Item 1 - Staff Briefing on FY 27-FY 31 Financial Forecast — original pdf

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Austin Water FY27-FY31 Forecast Update May 2026 Austin Water Austin Water Financial Team Introductions  Joseph Gonzales, Deputy Director of Business Services  Christina "Tina" Romero, Acting Assistant Director of Financial Services  Songli Floyd, Budget & Accouting Division Manager  Nam Nguyen, Acting Financial Management Division Manager  Li Yang, Budget & Accounting Financial Manager II  Frida Guo, Capital Asset & Accounting Financial Manager II  Shierin Shoghi, Rates & Forecasting Financial Manager II 2 Agenda  Financial Condition/Budget Considerations  Rates/Affordability  Inflationary Cost Increases  Growing Capital Spending Plan  Financial Metrics  Summary  Discussion 3 Austin Water Financial Condition Austin Water Financial Condition Revenue Considerations  Rate increases needed to cover increasing operating and capital costs  Customer Assistance Program enrollment growth  Slower development/customer growth  Expenditure Considerations  Ongoing resiliency and service reliability investments for essential infrastructure  Inflationary cost increases impacting operating and capital delivery costs  Workforce investments to support retention and staff increase  Growing Capital Improvements Plan  Continue debt management strategies Financial Performance  Significant drop in operating cash reserves  Cash financing of CIP below financial policy target 5 Austin Water Budget Development Process Revenues  Cost of service rates calculated annually  Revenue trend analysis and forecast updates performed monthly Operating Budget  Comprehensive review of historic budget utilization performed annually  Comprehensive review of open encumbrance amounts  Executive team review of significant budget increases  2-year staffing plan development Capital Budget  5-year Capital Improvement Plan Development  Proposed projects reviewed by a committee of Executive Team members 6 Bond Ratings Rating/Outlook Credit Highlights Fitch AA-/Stable Low leverage Moody’s Aa2/Stable DSC 2.3x Days Cash on Hand of 489 (neutral) Improving liquidity of 270 days cash Factors that could result in rating downgrade CIP cost increase not supported by adequate rate adjustments Significant increases in debt burden that exceeds 5x revenues S&P AA/Stable Adequate all-in DSC (2.9x) Strong liquidity (327 days) Material deterioration of all-in DSC and liquidity levels despite planned rate increases Sustained leverage exceeding 10.0x Sustained weakness in liquidity near 200 days cash or debt service coverage nearing 1.5x 7 FY27-FY31 Forecasted Rates $1,200.0 $1,100.0 $1,000.0 $900.0 $800.0 $700.0 $600.0 $500.0 $400.0 $300.0 $200.0 $100.0 $0.0 s n o i l l i M n I Total Available Funds Total Requirements -4.8% FY18 Actual $631.3 $631.2 Updated Rate Incr Forecast -4.8% 7.8% 9.6% 7.3% 6.7% 3.4% 4.4% 4.6% 3.5% 0.0% 0.0% 0.0% 0.0% 0.0% FY19 Actual $588.5 $607.1 0.0% FY20 Actual $616.2 $589.7 0.0% FY21 Actual $573.6 $597.1 0.0% FY22 Actual $691.9 $649.8 0.0% FY23 Actual $709.4 $675.7 0.0% FY24 Actual $700.9 $735.2 3.4% FY25 Actual $782.7 $772.3 7.3% FY26 Approved FY27 Forecast FY28 Forecast FY29 Forecast FY30 Forecast FY31 Forecast $829.3 $863.9 9.6% $881.3 $908.4 7.8% $938.4 $958.1 6.7% $983.3 $1,029.6 $1,066.6 $991.7 $1,028.9 $1,064.9 4.4% 4.6% 3.5% Total Available Funds Total Requirements Updated Rate Incr Forecast 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% 8 Rate Increase Comparison Rate Increase Cumulative Total (2018-2026) 128.0% 95.4% 96.0% 76.5% 45.9% 47.3% 39.8% 8.6% 9.2% 9.6% 11.8% 16.3% 17.4% 130.0% 110.0% 90.0% 70.0% 50.0% 30.0% 10.0% 5.8% -10.0% 9 Forecast Fund Summary FY25 Actual FY26 Estimate FY27 Forecast FY28 Forecast FY29 Forecast FY30 Forecast FY31 Forecast Beginning Fund Balance Revenue & Transfers In Expenditures & Transfers Out $268.5 $782.6 $773.9 $274.2 $829.3 $839.9 $263.5 $881.3 $908.8 $236.1 $938.4 $958.5 Change in Fund Balance $8.7 ($10.6) ($27.4) ($20.1) $216.0 $983.2 $992.0 ($8.7) $207.2 $207.6 $1,029.6 $1,029.3 $1,066.6 $1,065.3 $0.4 $1.3 Ending Fund Balance $277.3 $263.5 $236.1 $216.0 $207.2 $207.6 $208.9 Residential Rate Increase % 7.3% 9.6% 7.8% 6.7% 4.4% 4.6% 3.5% Residential Average Bill $91.20 $99.91 $107.67 $114.84 $119.89 $125.40 $129.82 Debt Service Coverage Days Cash on Hand 2.02 268 2.17 257 1.85 235 1.96 220 1.92 214 1.86 215 1.84 216 % Cash for CIP Spending 26.96% 36.05% 22.31% 21.09% 20.81% 21.70% 28.40% 10 10 Capital Improvement Plan 11 CIP Plan Funding Growth 12 12 Debt Management Savings Achieve $740M Total Debt Service Requirements Comparison FY2023 through FY2031 $4.8M $39.M $0.1M $40.M $12.3M $38.M $36.6M $24.M $50.6M $1.M $81.5M $68.5M $33.5M 20.9% 21.9% 19.6% 23.1% Total Debt Service Savings $740M 22.0% 22.9% 24.6% 24.9% $320 $280 $240 $200 $160 $120 $80 $40 $0 $28.1M 25.0% 2022-23 Actual 2023-24 Actual 2024-25 Actual 2025-26 Estimate 2026-27 Forecast 2027-28 Forecast 2028-29 Forecast 2029-30 Forecast 2030-31 Forecast (*) Total present value savings of $740M since 2016 as of April 2026, include savings beyond 2031. Current Debt Service Requirements Defeasance savings Fiscal Year Planned Defeasance savings (FY27-31) Debt Svc % of Total Requirements 13 ) s n o i l l i m n i ( e c i v r e S t b e D 13 Key Financial Benchmarks 14 Debt Service Coverage o i t a R e g a r e v o C e c i v r e S t b e D 2.40 2.20 2.00 1.80 1.60 1.40 1.20 1.00 Actual FY22 Actual FY23 Actual FY24 Actual FY25 Estimate FY26 Forecast FY27 Forecast FY28 Forecast FY29 Forecast FY30 Forecast FY31 Actual/Projected (FY22-31) Financial Policy AW Target AW Financial Policy and Goal  Financial Policy: 1.75x (previously was 1.5x, changed effective FY22)  AW Planning Target: 1.85x  Moody’s AA Median: 2.3x 15 15 Cash Financing of Capital Program 60.0% 40.0% 20.0% 0.0% m a r g o r P l a t i p a C i f o % g n d n u F h s a C Actual FY22 Actual FY23 Actual FY24 Actual FY25 Estimate FY26 Forecast FY27 Forecast FY28 Forecast FY29 Forecast FY30 Forecast FY31 Actual/Projected (FY22-31) Financial Policy AW Target (Max) AW Target (Min) AW Financial Policy and Goal 16  Financial Policy: 35% (previously was 20%, changed effective FY22)  Current Financial Policy & AW Planning Target: 35% min – 50% max 16 Days Cash on Hand d n a H n O h s a C s y a D 400 350 300 250 200 150 100 50 0 Actual FY22 Actual FY23 Actual FY24 Actual FY25 Estimate FY26 Forecast FY27 Forecast FY28 Forecast FY29 Forecast FY30 Forecast FY31 Actual/Projected (FY22-31) Financial Policy AW Target AW Financial Policy and Goal  Financial Policy: 180 days (previously was 60 days, changed effective FY22)  AW Planning Target: 245 days  Moody’s AA Median: 534 days 17 17 Summary Revenue Considerations  Rate increases needed to cover increasing operating and capital costs  Drought and economy - related revenue volatility  Customer Assistance Program enrollment growth Expenditure Considerations  Inflation impacts on operating and capital delivery costs  Growing Capital Improvements Plan  Debt management strategies to smooth FY28 peak debt service Rating Impact of Weakening Financial Metrics  Significant drop in cash reserves  Cash financing of CIP below financial policy target  Increasing debt burden 18 Question? Austin Water | May 8, 2026