Exhibit_D_-_FY25-Water,_Sewer,_Irrigation_and_Reclaimed_RSA_-_Final_Report.pdf

City of Clearwater, FL

FY 2025 Water, Sewer, Irrigation and Reclaimed Water Revenue Sufficiency Analysis- Final

Report

August 22, 2025

August 22, 2025

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

Re: Water, Sewer, Irrigation and Reclaimed Water Revenue Sufficiency Analysis Final Report

Dear Mr. Ravins, Stantec Consulting Services Inc. is pleased to present this Final Report of the FY 2025 Water, Sewer, Irrigation and Reclaimed Water Revenue Sufficiency Analysis (Study) that we completed for the City of Clearwater, Florida (City) and its Water and Sewer Department. We appreciate the fine assistance provided by you and each of 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 email me 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 Blvd., Suite 600 Tampa, Florida 33602

(813) 269-6010 leticia.doohaluk@stantec.com

Enclosure mailto:leticia.doohaluk@stantec.com

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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 Expenditure

2.1.4 Payment in Lieu of Taxes (PILOT)

2.1.5 Renewal & Replacement (R&R) Contributions

2.1.6 Capital Improvement Program (CIP)

2.1.7 Cost Escalation

2.1.8 Interest Earnings (Interest Income)

2.1.9 Price Elasticity

2.1.10 Total Demand and Purchased Water Expenses

2.1.11 Customer Growth & Volume Forecast

2.1.12 Minimum Operating Reserve Policy

2.1.13 Future Borrowing & Capital Funding

2.1.14 Debt Service and Coverage

Conclusions and Recomendations Water & Sewer Rate Survey

Appendix: Supporting Financial Schedules

1. Introduction

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INTRODUCTION

Stantec Consulting (Stantec) has conducted the Fiscal Year (FY) 2025 Water, Sewer, Irrigation and Reclaimed Water Revenue Sufficiency Analysis (RSA) for the City of Clearwater’s Water and Sewer 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 revenues provided by the City’s water, sewer, irrigation and reclaimed water rates, to meet both the current and projected cost requirements of the Utility. Stantec has been working with the City of Clearwater since 2003, and, most recently, completed Revenue Sufficiency Analyses (RSAs) in FY 20231 and FY 20242.

Historically, City Council has approved a 5-year plan of annual rate adjustments for its Water and Sewer Utility. The FY 2022 RSA identified the current 5-year plan (FY 2023 through FY 2027) of 3.00% annual rate adjustments starting on October 1, 2022. This 5-year plan was adopted by Council in August 2022.

Since the COVID pandemic, the Utility has not been immune to the inflationary pressures present throughout the Country. Moreover, Pinellas County, the City of Clearwater’s wholesale water provider, has continued to increase its wholesale rates driving up the City’s operating costs. Furthermore, conservation awareness has caused many of the Utility’s customers to reduce the quantity of water they are using while aging infrastructure, resiliency needs as well as regulatory requirements continue to drive the Utility’s capital improvement plan higher.

As such, the City has again retained Stantec to evaluate the adequacy of the revenues provided by its current Utility rates to meet its financial requirements over a ten-year projection period.

OBJECTIVES

The principal objectives of this Study were as follows:

Revenue Sufficiency Analysis – To evaluate the sufficiency of current water, sewer, irrigation and reclaimed water rate revenues to satisfy the Utility’s projected operating cost requirements through FY 2035, including 1) operating expenses, 2) capital improvement program (CIP) costs, 3) adequate operating reserves, 4) sufficient debt service coverage levels; and, to develop a plan of future rate revenue adjustments that will satisfy these projected requirements during each year of the projection.

1 Final Report dated June 2, 2023 2 Final Report dated September 5, 2024

1. Introduction

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Conduct a Residential Water & Sewer Fee Survey – To compare the City’s typical monthly water and sewer bill for a typical single-family residential customer to those of other single-family customers 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 for 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 trial balance schedules provided by City staff were used to establish FY 2025 beginning balances, 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

Revenues consist of rate revenue, other operating revenues (such as service taps, pre-treatment charges, late payments and other miscellaneous charges) impact fees and interest income. Rate revenues for each type of service (Water, Sewer, Irrigation and Reclaimed Water) are based upon FY 2024 actual results, adjusted for projected growth in FY 2025 and the 3.0% rate increase that went in effect October 1, 2024 (FY 2025). Beyond FY 2025, rate revenues are adjusted annually based upon assumed annual changes in accounts, changes in billed volumes, as well as recommended annual rate increases shown in the results section of this report.

The FY 2025 Budget serves as the basis for all other revenues, except for interest income (which is calculated annually based upon projected average annual fund balances and assumed interest rates and is discussed in more detail in Section 2.1.8 of this report) and revenues from impact fees (which are calculated based upon assumed new accounts and the impact fees identified in City Ordinance). All details of projected revenues to the Utility are presented in Schedule 3 of the Appendix.

2.1.3 Operating Expenditure

The Utility’s operating expenditure includes all personnel services costs, operations and maintenance (O&M) expenses, transfers (including payment in lieu of taxes and contributions to renewal and replacement), debt service requirements and minor capital outlay. The RSA based operating expenditure projections on the individual expense categories and expense amounts contained in the FY 2025 Budget.

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Starting in FY 2026, each expense line item is annually adjusted based upon assumed cost escalation factors discussed in Section 2.1.7 of this report, which were validated with City staff. Furthermore, based on the evaluation of historical O&M budget execution and discussion with City staff, the analysis includes an assumption of 96% execution to personnel services expenses and of 98% execution to O&M expenses. Existing annual debt service expenses reflect schedules for each outstanding issuance of the Utility. Projected (model calculated) annual debt service costs are presented in Schedules 4 and 11 of the Appendix. The complete list of all future O&M costs is presented in Schedule 4 of the Appendix.

2.1.4 Payment in Lieu of Taxes (PILOT)

The FY 2025 payment in lieu of taxes (PILOT) reflect the FY 2025 Budget amount as provided by City staff. Starting in FY 2026, the annual calculation of the PILOT to be transferred to the City’s General Fund is based upon 5.50% of the prior year’s audited total operating revenues in each year of the projection period. The total annual PILOT payments, allocated by department, are listed in Schedule 4 of the Appendix.

2.1.5 Renewal & Replacement (R&R) Contributions

The Utility’s bond covenant requires annual transfers of 5.0% of the prior year’s operating revenues into a Renewal & Replacement Fund. Based on discussion with City staff, this RSA includes an additional R&R transfer to comply with updated rating agency criteria for funding capital projects with cash, rather than additional borrowing. This additional R&R transfer began in FY 2019 in the amount of $4,000,000 and increases by $1,000,000 in each year of the projection period, such that by FY 2026, the additional R&R transfer will equal $10,000,000 and will stay at the $10,000,000 amount through FY 2034. Once transferred into the R&R fund, these deposits become a source of capital restricted to the funding for renewal and replacement of the Utility’s infrastructure. Given the size of renewal & replacement projects included in the Utility’s CIP, these deposits are projected to be used in full in each fiscal year. Further details are provided in both Schedule 4 and Schedule 10 of the Appendix.

2.1.6 Capital Improvement Program (CIP)

The Capital Improvement Program (CIP) was provided by City staff through FY 2035. It is also important to note that starting in FY 2026, the RSA includes an annual cost inflation factor of 3.0% based on the Engineering News Record’s Construction Cost Index 10-year average annual increase.

The CIP is provided by City staff and reflects staff’s best estimate of annual spending based on current existing appropriations and City priorities. The total CIP is from FY 2025 through FY 2035 is approximately $1.74 billion in future year dollars. 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, actual spending can be impacted by inflationary pressures, labor supply, project management and other items, which is to say that actual spending can vary significantly from projections

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Notably, since the 2022 RSA, which identified the current plan of annual rate increases, the City has gone through a Master Plan process which identified new capital needs of the Utility. Moreover, the current CIP includes approximately $730M of projected spending associated with the Water Reclamation Facilities (WRF) Consolidation and Senate Bill 64 discharge elimination regulatory requirements. Per Council approval, the Utility is planning on consolidating its East and Marshall Street Plants’ flows into its Northeast Plant, thereby moving plant operations farther away from coastal lines, in an effort to reduce the risk of wastewater overflows or plant interferences driven by storms, which are a constant risk in the gulf coast region of Florida, where the City of Clearwater is located.

Lastly, the WRF plant consolidation is expected to generate operational savings for the City through reduced energy and utility costs and from higher efficiencies stemming from utilizing newer technologies.

As such, the projection includes average annual operating costs savings of approximately $3.1 million starting in FY 2032, as presented in Schedule 4 of the Appendix.

2.1.7 Cost Escalation

Annual cost escalation factors for the various types of O&M expenses were discussed with City staff and applied in each year of the projection period beginning in FY 2026. In general, operating expenses are projected to track with overall inflation patterns, and most other cost line items are projected to increase at annual rates of between 2.50% and 7.00%. Notably, employee pension plan expenditures are calculated as a percentage of salaries and wages and in every year of the projection. The weighted average annual increase in O&M expenses for the 10-year projection period is 4.5%. The specific escalation factors assumed for each type of expense are presented on Schedule 5 of Appendix.

2.1.8 Interest Earnings (Interest Income)

The interest rate assumptions on invested funds (including funds dedicated for CIP projects) were provided by City staff and reflect a rate of 2.25% in FY 2025 and throughout the remainder of the projection. Projected interest earnings are calculated annually based upon projected average annual fund balances and assumed interest rates provided by City staff. Interest Income is presented in Schedule 3 of the Appendix.

2.1.9 Price Elasticity

A price elasticity adjustment is incorporated into the analysis to reflect the reverse relationship between rates adjustments and discretionary use. Typically, as rates increase, discretionary water usage by customers will likely decline. As such, to generate sufficient revenue, projected rate increases will have to be adjusted upward to reflect a smaller usage base to which they will be applied, thus causing the projected rate increases to be larger. The price elasticity adjustment reduces all usage revenues by the

City of Clearwater | FY 2025 Water, Sewer, Irrigation and Reclaimed Water Revenue Sufficiency Analysis Stantec | 7 product of the annual rate increase and the annual assumed price elasticity coefficient. In each year of the projection period, the price elasticity coefficient is 0.30, meaning for every 10% increase in rates, there is a resulting 3% reduction in consumption.

2.1.10 Total Demand and Purchased Water Expenses

The total projected demand including projected water loss is based upon the billed demand projections described in Section 2.1.11 of this report and is estimated to be approximately 11.73 million gallons per day (MGD) in FY 2025. This demand is projected to be met by the City’s water production of 7.12 MGD and purchases from Pinellas County of 4.60 MGD. Annual total billed demands, annual water purchases, and annual water produced are presented in Schedule 1 of the Appendix.

The City’s CIP as provided by staff and discussed in Section 2.1.6 of this report reflects certain CIP projects designed to significantly reduce the amount of water purchases from Pinellas County throughout the projection period, consistent with City plans. As such, projected purchase water demands from the County are reduced by approximately 0.5 MGD in FY 2026, 2.0 MGD in FY 2031 and an additional 1.0 MGD in FY 2032, representing a total reduction of 3.5 MGD by 2032. This reduction represents cost savings of approximately $5.56 million by 2032. Furthermore, with increased City water production, it is assumed that the City will incur additional energy and chemical costs, estimated at approximately $990,000 a year by FY 2032. As such, the total savings from lower County purchases are partially offset by the added cost of increased production.

It is the goal of the City to provide as much of the City’s average daily flow demand locally but maintain reliance upon the County and Regional System for maintenance, peaking demands, and emergency supply. The annual amount of water purchased is multiplied by the projected wholesale water rate in each year for Pinellas County, to determine the purchased water expense in each year of the RSA. Projections of purchased water expenses and increased production costs are presented in Schedules 1 and 4 of the Appendix.

Consistent with Pinellas County’s most recent rate study, available at the time this RSA was being conducted, 5.00% annual rate increases are approved through FY 2027 and are projected to be maintained in each year thereafter through FY 2035.

2.1.11 Customer Growth & Volume Forecast

Account Growth The analysis specifically reviewed changes in the number of active accounts by month during the past ten years. Based upon this review and discussion with City staff, the RSA developed annual projections of active accounts for each service type over the next ten years. Schedule 1 of the Appendix includes detailed projections of active accounts for water, irrigation, sewer, and reclaimed water service.

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Projection of Billed Demands The analysis of historical billed demands was based upon a review of the Utility’s monthly billing consumption by service and customer class for the past ten years. The results of this analysis concluded that in recent years, despite a minor increase in accounts, the Utility has experienced a decrease in demand per account, most likely due to a combination of increased efficiency in use, conservation efforts, and variable weather patterns seen across the industry. Schedule 1 of the Appendix includes detailed projections of annual billed demands by water, sewer, and reclaimed water system.

Reclaimed Water Use As reclaimed water is made available to more customers and reclaimed water usage increases, the analysis assumes a reduction in the Utility’s potable irrigation customers and demands, as well as a corresponding reduction in the amount of wholesale water that must be purchased. Furthermore, the analysis includes a reduction in lawn irrigation revenues, as potable irrigation use is replaced by lower priced reclaimed water use. The net effect of these reclaimed water impacts causes projected rate increases to be larger. The customer and demand projections for lawn irrigation and reclaimed water service are presented in Schedule 1 of the Appendix and include the impact of the continued expansion/growth of the reclaimed water system.

2.1.12 Minimum Operating Reserve Policy

The 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’s multi-year financial management plan.

Many utilities, rating agencies, and the investment community places 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 ratings 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 tends to be consistent with the level recommended by AWWA and our industry experience.

Based upon Stantec’s industry experience, effective 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 of Clearwater, the RSA reflects a target minimum operating reserve equal to 6 months of O&M 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 below that target for a period of time.

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In this case, the City is projected to reduce its existing reserves down to the six months operating reserve target over time and projected operating fund balances are maintained at the six months target level in every year of the projection as presented in Figure 2-1.

Figure 2-1 Projected Annual Operating Reserves

2.1.13 Future Borrowing & Capital Funding

For projected new long-term debt as identified within the RSA during the projection period, a 30-year term is assumed at an interest rate of 5.00% and 1.5% cost of issuance. The City’s actual future financing and funding decisions will reflect actual future conditions and broader City-wide financing objectives, but the projections in the RSA reflect realistic overall conditions for planning purposes.

2.1.14 Debt Service and Coverage

The Utility must maintain annual net revenue (gross revenue minus operating & maintenance 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 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 affect the interest rate and terms of future financing initiatives.

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 projections of revenue and expenses do not occur as predicted. 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 is projected to exceed its targeted coverage requirement of 1.50x in each year of the projection period.

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CONCLUSIONS AND RECOMENDATIONS

As discussed in the Background section of this report, the current 5-year plan of rate adjustments was approved and implemented based on results from the FY 2022 RSA (FY 2022 Study).

Since the FY 2022 RSA, additional operating costs, and new capital costs driven by: 1) the 2023 Master Plan, 2) aging infrastructure, 3) resiliency (specifically the WRF consolidation) as well as 4) regulatory requirements continue to drive the Utility’s 10-year capital improvement plan (capital costs) much higher.

The 10-year capital costs of the utility as discussed in this report represent an increase of approximately $900M since the FY 2022 RSA, mostly driven by projects such as the WRF Consolidation, Senate bill 64 discharge requirements, water pollution control and other renewal and replacement. Figure 2-2 below presents the 10-year capital needs for the FY 2022 and FY 2025 RSAs.

Figure 2-2 10-Year Capital Costs Comparison

The increase in capital costs resulted in a projected increase to future borrowing of $874M. Figure 2-3 below presents the 10-year capital funding sources for each of the FY 2022 and FY 2025 RSAs.

Figure 2-3 10-Year CIP Funding Sources Comparison

$1,743

$839

$0 $200 $400 $600 $800

$1,000 $1,200 $1,400 $1,600 $1,800 $2,000

M illi on s

FY 2025 RSA FY 2022 RSA

$23

$1,078

$204

$194

$180

$471

$432

1,000

1,200

1,400

1,600

1,800

2,000

M illi on s

Operating R&R Debt Other Sources

FY 2022 RSAFY 2025 RSA

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Moreover, the City has not been immune to inflationary pressures present throughout the Country. Since the FY 2022 Study, operating expenditures are larger due to increased salary and benefit costs, chemicals costs, purchased water costs and minor capital outlays.

As previously stated, the revenue sufficiency analysis’ objective is to evaluate the sufficiency of the current water, sewer, irrigation and reclaimed water rate revenues to generate the level of revenues necessary to satisfy the Utility’s projected 1) operating expenses, 2) capital improvement costs, 3) adequate operating reserves, and 4) adequate debt service coverage during the 10-year projection.

Given the source data and assumptions as described within this report, Stantec concludes that the current plan of rate adjustments approved thru FY 27 will not be enough to meet projected needs of the Utility. This is a result of the sizeable increase to the Utility’s projected 10-year capital costs, which leads to additional future borrowing and its associated annual debt service costs.

As such, for FY 26, Stantec recommends that a new 5-year plan of rate adjustments equal to 8.00% be implemented on October 1, 2025, and continue through FY 2030. This change is needed so that the Utility can maintain reliable service by executing its identified capital needs. Furthermore, the identified rate plan aims to maintain equilibrium between competing forces such as 1) appropriate level of total borrowing, 2) maintenance of suitable reserves, 3) funding of the Utility’s needs, 4) meeting bond covenants, and 5) limiting impact to Utility customers.

Table 2.1 – Proposed Rate Water & Sewer Rate Adjustments effective October 1st

*Annual rate adjustments also apply to irrigation, and reclaimed water rates.

2025 RSA Annual Rate Adjustments FY 2026 - FY 2030 FY 2031 – FY 2035

Water* 8.00% 8.00%

Sewer 8.00% 8.00%

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The results of the FY 2025 Water, Sewer, Irrigation and Reclaimed water revenue sufficiency analysis are summarized in Figure 2-4.

Figure 2-4 FY 2025 RSA Results

Stantec strongly recommends that the City continue to perform annual or bi-annual updates to the revenue sufficiency analysis to re-evaluate the adequacy of its water, sewer, irrigation and reclaimed water rates. Doing so will allow for the incorporation of updated revenue and expense information, as well as changes in economic conditions, customer accounts and usage levels, regulatory requirements, and other factors that can materially affect the results of this revenue sufficiency analysis. This will also ensure that the City’s Utility will continue to meet its financial and operating requirements in the future and minimize rate impacts to customers from future events occurring differently than currently projected.

It is important to note that the projections of future conditions underlying this analysis are not intended to be predictions. Applicable to many water, sewer, irrigation and reclaimed water 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 rate 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.

CLEARWATER, FL

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

Water 3.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% 36.05% 115.89%

Sewer Rate Plan 3.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% 36.05% 115.89%

Reclaimed Rate Plan 3.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00%

Senior-Lien DSC 6.51 7.12 7.60 4.04 3.85 2.40 2.43 1.97 1.97 1.77 1.77 Scenario Manager

All-In DSC 6.51 7.12 7.60 4.04 3.85 2.40 2.43 1.97 1.97 1.77 1.77

Water & Sewer Bill @ 3 Kgals $65.10 $70.31 $75.93 $82.01 $88.57 $95.65 $103.31 $111.57 $120.49 $130.13 $140.55 Proceeds ($M) $1,077.9 $ Change in Mo. Bill $5.21 $5.62 $6.08 $6.56 $7.08 $7.65 $8.26 $8.93 $9.64 $10.41

$0.0M $50.0M

$100.0M $150.0M $200.0M $250.0M $300.0M

25 26 27 28 29 30 31 32 33 34 35

R&R -327 Operating - 421 Debt

$0.0M $50.0M

$100.0M $150.0M $200.0M $250.0M $300.0M

24 25 26 27 28 29 30 31 32 33 34 35

Current Plan Target

$0.0M $50.0M

$100.0M $150.0M $200.0M $250.0M $300.0M

25 26 27 28 29 30 31 32 33 34 35

Current Plan

$0.0M $50.0M

$100.0M $150.0M $200.0M $250.0M $300.0M

25 26 27 28 29 30 31 32 33 34 35

Cash Out Less CIP Cash In Cash Out

$0.0M $50.0M

$100.0M $150.0M $200.0M $250.0M $300.0M $350.0M

25 26 27 28 29 30 31 32 33 34 35

Current Plan

Operating Fund - 421

CIP Spending

Revenues vs. Expenses

CIP Funding Borrowing

CALC SAVE CTRL LAST OVR

$0.0M $50.0M

$100.0M $150.0M $200.0M $250.0M $300.0M

25 26 27 28 29 30 31 32 33 34 35

Current Plan

Interim Financing

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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 Utility.

3. Water & Sewer Residential Rate Survey

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WATER & SEWER RATE SURVEY

As part of this RSA, Stantec prepared a comparative residential water and sewer rate survey of the City’s surrounding geographic area. The green and blue bars in Figure 3-1 reflect a monthly water and sewer bill for a single-family residential water and sewer customer using 3,000 gallons (this reflects the most commonly billed usage amount for City of Clearwater residential customers) per month, calculated with rates in effect as of October 1, 2024 (FY 2025). The rates used in the surveys were based upon information available on each utility’s website, provided by its billing department, and/or published in rate ordinances as available on Municode.com.

The survey below shows the City’s water and sewer typical monthly bill is in a comparable position to those of surrounding communities and below the regional average. It is important to note that this survey reflects a snapshot in time for FY 2025. With the multitude of financial pressures each surveyed utility is currently facing, many of the other monthly bills shown in this survey are likely to change in FY 2026 and beyond.

Figure 3-1 FY 2025 Monthly Water & Sewer Residential Bill Survey @ 3,000 Gallons / Month

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 Projected Accounts, Billed Volumes and Other 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 Forecast of Net Revenues & Debt Service Coverage

Schedule 9 Capital Project Funding Summary

Schedule 10 Funding Summary by Fund

Schedule 11 Long-Term Borrowing Projections

Projected Accounts, Billed Volumes and Other Assumptions Schedule 1 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 FY 2032 FY 2033 FY 2034 FY 2035

Projected Rate Increase Adoption Dates 10/1/2024 10/1/2025 10/1/2026 10/1/2027 10/1/2028 10/1/2029 10/1/2030 10/1/2031 10/1/2032 10/1/2033 10/1/2034

Annual Account Growth & Billed Volume Projections Water Number of Accounts 34,358 34,423 34,488 34,553 34,618 34,683 34,748 34,813 34,878 34,943 35,008 Annual Growth in Accounts 65 65 65 65 65 65 65 65 65 65 65 Annual % Change in Accounts 0.19% 0.19% 0.19% 0.19% 0.19% 0.19% 0.19% 0.19% 0.19% 0.19% 0.19% % of New Accounts Projected to Pay Impact Fees 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Monthly Usage per Account in each Fiscal Year (kgals) 8.52 8.46 8.41 8.35 8.29 8.24 8.18 8.12 8.07 8.01 7.95

% Change in Monthly Usage Per Account -0.66% -0.67% -0.67% -0.68% -0.68% -0.69% -0.69% -0.70% -0.70% -0.71% -0.71% Total Billed Volume (kgals) 3,513,489 3,496,621 3,479,664 3,462,618 3,445,483 3,428,260 3,410,948 3,393,547 3,376,057 3,358,478 3,340,811 % Change in Projected Total Billed Volume -0.48% -0.48% -0.48% -0.49% -0.49% -0.50% -0.50% -0.51% -0.52% -0.52% -0.53%

Sewer Number of Accounts 34,868 34,948 35,028 35,108 35,188 35,268 35,348 35,428 35,508 35,588 35,668

Annual Growth in Accounts 80 80 80 80 80 80 80 80 80 80 80 Annual % Change in Accounts 0.23% 0.23% 0.23% 0.23% 0.23% 0.23% 0.23% 0.23% 0.23% 0.23% 0.22% % of New Accounts Projected to Pay Impact Fees 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Monthly Usage per Account in each Fiscal Year (kgals) 8.55 8.49 8.43 8.37 8.32 8.26 8.20 8.14 8.08 8.03 7.97

% Change in Monthly Usage Per Account -0.67% -0.67% -0.68% -0.68% -0.69% -0.69% -0.70% -0.70% -0.71% -0.71% -0.72% Total Billed Volume (kgals) 3,575,721 3,559,760 3,543,688 3,527,506 3,511,212 3,494,809 3,478,295 3,461,670 3,444,934 3,428,088 3,411,131 % Change in Projected Total Billed Volume -0.44% -0.45% -0.45% -0.46% -0.46% -0.47% -0.47% -0.48% -0.48% -0.49% -0.49%

Reclaimed Metered Number of Accounts 6,473 6,544 6,688 6,832 6,976 7,120 7,264 7,336 7,408 7,479 7,551 Annual Growth in Accounts 72 144 144 144 144 144 72 72 72 72 72 Annual % Change in Accounts 1.11% 2.20% 2.15% 2.11% 2.06% 2.02% 0.98% 0.98% 0.97% 0.96% 0.95% Monthly Usage per Account in each Fiscal Year (kgals) 23.05 22.67 22.31 21.97 21.64 21.32 21.22 21.12 21.02 20.92 20.83 % Change in Monthly Usage Per Account -0.56% -1.63% -1.59% -1.55% -1.51% -1.48% -0.47% -0.47% -0.46% -0.46% -0.45% Total Billed Volume (kgals) 1,810,116 1,819,836 1,829,502 1,839,116 1,848,678 1,858,189 1,867,649 1,877,061 1,886,424 1,895,738 1,905,006 % Change in Projected Total Billed Volume 0.54% 0.54% 0.53% 0.53% 0.52% 0.51% 0.51% 0.50% 0.50% 0.49% 0.49%

Reclaimed Flat Number of Accounts 1,406 1,370 1,333 1,297 1,260 1,224 1,188 1,151 1,115 1,078 1,042 Annual Growth in Accounts (36) (36) (36) (36) (36) (36) (36) (36) (36) (36) (36) Annual % Change in Accounts -2.52% -2.59% -2.66% -2.73% -2.81% -2.89% -2.97% -3.07% -3.16% -3.27% -3.38% % of New Accounts Projected to Pay Impact Fees 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Monthly Usage per Account in each Fiscal Year (kgals) - - - - - - - - - - - % Change in Monthly Usage Per Account 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Total Billed Volume (kgals) - - - - - - - - - - - % Change in Projected Total Billed Volume 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Reclaimed Combined (Metered & Flat) Number of Accounts 7,950 8,058 8,166 8,273 8,381 8,488 8,524 8,559 8,594 8,629 8,664 Annual Growth in Accounts 35 108 108 108 108 108 35 35 35 35 35 Annual % Change in Accounts 0.44% 1.35% 1.34% 1.32% 1.30% 1.28% 0.41% 0.41% 0.41% 0.41% 0.41% Monthly Usage per Account in each Fiscal Year (kgals) 18.97 18.82 18.67 18.52 18.38 18.24 18.26 18.28 18.29 18.31 18.32 % Change in Monthly Usage Per Account -0.56% -1.63% -1.59% -1.55% -1.51% -1.48% -0.47% -0.47% -0.46% -0.46% -0.45% Total Billed Volume (kgals) 1,810,116 1,819,836 1,829,502 1,839,116 1,848,678 1,858,189 1,867,649 1,877,061 1,886,424 1,895,738 1,905,006 % Change in Projected Total Billed Volume 0.54% 0.54% 0.53% 0.53% 0.52% 0.51% 0.51% 0.50% 0.50% 0.49% 0.49%

City of Clearwater | FY 2025 Water, Sewer, Irrigation and Reclaimed Water Revenue Sufficiency Analysis

Projected Accounts, Billed Volumes and Other Assumptions Schedule 1 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 FY 2032 FY 2033 FY 2034 FY 2035

Irrigation Number of Accounts 1,995 1,990 1,985 1,980 1,975 1,970 1,965 1,959 1,954 1,949 1,944 Annual Growth in Accounts (5) (5) (5) (5) (5) (5) (5) (5) (5) (5) (5) Annual % Change in Accounts -0.25% -0.26% -0.26% -0.26% -0.26% -0.26% -0.26% -0.26% -0.26% -0.26% -0.26% % of New Accounts Projected to Pay Impact Fees 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Monthly Usage per Account in each Fiscal Year (kgals) 8.88 8.88 8.88 8.88 8.88 8.88 8.88 8.88 8.88 8.89 8.90 % Change in Monthly Usage Per Account 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.05% 0.10% Total Billed Volume (kgals) 212,693 212,150 211,607 211,064 210,521 209,978 209,435 208,891 208,348 207,912 207,582 % Change in Projected Total Billed Volume -0.25% -0.26% -0.26% -0.26% -0.26% -0.26% -0.26% -0.26% -0.26% -0.21% -0.16%

Capital Spending Annual Capital Budget (Future Year Dollars) 61,625,734$ 96,632,119 165,736,428 194,816,001 187,172,473 203,626,855 211,745,665 194,068,035 209,360,405 118,150,269 100,489,735 Annual CIP Redistribution -$ - - (60,000,000) (110,000,000) (110,000,000) (60,000,000) - 75,000,000 50,000,000 60,000,000

Impact Fees Water Impact Fees 600$ 660 720 720 720 720 720 720 720 720 720 Sewer Impact Fees 978$ 978 978 978 978 978 978 978 978 978 978 Lawn Impact Fees 88$ 96 105 105 105 105 105 105 105 105 105

Average Annual Interest Earnings Rate On Fund Balances 2.25% 2.25% 2.25% 2.25% 2.25% 2.25% 2.25% 2.25% 2.25% 2.25% 2.25%

Operating Budget Reserve Target (Number of Months of Reserve) 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0

Operating Budget Execution Percentage 1

Personnel Services 96% 96% 96% 96% 96% 96% 96% 96% 96% 96% 96% Purchased Water Cost 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Operations & Maintenance 98% 98% 98% 98% 98% 98% 98% 98% 98% 98% 98% Capital Outlay (Equip & Lease Purchase Program) 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

Purchased Water Projections Projected Total Billed Demand in MGD 10.21 10.16 10.11 10.06 10.02 9.97 9.92 9.87 9.82 9.77 9.72 Projected Total Billed Demand Adj. for Loss in MGD 2 1.52 1.51 1.50 1.50 1.49 1.48 1.47 1.47 1.46 1.45 1.45 Projected Total Water Produced in MGD 7.12 7.50 7.50 7.50 7.50 7.50 9.50 10.50 10.50 10.50 10.50 Projected Water Purchases in MGD 3 4.60 4.17 4.12 4.06 4.01 3.95 1.89 1.50 1.50 1.50 1.50

Pinellas County Rates Per Kgal 4.83$ 5.07 5.32 5.59 5.87 6.16 6.47 6.79 7.13 7.49 7.86 Projected Annual Rate Adjustments 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% Projected Annual Purchased Water Expense 8,111,706$ 7,717,281 7,996,170 8,283,084 8,578,101 8,881,283 4,470,633 3,718,611 3,904,541 4,099,768 4,304,757

1 Execution is based on discussion with City staff and reflects historical comparison of budget to actual spending.

2 Non-revenue water factor adjustment of 16% for the projection based on prior years' actuals.

3 Utility staff expects the completion of the WTP 2 expansion by the end of FY 20232, appearing in phases being an increase of 0.5 MGD in FY 2026, 2.0 MGD in 2031, and 1.0 MGD in 2032. As such FY 2033, reflects City staff's expectation to purchase the minimum contract amount of 1.5 MGD and produce about 10.5MGD, lowering overall projected water purchase costs.

City of Clearwater | FY 2025 Water, Sewer, Irrigation and Reclaimed Water Revenue Sufficiency Analysis

Schedule 2

Stantec Grouping of Funds in Model Revenue Fund (421) Restricted Reserves Water Impact Fees Sewer Impact Fees Renewal & Replacement (327)

Current Unrestricted Assets Cash and Cash Equivalents 192,489,389$ - - - - Restricted Cash and Investments - 12,621,250 - - - Interest Receivable 659,763 - - - - Billed 4,724,163 - - - - Unbilled Charges Estimated 4,593,800 - - - - Less: Allowances for Uncollectible Accounts (40,922) - - - - Lease Receivables 26,181 - - - - Other receivables - - - - - Due From Other Governmental Entities 1,228,095 - - - - Inventories at Cost 1,684,010 - - - - Prepaid Expenses and Other Assets 552,956$ - - - - Total Assets 205,917,435$ 12,621,250 - - -

Current Liabilities Accounts and Contract Payable (7,831,655)$ - - - - Accrued Payroll (476,067) - - - - Accrued Interest Payable (211,393) - - - - Compensated Absences (519,340) - - - - Other Postemployment Benefits (114,238) - - - - Lease Liabilities - - - - - Due to Other Funds (75,610) - - - - Claims Payable - - - - - Construction Contracts Payable - (2,763,001) - - - Accrued Interest Payable - (1,401,850) - - - Current Portion of Long-Term Liabilities, Bonds Payable) - (3,854,167) - - - Customer Deposits - (4,602,232) - - -

Net Fund Balance 195,772,996$ - - - -

Plus/(Less): Inventories at Cost (1,684,010)$ - - - - Plus/(Less): Renewal and Replacement (1,747,320) - - - 1,747,320 Plus/(Less): Water and Sewer Impact Fees (4,500,000) - 950,000 3,550,000 - Plus/(Less): Water And Sewer Impact Fees 187,841,666$ - 950,000 3,550,000 1,747,320

Available Fund Balance 187,841,666$ - 950,000 3,550,000 1,747,320

Fund Summary Revenue Fund (421) 187,841,666$ Restricted Reserves - Water Impact Fees 950,000 Sewer Impact Fees 3,550,000 Renewal & Replacement (327) 1,747,320 Available Fund Balance 194,088,986$

FY 2025 Beginning Balances as of 10/1/2024

City of Clearwater | FY 2025 Water, Sewer, Irrigation and Reclaimed Water Revenue Sufficiency Analysis

Schedule 3

FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 FY 2032 FY 2033 FY 2034 FY 2035 1 Assumed Rate Revenue Increases 2 Water Rate Increase 3.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% 3 Sewer Rate Increase 3.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% 4 Reclaimed Rate Increase 3.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00% 8.00%

5 Water Rate Revenue 6 Base Rate Revenue 26,744,754$ 28,938,979 31,313,114 33,881,901 36,661,290 39,668,536 42,922,310 46,442,810 50,251,886 54,373,181 58,832,270 7 Usage Rate Revenue 18,489,493 19,431,166 20,419,803 21,457,680 22,547,182 23,690,803 24,891,153 26,150,964 27,473,093 28,860,527 30,316,393 8 Total Water Rate Revenue 45,234,247$ 48,370,146 51,732,917 55,339,581 59,208,471 63,359,339 67,813,464 72,593,774 77,724,979 83,233,708 89,148,663

9 Lawn Irrigation 10 Base Rate Revenue 3,238,915$ 3,489,097 3,758,580 4,048,849 4,361,506 4,698,276 5,061,016 5,451,724 5,872,556 6,325,830 6,814,043 11 Usage Rate Revenue 698,976 752,966 811,122 873,764 941,237 1,013,914 1,092,195 1,176,512 1,267,330 1,365,849 1,472,777 12 Total Irrigation Rate Revenue 3,937,891$ 4,242,064 4,569,702 4,922,613 5,302,743 5,712,190 6,153,211 6,628,236 7,139,886 7,691,679 8,286,820

13 Sewer Rate Revenue 14 Base Rate Revenue 36,466,142$ 39,473,793 42,729,284 46,253,021 50,067,089 54,195,389 58,663,787 63,500,278 68,735,160 74,401,221 80,533,947 15 Usage Rate Revenue 19,105,824 20,085,690 21,114,726 22,195,330 23,330,011 24,521,395 25,772,231 27,085,396 28,463,900 29,910,891 31,429,663 16 Total Sewer Rate Revenue 55,571,966$ 59,559,483 63,844,010 68,448,352 73,397,100 78,716,783 84,436,018 90,585,674 97,199,060 104,312,112 111,963,610

17 Reclaimed Rate Revenue 18 Base Rate Revenue 1,689,207$ 1,849,034 2,023,623 2,214,311 2,422,559 2,649,955 2,873,800 3,116,500 3,379,640 3,664,937 3,974,252 19 Usage Rate Revenue 2,369,400 2,461,363 2,557,934 2,659,325 2,765,760 2,877,476 3,024,302 3,178,757 3,341,241 3,512,177 3,692,009 20 Total Reclaimed Rate Revenue 4,058,607$ 4,310,397 4,581,557 4,873,637 5,188,320 5,527,432 5,898,102 6,295,257 6,720,881 7,177,114 7,666,260

21 Other Operating Revenue 22 Other Water Revenue 75,000$ 75,000 75,000 75,000 75,000 75,000 75,000 75,000 75,000 75,000 75,000 23 Water Service Charges 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 24 Water Taps 95,000 95,000 95,000 95,000 95,000 95,000 95,000 95,000 95,000 95,000 95,000 25 Material & Water Service 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 26 Fire Line Detect Install 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 27 WPC Fee Safety Harbor 1,626,090 1,678,938 1,729,306 1,781,185 1,834,621 1,889,659 1,946,349 2,004,740 2,064,882 2,126,828 2,190,633 28 Sewer Taps 270,000 270,000 270,000 270,000 270,000 270,000 270,000 270,000 270,000 270,000 270,000 29 Grease Ord Revenue 55,000 55,000 55,000 55,000 55,000 55,000 55,000 55,000 55,000 55,000 55,000 30 Industrial Pretreatment Rev 45,000 45,000 45,000 45,000 45,000 45,000 45,000 45,000 45,000 45,000 45,000 31 Late Payment Fee 271,000 271,000 271,000 271,000 271,000 271,000 271,000 271,000 271,000 271,000 271,000 32 Rents Commercial Property 4,200 4,200 4,200 4,200 4,200 4,200 4,200 4,200 4,200 4,200 4,200 33 Sale of Scrap 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 34 Total Other Operating Revenue 2,721,290$ 2,774,138 2,824,506 2,876,385 2,929,821 2,984,859 3,041,549 3,099,940 3,160,082 3,222,028 3,285,833

35 Non-Operating Revenue 36 Interfund Svc Chgs Fund 010 37,890$ 39,785 41,774 43,862 46,056 48,358 50,776 53,315 55,981 58,780 61,719 37 Interfund Svc Chgs Fund 419 6,310 6,626 6,957 7,305 7,670 8,053 8,456 8,879 9,323 9,789 10,278 38 Interfund Svc Chgs Fund 423 3,160 3,318 3,484 3,658 3,841 4,033 4,235 4,446 4,669 4,902 5,147 39 Interfund Svc Chgs Fund 424 3,160 3,318 3,484 3,658 3,841 4,033 4,235 4,446 4,669 4,902 5,147 40 Interfund Svc Chgs Fund 432 3,160 3,318 3,484 3,658 3,841 4,033 4,235 4,446 4,669 4,902 5,147 41 Interfund Svc Chgs Fund 433 3,160 3,318 3,484 3,658 3,841 4,033 4,235 4,446 4,669 4,902 5,147 42 Interfund Svc Chgs Fund 435 3,160 3,318 3,484 3,658 3,841 4,033 4,235 4,446 4,669 4,902 5,147 43 Total Non-Operating Revenue 60,000$ 63,000 66,150 69,458 72,930 76,577 80,406 84,426 88,647 93,080 97,734

44 Interest Income 45 Unrestricted 4,130,390 3,376,879 1,819,957 837,488 871,795 905,502 918,429 911,652 929,125 969,061 1,010,763 46 Total Interest Income 4,130,390$ 3,376,879 1,819,957 837,488 871,795 905,502 918,429 911,652 929,125 969,061 1,010,763

Projection of Cash Inflows

City of Clearwater | FY 2025 Water, Sewer, Irrigation and Reclaimed Water Revenue Sufficiency Analysis

Schedule 3

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

Projection of Cash Inflows

47 Impact Fees1

48 Water Impact Fees 39,000$ 42,900 46,800 46,800 46,800 46,800 46,800 46,800 46,800 46,800 46,800 49 Sewer Impact Fees 78,240 78,240 78,240 78,240 78,240 78,240 78,240 78,240 78,240 78,240 78,240 50 Total Impact Fees 117,240$ 121,140 125,040 125,040 125,040 125,040 125,040 125,040 125,040 125,040 125,040

51 Total Cash Inflows 115,831,631$ 122,817,247 129,563,839 137,492,552 147,096,220 157,407,722 168,466,218 180,324,000 193,087,700 206,823,822 221,584,724

1 Although Impact Fee revenues are reflected in this schedule, these revenues are restricted for expansion related capital and as such are deposited into impact fee sub-funds.