Exhibit_C_-_FY25_–_Stormwater_RSA_–_Final_Report.pdf

City of Clearwater, FL

FY 2025 Stormwater Revenue Sufficiency Analysis – Final Report

August 12, 2025

August 12, 2025

Mr. Jay Ravins Finance Director City of Clearwater 100 S. Myrtle Avenue Clearwater, FL 33756

Re: FY 2025 Stormwater Revenue Sufficiency Analysis – Final Report

Dear Mr. Ravins, Stantec Consulting Services Inc. is pleased to present this Final Report of the FY 2025 Stormwater Revenue Sufficiency Analysis that we have completed for the City of Clearwater, Florida (City), and its Stormwater Department. We appreciate the excellent assistance provided by you and all the members of City staff who participated in this Study.

If you or others at the City have any questions, please do not hesitate to call me at (813) 269-6010 or reach me by email at Leticia.Doohaluk@stantec.com. We appreciate the opportunity to be of service to the City and look forward to working with you again in the near future.

Sincerely, Leticia Doohaluk Senior Manager

777 S. Harbour Island Boulevard, Suite 600 Tampa, FL 33602 Leticia.Doohaluk@stantec.com

Enclosure

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TABLE OF CONTENTS

Introduction

Background

Objectives

Revenue Sufficiency Analysis

Source Data & Assumptions

2.1.1 Beginning Fund Balances

2.1.2 Revenues

2.1.3 Operating Expenditures

2.1.4 Payment in Lieu of Taxes (PILOT)

2.1.5 Capital Improvement Program (CIP)

2.1.6 Cost Escalation Factors

2.1.7 Interest Earnings

2.1.8 Customer Growth

2.1.9 Future Borrowing

2.1.10 Debt Service Coverage

2.1.11 Minimum Operating Reserve Policy

Conclusions & Recommendations

Residential Stormwater Fee Survey

Appendix: Supporting Financial Schedules

1. Introduction

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INTRODUCTION

Stantec Consulting Services Inc. (Stantec) has conducted the FY 2025 Stormwater Revenue Sufficiency Analysis (RSA) for the City of Clearwater’s Stormwater Enterprise Fund (Utility or Fund). This report describes the objectives, data, and assumptions, as well as the conclusions and recommendations of the

RSA.

BACKGROUND

The City of Clearwater (City) regularly retains Stantec to evaluate the sufficiency of the revenue provided by the City’s stormwater fees to meet the projected cost requirements of the Utility.

The FY 2019 RSA identified that City staff had diligently worked to operate more efficiently, had been able to secure more grants than previously anticipated to fund capital costs and that potential additional regulatory requirements ultimately did not materialize. As such, the FY 2019 RSA1 recommended a reduction to FY 2020 fees of 8.5% followed by no fee adjustments in FY 2021 and FY 2022.

The FY 2021 RSA2 confirmed that no adjustments for FY 2022 were needed and the FY 2022 RSA established a new 5-year plan of fee adjustments of 1.75% through FY 2027.

The 2024 RSA3, completed in the summer of 2024, identified a new five-year plan of 8.00% fee increases starting in FY 2025 (FY 2025 through FY 2029). The 2024 RSA recognized that operating costs had increased substantially, driven by one of the largest inflationary periods in recent US history. Moreover, capital improvement costs had increased significantly driven by both broad inflationary pressures and by resiliency plans. Given the City’s coastal exposure to the Gulf and growing concerns about sea level rise and flooding, particularly from tropical storms and hurricanes, the City’s Capital Improvement Plan included several high priority projects throughout the Bay Area, North Beach Area and Downtown.

In the Spring of 2025, the City again retained Stantec to evaluate the sufficiency of the stormwater revenues to cover all projected operating and capital costs of the Stormwater Fund over a 5-year planning period (FY 26 through FY 30) and a 10-year projection period (FY 26 through FY 35).

OBJECTIVES

The principal objectives of this Study were as follows:

1 Final Report dated September 10, 2019.

2 Final Report dated July 30, 2021 3 Final Report dated September 5, 2024

1. Introduction

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Revenue Sufficiency Analysis – To evaluate the sufficiency of current stormwater fee revenue to generate the level of revenue necessary to satisfy the Utility’s projected cost requirements through FY 2034, including 1) operating expenses, 2) capital improvement program (CIP) costs, 3) adequate operating reserves, 4) adequate debt service coverages; and, to develop a level plan of future fee revenue adjustments that will satisfy these projected requirements during each year of the projection.

Conduct a Residential Stormwater Fee Survey – That compares the City’s monthly residential stormwater fee per single-family residential unit to those of other stormwater systems in the City’s surrounding geographic area.

2. Revenue Sufficiency Analysis

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REVENUE SUFFICIENCY ANALYSIS

This section presents the financial management plan developed and described herein, which includes the source data and assumptions, as well as conclusions and recommendations of the RSA. The Appendix includes detailed supporting schedules of the financial management plan.

SOURCE DATA & ASSUMPTIONS

The following presents the key source data and assumptions relied upon in conducting the RSA.

2.1.1 Beginning Fund Balances

The FY 2024 Comprehensive Annual Financial Report Statement of Net Position and supporting trial balance schedules provided by City staff were used to establish the FY 2025 beginning balances of the Fund, as of October 1, 2024. It is important to note that funds reserved or encumbered for specific capital projects were included in the beginning fund balances and the associated capital project costs were also included in the capital improvement program.

2.1.2 Revenues

The revenues utilized in the RSA reflect an evaluation of multiple years of historical results, FY 2024 actual results, and the FY 2025 Budget. Revenues consist of fee revenue (stormwater fee revenues), other minor operating revenues and interest income. FY 2025 stormwater fee revenues are based upon the FY 2024 actual fee revenues and adjusted for growth and the 8.0% fee increase. Beyond FY 2025, stormwater fee revenues are adjusted annually based upon assumed annual changes in accounts as well as changes for the projected annual fee increases shown in the results section of this report.

The FY 2025 Budget serves as the basis for all other revenue projections, except for interest income, which is calculated annually based upon projected average annual fund balances and assumed interest rates discussed in more detail in Section 2.1.7 of this report.

2.1.3 Operating Expenditures

The Fund’s operating expenditures include all personal services (PS), operating and maintenance (O&M) expenses, transfers (TO), including payment in lieu of taxes or PILOT, debt service (DS) requirements and minor capital outlay (CO) expenditures. The RSA based the operating expenditure projections on the individual expense categories and expense amounts contained in the FY 2026 Budget. Starting in FY 2027, each expense line item is adjusted annually based on assumed cost escalation factors discussed in Section 2.1.6 of this report, which were validated with City staff. In addition to the FY 2026 Budget, starting in FY 2026, garage services expenses reflect an additional $121,000 for Vacon and Frontier annual maintenance. Furthermore, FY 26 includes staffing and heavy equipment costs driven by new

City of Clearwater | FY 2025 Stormwater Revenue Sufficiency Analysis Stantec | 5 regulation around MS4 (Municipal Separate Sewer System) permitting requirements. Existing annual debt service expenses reflect schedules for each outstanding issuance of the Fund as provided by City staff.

Lastly, based on discussions with City staff, the analysis assumes that the City will spend its entire Stormwater Fund Budget in FY 2025 and FY 2026. A complete list of all projected Operating Expenditures is presented in Schedule 4 of the Appendix. The Operating Expenditures chart below presents a summary of the total projected operating expenses by category: personnel services (PS), operating and maintenance (O&M), transfers out (TO) and debt service(DS).

2.1.4 Payment in Lieu of Taxes (PILOT)

The FY 2025 and FY 2026 payment in lieu of taxes reflect the FY 2025 and FY 2026 Budgeted amounts as provided by City staff, respectively. Per City policy, starting in FY 2027, the annual calculation of the PILOT is based on 5.5% of the prior year’s audited total operating revenues in each year of the projection period. The total annual payments, allocated by department, are listed in Schedule 4 of the Appendix.

2.1.5 Capital Improvement Program (CIP)

The Stormwater Capital Improvement Program (CIP) was provided by City staff through FY 2035. No additional escalation factors were applied to the CIP because the data provided by staff already included an assumption of inflation and estimated future cost of construction.

The CIP reflects staff’s best estimate of annual spending based on current existing appropriations, and priorities. It is important to note that City staff will regularly re-evaluate and re-prioritize its appropriated capital improvement projects as well as the funding of future projects, furthermore, spending can be impacted by inflationary pressures, labor supply, project management and other items. A list of projects included in the RSA and costs by fiscal year is included in Schedule 6 of the Appendix.

$3

$5

$8

$10

$13

$15

$18

$20

$23

FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 FY 2032 FY 2033 FY 2034 FY 2035

M ill io ns

Operating Expenditures

PS O&M CO TO DS

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2.1.6 Cost Escalation Factors

Annual cost escalation factors for the various types of operating expenses were discussed with City staff and applied in each year of the projection period beginning in FY 2027. In general, the operating expenses, except for pension plan expenditures, are projected to track with overall inflation patterns, and most other expenditure line items are projected to increase at annual rates of between 3.0% and 8.0%. The employee pension plan expenditures are calculated as 8.0% of salaries and wages in FY 2027 and in every subsequent year. The weighted average annual projected operating expenses increase is 4.93% per year starting in FY 2027. The specific escalation factors assumed for each type of expense are presented on Schedule 5 of Appendix.

2.1.7 Interest Earnings

The projection of interest earnings on invested funds (including funds dedicated for CIP projects) was provided by City staff and reflects an earnings rate of 2.25% in FY 2025 and throughout the remainder of the forecast. Annual interest earnings are presented in Schedule 3 of the Appendix.

2.1.8 Customer Growth

The RSA assumes an annual growth rate of 0.1% until FY 2028, and no growth in accounts in the subsequent fiscal years. The assumed growth is based on review of historical account growth, discussion with City staff and the acknowledgment that the City is fairly built-out, without much room for new development. To the extent any additional growth happens, the results will have a positive impact to the financial plan, assuming all other factors remain constant.

2.1.9 Future Borrowing

To the extent that any new long-term debt is required during the projection period, the RSA assumes it would be issued for a 30-year term at an interest rate of 4.5% and 1.5% cost of issuance. The projection assumes the Stormwater Fund will utilize interim financing in Fiscal Years 2029, 2030, 2031, and 2032, before a senior debt issuance in Fiscal Year 2033. The City’s actual future financing and funding decisions will reflect actual future conditions and broader Citywide financing objectives, but the projections in the RSA reflect realistic overall conditions for planning purposes.

2.1.10 Debt Service Coverage

The Utility must maintain annual net revenue (gross revenue minus operating expenses) that is at least

1.15 times greater than the annual debt service requirement (i.e., the annual principal and interest payments) on its outstanding senior-lien debt. This coverage requirement is a minimum bond covenant requirement. To the extent a utility is unable to meet this requirement, it could be found in technical default, which could result in reductions in credit ratings, which would negatively affect the interest rate and terms of future financing initiatives.

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As a policy decision, well-managed utilities almost always measure revenue sufficiency and set rates based upon higher coverage levels, to ensure compliance with these covenants, in the event future actual revenue and expenses do not occur as projected. This practice tends to enhance a utility’s effectiveness over time as it tends to provide funds which can be available to implement programs and capital projects without the issuance of additional debt. The utility sufficiently meets the coverage requirements each year in the projection period. Annual coverage calculations are presented in Schedule 8 of the Appendix.

2.1.11 Minimum Operating Reserve Policy

An operating reserve is a balance maintained to meet short-term cash flow requirements as well as minimize the risk associated with meeting the financial obligations and continued operational and capital needs under adverse conditions. The level of reserves maintained by a utility is an important component and consideration of developing a utility system multi-year financial management plan.

Many utilities, rating agencies, and the investment community as a whole place a significant emphasis on having sufficient reserves available for potentially adverse conditions. The rationale related to the maintenance of adequate reserves is twofold. First, it helps to ensure that a utility will have adequate funds available to meet its financial obligations during unusual periods (i.e., when revenues are unusually low and/or expenditures are unusually high). Second, it provides funds that can be used for emergency repairs or replacements to the system that can occur because of natural disasters or unanticipated system failures.

Moreover, reserves are an important financial indicator considered by rating agencies in establishing credit rating for municipal utility systems, thereby impacting the terms and costs of future borrowing requirements.

Rating agency guidance as to the level of operating reserve for utility systems tend to be consistent with our industry experience.

Based upon Stantec’s industry experience, efficient utilities often target a minimum operating reserve in the range of 3–12 months of annual O&M expenses, depending on other reserve funds and practices, local economic conditions and other financial management policies and procedures. For the City, the RSA reflects a target minimum operating reserve equal to six months of operating expenses. This objective is generally not established as a strict minimum, as many factors could create circumstances under which a utility may elect to allow fund balances to fall below that target for a period of time.

As shown in the Operating Fund chart below, the RSA projects that existing operating reserves will be spent downward over the projection period and will move closer to the target six-month level, and the targeted minimum balances are projected to be maintained in all years.

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CONCLUSIONS & RECOMMENDATIONS

Given the data source and assumptions discussed herein, the updated 10-year projection includes slightly lower CIP spending in the first five years of the projection as compared to the FY 2024 RSA. As such, projected total borrowing and total annual debt service needs are reduced which place lower pressure on fees beyond FY 2029. Thus, the projection confirms that the current plan of adopted fee increases thru FY 2029 is still appropriate given the projected level of needs. Table 2.1 identifies the current fee adjustments and customer impacts.

Table 2.1 – Recommended (Already Approved by Council) 5-Year Fee Adjustments & Customer Impacts

Stantec recommends continuing annual or bi-annual reviews of the Fund’s revenue sufficiency so that the projected use of reserves can be monitored, and annual fee adjustment needs can be verified to avoid the need for sizeable one-time fee impacts to customers in future fiscal years. The annual or bi-annual reviews will also allow for the incorporation of updated revenue and expense information, as well as changes in economic conditions, customer accounts, regulatory requirements, and other factors that can materially affect the financial management plan.

4 FY 2025 rate adjustment was implemented on October 1st, 2024.

Fiscal Year FY 2025 (Current)4 FY 2026 FY 2027 FY 2028 FY 2029

Fee Adjustment 8.00% 8.00% 8.00% 8.00% 8.00%

Monthly Bill (per ERU) $14.98 $16.18 $17.47 $18.87 $20.38

$ Change $1.11 $1.20 $1.29 $1.40 $1.51

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The results of the Stormwater Fund’s revenue sufficiency analysis are summarized in Figure 2-1.

Figure 2-1 FY 2025 RSA Results

It is important to note that the projections of future conditions underlying this analysis are not intended to be predictions. Applicable to many stormwater utility systems, there are multiple factors beyond the City’s control, such as weather, regulatory changes, national, regional, and local economic conditions, the rate of growth in new customers, customer reaction to fee adjustments, operating and capital cost inflation, and changes in the timing and composition of the Utility’s capital improvement program, that will have material impacts on the future financial condition of the City’s utility operations. Further, the projections in this Study rely upon data and guidance provided during the Study, and while the information utilized in this Study is believed to be reliable, detailed independent reviews or auditing of the data were not conducted.

As a result, there will usually be differences between forecast and actual results because events and circumstances frequently do not occur as expected, and those differences may be material. While we have no responsibility to update this report for events and circumstances occurring after the date of this report, future management actions must be informed by and adjusted to reflect future results as they occur. These comments are provided to emphasize the importance of active management informed by the actual future results of utility operations by the City. While the planning effort supported by this Study will serve to guide and inform the City in balancing future revenue and spending decisions, it is only through observation of future results that the City will be able to determine the actions required to ensure its financial and operational objectives are met.

The Appendix includes detailed schedules presenting all components of the financial management plan developed for the Stormwater Utility.

3. Residential Stormwater Fee Survey

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RESIDENTIAL STORMWATER FEE SURVEY

As part of the RSA, Stantec performed a comparative residential stormwater fee survey of the City’s surrounding geographic area. The blue bars in Figure 3-1 reflects the monthly bill for a single-family residential stormwater customer with fees in effect as of October 1, 2024 (FY 2025) for each community, based on publicly available information related to FY 2025 fees as of May 12, 2025. The fees used in the surveys were based upon information available on each utility’s website, provided by its billing department, and/or published in fee ordinances as available on Municode.com.

It is important to note that this survey is a snapshot in time for FY 2025. With the multitude of financial pressures each utility is currently facing, many of the monthly bills shown for each municipality in this survey are most likely to change in FY 2026 and beyond.

Figure 3-1 FY 2025 Monthly Residential Stormwater Fee Survey

Disclaimer

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Disclaimer

This document was produced by Stantec Consulting Services Inc. (“Stantec”) for the City of Clearwater, FL and is based on a specific scope agreed upon by both parties. Stantec’s scope of work and services do not include serving as a “municipal advisor” for purposes of the registration requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act (2010) or the municipal advisor registration rules issued by the Securities and Exchange Commission. Stantec is not advising the City of Clearwater, FL, or any municipal entity or other person or entity, regarding municipal financial products or the issuance of municipal securities, including advice with respect to the structure, terms, or other similar matters concerning such products or issuances.

In preparing this report, Stantec utilized information and data obtained from the City of Clearwater, FL or public and/or industry sources. Stantec has relied on the information and data without independent verification, except only to the extent such verification is expressly described in this document. Any projections of future conditions presented in the document are not intended as predictions, as there may be differences between forecasted and actual results, and those differences may be material.

Additionally, the purpose of this document is to summarize Stantec’s analysis and findings related to this project, and it is not intended to address all aspects that may surround the subject area. Therefore, this document may have limitations, assumptions, or reliance on data that are not readily apparent on the face of it. Moreover, the reader should understand that Stantec was called on to provide judgments on a variety of critical factors which are incapable of precise measurement. As such, the use of this document and its findings by the City of Clearwater, FL should only occur after consultation with Stantec, and any use of this document and findings by any other person is done so entirely at their own risk.

Appendix: Supporting Financial Schedules

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APPENDIX: SUPPORTING FINANCIAL SCHEDULES

Schedule 1 Assumptions

Schedule 2 FY 2025 Beginning Balances

Schedule 3 Projection of Cash Inflows

Schedule 4 Projection of Cash Outflows

Schedule 5 Cost Escalation Factors

Schedule 6 Capital Improvement Program

Schedule 7 FAMS - Control Panel

Schedule 8 Pro Forma

Schedule 9 Capital Project Funding Summary

Schedule 10 Detailed Funding by Fund

Schedule 11 Senior Lien Borrowing Projections

Assumptions Schedule 1

FY 2025 Beginning Balances Schedule 2

Schedule 3Projection of Cash Inflows

Projection of Cash Outflows Schedule 4

Cost Escalation Factors Schedule 5

Capital Improvement Program Schedule 6

FAMS Control Panel Schedule 7

Pro Forma Schedule 8

Capital Project Funding Summary Schedule 9

Detailed Funding by Fund Schedule 10

Schedule 11Senior Lien Borrowing Projections

2.2 Conclusions & Recommendations