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Agenda Packet - Finance & Human Resources Committee - 10/27/2025
FINANCE & HUMAN RESOURCES COMMITTEE OCTOBER 27, 2025 East Valley Water District was formed in 1954 and provides water and wastewater services to 108,000 residents within the cities of San Bernardino and Highland, and portions of San Bernardino County. EVWD operates under the direction of a 5member elected Board. COMMITTEE MEMBERS David E. Smith Governing Board Member Ronald L. Coats Governing Board Member Finance & Human Resources Committee Meeting October 27, 2025 1:30 PM 31111 Greenspot Road, Highland, CA 92346 www.eastvalleywater.gov PLEASE NOTE: Materials related to an item on this agenda submitted to the Board after distribution of the agenda packet are available for public inspection in the District’s office located at 31111 Greenspot Rd., Highland, during normal business hours. Also, such documents are available on the District’s website at eastvalley.org and are subject to staff’s ability to post the documents before the meeting. Pursuant to Government Code Section 54954.2(a), any request for a disabilityrelated modification or accommodation, including auxiliary aids or services, that is sought in order to participate in the above agendized public meeting should be directed to the District Clerk at (909) 8854900 at least 72 hours prior to said meeting. In order to comply with legal requirements for posting of agenda, only those items filed with the District Clerk by 12:00 p.m. on Wednesday prior to the following Wednesday meeting not requiring departmental investigation, will be considered by the Board of Directors. CALL TO ORDER PLEDGE OF ALLEGIANCE ROLL CALL OF BOARD MEMBERS PUBLIC COMMENTS Any person wishing to speak to the Board of Directors is asked to complete a Speaker Card and submit it to the District Clerk prior to the start of the meeting. Each speaker is limited to three (3) minutes, unless waived by the Chairman of the Board. Under the State of California Brown Act, the Board of Directors is prohibited from discussing or taking action on any item not listed on the posted agenda. The matter will automatically be referred to staff for an appropriate response or action and may appear on the agenda at a future meeting. APPROVAL OF CONSENT CALENDAR All matters listed under the Consent Calendar are considered by the Board of Directors to be routine and will be enacted in one motion. There will be no discussion of these items prior to the time the board considers the motion unless members of the board, the administrative staff, or the public request specific items to be discussed and/or removed from the Consent Calendar. 1.Approve the July 8, 2025 Finance & Human Resources Committee Meeting Minutes INFORMATIONAL ITEMS 2.Review the Draft Annual Comprehensive Financial Report for Fiscal Year 202425 3.Classification and Compensation Study REPORTS 4.Finance Activities 5.Human Resource Activities ADJOURN FINANCE & HUMAN RESOURCES COMMITTEEOCTOBER 27, 2025East Valley Water District was formed in 1954 and provides water and wastewater services to108,000 residents within the cities of San Bernardino and Highland, and portions of SanBernardino County.EVWD operates under the direction of a 5member elected Board.COMMITTEE MEMBERS David E. Smith Governing Board Member Ronald L. Coats Governing Board Member Finance & Human Resources Committee Meeting October 27, 2025 1:30 PM 31111 Greenspot Road, Highland, CA 92346 www.eastvalleywater.gov PLEASE NOTE: Materials related to an item on this agenda submitted to the Board after distribution of the agenda packet are available for public inspection in the District’s office located at 31111 Greenspot Rd., Highland, during normal business hours. Also, such documents are available on the District’s website at eastvalley.org and are subject to staff’s ability to post the documents before the meeting. Pursuant to Government Code Section 54954.2(a), any request for a disabilityrelated modification or accommodation, including auxiliary aids or services, that is sought in order to participate in the above agendized public meeting should be directed to the District Clerk at (909) 8854900 at least 72 hours prior to said meeting. In order to comply with legal requirements for posting of agenda, only those items filed with the District Clerk by 12:00 p.m. on Wednesday prior to the following Wednesday meeting not requiring departmental investigation, will be considered by the Board of Directors. CALL TO ORDER PLEDGE OF ALLEGIANCE ROLL CALL OF BOARD MEMBERS PUBLIC COMMENTS Any person wishing to speak to the Board of Directors is asked to complete a Speaker Card and submit it to the District Clerk prior to the start of the meeting. Each speaker is limited to three (3) minutes, unless waived by the Chairman of the Board. Under the State of California Brown Act, the Board of Directors is prohibited from discussing or taking action on any item not listed on the posted agenda. The matter will automatically be referred to staff for an appropriate response or action and may appear on the agenda at a future meeting. APPROVAL OF CONSENT CALENDAR All matters listed under the Consent Calendar are considered by the Board of Directors to be routine and will be enacted in one motion. There will be no discussion of these items prior to the time the board considers the motion unless members of the board, the administrative staff, or the public request specific items to be discussed and/or removed from the Consent Calendar. 1.Approve the July 8, 2025 Finance & Human Resources Committee Meeting Minutes INFORMATIONAL ITEMS 2.Review the Draft Annual Comprehensive Financial Report for Fiscal Year 202425 3.Classification and Compensation Study REPORTS 4.Finance Activities 5.Human Resource Activities ADJOURN FINANCE & HUMAN RESOURCES COMMITTEEOCTOBER 27, 2025East Valley Water District was formed in 1954 and provides water and wastewater services to108,000 residents within the cities of San Bernardino and Highland, and portions of SanBernardino County.EVWD operates under the direction of a 5member elected Board.COMMITTEE MEMBERSDavid E. SmithGoverning Board Member Ronald L. CoatsGoverning Board MemberFinance & Human Resources Committee MeetingOctober 27, 2025 1:30 PM31111 Greenspot Road, Highland, CA 92346www.eastvalleywater.govPLEASE NOTE:Materials related to an item on this agenda submitted to the Board after distribution of theagenda packet are available for public inspection in the District’s office located at 31111Greenspot Rd., Highland, during normal business hours. Also, such documents are availableon the District’s website at eastvalley.org and are subject to staff’s ability to post thedocuments before the meeting.Pursuant to Government Code Section 54954.2(a), any request for a disabilityrelatedmodification or accommodation, including auxiliary aids or services, that is sought in orderto participate in the above agendized public meeting should be directed to the District Clerkat (909) 8854900 at least 72 hours prior to said meeting. In order to comply with legal requirements for posting of agenda, only those items filed with the District Clerk by 12:00 p.m. on Wednesday prior to the following Wednesday meeting not requiring departmental investigation, will be considered by the Board of Directors. CALL TO ORDER PLEDGE OF ALLEGIANCE ROLL CALL OF BOARD MEMBERS PUBLIC COMMENTS Any person wishing to speak to the Board of Directors is asked to complete a Speaker Card and submit it to the District Clerk prior to the start of the meeting. Each speaker is limited to three (3) minutes, unless waived by the Chairman of the Board. Under the State of California Brown Act, the Board of Directors is prohibited from discussing or taking action on any item not listed on the posted agenda. The matter will automatically be referred to staff for an appropriate response or action and may appear on the agenda at a future meeting. APPROVAL OF CONSENT CALENDAR All matters listed under the Consent Calendar are considered by the Board of Directors to be routine and will be enacted in one motion. There will be no discussion of these items prior to the time the board considers the motion unless members of the board, the administrative staff, or the public request specific items to be discussed and/or removed from the Consent Calendar. 1.Approve the July 8, 2025 Finance & Human Resources Committee Meeting Minutes INFORMATIONAL ITEMS 2.Review the Draft Annual Comprehensive Financial Report for Fiscal Year 202425 3.Classification and Compensation Study REPORTS 4.Finance Activities 5.Human Resource Activities ADJOURN Agenda Item #1 October 27, 20251 Meeting Date: October 27, 2025 1 6 4 2 Regular Meeting TO: Committee Members FROM: Chief Financial Officer SUBJECT: Approve the July 8, 2025 Finance & Human Resources Committee Meeting Minutes RECOMMENDATION That the Finance & Human Resources Committee approve the July 8, 2025 meeting minutes. DISTRICT PILLARS AND STRATEGIES V - Community Engagement, Advocacy, and Leadership a. Utilize Effective Communication Methods to Foster Exceptional Community Relations FISCAL IMPACT There is no fiscal impact associated with this agenda item. Respectfully submitted: ________________ Brian Tompkins Chief Financial Officer ATTACHMENTS July 8, 2025 Minutes Page 1 of 3 2 3 7 9 Draft pending approval EAST VALLEY WATER DISTRICT July 8, 2025 FINANCE & HUMAN RESOURCES COMMITTEE MEETING MINUTES PUBLIC COMMENTS APPROVAL OF CONSENT CALENDAR Page 2 of 3 2 3 7 9 REVIEW LETTER REGARDING AUDITOR RESPONSIBILITIES AND PLANNING DOCUMENT FROM ROGERS, ANDERSON, MALODY & SCOTT, LLP FOR PREPARATION OF THE DISTRICT’S FY 2024-25 AUDIT The Finance Manager introduced Ms. Veronica Hernandez of Rogers, Anderson, Malody & Scott, LLP (RAMS), who provided a presentation on the FY 2024-25 Audit. Ms. Hernandez reviewed the audit scope and objectives, recent GASB pronouncements, and the audit timeline. She further reported that no disclosures were identified during the Interim Audit conducted in May. Information only, no action required. The Chief Financial Officer reported that FY 2024-25 reclamation revenues did not fully cover operating costs and debt service due to lower-than-expected digester performance. IB Consulting is updating the Cost of Service Analysis (COSA) to evaluate whether additional rate adjustments, beyond those scheduled for 2026, are needed. He noted that the Reclamation Fund should be self-supporting and able to cover other expenses such as insurance and the City of San Bernardino settlement payment, which is currently being subsidized by other Funds. Staff is also building the required debt service reserve over a 10-year period. The COSA is expected to be completed by late September to mid-October. If rate adjustments are required, Proposition 218 notices will be issued, and new rates would likely take effect in January 2026. Information only, no action required. The Chief Financial Officer reported that staff is working to secure the $2.9 million retention payment from the San Bernardino Valley Municipal Water District. He also noted that a spear-phishing attack was successfully intercepted due to existing Finance procedures. The General Manager/CEO provided a recruitment update for the Senior Administrative Assistant and Information Technology Technician positions. The Human Resources Coordinator reported on the Student Summer Internship program. Page 3 of 3 2 3 7 9 ADJOURN The meeting adjourned at 2:07 p.m. Ronald L. Coats David E. Smith Governing Board Member Governing Board Member Agenda Item #2 October 27, 20251 Meeting Date: October 27, 2025 Agenda Item #2 Informational Item 1 6 6 5 Regular Meeting TO: Committee Members FROM: Chief Financial Officer SUBJECT: Review the Draft Annual Comprehensive Financial Report for Fiscal Year 2024-25 RECOMMENDATION That the Finance & Human Resources Committee recommend that the Board of Directors approve the attached Draft Annual Comprehensive Financial Report for Fiscal Year 2024-25. BACKGROUND / ANALYSIS Each year, the District contracts with an external audit firm to conduct an annual audit of the District’s books and records for the current fiscal year in compliance with California Water Code §30540(b)(2). The audit is both an industry best practice and a requirement of the State Controller Minimum Audit Requirements for California Special Districts. On July 8, 2025, the Manager from RAMS met with the District’s Finance and Human Resources Committee to review the auditing services to be provided during the audit for fiscal year ended June 30, 2025. In addition, RAMS described the procedures that were to be used to perform their audit in accordance with generally accepted auditing standards (GAAS). Once the audit is complete, the final requirement under Statement of Auditing Standards 114 (SAS 114) is for the auditors to communicate to those charged with governance: •Their views about qualitative aspects of the entity's significant accounting practices, including accounting policies, accounting estimates, and financial statement disclosures; •Significant difficulties, if any, encountered during the audit; •Uncorrected misstatements, other than those the auditor believes are trivial, if any; •Disagreements with management, if any; and Agenda Item #2 October 27, 20252 Meeting Date: October 27, 2025 Agenda Item #2 Informational Item 1 6 6 5 •Other findings or issues, if any, arising from the audit that are, in the auditor's professional judgement, significant and relevant to those charged with governance regarding their oversight of the financial reporting process. Attached is a draft of the 2024-25 Annual Comprehensive Financial Report (Annual Report) for the Committee’s review. The Annual Report includes the District’s annual financial statements with accompanying note disclosures, management discussion and analysis, and statistical information compiled by staff. The 2024-25 Annual Report will receive an unmodified opinion from RAMS. An unmodified opinion indicates the financial data of the District is presented fairly. RAMS conducted an audit in accordance with auditing standards generally accepted in the United States of America and guidelines established by the California State Controller for Special Districts. In addition, the District will apply for the Government Finance Officers Association (GFOA), Certificate of Achievement for Excellence in Financial Reporting to ensure the District’s Annual Report once again meets high standards in governmental accounting and financial reporting. On June 16, 2025 GFOA notified staff that the 2023-24 Annual Report was awarded the GFOA award for the 13th consecutive year. DISTRICT PILLARS AND STRATEGIES II - Sustainability, Transparency, and Accountability a. Uphold Transparent and Accountable Fiscal and Resource Management FISCAL IMPACT There is no fiscal impact associated with this agenda item. Respectfully submitted: ________________ Brian Tompkins Chief Financial Officer Agenda Item #2 October 27, 20253 Meeting Date: October 27, 2025 Agenda Item #2 Informational Item 1 6 6 5 ATTACHMENTS Draft Annual Report 2025 Draft Internal Controls Report Draft Audit Report Draft SAS 114 i ii iii Annual Comprehensive Financial Report Fiscal Year Ended June 30, 2025 East Valley Water District Prepared by: Finance Department 31111 Greenspot Road Highland, CA 92346 Annual Comprehensive Financial Report Fiscal Year Ended June 30, 2025 Table of Contents 1 Page No. Introductory Section Letter of Transmittal ......................................................................................................... 5-8 Organizational Structure ...................................................................................................... 9 Principal Officials ............................................................................................................... 10 GFOA Certificate .............................................................................................................. 11 Financial Section Independent Auditors’ Report ....................................................................................... 13-15 Management’s Discussion and Analysis .......................................................................... 16-29 Basic Financial Statements Statement of Net Position .......................................................................................... 31-32 Statement of Revenues, Expenses, and Changes in Net Position ................................... 33-34 Statement of Fiduciary Cash Flows ............................................................................. 35-36 Statement of Fiduciary Net Position ................................................................................. 37 Statement of Changes in Fiduciary Net Position ................................................................ 38 Notes to the Basic Financial Statements ...................................................................... 39-71 Required Supplementary Information Schedule of District’s Proportionate Share of the Net Pension Liability ................................ 73 Schedule of District’s Contributions .................................................................................. 74 Schedule of Changes in the Net OPEB Liability ............................................................ 75-76 Schedule of OPEB Healthcare Contributions ..................................................................... 77 Notes to the Required Supplementary Information ........................................................... 78 Supplementary Information History and Organization ................................................................................................. 82 Combining Schedule of Net Position ............................................................................ 83-84 Combining Schedule of Revenues, Expenses, and Changes in Net Position .................... 85-87 Combining Schedule of Cash Flows ............................................................................. 89-90 Annual Comprehensive Financial Report Fiscal Year Ended June 30, 2025 Table of Contents 2 Page No. Statistical Information Section Financial Trends Changes in Net Position by Component – Last Ten Fiscal Years .................................... 95-96 Operating Revenue by Source – Last Ten Fiscal Years ...................................................... 97 Water Operating Expenses – Last Ten Fiscal Years ........................................................... 98 Wastewater Operating Expenses – Last Ten Fiscal Years................................................... 99 Water Reclamation Operating Expenses – Last Ten Fiscal Years ...................................... 100 Revenue Capacity Water Sales and Production – Last Ten Fiscal Years ........................................................ 101 Revenue Rates for Water – Last Ten Fiscal Years ..................................................... 103-104 Revenue Rates for Wastewater – Last Ten Fiscal Years ............................................. 105-106 Active Services by Type – Last Ten Fiscal Years .............................................................. 107 Principal Customers – Current Fiscal Year and Nine Years Ago ........................................ 108 Debt Capacity Ratio of Outstanding Debt – Last Ten Fiscal Years .......................................................... 109 Debt Service Coverage – Last Ten Fiscal Years ............................................................... 110 Demographic Information Demographic and Economic Statistics – Last Ten Calendar / Fiscal Years ......................... 111 Operating Information Full-Time Equivalent Employees by Department – Last Ten Fiscal Years ........................... 112 Operating and Capacity Indicators for Water and Wastewater – Last Ten Fiscal Years ...... 113 Other Information Capacity Charge Funds .............................................................................................. 115-118 3 4 5 October 23, 2025 To the Board of Directors and Customers of East Valley Water District, We are pleased to submit the Annual Comprehensive Financial Report (Annual Report or ACFR) for East Valley Water District for the year ended June 30, 2025. This report was prepared by District staff in accordance with standards established by the Governmental Accounting Standards Board (GASB). The District’s management is responsible for the presented data, and the completeness and fairness of the presentation, including the note disclosures. We believe that the report presented is accurate in all material respects, and that the financial statements and other information are presented in a manner that enables readers to gain a full understanding of the District’s financial activities for the year. Readers should also refer to the Management’s Discussion and Analysis in the Financial Section of the Annual Report for a detailed discussion regarding the District’s financial condition and results of operations. The Annual Report follows the guidelines recommended by the Government Finance Officers Association (GFOA) of the United States and Canada. In November 2025, the District will, again, submit the Annual Report to this organization for review and possible recognition for achievement in reporting excellence. Background East Valley Water District (the District) was formed on January 18, 1954, and since then, has provided retail water service to customers in an expanding service area which now covers 30.1 square miles. The District directly serves treated water to approximately 108,000 people in the City of Highland, the eastern portion of the City of San Bernardino, the Yuhaaviatam of San Manuel Nation, and portions of the County of San Bernardino. In 1964, the District began providing wastewater collection services to the same service area. As of June 30, 2025, the District had 21,808 water connections and 20,080 wastewater connections. Water Supply and Reliability The District’s water supply for the year ended June 30, 2025 includes groundwater (79.9 percent), surface water (7.6 percent), and imported water (12.5 percent). Groundwater is pumped from the Bunker Hill Basin, and surface water from the Santa Ana River is diverted based on rights acquired from the North Fork Water Company. 6 Local Economy East Valley Water District is located within San Bernardino County in a metropolitan area referred to as the “Inland Empire”. Since 2015, the District’s population has grown by more than 6 percent and is currently comprised of mostly residential and commercial customers, with no major industrial users. Large consumers remain consistent year to year with the San Bernardino City Unified School District, Yaamava’ Resort & Casino at San Manuel, Patton State Hospital, City of Highland, and the Yuhaaviatam of San Manuel Nation forming the list of top five users. In 2025, the average household income within the District’s service area was $67,619, approximately 17% lower than the County of San Bernardino. Customers who reside in the City of Highland account for approximately 65% of the District’s customer base. These customers had an average household income of $72,222, approximately 7% higher than the overall District average. Financial Management The District manages its resources conservatively to deliver safe and reliable services to its customers at a fair and cost-effective price. It focuses on establishing fair rates, cost containment, long-term planning, maintaining and upgrading infrastructure, and pursuing alternative source of funding. This approach has allowed the District to undertake substantial capital improvement projects during tough economic times, while passing a series of modest rate increases. The keys to the District’s successful financial management are the District’s Capital Improvement and Financial Plan (CIFP), comprehensive reviews of water and wastewater rates, and the annual budget process. The CIFP provides a comprehensive view of infrastructure investments necessary over a seven-year period to ensure that water resources are adequate, water quality is maintained, and the water and wastewater service needs of current and future customers are met. The CIFP is reviewed annually by the District’s Board of Directors (Board) during the budget process, at which time the highest priority projects are adopted and receive authorization for expenditure along with the District’s operating budget. The District’s financial planning also includes the establishment and funding of reserves, and the pursuit of alternative funding sources, both of which help reduce reliance on rates and rate increases. In recent years the District has been very successful in pursuing project funding from the State Revolving Fund and Federal Emergency Management Agency (FEMA) and have applied for water and energy efficiency project funding from the Bureau of Reclamation and Edison. 79.9% 7.6% 12.5% Water Supply Sources Groundwater Surface Water Imported 7 Internal Control District management is responsible for establishing a system of internal accounting controls designed to provide reasonable assurances that assets of the District are safeguarded against losses from unauthorized use or disposition, and theft. The District’s internal controls also ensure the proper recording of financial transactions, and the preparation of financial statements in accordance with Generally Accepted Accounting Principles (GAAP). The District’s internal control structure is designed to provide reasonable assurance that these objectives are met. The concept of reasonable assurance recognizes that 1) the cost of a control should not exceed the benefits likely to be derived and 2) the valuation of costs and benefits requires estimates and judgments by management. Budgetary Control The District’s Board of Directors annually adopts a balanced operating and capital budget prior to the new fiscal year. The budget authorizes expenditures and provides a basis for accountability over the District’s enterprise operations and capital projects. Each quarter, management provides the Board with a quarterly budget review to allow Board assessment of staff’s progress in meeting goals and objectives, and budget adjustments, if necessary, are requested at the mid-year budget review in February. Debt Administration The District utilizes proceeds from long-term debt, along with reserves and contributions from the operating budget, to finance major construction projects. Current debt consists of Revenue Bonds and loans from US Bancorp, the State Revolving Fund, and the San Bernardino Valley Municipal Water District. The District received a credit rating of AA- from Standard and Poor’s and Fitch when the Revenue Bonds were issued in September 2020. Fitch affirmed this rating as the result of a review conducted in June 2024. Investment Policy The Board of Directors annually adopts an investment policy that conforms to California State Law, District ordinances and resolutions, and the prudent person standard. The objectives of the policy are safety, liquidity, and yield. District funds are normally invested in the State Treasurer’s Local Agency Investment Fund (LAIF), and Federal government Treasury notes or agency obligations. Audit and Financial Reporting State law requires the District to obtain an annual audit of its financial statements by an independent Certified Public Accountant. This year, the District’s Financial statements were audited by Rogers, Anderson, Malody & Scott, LLP from San Bernardino, California. Their audit opinion is included in the Basic Financial Statements section of this report. The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the District for its Annual Comprehensive Financial Report for the fiscal year ended June 30, 2024. This was the 13th year that the District has achieved this prestigious award. To be awarded a Certificate of Achievement, a governmental entity must publish an easily readable and efficiently organized Annual Comprehensive Financial Report. This report must satisfy both GAAP and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current Annual Comprehensive Financial Report continues to meet the Certificate of Achievement Program requirements, and we are submitting it to the GFOA to determine its eligibility for another certificate. 8 Acknowledgements Preparation of this report was accomplished by the combined efforts of District staff. We appreciate the dedication and professionalism that our staff bring to the District. We would also like to thank the members of the Board of Directors for their continued support in the planning and implementation of the financial affairs of the District. Respectfully submitted, Michael Moore General Manager/CEO Brian W. Tompkins Chief Financial Officer EAST VALLEY WATER DISTRICT Organizational Structure Year Ended June 30, 2025 9 EAST VALLEY WATER DISTRICT Principal Officials Year Ended June 30, 2025 10 Vision Enhance & preserve the quality of life for our community through innovative leadership and world class public service. Core Values Leadership: Motivating a group of people to act toward achieving a common goal or destination. Partnership: Developing relationships between a wide range of groups and individuals through collaboration and shared responsibility. Stewardship: Embracing the responsibility of enhancing and protecting resources considered worth caring for and preserving. East Valley Water District Governing Board Members as of June 30, 2025 Name Title Elected / Appointed Current Term James Morales, Jr. Chairman of the Board Elected 2022 - 2026 Ronald L. Coats Vice-Chairman of the Board Elected 2022 - 2026 David E. Smith Governing Board Member Elected 2020 - 2024 Ronald L. Coats Governing Board Member Elected 2022 - 2026 Chris Carrillo Governing Board Member Elected 2020 - 2024 Contact Information East Valley Water District Michael Moore, General Manager/CEO 31111 Greenspot Road Highland, CA 92346 (909) 889-9501 www.eastvalleywater.gov EAST VALLEY WATER DISTRICT GFOA Certificate Year Ended June 30, 2024 11 12 EAST VALLEY WATER DISTRICT Independent Auditor’s Report Year Ended June 30, 2025 13 EAST VALLEY WATER DISTRICT Independent Auditor’s Report Year Ended June 30, 2025 14 EAST VALLEY WATER DISTRICT Independent Auditor’s Report Year Ended June 30, 2025 15 EAST VALLEY WATER DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2025 16 The District East Valley Water District (District) is a California Special District established under section 30000 et seq. of the California Water Code. The District is engaged in pumping, treating, and distributing water to its customers, as well as maintaining a collection system and a newly commissioned reclamation plant known as the Sterling Natural Resource Center (SNRC) for treatment of residential and commercial wastewater. The District serves the City of Highland and portions of the City and County of San Bernardino in California. The Basic Financial Statements East Valley Water District is a special-purpose government agency, engaged in activities that are supported exclusively by user charges. As such, the District’s financial statements are presented in the format prescribed for proprietary funds by the Governmental Accounting Standards Board (GASB). The following financial statements for the year ended June 30, 2025 (2024 for comparative purposes only) consist of three interrelated statements designed to provide the reader with relevant, understandable data about the District’s financial condition and operating results. They are the Statement of Net Position, the Statement of Revenues, Expenses, and Changes in Net Position, and the Statement of Cash Flows. The Statement of Net Position presents financial information on the District’s assets, liabilities, and deferred inflow and outflows of resources, with the difference reported as net position as of the last day of the District’s fiscal year (FY). Over time, increases or decreases in net position can serve as a useful indicator of whether the financial position of the East Valley Water District is improving or deteriorating. The Statement of Revenues, Expenses, and Changes in Net Position presents information showing how the District’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of the related cash flows. The Statement of Cash Flows (direct method) conveys to financial statement users how the District managed cash resources during the year. This statement converts the change in net position presented on the Statement of Revenues, Expenses, and Changes in Net Position into actual cash provided by or used for operations. The Statement of Cash Flows also details how the District obtains cash through financing and investing activities, and conversely, how cash is spent for these purposes. Fiduciary fund statements provide information about fiduciary relationships, also known as custodial funds of the District, in which the District acts solely as a trustee or custodian for the benefit of others, to whom the resources in question belong. The fund is used to account for receipts and disbursements associated with Community Facilities District (CFD), which are administered by, but are not the liability of the District. EAST VALLEY WATER DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2025 17 Summary Financial Information and Analysis Financial Condition During the year ended June 30, 2025, the District’s total assets and deferred outflows decreased by $9.1 million, to $386.6 million. The decrease included a modest increase to Current Assets, offset by a modest decrease to Deferred Outflows, but the most significant shift was a decrease in the balances of Restricted and Capital assets. Current assets increased $2.8 million (7%) to $44.1 million. The increase is a net between increases and decreases of the various Current asset line items. First, Cash and Cash Equivalents increased by $3.8 million and Due from Other Governments decreased by more than $3 million due to receipt of the final reimbursement of SNRC construction costs under the State funding agreement. Utility Accounts Receivable balances grew 12% to $6.8 million during FY 2024-25 due to scheduled water rate adjustments which became effective in January 2025. Inventory balances also increased by 38% to $1.4 million. The sustained growth in inventory, such as pipes and fittings, will facilitate the District’s plan to replace up to 10,000 feet of undersized water mains in the coming year, working towards a goal of replacing up to 3 miles of pipeline each fiscal year. Restricted Asset balances decreased from $23.0 to $16.3 million due to the revision of a debt service reserve requirement related to State Revolving Fund funding agreement for the Sterling Natural Resource Center water reclamation plant. The requirement under the original agreement was to fund a reserve equal to one year’s debt service, approximately $7.8 million, on day one of the plant’s operation. This was a very challenging requirement for the start-up water reclamation enterprise. Amendment 3 to the funding agreement, dated May 1, 2025, revised this requirement allowing this reserve to be accumulated over a period of ten years, rather than requiring that it be funded immediately upon completion of construction. The first contribution to the reserve of $.78 million must be restricted by December 31, 2025. 2025 2024 Current Assets 44.1$ 41.3$ Restricted Assets 16.4 23.0 Other Assets 0.2 0.3 Capital Assets - Net 318.6 322.0 Total Assets 379.3 386.6 Total Deferred Outflow of Resources 7.3 9.1 Current Liabilities 15.7 19.9 Non-Current Liabilities 222.0 228.4 Total Liabilities 237.7 248.3 Total Deferred Inflows of Resources 2.0 2.2 Net Position Net Investment in Capital Assets 113.8 112.1 Restricted 14.1 13.3 Unrestricted 19.0 19.8 Total Net Position 146.9$ 145.2$ Capital Assets decreased by $3.5 million during FY 2024-25. For purposes of the table above, Capital Assets includes construction in progress (CIP), utility plant in service and related accumulated depreciation. Changes in Capital Assets included additions of $9.0 million, an annual depreciation charge of $12.3 million and expensing of certain EAST VALLEY WATER DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2025 18 capital projects totaling $0.1 million. Capital expenditures during the year were primarily Construction in Progress, and assets that were retired had remaining book value of $0.1 million. A more detailed description of capital spending is in the Capital Assets section of this analysis, and a more detailed schedule showing the changes to fixed assets during the fiscal year is included in Note 4 of the financial statements. Total Deferred Outflow of Resources consists of pension contributions made after the most recent pension plan actuarial valuation, as well as differences between projected and actual earnings on pension plan investments and changes in assumptions. Investment earnings of 9.3% on pension plan assets during the plan year ended June 2024, compared to actuarial assumptions that the assets would earn 6.8%, led to a decrease in Deferred Outflows- Pensions for 2024-25 of $1.5 million. This amount was accompanied by a decrease in Deferred Outflows related to Other Post Employment Benefits (OPEB) of $325 thousand, also related to earnings on plan assets. Current Liabilities decreased by $4.2 million to $15.7 million in FY 2024-25. This decrease is primarily the result of paying the $5.6 million balance of retentions withheld during construction of the SNRC; this amount was included in accounts payable at the end of the previous fiscal year. Also, with the end of the SNRC project construction the District received an amortization schedule for the state loan, and based on the schedule was able to precisely determine the current portion of long term debt, as well as calculate interest payable, which increased 670% to $1.76 million due to the state loan. The increase in Current Assets combined with the decrease in Current Liabilities resulted in an improvement to the District’s current ratio from 2.1:1 to 2.8:1. Non-Current Liabilities decreased $6.4 million to $221.9 million during FY 2024-25. The decrease was the result of making regularly scheduled payments on long-term obligations, as follows: $4.2 million in principal payments on SNRC State Revolving Fund loans. $1.3 million in principal payments on 2020 Revenue Bonds. $200 thousand in principal payments on State Revolving Fund loan for water treatment plant upgrade. $700 thousand annual payment on settlement obligation to the City of San Bernardino, payable each year for ten years through FY 2032-33. Pensions and OPEB (Other Post Employment Benefits) long-term liabilities did not change significantly but are discussed in Notes 8 and 11 of the accompanying financial statements. Long-Term Debt and Compensated Absences are further explained in financial statement Notes 5 and 6, respectively. The settlement obligation payable to the City of San Bernardino was part of a critical agreement releasing the District from a 1957 wastewater treatment Joint Powers Authority and facilitating the Local Agency Formation Commission’s (LAFCO) granting of wastewater treatment authority to the District, ultimately allowing the District’s water reclamation plant project (SNRC) to proceed. The total settlement cost has been set up as a long-term obligation being paid by the Water and Wastewater funds. The District’s total Net Position was $146.9 million at the end of FY 2024-25; a $1.7 million increase compared to the end of the previous fiscal year. Of the $146.9 million Net Position balance, $113.8 million is categorized as Net Investment in Capital Assets, $14.1 million is Restricted for Capital Expansion Projects, and $19.0 million is Unrestricted. The calculation of Net Investment in Capital Assets is included in Note 7 of the accompanying financial statements. EAST VALLEY WATER DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2025 19 Looking at longer term results, the District’s total Net Position has increased $11.9 million and $35.0 million over five- and ten-year periods, respectively. Results of Operations and Changes in Net Position Water Operations The District’s water enterprise fund received a financial boost from water sales in 2024-25, when customer consumption rebounded to almost 17 thousand acre-feet (5.5 billion gallons) during the fiscal year. In dollars, water sales increased 15% to $20.1 million, the result of a rate adjustment effective January 2025, and a significant increase in customer water demand from 15,420 acre-feet in 2023-24, to 16,926 acre-feet. This level of water usage was well above projections of 15,528, and well above usage in the prior two consecutive years both of which saw usage of less than 15,500 acre-feet. The District’s weather station located in Highland, California provides data for the District’s water budget-based billing, and also data that is used to help explain fluctuations in customer water consumption. The tables of data collected from the weather station show monthly rainfall and average daily high temperatures for each month during FY 2024-25 and FY 2023-24: 07/24 08/24 09/24 10/24 11/24 12/24 01/25 02/25 03/25 04/25 05/25 06/25 0.01” 0.75” 1.03” 0.56” 1.28” 0.97” 1.87” 4.35” 3.01” 1.39” 3.76” 2.58” 99.7° 98.2° 91.4° 86.9° 71.7° 71.5° 66.4° 71.3° 67.2° 73.3° 80.1° 88.8° 07/23 08/23 09/23 10/23 11/23 12/23 01/24 02/24 03/24 04/24 05/24 06/24 0.87” 1.94” 1.00” 0.95” 0.62” 0.00” 1.24” 8.55” 2.30” 0.63” 0.00” 0.00” 99.1° 95.1° 84.9° 84.6° 75.0° 70.0° 65.1° 62.4° 65.1° 73.5° 76.8° 89.7° The tables show that during a year when consumption increased, annual rainfall also increased, to 21.6 inches between July 2024 and June 2025, compared to 18.1 inches recorded in 2023-24. This defies the expectation that consumption would decrease with increased rain, as does the fact that 30% of the rain occurred in May and June, while temperatures were rising, and after customers had already established irrigation schedules for the summer. The tables also show that the average daily high temperatures were higher in the summer months (July through October) and the winter months (January through March) during 2024-25, which likely explains 15% higher water usage by customers. Total water produced by the District during the year was 17,657 acre-feet, compared to 16,273 acre-feet in the prior year – an increase of 8.5%. The difference between water produced in 2024-25, and water sold (16,926 acre- feet) of 731 acre-feet is the result of District flushing programs, water use at District facilities, and system leaks. The District, like all California water agencies, participates in an annual water audit to identify and work to mitigate unidentified water losses from the District’s water distribution system. The other major water operating revenue collected by the District is Water System, or Meter Charge revenue. Meter Charge revenue grew by 6.7% to $10.8 million for FY 2024-25. The increase was due to a 6% rate adjustment that EAST VALLEY WATER DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2025 20 became effective in February of 2025, and to a lesser extent, new development. The District added approximately 50 new customers during the fiscal year. $0 $5 $10 $15 $20 $25 $30 $35 2021 2022 2023 2024 2025 Mi l l i o n s Water Operating Revenue versus Expenses Revenue Expenses Water Operating expenses increased 19% to $31.5 million for FY 2024-25. Most of the increase occurred in the water enterprise’s allocation of shared costs, Customer Accounts and General and Administrative, which are discussed as agency wide costs below. Costs directly related to water production and treatment were $11.1 million, which is only a 4.6% increase over the prior year. This increase is in line with an overall CPI increase for the District’s area of 3.2% combined with the fact that the District produced more water in 2024-25 as discussed above. The most notable year-over-year variations in water operating costs are outlined below: Power costs, which had risen significantly over the past five years, rose just 0.5% in 2024-25. The primary reason for this was a shift in production, from groundwater to river/purchased water, when four wells had to be taken offline in January 2024 because of their proximity to the recharge point for recycled water being produced by the new SNRC water reclamation plant. By shifting production to river/purchased water, which runs through the District’s treatment plant, power costs are reduced as the water does not have to be pumped out of the ground, and the treatment plant is equipped with energy saving equipment which further helps save energy. Salaries & Benefits increased approximately 5% across all programs that contribute to the production and delivery of water to customers. This corresponds directly to a negotiated 5% cost of living increase that was effective for the fiscal year. A slightly higher increase in the Transmission & Distribution program is due to authorized overtime, when pipeline maintenance crews responded to requests for assistance at the SNRC plant to help with cleanup of catch basins after a pump failure led to a temporary diversion of wastewater flows to those basins. EAST VALLEY WATER DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2025 21 Wastewater Collection Operations Wastewater Collection operating revenues consists of System Charges and Other Operating Revenue. System Charge rates are set by the District to cover the cost of maintaining the District’s wastewater collection system and to cover a portion of administrative and general expenses. A rate adjustment implemented in July 2024 was primarily responsible for a 9.8% increase in System Charge Revenue to $6.67 million for 2024-25, but the District also added approximately 200 customers when phase 1 of a large apartment complex was placed in service. Other Operating Revenue includes inspections, plan checking, and other development related fees; and periodic reimbursements from other public agencies or utilities for shared costs or participation in conservation programs. In FY 2024-25, Other Operating Revenue nearly doubled as development fees, particularly for infill commercial development, picked up again after a slow year in 2023-24. Wastewater Collection pipeline maintenance costs include video logging the condition of pipelines from the inside; utilizing a camera mounted on a robotic crawler; contracting for the repair of cracks in the pipelines noted on videos; and jetting pipelines with a Vactor to dislodge buildups of fats, oil and grease (FOG) before they can cause backups and spills. The collection system is entirely gravity flow, requiring no pumps and associated facilities. In FY 2024-25, wastewater collection maintenance costs decreased by 5.3% compared to the prior year. This change is the net effect of a 5% Cost of Living Adjustments (COLA) on salaries & benefits costs’, offset by a decrease in contract services as the District did not repeat the purchase and installation of flow sensors on manhole covers as was done in the prior year. Operating income for Wastewater Collections dropped from $125 to $15 thousand because of a significant increase in depreciation expense. 2024-25 was the first full year of depreciation taken on a large, $11.5 million interceptor line that was installed as part of the SNRC project to redirect wastewater flows to the SNRC. $0 $1 $2 $3 $4 $5 $6 $7 $8 2021 2022 2023 2024 2025 Mi l l i o n s Wastewater Collection Operating Revenue versus Expenses Revenue Expenses EAST VALLEY WATER DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2025 22 Water Reclamation Operations The District entered FY 2024-25 having produced 819.7 million gallons of recycled water between January and June of 2024, the first six months of operations for the new Sterling Natural Resource Center (SNRC) water reclamation plant. During FY 2024-25, the SNRC produced another 2.272 billion gallons (6,972 acre-feet) of recycled water, affirming the District’s decision to pursue water recycling as a supplemental water source. While these production numbers are encouraging, they are also an indicator of higher-than-expected wastewater flows into the plant which has occasionally exceeded treatment capacity and forced the use of overflow retention basins. For this reason, the SNRC construction contract was amended to add a fifth membrane bioreactor (MBR) train to increase the plant’s treatment capacity. Additional information regarding the fifth MBR train is provided in the capital section of this discussion. Water Reclamation does involve some new revenue sources for the District, but the primary and most reliable source is wastewater treatment charges. The District has been collecting these charges since approximately 1957, but as of March of 2024, the District no longer remits those charges to the City of San Bernardino Water Department (City) which provided treatment services for the District prior to that date. The completion of the Sterling Natural Resource Center in 2024 allows the District to treat wastewater and to keep the charges collected for providing that service. Treatment charges for FY 2024-25, which were based on rates established by the District in May 2021, were $12.7 million. This is an 18.0% increase over prior year revenue of $10.7 million and resulted from 1) a rate adjustment that went into effect on January 1, 2025, 2) new development, with a 200-unit apartment complex completed near the beginning of the fiscal year, and 3) much higher water consumption compared to recent years, which is factored into billing for non-residential customers. A second revenue stream in Reclamation is for the production and delivery of recycled water, which the District has reported as a type of Water Sales in the accompanying financial statements. The recharge basins where recycled water is delivered are owned by the San Bernardino Valley Municipal Water District (San Bernardino Valley), with which the District has an agreement under its Local Resource Investment Program (LRIP) to recharge all recycled water produced by the SNRC. In exchange the District receives a contribution from San Bernardino Valley of $173 per acre-foot of water recharged. During FY 2024-25 the District recharged 6,972.09 acre-feet of recycled water to earn a LRIP contribution of $1,206,250. This amount exceeded projections by $134,250 due to higher-than- expected wastewater flows into the plant. A third Reclamation revenue stream is tipping fees charged to food waste haulers who choose to discharge their waste at the SNRC. This waste is added to sludge generated by plant treatment operations, converted to gas by anaerobic digesters, and then converted to energy for use in powering plant operations. Though the District anticipated generating approximately $2.04 million in tipping fees during FY 2024-25, power outages and other perplexities continue to hamper attempts to make the digesters fully operational, and by the end of the fiscal year only $460 thousand, or 22%, of projected tipping fee revenues were realized. The graph below depicts the District’s revenue and expenses related to wastewater treatment and reclamation. Through FY 2021 the District used the City rates to bill its customers and then remit payment to the City at the end of each month. Under this relationship, treatment revenue collected was exactly equal to treatment fees paid to the City. In May 2022, the District established and implemented its own rates and began hiring operators and covering startup costs for commencement of operations at the SNRC. The District’s Wastewater Treatment rates were adopted with three phases. Phases 1 and 2 were implemented in May 2022 and January 2023, respectively, with phase 3 scheduled for implementation in January 2024. The District’s rate structure consists of fixed monthly EAST VALLEY WATER DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2025 23 charges for all residential customers, and for non-residential customers, a combination of fixed and variable charges, which are assessed based on water usage. For the year ended June 2025, Water Reclamation Revenue was $14.3 million, compared to $11.1 million in the previous fiscal year. The increase was substantially due to rate adjustments that became effective in January 2025. $6 $7 $8 $9 $10 $11 $12 $13 $14 $15 $16 2021 2022 2023 2024 2025 Mi l l i o n s Water Reclamation Operating Revenue versus Expenses Revenue Expenses Operating expenses recorded by the Reclamation fund (before depreciation) in FY 2024-25 were $10.0 million compared to projections of $7.7 million. The extended process of commissioning the digesters resulted in energy costs being more than double the $1.4 million budgeted for FY 2024-25. In addition, the digester delays had unexpected costs such as the need to rent a boiler and use gas to keep the biology in the digesters alive while problems were resolved. Salaries & Benefits of $2.1 million also exceeded budget by 23% due to unexpected overtime costs as staff worked to address issues such as clogged screens, odors, and leaking seals that arose during start-up. Finally, a full year of depreciation expense for $5.44 million was added to total operating expenses of $15.4 million. Upon completion of construction in FY 2023-24, the cost of the new SNRC plant was allocated to approximately 200 components (facilities and equipment) and capitalized, with useful lives ranging from 10 to 60 years. FY 2024- 25 was the first year in which a full 12 month depreciation was recognized for all of these components. Shared Customer Account & Administrative Costs Costs related to Customer Accounts are generated by the Customer Service and Meter Services departments. The burden for funding these costs is allocated between the Water and Wastewater Collection funds at roughly a 70%- 30% split; the Water Reclamation fund does not currently share in these costs and will not until the fund is more established and revenues are able to cover costs sufficiently. EAST VALLEY WATER DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2025 24 Customer Account costs increased by 11.3% in FY 2024-25 to $2,663,991. While there were nominal cost increases in many cost categories, the two categories that were most impactful were: Contract Services increased 13% to $1.1 million due to the increased price of maintenance contracts on District billing and other software applications. Salaries & Benefits increased $138 thousand to $1,343,602 due to a negotiated COLA increase of 5%, and pension costs and health insurance costs both increasing by approximately 10%. General and Administrative (G&A) costs increased 32.6% to $16.9 million from $12.8 million in the previous fiscal year. These are reported G&A cost totals, for both years, after posting significant Salaries & Benefits expense adjustments related to Net Pension, and Other Post Employment Benefit (OPEB) liabilities in accordance with Governmental Accounting Standards Board (GASB) statements 68 and 75. The amounts of expense adjustments were $0.8 million and ($1.8) million for fiscal years 2024-25, and 2023-24, respectively. Prior to the adjustments, cost totals for G&A were $16.2 million and $14.6 million in the current and prior years, respectively. This equates to a real dollar increase of $1.6 million, and some of the reasons for that increase are explained below: 1. Salaries & Benefits increased $0.4 million to $7.6 million, compared to $7.2 million incurred in the previous year. This increase is due to a 5% COLA negotiated with staff for FY 2024-25. In addition to the agency- wide COLA, an FTE was added to the Public Affairs department during the fiscal year. 2. Contract Services in G&A increased 33.9% to $4.4 million. This increase includes a charge for accumulated costs for environmental and habitat conservation services related to the SNRC water recycling plant. The District has ongoing commitments related to translocation of a fish species whose habitat was impacted by the diversion of recycled water discharge points as a result of the project. In addition, the District has increased the utilization of consultants to pursue grant funding for planned projects, and has also issued a new contract for consultants to update the District’s digital mapping software. 3. Insurance costs continued to climb, by 26.4% to $2.3 million in FY 2024-25. The primary reason for the increase is that 2024-25 was the first full year for the SNRC to be included in the District’s insurance. Non-Operating Activities The District’s Non-Operating Revenue of $3.7 million includes Investment Income of $1.9 million (including unrealized gains / losses), and reimbursements of $1.8 million, the most significant of which was from a greening grant awarded for the landscaping design and installation at the new Sterling Natural Resource Center. Investment Income is earned on the District’s portfolio of U.S. Treasury and Agency Bonds and deposits with two Local Government Investment Pools (LGIP). During FY 2024-25, investment income increased $626 thousand, or 49%, to $1,893,149. The increase was due to an increase in the amount of investible cash reserves, and stable interest rates. The average stated rate on the District’s portfolio of U.S. bonds is 3.72%, and the yield for the two LGIPs were 4.275% and 4.40% as of June 2025. Non-Operating Expense includes interest paid on Long-Term Debt, which jumped to $5.3 million with the first payment on the SNRC State loan coming due in December 2024. Also included in non-operating is a loss on disposal of assets of $81 thousand which occurred due to an over-estimate of the useful lives of network equipment that had to be replaced in 2024-25. EAST VALLEY WATER DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2025 25 Capital Contributions Contributions received during FY 2024-25 included $3.6 million in developer capacity fees, across all funds, for approximately 243 EDUs (equivalent dwelling units). These fees represent ‘moderate’ continued development activity from the prior year when fees were received for 156 EDUs. Development is a mixture of both commercial and residential construction, mostly for Tract developments. East Valley Water District Changes in Net Position (in millions) 2025 2024 2023 Water Sales 21.3$ 17.9$ 17.0$ System Char es 17.5 16.2 15.5 Treatment Char es 12.7 10.7 10.1 Other Operatin Rev 1.8 1.1 1.2 Supply & Pumpin (4.9) (5.0) (4.9) Distribution / Collection (5.1) (4.8) (5.1) Treatment (11.8) (12.0) (10.8) Customer Accounts (2.7) (2.4) (2.2) General & Administrative (16.9) (12.8) (13.2) Depreciation (12.3) (7.6) (6.3) Investment Income 1.9 1.2 0.3 Gain on Disposal and Other 0.3 0.1 0.1 Interest Expense (5.4) (0.8) (0.9) Income Before Contributions & Special Item (3.6) 1.8 0.8 Developer Contributions 3.6 2.6 1.8 Grant Funds Contributed 1.7 - 0.1 Special Item - Settlement Obli ation - (7.0) - Chan e in Net Position 1.7 (2.6) 2.7 Be innin Net Position, as Previously Reported 145.2 147.8 145.1 Endin Net Position 146.9$ 145.2$ 147.8$ Components of Net Position The District is required to present its Net Position in three categories: Net Investment in Capital Assets, Restricted, and Unrestricted. Net Investment in Capital Assets The components comprising Net Investment in Capital Assets are presented in Note 7 of the accompanying financial statements. The balance at June 30, 2025 is $113.8 million, an increase of $1.7 million compared to June 30, 2024. The increase is the net result of the acquisition or construction of Capital assets for $8.1 million, combined with a $5.1 million decrease in outstanding debt (includes associated deferred inflows/outflows), and then offset by an increase in accumulated depreciation of $11.5 million. EAST VALLEY WATER DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2025 26 Restricted Restricted Net Position consists of unexpended development impact fees which may only be appropriated for a project included in the District’s Capital Improvement Program. During FY 2024-25 the District received $3.6 million in capacity fees while $2.9 million was expended on projects to expand plant capacity. A summary of the accumulation and use of these funds is presented as ‘Other Information’ in this document. Restricted Net Position also includes cash owned by the North Fork Water Company, a blended component unit. Unrestricted Unrestricted Net Position is the balance after amounts to be classified as Net Investment in Capital Assets or Restricted have been determined. Unrestricted Net Position decreased $0.9 million to $19.0 million in FY 2024-25. Capital Assets The District spent approximately $9.1 million for expansion or replacement of property, plant, and equipment during FY 2024-25. These amounts are reflected in Utility Plant, or as additions to Construction in Progress, in the accompanying financial statements. Placed in Service During FY 2024-25, District staff, consultants, and contractors completed work on the following: Completed rehabilitation of 0.5-million-gallon tank at Plant 56. Replaced and upsized to 6 inch pipe, approximately 420’ of water main in Elmwood Drive and Oakridge Court with District crews. Replaced 40 aging gate valves to ensure proper operation in case of emergency and need to isolate critical sections of District distribution system. Camera and fencing upgrades to enhance security at critical District sites. Utility Plant in Service – June 30th (in millions) Department 2025 2024 Water Source of Suppl 21.6$ 21.4$ Pumpin 15.6 15.3 ransmission & Distribution 105.4 102.7 reatment 33.6 33.5 Wastewater Collection Lines 39.4 39.4 Reclamation Plant 177.0 176.0 General Plant & Equipment 45.0 44.7 Total 437.6$ 433.0$ EAST VALLEY WATER DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2025 27 Construction in Progress (CIP) Construction in Progress increased from $491 thousand to $4.0 million (see Note 4) during FY 2024-25 as the District turned its attention to water facilities after having completed a $197 million treatment plant in the previous fiscal year. During the current year, $6.4 million in cost was added to CIP, $2.8 million was removed 8 projects were closed, capitalized and placed in service, and another $133 thousand related to two small projects was expensed, leaving a balance at June 30, 2025 of $4.0 million. Approximately 40 projects, most related to new development, remain in progress at year end. Future Capital Improvements - Water The District’s ability to meet water quality requirements, promote water conservation, and increase efficiencies in conducting District business are the driving forces by which District management develops long-term capital plans. To meet these objectives, the District’s 5-Year Capital Improvement Plan includes the following projects: Rehabilitate and extend the useful lives of aging water storage tanks. Replace aging water distribution pipelines that require frequent repair and are suspected of causing system water losses. Drill and equip three new wells to meet the demands of new development, and to replace the capacity of three existing wells taken out of service due to their proximity to recycled water recharge basins. Partner with developers to increase the capacity of new storage tanks they plan to build to serve their projects. The District has been awarded 10% match funding under the State’s Prepare California Match Program for a $6.8 million project to complete seismic retrofits on several water storage tanks. A FEMA Hazard Mitigation Grant Program (HMGP) grant has been awarded for the design phase (Phase 1) of the project and should facilitate an award for the construction phase (Phase 2) once the design is completed. The District has also been awarded Phase 1 FEMA funding of over $1.1 million for design of a significant water main replacement project. Once design is complete, the District will work to finalize Phase 2 funding to cover up to $40 million in replacement of pipelines which qualify for hazard mitigation assistance. Future Capital Improvements - Wastewater The District maintains a list of recommended wastewater main replacements/rehabilitations based on assessments of pipeline conditions noted during video logging of the collection system. Pipelines assessed at the highest risk of structural failure are prioritized on the District’s Five-Year Capital Improvement Plan (CIP). The District will also update its Wastewater Collection System Master Plan during the next two years to identify undersized main pipelines that are susceptible to surcharging during heavy rains. Undersized pipelines can impede new development and will be included in discussions with developers as necessary. Pipelines identified in the District’s Wastewater Collection System Master Plan will be built into models developed for an update to the District’s capacity fees. EAST VALLEY WATER DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2025 28 Future Capital Improvements - Reclamation The SNRC has realized higher than expected influent flows during the first eighteen months of treatment operations causing the District to contract for construction of a fifth MBR train, increasing the treatment capacity of the plant overall. The additional capacity will allow for the appropriate rotation of the trains for cleaning and maintenance, and the cost to add the additional MBR train will be approximately $8.5 million. Current and future development capacity fees are being leveraged to finance the cost of this project. Long Term Debt / Credit The District’s long-term debt consists of Revenue Bonds and loans from the California State Water Resources Control Board State Revolving Fund. Outstanding balances as of June 30, 2025 were as follows: Revenue Bonds 2020A Refundin Bonds 13,030,000$ 2020B Refundin Bonds 12,505,000 SWRCB Loans AVAD Construction 40,213 EFAD Construction 234,291 Plant 134 Construction 4,667,975 SNRC Construction 172,053,787 Total 202,531,266$ The funding agreement with the State Water Resources Control Board for the SNRC construction consists of a $168.30 million loan at 1.8% and a $6.7 million grant. Upon project completion, interest accrued on District draws against the loan during construction, totaling $7.96 million, was added to the loan balance for a total loan balance of $176.26 million. The State Water Resources Control Board considered the project complete in December 2023, and according to terms of the State Funding Agreement, the first principal payment of $4,211,290 (plus interest of $2,983,285) was made to the state in December 2024. An annual payment of $7,811,471 will be made in December 2025 and continue through the end of the loan in 2052. All scheduled debt payments for FY 2024-25 were paid timely. See Note 5 to the accompanying financial statement notes for further discussion about Long-Term Debt. EAST VALLEY WATER DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2025 29 $0 $50 $100 $150 $200 $250 2021 2022 2023 2024 2025 Mi l l i o n s Outstanding Long-Term Debt June 30th 2020B Bonds 2020A Bonds SBVMWD Loan U.S. Bank Loan SRF Loans-Other SRF Loan-SNRC Loans from U.S. Bank and San Bernardino Valley Municipal Water District were paid off during FY 2023-24, and are referenced solely because they are included in the five year schedule shown above. Standard & Poor’s and Fitch rated the District’s 2020 Series A and B Revenue Bonds at AA- at the time of issuance. Fitch affirmed this rating after a review of the District’s financial plans in June 2024. Dun & Bradstreet (D&B), based on audited financial statements and creditor input, also rated the District. The rating given by D&B is currently 5A1 accompanied by a financial condition assessment of ‘strong’, which is no change from previous years. Rate Increases On May 15, 2024, the District adopted rate adjustments for all three of the District’s enterprise activities, to be implemented in three phases. Wastewater Collection and Reclamation rate adjustment phases are effective on July 1 of 2024, 2025, and 2026, and water rate adjustments are effective on January 1 of 2025, 2026, and 2027. Additional information about the District’s water and wastewater rates can be found on the District’s website at www.eastvalleywater.gov. Contacting the District’s Financial Management This financial report is designed to give our customers/ratepayers, creditors, and investors a general overview of the District’s finances, and to demonstrate the District’s accountability for money it receives, and stewardship over facilities it maintains. If you have questions about this report, or need additional information, contact the District’s Finance Department at 31111 Greenspot Road, Highland, California 92346, or call (909) 381-6463. 30 EAST VALLEY WATER DISTRICT Statement of Net Position June 30, 2025 The accompanying notes are an integral part of this statement. 31 For Comparative Purposes Only 2025 2024 SSETS Current Assets: Cash and Cash Equivalents 11,982,358$ 8,197,155$ Investments 15,802,745 15,304,169 Accounts Receivable, Net 6,856,863 6,107,689 Interest Receivable 327,422 341,051 Other Receivables 2,766,435 1,959,106 Due from Other Governments 4,221,622 7,553,848 Inventor 1,462,448 1,061,891 Prepaid Expenses 675,291 775,440 otal Current Assets 44,095,184 41,300,349 Non-Current Assets: Restricted Cash and Cash Equivalents 16,349,722 15,207,521 Restricted Due from Other Governments - 7,800,000 Assessments Receivable 230,355 246,083 Capital Assets not bein Depreciated 11,101,646 7,574,139 Capital Assets, Net 307,519,963 314,384,669 otal Non-Current Assets 335,201,686 345,212,412 otal Assets 379,296,870 386,512,761 DEFERRED OUTFLOWS OF RESOURCES Deferred Char e on Refundin 770,237 812,441 Deferred Outflows - Pensions 4,832,914 6,318,359 Deferred Outflows - OPEB 1,679,283 2,004,127 otal Deferred Outflows Of Resources 7,282,434 9,134,927 otal Assets and Deferred Outflows of Resources 386,579,304$ 395,647,688$ (Continued) EAST VALLEY WATER DISTRICT Statement of Net Position - Continued June 30, 2025 The accompanying notes are an integral part of this statement. 32 For Comparative Purposes Only 2025 2024 LIABILITIES Current Liabilities: Accounts Payable and Accrued Expenses 4,500,764$ 10,449,146$ Accrued Payroll and Benefits 1,027,424 944,585 Customer Service Deposits 1,590,870 1,439,016 Construction Advances and Retentions 212,689 140,317 Accrued Interest Payable 1,758,943 228,360 Current Portion of Compensated Absences 486,184 432,702 Current Portion of Long-Term Debt 5,947,873 6,183,942 Due to Other Governments 139,103 76,452 Total Current Liabilities 15,663,850 19,894,520 Non-Current Liabilities: Compensated Absences, Less Current Portion 1,304,121 1,108,524 Net Pension Liability 14,505,560 14,902,033 Net OPEB Liability 1,481,136 2,067,180 Long-Term Debt, Less Current Portion 199,070,556 203,977,262 Due to Other Governments 5,600,000 6,300,000 Total Non-Current Liabilities 221,961,373 228,354,999 Total Liabilities 237,625,223 248,249,519 DEFERRED INFLOWS OF RESOURCES Deferred Inflows - Refunding 1,019,098 1,076,449 Deferred Inflows - Pensions 304,714 543,111 Deferred Inflows - OPEB 679,624 550,043 Total Deferred Inflows Of Resources 2,003,436 2,169,603 Total Liabilities and Deferred Inflows of Resources 239,628,659 250,419,122 NET POSITION Net Investment in Capital Assets 113,835,631 112,073,604 Restricted for: Future Capital Expansion Projects 14,135,060 13,314,565 Unrestricted 18,979,954 19,840,397 Total Net Position 146,950,645$ 145,228,566$ EAST VALLEY WATER DISTRICT Statement of Revenues, Expenses, and Changes in Net Position Year Ended June 30, 2025 The accompanying notes are an integral part of this statement. 33 For Comparative Purposes Only 2025 2024 OPERATING REVENUES Water Sales 21,280,114$ 17,900,515$ Wastewater Treatment Char es 12,683,579 10,746,724 System Char es 17,507,882 16,222,435 Other Char es 1,812,604 1,060,541 Total Operatin Revenues 53,284,179 45,930,215 OPERATING EXPENSES Water Department: Source of Supply 3,801,843 4,079,366 Pumpin 1,124,472 883,731 Treatment 1,753,123 1,592,368 Transmission and Distribution 4,375,616 4,012,276 Customer Accounts 1,958,853 1,757,943 Total Water Department 13,013,907 12,325,684 Wastewater Department: Wastewater Collection 747,704 792,350 Customer Accounts 705,138 634,414 Total Wastewater Department 1,452,842 1,426,764 Reclamation Department: Treatment 10,001,513 10,411,256 Total Reclamation Department 10,001,513 10,411,256 Administrative and General 16,949,097 12,776,969 Operatin Expenses Before Depreciation 41,417,359 36,940,673 Depreciation 12,311,922 7,624,666 Total Operating Expenses 53,729,281 44,565,339 Operatin Income (445,102)$ 1,364,876$ (Continued) EAST VALLEY WATER DISTRICT Statement of Revenues, Expenses, and Changes in Net Position - Continued Year Ended June 30, 2025 The accompanying notes are an integral part of this statement. 34 For Comparative Purposes Only 2025 2024 NON-OPERATING REVENUES (EXPENSES) Investment Income 1,692,203$ 1,136,502$ Unrealized Investment Gain 200,946 130,536 Other Income 339,433 39,064 Interest Expense (5,313,021) (789,683) Loss on Disposal (81,006) - Total Non-Operatin Revenues (Expenses) (3,161,445) 516,419 Income Before Contributions (3,606,547) 1,881,295 CONTRIBUTIONS Capacity Char es 3,630,874 2,556,388 Capital Grants 1,493,764 - Operatin Grants 203,988 - Total Contributions 5,328,626 2,556,388 SPECIAL ITEM Settlement Obli ation - Wastewater Treatment Authority Disassociation - (7,000,000) CHANGE IN NET POSITION 1,722,079 (2,562,317) TOTAL NET POSITION, BEGINNING 145,228,566 147,790,883 TOTAL NET POSITION, ENDING 146,950,645$ 145,228,566$ EAST VALLEY WATER DISTRICT Statement of Cash Flows Year Ended June 30, 2025 The accompanying notes are an integral part of this statement. 35 For Comparative Purposes Only 2025 2024 CASH FLOWS FROM OPERATING ACTIVITIES Cash Received from Customers 51,879,529$ 45,687,123$ Cash Payments for Employees Services (15,569,983) (13,812,566) Cash Payments to Suppliers (30,889,987) (22,969,278) Cash to/(from) Other Sources 338,628 39,064 Net Cash Provided by Operatin Activities 5,758,187 8,944,343 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Assessments Received 301,968 131,891 Developer Fees Received 3,630,874 2,556,388 Reimbursements Received 1,697,756 6,579,416 Proceeds/Draws from SRF Loan 11,919,642 8,813,935 Due (From) To Water Fund - (2,655,077) Due (From) To Reclamation Fund - 5,661,647 Principal Paid on Capital Debt (5,766,446) (3,242,553) Interest Paid on Capital Debt (3,960,686) (998,343) Due (From) To Other A encies (637,993) (623,548) Assessments Received 131,891 Acquisition of Capital Assets (9,137,856) (15,497,342) Net Cash Provided (Used) by Capital and Related Financin Activites (1,952,741) 726,414 CASH FLOWS FROM INVESTING ACTIVITIES Interest Received from Investments 1,414,534 743,713 Acquisition of Investments (8,692,576) (11,398,599) Proceeds from Sale of Investments 8,400,000 1,565,000 Net Cash Provided (Used) by Investin Activities 1,121,958 (9,089,886) Net Increase (Decrease) in Cash and Cash Equivalents 4,927,404 580,871 Cash and Equivalents, Be innin of Year 23,404,676 22,823,805 Cash and Equivalents, End of Year 28,332,080$ 23,404,676$ RECONCILIATION TO STATEMENT OF NET POSITION Cash and Cash Equivalents 11,982,358$ 8,197,155$ Restricted Cash and Cash Equivalents 16,349,722 15,207,521 otal Cash and Cash Equivalents 28,332,080$ 23,404,676$ (Continued) EAST VALLEY WATER DISTRICT Statement of Cash Flows - Continued Year Ended June 30, 2025 The accompanying notes are an integral part of this statement. 36 For Comparative Purposes Only 2025 2024 Reconciliation of Operatin Income (Loss) to Ne Cash Provided by Operatin Activities Operatin Income (Loss) (445,102)$ 1,364,876$ Ad ustments to Reconcile Operatin Income (Loss) to Net Cash Provided by Operatin Activities: Depreciation 12,311,922 7,624,666 Miscellaneous Income/(Expense) 339,433 39,064 CIP Pro ects Expensed 133,319 168,183 Chan e in Assets and Liabilities: (Increase) Decrease in Accounts Receivable (749,175) (166,850) (Increase) Decrease in Inventory (400,557) (87,071) (Increase) Decrease in Prepaids 100,154 (518,642) (Increase) in Deferred Outflows of Resources - Pensions 1,810,289 (1,821,089) Increase (Decrease) in Accounts Payable (5,948,382) 1,890,483 Increase (Decrease) in Accrued Salaries and Benefits 169,588 119,209 Increase (Decrease) in Compensated Absences 162,330 113,459 Increase (Decrease) in Net Pension Liability (396,473) 1,046,897 Increase in Net OPEB Liability (586,045) 80,819 Decrease in Deferred Inflows of Resources (108,816) (833,419) Increase (Decrease) in Customer Deposits (807,329) (111,296) Increase (Decrease) in Developer Deposits 173,031 35,054 Total Cash Provided by Operatin Activities 5,758,187$ 8,944,343$ NON-CASH INVESTING, CAPITAL, AND NON-CAPITAL FINANCING ACTIVITIES: Fair Value Ad ustments to Investments 200,947$ 130,536$ Receivable Offset by Debt 51,195$ 8,616,385$ -$ -$ Capital Assets Acquired by Assumin Liabilities, Including Retainage Payable EAST VALLEY WATER DISTRICT Statement of Fiduciary Net Position Year Ended June 30, 2025 The accompanying notes are an integral part of this statement. 37 For Comparative Purposes Only 2025 2024 SSETS Current Assets: Cash and Equivalents 2,972,682$ 3,773,219$ Due from Other Governments 135,131 76,662 Assessments Receivable 3,262 5,375 otal Assets 3,111,075 3,855,256 NET POSITION Restricted for Debt Obli ations 3,111,075 3,855,256 otal Net Position 3,111,075$ 3,855,256$ EAST VALLEY WATER DISTRICT Statement of Changes in Fiduciary Net Position Year Ended June 30, 2025 The accompanying notes are an integral part of this statement. 38 For Comparative Purposes Only 2025 2024 DDITIONS Interest Income 148,698$ 140,320$ Special Tax Assessments on Behalf of Other Entities 305,955 195,418 Debt Proceeds Collected on Behalf of Other Entities - 5,517,670 otal Additions 454,653 5,853,408 DEDUCTIONS Adminstrative Costs 11,271 8,482 Principal Payments to Bondholders 135,000 - Interest Expense 266,306 140,481 Payments to Other Entities 786,257 1,735,960 Costs of Issuance - 250,920 otal Deductions 1,198,834 2,135,843 CHANGE IN NET POSITION (744,181) 3,717,565 NET POSITION - BEGINNING OF YEAR 3,855,256 137,691 NET POSITION - END OF YEAR 3,111,075$ 3,855,256$ EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2025 39 1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A) Reporting Entity The East Valley Water District is a special district that was formed in 1954, as a result of an election by local residents who desired water service by a public water agency. Later, as the population increased, a modern wastewater system was needed to replace the septic tanks used at the time. Citizens voted to give the District responsibility for that service. The District encompasses an area of approximately 30.1 square miles and provides water and wastewater service to the City of Highland, parts of the City of San Bernardino, and unincorporated parts of the County of San Bernardino, California. The East Valley Water District Financing Authority (Authority), and the North Fork Water Company (Company) are component units of the East Valley Water District. A component unit is an entity which is financially accountable to the primary government, either because the primary government appoints a voting majority of the component unit's Board, or because the component unit will provide a financial benefit or impose a financial burden on the primary government. The Authority and Company are blended component units. Only North Fork Water Company prepares separate financial statements. The Authority was created in August 2010 by a joint exercise of powers agreement for the purpose of financing public capital improvements. It is governed by a Board of Directors comprised of the District's Board of Directors. The Authority issued debt in October 2010 which is secured solely from installment payments under an installment purchase agreement entered into by the District and the Authority. The Company was established in February 1885 to deliver water, taken from the Santa Ana River to its property owner /shareholders. The Company is governed by a Board of Directors comprised of, and elected by, Company shareholders. The District has purchased shares of Company stock as they become available to secure rights to the Santa Ana River water and have it delivered to the District's surface water treatment plant. At June 30, 2024, the District owned 7,147 of 7,156 outstanding Company shares. Due to the number of Company shares owned, the District is able to appoint a majority of the Company’s Governing Board and is therefore financially accountable for the Company. In addition, management and staff of the District have complete responsibility for the operations of the Company. As a result, the Company's financial statements have been included in the accompanying financial statements as a blended component unit. Copies of the Company's financial statements may be obtained from the District’s Finance Department at 31111 Greenspot Road, Highland, California 92346. EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2025 40 1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued The following condensed combining schedule shows how the District, and its component units are blended in the accompanying financial statements: Table 1-1 District NFWC Eliminations Total Statement of Net Position Current Assets 44 081 601 13 583 - 44 095 184 Ca ital Assets 318 139 708 2 550 632 2 068 731 318 621 609 Other Assets 16 331 949 248 128 - 16 580 077 Deferred Outflows 7 282 434 - - 7 282 434 otal Assets & Deferred Outflows 385 835 692 2 812 343 2 068 731 386 579 304 Current Liabilities 15 624 535 39 315 - 15 663 850 Lon -Term Liabilities 221 961 373 - - 221 961 373 Deferred Inflows 2 003 436 - - 2 003 436 otal Liabilities & Deferred Inflows 239 589 344 39 315 - 239 628 659 Net Investment in Ca ital Assets 113 330 681 2 573 681 2 068 731 113 835 631 Restricted Net Position 13 935 713 199 347 - 14 135 060 Unrestricted Net Position 18 979 954 - 18 979 954 otal Net Position 146,246,348$ 2,773,028$ (2,068,731)$ 146,950,645$ Statement of Changes in Net Position Sales and Services 51 471 575 - - 51 471 575 Other O eratin Revenue 1 812 604 - - 1 812 604 O eratin Ex enses 41 241 840 175 519 - 41 417 359 De reciation 12 256 085 55 837 - 12 311 922 O eratin Income 213 746 231 356 - 445 102 Net Non-O eratin Revenue Ex enses 1 953 921 286 240 - 1 667 681 Ca ital Contributions 3 834 862 - - 3 834 862 S ecial Items - - - - Chan e in Net Position 1 667 195 54 884 - 1 722 079 Be innin Net Position 144 579 153 2 718 144 2 068 731 145 228 566 Ending Net Position 146,246,348$ 2,773,028$ (2,068,731)$ 146,950,645$ Net Cash from Operating Activities 5,937,229$ (179,042)$ -$ 5,758,187$ Net Cash from Ca ital and Related Financin Activities 2 238 818 286 077 - 1 952 741 Net Cash from Investin Activities 1 121 958 - - 1 121 958 Be innin Cash and E uivalents 23 263 583 141 093 - 23 404 676 Ending Cash & Equivalents 28,083,952$ 248,128$ -$ 28,332,080$ EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2025 41 1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued B) Measurement Focus, Basis of Accounting and Financial Statement Presentation The accounting and financial reporting treatment is determined by the applicable measurement focus and basis of accounting. Measurement focus indicates the type of resources being measured such as current financial resources or economic resources. The basis of accounting indicates the timing of transactions or events for recognition in the financial statements. The District uses the economic resources measurement focus and the accrual basis of accounting. Accordingly, revenues are recognized when they are earned, and expenses are recorded when the liability is incurred. Fiduciary fund financial statements include a statement of fiduciary net position. The District has one type of fiduciary fund presented: a custodial fund, which is used to account for Community Facilities District assessments, debt issuances, the financing of eligible public facilities, and debt service. All of the assets in this fund are matched by a liability to parties on whose behalf they are held. Accordingly, there is no balance for Net Position, and no Statement of Changes in Net Position. The custodial fund is used to report resources held by the District in a purely custodial capacity, which involves only the receipt, temporary investment and remittance of fiduciary resources to individuals, private organizations or other governments. Custodial funds use the economic resource measurement focus. C) Comparative Data Prior year data has been included where practical for comparison purposes only. The prior year data does not represent a complete presentation in accordance with accounting principles generally accepted in the United States of America. D) Inventory Valuation Inventories are valued at cost using the average-cost method. E) Capitalization and Depreciation Capital assets purchased or constructed by the District are recorded at cost. Donated capital assets are recorded at actual or estimated acquisition value as of the date received. The District has a capitalization threshold of $5,000. Depreciation is computed using the straight-line method over the estimated useful lives of the various assets. Water canals, water, and wastewater lines are depreciated over 25 to 50 years; office equipment and vehicles are depreciated over 5 years. Water stock and rights contributed to the District are recorded at the same value the District is currently paying for the purchase of similar stock. EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2025 42 1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued F) Restricted Assets Certain assets of the District are restricted in use by ordinance or debt covenant and accordingly are shown as restricted assets on the accompanying statement of net position. Unexpended Bond proceeds are set aside for capital improvements, District deposits into Bond trustee accounts are to be used for debt service, and utility deposits must be returned to the customers at their request after their account has been paid timely for 12 consecutive months, or when their account is closed. G) Cash and Cash Equivalents For the purposes of the statement of cash flows, cash and cash equivalents have been defined as demand deposits and highly liquid investments purchased with an original maturity of 3 months or less. The District invests funds with the Local Agency Investment Fund (LAIF) and Money Market Mutual Funds. Due to the high liquidity of these investments, these funds are classified as cash equivalents. H) Investments The District has adopted the provisions of GASB Statement No. 72, Fair Value Measurement and Application. The objective of this Statement is to enhance comparability of financial statements among governments by measurement of certain assets and liabilities at their fair value using a consistent and more detailed definition of fair value and accepted valuation techniques. The definition of fair value is the price that would be received to sell and asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This Statement establishes a hierarchy of inputs to valuation techniques used to measure fair value. I) Deferred Outflows/Inflows of Resources In addition to assets, the statement of financial position includes a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net assets that applies to future periods and so will not be recognized as an outflow of resources (expense/expenditure) until then. The District has three items which qualify for reporting in this category: Deferred Outflows Charge on Refunding, Deferred Outflows Related to Pensions, and Deferred Outflows Related to OPEB. In addition to liabilities, the statement of financial position includes a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net assets that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The District has three items which qualify for reporting in this category: Deferred Inflows related to Pensions, Deferred Inflows related to OPEB, and Deferred Inflows related to Bond Refinancing. EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2025 43 1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued J) Compensated Absences The District has a policy whereby an employee can accumulate unused sick leave and vacation. Sick leave is to be used for extended periods of sickness; however, upon termination or retirement, a portion will be paid as additional benefits to the employee. At retirement or termination, employees who have accumulated over ten years of service will be paid between 50 to 70% of their unused sick leave (based upon their balance of unused sick leave) at their regular payroll rates in effect at the date of termination. Also, employees can cash out up to 300 hours of unused sick time, per calendar year, provided that a minimum of 160 hours is retained after said cash-out. The District has provided for these future costs by accruing a range of the earned and unused sick leave and 100% of the earned and unused vacation. K) Classification of Revenue As an enterprise (proprietary) fund, the District classifies its revenues into three classifications: operating revenue, non-operating revenue, and contributions. Operating revenues are defined as revenues realized by the District in exchange for providing its primary services of water distribution, wastewater collection, and water reclamation to its customers. Non-operating revenues are those derived from the investment of cash reserves and from the disposal of excess property, and include those resources received from entities other than customers, such as governmental agencies and developers, for purposes not related to capital improvement. Donated plant and cash received for capital improvement without the requirement that the District give resources in exchange are recorded as contributions. L) Use of Restricted Resources The District uses restricted resources, prior to using unrestricted resources, to pay expenses meeting the criteria imposed on the use of restricted resources by a third party. M) Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. N) Pension For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Plan and additions to/deductions from the Plan’s fiduciary net position have been determined on the same basis. For this purpose, benefit payments (including refunds of employee contributions) are recognized when currently due and payable in accordance with the benefit terms. Investments are reported at fair value. EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2025 44 1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued GASB 68 requires that the reported results must pertain to liability and asset information within certain defined timeframes. For this report, the following timeframes are used. Valuation Date June 30, 2023 Measurement Date June 30, 2024 Measurement Period July 1, 2023 to June 30, 2024 O) Postemployment Benefits Other Than Pensions (OPEB) For purposes of measuring the District’s OPEB liability related to the California Employer’s Retirement Benefits Trust (CERBT), deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense, information about the fiduciary net position of the CERBT and additions to/deductions. from the CERBT fiduciary net position have been determined on the same basis as they are reported by the CERBT. For this purpose, the CERBT recognizes benefit payments when due and payable in accordance with the benefit terms. Investments are reported at fair value, except for money market investments and participating interest earning investment contracts that have a maturity at the time of purchase of one year or less, which are reported at cost. EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2025 45 1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued P) Future Accounting Pronouncements The applicable GASB Statements listed below will be implemented in future financial statements: Table 1-2 GASB Statemen Description Effective Date Statement No. 103 Financial Reporting Model Improvements Provides guidelines for the accounting and reporting of derivative instruments in governmental entities, focusing on their recognition, measurement, and disclosure. It distinguishes between hedging and investment derivatives, requiring different reporting for each, with all derivatives measured at fair value. The standard also mandates evaluating hedging effectiveness and requires detailed disclosures to enhance financial transparency. The statement is effective for fiscal years beginning after June 15, 2025. Statement No. 104 Disclosure of Certain Capital Assets n ances sc osure requ remen s or cap a asse s by building on Statement No. 34 to require separate reporting by major class for lease assets, intangible right-to-use assets from public-private or public- public partnerships, subscription-based IT arrangement assets, and other intangible assets. It also establishes new disclosures for capital assets held for sale requiring governments to reassess this status each reporting period and disclose historical cost, accumulated depreciation, and any related pledged debt by major asset class. The statement is effective for fiscal years beginning after June 15, EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2025 46 2) CASH AND INVESTMENTS Cash and Investments as of June 30, 2025 are classified in the accompanying financial statements as follows: Table 2-1 Cash and Cash Equivalents 11,982,358$ Restricted Cash and Cash Equivalents 16,349,722 Investments 15,802,745 otal 44,134,825$ Cash and investments as of June 30, 2025 consist of the following: Table 2-2 Cash on Hand 9,000$ Deposits with Financial Institutions 7,687,674 Money Market Accounts with Financial Institutions 1,004,833 Investments with Local Agency Investment Fund 18,627,601 Investments with California CLASS 1,002,972 Investment in Debt Securities 15,802,745 Total 44,134,825$ Investments Authorized by the California Government Code and the District’s Investment Policy The table below identifies the investment types that are authorized by the District's investment policy and in accordance with Section 52601 of the California Government Code. The table also identifies certain provisions of the District's investment policy that address interest rate risk and concentration of credit risk. Table 2-3 Authorized Investment Type Maximum Maturity uthorized Limit Required Rating Municipal Securities includin EVWD Issues 5 years None None U.S. Treasury Bills, Notes, or Bonds 5 years None None State Re istered Warrants, Notes, or Bonds 5 years None None Notes and Bonds of other Local California A encies 5 years None None U.S. A encies 5 years None None Placement Service Deposits 5 years 30% None Money Market Mutual Funds and Mutual Funds 5 years 15% 2 - AAA Collateralized Bank Deposits 5 years None None Commercial Papers 270 days 5% A Medium Term Notes 5 years 30% AA Local Government Investment Pools N/A 25% AA Local A ency Investment Fund (LAIF) N/A None None California CLASS N/A None None EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2025 47 2) CASH AND INVESTMENTS - Continued At June 30, 2025, the District had no investments in repurchase agreements and did not utilize this investment media during the reporting year. As a matter of investment policy, the District does not borrow funds with reverse repurchase agreements. Disclosures Relating to Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. One of the ways that the District minimizes its exposure to this type of risk is by investing in investments with laddered maturity dates. As of June 30, 2025, the District had the following investments and maturities: Table 2-4 Investment Type Fair Value Avera e Maturity Fannie Mae 299,952$ 2.54 years Freddie Mac 2,295,790 2.11 years Federal Home Loan Bank 7,514,838 2.29 years Federal Farm Credit Bank 193,370 1.4 years US Treasury 5,498,795 1.29 years Tenn Valley Authority - - LAIF 18,627,601 N/A Cal CLASS 1,002,972 N/A Money Market Mutual Funds 1,004,833 N/A 36,438,151$ Disclosures Relating to Credit Risk Generally, credit risk is the risk that the issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the minimum rating required by (where applicable) the California Government Code or the District’s investment policy, and the actual rating as of year-end for each investment type. EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2025 48 2) CASH AND INVESTMENTS - Continued Table 2-5 Investment Type Fair Value Minimum Legal Rating Exempt From Disclosure Rating at Year End AAA Not Rated Fannie Mae 299,952$ N/A -$ 299,952$ -$ Freddie Mac 2,295,790 N/A - 2,295,790 - Federal Home Loan Bank 7,514,838 N/A - 7,514,838 - Federal Farm Credit Bank 193,370 - 193,370 - US Treasury 5,498,795 N/A 5,498,795 - - Tenn Valley Authority - N/A - - - LAIF 18,627,601 N/A - - 18,627,601 Cal CLASS 1,002,972 N/A - - 1,002,972 Money Market Mutual Funds 1,004,833 N/A - 1,004,833 - 36,438,151$ 5,498,795$ 11,308,783$ 19,630,573$ Fair Value Measurements The District categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. These principles recognize a three-tiered fair value hierarchy, as follows: Level 1: Investments reflect prices quoted in active markets; Level 2: Investments reflect prices that are based on a similar observable asset either directly or indirectly, which may include inputs in markets that are not considered to be active; and Level 3: Investments reflect prices based upon unobservable sources. Valuation Technique: Level 2 Investments use the Market Approach which uses prices generated for identical or similar assets or liabilities. EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2025 49 2)CASH AND INVESTMENTS - Continued The District has the following recurring fair value measurements as of June 30, 2025: Table 2-6 Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs Investments by Fair Value Level (Level 1) (Level 2) (Level 3) Total Debt Securities Fannie Mae 299,952$ -$ -$299,952$ Freddie Mac 2,295,790 -- 2,295,790 Federal Home Loan Bank 7,514,838 -- 7,514,838 Federal Farm Credit Bank 193,370 -- 193,370 US Treasury 5,498,795 -- 5,498,795 Total Investments Measured at Fair Value 15,802,745$ -$ -$15,802,745$ Investments Measured at Amortized Cost LAIF 18,627,601 Cal CLASS 1,002,972 Mone Market Mutual Funds 1,004,833 otal Investments 36,438,151$ Fair Value Measurements Using Disclosure Related to Concentration of Credit Risk The District's policy places no limits on amounts invested in any given issuer beyond that stipulated by the California Government Code. Freddie Mac and FHLB investments valued at $2,295,790 and $7,514,838, respectively, exceeded 5% of District total investments. EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2025 50 2) CASH AND INVESTMENTS - Continued Custodial Credit Risk Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty (e.g., broker-dealer) to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The California Government Code requires California banks and savings and loan associations to secure deposits by pledging government securities as collateral. Such collateralization of public funds is accomplished by pooling. As such, collateralized securities are held by the pledging financial institution's agent on behalf of the District. The fair value of the pledged securities must equal at least 110% of District deposits. California law also allows financial institutions to secure deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public deposits. The District may waive collateral requirements for deposits which are fully insured by Federal depository insurance. As of June 30, 2025, the District had $7,400,006 deposited with financial institutions that were in excess of federal depository insurance limits. The federal deposit insurance limit is $250,000. Investment in State Investment Pool The management of the State of California Pooled Money Investment Account (generally referred to as LAIF) has reported to its participating agencies that, as of June 30, 2025, the carrying amount (at amortized cost) of the pool was $178,938,897,012 and the estimated fair value of the pool was $179,153,321,241. LAIF is regulated by the California Government Code under the oversight of the Treasurers of California. The District's proportionate share of the fair value (as determined by LAIF) as of June 30, 2025, was $18,627,603. Included in LAIF's investment portfolio are collateralized mortgage obligations, mortgage-backed securities, other asset-backed securities, loans to certain State funds, and floating rate securities issued by federal agencies, government- sponsored enterprises, and corporations. Currently LAIF does not have an investment rating. LAIF has a minimum $5,000 transaction amount in increments of $1,000 with a maximum of 15 transactions (combination of deposits and withdrawals) per month. LAIF requires a one-day prior notice for deposits and withdrawals of $10 million or more. 3) RESTRICTED CASH AND CASH EQUIVALENTS Restricted cash and cash equivalents at June 30, 2025 are restricted as follows: Table 3-1 Held for Debt Service 466,411$ Capacity Fees from Developers 13,935,713 Customer Deposits 1,589,966 Construction Advances 109,500 North Fork Water Company 248,132 otal 16,349,722$ EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2025 51 4) CAPITAL ASSETS A summary of changes in capital assets for the year ended June 30, 2025 is as follows: Table 4-1 Be innin of End of Year dditions Deletions d ustments Year Water Fund Non-Depreciable Assets Land and Easements 3,651,696$ -$ -$ -$ 3,651,696$ Water Rights 732,835 - - - 732,835 Construction in Pro ress 341,102 4,599,372 (2,981,673) - 1,958,801 Total Non-Depreciable Assets 4,725,633 4,599,372 (2,981,673) - 6,343,332 Depreciable Assets Source of Supply 21,383,763 395,366 (132,813) - 21,646,316 Pumpin Plant 15,320,702 277,539 - - 15,598,241 Treatment Plant 33,543,906 181,310 (121,874) - 33,603,342 Transmission and Distribution Plant 102,724,617 2,851,059 (165,788) - 105,409,888 General Plant 34,312,344 610,345 (324,358) - 34,598,331 Total Depreciable Assets 207,285,332 4,315,619 (744,833) - 210,856,118 Accumulated Depreciation Source of Supply (10,443,505) (730,813) 100,513 - (11,073,805) Pumpin Plant (8,984,676) (493,590) - - (9,478,266) Treatment Plant (15,244,880) (824,817) 77,016 - (15,992,681) Transmission and Distribution Plant (50,296,581) (2,475,585) 161,941 - (52,610,225) General Plant (10,868,903) (1,314,549) 324,358 - (11,859,094) Total Accumulated Depreciation (95,838,545) (5,839,354) 663,828 - (101,014,071) Water Fund Capital Assets, Net 116,172,420 3,075,637 (3,062,678) - 116,185,379 Wastewater Fund Non-Depreciable Assets Land and Easements 2,698,706 - - - 2,698,706 Construction in Pro ress 149,800 862,293 (112,059) - 900,034 Total Non-Depreciable Assets 2,848,506 862,293 (112,059) - 3,598,740 Depreciable Assets Wastewater Collection Plant 39,419,357 - - - 39,419,357 General Plant 10,204,423 193,855 (153,340) - 10,244,938 Total Depreciable Assets 49,623,780 193,855 (153,340) - 49,664,295 Accumulated Depreciation Wastewater Collection Plant (16,960,907) (645,761) - - (17,606,668) General Plant (4,778,338) (391,750) 153,340 - (5,016,748) Total Accumulated Depreciation (21,739,245) (1,037,511) 153,340 - (22,623,416) Wastewater Fund Capital Assets, Ne 30,733,041 18,637 (112,059) - 30,639,619 Water Reclamation Fund Non-Depreciable Assets Construction in Pro ress - 1,196,428 (36,854) - 1,159,574 Total Non-Depreciable Assets - 1,196,428 (36,854) - 1,159,574 Depreciable Assets Reclamation Plant 175,990,516 995,800 - - 176,986,316 General Plant 115,515 22,947 - - 138,462 Total Depreciable Assets 176,106,031 1,018,747 - - 177,124,778 Accumulated Depreciation Reclamation Plant (1,048,372) (5,411,571) - - (6,459,943) General Plant (4,312) (23,486) - - (27,798) Total Accumulated Depreciation (1,052,684) (5,435,057) - - (6,487,741) Water Reclamation Fund Capital Assets 175,053,347.00 (3,219,882) (36,854) - 1,159,574 Total Capital Assets, Net 321,958,808$ (125,608)$ (3,211,591)$ -$ 318,621,609$ EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2025 52 5) LONG-TERM DEBT The schedule below summarizes changes in long-term debt during the year ended June 30, 2025: Table 5-1 Beginning of Year Additions Retirements/ Payments End of Year Current Portion Long-Term Portion Direct Placement: 2020A Refunding Bonds 14,060,000$ -$ (1,030,000)$ 13,030,000$ 575,000$ 12,455,000$ 2020A Unamortized Premium 2,650,264 - (163,101) 2,487,163 163,101 2,324,062 2020B Refunding Bonds 12,780,000 - (275,000) 12,505,000 375,000 12,130,000 Subtotal Direct Placement 29,490,264 - (1,468,101) 28,022,163 1,113,101 26,909,062 Direct Borrowin : DWR Contracts: AVAD Construction 43,954$ -$ (3,741)$ 40,213$ 9,783$ 30,430$ Plant 134 Construction 4,901,374 - (233,399) 4,667,975 233,399 4,434,576 EFAD Construction 247,307 - (13,016) 234,291 13,016 221,275 SNRC 175,478,305 786,772 (4,211,290) 172,053,787 4,578,574 167,475,213 Subtotal Direct Borrowing 180,670,940 786,772 (4,461,446) 176,996,266 4,834,772 172,161,494 Total 210,161,204$ 786,772$ (5,929,547)$ 205,018,429$ 5,947,873$ 199,070,556$ 2020 Revenue Bonds Series 2020A - On September 10, 2020, the District issued $16,885,000 of East Valley Water District Refunding Revenue Bonds, Series 2020A (2020A Bonds), to accomplish a current refunding of then outstanding 2010 Revenue Bonds ($21,635,000). The 2020A Bonds carry interest rates ranging from 3.00% to 5.00% and will be repaid in various principal increments with the final payment due on October 1, 2040. The refunded 2010 Bonds carried interest rates ranging from 4.00% to 5.00% and were due in various principal increments until October 1, 2040. The 2020A bonds were issued at a premium of $3,261,890, and after paying issuance costs of $161,885, net proceeds were $19,985,005. The net proceeds, combined with a $2,129,931 sinking fund for 2010 bond debt service, were sufficient to accomplish the refunding of the existing debt. All refunded debt has been retired. The refunding resulted in a difference between the reacquisition price and the carrying amount of the old debt of $259,548. This difference is included in the accompanying financial statements as a Deferred Outflows of Resources and is being charged to operations through the year 2040 using the straight-line method of amortization. The District completed the refunding to decrease total debt service over the next 20 years by $6,052,794, and to obtain an economic gain (difference between the present values of the old and new debt service payment) of $4,765,023. Series 2020B - Also on September 10, 2020, the District issued $13,615,000 of East Valley Water District Refunding Revenue Bonds, Series 2020B (2020B Bonds), to accomplish an advance refunding of then outstanding 2013 Revenue Bonds ($12,085,000). The 2020B Refunding Bonds carry interest rates from 0.42 % to 2.93 % (federally taxable) and will be repaid in various principal increments with the final payment due EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2025 53 5) LONG-TERM DEBT - Continued on October 1, 2043. The refunded 2013 Bonds carried interest rates ranging from 4.00% to 5.00% and were due in various principal increments until October 1, 2043. The 2020B bonds were issued at face value, and after paying issuance costs of $123,500, net proceeds were $13,491,500. The net proceeds, combined with a $292,563 sinking fund held for 2013 bond debt service, were used to purchase US Government securities which were deposited in an irrevocable trust with an escrow agent to provide debt service on the 2013 Bonds until October 1, 2023 on which date all outstanding bonds will be redeemed. The advance refunding met the requirements of an in-substance defeasance therefore; accordingly, the 2013 Revenue Bonds are no longer reflected as a liability on the accompanying financial statements. The refunding resulted in a difference between the reacquisition price and the carrying amount of the old debt of $259,548. This difference is included in the accompanying financial statements as a Deferred Outflows of Resources and is being charged to operations through the year 2043 using the straight-line method of amortization. The District completed the refunding to decrease total debt service over the next 23 years by $3,014,190, and to obtain an economic gain (difference between the present values of the old and new debt service payment) of $2,154,117. US Bank Lease Purchase On November 13, 2013 the District entered into a Lease Purchase Agreement with US Bancorp Government Leasing and Finance, Inc. (US Bank), to implement Energy Conservation Measures (ECM) identified in a comprehensive energy conservation and operational efficiency study prepared by Honeywell International, Inc. (Honeywell). Honeywell had been contracted to install the facilities necessary to achieve the energy savings identified in their study and has guaranteed that the savings will be sufficient to pay the debt service on the lease with US Bank. Project costs paid to Honeywell, and the amount borrowed from US Bank under the lease agreement was $3,998,560 with an interest rate of 2.38%. Semi-annual payments are $226,398, to commence in September 2014 through March 2024. As of June 30th, 2024, the District fully paid off its outstanding debt related to US Bank Lease Purchase, with no remaining obligations under the debt agreement. San Bernardino Valley Municipal Water District - City Creek Turnout and Plant 134 Hydroelectric Station Loan On January 20, 2015, the District entered into an agreement with the SBVMWD for the construction, financing, and maintenance of a turnout by which the District’s surface water treatment plant can receive State Project water. The total amount borrowed for construction of the project is $4,367,927 bearing interest at the State of California Local Agency Investment Fund (LAIF) apportionment rate, which is 0.75% at June 30, 2022. Debt service payments are to be made annually on February 1st over ten years. As of June 30th, 2024, the District fully paid off its outstanding debt related to City Creek Turnout and Plant 134 Hydroelectric Station Loan, with no remaining obligations under the debt agreement. Department of Water Resources Contract 00C412 - Arroyo Verde Assessment District (AVAD) On June 30, 2004, the District entered into a Funding Agreement for replacement of distribution pipelines in the section of the District's service area formerly served by the Arroyo Verde Water Company. The original loan EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2025 54 5) LONG-TERM DEBT - Continued amount was $169,052 with an annual interest rate of 0%. Semi-annual payments of $3,381 are due through January 2031 and are secured by annual assessments to property owners within the Arroyo Verde Assessment District. The indenture authorizes, upon default, the Trustee to declare immediate due and payable the total unpaid principal of the Bonds and accrued interest thereon. Department of Water Resources Contract 10CX110 - Plant 134 On December 21, 2010, the District entered into a Funding Agreement to upgrade treatment methods utilized by the District's surface water treatment plant (Plant 134). The amount borrowed under the agreement is $7,001,964 with an annual interest rate of 0%. Semi-annual payments of $116,699 are due through January 2045 and are secured by a pledge of net revenues of the District's water operating fund. The indenture authorizes, upon default, the State to declare immediate due and payable the total unpaid principal of the debt and accrued interest thereon. Department of Water Resources Contract 11CX101 - Eastwood Farms Assessment District (EFAD) On June 15, 2011 the District entered into a Funding Agreement for replacement of distribution pipelines in the section of the District's service area formerly serviced by the Eastwood Farms Water Users Association. The amount of the loan is $390,482 with an annual interest rate of 0%. Semi-annual payments of $6,508 are due for 30 years through January 2043. Repayment of the loan is secured by annual assessments to property owners within the Eastwood Farms Assessment District. The indenture authorizes, upon default, the Trustee to declare immediate due and payable the total unpaid principal of the Bonds and accrued interest thereon. California State Water Resources Control Board Contract C-06-8106-110 – Sterling Natural Resource Center On June 26, 2018, the District entered into a Funding Agreement with the State Water Resources Control Board for the construction of a 6 million gallon per day (mgd) water recycling plant known as the Sterling Natural Resource Center (SNRC). The initial agreement plus two amendments provides $175 million for the plant’s construction and includes a $6.7 million grant and a low interest (1.8%) loan for the balance of $168.3 million. During fiscal year 2023-24 the District completed construction on the SNRC, and all reimbursement requests totaling $175 million had been submitted to the state as required by the SWRCB funding agreement. At June 30, 2024, approximately $15.4 million of reimbursement requests were outstanding and are included in a receivable Due From Other Governments in the accompanying financial statements. As the SWRCB has not paid out all the loan funds, a final 30-year amortization schedule for the loan has not been produced. However, the first payment on the loan is due by the end of December 2024, so providing a repayment schedule for purposes of District financial reporting is essential. Accordingly, the District has produced a schedule based on the maximum loan amount of $168.3 million, plus construction period interest of $7.2 million accrued on loan draws that were taken during construction for a total amortizable balance of $175.5 million. This amount amortized over 30 years at an interest rate of 1.8% results in an annual payment of $7.6 million. EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2025 55 5) LONG-TERM DEBT - Continued The District has pledged available water and wastewater revenue for the repayment of the loan, including the following new revenue streams: Wastewater treatment charges (previously paid to the City of San Bernardino); Sale of electrical energy produced by plant digesters (beyond energy used on site); Local Resource Investment Program fees for recycled water delivered for groundwater recharge; and Tipping fees from waste haulers. The aggregate debt service requirements to maturity for long-term debt as of June 30, 2025 are as follows (excludes unamortized premiums/discounts): Table 5-2 Year Endin June 30, Principal Interest Total 2026 5,785,132$ 3,931,035$ 9,716,167$ 2027 5,895,796 3,823,283 9,719,079 2028 6,014,543 3,703,420 9,717,962 2029 6,134,797 3,579,577 9,714,374 2030 6,261,586 3,451,586 9,713,172 2031-2035 33,295,013 15,236,195 48,531,209 2036-2040 36,828,030 11,701,195 48,529,226 2041-2045 39,133,841 7,810,020 46,943,861 2046-2050 33,846,128 4,489,734 38,335,862 2051-2055 29,336,761 1,331,929 30,668,689 202,531,627$ 59,057,974$ 261,589,601$ Security for debt is as follows: Table 5-3 Deb Security 2020A and 2020B Refunding Revenue Bonds and Department of Water Resources Construction Loans The District is required to maintain net revenues, as defined by the revenue bond trust agreements and State of California Department of Public Health Funding agreements of at least 120% of District's annual debt service (principal and interest). The debt service coverage is agency wide, as pledged for in the loan documents. At June 30, 2025, net revenues represented 203% of the annual debt service. EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2025 56 6) COMPENSATED ABSENCES Compensated absences are comprised of unused vacation leave and a limited amount of sick leave which is accrued as earned in accordance with District policy. The District's liability for compensated absences is determined annually. Current portions are determined based on estimates of usage, amounts in excess of 196 hours that will be voluntarily cashed out and amounts that will be cashed out upon termination of employment. Table 6-1 Be innin o ear dditions Usa e / Pa ments End of Year Current Portion Lon -Term Portion Accrued Vacation Leave 799 995$ 757 801$ 698 470$ 859 326$ 325 943$ 533 383$ Accrued Sick Leave 741 231 472 546 282 798 930 979 160 241 770 738 otal 1,541,226$ 1,230,347$ (981,268)$ 1,790,305$ 486,184$ 1,304,121$ 7) NET INVESTMENT IN CAPITAL ASSETS Net Investment in capital assets at June 30, 2025 consisted of the following: Table 7-1 Non-Depreciable Capital Assets 11,101,646$ Depreciable Capital Assets 437,645,192 Accumulated Depreciation (130,125,228) North Fork Water Company 481,311 Loans Payable (176,996,266) Bonds Payable (28,022,163) Deferred Inflows (1,019,098) Deferred Ouflows 770,237 otal 113,835,631$ 8) DEFINED BENEFIT PENSION PLAN (PERS) A) General Information about the Pension Plans Plan Description All qualified permanent and probationary employees are eligible to participate in the Public Agency Cost- Sharing Multiple-Employer Defined Benefit Pension Plan (Plan or PERF C) administered by the California Public Employees’ Retirement System (CalPERS.) The Plan consists of a miscellaneous pool and a safety pool (also referred to as “risk pools”), which are comprised of individual employer miscellaneous and safety rate plans, respectively. Plan assets may be used to pay benefits for any employer rate plan of the safety and miscellaneous pools. Accordingly, rate plans within the safety or miscellaneous pools are not separate plans under generally accepted accounting principles. Individual employers may sponsor more than one rate plan in the miscellaneous or safety risk pools. The District participates in two rate plans (two miscellaneous). Benefit provisions under the Plan are established by State statute and District’s resolution. CalPERS issues publicly available reports that include a full description of the pension plan regarding benefit provisions, assumptions and membership information that can be found on the CalPERS website, at www.calpers.ca.gov. EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2025 57 8) DEFINED BENEFIT PENSION PLAN (PERS) - Continued Benefits Provided CalPERS provides service retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of full-time employment. Members with five years of total service are eligible to retire at age 50 with statutorily reduced benefits. All members are eligible for non-duty disability benefits after 10 years of service. The death benefit is one of the following: the Basic Death Benefit, the 1957 Survivor Benefit, or the Optional Settlement 2 W Death Benefit. The cost-of-living adjustments for each plan are applied as specified by the Public Employees’ Retirement Law. The Plan operates under the provisions of the California Public Employees’ Retirement Law (PERL), the California Public Employees’ Pension Reform Act of 2013 (PEPRA), and the regulations, procedures and policies adopted by the CalPERS Board of Administration. The Plan’s authority to establish and amend the benefit terms are set by the PERL and PEPRA, and may be amended by the California state legislature and in some cases require approval by the CalPERS Board. The Plans’ provisions and benefits in effect at June 30, 2025, are summarized as follows: Table 8-1 Prior to On or after Hire Date Januar 1 2013 Januar 1 2013 Benefit Formula 2.7% @55 2.0% @62 Benefit Vestin Schedule 5 years service 5 years service Benefit Payments monthly for life monthly for life Retirement A e 50 - 55 52 - 67 Monthly Benefits, as a % of Eli ible Compensation 2.0% to 2.7%1.0% to 2.5% Required Employee Contribution Rates 8.0%8.0% Required Employer Contribution Rates 15.53%7.94% Miscellaneous Contributions Section 20814(c) of the California Public Employees’ Retirement Law requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. Funding contributions for both Plans are determined annually on an actuarial basis as of June 30 by CalPERS. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The District is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2025 58 8) DEFINED BENEFIT PENSION PLAN (PERS) - Continued For the year ended June 30, 2025, the contributions recognized as part of pension expense for the Plans were as follows: Table 8-2 Miscellaneous Contributions - Employer $ 2,121,368 B) Pension Liabilities, Pension Expenses, and Deferred Outflows/Inflows of Resources Related to Pensions As of June 30, 2025, the District reported net pension liabilities for its proportionate shares of the net pension liability of the Plans as follows: Table 8-3 Proportionate Share of Net Pension Liabilit Miscellaneous $ 14,505,560 The District’s net pension liability for the Plan is measured as the total pension liability, less the pension plan’s fiduciary net position. The net pension liability of the Plan is measured as of June 30, 2024, using an annual actuarial valuation as of June 30, 2023 rolled forward to June 30, 2024 using standard update procedures. A summary of principal assumptions and methods used to determine the net pension liability is as follows: Table 8-4 Proportion - June 30, 2024 0.29802% Proportion - June 30, 2025 0.29991% Chan e - Increase (Decrease)0.00189% Miscellaneous Amortization of Deferred Outflows and Deferred Inflows of Resources Under GASB 68, gains and losses related to changes in total pension liability and fiduciary net position are recognized in pension expense systematically over time. The first amortized amounts are recognized in pension expense for the year the gain or loss occurs. The remaining amounts are categorized as deferred outflows and deferred inflows of resources related to pensions and are to be recognized in future pension expense. EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2025 59 8) DEFINED BENEFIT PENSION PLAN (PERS) - Continued The amortization period differs depending on the source of the gain or loss: Net difference between projected and actual earnings on pension plan investments 5-year straight-line amortization All other amounts Straight-line amortization over the expected average remaining service lives (EARSL) of all members that are provided with benefits (active, inactive, and retired) as of the beginning of the measurement period The expected average remaining service lifetime (EARSL) is calculated by dividing the total future service years by the total number of plan participants (active, inactive, and retired) in the Public Agency Cost- Sharing Multiple-Employer Plan (PERF C). The EARSL for PERF C for the measurement period ending June 30, 2024 is 3.8 years, which was obtained by dividing the total service years of 630,177 (the sum of remaining service lifetimes of the active employees) by 166,163 (the total number of participants: active, inactive, and retired) in PERF C. Inactive employees and retirees have remaining service lifetimes equal to 0. Total future service is based on the members' probability of decrementing due to an event other than receiving a cash refund. For the year ended June 30, 2025, the District recognized pension expense of $2,971,942. At June 30, 2025, the District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Table 8-5 De erre Outflows of Resources De erre Inflows of Resources Difference between expected and actual experience $ 1,254,139 48,936$ Changes in Assumptions 372,823 - Net differences between projected and actual earnings on plan investments 835,067 - Change in employer's proportion 40,828 217,157 Di erence etween t e emp oyer s contri utions and the employer's proportionate share of contributions 208,689 38,621 Pension contributions subsequent to measurement date 2,121,368 - ota 4,832,914 304,714 EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2025 60 8) DEFINED BENEFIT PENSION PLAN (PERS) - Continued Contributions subsequent to the measurement date of $2,121,368 reported with deferred outflows of resources will be recognized as a reduction of the net pension liability in the year ended June 30, 2025. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows: Table 8-6 Year Ended June 30, Amount 2026 $ 760,390 2027 1,902,578 2028 30,033 2029 (286,168) $ 2,406,833 Actuarial Methods and Assumptions Used to Determine Total Pension Liability The collective total pension liability for the June 30, 2024 measurement period was determined by an actuarial valuation as of June 30, 2023, with updated procedures used to roll forward the total pension liability to June 30, 2024. The collective total pension liability was based on the following assumptions: Table 8-7 Miscellaneous Valuation Date une , Measurement Date une , Entry A e Normal in accordance with the requirements of GASB Fair Value of Assets 6.90% 2.30% Varies by Entry A e and Service Derived usin CalPERS' membershi data for all Funds The lesser of contract COLA or 2.30% until Purchasing Power Protection Allowance floor on purchasing power applies, 2.30% thereafter (1)The mortality table used was developed based on CalPERS-specific data. The probabilities of mortality are based on the 2021 CalPERS Experience Study and Review of Actuarial Assumptions. Mortality rates incorporate full generational mortality improvement using 80% of Scale MP-2020 published by the Society of Actuaries. For more details on this table, please refer to the 2021 experience study report from November 2021 that can be found on the CalPERS website Mortality Rate Table Post Retirement Benefit Increase Actuarial Cost Method Asset Valuation Method Actuarial Assumptions: Discount Rate Inflation Salary Increases EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2025 61 8) DEFINED BENEFIT PENSION PLAN (PERS) - Continued Change of Assumptions There were no assumption changes in 2023 or 2024. Effective with the June 30, 2021 valuation date (June 30, 2022 measurement date), the accounting discount rate was reduced from 7.15% to 6.90%. In determining the long-term expected rate of return, CalPERS took into account long-term market return expectations as well as the expected pension fund cash flows. In addition, demographic assumptions and the price inflation assumption were changed in accordance with the 2021 CalPERS Experience Study and Review of Actuarial Assumptions. The accounting discount rate was 7.15% for measurement dates June 30, 2017 through June 30, 2021, 7.65% for measurement dates June 30, 2015 through June 30, 2016, and 7.50% for measurement date June 30, 2014. Discount Rate The discount rate used to measure the total pension liability for PERF C was 6.90%. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current member contribution rates and that contributions from employers will be made at statutorily required rates, actuarially determined. Based on those assumptions, the Plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Subsequent Events There were no subsequent events that would materially affect the results presented in this disclosure. Long-Term Expected Rate of Return The long-term expected rate of return on pension plan investments was determined using a building-block method in which expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. In determining the long-term expected rate of return, CalPERS took into account both short-term and long- term market return expectations. Using historical returns of all of the funds’ asset classes, expected compound (geometric) returns were calculated over the next 20 years using a building-block approach. The expected rate of return was then adjusted to account for assumed administrative expenses of 10 Basis points. EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2025 62 8) DEFINED BENEFIT PENSION PLAN (PERS) - Continued The table below reflects the long-term expected real rate of return by asset class. Table 8-8 Asset Class Assumed Asset llocation Real Return (1)(2) Global E uit - ca wei hted 30.0% 4.54% Global E uit - non-ca -wei hted 12.0% 3.84% Private E uit 13.0% 7.28% reasur 5.0% 0.27% Mort a e-backed securities 5.0% 0.50% Investment rade cor orates 10.0% 1.56% Hi h Yield 5.0% 2.27% Emer in market debt 5.0% 2.48% Private debt 5.0% 3.57% Real Assets 15.0% 3.21% Levera e -5.0% -0.59% Total 100.0% (1) An expected inflation of 2.30% used for this period (2) Figures are based on the 2021 Asset Liability Management Study C) Sensitivity of the Proportionate Share of the Net Pension Liability to Changes in the Discount Rate The following presents East Valley Water District’s proportionate share of the net pension liability for the Plan, calculated using the current discount rate, as well as what the District’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is one-percentage point lower or one-percentage point higher than the current rate: Table 8-9 Miscellaneous 1% Decrease 5.90% Net Pension Liability $ 23,012,949 Current Discount Rate 6.90% Net Pension Liability $ 14,505,560 1% Increase 7.90% Net Pension Liability $ 7,502,727 EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2025 63 8) DEFINED BENEFIT PENSION PLAN (PERS) - Continued D) Pension Plan Fiduciary Net Position Information about the pension plan’s assets, deferred outflows of resources, liabilities, deferred inflows of resources, and fiduciary net position are presented in CalPERS’ audited financial statements, which are publicly available reports that can be obtained at CalPERS’ website, at www.calpers.ca.gov. The plan’s fiduciary net position and additions to/deductions from the plan’s fiduciary net position have been determined on the same basis used by the pension plan, which is the economic resources measurement focus and the accrual basis of accounting. Benefits and refunds are recognized when due and payable in accordance with the terms of the plan. Investments are reported at fair value. E) Payable to the Pension Plan At June 30, 2025, the District reported a payable of $0 for the outstanding number of contributions to the pension plan required for the year ended June 30, 2025. 9) COMMITMENTS AND CONTINGENCIES Grant Awards Grant funds received by the District are subject to audit by the grantor agencies. Such audit could lead to requests for reimbursements to the grantor agencies for expenditures disallowed under terms of the grant. Management of the District believes that such disallowances, if any, would not be significant. 10) RISK MANAGEMENT The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omission; injuries to employees; and natural disasters. The District participates in a joint powers agreement (JPA) with the Special District Risk Management Authority (Authority). The Authority is a risk-pooling self-insurance authority created under the provisions of California Government Code Section 6500 et. sec. The Authority is governed by a Board consisting of 7 directors that are either a manager or Board member of a current member agency that were elected by members of SDRMA. The Board controls the operations of the Authority including selection of management and approval of operation budgets. The relationship between the District and the Authority is such that the Authority is not a component unit of the District for financial reporting purposes. Settled claims have been immaterial and claims liabilities have not been reported in these financial statements as of June 30, 2024, or in the previous two fiscal years. The purpose of the Authority is to arrange and administer programs of insurance for the pooling of self-insured losses and to purchase excess insurance coverage. EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2025 64 10) RISK MANAGEMENT - Continued At June 30, 2025, the District's participation in the self-insurance programs of the Authority was as follows: Table 10-1 Description Deductible Personal Injury and Property Damage Liability Coverage - General 10,000,000$ Per occurrence / aggregate where applicable $500 (property damage only) Personal Injury and Property Damage Liability Coverage - Auto 10,000,000$ Per accident None Public Officials and Employees Errors and Omissions Liability 10,000,000$ Per wrongful act / annual member aggregate None Employment Practices Liability 10,000,000$ Per wrongful employment practice / aggregate limits per member included with Public Officials and Employee Errors and Omissions Coverage None up to $10,000, 50% co-insurance from $10,000 to $50,000, none for amounts greater than $50,000 Employee Benefits Liability 10,000,000$ Per wrongful act / annual member aggregate None Employee Dishonesty Coverage 1,000,000$ Per loss None Public Officials Personal Liability 500,000$ Per occurrence / annual aggregate per Board Member $ 500 Automobile Physical Damage ACV Limits Replacement cost (stated value adjusted for depreciation on selected vehicles) $250/$500 or $500/$1,000 comprehensive / collision (as elected per vehicle) Uninsured Motorist Bodily Injury Coverage 750,000$ Per accident None Property Coverage 1,000,000,000$ Replacement cost for scheduled property if replaced (if not replaced within two years, actual cash value basis $ 1,000 Boiler and Machinery 100,000,000$ Replacement cost $ 1,000 Limits EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2025 65 11) POST-EMPLOYMENT HEALTHCARE BENEFITS The District provides post-employment healthcare benefits for retired employees and eligible surviving spouses in accordance with the plan as established by the District. As of June 30, 2025, the District’s total liability for post-employment healthcare benefits and details of the plan are explained below: Table 11-1 OPEB Plan Net OPEB Liability De erre Outflows of Resources Deferred Inflows of Resources OPEB Expense Retiree Benefits Plan 1,481,136$ 1,679,283$ 679,624$ 366,457$ Plan Description and Eligibility The District contributes to the retiree health coverage of eligible retirees and eligible surviving spouses. As of June 7, 2011, the District is part of the Public Agency portion of the California Employers’ Retiree Benefit Trust Fund (CERBT), an agent multiple-employer plan administered by California Public Employees’ Retirement System (CalPERS), which acts as a common investment and administrative agent for participating public employers within the State of California. A menu of benefit provisions as well as other requirements is established by State statute within the Public Employees’ Retirement Law. The District selects optional benefit provisions from the benefit menu by contract with CalPERS and adopts those benefits through District resolution. CalPERS issues an Annual Comprehensive Financial Report (Report). The Report is issued in aggregate and includes the sum of all CalPERS plans. Copies of the CalPERS Report may be obtained from the CalPERS Executive Office, 400 P Street, Sacramento, California 95814. Membership in the health benefit plan consisted of the following as of June 30, 2024, the date of the latest actuarial valuation: Table 11-2 Participant Type 27 0 Active employees 75 102 Number of Participants Inactive participants currently receiving benefits Inactive participants entitled to but not yet receiving benefit otal Funding Policy The contribution requirements of plan members and the District are established and may be amended by the Board of Directors. At retirement, the District provides the minimum employer contribution under the CalPERS Health Program for eligible retirees and surviving spouses in receipt of a pension benefit from CalPERS. An employee is eligible for this employer contribution provided they are vested in their CalPERS pension benefit and commence payment of their pension benefit within 120 days of retirement with the District. Vesting requires at least five years of service. The surviving spouse of an eligible retiree who elected spouse coverage under CalPERS is eligible for the employer contribution upon death of the retiree. EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2025 66 11) POST-EMPLOYMENT HEALTHCARE BENEFITS - Continued Employees retiring with at least 10 years of District service will receive an additional District contribution through attainment of Medicare eligibility age. The additional contribution is based on the negotiated dollar amount at retirement (currently $850 per month). The surviving spouse of an eligible retiree is eligible for the District's contribution upon the death of the retiree through the spouse's attainment of Medicare eligibility age. The District’s funding policy is to contribute the Annual Determined Contribution (ADC) to their account within the CERBT. For fiscal year ended June 30, 2024, the District paid $582,171 to the plan including the implicit rate subsidy. The District contributed $339,896 including the implicit rate subsidy for retiree health benefits to the Trust during the fiscal year ended June 30, 2025. Net OPEB Liability The table herein shows the components of the net OPEB liability of the District: Table 11-3 Balance June 30, 2025 Total OPEB Liabilit 3 963 551 Plan Fiduciar Net Position 2 482 415 District's Net OPEB Liability (Asset) $ 1,481,136 Investments As described above, at June 30, 2025, all Plan investments are held in the CERBT through CalPERS. Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB At June 30, 2025, the District reported deferred outlflows of resources and deferred inflows of resources related to pensions from the sources as follows: Table 11-4 Deferred Outflows and Inflows of Resources Deferred Outflows of Resources Deferred Inflows of Resources Contributions subse uent to measurement date 577,908$ -$ Differences between ex ected and actuarial ex erience in 797,815 154,053 Chan es of assum tions 238,102 525,571 Differences between pro ected and actual earnin s on OPEB lan investments 65,458 - Total 1,679,283$ 679,624$ The deferred outflow of resources results from a change of assumptions and is amortized over the expected average remaining service life (EARSL) of the plan participants. Contributions submitted subsequent to the measurement date will be recognized in the following fiscal year. The EARSL for the OPEB plan for EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2025 67 11) POST-EMPLOYMENT HEALTHCARE BENEFITS - Continued June 30, 2025 is five years. The year of amortization is recognized in OPEB expense for the year the gain or loss occurs. The remaining amount is deferred and will be amortized over the remaining periods not to exceed four years. The deferred inflows of resources related to OPEB resulting from the net differences between projected and actual earnings on planned investments is amortized over a five-year period on a straight-line basis. One-fifth is recognized in pension expense during the measurement period and the remaining amount is deferred and will be amortized over the remaining four-year period. Deferred inflows and outflows will be amortized as follow: Table 11-5 Year Ending June 30 Amount 2026 $ 90,553 2027 117,042 2028 60,169 2029 52,281 2030 51,003 hereafter 50 703 $ 421,751 Actuarial Methods and Assumptions The District’s net OPEB liability was measured as of June 30, 2024, and the total OPEB liability used to calculate the net OPEB liability was determined by an actuarial valuation as of June 30, 2024. Liabilities in this report were calculated as of the valuation date. The total OPEB liability was determined by an actuarial valuation as of June 30, 2024, using the actuarial assumptions shown herein, applied to all periods included in the measurement, unless otherwise specified. Table 11-6 Actuarial Methods and Assumptions Valuation Date June 30, 2024 Measurement Date June 30, 2024 Salary Increases 2.80% Investment Rate of Return 6.10% Health Care Trend Rate 8% HMO / 8% PPO Mortality rates were based upon the rates under the CalPERS pensions plan updated to reflect the most recent experience study. EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2025 68 11) POST-EMPLOYMENT HEALTHCARE BENEFITS - Continued The long-term expected rate of return on Plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of OPEB plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of arithmetic real rates of return for each major asset class included in the OPEB plan’s target asset allocation at June 30, 2024 are shown herein: Table 11-7 Asset Class Global Equity 34% N/A Fixed Income 41% N/A reasury Inflation - Protected Securities 5% N/A Commodities 3% N/A Real Estate Investment Trusts 17% N/A otal 100% 6.10% Target Allocation L/T Expected Gross ROR The discount rate used to measure the total OPEB liability was 6.1 percent. The discount rate assumes the District continues to fully fund its retiree health benefits through the CERBT under its investment allocation strategy 2. The rate reflects the CERBT published median interest rate for strategy 2 with an additional margin for adverse deviation. Changes in the Net OPEB Liability Table 11-8 Total OPEB Liability (a) Plan Fiduciary Net Position (b) Net OPEB Liability (Asset) (a) Balances at June 30, 2024 $ 4,036,052 $ 1,968,872 $ 2,067,180 Changes for the year: Service Cost 164,417 - 164,417 Interest 224,452 - 224,452 Differences between expected and actual experience (36,071) - (36,071) Employer Contributions - 582,171 (582,171) Net Investment Income - 174,321 (174,321) Change of assumptions (183,024) - (183,024) Benefit Payments (242,275) (242,275) - Administrative Expenses - (674) 674 Other Expenses - - - Net Changes (72,501) 513,543 (586,044) Ba ances at June 30, 2025 3,963,551 2,482,415 1,481,136 Increase (Decrease) EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2025 69 11) POST-EMPLOYMENT HEALTHCARE BENEFITS - Continued The following presents the District’s net OPEB liability calculated using the discount rate of 6.1 percent, as well as what the net OPEB liability would be if it were calculated using a discount rate that is 1-percentage-point lower (5.1 percent) or 1-percentage-point higher (7.1 percent) than the current rate: Table 11-9 Discount Rate Net OPEB Liability (Asset) 1,855,805$ 1,481,135$ 1,152,630$ 1% Decrease (5.1%) Current Discount Rate (6.1%) 1% Increase (7.1%) The following presents the District’s net OPEB liability calculated using the current healthcare cost trend rate of 8.0 percent, as well as what the net OPEB liability would be if it were calculated using healthcare cost trend rates that are 1-percentage-point lower (7.0 percent) or 1-percentage-point higher (9.0 percent) than the current rate: Table 11-10 Healthcare Trend Rate Net OPEB Liability (Asset) 1% Decrease (7% HMO/7% PPO Decreasing to 3.50% HMO/3.50% PPO)1,035,613$ Current Healthcare Cost Trend Rates (8% HMO/8% PPO Decreasing to 4.50% HMO/4.50% PPO)1,481,135$ 1% Increase (9% HMO/9% PPO Decreasing to 5.50% HMO/5.50% PPO)2,014,899$ OPEB Expense For the year ended June 30, 2025, the District recognized OPEB expense of $366,457 and recorded deferred outflows of resources of $1,679,283 for contributions made during fiscal year 2025 after the measurement date. Contributions subsequent to the measurement date will reduce the OPEB liability in the next period. Other deferred amounts are either amortized over the EARSL or five years. The District recorded $679,624 of deferred inflows of resources resulting from the differences between projected and actual earnings on OPEB plan investments for the period ending June 30, 2024. The deferred inflows of resources will be amortized and recognized in OPEB expense over three remaining periods ending June 30, 2028. EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2025 70 12) CONSTRUCTION AND OTHER SIGNIFICANT COMMITMENTS The District has six significant active construction project commitments as of June 30, 2025. The following contracts are related to infrastructure upgrades and the recycled water facility. Table 12-1 Contractual Commitments Spent to Date Remainin Commitment Plunge Creek Fire Repair 66,500$ 243,500$ Reservoir Seismic Retrofit Project Ph. 1 223,043$ 289,328$ Well Plant 129 Drilling 553,350$ 436,226$ Water Main Seismic Retrofit 475,254$ 708,746$ Plant 101 Rehabilitation Project 12,185$ 1,049,732$ SNRC - MBR Train #5 1,074,955$ 7,306,175$ 13)DEBT WITHOUT DISTRICT COMMITMENT The District authorized the formation of CFD 2021-1 Mediterra Project for purpose of the issuance of bonds under improvement acts of the State of California to finance eligible public facilities to serve residential, and/or mixed- use developments. Bonds issued by the CFD is secured by annual special tax levies or liens placed on properties within each CFD. The District is not liable for repayment and the District, acting as an agent on behalf of the CFD, is only responsible for levying and collecting the special tax assessments, forwarding the collections to the bond trustee on behalf of bondholders, and initiating foreclosure proceedings on faulted special tax payments when necessary. The bonds issued by the CFD are limited obligations and are payable solely from special tax assessments, specific bond reserves, and the proceeds from property foreclosures. Since these debts do not constitute an obligation of the District and the District is not obligated to make payments on the bonds, the CFD Bonds (whose terms are disclosed in Note 5) are not reported as long-term liabilities in the accompanying District financial statements. The activities related to the District Bond reserves, special assessment tax collection, remittance to the bond trustee, repayment of District Bonds and use of new bond proceeds for developer capital projects for infrastructure, are reported as a custodial fund. As of June 30, 2025, debt without District commitment is as follows: Table 13-1 Balance June 30, 2025 2023 Special Tax Bonds, IA No. 1 - 30 years 5,585,000$ EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2025 71 14)DUE TO OTHER GOVERNMENTS During fiscal year 2023-24, the District recorded a settlement obligation of $7 million as part of an agreement with the City of San Bernardino. This settlement, a critical component in releasing the District from a 1957 wastewater treatment Joint Powers Authority (JPA), was necessary to facilitate the Local Agency Formation Commission’s (LAFCO) granting of wastewater treatment authority to the District. This release enabled the District to move forward with its water reclamation plant project, the Sterling Natural Resource Center (SNRC). The settlement obligation is payable in annual installments of $700,000 per year for 10 years, beginning in fiscal year 2023-24. The entire settlement obligation was accrued and expensed as a special item in fiscal year 2023- 24. The Water and Wastewater funds, which were the funds in existence when the obligation was incurred, are being charged for the settlement payments. The settlement expense is reflected as a one-time charge of $7 million in the accompanying financial statements. 72 East Valley Water District Required Supplementary Information Schedule of District’s Proportionate Share of the Net Pension Liability Year Ended June 30, 2025 Last Ten Years The accompanying notes to required supplementary information are an integral part of this schedule. 73 Schedule of District’s Proportionate Share of the Net Pension Liability The schedule presents information on the District’s proportionate share of the net pension liability, the plans’ fiduciary net position and, when applicable, the proportionate share of the net pension liability associated with the District. 2025 2024 2023 2022 2021 Proportion of the Net Pension Liabilit 0.119609% 0.119452% 0.119950% 0.123102% 0.113169% Proportionate Share of the Net Pension Liabilit 14 505 560 14 902 033 13 855 136 6 657 689 12 313 294 Covered-Em lo ee Pa roll 7 750 618 7 393 654 6 565 118 6 197 060 5 888 338 Proportionate Share of the Net Pension Liability as Percentage of Covered-Employee Payroll 187.15% 201.55% 211.04% 107.43% 209.11% Plan's Fiduciar Net Position 48 539 972 44 216 314 41 301 132 44 006 462 36 172 219 Plan's Fiduciary Net Position as a Percentage of the Total Pension Liabilit 81.69% 74.79% 74.88% 86.86% 77.71% 2020 2019 2018 2017 2016 Proportion of the Net Pension Liabilit 0.11521% 0.28782% 0.11699% 0.11585% 0.11551% Proportionate Share of the Net Pension Liabilit 11 805 140 10 846 955 11 601 798 10 024 712 7 928 173 Covered-Em lo ee Pa roll 5 658 626 5 447 702 4 489 575 5 097 156 4 715 712 Proportionate Share of the Net Pension Liability as Percentage of Covered-Employee Payroll 208.62% 199.11% 258.42% 196.67% 168.12% Plan's Fiduciar Net Position 34 016 773 33 563 265 27 706 747 27 529 345 28 045 198 Plan's Fiduciary Net Position as a Percentage of the Total Pension Liabilit 77.73% 77.69% 71.37% 74.06% 78.40% East Valley Water District Required Supplementary Information Schedule of District’s Contributions Year Ended June 30, 2025 Last Ten Years The accompanying notes to required supplementary information are an integral part of this schedule. 74 Schedule of District’s Contributions The schedule presents information on the District’s required contribution, the amounts actually contributed, and any excess or deficiency related to the required contribution. 2025 2024 2023 2022 2021 Contractually Required Contribution Actuariall Determined 2,121,368$ 2,047,342$ 1,976,052$ 1,938,185$ 1,900,734$ Contributions in Relation to the Actuariall Determined Contributions 2,121,368$ 2,047,342$ 1,976,052$ 1,938,185$ 1,900,734$ Contribution Deficiency (Excess)-$ -$ -$ -$ -$ Covered-Employee Payroll $ 8,504,206 $ 7,750,618 $ 7,393,654 $ 6,565,118 $ 6,197,060 Contributions as a Percentage of Covered-Em lo ee Pa roll 24.94% 26.42% 26.73% 29.52% 30.67% 2020 2019 2018 2017 2016 Contractually Required Contribution Actuariall Determined 1,798,495$ 1,228,277$ 1,579,268$ 1,035,102$ 895,822$ Contributions in Relation to the Actuariall Determined Contributions 1,798,495$ 1,228,277$ 1,579,268$ 1,035,102$ 895,822$ Contribution Deficiency (Excess)-$ -$ -$ -$ -$ Covered-Employee Payroll $ 5,888,338 $ 5,658,626 $ 5,447,702 $ 4,489,575 $ 5,097,156 Contributions as a Percentage of Covered-Em lo ee Pa roll 30.54% 21.71% 28.99% 23.06% 17.57% East Valley Water District Required Supplementary Information Schedule of Changes in the Net OPEB Liability Year Ended June 30, 2025 Last Ten Years* The accompanying notes to required supplementary information are an integral part of this schedule. 75 Schedule of Changes in the Net OPEB Liability Accounting standards require presentation of 10 years of information. However, the information in this schedule is not required to be presented retroactively. Years will be added to this schedule as future data becomes available. Total OPEB Liabilit 2025 2024 2023 Service Cost 164 417 145 701 118 145 Interest 224 452 198 070 213 973 Differences bewteen exptected and actual experience (36,071) 644,957 (173,230) Chan es of assum tions 183 024 293 567 340 147 Benefit Payments, including refunds of member contributions (242,275) (226,323) (207,859) Net Change in Total OPEB Liability (72,501) 468,838 291,176 otal OPEB Liabilit - Be innin 4 036 052 3 567 214 3 276 038 otal OPEB Liabilit - Endin a 3 963 551 4 036 052 3 567 214 Plan Fiduciar Net Position 2025 2024 2023 Contributions - Em lo er 582 171 558 324 556 222 Net Investment Income 174 321 56 506 181 313 Benefit Pa ments 242 275 226 323 207 859 Administrative Ex ense 673 489 359 Other Ex ense - - - Net Change in Plan Fiduciary Net Position 513,544$ 388,018$ 166,691$ Plan Fiduciary Net Position - Beginning 1,968,872 1,580,854 1,414,163 Plan Fiduciary Net Position - Ending (b)2,482,416$ 1,968,872$ 1,580,854$ Net OPEB Liability (Asset) - Ending (a) - (b)1,481,135$ 2,067,180$ 1,986,360$ Plan Fiduciary Net Position as a Percentage of the Total OPEB Liability 62.63% 48.78% 44.32% Covered-Em lo ee Pa roll 8 548 186 6 536 459 6 007 798 Net OPEB Liability (Asset) as a Percentage of Covered-Employee Payroll 17.33% 31.63% 33.06% Continued Note: Fiscal year 2018 was the first year of implementation, therefore only eight years are shown. East Valley Water District Required Supplementary Information Schedule of Changes in the Net OPEB Liability Year Ended June 30, 2025 - Continued Last Ten Years The accompanying notes to required supplementary information are an integral part of this schedule. 76 Schedule of Changes in the Net OPEB Liability Accounting standards require presentation of 10 years of information. However, the information in this schedule is not required to be presented retroactively. Years will be added to this schedule as future data becomes available. Total OPEB Liabilit 2022 2021 2020 2019 2018 Service Cost 122 441 122 428 106 297 103 452 97 138 Interest 199 913 189 204 174 233 166 826 160 043 Differences bewteen exptected and actual experience 278,335 75,893 192,265 - - Changes of assumptions (163,361) - (65,796) - - Benefit Payments, including refunds of member contributions (225,321) (220,316) (168,787) (149,550) (168,724) Net Change in Total OPEB Liability 212,007 167,209 238,212 120,728 88,457 otal OPEB Liabilit - Be innin 3 064 031 2 896 822 2 658 610 2 537 882 2 449 425 otal OPEB Liabilit - Endin a 3 276 038 3 064 031 2 896 822 2 658 610 2 537 882 Plan Fiduciar Net Position 2022 2021 2020 2019 2018 Contributions - Em lo er 412 106 405 008 278 539 149 548 218 724 Net Investment Income 204 887 38 644 48 769 37 365 36 877 Benefit Pa ments 225 321 220 316 168 787 149 548 168 724 Administrative Ex ense - - 330 - 261 Other Ex ense 563 427 240 683 - Net Change in Plan Fiduciary Net Position 391,109$ 222,909$ 157,951$ 36,682$ 86,616$ Plan Fiduciary Net Position - Beginning 1,023,054 800,145 642,194 605,512 518,896 Plan Fiduciary Net Position - Ending (b)1,414,163$ 1,023,054$ 800,145$ 642,194$ 605,512$ Net OPEB Liability (Asset) - Ending (a) - (b)1,861,875$ 2,040,977$ 2,096,677$ 2,016,416$ 1,932,370$ Plan Fiduciary Net Position as a Percentage of the Total OPEB Liability 43.17% 33.39% 27.62% 24.16% 23.86% Covered-Em lo ee Pa roll 5,847,005$ 5,902,604$ 5,744,627$ 5,495,000$ 5,495,000$ Net OPEB Liability (Asset) as a Percentage of Covered-Employee Payroll 31.84% 34.58% 36.50% 36.70% 35.17% Note: Fiscal year 2018 was the first year of implementation, therefore only eight years are shown. East Valley Water District Required Supplementary Information Schedule of OPEB Healthcare Contributions Year Ended June 30, 2025 Last Ten Years* The accompanying notes to required supplementary information are an integral part of this schedule. 77 Schedule of OPEB Healthcare Contributions Accounting standards require presentation of 10 years of information. However, the information in this schedule is not required to be presented retroactively. Years will be added to this schedule as future data becomes available. OPEB Contributions 2025 2024 2023 Actuarially Determined Contribution ADC 362,038$ 339,896$ 332,001$ Contributions in Relation to the ADC 577,908 582,171 558,324 Contribution Deficiency (Excess) (215,870)$ (242,275)$ (226,323)$ District's Covered-Employee Pa roll 8,787,535$ 8,548,186$ 7,729,384$ Contributions as a Percenta e of Covered-Em lo ee Pa roll 6.58% 6.81% 7.22% OPEB Contributions 2022 2021 2020 2019 2018 Actuarially Determined Contribution ADC 332,001$ 348,363$ 348,363$ 350,024$ 346,520$ Contributions in Relation to the ADC 556,222 412,106 405,008 278,539 149,548 Contribution Deficiency (Excess) (224,221)$ (63,743)$ (56,645)$ 71,485$ 196,972$ District's Covered-Employee Pa roll 6,007,798$ 5,847,005$ 5,902,604$ 5,744,627$ 5,495,000$ Contributions as a Percenta e of Covered-Em lo ee Pa roll 9.26% 7.05% 6.86% 4.85% 2.72% Note: Fiscal year 2018 was the first year of implementation, therefore only eight years are shown. East Valley Water District Notes to the Required Supplementary Information Purpose of Schedules Year Ended June 30, 2025 78 Schedule of District’s Proportionate Share of the Net Pension Liability The schedule presents information on the District’s proportionate share of the net pension liability, the plans’ fiduciary net position and, when applicable, the State’s proportionate share of the net pension liability associated with the District. In the future, as data becomes available, 10 years of information will be presented. Schedule of District’s Contributions The schedule presents information on the District’s required contribution, the amounts actually contributed, and any excess or deficiency related to the required contribution. In the future, as data becomes available, 10 years of information will be presented. Schedule of Changes in Net OPEB Liability The schedule is intended to show the funded status of the District’s actuarially determined liability for postemployment benefits other than pensions. In the future, as data becomes available, 10 years of information will be presented. Schedule of OPEB Healthcare Contributions The schedule presents information on the District’s required contribution, the amounts actually contributed, and any excess or deficiency related to the required contribution. In the future, as data becomes available, 10 years of information will be presented. Pertinent valuation dates and methods and assumptions used to determine the OPEB liability and required contributions are as follows: Measurement Date June 30, 2024 Valuation Date June 30, 2024 Methods and Assumptions Used to Determine Contribution Rates: Actuarial Cost Method Entry Age Normal Amortization Method Level Percentage of Payroll Remaining Amortization Period 14 years Assets Valuation Method 5 Year Salary Increases . Annua y P us Mer t Increases Based on 2021 Experience Study Investement Rate of Return 6.10% 79 80 81 East Valley Water District History and Organization Year Ended June 30, 2025 82 Formation of the District The Board of Supervisors of San Bernardino County approved a petition in writing for the formation of the East Valley Water District (formerly East San Bernardino County Water District) under Division 12 of the Water Code of the State of California and ordered an election held January 12, 1954. The formation of the District was voted for by the electors. The Board of Supervisors of San Bernardino County, by action on January 18, 1954, approved the formation of the District. Incorporation of the "East Valley Water District" was approved by the State of California on February 1, 1954. East Valley Water District Financing Authority The East Valley Water District Financing Authority (Authority) is a public body organized and existing under a Joint Exercise of Powers Agreement, and under the Constitution and laws of the State of California, between East Valley Water District and the California Municipal Finance Authority. The Authority was formed to assist in the financing and refinancing of capital improvement projects of the District for the use, benefit, and enjoyment of the public. Nature of Business The District has been engaged in the furnishing of water service and wastewater services to its customers since inception. Location The District Headquarters office is located at 31111 Greenspot Road, Highland, California. The office is situated within the District's boundaries which encompass an area of approximately 30.1 square miles within the County of San Bernardino, California. Directors James Morales Jr. Chairman of the Board Ronald L. Coats Vice-Chairman of the Board David E. Smith Governin Board Member Ronald L. Coats Governin Board Member Chris Carrillo Governin Board Member East Valley Water Distric James Morales Jr. President Ronald L. Coats Vice-President Michael Moore Secretar /Executive Director Brian W. Tom kins Director of Finance East Valley Water District Financing Authority Management Michael Moore General Mana er CEO Brian W. Tom kins Chief Financial Officer Treasurer East Valley Water District District General Counsel Jean Cihi o enetche JC Law Firm East Valley Water District East Valley Water District Combining Schedule of Net Position June 30, 2025 83 Water Wastewater Water Reclamation Eliminations Total ASSETS Current Assets: Cash and Cash Equivalents 4,482,833$ 4,064,369$ 3,435,156$ -$ 11,982,358$ Investments 13,821,318 1,981,427 - - 15,802,745 Accounts Receivable, Net 5,725,339 372,123 759,401 - 6,856,863 Interest Receivable 200,111 79,199 48,112 - 327,422 Other Receivables 2,766,435 - - - 2,766,435 Due From Other Fund 3,000,000 - - (3,000,000) - Due from Other Governments 644 - 4,220,978 - 4,221,622 Inventory 1,455,727 6,721 - - 1,462,448 Prepaid Expenses 619,667 55,624 - - 675,291 Total Current Assets 32,072,074 6,559,463 8,463,647 (3,000,000) 44,095,184 Non-Current Assets: Restricted Cash and Cash Equivalents 9,164,541 3,678,670 3,506,511 - 16,349,722 Assessments Receivable 230,355 - - - 230,355 Capital Assets not being Depreciated 6,343,332 3,598,740 1,159,574 - 11,101,646 Capital Assets, Net (Note 4) 109,842,047 27,040,879 170,637,037 - 307,519,963 Total Non-Current Assets 125,580,275 34,318,289 175,303,122 - 335,201,686 Total Assets 157,652,349 40,877,752 183,766,769 (3,000,000) 379,296,870 DEFERRED OUTFLOWS OF RESOURCES Deferred Charge on Refunding 524,362 245,875 - - 770,237 Deferred Outflows - Pensions 3,383,040 1,449,874 - - 4,832,914 Deferred Outflows - OPEB 1,175,498 503,785 - - 1,679,283 Total Deferred Outflows 5,082,900 2,199,534 - - 7,282,434 Total Assets and Deferred Outflows of Resources 162,735,249$ 43,077,286$ 183,766,769$ (3,000,000)$ 386,579,304$ (Continued) East Valley Water District Combining Schedule of Net Position – Continued June 30, 2025 84 Water Wastewater Water Reclamation Eliminations Total LIABILITIES Current Liabilities: Accounts Payable and Accrued Expenses 4,468,837$ 31,927$ -$ -$ 4,500,764$ Accrued Payroll and Benefits 696,434 198,139 132,851 - 1,027,424 Customer Service Deposits 1,590,870 - - - 1,590,870 Construction Advances and Retentions 188,012 3,500 21,177 - 212,689 Accrued Interest Payable 190,572 24,072 1,544,299 - 1,758,943 Current Portion of Compensated Absences 333,496 99,373 53,315 - 486,184 Current Portion of Long-Term Debt 1,194,659 175,000 4,578,214 - 5,947,873 Due To Other Fund - - 3,000,000 (3,000,000) - Due To Other Governments 139,103 - - - 139,103 Total Current Liabilities 8,801,983 532,011 9,329,856 (3,000,000) 15,663,850 Non-Current Liabilities: Compensated Absences, Less Current Portion 822,653 253,650 227,818 - 1,304,121 Net Pension Liability 10,153,892 4,351,668 - - 14,505,560 Net OPEB Liability 1,036,795 444,341 - - 1,481,136 Long-Term Debt, Less Current Portion 27,740,341 3,855,000 167,475,215 - 199,070,556 Due To Other Governments 3,920,000 1,680,000 - - 5,600,000 Total Non-Current Liabilities 43,673,681 10,584,659 167,703,033 - 221,961,373 Total Liabilities 52,475,664 11,116,670 177,032,889 (3,000,000) 237,625,223 DEFERRED INFLOWS OF RESOURCES Deferred Inflows - Refunding 1,019,098 - - - 1,019,098 Deferred Inflows - Pensions 213,300 91,414 - - 304,714 Deferred Inflows - OPEB 475,737 203,887 - - 679,624 Total Deferred Inflows 1,708,135 295,301 - - 2,003,436 Total Liabilities and Deferred Inflows of Resources 54,183,799 11,411,971 177,032,889 (3,000,000) 239,628,659 NET POSITION Net Investment in Capital Assets 87,237,315 26,598,316 - - 113,835,631 Restricted for: Future Capital Expansion Projects 7,136,579 3,491,970 3,506,511 - 14,135,060 Unrestricted 14,177,556 1,575,029 3,227,369 - 18,979,954 Total Net Position 108,551,450$ 31,665,315$ 6,733,880$ -$ 146,950,645$ East Valley Water District Combining Schedule of Revenues, Expenses, and Changes in Net Position Year Ended June 30, 2025 85 Water Wastewater Water Reclamation Eliminations Total OPERATING REVENUE Water Sales 20,073,864$ -$ 1,206,250$ -$ 21,280,114$ Wastewater Treatment Charges - - 12,683,579 - 12,683,579 System Charges 10,829,537 6,678,345 - - 17,507,882 Other Revenue 1,224,599 112,285 475,720 - 1,812,604 Total Operating Revenue 32,128,000 6,790,630 14,365,549 - 53,284,179 OPERATING EXPENSES Source of Supply: Salary & Benefits 590,561 - - - 590,561 Contract Services 344,450 - - - 344,450 Utilities 1,813,742 - - - 1,813,742 Insurance 8,860 - - - 8,860 Materials & Supplies 102,188 - - - 102,188 Purchased Water 621,508 - - - 621,508 Water Assessments 168,221 - - - 168,221 Chemicals 129,485 - - - 129,485 Professional Development 596 - - 596 Taxes 22,232 - - - 22,232 Total Source of Supply 3,801,843 - - - 3,801,843 Pumping: Salary & Benefits 206,014 - - - 206,014 Contract Services 59,075 - - - 59,075 Utilities 848,512 - - - 848,512 Materials & Supplies 10,871 - - - 10,871 Total Pumping 1,124,472 - - - 1,124,472 Treatment: Salary & Benefits 546,095 - 2,138,747 - 2,684,842 Contract Services 623,950 - 3,871,431 - 4,495,381 Utilities 216,076 - 2,906,069 - 3,122,145 Materials & Supplies 86,987 - 420,784 - 507,771 Chemicals 280,015 - 630,086 - 910,101 Memberships & Dues - - 1,565 - 1,565 Tools - - 16,840 - 16,840 Professional Development - - 15,991 - 15,991 Total Treatment 1,753,123 - 10,001,513 - 11,754,636 Transmission & Distribution: Salary & Benefits 2,854,020 - - - 2,854,020 Contract Services 615,205 - - - 615,205 Materials & Supplies 833,948 - - - 833,948 Chemicals 14,069 - - - 14,069 Permits 3 - - - 3 Tools 58,371 - - - 58,371 otal Transmission & Distribution 4,375,616$ -$ -$ -$ 4,375,616$ (Continued) East Valley Water District Combining Schedule of Revenues, Expenses, and Changes in Net Position - Continued Year Ended June 30, 2025 86 Water Wastewater Water Reclamation Eliminations Total OPERATING EXPENSES - Continued Wastewater Collection: Salary & Benefits -$ 587,665$ -$ -$ 587,665$ Contract Services - 118,448 - - 118,448 Materials & Supplies - 24,907 - - 24,907 Tools - 16,684 - - 16,684 Total Wastewater Collection - 747,704 - - 747,704 Customer Accounts: Salary & Benefits 1,027,269 316,333 - - 1,343,602 Contract Services 776,362 328,512 - - 1,104,874 Utilities 4,401 1,562 - - 5,963 Materials & Supplies 1,374 - - - 1,374 General Office Supplies 13,781 589 - - 14,370 Printing & Publishing 1,883 807 - - 2,690 Postage 127,914 54,820 - - 182,734 Professional Development 5,869 2,515 - - 8,384 Total Customer Accounts 1,958,853 705,138 - - 2,663,991 General & Administrative: Salary & Benefits 6,166,322 2,186,711 - - 8,353,033 Contract Services 3,309,399 1,069,124 - - 4,378,523 Conservation Rebates 84,635 - - - 84,635 Utilities 455,364 103,418 - - 558,782 Insurance 1,729,860 526,801 - - 2,256,661 Materials & Supplies 357,263 178,331 - - 535,594 General Office Supplies 17,654 8,041 - - 25,695 Legal Services 135,155 57,924 - - 193,079 Permits 40,184 21,844 - - 62,028 Memberships & Dues 86,333 32,492 - - 118,825 Tools 11,067 4,187 - - 15,254 Printing & Publishing 118,243 43,413 - - 161,656 Professional Development 143,292 47,693 - - 190,985 Rents & Leases 10,043 4,304 - - 14,347 Total General & Administrative 12,664,814 4,284,283 - - 16,949,097 OPERATING EXPENSES BEFORE DEPRECIATION 25,678,721 5,737,125 10,001,513 - 41,417,359 Depreciation 5,839,354 1,037,511 5,435,057 - 12,311,922 Total Operating Expenses 31,518,075 6,774,636 15,436,570 - 53,729,281 OPERATING INCOME (LOSS)609,925$ 15,994$ (1,071,021)$ -$ (445,102)$ (Continued) East Valley Water District Combining Schedule of Revenues, Expenses, and Changes in Net Position - Continued Year Ended June 30, 2025 87 Water Wastewater Water Reclamation Eliminations Total NON-OPERATING REVENUES Investment Income 1,228,235$ 282,198$ 181,770$ -$ 1,692,203$ Unrealized Investment Gain 161,798 39,148 - 200,946 Other Income 339,433 - - - 339,433 Total Non-Operating Revenues 1,729,466 321,346 181,770 - 2,232,582 NON-OPERATING EXPENSES Interest Expense 700,343 109,831 4,502,847 - 5,313,021 Loss on Disposal of Assets 81,006 - - 81,006 Total Non-Operating Expenses 781,349 109,831 4,502,847 - 5,394,027 INCOME BEFORE CONTRIBUTIONS 1,558,042 227,509 (5,392,098) - (3,606,547) CONTRIBUTIONS: Capacity Charges 2,061,493 533,455 1,035,926 - 3,630,874 Capital Grants - - 1,493,764 - 1,493,764 Operating Grants 203,988 - - - 203,988 Total Contributions 2,265,481 533,455 2,529,690 - 5,328,626 CHANGE IN NET POSITION 3,823,523 760,964 (2,862,408) - 1,722,079 TOTAL NET POSITION, BEGINNING 104,727,927 30,904,351 9,596,288 - 145,228,566 TOTAL NET POSITION, ENDING 108,551,450$ 31,665,315$ 6,733,880$ -$ 146,950,645$ 88 East Valley Water District Combining Schedule of Cash Flows Year Ended June 30, 2025 89 Water Wastewater Water Reclamation Eliminations Total CASH FLOWS FROM OPERATING ACTIVITIES Cash Received from Customers 30,836,827$ 6,769,524$ 14,273,178$ -$ 51,879,529$ Cash Payments for Employees Services (10,731,338) (2,814,460) (2,024,185) - (15,569,983) Cash Payments to Suppliers (20,207,903) (2,680,430) (8,001,654) - (30,889,987) Misc Income / (Expense) 338,628 - - - 338,628 Net Cash Provided by Operating Activities 236,214 1,274,634 4,247,339 - 5,758,187 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Assessments Received 301,968 - - - 301,968 Developer Fees Received 2,061,493 533,455 1,035,926 - 3,630,874 Reimbursements Received 203,992 - 1,493,764 - 1,697,756 Proceeds/Draws from SRF Loan - - 11,919,642 - 11,919,642 Due (From) To Other Fund 9,526,922 2,257,875 (11,784,797) - - Due (From) To Reclamation Fund - - - - - Principal Paid on Capital Debt (1,379,796) (175,000) (4,211,650) - (5,766,446) Interest Paid on Capital Debt (905,140) (96,998) (2,958,548) - (3,960,686) Due (From) To Other Agencies (427,993) (210,000) - - (637,993) Acquisition of Capital Assets (5,923,315) (999,366) (2,215,175) - (9,137,856) Net Cash Provided (Used) by Capital and Related Financing Activities 3,458,131 1,309,966 (6,720,838) - (1,952,741) CASH FLOWS FROM INVESTING ACTIVITIES Interest Received from Investments 845,176 413,346 156,012 - 1,414,534 Acquisition of Investment Securities (7,893,566) (799,010) - - (8,692,576) Proceeds from Sales of Investments 7,400,000 1,000,000 - - 8,400,000 Net Cash Provided (Used) by Investing Activities 351,610 614,336 156,012 - 1,121,958 Net (Decrease) Increase in Cash and Cash Equivalents 4,045,955 3,198,936 (2,317,487) - 4,927,404 Cash and Equivalents: Beginning of Year 9,601,419 4,544,103 9,259,154 - 23,404,676 End of Year 13,647,374$ 7,743,039$ 6,941,667$ -$ 28,332,080$ RECONCILIATION TO STATEMENT OF NET POSITION Cash and Cash Equivalents 4,482,833$ 4,064,369$ 3,435,156$ -$ 11,982,358$ Restricted Cash and Cash Equivalents 9,164,541 3,678,670 3,506,511 - 16,349,722 Total Cash and Cash Equivalents 13,647,374$ 7,743,039$ 6,941,667$ -$ 28,332,080$ (Continued) East Valley Water District Combining Schedule of Cash Flows - Continued Year Ended June 30, 2025 90 Water Wastewater Water Reclamation Eliminations Total Reconciliation of Operating Income (Loss) to Net Cash Provided by Operating Activities Operating Income (Loss) 609,925$ 15,994$ (1,071,021)$ -$ (445,102)$ Adjustments to Reconcile Operating Income (Loss) to Net Cash Provided by Operating Activities: Depreciation 5,839,354 1,037,511 5,435,057 - 12,311,922 Miscellaneous Income/(Expense) 339,433 - - - 339,433 CIP Projects Expensed 41,190 55,275 36,854 - 133,319 Change in Assets and Liabilities: Customer Receivables (635,698) (21,106) (92,371) - (749,175) Inventory (400,557) - - - (400,557) Prepaids 113,764 (13,610) - - 100,154 Deferred Outflow of Resources 1,267,202 543,087 - - 1,810,289 Accounts Payable - Supplier (5,675,784) (75,679) (196,919) - (5,948,382) Salaries & Benefits Payable 26,824 28,202 114,562 - 169,588 Compensated absences 129,970 32,360 - - 162,330 Net Pension Liability (277,531) (118,942) - - (396,473) Net OPEB Liability (410,232) (175,813) - - (586,045) Deferred Inflows of Resources (76,171) (32,645) - - (108,816) Other Receivables (807,329) - - - (807,329) Customer / Developer Deposits 151,854 - 21,177 - 173,031 Total Cash Provided by Operating Activities 236,214$ 1,274,634$ 4,247,339$ -$ 5,758,187$ NON-CASH INVESTING, CAPITAL, AND NON-CAPITAL FINANCING ACTIVITIES: Fair Value Ad ustments to Investments 161,799$ 39,148$ -$ -$ 200,947$ 51,195$ -$ -$ -$ 51,195$ Retentions Related to Construction 91 92 Annual Comprehensive Financial Report Fiscal Year Ended June 30, 2025 Table of Contents 93 Page No. Statistical Information Section Financial Trends ................................................................................................. 95-100 These schedules contain information to help the reader understand how the District’s financial performance and well-being have changed over time. Changes in Net Position by Component – Last Ten Fiscal Years .................................... 95-96 Operating Revenue by Source – Last Ten Fiscal Years ...................................................... 97 Water Operating Expenses – Last Ten Fiscal Years ........................................................... 98 Wastewater Operating Expenses – Last Ten Fiscal Years................................................... 99 Water Reclamation Operating Expenses – Last Ten Fiscal Years ...................................... 100 Revenue Capacity ............................................................................................. 101-108 These schedules contain information to help the reader assess the District’s most significant sources of revenue, water sales, meter charges, wastewater system charges, wastewater treatment charges, and other charges. Water Sales and Production – Last Ten Fiscal Years ........................................................ 101 Revenue Rates for Water – Last Ten Fiscal Years ..................................................... 103-104 Revenue Rates for Wastewater – Last Ten Fiscal Years ............................................. 105-106 Active Services by Type – Last Ten Fiscal Years .............................................................. 107 Principal Customers – Current Fiscal Year and Nine Years Ago ........................................ 108 Debt Capacity .................................................................................................. 109-110 These schedules present information to help the reader assess the affordability of the District’s current levels of outstanding debt and the District’s ability to issue additional debt in the future. Ratio of Outstanding Debt – Last Ten Fiscal Years .......................................................... 109 Debt Service Coverage – Last Ten Fiscal Years ............................................................... 110 Annual Comprehensive Financial Report Fiscal Year Ended June 30, 2025 Table of Contents 94 Page No. Statistical Information Section - Continued Demographic Information ....................................................................................... 111 These schedules offer demographic indicators to help the reader understand the environment within which the District’s financial activities take place. Demographic and Economic Statistics – Last Ten Calendar / Fiscal Years ......................... 111 Operating Information .................................................................................... 112-113 These schedules contain service and infrastructure data to help the reader understand how the information in the District’s financial report relates to the service provided by the District. Full-Time Equivalent Employees by Department – Last Ten Fiscal Years ........................... 112 Operating and Capacity Indicators for Water and Wastewater – Last Ten Fiscal Years ...... 113 EAST VALLEY WATER DISTRICT Changes in Net Position by Component Last Ten Fiscal Years 95 Year ended June 30, 2016 2017 2018 2019 2020 Chan e In Net Position O eratin Revenue 33 024 082 37 448 549 40 291 125 39 309 298 39 812 912 O eratin Ex enses 32 655 921 32 299 587 35 980 099 35 898 073 36 249 650 O eratin Income Loss 368 161 5 148 962 4 311 026 3 411 225 3 563 262 Non-O eratin Revenue Ex enses Investment Income 146 874 69 237 221 359 571 549 524 675 Other Income 830 806 401 323 258 560 307 247 121 983 Interest Ex ense 1 843 440 1 776 684 1 777 852 1 684 986 1 579 104 Gain Loss on Dis osal of Assets - - - 705 285 - Total Non-O eratin Revenue Ex enses 865 760 1 306 124 1 297 933 100 905 932 446 S ecial Item Abandoned Pro ects - 1 615 241 - - - Hazard Miti ation - - 155 177 - - Settlement Obli ation - - - - - Ca ital Contributions 732 642 2 446 118 523 918 611 673 9 961 522 Chan e in Net Position 235 043 4 673 715 3 537 011 3 921 993 12 592 338 Prior Period Ad ustment - - - - - Cumulative Effect of Chan e in Accountin Princi les - - 1 711 803 - - Net Position - Be innin 112 814 877 113 049 920 117 723 635 119 393 666 123 315 659 Net Position - Endin 113 049 920 117 723 635 119 548 843 123 315 659 135 907 997 Net Position B Com onent Net Investment in Ca ital Assets 103 222 160 104 659 796 103 210 762 95 468 735 106 708 555 Restricted 2 276 695 2 847 924 3 334 940 3 460 835 6 659 487 Unrestricted 7 551 065 10 215 915 12 847 964 24 386 089 22 539 955 113 049 920 117 723 635 119 393 666 123 315 659 135 907 997 Continued SOURCE: East Valle Water District - Finance De artment EAST VALLEY WATER DISTRICT Changes in Net Position by Component - Continued Last Ten Fiscal Years 96 Year ended June 30, 2021 2022 2023 2024 2025 Chan e In Net Position O eratin Revenue 42 236 814 43 093 615 43 810 012 45 930 215 53 284 179 O eratin Ex enses 36 496 064 40 578 341 42 515 136 44 565 339 53 729 281 O eratin Income Loss 5 740 750 2 515 274 1 294 876 1 364 876 445 102 Non-O eratin Revenue Ex enses Investment Income 167 499 165 989 352 273 1 136 502 1 692 203 Other Income 43 744 269 768 37 876 169 600 540 379 Interest Ex ense 1 387 113 1 295 223 869 397 789 683 5 313 021 Gain Loss on Dis osal of Assets 1 236 600 1 042 562 30 134 - 81 006 Total Non-O eratin Revenue Ex enses 2 412 470 356 440 524 866 516 419 3 161 445 S ecial Item Abandoned Pro ects - - - - - Hazard Miti ation - - - - - Settlement Obli ation - - - 7 000 000 - Ca ital Contributions 877 185 2 826 525 1 922 052 2 556 388 3 834 862 Chan e in Net Position 4 205 465 4 985 359 2 692 062 2 562 317 228 315 Prior Period Ad ustment - - - - - Cumulative Effect of Chan e in Accountin Princi les - - - - - Net Position - Be innin 135 907 997 140 113 462 145 098 821 147 790 883 145 228 566 Net Position - Endin 140 113 462 145 098 821 147 790 883 145 228 566 145 456 881 Net Position B Com onent Net Investment in Ca ital Assets 114 767 362 117 079 071 112 909 956 112 073 604 113 835 631 Restricted 6 435 505 9 076 014 10 761 677 13 314 565 14 135 060 Unrestricted 18 910 595 18 943 736 24 119 250 19 840 397 18 979 954 140 113 462 145 098 821 147 790 883 145 228 566 146 950 645 SOURCE: East Valle Water District - Finance De artment EAST VALLEY WATER DISTRICT Operating Revenue by Source Last Ten Fiscal Years 97 Wastewater Wastewater Total ear Ended Water Meter System Treatment Other Operatin June 30, Sales Char es Char es Char es Char es Revenue 2016 11,927,523$ 8,063,077$ 4,286,594$ 7,165,655$ 1,581,233$ 33,024,082$ 2017 14,556,339 8,944,652 4,703,439 8,128,030 1,116,089 37,448,549 2018 17,063,891 8,999,756 4,668,923 8,697,671 860,884 40,291,125 2019 15,746,654 9,009,881 4,643,732 8,592,950 1,316,081 39,309,298 2020 16,902,370 9,023,267 4,647,347 8,496,012 743,916 39,812,912 2021 19,305,631 9,217,003 4,705,683 8,456,508 551,989 42,236,814 2022 18,472,876 9,192,297 4,828,526 9,764,357 835,559 43,093,615 2023 17,004,576 9,831,561 5,651,554 10,108,850 1,213,471 43,810,012 2024 17,900,515 10,149,281 6,073,154 10,746,724 1,060,541 45,930,215 2025 21,280,114 10,829,537 6,678,345 12,683,579 1,812,604 53,284,179 SOURCE: East Valley Water District - Finance Department $- $10,000,000 $20,000,000 $30,000,000 $40,000,000 $50,000,000 $60,000,000 Other Charges Wastewater Treatement Charges Wastewater System Charges Meter Charges Water Sales EAST VALLEY WATER DISTRICT Water Operating Expenses Last Ten Fiscal Years 98 Transmission Customer Accts,Total ear Ended Source o Wate General, & Water Ope June 30, Supply Pumpin Treatment Distribution dmin Expenses 2016 2,442,061$ 696,432$ 799,947$ 2,327,185$ 8,782,957$ 15,048,582$ 2017 3,401,062 646,940 750,052 2,222,953 7,696,211 14,717,218 2018 2,595,071 683,296 969,460 2,538,910 9,347,724 16,134,461 2019 2,975,348 585,585 840,623 2,819,288 9,393,555 16,614,399 2020 3,263,403 457,846 891,127 3,460,642 9,414,762 17,487,780 2021 3,617,788 596,586 1,008,129 3,253,175 9,208,176 17,683,854 2022 3,515,262 756,843 1,045,730 3,563,328 12,534,090 21,415,253 2023 3,890,634 1,003,038 1,212,646 4,311,606 10,744,909 21,162,833 2024 4,079,366 883,731 1,592,368 4,012,276 10,271,373 20,839,114 2025 3,801,843 1,124,472 1,753,123 4,375,616 14,623,667 25,678,721 SOURCES: East Valley Water District - Customer Service, Finance, and Operations Departments $0 $5,000,000 $10,000,000 $15,000,000 $20,000,000 $25,000,000 $30,000,000 Source of Supply Pumping Water Treatment Transmission & Distribution Customer Accts, General, & Admin EAST VALLEY WATER DISTRICT Wastewater Operating Expenses Last Ten Fiscal Years 99 Customer Accts, Total ear Ended Wastewater General & Wastewater Oper June 30, Collections dmin Expenses 2016 407,913$ 2,752,779$ 3,160,692$ 2017 425,944 2,510,920 2,936,864 2018 753,000 3,367,091 4,120,091 2019 700,507 3,309,983 4,010,490 2020 767,448 2,922,949 3,690,397 2021 722,680 3,140,650 3,863,330 2022 587,128 3,113,309 3,700,437 2023 752,489 4,048,730 4,801,219 2024 792,350 4,293,503 5,085,853 2025 747,704 4,989,421 5,737,125 SOURCES: East Valley Water District - Customer Service and Finance Departments $0 $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 $7,000,000 Wastewater Collections Customer Accts, General, & Admin EAST VALLEY WATER DISTRICT Water Reclamation Operating Expenses Last Ten Fiscal Years 100 Customer Accts, Total ear Ended Wastewater General, & Water Recl Oper June 30, Treatment dmin Expenses 2016 7,302,389$ -$ 7,302,389$ 2017 8,128,030 - 8,128,030 2018 8,697,671 - 8,697,671 2019 8,592,950 - 8,592,950 2020 8,496,012 - 8,496,012 2021 8,456,508 - 8,456,508 2022 9,084,061 - 9,084,061 2023 9,601,461 685,246 10,286,707 2024 10,411,256 604,450 11,015,706 2025 10,001,513 - 10,001,513 SOURCES: East Valley Water District - Customer Service and Finance Departments $0 $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 Wastewater Treatment Customer Accts, General, & Admin EAST VALLEY WATER DISTRICT Water Sales and Production Last Ten Fiscal Years 101 ear Ended Water Sales Water Produced June 30, (Acre Feet) (Acre Feet) 2016 14,999 16,614 2017 16,223 17,922 2018 18,361 18,997 2019 16,167 17,397 2020 17,037 17,596 2021 18,429 18,784 2022 17,998 18,789 2023 15,341 16,408 2024 15,420 16,273 2025 16,926 17,657 SOURCES: East Valley Water District - Finance and Operations Departments 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000 Water Produced Water Sales 102 EAST VALLEY WATER DISTRICT Revenue Rates for Water Last Ten Fiscal Years 103 Water Consumption Rates (Char e per HCF) Year ended June 30 2016 2017 2018 2019 2020 1 Tier 1-$1.45 Tier 1-$1.63 Tier 1-$1.73 Tier 1-$1.73 Tier 1-$1.83 Residential Tier 2-$2.07 Tier 2-$2.32 Tier 2-$2.46 Tier 2-$2.46 Tier 2-$2.61 Tier 3-$2.89 Tier 3-$3.24 Tier 3-$3.44 Tier 3-$3.44 Tier 3-$3.64 Commercial Flat-Rate 4 N/A N/A N/A N/A N/A Water Monthly System Char es Year ended June 30, 2016 2017 2018 2019 2020 1 20.96$ 23.06$ 23.06$ 23.06$ 23.06$ 26.61 29.27 29.27 29.27 29.27 37.92 41.71 41.71 41.71 41.71 66.19 72.81 72.81 72.81 72.81 100.12 110.13 110.13 110.13 110.13 207.54 228.30 228.30 228.30 228.30 365.85 402.44 402.44 402.44 402.44 744.67 819.14 819.14 819.14 819.14 1,366.62 1,503.28 1,503.28 1,503.28 1,503.28 (Continued) NOTES: HCF = Hundred Cubic Feet = 748 allons 1 On January 1, 2020 the District adopted New Water Rates. 2 On January 1, 2022 the District adopted New Water Rates. 3 On May 15, 2024 the District adopted New Water Rates. 4 Startin January 1, 2025 Commercial customers are billed usin a flat-rate instead of tiered rates. SOURCE: East Valley Water District - Water and Wastewater Rate Resolutions Meter Size (inches) 1 1/2 5/8 3/4 1 2 8 3 4 6 EAST VALLEY WATER DISTRICT Revenue Rates for Water - Continued Last Ten Fiscal Years 104 Water Consumption Rates (Char e per HCF) Year ended June 30, 2021 2022 2 2023 2024 2025 3 Tier 1-$1.83 Tier 1-$1.98 Tier 1-$2.04 Tier 1-$2.11 Tier 1-$2.19 Residential Tier 2-$2.61 Tier 2-$2.54 Tier 2-$2.62 Tier 2-$2.70 Tier 2-$2.84 Tier 3-$3.64 Tier 3-$3.93 Tier 3-$4.05 Tier 3-$4.18 Tier 3-$4.10 Commercial Flat-Rate 4 N/A N/A N/A N/A 2.39$ Water Monthly System Char es Year ended June 30, 2021 2022 2 2023 2024 2025 23.06$ 24.01$ 24.74$ 25.49$ 27.52$ 29.27 30.85 31.78 32.74 34.62 41.71 44.52 45.86 47.24 48.83 72.81 78.69 81.06 83.50 84.35 110.13 119.70 123.30 127.00 126.97 228.30 229.05 235.93 243.01 368.48 402.44 352.07 362.64 373.52 901.23 819.14 693.79 714.61 736.05 1,433.89 1,503.28 1,923.98 1,981.70 2,041.16 2,854.65 2,041.16 4,630.48 2,041.16 5,695.98 NOTES: HCF = Hundred Cubic Feet = 748 allons 1 On January 1, 2020 the District adopted New Water Rates. 2 On January 1, 2022 the District adopted New Water Rates. 3 On May 15, 2024 the District adopted New Water Rates. 4 Startin January 1, 2025 Commercial customers are billed usin a flat-rate instead of tiered rates. SOURCE: East Valley Water District - Water and Wastewater Rate Resolutions 10 12 Meter Size (inches) 1 1/2 5/8 3/4 1 8 3 4 6 2 EAST VALLEY WATER DISTRICT Revenue Rates for Wastewater Last Ten Fiscal Years 105 Wastewater Collection Charges Year ended June 30, 2016 2017 2018 2019 2020 Single-Family Residential (1 to 3 units) Flat Monthly Charge (per unit) 15.36$ 15.36$ 15.36$ 15.36$ 15.36$ Multi-Family Residential (4 or more units) Flat Monthly Charge (per unit) N/A N/A N/N/A N/A Commercial Non-Residential Flat Monthly Charge 3.90 3.90 3.90 3.90 3.90 plus, Charge per HCF 0.55 0.55 0.55 0.55 0.55 Wastewater Treatment Charges Year ended June 30, 2016 2017 2018 2019 2020 Residential (Flat Monthly Charge) Flat Monthly Charge Residential (1 unit) 19.18$ 20.85$ 21.55$ 21.55$ 21.55$ Residential (2 units) N/A N/A N/N/A N/A Residential (3 units) N/A N/A N/N/A N/A Multi-Family (2 units) 38.37 41.72 43.10 43.10 43.10 Multi-Family (3 units) 57.55 62.58 64.64 64.64 64.64 Multi-Family (4 or more units) N/A N/A N/N/A N/A Commercial Multi-Family (4+ units) 1.71 1.90 1.97 1.97 1.97 Non-Residential 3.18 3.42 3.52 3.52 3.52 plus, Charge per HCF: Multi-Family (4+ units) 1.36 1.48 1.53 1.53 1.53 Retail 2.28 2.47 2.55 2.55 2.55 Restaurants/Lounges 2.93 3.18 3.28 3.28 3.28 Schools/Churches 1.19 1.29 1.33 1.33 1.33 Governments/Municipal 1.63 1.77 1.83 1.83 1.83 Laundromats 1.63 1.77 1.83 1.83 1.83 Dry Cleaners 2.28 2.47 2.55 2.55 2.55 Convalescent Homes 1.46 1.58 1.63 1.63 1.63 Auto Repair/Svc Stations 1.41 1.53 1.58 1.58 1.58 Car Wash 1.41 1.53 1.58 1.58 1.58 Patton State Hospital N/A N/A N/N/A N/A Hotels 2.93 3.18 3.28 3.28 3.28 Ofc Bldgs/Motels 1.63 1.77 1.83 1.83 1.83 Supermarkets 2.93 3.18 3.28 3.28 3.28 NOTES:(Continued) HCF = Hundred Cubic Feet = 748 gallons 1 SOURCE: East Valle Water District - Water and Wastewater Rate Resolutions Starting in May 2022, the District transitioned from rates established by the City of San Bernardino to rates adopted as the result of a wastewater Cost of Service Analysis for the District's Sterling Natural Resource Center Water Reclamation Plant. EAST VALLEY WATER DISTRICT Revenue Rates for Wastewater - Continued Last Ten Fiscal Years 106 Wastewater Collection Charges Year ended June 30, 2021 2022 1 2023 2024 2025 Single-Family Residential (1 to 3 units) Flat Monthly Charge (per unit) 15.36$ 14.25$ 15.25$ 16.32$ 16.70$ Multi-Family Residential (4 or more units) Flat Monthly Charge (per unit) N/A 13.46 14.41 15.42 15.48 Commercial Non-Residential Flat Monthly Charge 3.90 10.33 11.06 11.84 10.59 plus, Charge per HCF 0.55 - - - - Wastewater Treatment Charges Year ended June 30, 2021 2022 1 2023 2024 2025 Residential (Flat Monthly Charge) Flat Monthly Charge Residential (1 unit) 21.55$ 23.37$ 25.01$ 26.77$ 29.79$ Residential (2 units) N/A 23.37 25.01 26.77 29.79 Residential (3 units) N/A 23.37 25.01 26.77 29.79 Multi-Family (2 units) 43.10 20.86 22.33 23.90 25.67 Multi-Family (3 units) 64.64 20.86 22.33 23.90 25.67 Multi-Family (4 or more units) N/A 20.86 22.33 23.90 25.67 Commercial Multi-Family (4+ units) 1.97 N/A N/N/A N/A Non-Residential 3.52 10.83 11.59 12.41 9.16 plus, Charge per HCF: Multi-Family (4+ units) 1.53 N/A N/N/A N/A Retail 2.55 1.31 1.41 1.52 2.96 Restaurants/Lounges 3.28 1.31 4.16 4.46 4.73 Schools/Churches 1.33 1.31 1.41 1.52 2.96 Governments/Municipal 1.83 1.31 1.41 1.52 2.96 Laundromats 1.83 1.99 2.14 2.30 3.31 Dry Cleaners 2.55 1.99 2.14 2.30 3.31 Convalescent Homes 1.63 1.99 2.14 2.30 3.31 Auto Repair/Svc Stations 1.58 1.99 2.14 2.30 3.31 Car Wash 1.58 1.99 1.41 1.52 2.96 Patton State Hospital N/A 2.36 2.53 2.72 1.74 Hotels 3.28 3.88 4.16 4.46 4.73 Ofc Bldgs/Motels 1.83 3.88 1.41 1.52 2.96 Supermarkets 3.28 1.31 4.16 4.46 4.73 NOTES: HCF = Hundred Cubic Feet = 748 gallons 1 SOURCE: East Valle Water District - Water and Wastewater Rate Resolutions Starting in May 2022, the District transitioned from rates established by the City of San Bernardino to rates adopted as the result of a wastewater Cost of Service Analysis for the District's Sterling Natural Resource Center Water Reclamation Plant. EAST VALLEY WATER DISTRICT Active Services by Type Last Ten Fiscal Years 107 Year Ended Residential Multi-Family Total June 30, (1 to 3 units) (4+ units) Commercial Irri ation Fire Svcs Service 2016 19,500 463 949 275 1,330 22,517 2017 19,526 463 988 275 1,339 22,591 2018 19,526 463 988 275 361 21,613 2019 19,883 474 681 322 252 21,612 2020 19,526 463 988 275 255 21,507 2021 19,526 463 988 275 255 21,507 2022 19,853 463 988 275 255 21,834 2023 19,876 474 715 354 260 21,679 2024 19,966 479 710 360 265 21,780 2025 19,976 479 712 364 277 21,808 SOURCES: East Valley Water District - Customer Service and Finance Departments 17,500 18,000 18,500 19,000 19,500 20,000 20,500 21,000 21,500 22,000 22,500 23,000 Residential Multi-Family Commercial Irrigation Fire Svcs EAST VALLEY WATER DISTRICT Principal Customers Current Fiscal Year and Nine Years Ago 108 Water Percentage Water Percentage Consumed of Total Consumed of Total Customer (AF) Rank (%) (AF) Rank (%) San Bernardino City Unified School District 650 1 3.68% 599 1 3.61% Yaamava' Resort & Casino at San Manuel 345 2 1.95% 208 6 1.25% Patton State Hospital 333 3 1.89% 345 2 2.08% City of Hi hland 283 4 1.60% 274 3 1.65% The Yuhaaviatam of San Manuel Nation 268 5 1.52% 238 4 1.43% East Hi hlands Ranch 206 6 1.17% 228 5 1.37% Amusement Industry, Inc. 141 7 0.80% - - 0.00% Stubblefield Mobile Home Parks & Offices 125 8 0.71% 102 8 0.61% Valencia Lea Mobile Home Park 116 9 0.66% 100 9 0.60% Victoria Villa e Apartments 111 10 0.63% 105 7 0.63% Villa e Lakes Homeowners Association 99 10 0.60% Total - Top 10 2,578 14.61% 2,298 13.83% Total - Water Produced 17,657 16,614 SOURCES: East Valley Water District - Customer Service 20162025 EAST VALLEY WATER DISTRICT Ratio of Outstanding Debt Last Ten Fiscal Years 109 Fiscal ea Revenue Bonds DWR Loans Financed Purchases and Loans Certificates of Partici ation Installment Note Outstanding Debt $ Per Ca ita s a Share of Personal Income 2016 39,615,000$ 6,818,565$ 3,299,108$ -$ -$ $ 49,732,673 $ 476 1.31% 2017 38,235,000 6,565,166 7,278,478 - - 52,078,644 510 1.37% 2018 36,800,000 6,721,695 6,392,308 - - 49,914,003 489 1.27% 2019 35,300,000 31,947,551 5,131,238 - - 72,378,789 710 1.73% 2020 33,720,000 69,565,404 4,295,104 - - 107,580,508 1,044 2.30% 2021 33,261,998 132,399,838 3,449,724 - - 169,111,561 1,642 3.30% 2022 32,288,904 145,368,048 2,582,889 - - 180,239,841 1,733 3.56% 2023 30,923,365 161,169,730 1,719,375 - - 193,812,470 1,864 3.64% 2024 29,490,264 180,670,939 - - - 210,161,203 1,946 * 2025 28,022,163 176,996,266 - - - 205,018,429 1,898 * NOTE: * This data was not developed in the format required for this fiscal year. SOURCE: East Valley Water District - Finance Department $0 $25,000,000 $50,000,000 $75,000,000 $100,000,000 $125,000,000 $150,000,000 $175,000,000 $200,000,000 Revenue Bonds DWR Loans Financed Purchases and Loans Certificates of Participation Installment Note EAST VALLEY WATER DISTRICT Debt Service Coverage Last Ten Fiscal Years 110 Water Department Gross Operating Net Available Revenue(1)Expenses(2)Revenue Principal(3)Interest Total 22,543,107$ 15,048,582$ 7,494,525$ 1,851,139$ 1,718,658$ 3,569,797$ 2.10 25,257,709 14,717,219 10,540,490 1,926,956 1,653,322 3,580,278 2.94 27,537,072 16,134,461 11,402,611 2,479,570 1,584,820 4,064,390 2.81 27,071,082 16,614,399 10,456,683 2,904,466 1,593,181 4,497,647 2.32 27,466,707 17,487,780 9,978,927 2,564,310 1,456,842 4,021,152 2.48 29,738,333 17,638,854 12,099,479 4,703,778 1,104,438 5,808,216 2.08 30,465,196 21,415,253 9,049,943 2,100,233 957,953 3,058,186 2.96 29,330,516 21,162,833 8,167,683 2,141,913 917,000 3,058,913 2.67 30,689,900 20,839,114 9,850,786 2,197,774 885,675 3,083,449 3.19 36,122,947 25,678,721 10,444,226 1,130,000 788,441 1,918,441 5.44 Wastewater Departmen Gross Operating Net Available Revenue(1)Expenses(2)Revenue Princi al Interest Total 2016 12,095,372$ 10,463,081$ 1,632,291$ 90,000$ 225,775$ $ 315 775 5.17 2017 13,134,564 11,064,894 2,069,670 95,000 221,625 316 625 6.54 2018 13,758,976 12,817,762 941,214 95,000 217,350 312 350 3.01 2019 14,433,970 12,603,440 1,830,530 100,000 212,475 312 475 5.86 2020 22,954,385 12,186,049 10,768,336 105,000 207,350 312 350 34.48 2021 13,586,909 12,319,838 1,267,071 110,000 158,476 268 476 4.72 2022 16,697,201 12,784,498 3,912,703 170,000 100,145 270 145 14.48 2023 6,274,931 4,801,219 1,473,712 175,000 99,316 274 316 5.37 2024 7,188,774 5,085,853 2,102,921 175,000 98,274 274 274 7.70 2025 7,645,431 5,737,125 1,908,306 4,386,650 3,055,545 7 442 195 0.26 NOTES: 1 2 Operatin expenses, less depreciation, for the utility fund. 3 Excludes Debt Service for Assessment Districts' Arroyo Verde and Eastwood Farms. SOURCE: East Valley Water District - Finance Department Year Ended Gross revenue includes all operating revenue, interest income, other non-operating revenue and connection fees from the utilit fund. Coverage Debt Service June 30, Year Ended June 30, Debt Service 2021 2022 2025 Coverage 2016 2017 2018 2019 2020 2023 2024 EAST VALLEY WATER DISTRICT Demographics and Economic Statistics Last Ten Calendar / Fiscal Years 111 County of San Bernardino Personal Personal Income Income District Unemployment Population (thousands Per Ca ita Population 3 4 Rate 1 3 +2 +of dollars)2 +(dollars)2 + 2016 104,457 6.0%2,126,834 77,453,102 36,417 2017 102,208 5.5%2,145,333 80,031,472 37,305 2018 102,000 4.5%2,160,491 83,514,331 38,655 2019 102,000 4.0%2,171,521 89,202,022 41,078 2020 103,000 6.5%2,183,391 99,009,671 45,347 2021 103,000 9.3%2,193,087 109,085,530 49,741 2022 104,000 5.4%2,194,908 106,853,756 48,683 2023 104,000 4.2%2,195,611 112,402,797 51,194 2024 108,000 4.9% * * * 2025 108,000 5.2% * * * NOTES: +his data was revised in 2025. *his data was not developed in the format required for this fiscal year. SOURCES: 1 U.S. Department of Labor, Bureau of Labor Statistics (BLS) Census Bureau midyear population estimates. 2 Bureau of Economic Analysis (BEA) Computed usin mid-year population estimates. 3 Fiscal Year ends on June 30 of the year that is shown. 4 East Valley Water District - Finance Department June 30, Year Ended EAST VALLEY WATER DISTRICT Full-Time Equivalent Employees by Department Last Ten Fiscal Years 112 District En ineerin & Water m n strat on a ntenance perat ons Reclamation 1 ota 27 28 13 0 68* 27 29 12 0 68* 26.5 29 13 0 68.5* 27.5 32 11 0 70.5* 26 30 11 0 67 25 30 11 0 66 26 30 11 9 76 26 30 11 9 76 26 28 11 8 73 26 29 11 9 75 NOTES: * Includes Part-Time Employees (PTEs) 1 Water Reclamation pro ram started in FY 2021-22 SOURCES: East Valley Water District - Finance and Human Resources & Risk Mana ement Departments Year Ended June 30, 2020 2021 2025 2018 2016 2017 2019 2022 2023 2024 0 10 20 30 40 50 60 70 80 District Administration Engineering & Maintenance Operations Water Reclamation EAST VALLEY WATER DISTRICT Operating and Capacity Indicators for Water and Wastewater Last Ten Fiscal Years 113 nnual vera e Miles of Number of Production Production Water Main Fire Hydrants (MG) (MGD) 2016 316 3 005 4,887 13 2017 316 3 005 5,286 14 2018 300 3 018 5,983 16 2019 300 3 025 5,268 14 2020 300 3 025 5,552 15 2021 300 3 029 6,121 17 2022 300 3 043 6,122 17 2023 300 3 048 5,347 15 2024 300 3 073 5,303 15 2025 300 3 099 5,754 16 Annual Daily Miles of Service Sewera e Sewera e Wastewater Connections (MG) (MGD) 2016 224 19 572 2,167.71 5.94 2017 260 20 290 2,175.40 5.96 2018 225 20 581 2,149.85 5.89 2019 214 20 563 2,091.45 5.73 2020 214 19 679 2,220.61 6.08 2021 214 19 686 2,220.61 6.08 2022 220 19 766 2,448.97 6.71 2023 230 19 831 2,138.63 5.86 2024 230 19 859 2,121.03 5.81 2025 230 20 080 2,301.42 6.31 SOURCE: East Valley Water District - En ineerin and Finance Departments Water System Wastewater System ear Ended June 30, ear Ended June 30, 114 EAST VALLEY WATER DISTRICT Capacity Charge Funds Year Ended June 30, 2025 115 Capacity Charge Funds Government Code Section 66013 requires local agencies that collect capacity charges to deposit and account for these fees in a separate capital facilities fund. In addition, local agencies are required to annually provide the information in this report to the public upon request. Government Code Section 66013 (b) (3) defines "Capacity charge" means a charge for public facilities at the time the charge is imposed or charges for new public facilities to be acquired or constructed in the future that are of proportional benefit to the person or property being charged, including supply or capacity contracts for rights or entitlements, real property interests, and entitlements and other rights of the local agency involving capital expense related to its use of the use of existing or new public facilities. " Government Code Section 66013 (d) outlines the reporting requirements on the capital facilities funds and expenditures. Government Code Section 66013 (f) (2) exempts capacity charges that are used to pay existing debt service from the reporting requirements of Section 66013 (d). Two of the District's capacity charges are used to pay existing debt service; therefore, they are exempt from the reporting requirements. For the purpose of enhancing transparency, the District has provided the reporting information on its capacity charges that are exempt from Section 66013 (d). The District has the following capacity charge funds: Water Capacity Fee Fund. This fund collects System Capacity Charges for new water service connections to pay for proportionate shares of the District equipment replacements and facility improvements. Wastewater Capacity Fee Fund. This fund collects a fee for the capacity used by new wastewater connections and the funds are used to pay facilities and to help ensure the wastewater collection system can contain additional wastewater flows from new customers. Water Reclamation Capacity Fee Fund. This fund collects fees for the expansion of the Sterling Natural Resource Center to treat the flows generated by new development. EAST VALLEY WATER DISTRICT Capacity Charge Funds Year Ended June 30, 2025 116 A summary of changes in Water Fund Capacity Fees collected for the year ended June 30, 2025 is as follows: Be innin of End of Cate ories ear Contributions Usa e ear Storage 498,076$ $ 552,409 $ - $ 1,050,485 Supply/Treatmen 2,751,002 765,717 (974,248)2,542,471 rans & Distribution 2,348,505 640,319 - 2,988,824 General 252,404 103,048 - 355,452 5,849,987$ 2,061,493$ (974,248)$ 6,937,232$ A summary of Projects Funded by Capacity Fees for the year ended June 30, 2025: Cate ories CIP Pro ect* FY 2024-25 Ex ended % Funded by Ca acit Total Capacity Fees Usa e Stora e -$ -$ Supply/Treatment Plant 129 - Well Pro ect 974,250 100% 974,250 rans & Distribution General New Treatment Plant 974,250$ 974,250$ Note: * The District did not have any CIP projects utilizing Capacity Fee funds for the year ended June 30, 2025. EAST VALLEY WATER DISTRICT Capacity Charge Funds Year Ended June 30, 2025 117 A summary of changes in Wastewater Fund Capacity Fees collected for the year ended June 30, 2025 is as follows: Be innin of End of Cate ories Year Contributions Usa e Year Collection $ 3,420,965 $ 310,155 $ (798,209) $ 2,932,911 General 335,759 223,300 - 559,059 3,756,724$ 533,455$ (798,209)$ 3,491,970$ A summary Project Funded by Capacity Fees for the year ended June 30, 2025: Cate ories CIP Pro ect FY 2024-25 Ex ended % Funded by Ca acit Total Capacity Fees Usa e Collection Recyled Water Pipeline 798,209$ 100% 798,209$ General - 798,209$ 798,209$ EAST VALLEY WATER DISTRICT Capacity Charge Funds Year Ended June 30, 2025 118 A summary of changes in Water Reclamation Fund Capacity Fees collected for the year ended June 30, 2025 is as follows: Be innin of End of Cate ories ear Contributions Usa e ear Treatmen 3,630,159$ $ 1,035,926 $ (1,159,574)3,506,511$ 3,630,159$ 1,035,926$ (1,159,574)$ 3,506,511$ A summary Project Funded by Capacity Fees for the year ended June 30, 2025: Cate ories CIP Pro ect FY 2024-25 Ex ended % Funded by Ca acit Total Capacity Fees Usa e Treatment SNRC Membrane Bio-Reactor 1,159,574$ 100% 1,159,574$ 1,159,574$ 1,159,574$ -1- REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Independent Auditor’s Report To the Honorable Board of Directors East Valley Water District Highland, California We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States (Government Auditing Standards), the financial statements of the East Valley Water District (the District) as of and for the year ended June 30, 2025, and the related notes to the financial statements, which collectively comprise the entity’s basic financial statements, and have issued our report thereon dated October 23, 2025. Report on Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered the District’s internal control over financial reporting (internal control) as a basis for designing procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the District’s internal control. Accordingly, we do not express an opinion on the effectiveness of the District s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses or significant deficiencies may exist that were not identified. Report on Compliance and Other Matters As part of obtaining reasonable assurance about whether the District’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Draft - for discussion purposes only -2- Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the District’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. San Bernardino, California October 23, 2025 Draft - for discussion purposes only 13 Independent Auditor’s Report Board of Directors East Valley Water District Highland, California Report on the Audit of the Financial Statements Opinion We have audited the financial statements of East Valley Water District (the District), as of and for the year ended June 30, 2025, and the related notes to the financial statements, which collectively comprise the District’s basic financial statements as listed in the table of contents. In our opinion, the accompanying financial statements referred to above present fairly, in all material respects, the financial position of the District, as of June 30, 2025, and the changes in financial position, and cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America and State Controller’s Minimum Audit Requirements for California Special Districts. Basis for Opinion We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS), the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States (Government Auditing Standards), and State Controller’s Minimum Audit Requirements for California Special Districts. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of District and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Other Matter Report on Summarized Comparative Information We have previously audited the District’s 2024 financial statements, and we expressed an unmodified opinion on the respective financial statements in our report dated October 28, 2024. In our opinion, the summarized comparative information presented herein as of and for the year ended June 30, 2024, is consistent, in all material respects, with the audited financial statements from which it has been derived. Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the District’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter. Draft - for discussion purposes only 14 Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. In performing an audit in accordance with GAAS and Government Auditing Standards, we: Exercise professional judgment and maintain professional skepticism throughout the audit. Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the District’s internal control. Accordingly, no such opinion is expressed. Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the District’s ability to continue as a going concern for a reasonable period of time. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control–related matters that we identified during the audit. Required Supplementary Information Accounting principles generally accepted in the United States of America require that the required supplementary information, as listed in the table of contents, be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with GAAS, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Draft - for discussion purposes only 15 Supplementary Information Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the District’s basic financial statements. The supplementary information is presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with GAAS. In our opinion, the accompanying supplementary information is fairly stated, in all material respects, in relation to the basic financial statements as a whole. Other Information Management is responsible for the other information included in the annual comprehensive financial report. The other information comprises the introductory and statistical sections but does not include the basic financial statements and our auditor's report thereon. Our opinion on the basic financial statements do not cover the other information, and we do not express an opinion or any form of assurance thereon. In connection with our audit of the basic financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the basic financial statements, or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated October 23, 2025 on our consideration of the District’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the District’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering District’s internal control over financial reporting and compliance. San Bernardino, California October 23, 2025 Draft - for discussion purposes only -1- October 23, 2025 To the Board of Directors East Valley Water District Highland, California We have audited the financial statements of the East Valley Water District (the entity) as of and for the year ended June 30, 2025, and have issued our report thereon dated October 23, 2025. Professional standards require that we advise you of the following matters relating to our audit. Our Responsibility in Relation to the Financial Statement Audit As communicated in our engagement letter dated April 15, 2025, our responsibility, as described by professional standards, is to form and express opinions about whether the financial statements that have been prepared by management with your oversight are presented fairly, in all material respects, in accordance with accounting principles generally accepted in the United States of America. Our audit of the financial statements does not relieve you or management of your respective responsibilities. Our responsibility, as prescribed by professional standards, is to plan and perform our audit to obtain reasonable, rather than absolute, assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes consideration of the system of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, as part of our audit, we considered the system of internal control of the entity solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control. We are also responsible for communicating significant matters related to the audit that are, in our professional judgment, relevant to your responsibilities in overseeing the financial reporting process. However, we are not required to design procedures for the purpose of identifying other matters to communicate to you. Planned Scope and Timing of the Audit We conducted our audit consistent with the planned scope and timing we previously communicated to you. Compliance with All Ethics Requirements Regarding Independence The engagement team, others in our firm, as appropriate, and our firm have complied with all relevant ethical requirements regarding independence. Draft - for discussion purposes only -2- Significant Risks Identified We have identified the possibility of the following significant risks: Management's override of internal controls over financial reporting – Management override of internal controls is the intervention by management in handling financial information and making decisions contrary to internal control policy. Revenue recognition – Revenue recognition is a generally accepted accounting principle that refers to the conditions under which an entity can recognize a transaction as revenue. Auditing standards indicate that recognizing revenue is a presumed fraud risk and usually classified as a significant risk in most audits. These significant risks are presumptive in most audits and merit attention by the auditors due to the direct impact over financial reporting and internal control processes. Although identified as significant risks, we noted no matters of management override of controls or deviations from generally accepted accounting principles which caused us to modify our audit procedures or any related matters which are required to be communicated to those charged with governance due to these identified risks. Qualitative Aspects of the Entity’s Significant Accounting Practices Significant Accounting Policies Management has the responsibility to select and use appropriate accounting policies. A summary of the significant accounting policies adopted by the entity is included in Note 1 to the financial statements. The entity adopted GASB Statement No. 101, Compensated Absences and GASB Statement No. 102, Certain Risk Disclosures during 2025. No matters have come to our attention that would require us, under professional standards, to inform you about (1) the methods used to account for significant unusual transactions and (2) the effect of significant accounting policies in controversial or emerging areas for which there is a lack of authoritative guidance or consensus. Significant Accounting Estimates and Related Disclosures Accounting estimates and related disclosures are an integral part of the financial statements prepared by management and are based on management’s current judgments. Those judgments are normally based on knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ markedly from management’s current judgments. The most sensitive accounting estimates affecting the entity’s financial statements are: Management’s estimate of the net pension liability and related deferred inflows and outflows of resources are based on actuarial reports by independent actuaries. We evaluated the key factors and assumptions used to develop the estimate in determining that it is reasonable in relation to the basic financial statements taken as a whole and in relation to the applicable opinion units. Management’s estimate of the liability for other post-employment benefits (OPEB) and related deferred inflows and outflows of resources are based on actuarial reports provided by independent actuaries. We evaluated the key factors and assumptions used to develop the estimate in determining that it is reasonable in relation to the basic financial statements taken as a whole and in relation to the applicable opinion units. Draft - for discussion purposes only -3- Management’s estimate of the fair value of investments is based on information provided by financial institutions. We evaluated the key factors and assumptions used to develop the fair value of investments and determined that it is reasonable in relation to the basic financial statements taken as a whole. Management’s estimate of depreciation expense is based on the useful lives of acquired assets. We evaluated the key factors and assumptions used to develop depreciation expense in determining that it is reasonable in relation to the financial statements taken as a whole. Management’s estimate of leases and subscription liabilities, right-to-use assets, and asset amortization based on the useful lives of acquired assets. We evaluated the key factors and assumptions used to develop depreciation expense in determining that it is reasonable in relation to the financial statements taken as a whole. Financial Statement Disclosures Certain financial statement disclosures involve significant judgment and are particularly sensitive because of their significance to financial statement users. The most sensitive disclosures affecting the entity’s financial statements relate to: The disclosure of fair value of investments in the basic financial statements represents amounts susceptible to market fluctuations. The disclosure of capital assets (and related accumulated depreciation) in the basic financial statements is based on historical information which could differ from actual useful lives of each capitalized item. The disclosure of net pension liability and related deferred inflows and outflows of resources in the basic financial statements is based on actuarial assumptions. Actual future liabilities and actuarial deferred inflows and outflows may vary from disclosed estimates. The disclosures of the other post-employment benefits (OPEB) liability and related deferred inflows and outflows of resources in the basic financial statements is based on actuarial assumptions. Actual future liabilities and actuarial deferred inflows and outflows may vary from disclosed estimates. The disclosure of leases and subscription liabilities, right-to-use assets, and asset amortization in the basic financial statements is based on certain terms and assumptions in the agreements which could differ from actual amounts. Significant Difficulties Encountered during the Audit We encountered no significant difficulties in dealing with management relating to the performance of the audit. Uncorrected and Corrected Misstatements For purposes of this communication, professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that we believe are trivial, and communicate them to the appropriate level of management. Further, professional standards require us to also communicate the effect of uncorrected misstatements related to prior periods on the relevant classes of transactions, account balances or disclosures, and the financial statements as a whole and each applicable opinion unit. There were no uncorrected misstatements noted. Draft - for discussion purposes only -4- In addition, professional standards require us to communicate to you all material, corrected misstatements that were brought to the attention of management as a result of our audit procedures. There were no such misstatements. Disagreements with Management For purposes of this letter, professional standards define a disagreement with management as a matter, whether or not resolved to our satisfaction, concerning a financial accounting, reporting, or auditing matter, which could be significant to the entity’s financial statements or the auditor’s report. No such disagreements arose during the course of the audit. Representations Requested from Management We have requested certain written representations from management, which are included in the attached letter dated October 23, 2025. Management’s Consultations with Other Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters. Management informed us that, and to our knowledge, there were no consultations with other accountants regarding auditing and accounting matters. Other Significant Matters, Findings, or Issues In the normal course of our professional association with the entity, we generally discuss a variety of matters, including the application of accounting principles and auditing standards, significant events or transactions that occurred during the year, operating and regulatory conditions affecting the entity, and operational plans and strategies that may affect the risks of material misstatement. None of the matters discussed resulted in a condition to our retention as the entity’s auditors. Other Information Included in Annual Reports Pursuant to professional standards, our responsibility as auditors for other information, whether financial or nonfinancial, included in the entity’s annual reports, does not extend beyond the information identified in the audit report, and we are not required to perform any procedures to corroborate such other information. However, in accordance with such standards, we have: Read the transmittal letter and the statistical section and considered whether a material inconsistency existed between the other information and the basic financial statements, or the other information optherweise appears to be materialy misstated Our opinions on the basi financial statements do not cover the other information, and we do not exprtess an opinion or ay form of assurance thereon. Our responsibility also includes communicating to you any information which we believe is a material misstatement of fact. Nothing came to our attention that caused us to believe that such information, or its manner of presentation, is materially inconsistent with the information, or manner of its presentation, appearing in the financial statements. This report is intended solely for the information and use of the Board of Directors and management of the entity and is not intended to be and should not be used by anyone other than these specified parties. Very truly yours, Draft - for discussion purposes only Agenda Item #3 October 27, 20251 Meeting Date: October 27, 2025 Agenda Item #3 Informational Item 1 6 6 4 Regular Meeting TO: Committee Members FROM: Director of Administrative Services SUBJECT: Classification and Compensation Study RECOMMENDATION This agenda item is for informational purposes only, no action is required. BACKGROUND / ANALYSIS As part of the 2023-2026 Memorandum of Understanding (MOU) negotiations with the East Valley Water District Employee Partnership (EVWDEP), the District committed to conducting a classification and compensation study during the third year of the agreement with results to be negotiated and implemented in the subsequent MOU. Conducting a classification and compensation study is a best practice for public agencies. It provides a structured approach to evaluating internal equity, aligning classifications and compensation with market conditions, and ensuring legal compliance. The key benefits of classification and compensation studies include: Ensuring Fairness and Equity These studies promote equal pay for equal work by grouping positions with similar qualifications, responsibilities, and complexities into appropriate classifications. This helps prevent internal pay disparities and supports equity across the organization. Improving Recruitment and Retention Competitive compensation aligned with the external labor market allows agencies to attract top talent and retain experienced, quality staff. Maintaining Legal Compliance A comprehensive review of classifications and pay structures ensures compliance with federal, state, and local labor laws, minimizing legal risks related to wage and hour issues or potential misclassification. Supporting Strategic Decision-Making The data and insights from these studies support objective and informed decisions about pay policies, staffing needs, budgeting, and organizational planning. While the District has conducted base pay salary studies over the past several years, Agenda Item #3 October 27, 20252 Meeting Date: October 27, 2025 Agenda Item #3 Informational Item 1 6 6 4 and classification studies on identified classifications as needed, a full classification and total compensation study has not been conducted since 2014. To initiate this process, the District issued a request for proposals (RFP) to find qualified firms to assist with the study. Five proposals were received in response to this RFP. All proposals were reviewed and evaluated, with the top two firms invited to interview with District staff. Staff selected Gallagher Public Sector Human Resources and Recruitment Services Practice (Gallagher) as the best overall choice based on quality and overall experience. Gallagher consists of an experienced team of consultants that have been providing classification, compensation, and recruiting services to cities, counties, special districts, and other public agencies for over 40 years. Their team has achieved a reputation for working successfully with management, employees, employee representation, and governing bodies. Gallagher ensures that each of their projects is given the appropriate resources and attention, resulting in a high level of quality control, excellent communication between clients, commitment to meeting timelines and budgets, and a consistently high-caliber work product. Gallagher’s team consists of 34 employees, all who have worked on multiple comprehensive classification and compensation studies, and no subcontractors are used in their services. Prior to joining Gallagher in 2021, the project manager assigned to our study had over 20 years of local government human resources experience in classification and compensation, labor contract administration, policy development, and recruitment and selection. The scope of work will be conducted in the following two phases with included milestones: Phase 1 – Classification Study A. Project kickoff, orientations, and documentation review B. Collection and review of Position Description Questionnaires (PDQs) and employee/supervisor/manager interviews as needed C. Draft Classification Description Development D. Finalization of Classification Plan and draft/final reports Phase 2 – Compensation Study A. Determination of market survey elements a. Comparator agencies b. Benchmark classifications c. Salary and benefits data collection B. Draft compensation findings and stakeholder review and feedback C. Development of recommendations, final reports, and presentations. Agenda Item #3 October 27, 20253 Meeting Date: October 27, 2025 Agenda Item #3 Informational Item 1 6 6 4 The total project is estimated to take approximately 19 weeks, or up to 5 months, following the project timeline below: Task/Milestone Estimated Start Estimated End Estimated # Weeks to Complete Task CLASS STUDY Kick Off Sessions with Stakeholders/Finalize Contract 10/1/2025 10/10/2025 2 Orientations 10/13/2025 10/17/2025 1 Employees & Supervisors Complete PDQs 10/17/2025 10/28/2025 2 Gallagher Review PDQs & Develop Interview Schedule 10/28/2025 11/7/2025 2 Supervisor/Manager/Select Employee Interviews 11/10/2025 11/14/2025 1 Gallagher Develop Classification Concepts & Employee Allocations 11/17/2025 11/28/2025 2 EVWD Review and Approval of Classification Concepts/Allocations 12/1/2025 12/12/2025 2 Development of New Class Specifications 12/15/2025 2/6/2026 8 EVWD Review Specs & Finalize Class Plan 2/9/2026 2/20/2026 2 Final Recommendations/Changes & Report 2/23/2026 3/6/2026 2 COMPENSATION STUDY Conduct Comparator Analysis for Market Study 10/13/2025 10/24/2025 2 EVWD to Finalize Market Comparators 10/27/2025 11/7/2025 2 Launch Salary Survey: Data Collection and Analysis 11/10/2025 12/26/2025 7 EVWD Review Data & Provide Feedback 12/29/2025 1/9/2026 2 Develop Compensation Design/Plan & Salary Recommendations 1/12/2026 1/23/2026 2 EVWD Review &Feedback of Comp Design Plan/Recommendations 1/26/2026 2/6/2026 2 Final Recommendations & Report 2/9/2026 2/13/2026 1 Agenda Item #3 October 27, 20254 Meeting Date: October 27, 2025 Agenda Item #3 Informational Item 1 6 6 4 DISTRICT PILLARS AND STRATEGIES III - Organizational Resiliency b. Promote a Positive Organizational Culture FISCAL IMPACT This item is funded in the current fiscal year budget. Respectfully submitted: ________________ Kerrie Bryan Director of Administrative Services ATTACHMENTS Classification and Compensation Study Technical Proposal from Gallagher East Valley Water District CLASSIFICATION AND COMPENSATION STUDY TECHNICAL PROPOSAL August 18, 2025 Gallagher Benefit Services, Inc. GEORG S. KRAMMER Managing Director, Compensation and Rewards Consulting 2121 N. California Boulevard, Suite 350 Walnut Creek, CA 94596 georg_krammer@ajg.com Tel: 510.658.5633 Fax: 510.652.5633 ©2025 Arthur J. Gallagher & Co. All rights reserved. 1. Cover Letter August 18, 2025 Ms. Kerrie Bryan Director of Administrative Services East Valley Water District 31111 Greenspot Road Highland, CA 92346 Dear Ms. Bryan: Thank you for the opportunity to respond to your Request for Proposals for a Classification and Compensation Study for the East Valley Water District (“District”). We are most interested in assisting the District with this important study and feel that we are uniquely qualified to provide value to your organization based on our experience working with other special districts, cities, counties, joint-powers associations, and other public agencies, and of course the District itself over many years. Gallagher’s (“Gallagher”) Public Sector Human Resources and Recruitment Services Practice was formerly known as Koff & Associates and consists of an experienced team of consultants that has been providing predominantly classification, compensation, and recruiting services to cities, counties, special districts, courts, educational institutions, and other public agencies for over 40 years. Our team has achieved a reputation for working successfully with management, employees, employee representation, and governing bodies. We believe in a high level of dialogue and input from study stakeholders and our proposal speaks to that level of effort. Our team’s extra effort has resulted in close to 100% acceptance of all our classification and compensation studies. Gallagher ensures that each of our projects is given the appropriate resources and attention, resulting in a high level of quality control, excellent communication between clients and our office, commitment to meeting timelines and budgets, and a consistently high-caliber work product. As a Managing Director of Gallagher, I would assume the role of Project Director and be responsible for the successful completion of project. I can be reached at our Walnut Creek address and the phone number listed on the cover page. My email is georg_krammer@ajg.com. This proposal will remain valid for at least 90 days from the date of submittal. Please call if you have any questions or wish additional information. We look forward to the opportunity to provide professional services to the East Valley Water District. Sincerely, Georg S. Krammer Managing Director, Compensation and Rewards Consulting ©2025 Arthur J. Gallagher & Co. All rights reserved. Contents 1. Cover Letter .................................................................................................................. 2 2. Organizational Chart ..................................................................................................... 5 3. Resumes and Qualification of Personnel ...................................................................... 7 4. References .................................................................................................................. 17 5. Overview and Approach .............................................................................................. 19 Contractual Considerations ................................................................................................ 32 Signature Page .................................................................................................................. 34 Appendix - Firm Qualifications Our Cost Proposal has been provided under separate cover per the RFP instructions. ©2025 Arthur J. Gallagher & Co. All rights reserved. 2. Organizational Chart Our team consists of 34 employees as shown below in our organizational chart. All members of our team have worked on multiple comprehensive classification and compensation studies and are well acquainted with the wide array of public sector organizational structures, compensation structures, classification plans, as well as the challenges and issues that arise when conducting studies such as this one for the District. KEY PERSONNEL Our project team will be led by Co-Project Directors Georg Krammer (Managing Director) and Maggie Williams-Dalgart (Project Manager). They will coordinate all of Gallagher’s efforts, attend all meetings with the City, and be responsible for all work products and deliverables. CONSULTANTS Alyssa Thompson (Senior Consultant), Monica Garrison-Reusch (Consultant), Janna Dinkelspiel (Consultant), Ed Hsi (Associate Consultant), Kelly Barns (Consultant), Suzy Parker (Associate Consultant), Cindy Harary (Consultant) and Renate Tiner (Consultant) will conduct classification analysis and interviews with employees and management, compensation data collection and analysis, internal job analysis, and develop recommendations and implementation strategies. WORKLOAD We currently have a team of 25 HR consultants and five administrative support staff – resources that we are able to pool based on each project’s needs, to execute projects and to ©2025 Arthur J. Gallagher & Co. All rights reserved. meet clients’ needs and expectations. Each time we are selected as the successful bidder on a project, we strategize to determine project timelines, deliverable deadlines, and the resources that are required to produce the deliverables as promised. We are poised to accommodate the District’s classification and compensation study and plan to devote the necessary resources for the successful execution of the project. We have provided a full description of Gallagher’s qualifications in the Appendix. ©2025 Arthur J. Gallagher & Co. All rights reserved. 3. Resumes and Qualification of Personnel Georg S. Krammer, M.B.A., S.P.H.R. Managing Director Georg brings over 25 years of management-level human resources experience to Gallagher, formerly Koff & Associates (K&A), with an emphasis over the last 22 years in classification and compensation design, market salary studies, organizational effectiveness, performance management, and strategic advisory, in the public sector and local government agencies. After obtaining a Master of Arts in English and Russian and teaching credentials at the University of Vienna, Austria, Georg came to the United States to further his education and attained his Master of Business Administration from the University of San Francisco. After starting his HR career in Wells Fargo’s college recruiting department, he moved on to HR management positions in the banking and high-tech consulting industries. He spent five years in the private sector where he served as an HR Manager and then HR Director before entering the public sector in his current consulting role. With his wide-ranging and deep experience as a classification and compensation expert, his education in business and teaching, his depth and breadth of experience with public sector HR needs, programs, and functions, Georg’s contributions to Gallagher’s variety of projects greatly complements our Human Resources and Recruitment Services team. Georg has spearheaded several hundreds of classification, compensation, organizational, strategic planning, etc., studies for hundreds of cities, towns, counties, and special districts throughout the State of California, and the Western Region, and has contributed to more than quadrupling the size of our practice as a result of the success of his projects and the subsequent expansion of the business through referrals from satisfied clients. Georg joined K&A in 2003, served as its Chief Executive Officer from 2005 to 2021, was instrumental in K&A’s joining Gallagher in 2021, and has been serving as Managing Director since then. In the last few years, Georg has been the Project Director/Key Personnel for classification and/or compensation studies, organizational assessments, and other HR projects, at the following agencies: • Cities/Towns: Amarillo (TX), Bellflower, Berkeley, Campbell, Chino, Coachella, Commerce, Concord, Corona, Cotati, El Monte, Gardena, Gilroy, Hayward, La Cañada Flintridge, Los Altos, Los Altos Hills, Menifee, Mountain View, Newport Beach, Oakland, Ontario, Pasadena, Perris, Pleasant Hill, Pomona, Redwood City, Rohnert Park, San Bernardino, San Diego, San Jose, Santa Cruz, Santa Monica, Saratoga, Seal Beach, Seattle (WA), Sunnyvale, and Upland. • Counties: Del Norte, Imperial, Monterey, Orange, Sacramento, San Diego, San Mateo, Siskiyou, Sonoma, and Tehama. • Courts: Habeas Corpus Resource Center, Superior Courts of San Francisco, San Bernardino, Sonoma, and San Diego. • Education: College of the Sequoias, Compton Community College District, Foothill-De Anza Community College District, Riverside Community College District, West Valley Mission Community College District, Rancho Santiago Community College District, San Diego Community College District, Southwestern College, Victor Valley Community College District, Yuba Community College District; Los ©2025 Arthur J. Gallagher & Co. All rights reserved. Angeles Unified School District, South San Francisco Unified School District; Contra Costa County Office of Education, El Dorado County Office of Education, San Mateo County Office of Education, and Stanislaus County Office of Education. • Special Districts: o Air Quality: Bay Area Air Quality Management District, Monterey Bay Air Resources District, and South Coast Air Quality Management District. o Community Services, Parks, Recreation, and Open Space: Cosumnes CSD, Desert Recreation District, East Bay Regional Park District, Hayward Area Recreation and Park District, Helendale CSD, Jurupa CSD, Phelan-Pinon Hills CSD, Midpeninsula Regional Open Space District, Rosamond CSD, Truckee Donner Recreation & Park District, and Tualatin Hills Park & Recreation District (OR). o Fire Protection: Alameda County Fire, Central Fire District of Santa Cruz, Fire Protection District of Southern Marin, Orange County Fire Authority, Novate Fire Protection District, and Sacramento Metropolitan Fire District. o Housing/Economic Development: Housing Authority of County of San Bernardino, Housing Authority of County of Santa Barbara, Housing Authority of County of San Luis Obispo, , Santa Clara County Housing Authority, and San Diego Housing Commission. o Library Districts: Altadena Library District, Banning Library District, and Buena Park Library District. o Public Utilities: East Bay Municipal Utility District, North Tahoe Public Utility District, Redwood Coast Energy Authority, Sacramento Municipal Utilities District, and Southern California Public Power Authority. o Transportation: Alameda County Transportation Commission, Contra Costa Transportation Authority, El Dorado County Transit Authority, Livermore Amador Valley Transit Authority, Long Beach Transit, Marin Transit District, Metropolitan Transportation Commission, Monterey-Salinas Transit District, Orange County Transportation Authority, Port of Long Beach, Port of Oakland, Port of San Diego, Port of Stockton, Riverside County Transportation Commission, Sacramento Area Council of Governments, San Bernardino County Transportation Authority, San Bernardino International Airport, San Francisco Bay Area Water Emergency Transportation Authority, San Mateo County Transit District, Santa Cruz Metropolitan Transit District, Sonoma-Marin Area Rail Transit, Western Riverside Council of Governments. o Wastewater: California Association of Sanitation Agencies, Central Marin Sanitation Agency, Orange County Sanitation District, Reclamation District No. 1000, Sacramento Area Sewer District, and Tahoe Truckee Sanitation Agency. o Water: Bay Area Water Supply & Conservation Agency, Beaumont Cherry Valley Water District, Central Coast Water Authority, Coachella Valley Water District, Coastside County Water District, Contra Costa Water District, Eastern Municipal Water District, Helix Water District, Irvine Ranch Water District, Mesa Water District, Metropolitan Water District of Southern California, Mission Springs Water District, Mojave Water Agency, Rainbow Municipal Water District, North Coast Water District, North Marin Water District, Rancho California Water District, Rincon del Diablo Municipal Water District, San Lorenzo Valley Water District, Santa Clara Valley Water District, Santa Clarita Valley Water Agency, Sonoma County Water Agency, State Water Contractors, ©2025 Arthur J. Gallagher & Co. All rights reserved. Western Municipal Water District, Yorba Linda Water District, and Yuba Water Agency. o Other: Association of California Water Agencies, First 5 Alameda, League of California Cities, Natividad Medical Center, Orange County Employee Retirement System, Rural County Representatives of California. Georg will be key personnel and serve as the Co-Project Director for this project; he will coordinate all of Gallagher’s efforts, will attend all meetings, and will be responsible for all work products and deliverables. Maggie Williams-Dalgart Project Manager Since joining Gallagher in 2021 Maggie has been providing a wide range of consulting services, including classification analysis and development, custom salary and benefits surveys, and pay plan design for various public sector agencies, including cities, counties, special districts, community colleges, and transit agencies. Maggie provides strategic advising and understands the importance of engaging key stakeholders throughout the study. Prior to joining Gallagher, Maggie spent 20 years in human resources for local government. In addition to classification and compensation expertise, Maggie’s experience includes collective bargaining, labor contract administration and labor costing, policy development, and recruitment and selection. Maggie served as President of CalPACS from 2018 - 2021, a regional internet-based salary and benefits survey website for local agencies in Southern California. Maggie holds a bachelor’s degree in History of Public Policy from the University of California, Santa Barbara and a master’s degree in Public Administration from the University of Colorado, Colorado Springs. Alyssa Thompson, Ph. D. Senior Consultant Alyssa has over 25 years of human resources experience in classification and compensation analysis and development, performance management, affirmative action program development, and recruitment. Alyssa also has experience in designing and conducting quantitative and qualitative research studies. Since joining K&A in 2007, Alyssa has led and worked on well over 300 classification, compensation, organizational assessment, and recruitment projects for cities, counties, and special districts, including but not limited to some of these more recent projects: • Cities and Towns: Concord, Danville, El Cerrito, Hayward, Hillsborough, Los Altos Hills, Monterey, Napa, Newman, Oakland, Orange, Palm Desert, Piedmont, Redlands, Sacramento, San Diego, Santa Barbara, Santa Monica, Santa Rosa, Truckee, Vallejo, Yuba City • Counties: Bernalillo (New Mexico), Butte, Humboldt, Orange, Placer, San Joaquin, San Mateo, Solano, Sonoma, Tehama, Tuolumne • Special Districts: o Community Services District: Cosumnes CSD, Hayward Area Recreation and Park District, Heritage Ranch CSD, Rosmond Community Services District, Tualatin Hills Park & Recreation District (OR) ©2025 Arthur J. Gallagher & Co. All rights reserved. o Fire and Police Protection: Sacramento Metropolitan Fire District o Housing/Economic Development: Housing Authority of the County of Alameda, Oakland Housing Authority, San Diego Housing Commission, Santa Clara County Housing Authority o Open Space: Midpeninsula Regional Open Space District o Public Utilities: East Bay Municipal Utility District, Northern California Power Agency o Transportation: Alameda County Transportation Commission, Coachella Valley Association of Governments, Contra Costa Transportation Authority, Livermore Amador Valley Transit Authority, Metropolitan Transportation Commission, Napa County Transportation Authority, Port of Long Beach, Riverside County Transportation Commission, San Bernardino County Transportation Authority, Santa Cruz Metropolitan Transit District, San Gabriel Valley Council of Governments, Sonoma County Transportation Authority, Western Riverside Council of Governments o Wastewater: Central Contra Costa Sanitary District, Central Marin Sanitation Agency, Los Angeles County Sanitation Districts, Orange County Sanitation District, Salinas Solid Waste Authority o Water: Alameda County Water District, Bay Area Water Supply & Conservation Agency, Coastside County Water District, Contra Costa Water District, Dublin San Ramon Services District, Irvine Water District, Metropolitan Water District of Southern California, Mid- Peninsula Water District, Santa Clara Valley Water District, Santa Clarita Valley Water Agency, South Coast Water District, Valley County Water District, Zone 7 Water Agency • Education: Cabrillo College, Foothill-De Anza Community College District, Mount San Antonio College, West Valley Mission Community College District • Courts: Habeas Corpus Resource Center, Superior Court of California-County of Orange She earned a Bachelor’s degree in Psychology with a minor in Sociology-Organizational Studies from the University of California, Davis, and a Ph.D. in Organizational Psychology from Alliant International University. Alyssa will provide consultant support throughout the effort, including classification analysis, interviews with employees and management, compensation data collection and analysis, internal job analysis, development of recommendations, and implementation strategies. Monica Garrison-Reusch, B.A., M.B.A. Consultant Monica has over 20 years of human resource program experience, all of which have been spent serving as either a team member or project manager on projects working with public sector agencies. Monica’s primary professional focus has been on classification and compensation practices. Over the years Monica has performed classification and compensation consulting services as either a team member or project manager on varied projects including large scale studies done for the Counties of Sacramento, San Diego, San Mateo. Monica’s depth of experience ©2025 Arthur J. Gallagher & Co. All rights reserved. allows her to provide a broad range of human resources services to public agencies. She specializes in compensation projects focusing on both base salary and total compensation analysis studies. Monica has also worked on project teams conducting classification studies and organizational analysis, including performing the full range of classification analysis and conducting in-depth survey and analysis of organizational structures and past organizational practices. Since joining Gallagher (formerly Koff & Associates) in 2016, Monica has worked on studies for many agencies including the following clients: • Cities: Cotati, Crescent City, Pleasant Hill, Pomona, Sacramento, Vallejo • Counties: Alpine, El Dorado, Humboldt, Kings, Madera, Mendocino, Monterey, San Mateo, San Diego, Trinity • State: California State Auditor’s Office • Special Districts: AC Transit, Cosumnes Community Services District, East Bay Municipal Utility District, Eastern Municipal Water District, El Dorado County Transit Authority, First 5 Contra Costa County, First 5 Santa Clara County, Hayward Area Recreation and Park District, Livermore Amador Valley Transit Authority, Los Angeles County Sanitation District, Mendocino Coast Rec and Park District, Mojave Water Agency, Montecito Water District, North Tahoe Public Utility District, Orange County Transportation Authority, Port of San Diego, Port of Stockton, Sacramento Municipal Utility District, Sonoma Marin Area Rail Transit District, State Water Contractors, Sunline Transit Agency, Trabuco Canyon Water District She earned a master's in business administration at Golden Gate University and a Bachelor of Science in Business Administration from the University of Southern California. Monica will provide Consultant support for this project, including classification analysis, interviews with employees and management, compensation data collection and analysis, internal job analysis, development of recommendations, and implementation strategies. Janna Dinkelspiel Consultant Janna Dinkelspiel came to Gallagher in August 2022 with over 15 years’ experience in private and public sector human resources. Most recently Janna was a Senior Employee Relations Analyst in a municipality where she gained well rounded experience in recruitment and retention, employee relations, labor relations, policy development, performance management, training and development and classification and compensation. Since joining Gallagher, Janna has worked on the following studies: • Classification Study: City of Brentwood, City of Menifee, City of Imperial, County of Madera, County of Kings, Western Contra Costa County Transit Authority, City of Santa Rosa, Orange County Employees Retirement System, Superior Court of San Diego, Irvine Ranch Water District, Elk Grove, City of Fillmore, City of Malibu, Superior Court of San Francisco, County of Sonoma, Santa Clarita Valley Water Agency, Stanislaus County Office of Education. ©2025 Arthur J. Gallagher & Co. All rights reserved. • Compensation Study: City of Brentwood, West County Wastewater, City of Fillmore, City of Seattle IT, City of Bakersfield, Mid-Peninsula Open Space District, City of Leavenworth, City of Perris, San Bernardino County Transit Authority, City of San Leandro, Santa Clarita Water Agency, Yorba Linda Water District, Rosamond Community Services District, County of San Diego. Janna has a degree in Business Administration from the University of Washington and holds a Senior Professional Human Resources Certificate from HRCI. In January 2023, Janna obtained a Compensation Metrics & Cash Compensation Programs Certification from Career Learning. Edward Hsi Associate Consultant Edward Hsi has over 5 years of public-sector human resources experience including over 4 years within classification and compensation prior to joining Gallagher, formerly Koff and Associates. His experience included analytical human resources work for the California Public Utilities Commission and Glendale Community College. At Glendale Community College Edward worked as a Classification and Compensation Analyst where he managed, coordinated, and participated in its District-wide classification study. He was also responsible for other classification and compensation-related projects, activities, and functions including but not limited to job analysis, reclassification, and classification specification development. Edward joined Gallagher, formerly Koff and Associates, in November 2022 and has since collaborated on a variety of projects and studies for various cities, counties, and municipalities and special district clients. He provides Human Resources Associate support throughout his assigned project roles which includes classification analysis and recommendations, employee and management interviews, classification specification development, and compensation/benefits data collection, analysis, and/or recommendations. Edward earned his B.A. degree in Psychology at the University of California, Riverside and his M.S. degree in Industrial/Organizational Psychology at San Jose State University which has given him additional theoretical insight in developing related recommendations and strategies. Kelly Barns Consultant Kelly Barns brings over 20 years of experience in a variety of leadership and technical public- sector human resources and risk management roles, from Analyst to, Risk Manager to, Assistant Director and Director of Human Resources in municipal government. While a well- rounded practitioner, with broad and deep knowledge and experience in talent acquisition, labor relations, classification and compensation, policy and contract development, performance management, employee engagement, Leaves and ADA administration and management, training and development, legal compliance, business strategy and change management, workplace investigations, health and safety, workers’ compensation, employee benefits, liability administration and management, and universal Human Resources and Risk Management administration. Kelly joined Koff & Associates in March 2022 and has had the privilege to work with and support special projects and studies for several cities, counties, and ©2025 Arthur J. Gallagher & Co. All rights reserved. various municipalities and special district clients. Client’s that Kelly has provided project support for are the following: • Cities/Towns: Brentwood, San Leandro, Elk Grove, Santa Rosa, Lodi, Livermore, Pleasanton, Fillmore, Ontario, Emeryville, Upland, Santa Cruz, Rohnert Park, Cathedral, and Phoenix. • Counties: Kings, Alameda, Madera, San Diego, Sonoma, and Imperial. • Education: Yuba Community College District and Mount Diablo Unified School District. • Special Districts: San Mateo Transit, Sunline Transit Agency, Sonoma-Marin Area Rail Transit, Long Beach Transit, and North Central Regional Transit District, Port of San Diego, Fred Finch Youth and Family Services, Metro Parks Tacoma, Coachella Valley Water District, and Rosamund Community Services District. Kelly has a degree in Business Administration and Management, is a Human Resources Certified Professional through International Public Management Association of Human Resources (IPMA-CP) and has a Senior Professional Human Resources Certificate (SPHR). Kelly has had the opportunity to serve on committees and boards, focused on a variety of human resources, risk management, and business strategy affairs and goals. Kelly provides Human Resources Associate support throughout each project role, primarily consisting of project and technical support in, classification analysis, job classification crosswalks, classification concepts and plans, interviews with employees and management, compensation data collection and analysis, internal job analysis, and development of recommendations. Kelly has a passion for engaging, collaborating with, and supporting clients, strengthening employee relations and community partnerships. Kelly has been dedicated to helping organizations and leaders navigate through change and define and implement their Human Resources strategies; in addition to promoting a culture of continuous opportunity and helping people to be inspired to innovate and make an impact on an organization’s most valuable asset, it’s people. Suzy Parker Associate Consultant Suzy Parker brings over seven years of experience in various public sector roles, ranging from Programmatic Case Management to Human Resource Analyst, and most recently, as the Classification & Compensation Manager at the Oregon Department of Human Services. She is highly skilled in classification and compensation, labor management, policy and contract development, position management, performance management, employee engagement, and training and development. Suzy joined Gallagher (formerly Koff and Associates) in September 2023. Since joining Gallagher, Suzy has worked on the following studies: • Classification Study: City of Sunnyvale, Port of San Diego, Imperial County, Jurupa Community Services District, City of Perris, City of Ontario, Zone 7 Water Agency, City of Pomona, City of Elk Grove, City of Chino, City of Pasadena, and Santa Cruz Metropolitan Transit District. ©2025 Arthur J. Gallagher & Co. All rights reserved. • Compensation Study: Imperial County, City of Lompoc, City of Pomona, Jurupa Community Services District, Triunfo Water and Sanitation District, Superior Court of California, County of San Bernardino, Triunfo Water and Sanitation District, Tahoe- Truckee Sanitation Agency, Santa Cruz Metropolitan Transit District, City of San Diego, and City of El Cerrito. Suzy holds both a bachelor’s and a master’s degree in business administration and holds a SHRM-CP Certificate. In her current role, Suzy provides Human Resources Associate support across multiple projects, focusing on classification analysis, conducting interviews with employees and management, collecting and analyzing compensation data, performing internal job analyses, and developing recommendations. Suzy is passionate about engaging with clients, building partnerships within communities, and fostering collaboration. Cindy Harary, B.A. Consultant Cindy’s professional qualifications include over 38 years of experience in the Human Resources field, primarily in classification and compensation. She spent the first 11 years in the public sector working for the City of Whittier, California, where she started out in their Public Works Department before moving to the Human Resources Department. She gained experience in classification and compensation, recruitment and selection, employee training and development, labor relations, and general human resources administration. For the next 16 years, Cindy worked as a Human Resources Consultant for a consulting firm where she specialized in conducting classification and compensation studies for multiple public sector agencies including cities, counties, and special districts as well as several private sector clients. Some of the Orange County Cities she worked on in partnership with other consultants at that firm were: Cities of Brea, Laguna Beach, Lake Forest, La Palma, Los Alamitos, Placentia, San Clemente, Stanton and Tustin. In Los Angeles County, her work includes the Cities of Corona, Downey, El Monte, Manhattan Beach, and Upland. Finally, in San Bernardino County she has worked on the City of Rancho Cucamonga. Since joining Gallagher (formerly Koff and Associates) in 2015, Cindy has worked on Classification and/or Compensation studies for: • Air Quality Districts: Monterey Bay Air Resources District, South Coast Air Quality Management District • Cities/Towns: Anaheim, Big Bear Lake, Campbell, Carmel, Cathedral City, Commerce, Corona, Danville, Davis, El Cerrito, Fullerton, Hanford, Indian Wells, Laguna Niguel, Long Beach, Los Altos, Manteca, Menifee, Murrieta, National City, Oceanside, San Diego, Santa Ana, Santa Barbara, Santa Monica, Seal Beach, Tracy, Tustin, Yucca Valley • Courts: Superior Court of California-San Bernardino County • Counties: Butte, Kings, Madera, Orange, San Diego • Education: Compton College, Merced County Office of Education, Rancho Santiago Community College District, San Mateo County Office of Education, Southwestern Community College District, Weaver Union School District, Yuba Community College District ©2025 Arthur J. Gallagher & Co. All rights reserved. • Housing Authorities: Alameda Housing Authority, Albuquerque Housing Authority (New Mexico), Housing Authority of Alameda County, Housing Authority County of San Bernardino, Housing Authority for the County of Santa Barbara, Los Angeles County Development Authority, San Diego Housing Commission • Library Districts: Altadena Library District • Ports: Port of Hueneme, Port of Oakland, Port of Stockton • Sanitation/Waste Management Districts: Central Marin Sanitation Agency, Humboldt Waste Management Authority, Monterey Regional Waste Management District, Orange County Sanitation District, Oro Loma Sanitary District • Transportation: Central Contra Costa County Transit, Marin Transit, Riverside County Transportation Commission, San Bernardino County Transportation Agency, Santa Cruz Metro Transit District • Wastewater Districts: Encina Wastewater Authority, Monterey Regional Waste Management District • Water Districts: Bay Area Water Supply and Conservation Agency, Chino Basin Water Conservation District, Coachella Valley Water District, Eastern Municipal Water District, Marina Coast Water, Mojave Water Agency, Monte Vista Water District, North Coast County Water District, Rincon del Diablo Municipal Water District, Sammamish Plateau Water (Washington), Santa Clarita Valley Water Agency, Sweetwater Authority, Trabuco Canyon Water District, Vallecitos Water District, Western Municipal Water District • Special Districts: Cosumnes Community Services District, First 5 Alameda, Inland Empire Utilities Agency, North Tahoe Public Utility District, Orange County Fire Authority, Orange County Mosquito and Vector Control District, Water Replenishment District of Southern California. Cindy earned her B.A. degree in Broadcast Journalism at California State University, Long Beach. Cindy will provide Human Resources Consultant support throughout this effort, including classification analysis, interviews with employees and management, compensation data collection and analysis, internal job analysis, development of recommendations, and implementation strategies. Renate Tiner, B.Sc. Consultant Renate’s professional qualifications include five years of both non-profit and private sector Human Resources experience before joining Gallagher. Starting in Human Resources administration and rising into Human Resources management, she gained experience in full- cycle recruitment, orientation and on-boarding, Health and Safety, Worker’s Compensation, licensing and accreditation, policy development, and general Human Resources administration. Renate has a total of 13 years’ experience. Since joining Gallagher (formerly Koff & Associates) in 2017, Renate has worked on Classification and Compensation Studies for the following agencies: • Cities and Counties: Bellflower, Chino, Concord, Cupertino, El Cerrito, El Monte, Hillsborough, Los Altos, Malibu, Mountain View, Mt. Shasta, ©2025 Arthur J. Gallagher & Co. All rights reserved. Oceanside, Perris, Piedmont, Pomona, Rohnert Park, San Diego, Sausalito, West Sacramento, Calistoga, Foster City, Pittsburg, Perris, Santa Cruz, Seattle, Town of Truckee, Hayward, Rio Dell, Yuba City, County of Alpine, County of Butte, County of Kings, County of Madera, and County of San Mateo. • Special Districts: Alameda County Transportation Commission, Antelope Valley-East Kern Water Agency, Bay Area Rapid Transit, Bay Area Water Supply and Conservation Agency, Buena Park Library District, Coachella Valley Water District, Coastside County Water District, Contra Costa County Office of Education, Delta Diablo Sanitary District, Dublin-San Ramon Services District, Eastern Municipal Water District, Elsinore Valley Municipal Water District, First 5 Alameda County, Foothill-De Anza Community College District, Foothill Municipal Water District, Greater Vallejo Recreation District, Groveland Community Services District, Habeas Corpus Resource Center, Jurupa Community Services District, Long Beach Transit, Los Angeles County Employees Retirement Association, Los Angeles Unified School District, Metropolitan Transportation Commission, Midpeninsula Regional Open Space District, Monterey Peninsula Regional Open Space District, North Marin Water District, Orange County Sanitation District, Orange County Transportation Authority, Port of Long Beach, Port of Stockton, Rainbow Municipal Water District, Rincon del Diablo Water District, Riverside Community College District, San Luis & Delta Mendota Water Authority, San Mateo County Office of Education, Santa Clara Valley Open Space Authority, South Tahoe Public Utility District, Superior Court of San Joaquin County, Superior Court of San Diego County, Tahoe Transportation District, Triunfo Water & Sanitation District, Truckee Donner Public Utility District, and Yuba Water Agency. Renate earned her B.Sc. degree in Psychology from the University of Northern British Columbia, in Prince George BC, Canada. She was a Canadian Human Resource Professional (CHRP) Candidate before moving to the United States. She will provide H.R. Consultant support throughout this effort, including analysis, interviews with employees and management, compensation data collection and analysis, internal job analysis, development of recommendations, and implementation strategies. ©2025 Arthur J. Gallagher & Co. All rights reserved. 4. References AGENCY & PROJECT CONTACT Beaumont-Cherry Valley Water District Classification and Compensation Study (February 2022). Compensation Study, completed 2017. Director of Finance and Administrative (951) 845-9581 x 224 560 Magnolia Ave. Beaumont, CA 92223 Kirene.manini@bcvwd.org Carpinteria Water District Classification and Compensation study, completed 2024. Ms. Norma C. Rosales Assistant General Manager (805)824-0345 1301 Santa Ynez Ave, Carpinteria, CA 93013 Norma@cvwd.net Chino Basin Water Conservation District Classification & Compensation Study, completed 2021. Small Classification Study completed in 2022. Ms. Elizabeth Skrzat General Manager (909)267-3220 4594 San Bernardino St. Montclair, CA 91763 eskrzat@cbwcd.org Coachella Valley Water District Classification and Compensation Study, 2023. Mr. Bill Walters Human Resources Administrator (760)398-2661 ext. 2372 51501 Tyler St. Coachella, CA 92236 bwalters@cvwd.gov Contra Costa Water District Ongoing classification and compensation services since we completed a District-wide Classification Study in 2020. Ms. Kristen Cunningham Director of People & Culture 925-688-8172 1331 Concord Ave. Concord, CA 94520 kcunningham@ccwater.com Eastern Municipal Water District Classification and Total Compensation Study, completed 2019. Ms. Laura Zamora Director of Human Resources (909) 521-3438 247 West Third Street San Bernardino, CA 92415 lzamore@sb-court.org Please note: Ms. Zamora is no longer with Eastern Municipal Water District and now works for the Superior Court of San Bernardino County. We provide her information where you can contact her for a reference of our work for Eastern Municipal Water District. ©2025 Arthur J. Gallagher & Co. All rights reserved. Jurupa Community Services District District-wide Classification and Total Compensation Study currently in progress early 2025. Total Compensation Study, completed 2020. Currently initiating a District-wide Classification and Total Compensation study, completed 2024. General Manager (951) 685-7434 11201 Harrel Street Jurupa Valley, CA 91752 cberch@jcsd.us Ms. Sharmeen Bhojani Human Resources Manager (951) 685-7434 x 511 sbhojani@jcsd.us Mojave Water Agency Ongoing classification and compensation services since 2017. Human Resources Manager (760) 946-7003 13846 Conference Center Drive Apple Valley, CA 92307 mwarren@mojavewater.org Classification and Total Compensation Study, currently underway early 2025. Classification and Total Compensation Study, completed 2019. Mr. Jeffrey J. Umbrasas, MPA Director of Administration & Finance (760) 445-1514 1920 North Iris Lane, Escondido, CA 92026 jumbrasas@rinconwater.org Santa Clara Valley Water District Ongoing Classification and Compensation Projects since 2013. District-wide Compensation survey completed in 2022. Employment Services Manager (408)630-3171 5750 Almaden Expressway San Jose, CA 95118 ingridbella@valleywater.org or Ms. Patrice McElroy Deputy Administrative Officer patricemcelroy@valleywater.org Zone 7 Water Agency Ongoing classification, compensation, organizational assessment, staffing, and succession planning services since 2016. Assistant General Manager (925) 454-5043 100 North Canyons Parkway Livermore, CA 94551 osolitei@zone7water.com ©2025 Arthur J. Gallagher & Co. All rights reserved. 5. Overview and Approach The District desires human resources assistance to conduct a comprehensive classification and total compensation study for 79 full-time positions within 54 classifications. This includes one employee association, the East Valley Water District Employee Partnership (EVWDEP), made up of 46 employees.. The study’s first level of effort is to initially develop an updated and well-structured classification system and classification descriptions for all study positions that are legally compliant (including Fair Labor Standards Act (“FLSA”) and Americans with Disabilities Act (“ADA”) requirements), internally aligned, reflective of contemporary standards, and accurately descriptive of current roles, responsibilities, duties, and qualifications. The classification analysis process includes orientation and briefing sessions with employees, management, Human Resources, union representation, and other stakeholders, as appropriate; the completion of a position description questionnaire by employees; and interviews with supervisors and management to address any classification issues, as needed. Draft classification descriptions will be developed, and sent back to the District and incumbents for additional feedback and concurrence. A second level of effort will be to review the District’s compensation structure for the studied classifications and to conduct a compensation market survey (salaries plus benefits) using a set of appropriate comparator agencies. The identification of comparator agencies, benchmark classifications, and benefits to be collected is an iterative process that includes all stakeholders. We have found this open discussion philosophy to be critical to our success for organizational buy-in. Once the external data development is completed, we will make specific recommendations for internal equity for non-benchmarked classifications and classifications without a large enough market sampling. The compensation study will contain specific recommendations regarding the integration of all study classifications into the District’s compensation structure, with the goal of developing a clearly designed, internally equitable format that is flexible for career opportunity and future growth. Our study will make recommendations regarding a salary structure that takes the District’s compensation preferences into consideration as well as the appropriate placement of each classification on the District’s salary schedule. The study includes a significant number of meetings with the Study Project Team, Human Resources, employees, union representation, and the District’s Board of Directors, as desired. We have expertise in labor/management relations and understand the importance of active participation by all stakeholders to ensure a successful outcome. The meetings and “stakeholder touch-points” that we recommend ensure understanding of the project parameters, enhance accurate intake and output of information, and create a collaborative and interactive approach resulting in greater buy-in for study recommendations. This interactive approach has resulted in almost 100% implementation success of Gallagher’s studies. The majority of our clients are unionized and our larger city, county, and special district clients typically have multiple unions. Due to the multitude of stakeholder groups who are affected by any classification and compensation study Gallagher conducts, our team understands the importance of accurate and validated data that withstands any scrutiny, effective and ongoing ©2025 Arthur J. Gallagher & Co. All rights reserved. communication throughout each effort, and collaboration with the various stakeholder groups to ensure organizational buy-in to our findings and recommendations. We have developed a unique methodology of stakeholder “touchpoints” and collaboration that has made us highly successful and effective and has earned our team respect, agreement, and understanding from all stakeholders. In addition, we adjust and customize our methodology based on each individual client’s unique needs and circumstances. We also recognize that both the District and union representatives have obligations to employees and members to ensure that any study is conducted in a fair and equitable manner. Our project work plans are designed for transparency and we strongly encourage dialog with all stakeholders on study deliverables so they in turn can express their concerns; we all have a shared goal of ensuring the process followed is fair and equitable. This intense and comprehensive stakeholder engagement and our transparent study processes are also a mechanism of quality control. The fact that our information, data, and recommendations have to be able to withstand utmost scrutiny by diverse stakeholders requires an in-depth multi-step quality control process for deliverables. This involves Gallagher team member validation of classification analyses and compensation data, Gallagher Project Manager review of all classification and compensation analyses, recommendations and deliverables, and finally Gallagher Principal (Project Director) review of deliverables before submittal to the client. STUDY OBJECTIVES Classification Objectives: • To analyze and update the District’s classification system and each study position’s classification description and structure through a comprehensive process of job analysis and evaluation, including review of existing documentation, position description questionnaire completion, employee interviews (as needed, management interviews (as needed), analysis of existing positions and working situations, analysis of levels of duties and responsibilities, and other professional methods, as appropriate; • To create new classifications (if applicable), eliminate outdated classifications (if applicable), and consolidate classifications assigned to similar functional areas (as appropriate); • To provide for growth and flexibility of assignment within the new classification structure, where feasible, in recognition that some job duties and responsibilities may evolve over time, as well as to provide adequate career paths and class series/job families that will foster career service within the District; • To clearly state definitions of job classifications, the typical job functions, and minimum required qualifications such as education, prior work experience, knowledge, skills, abilities, licenses, certifications, and physical demands and working conditions; • To provide a classification structure that ensures regulatory compliance, including appropriate FLSA designation as well as meeting ADA and EEO regulations; and • To ensure sufficient documentation throughout the study, on methods used to determine appropriate classification and level, methods for logical progression of movement between classifications, classification concepts and distinguishing characteristics, as well as the delivery of final reports and recommendations to guide the organization in implementing, managing, and maintaining the classification system. ©2025 Arthur J. Gallagher & Co. All rights reserved. Note: since the classification component of the study is focused on updating classification descriptions and, according to the RFP’s Q&A process, the District anticipates that not all employees will be interviewed, our process will not include any allocation recommendations, such as reclassifications or title changes for individual employees. Of course, we can provide such recommendations, if the District so chooses at a later date. Compensation Objectives: • To make recommendations regarding a list of appropriate, logical and defensible comparator agencies, benchmark classifications, and benefits to be collected prior to beginning the compensation portion of the study; • To collect accurate salary and benefit data from the approved group of comparator agencies and to ensure that the information is analyzed in a manner that is clear and comprehensible to the Study Project Team, Human Resources, management, employees, union representation, and the Board; • To carefully analyze the scope and level of duties and responsibilities, requirements for successful work performance, and other factors for survey classes, according to generally accepted compensation practices; • To review the District’s compensation structure and practices and develop compensation recommendations, including appropriate internal salary relationships, that will assist the District in recruiting, motivating, and retaining competent staff; • To develop solutions that address pay equity issues and create a market adjustment implementation strategy supporting the District’s goals, objectives, and budget considerations; • To create a comprehensive final report summarizing the compensation study approach and methodology, analytical tools, findings, and recommended compensation structure; and; • To ensure sufficient documentation and training throughout the study, on methods used to determine appropriate salary ranges, methods for logical progression within the salary scale for each classification, and other practices, so that our recommendations can be implemented and maintained in a competent and fair manner. Overall Objectives: • To review and understand all current documentation, rules, regulations, policies, budgets, procedures, class descriptions, organizational charts, memoranda of understanding, personnel policies, wage and salary schedules, and related information so that our recommendations can be operationally incorporated with a minimum of disruption; • To conduct project start-up meetings with study stakeholders to discuss any specific concerns with respect to the development of classification and compensation recommendations; finalize study plans and timetables; conduct orientation sessions with management, union leadership, and staff in order to educate and explain the scope of the study and describe what are and are not reasonable study expectations and goals; • To work collaboratively and effectively with the District and its stakeholders while at the same time maintaining control and objectivity in the conduct of the study; and • To provide effective ongoing communications throughout the duration of the project and continued support after implementation. ©2025 Arthur J. Gallagher & Co. All rights reserved. METHODOLOGY / WORKPLAN / DELIVERABLES Our approach is to complete the classification and job evaluation before completing the compensation review. The reasons for this include: • The description of the work performed and the requirements for that work are, in the minds of the employees and their supervisors, inextricably associated with the “value of that work” or compensation, which is often a highly emotional issue. Separating the two phases of the study, even though elements of phases may be conducted concurrently, tends to produce more objective classification results. • The compensation review will be completed when there is a full understanding of the work of the District, thereby ensuring that the data developed from the labor market compared to the District’s classifications is accurate. Given these parameters, our approach is as follows: PHASE I – CLASSIFICATION STUDY: Milestone A: Project Kickoff Meetings, Orientations, and Initial Documentation Review This phase includes identifying the District’s Study Project Team (Human Resources, management, employee representation, etc.), contract administrator, and reporting relationships. Our team of Project Managers and Consultants will conduct a briefing session with the Study Project Team to explain process and methodology; create the specific work plan and work schedule; identify subsequent tasks to be accomplished; reaffirm the primary objectives and specific end products; determine deadline dates for satisfactory completion of the overall assignment; determine who will be responsible for coordinating/scheduling communications with employees, management, union representation, and the Board; and develop a timetable for conducting the same. Included in this task will be the gathering of written documentation, identifying current incumbents, and assembling current class descriptions, organizational charts, salary schedules, budgets, memoranda of understanding (“MOU”), personnel policies, previous classification and compensation studies, and any other relevant documentation to gain a general understanding of District operations. District terminology and methods of current classification and compensation procedures, will be reviewed and agreed to. The Position Description Questionnaire (“PDQ”) will be discussed and customized as needed to meet the study objectives prior to distributing copies to employees. We will discuss methodology, agree to formats for class descriptions and compensation results, identify appropriate comparator agencies, benchmark classifications, and benefits to be surveyed for compensation survey purposes. We will respond to any questions that may arise from the various stakeholders. We will facilitate an appropriate number of orientation meetings with employees over the course of several days and distribute our Position Description Questionnaire (“PDQ”). According to the RFP’s Q&A process, the District anticipates that classification questions may be addressed by interviewing managers and staff as needed; however, we do recommend that employees complete PDQ to capture in writing any changes to their assignments and to create a record that ensures that Gallagher can update the District’s classification descriptions appropriately. ©2025 Arthur J. Gallagher & Co. All rights reserved. While these meetings are not mandatory, they form the beginning of the educational process that continues throughout the study. We will discuss the importance of the employees’ involvement in the study and their participation in PDQ completion and job analysis interviews. Project processes will be explained, expectations will be clarified, and elements that are not a part of the study will also be covered. Questions will be answered and a detailed explanation and examples for completing the PDQ will be given. In recent years, we have found that it can be a much more efficient and cost effective for our clients to conduct employee orientations virtually because this approach avoids multiple employees having to travel to a central location and potentially losing hours of productivity versus simply clicking on a video link. We can provide the District with the technological options to ensure a smooth process. Our clients have received these operational changes very positively and our client-centric approach and methodology does not change with the venue. Milestone B. Collection and Review of PDQs and Employee/Supervisor/Manager Interviews Collection and Review of PDQs We recommend giving employees in the same classification the option of collaborating on completing a PDQ together, if the employees so choose. At the same time, we will invite employees to complete an individual PDQ if they prefer and if they wish to be interviewed separately. We provide an electronic version of our questionnaire so that employees can more easily complete it. Employees complete the questionnaire and then send it to their supervisor for review, comment, and signature. We typically require a second level of review by the next level of management in the reporting structure. This ensures that all staff have an opportunity to provide information as to what the nature of the job is for each job classification. Upon receipt of the PDQs in our office, Gallagher staff will review and analyze the PDQs in detail along with other documentation to obtain an understanding of the duties and responsibilities assigned to each position. Employee/Supervisor/Manager Interviews Interviews will be scheduled with employees, as needed. Again, according to the RFP’s Q&A process, the District anticipates that employees will be interviewed, as needed, and Gallagher will determine that need based on the review of PDQs received and if any clarifications are needed. Interviews will then be held with supervisory and management staff (division managers, department heads, etc.), again if needed, who will clarify their own responsibilities and/or confirm the information we have received in the PDQs from and interviews with their staff. The purpose of the interviews is to clarify and supplement the questionnaire data and to respond to potential perception differences regarding roles, tasks, scope, and supervisory responsibilities. Milestone C. Draft Class Description Development New and/or updated class descriptions will be developed for each proposed classification, following the format approved by the District. Before Koff & Associates merged with ©2025 Arthur J. Gallagher & Co. All rights reserved. Gallagher, K&A conducted the District’s 2014 classification study. We’ll ensure that the District still prefer the original format and will, of course, make any recommendations for changes best on contemporary industry standards and best practices. From the review of the PDQs and employee interviews, we will update duties, responsibilities, and minimum qualifications of each class specification. We will develop new class specifications if duties, responsibilities, and minimum qualifications have changed significantly, and/or if we recommend new classifications/class levels. Following EEO Uniform Guidelines, we will review, analyze, and update knowledge, skills, abilities, education and experience, position definitions, purpose, distinguishing characteristics, supervision received and exercised, position functions and special requirements including licensing and certifications. We will also review and update physical demands based on the most typical job functions of each classification in accordance with the ADA. Finally, we will review each classification’s typical job functions and determine exempt vs. non-exempt status in accordance with “white collar” exemptions under the FLSA. Note: Per the RFP’s Q&A’s process, it is our understanding that the District does not desire a detailed, incumbent-specific allocation list for each position that would specify changes to classification title and impact of such recommendations (reclassification – upgrade or downgrade, title change, or no change). Of course, Gallagher can provide such recommendations if desired at a later date. Milestone D. Facilitation of Draft Class Description Review, Finalization of Classification Plan, and Draft of Interim Report and Final Report A draft copy of the revised/new class description will be submitted to the Study Project Team and subsequently to each manager for review to provide comments and concerns regarding any modifications to the classification structure and specifications. Our experience has been that this is one of the most critical phases of the project (as well as one of the most time- consuming). Our proactive and effective communication process at this juncture has always avoided formal appeals, adversarial meetings, or major conflicts at the conclusion of our studies. Class description changes will be made as required and the class specifications will be finalized and submitted for approval. We will provide a written response to stakeholder feedback to inform stakeholders of the outcome of their concerns. A Draft Interim Report of the Classification Study will be completed and submitted to the Study Project Team for review and comment. The report will contain: • Documentation regarding classification methodology and process as well as all findings, analysis, and resulting recommendations for changes to the District’s classification plan; and • Classification concepts as well as methods used to determine appropriate classification and level, methods for logical progression between classifications, distinguishing characteristics and other pertinent information for implementation and continued maintenance of the recommendations. ©2025 Arthur J. Gallagher & Co. All rights reserved. Once we have received the District’s comments regarding the Draft Interim Report and have made any necessary changes, a Final Classification Report will be developed. PHASE II – TOTAL COMPENSATION STUDY: Milestone A: Determination of Survey Elements and Delivery of Market Survey During the initial meeting with the Study Project Team, we will discuss and agree to the compensation study factors. We will identify appropriate, logical and defensible comparator agencies that will be included in the external market survey, which will be the foundation for ensuring that the District’s compensation plan is competitively aligned with the external labor market. We will also identify those classifications that will be surveyed in the market (i.e., benchmark classifications), with the intention of internally aligning the remaining classifications with those that were surveyed. Finally, we will determine the list of benefits that the District wants to include in the total compensation data gathering process. 1. Determination of Comparator Agencies The selection of comparator agencies is a critical step in the study process. We typically use the following factors to identify appropriate comparators and will receive approval before proceeding with the compensation study. Our recommended methodology is that we involve management, Human Resources, employee representation, and the Board, in the decision-making process of selecting which comparable agencies are included, PRIOR to beginning the study. Our experience has shown that this is the most successful approach. The factors that we typically review when selecting and recommending appropriate comparator agencies include: • Organizational type and structure – While various organizations may provide overlapping services and employ some staff having similar duties and responsibilities, the role of each organization is unique, particularly in regard to its relationship to the citizens it serves and level of service expectation. During this iterative process, the District’s current/previous list of comparators that Gallagher (i.e., Koff & Associates) surveyed in 2014 and 2021, and the advantages/disadvantages of including them and/or others, will be discussed. • Similarity of population served, District demographics, District staff, and operational budgets – These elements provide guidelines in relation to resources required (staff and funding) and available for the provision of services. • Scope of services provided – While having an organization that provides all of the services at the same level of citizen expectation is ideal for comparators, as long as the majority of services are provided in a similar manner, sufficient data should be available for analysis. When reviewing this factor, the District’s unique services would be evaluated in order to ensure that the majority of comparators provide the same services. This ensures that each comparator yields a sufficient number of matches for the District’s jobs. • Labor market – The reality of today’s labor market is that many agencies are in competition for the same pool of qualified employees, because large portions of the workforce don’t live in the communities they serve, are accustomed to lengthy commutes, and are more likely to consider changing jobs in a larger geographic area than in the past. In addition, working-from-home opportunities and hybrid work schedules have further changed the landscape of supply and demand of ©2025 Arthur J. Gallagher & Co. All rights reserved. talent. Therefore, the geographic labor market area (where the District is competing for talent) is taken into consideration. • Cost of living and cost of labor – The price of housing and other cost-of-living related issues are some of the biggest factors in determining labor markets and the appropriateness of comparator agencies. When the identified survey market includes comparators that are located outside of the District’s geographic area, we analyze cost of labor to ascertain whether there are significant differences and, if so, we are able to apply geographic cost-of-labor adjustments factors to the market data to ensure and apples-to-apples comparison. We typically recommend using 10-12 comparator agencies for all survey benchmarks in order to achieve statistical significance but are flexible and can easily use a different approach based on the District’s preferences. In 2021, we surveyed the following 11 comparators and they will be included in this analysis to determine if they are still the best survey market for the District, or any changes should be made at this point: 1. City of Riverside Public Utilities 2. City of San Bernardino Municipal Water Department 3. Coachella Valley Water District 4. Cucamonga Valley Water District 5. Eastern Municipal Water District 6. Elsinore Valley Municipal Water District 7. Inland Empire Utilities Agency 8. Irvine Ranch Water District 9. Rancho California Water District 10. Western Municipal Water District 11. Yucaipa Valley Water District 2. Determination of Benchmark Classifications In the same collaborative manner as described in Step 1 above, we will work with the District’s stakeholders to select those classifications that will be surveyed. “Benchmark classes” are ordinarily chosen to reflect a broad spectrum of class levels. In addition, those that are selected normally include classes that are most likely to be found in other similar agencies, and therefore provide a sufficient valid data sample for analysis. Internal relationships will be determined between the benchmarked and non- benchmarked classifications and internal equity alignments will be made for salary recommendation purposes. Due to the fact that the labor market typically yields reliable data, we recommend using approximately 60-65% of all classifications as benchmarks. 3. Determination of Salary and Benefits Data to Be Collected In addition to base salaries, per the RFP we understand the District is interested in including the following benefits in the study: • Specialty pay, for example, certification incentive pay, bilingual pay, stand-by pay, etc. • Allowances/reimbursements, for example, uniform/boot allowance, auto allowance, etc. • Pay for Performance incentive program pay ©2025 Arthur J. Gallagher & Co. All rights reserved. • Employer paid health, dental, and vision insurance contributions • Employer paid life and disability benefits • Retirement benefits (pension and supplemental accounts) • Leave-related benefits (holidays, sick, vacation, administrative leave, etc.) Data from Comparators and Preliminary Analysis of Data Gallagher does not collect market compensation data by merely sending out a written questionnaire. Our experienced compensation analysts conduct all of the data collection and analysis to ensure validity of the data and quality control. We collect classification descriptions, organization charts, salary schedules, personnel policies, budgets, MOUs, and other information via website, by telephone, or email directly from each comparator agency. We then compare job description to job description and not just job titles, therefore ensuring true “matches” of at least 70%, which is the threshold we use to determine whether to include a comparator classification or not. As mentioned above in the classification methodology above, our job analysis method is the whole position analysis approach, which we apply here as well. We also schedule appointments with knowledgeable individuals at each comparator to answer specific questions. We find that information collected using these methods has a very high validity rate and allows us to substantiate the data for employees, management, and governing bodies. Data will be entered into spreadsheet format designed for ease of interpretation and use. Information will be calculated based upon average and median figures allowing the District to make informed compensation decisions. Other elements of the compensation survey report are agencies surveyed; comparable class titles; salary range maximum/control point; number of observations; and percent of the District’s salary range above/below the market values. In addition, we will include any type of statistical representation and analysis that the District desires such as 60th, 70th, or any other percentiles per the District’s compensation philosophy. Benefits data will be displayed in an easy-to-read format. You will receive three sets of spreadsheets per classification, one with base pay, one with the benefits detail, and one with total compensation statistical data. In addition, we are often asked to collect “additional” benefits, which we typically report on a separate spreadsheet. Milestone B. Draft Compensation Findings/Stakeholder Review and Feedback As part of our transparent approach and communication strategy to ensure organizational buy-in to the study, we share the market survey with the organization. We first distribute our draft findings to the Study Project Team. After their preliminary review, we will meet with the Study Project Team and other stakeholders (including Human Resources, management, employees) to clarify data, to receive requests for reanalysis of certain comparators, and to answer questions and address concerns. This provides an opportunity for our team to engage with study stakeholders in a collaborative manner. If questions arise, we conduct follow-up analysis to reconfirm our original analysis and/or make corrections, as appropriate. Milestone C. Development of Recommendations, Final Reports, and Presentations Analysis of Internal Relationships and Alignment ©2025 Arthur J. Gallagher & Co. All rights reserved. To determine internal equity for all studied positions, considerable attention is given to this phase of the project. It is necessary to develop an internal position hierarchy based on the organizational value of each classification. Again, we utilize the whole position analysis methodology as described earlier. By reviewing those factors, we will make recommendations regarding vertical salary differentials between classes in a class series, for example, as well as across departments. This analysis will be integrated with the results of the compensation survey and the District’s existing compensation plan. The ultimate goal of this critical step in the process is to address any potential internal equity issues and concerns with the current compensation system, including compaction issues between certain classifications. We will create a sound and logical compensation structure for the various levels within each class series, so that career ladders are not only reflected in the classification system but also in the compensation system, with pay differentials between levels that allow employees to progress on a clear path of career growth and development. Career ladders will be looked at vertically as well as horizontally. Compensation Structure Development We will review and make recommendations regarding the District’s salary structure (set of salary ranges, salary differentials, steps within ranges, and/or alternative compensation plans) within which the classes are allocated, based upon the District’s preferred compensation model. We will also work with the District on their compensation philosophy as it relates to market position and the formulation of their compensation plan. This analysis will result in external pay equity, solutions to address any pay equity issues, and an implementation strategy supporting District goals, objectives, and budget considerations. Draft recommendations will be discussed with the Study Project Team and management for discussions and decisions on overall pay philosophy and the practicality of acceptance and prior to developing an Interim Report. Final Report A Draft Interim Report of the Compensation Study will be completed and submitted to the Study Project Team for review and comment. The report will include: • An executive summary of the compensation study results; • A set of all market data spreadsheets; • A proposed compensation structure; • A proposed salary range placement document; • A procedure to address employees whose current base pay either falls below the minimum of or exceeds the maximum of their newly assigned pay range; • Implementation options surrounding our recommendations; and • A guide for implementing, managing and maintaining the compensation system. Once all of the District’s questions/concerns are addressed and discussed, a Final Classification and Compensation Report will be created and submitted in the District’s preferred format. The Final Report will incorporate any appropriate revisions identified and submitted during the review process. ©2025 Arthur J. Gallagher & Co. All rights reserved. Final Presentation Our proposal includes multiple meetings and weekly oral and written status/progress updates to the Study Project Team. Regarding the involvement of the Board of Directors, we recommend at least one initial meeting to identify the comparator agencies to be included in the study, one interim study session (to discuss the initial findings of the compensation study), and one final presentation of our Final Report. Of course, we are flexible regarding having more or less interaction with the Board, based on the District’s preferences. EXPECTATIONS OF DISTRICT SUPPORT: In order to conduct this study in the most timely and cost-effective manner, we ask for support in the following areas: • Timely provision of written documentation, such as current class specifications, union contracts, organizational charts, budget documents, salary schedules, past studies, etc.; • Assistance in the notification and scheduling of initial kickoff and other meetings and the provision of adequate interview tools and resources; • Assistance in the compilation of current descriptions with the PDQ; collecting and forwarding questionnaires; and in ensuring that materials are completed and returned in a timely manner; and • Meeting agreed-upon timelines. In terms of time commitment for District staff, we understand that the District hires an outside consultant to conduct and coordinate the entire effort. Therefore, it is our goal to reduce the time commitment of District staff as much as possible and to only request assistance in the coordination of some of the steps in the process, such as scheduling meetings, disseminating information, and in general, being a channel of communication between our firm and employees. COMMUNICATION WITH THE DISTRICT: Our typical communication model includes at least weekly or biweekly written status updates, or virtual meetings, to keep the District informed on where we are during each phase of the project. In addition, the study includes a significant number of meetings with the Study Project Team, human resources, management, employees, and the Board, as desired. The meetings and “stakeholder touch-points” that we recommend ensure understanding of the project parameters, enhance accurate intake and output of information, and foster a collaborative and interactive approach that will result in greater buy-in for study recommendations. This interactive approach, although time-consuming, has resulted in almost 100% implementation success of Gallagher’s studies. POST-STUDY CONSULTATION AND SUPPORT: We are committed to providing the District with the highest-quality product and service. Providing ongoing consultation and support after study completion is a service that is included in our professional fees and a continued relationship-building aspect of our client relationship that we highly value. We often find that clients will call or email with follow-up questions and to discuss certain aspects of the study, ask why decisions and recommendations were made, and other ©2025 Arthur J. Gallagher & Co. All rights reserved. important components of the study. We consider post-implementation support as part of our customer service. Should the District request any additional meetings and/or training after completion of the study and/or other specific, identifiable work efforts, such as single-position compensation reviews or conducting annual surveys, we would honor our composite hourly rate for actual hours worked. However, from experience, we expect that most follow-up support will be conducted via telephone and email and this is absolutely included in our project fee for this project. STAKEHOLDER ENGAGEMENT: We believe in an interactive and collaborative process with the whole organization and in a high level of stakeholder contact and interaction to ensure organizational buy-in to the study throughout the entire process. Following are the major milestones at which we touch base with Human Resources, employees, managers, and other stakeholders, as appropriate: • Initial study kick-off meetings with stakeholders; • Stakeholder input regarding a list of appropriate comparator agencies, benchmark classifications, and benefits to be collected; • PDQ completion and review; • Employee and management interviews; • Human Resources, management, and other stakeholder review of draft class descriptions; • Contact with management and employees to address final classification issues. • District stakeholder review of compensation study data and contact with them to address any challenges to the market comparables we identified; • Stakeholder input on internal salary relationship analysis and recommendations; and • Stakeholder input regarding final compensation plans and structure recommendations. These steps will ensure that the study results in a product that is accepted and trusted by all levels within the organization. Beyond sound mechanics, our approach includes sufficient communication steps to ensure that the study methodology is understood and the results are regarded as expert, impartial, and fair. Time Requirements We understand that the District anticipates contract award on or around September 24, 2025, and requires that the selected firm must have the ability to complete the study and present recommendations by January 12, 2026. This is a 15-week completion timeline. Considering that this is a classification and compensation study, this is a very aggressive timeline. Our professional experience is that classification and compensation studies of this scope and for this size organization take approximately five to six months to complete, allowing for adequate PDQ completion, employee and supervisor interviews, class description development, compensation data collection and analysis, review steps by the District, the development of final reports, any appeals, and presentations. However, if the District is agreeable to conducting both phases of the project concurrently, the timeline is achievable. The caveat is that we would need to begin the compensation phase of the study before completing the classification description update. We propose commencing ©2025 Arthur J. Gallagher & Co. All rights reserved. the project as soon as feasible in September 2025 and anticipate completion by January 12, 2026. The following is a suggested timeline (which can be modified based on the District’s needs): MILESTONES PHASE I: CLASSIFICATION STUDY A. Project Kickoff Meetings, Orientations, and Initial Documentation Review Weeks 1-2 B. Collection and Review of PDQs and Employee/Supervisor/Manager Interviews (to achieve the project timeline, PDQs will need to be completed within 2 weeks and staff will need to be available to complete interviews within 2-3 weeks thereafter) Weeks 3-7 C. Draft Class Description Development Weeks 8-12 D. Facilitation of Draft Class Description Review, Finalization of Classification Plan, and Draft of Interim Report and Final Report Weeks 13-15 MILESTONES PHASE II: COMPENSATION STUDY A. Determination of Survey Elements and Market Survey Delivery Weeks 1-11 B. Draft Compensation Findings/Stakeholder Review and Feedback Weeks 12-13 C. Development of Recommendations, Final Reports, and Presentations Weeks 14-15 ©2025 Arthur J. Gallagher & Co. All rights reserved. Contractual Considerations We will be pleased to sign the District’s professional services agreement for a Compensation Study. We respectfully request that the District will allow for a period of negotiation of certain terms in the professional services contract related to liability, indemnity, insurance, and other terms. We have found that we have always come to an agreement with all our clients in the past and appreciate the District’s flexibility in reviewing certain terms in a collaborative fashion between our legal counsels. The following are terms we would like to review with the District if we are fortunate to be selected for this project: • Gallagher is pleased to submit this proposal to the District. While this proposal is not meant to constitute a formal offer, acceptance, or contract, notwithstanding anything to the contrary contained in the proposal, Gallagher is submitting this proposal with the understanding the parties would negotiate and sign a contract containing terms and conditions that are mutually acceptable to both parties. • Gallagher is not a federal contractor or subcontractor. Therefore, Gallagher cannot agree to federal contracting provisions contained within the RFP. • Section 12, (PDF Page 10); Section 6.9, (PDF Page 21) - Indemnification should be limited to grossly negligent acts and omissions, breaches of the contract, intentional misconduct, or violations of law. • Section 12, (PDF Page 10); Section 6.9, (PDF Page 21) - A limitation of liability of fees paid needs to be added to the indemnification provision. • Section 6.3 (PDF Page 16 – 19) - Below are Gallagher's insurance representations based on AJG Risk Management policies. These are not changed on a client by client basis. • Section 6.6, (PDF Page 20) - This section needs modified so that no prior approval of personnel is required from the District. Gallagher will provide notice of substitutions after they occur. Gallagher can agree to a reasonable time period to provide such notice and will use good faith efforts to ensure that the District is satisfied with any replacement personnel assigned • Section 6.7, (PDF Page 20); Section 6.11 and Section 6.12 (PDF Page 22-23) - This section should make clear that the District shall own all final deliverables provided to the District by Gallagher as part of the services provided under this Agreement, provided however, Gallagher shall retain sole and exclusive ownership of all right, title, and interest in, and to, its intellectual property and derivatives thereof which no data or Confidential Information of the District was used to create and which was developed entirely using Gallagher’s own resources, including any and all pre-existing or independently developed know-how, methods, processes and other materials prepared by Gallagher. To the extent Gallagher’s intellectual property is necessary for the District to use the deliverables provided under this Agreement, Gallagher grants to the District a non-exclusive, royalty-free license to Gallagher’s intellectual property solely for the District’s use of such deliverables. ©2025 Arthur J. Gallagher & Co. All rights reserved. It is our practice to provide the coverage below in lieu of the District contract insurance language. We therefore propose to replace the insurance language in the RFP’s sample agreement with coverage language provided by Gallagher as follows: Gallagher shall at all times during the term of this Agreement and for a period of two (2) years thereafter, obtain and maintain in force the following minimum insurance coverages and limits at its own expense: • Commercial General Liability (CGL) insurance on an ISO form number CG 00 01 (or equivalent) covering claims for bodily injury, death, personal injury, or property damage occurring or arising out of the performance of this Agreement, including coverage for premises, products, and completed operations, on an occurrence basis, with limits no less than $2,000,000 per occurrence; • Workers Compensation insurance with statutory limits, as required by the state in which the work takes place, and Employer’s Liability insurance with limits no less than $1,000,000 per accident for bodily injury or disease. Insurer will be licensed to do business in the state in which the work takes place; • Automobile Liability insurance on an ISO form number CA 00 01 covering all hired and non-owned automobiles with limit of $1,000,000 per accident for bodily injury and property damage; • Umbrella Liability insurance providing excess coverage over all limits and coverages with a limits no less than $10,000,000 per occurrence or in the aggregate; • Errors & Omissions Liability insurance, including extended reporting conditions of two (2) years with limits of no less than $5,000,000 per claim, or $10,000,000 in the aggregate; • Cyber Liability, Technology Errors & Omissions, and Network Security & Privacy Liability insurance, including extended reporting conditions of two (2) years with limits no less than $2,000,000 per claim and in the aggregate, inclusive of defense cost; and • Crime insurance covering third-party crime and employee dishonesty with limits of no less than $1,000,000 per claim and in the aggregate. • All commercial insurance policies shall be written with insurers that have a minimum AM Best rating of no less than A-VI, and licensed to do business in the state of operation. Any cancelled or non-renewed policy will be replaced with no coverage gap, and a Certificate of Insurance evidencing the coverages set forth in this section shall be provided to Client upon request. ©2025 Arthur J. Gallagher & Co. All rights reserved. Signature Page Gallagher Benefit Services, Inc., formerly known as Koff & Associates, intends to adhere to all of the provisions described above. This proposal is valid for 90 days. Respectfully submitted, By: GALLAGHER BENEFIT SERVICES, INC., State of California Georg S. Krammer August 18, 2025 Managing Director, Compensation and Rewards Consulting ©2025 Arthur J. Gallagher & Co. All rights reserved. Appendix ©2025 Arthur J. Gallagher & Co. All rights reserved. Firm Qualifications Gallagher’s (“Gallagher”) Public Sector Human Resources and Recruitment Services Practice was formerly known as Koff & Associates and consists of an experienced team of consultants that has been providing predominantly classification, compensation, and recruiting services to cities, counties, special districts, courts, educational institutions, and other public agencies for over 40 years. We have offices all throughout California, the Western Region, as well as across the entire nation and serve clients in all 50 states. We are familiar with the various public sector organizational structures, agency missions, operational and budgetary requirements, and staffing expectations. We have extensive experience working in both union and non-union environments, working with City Councils, County Commissions, Boards of Directors, Boards of Supervisors, Boards of Trustees, Boards of Education, Merit Boards, and Joint Power Authorities. The firm’s areas of focus are classification and compensation studies (approximately 70% of our workload); executive search and staff recruitments; and organizational development/assessment studies. Without exception, all our classification and compensation studies have successfully met all our intended commitments; communications were successful with employees, supervisors, management, and union representatives; and we were able to assist each agency in successfully implementing our recommendations. All studies were brought to completion within stipulated time limits and proposed budgets. Our long list of clients (please see https://koffassociates.com/our-clients/) is indicative of our firm’s reputation as being a quality organization that can be relied on for producing comprehensive, sound, and cost-effective recommendations and solutions. Gallagher has a reputation for being “hands on” with the ability and expertise to implement its ideas and recommendations through completion in both union and non-union environments. Gallagher relies on our stellar reputation and the recommendations and referrals of past clients to attract new clients. Our work speaks for itself and our primary goal is to provide professional and technical consulting assistance with integrity, honesty and a commitment to excellence. We are very proud of the fact that in working with hundreds of public agency clients and completing hundreds of classification and/or compensation and other types of studies, we have only had a handful of formal appeals in our entire history. Especially when it comes to compensation, we know we are dealing with people’s livelihoods and we take that very seriously. We are human resources professionals by trade and at heart and always keep the human aspect at the forefront of our problem solving methodologies. Our guiding principle of assisting public agencies for the greater good of their people and the communities they serve has been the backbone of our culture of integrity and ethics. Our values of being public-spirited, resourceful, curious, and courageous help us succeed in being very client- centric, fully invested in our work and finding the best solutions for our clients, and in applying a synergistic approach to all of our projects. About the Larger Gallagher ©2025 Arthur J. Gallagher & Co. All rights reserved. Value Proposition: The ability to deliver comprehensively structured human capital solutions to clients is Gallagher’s signature in the marketplace. At Gallagher, we want to know what makes your organization unique. We listen intently to learn about your culture and priorities and delve deeply into all the details that matter when balancing human capital needs with financial sustainability. This single-minded focus on excellence — characterized by innovation and creativity — is the driving force behind every Gallagher engagement. Company History: Arthur J. Gallagher & Co. opened its doors for business in 1927 and is still “growing strong” because of a practiced ability to help clients think ahead. Founded by its namesake who was previously the leading producer for Chicago’s largest insurance brokerage, Gallagher is now one of the world’s largest human capital, insurance brokerage and risk management services firms. Headquartered in Rolling Meadows, IL, we have operations in 33 countries, and extend our client-service capabilities to more than 90 countries through a global network of correspondent brokers and consultants. Since 1961, we’ve been helping clients overcome business barriers and create new opportunities to cost-effectively attract, retain and productively engage the best performers in their field. Gallagher started trading on the NYSE under the symbol AJG in 1984. Company Culture and Philosophy: The ideals, principles and values embodied by the founder whose name still appears on our door are part of our corporate DNA. Gallagher’s approach to business, cultivated through three generations of family leadership, has always centered on creating relationship value as true partners to our clients. Gallagher’s interactions with you will be straightforward and candid. By earning the trust of our clients, we’ve sustained a reputation for ethics and a commitment to transparency that continue to contribute to our growth. In fact, Gallagher was the first insurance broker named to the Ethisphere® Institute’s annual list of the World’s Most Ethical Companies in 2012 — and has earned this recognition for twelve consecutive years, through 2023. This is a ©2025 Arthur J. Gallagher & Co. All rights reserved. tremendous achievement: annually, less than 150 companies based in 24 countries and representing 57 industry categories received this honor. Gallagher is the only insurance broker to have ever been recognized (World’s Most Ethical Release). The high standards of conduct we’ve set for our external professional relationships are the same rules we follow internally. The Gallagher Way, a one-page document that outlines our 25 shared values, was written in 1984 but is just as culturally relevant today. It speaks to the value of relationships and several tenets set guidelines for ethical behavior. Gallagher combines innovative solutions, thoughtful advice, and honest business practices to minimize risk and help fuel your success. Human Resource and Compensation Consulting Practice Gallagher’s Human Resources & Compensation Consulting practice, of which the former K&A team is now a part, empowers clients to attract talent, manage staff, develop leaders, and reward success—leveraging the power of Gallagher and wisdom of experience to produce an engaged and productive workforce. Tapping into expertise that spans the spectrum of human resources at every level, we can assemble flexible compensation and consulting solutions that improve efficiency and fiscal sustainability. Our practice is a combination of some of the most respected names in human resources and compensation consulting. Bringing together experts from compensation, performance, search, survey, and leadership fields, Gallagher empowers clients with tools for the entire lifecycle of employment management. With an experienced team of 205 consultants located in 14 offices across the United States and Canada, our services include: • Classification and Compensation • Employee Engagement • Executive Compensation • • HR Management • Search and Interim Placement • Custom Salary and Benefit Surveys • ©2023 Arthur J. Gallagher & Co. All rights reserved.