to our community and staff.

• Integrity. We maintain high standards of conduct in all our actions and circumstances.

The District (located in the eastern desert area of Riverside County) provides sanitary sewer services to approximately 28,028 connections within its 19.5 square mile service area. The District encompasses portions of the City of Indio, Coachella, and adjacent unincorporated Riverside County, California areas. Residential customers represent approximately 97% of the District's customer base and produce an estimated 81% of the sewage flow. The District operates and maintains around 254 miles of sanitary sewer lines and delivers over 6 million gallons per day of wastewater to its wastewater reclamation facility. The reclamation facility can treat 12.5 million gallons per day. The treated wastewater is discharged into the Whitewater Storm Channel and becomes a source of freshwater replenishment to the Salton Sea.

District Service Area

STRATEGIC PLAN

In the calendar year 2023, the District retained the services of Rauch Communication Consultants, Inc., to facilitate and coordinate the development of the District's Strategic Plan.

Purpose of the Plan

This three-year Strategic Plan is Valley Sanitary District’s (VSD’s) highest-level planning document and represents the Board's and staff's direction for the future. The Plan identifies the District’s mission, vision, and core values while providing a set of goals and objectives that serve as a framework for decision‐making.

The Plan is also a practical working tool that provides clear direction to the staff regarding the Board's goals and objectives. It includes a Work Plan developed by the staff to meet those goals and objectives. The Board and staff will regularly refer to it as a guide to the District’s actions during the period covered.

Plan Development

Background Research. The consultants began by holding discussions with the Board President and General Manager.

Confidential Interviews. The consultant conducted a series of confidential interviews. The goal was for the interviewees to candidly express their interests and perspectives on the District and its priorities. The interviewees included the Board of Directors and Management Team.

Strategic Planning Workshop. The interviewees also participated in a workshop. At the workshop, the group reviewed the interview results, undertook exercises to examine the District’s current state, identified issues and opportunities expected to confront the District in the future, and discussed priorities.

Staff and Board Work. The consultant, General Manager, and Leadership Team developed a draft Strategic Plan based on the interviews, workshop, and other information.

Second Strategic Planning Workshop. The draft was distributed to the Board and leadership team, and at a second workshop, the participants reviewed, discussed, and refined the draft plan, including mission, vision, and values, and provided direction for additional changes.

Staff Work Plan. The Leadership Team and consultant developed a staff Work Plan to meet the District’s mission, strategic goals, and objectives.

Adoption. The three-year strategic plan was adopted on April 23, 2024.

Summary of Strategic Goals and Objectives

GOAL 1: FACILITIES. Reliable, Sustainable Facilities that Meet

Customer Needs

GOAL 2: FINANCE. Sustainable, Long-Term Funding Is in Place

GOAL 3: STAFF. The District Retains Its Motivated, Well-

Trained, and Experienced Staff

GOAL 1: FACILITIES. Reliable, Sustainable Facilities that Meet Customer Needs

• OBJECTIVE 1.1: A Board-approved, up-to-date capital prioritization methodology is being implemented.

• OBJECTIVE 1.2: Comprehensive wastewater and facilities master plans are funded and implemented.

• OBJECTIVE 1.3: The District’s use of technology lowers costs and improves quality and reliability.

• OBJECTIVE 1.4: The purposes, needs, urgency, costs, and other parameters of major projects are clearly described so that the Board has the information to make decisions that can be followed through without reconsideration.

• OBJECTIVE 1.5: Recognizing that the District provides a critical public service – the Board will confirm the essential nature of approved projects and prioritize completing them on schedule.

• OBJECTIVE 1.6: Work plans for large projects are phased for tracking, demonstration of progress, and reporting.

• OBJECTIVE 1.7: Opportunities to decrease energy and chemical use and be a good steward are evaluated for implementation.

• OBJECTIVE 1.8: The District is seeking to utilize its treated effluent for the highest practical use and is positioned to move quickly on reuse when funding becomes available.

Goal 2: FINANCE. Sustainable, Long-Term Funding is in Place

• OBJECTIVE 2.1: An up-to-date, long-term financial plan guides financial decisions.

• OBJECTIVE 2.2: Grants and other favorable public and private funding help keep customers' rates reasonable.

• OBJECTIVE 2.3: Long-term, sustainable revenue sources fully fund all identified

District needs.

• OBJECTIVE 2.4: Reserve targets are reviewed and updated annually.

GOAL 3: STAFF. The District Retains Its Motivated, Well-Trained, and Experienced Staff

• OBJECTIVE 3.1: Key positions are identified, and there is at all times more than one person prepared to carry out each identified key role as an interim successor in a reasonably proficient manner.

• OBJECTIVE 3.2: A succession and knowledge retention plan is being implemented for each key position.

• OBJECTIVE 3.3: An effective retention plan is being actively implemented for all staff.

• OBJECTIVE 3.4: Adequate, qualified, trained, and experienced staff are in place to meet the District’s approved needs.

• OBJECTIVE 3.5: Staff has the management, tools, and technology needed to excel.

GOAL 4: OUTREACH. A Well-Designed and Properly Resourced Outreach Plan is Sustained

• OBJECTIVE 4.1: The public understands the services the District provides, where to learn more, and have their questions answered.

• OBJECTIVE 4.2: The District’s programs and funding needs are understood and supported by the public.

• OBJECTIVE 4.3: The District understands customer service-related wants, needs, and interests.

GOAL 5: GOVERNANCE. An Ever-Improving Board Sets Clear and Thoughtful Direction for the District

• OBJECTIVE 5.1: The Board self-evaluates and actively seeks to improve its performance over time.

o 5.1.1 The Board, with the support of the Manager, will undertake an annual self-assessment and consider making improvements and changes in its policies, processes, and procedures.

o 5.1.2: The Board will encourage its members to engage in relevant training at conferences and other appropriate venues.

• OBJECTIVE 5.2: The Board is engaged in relationship building in the community and among local, state, and national governments.

• OBJECTIVE 5.3: New directors receive a useful orientation that helps integrate them into the Board and become productive members more rapidly.

• OBJECTIVE 5.4: The General Manager’s annual performance evaluation process is thorough and productive, benefiting both the Board’s and Manager’s performance and supporting the maintenance of proper roles and relationships, and is conducted annually at a fixed date.

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