May 2026

City of Scotts Valley Service and Sphere of Influence Review Adopted Version (May 6, 2026) Local Agency Formation Commission of Santa Cruz County 701 Ocean Street, Room 318-D Santa Cruz, CA 95060 Website: www.santacruzlafco.org Phone: (831) 454-2055 TABLE OF CONTENTS EXECUTIVE SUMMARY ........................................................................................................... 2 Introduction ............................................................................................................................ 2 City Overview ......................................................................................................................... 2 Key Findings........................................................................................................................... 3 Recommended Actions .......................................................................................................... 4 CITY OVERVIEW ...................................................................................................................... 6 History .................................................................................................................................... 6 Services & Operations ............................................................................................................ 6 Population and Growth ..........................................................................................................13 Disadvantaged Unincorporated Communities ........................................................................13 FINANCES ...............................................................................................................................14 Revenues ..............................................................................................................................15 Expenditures .........................................................................................................................18 Fund Balance / Net Position ..................................................................................................20 GOVERNANCE ........................................................................................................................23 Legal Authority ......................................................................................................................23 Local Accountability & Structure ............................................................................................23 Opportunities and Challenges ...............................................................................................29 SPHERE OF INFLUENCE ........................................................................................................33 Cortese-Knox-Hertzberg Act ..................................................................................................33 Current & Proposed Sphere Boundary ..................................................................................33 CITY SUMMARY ......................................................................................................................36 SERVICE AND SPHERE REVIEW DETERMINATIONS ..........................................................37 Service Provision Determinations ..........................................................................................37 Sphere of Influence Determinations .......................................................................................38 APPENDICES...........................................................................................................................39 Appendix A: Past Boundary Changes (1966 to 2024) ............................................................39 Appendix B: Status of Projects (as of January 2025) .............................................................39 Appendix C: Wastewater Annual Report (2023) ....................................................................39 Appendix D: Wastewater Rate Study (2021 - 2026)...............................................................39 City of Scotts Valley –Administrative Draft Page 1 of 39 EXECUTIVE SUMMARY Introduction This Service and Sphere of Influence Review is meant to provide information about the services and boundaries of the City of Scotts Valley (“City”). This report will be used by the Local Agency Formation Commission to conduct a statutorily required review and update process. The Cortese-Knox-Hertzberg Act requires that the Commission conduct periodic reviews and updates of Spheres of Influence for all cities and special districts in Santa Cruz County (Government Code section 56425). It also requires LAFCO to conduct a review of municipal services before adopting sphere updates (Government Code Section 56430). The City’s last service review was adopted on March 3, 2021. The municipal service review process does not require LAFCO to initiate changes of organization based on service review conclusions or findings; it only requires that LAFCO make determinations regarding the delivery of public services in accordance with the provisions of Government Code Section 56430. However, LAFCO, local agencies, and the public may subsequently use these determinations and related analysis to consider whether to pursue changes in service delivery, government organization, or spheres of influence. Service and sphere reviews are informational documents that are generally exempt from environmental review. The Executive Officer has conducted an environmental review of the City’s existing sphere of influence pursuant to the California Environmental Quality Act (CEQA) and determined that this report is exempt from CEQA. Such exemption is due to the fact that it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment (Section 15061[b][3]). City Overview The City of Scotts Valley was incorporated in 1966 and operates as a general law city pursuant to the laws of the State of California. Scotts Valley’s city limits encompass approximately five square miles and contain a population estimated at approximately 12,200 residents. An overview map, depicting the current jurisdictional and sphere boundaries, is shown as Figure 1 on page 5. The City provides an array of services, including but not limited to, law enforcement, animal control, wastewater treatment, and stormwater management. A full review of all municipal services is found within this report. Sphere of Influence Santa Cruz LAFCO adopted the City’s first sphere of influence on October 16, 1985. The current sphere includes 11 areas outside the City’s jurisdictional boundary. The last sphere update occurred in March 2021. LAFCO staff is recommending that the sphere boundary be reaffirmed, as shown in Figure 11 on page 35. City of Scotts Valley –Administrative Draft Page 2 of 39 Key Findings The following are key findings of the 2026 Service and Sphere of Influence Review for the City of Scotts Valley: 1. The City provides multiple services to an estimated 12,200 constituents. Scotts Valley provides various types of municipal services, which can be categorized in two activities (Government and Business). Government activities include general government, public safety, planning and building, public works, and recreation. Business activities include wastewater services. In 2025, the City’s population was estimated to be 11,700. LAFCO staff projects that the City’s population will reach 12,000 by 2045. 2. The City is financially healthy, but business activity continues to experience fiscal shortfall. The City is funded by business and government activities. Business activities are derived from wastewater services. The City has ended in a slight deficit in three of the last five fiscal years. While the City’s governmental activity has ended in a surplus in nine of the last 11 fiscal years, it has been the business activity that has negatively affected the City’s overall financial performance. Based on LAFCO’s analysis, business activity has experienced annual deficits each year since FY 2014-15. The City should consider raising rates for wastewater services or find methods to minimize annual expenses to address the ongoing fiscal shortage within the business activity. 3. Business Activity Expenditures continue to outpace Business Activity Revenues. Combining data from the previous service review completed in 2021, the City has experienced 11 consecutive years of business activity deficits. Expenditures have outpaced revenues, with deficits ranging from $218,000 to $2.6 million. The City last completed a wastewater rate study in 2021 and will conduct a new one in 2026 to address the operating deficit. 4. The City is currently receiving water services from two special districts. Residents from the Scotts Valley community currently receive water service from either the Scotts Valley Water District (SVWD) or the San Lorenzo Valley Water District (SLVWD). The majority of Scotts Valley residents receive water from SVWD, but the division means residents of Scotts Valley are subject to two different boards, policies, and water rates. It may be beneficial if the City, the two water districts, and LAFCO collaborate to determine the most efficient method of providing water service to the entire Scotts Valley community. 5. The City provides services outside its jurisdictional boundary. Scotts Valley currently has 13 extraterritorial service agreements to provide wastewater services to non-constituent residents. An ESA is a formal agreement between an agency and a landowner to allow for the provision of services outside their jurisdictional boundaries – this practice is commonly used to address health and safety concerns. The City should analyze and consider if any ESA can be feasibly annexed into the City limits before the next scheduled service review in 2031. 6. The City’s sphere of influence is larger than its jurisdictional boundary. Scotts Valley’s original sphere boundary was established on October 16, 1985. At present, the current sphere goes beyond City limits and includes 13 unincorporated areas totaling 12 acres. The last sphere update occurred in March 2021. LAFCO staff is recommending that the existing sphere boundary be reaffirmed. City of Scotts Valley –Administrative Draft Page 3 of 39 Recommended Actions Based on the analysis and findings in the 2026 Service and Sphere of Influence Review for the City of Scotts Valley, the Executive Officer recommends that the Commission: 1. Find, pursuant to Section 15061(b)(3) of the State CEQA Guidelines, that LAFCO determined that the sphere of influence review is not subject to the environmental impact evaluation process because it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment and the activity is not subject to CEQA; 2. Determine, pursuant to Government Code Section 56425, that LAFCO is required to develop and determine a sphere of influence for the City of Scotts Valley, and review and update, as necessary; 3. Determine, pursuant to Government Code Section 56430, that LAFCO is required to conduct a service review before, or in conjunction with an action to establish or update a sphere of influence; and 4. Adopt LAFCO Resolution (No. 2026-08) approving the 2026 Service and Sphere of Influence Review for the City of Scotts Valley with the following conditions: a. Reaffirm the City’s current sphere of influence; b. Coordinate with the City, Scotts Valley Water District, and San Lorenzo Valley Water District to determine whether there is a more efficient way to provide water service to the Scotts Valley community beyond the status quo; c. Coordinate with the City to analyze and consider annexation of any of the 13 extraterritorial service agreements and receive an update before the next scheduled service and sphere review (April 2031); and d. Direct the Executive Officer to distribute a copy of this adopted service and sphere review to the City of Scotts Valley, Scotts Valley Water District, San Lorenzo Valley Water District, the Board of Supervisors and any other interested or affected parties identified in the service review. City of Scotts Valley –Administrative Draft Page 4 of 39 Figure 1: Vicinity Map City of Scotts Valley –Administrative Draft Page 5 of 39 CITY OVERVIEW History Scotts Valley was incorporated as a city on August 2, 1966, and is currently a small community that encompasses an area of approximately five (5) square miles with a population of approximately 12,200. Appendix A provides a timeline of all the boundary changes approved by LAFCO since its inception. Scotts Valley is located in the center of Santa Cruz County and is six miles north of the City of Santa Cruz, as shown on page 5. The City operates under the council-manager form of municipal government and provides an array of municipal services. Services & Operations The City of Scotts Valley provides various types of municipal services which can be categorized into two activities (Government and Business). Government activities include general government, public safety, planning and building, public works, and recreation. Business activities include wastewater services. At present, the City does not offer fire protection or water services. These two municipal services are provided by the Scotts Valley Fire Protection District and Scotts Valley Water District or San Lorenzo Valley Water District, respectively. The following sections provide a summary of Scotts Valley’s government and business operations. The Governance Chapter of this report provides a breakdown of the number of full-time employees within each service and operation. Animal Control The City is a member of the Santa Cruz County Animal Shelter, a Joint Powers Authority (JPA) formed in June 2002 that includes the County and all four cities (Capitola, Santa Cruz, Scotts Valley, and Watsonville). The JPA provides a full range of services to the community and operates two shelters: one located on 7th Avenue in Santa Cruz County and one located on Airport Boulevard in Watsonville. The JPA is responsible for enforcing laws and codes involving animals within incorporated and unincorporated areas. Public Safety (Police Protection) The Police Department provides public safety for Scotts Valley through community partnerships, proactive law enforcement and professional service. Under the Office of the Police Chief, the department is organized into two divisions: Operations and Services. Operations encompass uniformed patrol services, whereas the Services division is comprised of the Investigation Unit and Communications/Records. The department employs crime prevention strategies that include community awareness and education, proactive targeted enforcement of problem areas, and community-oriented policing. Although services were reduced due to the COVID-19 pandemic, the department is now facilitating community outreach efforts through daily community interactions, a School Resource Officer assignment and teaching DARE in schools, police department tours, neighborhood watch programs, foot patrols, social media, and many other community outreach programs. The Police Department’s workload remains consistent from year to year. These typical recurring activities are assumed in the baseline activities of the department. Factors impacting the department’s workplan include changes in laws and policies, new technology, work force levels, and personnel development. Table 1 on page 7 highlights the Police Department’s role in the community. City of Scotts Valley –Administrative Draft Page 6 of 39 Table 1: Police - Activities (FY 2024-25) Activity Description The department maintains an independent PSAP (Public Safety Answering Point), or dispatch center. Often the first 1. Communications point of contact for individuals in crisis, dispatchers triage priority and non-priority calls and dispatch officers accordingly. The department conducts outreach into the community by partnering with other local organizations, offering crime prevention education and social media content. The department continues to use platforms such as Facebook, Nixle and NextDoor to keep the public informed. The aim of 2. Community Outreach Programs the department is to collectively build trust, enhance public safety, and promote a sense of partnership between law enforcement and the community. The department’s personnel also organize and participate in several community events. The department updates the Emergency Operations Plan to address any changes to personnel or contact 3. Emergency Operations Planning information. The plan addresses the City’s responsibilities in emergencies associated with natural disaster, human- caused emergencies and technological incidents. This is the department’s largest commitment of resources and personnel. Officers respond to calls for service and conduct self-initiated activities to bring safety and a high 4. Patrol Operations quality of life to residents of the City, including Scotts Valley schools. The Patrol Unit is comprised of officers who operate marked police vehicles and handle the bulk of the day-to-day calls for service. The department prepares existing personnel to take on more responsibilities and for career advancement. The department focuses on outside training opportunities to allow existing personnel to develop their skills and prepare 5. Personnel Development them to take on more duties. Efforts to modernize and address officer wellness have allowed the department to also support the mental and physical health needs of officers. The department updates its department policy manual to 6. Policy reflect current case law and best practices. The department is responsible for performing thorough background checks, conducting extensive interviews and assessments to ensure each potential candidate meets the 7. Recruitment highest standards that a career in law enforcement requires. Staff organize or participate in recruitment fairs, visits, and Dispatch Academies. Table 2 is a list of staffing levels in the Division in the last five years. With the passage of Measure Z in 2020, the City has been able to hire key staff across departments, including the Police Department that is 100% staffed for FY 2025-26. City of Scotts Valley –Administrative Draft Page 7 of 39 Table 2: Police – Staffing Levels (FY 2019-20 to 2024-25) FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 Officers 19 20 20 20 20 20 Dispatch & 8.0 8.0 8.0 8.0 8.0 8.0 Support Total 27.0 28.0 28.0 28.0 28.0 28.0 Recent Weather Phenomenon On December 14, 2024, Scotts Valley experienced the first recorded tornado incident in city history. The tornado touched down on Mount Hermon Road and traveled eastbound for multiple blocks, damaging vehicles in nearby parking lots and on the roadway. Although the tornado knocked down powerlines and poles, there were no significant injuries or casualties reported as a result of the unprecedented weather incident. For their part, SVPD officers were immediately called into action. Other off duty officers self-deployed to assist those in need. Officers also responded and converged to affected areas and helped evacuate residents to safety. When the situation stabilized, officers conducted hours of traffic control due to road closures caused by the tornado’s disruption. Finally, the City was assisted by regional partners that included the Scotts Valley Fire Protection District, Cal FIRE, and AMR. Planning & Building The Planning Department is responsible for current and long-term planning as it relates to the orderly growth and development of the City. Staff reviews development proposals and processes residential and commercial applications. The Planning Department periodically updates an active project list which identifies key development projects that are under construction, approved, or under review, as shown in Appendix B. The list is not considered all-inclusive but reflects highly visible projects in the community. As of February 2026, there are three projects under construction, seven approved projects, and 6 projects under review. Public Works The Public Works Department provides residents with a variety of services, including but not limited to engineering design, stormwater management, and street maintenance. The following sections provide an overview of such services. Engineering The Engineering Division includes three primary categories: design and construction, traffic engineering, and land development. The design and construction category includes design and implementation of capital improvement projects. Traffic engineering consists of the review of traffic impact studies, traffic movement counts, capacity analyses, and management of traffic signals throughout the City. Land development includes reviewing projects proposed by perspective land developers and coordinating the review process with departments such as Planning, Police, and other agencies. City of Scotts Valley –Administrative Draft Page 8 of 39 Stormwater Management The City’s storm drainage system collects storm water runoff from City streets along gutters and through underground pipes to discharge into waterways. The system is designed to help in the control of flooding and does not provide any treatment to storm water runoff. In June 2009, the City adopted a Storm Water Management Plan. Urban runoff and other “non-point source” discharges are regulated by the 1972 Federal Clean Water Act (CWA) through the National Pollutant Discharge Elimination System (NPDES) permit program. In October 2018, the City adopted a master plan update. The purpose of the plan update was to determine, prioritize, and provide estimates on the capital improvement needs of the City’s storm drain collection system. In June 2025, an RFP was launched for the development a new Wastewater Master Plan to assess the existing wastewater treatment and collection facilities and identify required improvements to optimize the operations of the existing Water Reclamation Facility and collection system. Street Maintenance Road and street conditions are largely driven by available funding and the ability to maintain an acceptable level of service. Cities commonly rely on two tools to guide this work: a Pavement Management Program (PMP) and a Pavement Condition Index (PCI). The PMP functions as a master plan identifying pavement needs, conditions, costs, and funding priorities. The PCI, based on an inventory and assessment of roadway segments, provides the condition data that informs the PMP. PCI scores range from 0 to 100, with 25 or below indicating significant deterioration and 75 or above reflecting generally acceptable conditions. A jurisdiction’s average PCI can fluctuate over time due to funding levels, weather, and deferred maintenance. The Road Repair and Accountability Act of 2017 (SB1) provides over $368,000 in revenues to the City to fund road maintenance and rehabilitation. In FY 2022-23 a pavement management study (PMS) was completed to inform the prioritization and funding of streets throughout the City. Based on the study, there is a need for approximately $1.45 million in funding required to maintain the City’s roadways at its current PCI level of 60, which is below state average. Additional resources and funding will be required to maintain the PCI levels desired by the City. Transportation-related projects currently expect to be funded based upon additional revenue sources provided by Santa Cruz County Measure D, gas tax revenues, and SB-1 funding. SB-1 funds have helped the City increase its annual street maintenance/resurfacing program from $75,000 to $368,000. Parks & Recreation The Parks & Recreation Department provides a variety of public parks, recreation facilities and programming for the community. These facilities include open space with hiking trails, BBQ areas and athletic fields, a community center, a dog park, large parks with playgrounds, a senior center, skate parks, smaller neighborhood parks, and tennis courts. The onset of the COVID-19 pandemic in 2020 caused nearly all of the City’s recreation programs and activities to be halted as a result of restrictions, leading to staff layoffs. With restrictions lifted, the City hired Management Partners to create a Restoration Plan for the division, which included a recommendation to update the Parks Master Plan. In 2023, the City contracted Odell Engineering to develop a new Parks Master Plan, which sought City of Scotts Valley –Administrative Draft Page 9 of 39 to support the Recreation Division’s vision and provide recommendations to allow residents opportunities for access, exploration, and engagement with the City’s unique parks and recreation system. The plan was adopted in August 2024 and prioritizes improvements to existing parks and pursuing partnerships, joint-use agreements and identifying other funding opportunities. In conjunction with the master plan, the 2021 Scotts Valley Recreation Services Assessment and Restoration Report emphasized building core recreation programming with high attendance and engagement rates such as aquatics, school age recreation (childcare) and summer camps, sport programs, facility rentals, senior center programs, and special events. Table 3 is a list of the resources and services provided by the Division. Table 3: City of Scotts Valley Existing Parks and Facilities System Resource Description The City’s park system consists of two community Existing Parks and parks, two neighborhood parks, four mini parks, a Facilities System community center, a community garden, and a performing arts center. Make up over 80% of the City’s 209 acres of park Open Space, Trails, and land acreage and provides for hiking, horseback Undeveloped Parks riding, and biking opportunities. The City recently renovated and reopened the Pool Facilities community pool called Siltanen Pool in 2023. The City’s park system features assets for bicycle, Bikeways and Bicycle Paths pedestrian, and equestrian trails and paths linking parks and neighborhoods together. This facility can be rented for special events and has Senior Center a large, multi-purpose room for up to 100 people. Continues to rebuild from the impacts of the pandemic, and the master plan presents an Recreation Division opportunity to understand and prioritize the recreational needs of the community. Wastewater The Scotts Valley Water Reclamation Facility (WRF) is owned and operated by the City to provide residents with efficient, reliable wastewater treatment services and high-quality recycled water for landscape irrigation and other potential beneficial uses. The plant was originally constructed in 1964 as a 30,000 gallon per day package wastewater treatment plant in order to provide secondary level wastewater treatment. In 1972, an activated sludge treatment system was added, and plant capacity was expanded to 1.5 million City of Scotts Valley –Administrative Draft Page 10 of 39 gallons/day. Over the years plant capacity has been expanded several times to serve growth in the community, and it now has the capacity to treat 950,000 gallons each day, enough to see the City through planned build-out. The City produces annual reports evaluating the status of the wastewater system and its infrastructure. Each report since 2008 is available on the City’s website. Appendix C provides a copy of the 2023 report. Reclamation Facility Upgrades Recent plant upgrades include a Tertiary Treatment Facility that treats up to 1 million gallons per day (MGD) of recycled water. In 2001, the City received a permit from the Regional Water Quality Control Board to produce recycled water for unrestricted irrigation use. The recycled water is used mainly for irrigation at businesses, landscape medians, local parks, residences, and schools. State-of-the-art ultraviolet disinfection kills any pathogens (disease causing bacteria). Following disinfection, the tertiary treated water meets State Title 22 standards for water reuse in California and is safe for all permitted uses. Lift Stations Scotts Valley owns and operates eight lift stations at various locations throughout the City. All stations are inspected three times each week. During these routine inspections, hourly readings are taken to verify normal running times and flow throughout. Stations equipped with permanent emergency generators are tested on emergency power on a weekly basis to ensure proper operation. Six stations are equipped with permanent emergency standby power. All of the City’s eight stations have backup pumps, redundant controls, and alarm SCADA systems that automatically call 24-hour emergency personnel in case of a power outage or high-level conditions. Service Rates The City bills for their commercial wastewater service every two months and residential customers pay through their annual property tax bill. In 2021, the City contracted with Bartle Wells Associates (BWA) to prepare a wastewater rate model to develop long-term financial projections for the wastewater enterprise and calculate wastewater rates that equitably recover the cost of providing service over the next five years. The last comprehensive wastewater study was completed during FY 2019-20. The most recent wastewater rate adjustment (9%) went into effect on July 1, 2021. The Five-Year Financial Plan was included in the adopted FY 2021-22 Annual Budget and indicated that wastewater utility would experience an operating deficit of $28 million in planned capital improvement projects over the next decade. In April 2021, the City reviewed a draft wastewater rate model prepared by BWA. Upon review of the draft rate model, the Council directed staff to issue a public hearing rate notice for a five-year rate model that includes a 9% increase each year. In June 2021, the Council approved rate increases for FY 2021-2022 to FY 2025-26. Table 4 on the following page shows wastewater rates from 2021 to 2026. Appendix D also provides a complete copy of the wastewater rate study. City of Scotts Valley –Administrative Draft Page 11 of 39 Table 4: Wastewater Service Rates Rates FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 Residential Single-Family Flat Monthly Fee $50.67 $55.23 $60.21 $65.62 $71.53 Low-Income Homes $44.59 $48.61 $52.98 $57.75 $62.95 Multi-Family Flat Monthly Fee $35.49 $38.68 $42.17 $45.96 $50.10 Low-Income Homes $31.23 $34.04 $37.10 $40.44 $44.08 Mobile Home Flat Monthly Fee $33.81 $36.85 $40.17 $43.79 $47.73 Low-Income Homes $29.75 $32.42 $35.34 $38.52 $41.99 Commercial & Industrial Commercial and Industrial Monthly Minimum Fee $50.67 $55.23 $60.21 $65.62 $71.53 Charge per 100gal (w/ strength factor) Low Strength $0.90 $0.99 $1.07 $1.17 $1.28 Medium Strength $1.21 $1.32 $1.44 $1.57 $1.71 High Strength $1.55 $1.69 $1.84 $2.00 $2.18 City of Scotts Valley –Administrative Draft Page 12 of 39 Population and Growth The Association of Bay Area Governments (ABAG) and the Association of Monterey Bay Area Governments (AMBAG) provide population projections for cities and counties in the Coastal Region. In general, the Coastal Region is anticipated to have slow growth over the next twenty years. Based on staff’s analysis, the population for the City of Scotts Valley in 2025 was estimated to be 11,700. Table 5 shows the City’s anticipated population over the next twenty years. The average rate of change is 0.59%. Under this rate, projections indicate that the entire population of Scotts Valley will be approximately 12,000 by 2045. Table 5: Projected Population Average 2025 2030 2035 2040 2045 Rate of Change Santa Cruz County 134,675 135,027 135,304 135,625 135,953 0.45% (unincorporated area) City of Scotts Valley 11,718 11,837 11,867 11,868 12,010 0.59% Source: AMBAG 2022 Regional Growth Forecast Disadvantaged Unincorporated Communities State law requires LAFCO to identify and describe all “disadvantaged unincorporated communities” (DUCs) located within or contiguous to existing spheres of influence for cities and special districts that provide fire protection, sewer, and/or water services. DUCs are defined as inhabited unincorporated areas within an annual median household income that is 80% or less than the statewide annual median household income. In 2020, the California statewide median household income was $78,672 and 80% of that was $62,938. LAFCO staff utilized the ArcGIS mapping program to locate any potential DUCs in the County. Based on the criteria set forth by SB 244, staff’s analysis indicates that there are no disadvantaged unincorporated communities within or surrounding the City of Scotts Valley. City of Scotts Valley –Administrative Draft Page 13 of 39 FINANCES This section will highlight the City’s financial performance during the most recent fiscal years. Fiscal Year 2024-25 is the latest audited financial statement available. LAFCO evaluated the City’s financial health from 2014 to 2025. A comprehensive analysis of the City’s financial performance during the past 11 years is shown in Tables 8 and 9 on pages 21 and 22. The sources used by LAFCO are available on the City’s website: https://www.scottsvalley.gov/427/Annual-Comprehensive-Financial-Reports. At the end of Fiscal Year 2024-25, total revenue collected was approximately $40.1 million, representing a 34% increase from the previous year ($29.9 million in FY 2023- 24). Total expenses for FY 2024-25 were approximately $40.2 million, which increased from the previous year by 28% ($31.4 million in FY 23-24). The City has ended in a slight deficit in three of the last five fiscal years, as shown in Figure 2. While the City’s governmental activity has ended in a surplus in nine of the last 11 fiscal years, it has been the business activity that has negatively affected the City’s overall financial performance. Based on LAFCO’s analysis, the City’s business activity continues to have annual deficits each year since FY 2014-15. The City should consider raising rates for wastewater services or find methods to minimize annual expenses to address the ongoing fiscal shortage within the business activity. City of Scotts Valley –Administrative Draft Page 14 of 39 755,501,71$ 812,601,71$ 980,171,51$ 530,924,61$ 358,885,91$ 410,329,91$ 433,911,91$ 153,054,12$ 056,767,22$ 484,309,91$ 484,639,82$ 247,462,03$ 241,915,22$ 736,262,91$ 536,531,62$ 017,923,62$ 776,486,72$ 243,855,42$ 948,059,92$ 593,953,13$ 111,960,04$ 319,222,04$ Figure 2: Total Revenue vs Total Expenses (FY 2014-15 to FY 2020-21) $45,000,000.00 $40,000,000.00 $35,000,000.00 $30,000,000.00 $25,000,000.00 $20,000,000.00 $15,000,000.00 $10,000,000.00 $5,000,000.00 $- FY 2014- FY 2015- FY 2016- FY 2017- FY 2018- FY 2019- FY 2020- FY 2021- FY 2022- FY 2023- FY 2024- 15 16 17 18 19 20 21 22 23 24 25 (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) Total Revenue Total Expenditure Revenues The City provides various municipal services to the Scotts Valley community. For financial purposes, the City categorizes its operations under two divisions: Government and Business-type activities. The primary source of revenue comes from government activities (88%), as shown in Figure 3. The following section summarizes the revenue stream from both categories. Figure 3: Operating vs Non-Operating Revenue (FY 2024-25) Total Business Activity Revenue $4,642,019 (12%) Total Government Activity Revenue $35,427,091 (88%) Measure Z (2020) Measure Z was a sales tax increase measure approved by voters of Scotts Valley in March 2020 as a response to a growing fiscal emergency. The ballot measure authorized the city to remove the 0.50% general sales tax and impose a new rate of 1.25%, increasing the total tax rate in the City to 9.75%. The measure is expected to generate $3.3 million in revenue for the general fund for the next twelve years. Proceeds from the tax are deposited into the General Fund and are used to fund general city services such as local 911 dispatch, police, emergency preparedness, park maintenance, and street and storm drain repair. In 2025, property taxes made up 8% of total revenues per year for the City while Measure Z accounted for 18%1. For FY 2024-25, the City recorded revenues of approximately $4,300,000 from Measure Z, a decrease of 3% from the previous year (or approximately $152,000), reflecting changes in local economic activity. Revenue from Measure Z is expected to remain flat for FY 2024-25. As already stated, the measure includes a sunset of 12 years and is set to expire in 2031. 1 https://www.scottsvalley.gov/DocumentCenter/View/5733/City-Manager-Budget-Message-FY2526-Final City of Scotts Valley –Administrative Draft Page 15 of 39 Business Activity Revenue The City provides wastewater services to residents funded through user fees. In FY 2024- 25, revenues from this category increased by $400,000 or 9% from the previous year. Charges for services increased in Wastewater by $311,000 due primarily to planned annual fee increases of 9% to wastewater rate payers. Combining data from the previous service review completed in 2021, the City has experienced 11 consecutive years of business activity deficits with expenditures outpacing revenues. Based on LAFCO staff’s analysis, total revenue from business activities continues to be lower than total expenditures, resulting in the ongoing deficit. Table 6 shows the City’s business activity revenue trend from 2019 to 2025. The 2021 service review also noted five consecutive years of deficits. During the last five years, the average total revenue has increased by approximately $90,000. However, the average total expenditure has also risen approximately $73,000 as shown on Table 7 on page 18. Table 6: Business Activity – Total Revenue FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 Total $4,188,986 $3,432,413 $4,044,044 $3,818,066 $4,241,941 $4,642,019 Revenue Difference $(756,573) $611,631 $(225,978) $423,875 $400,078 ($) Difference -18% 18% -6% 11% 9% (%) Photo Courtesy of Soaring Eagle Eyes (Paul Regan) City of Scotts Valley –Administrative Draft Page 16 of 39 Government Activity Revenue All other services are provided by the City through government activities. In FY 2024-25, revenues from governmental activities increased from the previous year by approximately $10 million or 38% - FY 24-25 total revenue was approximately $35 million compared to FY 23-24 (approximately $26 million). Based on LAFCO staff’s analysis, the City’s primary source of government activity revenue is from taxes and assessments (47%), as shown in the figure below. Figure 4: Government Activities - Total Revenue (FY 2024-25) Contributions, Non-Government $764 Fines & Forfeitures $47,348 Facility/Building Rental $142,945 Investment Earnings $1,165,218 Miscellaneous $1,515,505 Intergovernmental $2,204,863 Fees & Services $2,940,130 Transfers In $4,473,408 Issuance of Debt $6,380,591 Taxes & Assessments $16,556,320 $- $5,000,000 $10,000,000 $15,000,000 $20,000,000 City of Scotts Valley –Administrative Draft Page 17 of 39 Expenditures Business Activity Expenses The City’s business expenses represented approximately 13% of total expenditure during FY 2024-25, as shown in Figure 5. As previously mentioned, the average total revenue from business activities from FY 2019-20 to FY 2024-25 was approximately $4 million. However, based on LAFCO staff’s analysis, total expenses from business have been increasing since FY 2022-23, with an average total expenditure of approximately $4.7 million. Table 7 shows the trends in total expenses for business activities. As previously stated, combining data from the previous service review completed in 2021, the City has experienced 11 consecutive years of business activity deficits with expenditures outpacing revenues as seen on Table 9 on page 21. Figure 5: Government vs Business Activity Expenditure (FY 2024-25) Total Business Activity Expenditure $5,030,041 (13%) Total Government Activity Expenditure $35,192,872 (87%) Table 7: Business Activity – Total Expenses FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-2023 FY 2023-24 FY 2024-2025 Total $4,560,241 $3,737,000 $5,888,966 $4,036,722 $4,684,018 $5,030,041 Expenses Difference $(823,241) $2,151,966 $(1,852,244) $647,296 $346,023 ($) Difference -18% 58% -31% 16% 7% (%) City of Scotts Valley –Administrative Draft Page 18 of 39 Government Activity Expenses In FY 2024-25, government activity expenses increased by approximately $8.5 million from the previous year. The change was due primarily to an increase in capital outlay expenses and staff salary and benefits adjustments, respectively. Based on LAFCO staff’s analysis, the City’s primary government activity expenses are derived from Public Safety (27%) and Public Works (22%). Figure 6 provides a breakdown of all expenses associated with the City’s government activity expenses. Figure 6: Government Activity - Total Expenditure (FY 2024-25) Interest & Finance Charges $286,175 Principal $1,100,932 Planning & Building $1,761,216 Transfers Out $2,239,416 Capital Outlay $2,714,612 General Government $5,694,137 Public Works $5,761,539 Public Safety $7,117,350 $- $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 $7,000,000 $8,000,000 City of Scotts Valley –Administrative Draft Page 19 of 39 Fund Balance / Net Position As of June 30, 2025, the total net position balance ended with approximately $24 million. The following table highlights the net position balance from 2019 to 2025. As shown in Table 8, the City’s fund balance experienced an increase in each year except for FY 2020-21 and FY 2024-25. However, the City has seen a gradual decrease in total reserves since FY 2014-15, as shown in Figure 7. That being said, the healthy balance of $24 million in the City’s Fund Balance will be critical in the event that Scotts Valley faces further unintended expenses, major capital improvement projects, or emergency repairs. Table 8: Net Position (2019 to 2026) FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24 FY 24-25 (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) Beginning $26,698,000 $14,262,024 $18,637,678 $20,288,525 $23,607,150 $23,397,209 Balance Ending $24,581,945 $17,823,116 $20,288,525 $23,633,516 $22,640,681 $23,631,429 Balance Difference $(6,758,829) $2,465,409 $3,344,991 $(992,835) $990,748 ($) Difference -27% 14% 16% -4% 4% (%) Figure 7: Net Position from 2014 to 2025 (Ending Balance) $45,000,000 $40,000,000 $38,965,565 $36,966,282 $35,000,000 $33,210,883 $30,000,000 $26,205,353 $24,581,945 $25,000,000 $23,141,455 $23,633,516 $23,631,429 $22,640,681 $20,288,525 $20,000,000 $17,823,116 $15,000,000 $10,000,000 $5,000,000 $- FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) City of Scotts Valley –Administrative Draft Page 20 of 39 Table 9: Total Revenue & Expenditure (Business & Government Activities) FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) BUSINESS ACTIVITY (RECREATION & WASTEWATER) REVENUE Fees & Services $ 2,831,207 $ 3,037,054 $ 2,998,479 $ 3 ,443,087 $ 3 ,709,621 $ 3 ,733,345 $ 2 ,957,820 $ 3 ,236,038 $ 3 ,375,470 $ 4 ,115,632 $ 4,427,136 Capital Contributions $ - $ - $ 58,280 $ 318,981 $ 225,624 $ 3 1,204 $ 116,195 $ 259,368 $ 126,707 $ 2 0,891 $ 108,559 Transfers In $ 438,214 $ 8 ,604 $ 331,634 $ 221,227 $ 9 7,084 $ 380,535 $ 354,905 $ 540,728 $ 213,198 $ - $ - Connection Fees $ 78,371 $ 28,989 $ - $ - $ - $ - $ - $ - $ - $ - $ - Interest Income $ 5 ,842 $ 8 ,604 $ 13,145 $ 1 8,117 $ 3 6,476 $ 4 3,902 $ 3,493 $ 7,910 $ 102,691 $ 105,418 $ 106,324 Total Revenue $ 3,353,634 $ 3,083,251 $ 3,401,538 $ 4 ,001,412 $ 4 ,068,805 $ 4 ,188,986 $ 3 ,432,413 $ 4 ,044,044 $ 3 ,818,066 $ 4 ,241,941 $ 4,642,019 EXPENDITURE Salaries $ 1,017,465 $ 1,125,503 $ 1,165,982 $ 1 ,111,908 $ 1 ,212,772 $ 1 ,031,992 $ 582,077 $ 587,675 $ 783,456 $ 643,413 $ 807,909 Taxes & Benefits $ 502,362 $ 756,914 $ 1,978,311 $ 2 ,857,405 $ 959,372 $ 789,170 $ 750,304 $ 1 ,599,665 $ 5 1,242 $ 979,277 $ 669,913 Maintenance & Operations $ 770,240 $ 813,452 $ 883,338 $ 752,588 $ 827,977 $ 1 ,059,296 $ 828,209 $ 1 ,849,921 $ 918,738 $ 998,115 $ 1,176,228 Advertising $ 8 ,731 $ 7 ,778 $ 8 ,838 $ 8,459 $ 7,642 $ 4 94 $ - $ - $ 6,969 $ - $ - Professional & Contractual Services $ 221,436 $ 216,984 $ 256,746 $ 208,878 $ 213,530 $ 237,602 $ 154,286 $ 324,757 $ 449,782 $ 236,613 $ 292,474 Utilities & Communications $ 375,972 $ 347,716 $ 390,761 $ 420,045 $ 446,410 $ 436,004 $ 393,102 $ 437,316 $ 541,471 $ 558,620 $ 747,375 Insurance & Bonds $ 64,467 $ 66,686 $ 62,108 $ 157,181 $ 205,967 $ 146,822 $ 188,400 $ 242,546 $ 342,105 $ 324,650 $ 343,941 Depreciation $ 763,486 $ 777,802 $ 784,270 $ 788,390 $ 795,353 $ 777,828 $ 760,301 $ 775,977 $ 876,123 $ 890,271 $ 939,967 Transfers Out $ 427,278 $ 297,037 $ 232,236 $ 302,515 $ 150,495 $ 8 1,033 $ 8 0,321 $ 7 1,109 $ 6 6,836 $ 5 3,059 $ 52,234 Total Expenditure $ 4,151,437 $ 4,409,872 $ 5,762,590 $ 6 ,607,369 $ 4 ,819,518 $ 4 ,560,241 $ 3 ,737,000 $ 5 ,888,966 $ 4 ,036,722 $ 4 ,684,018 $ 5,030,041 Surplus/(Deficit) $ (797,803) $ ( 1,326,621) $ ( 2,361,052) $ ( 2,605,957) $ ( 750,713) $ ( 371,255) $ ( 304,587) $ ( 1,844,922) $ ( 218,656) $ ( 442,077) $ (388,022) GOVERNMENT ACTIVITY REVENUE Taxes & Assessments $ 9,444,126 $ 9,362,093 $ 9,675,857 $ 10,314,528 $ 12,167,669 $ 11,117,073 $ 14,120,985 $ 17,055,380 $ 15,839,330 $ 16,172,387 $ 16,556,320 Intergovernmental $ 1,062,025 $ 152,753 $ 288,725 $ 803,971 $ 1 ,744,402 $ 1 ,048,976 $ 1 ,657,378 $ 684,297 $ 3 ,690,925 $ 2 ,602,945 $ 2,204,863 Fees & Services $ 1,285,952 $ 1,192,986 $ 2,344,647 $ 1 ,578,574 $ 2 ,658,009 $ 1 ,360,195 $ 1 ,768,492 $ 3 ,278,328 $ 2 ,098,721 $ 2 ,510,001 $ 2,940,130 Fines & Forfeitures $ 70,470 $ 35,411 $ 37,680 $ 3 5,013 $ 4 4,265 $ 3 1,442 $ 1 7,510 $ 1 7,438 $ 2 4,860 $ 4 7,138 $ 47,348 Contributions, Non-Government $ 19,911 $ 2 ,306 $ 2 ,865 $ 167,840 $ 1 8,468 $ 8,505 $ 1,653 $ 1,150 $ 9 5,210 $ 156,677 $ 764 Facility/Building Rental $ 22,500 $ 44,910 $ 32,760 $ 3 2,760 $ 288,912 $ 112,354 $ 155,255 $ 260,050 $ 8 6,961 $ 249,162 $ 142,945 Investment Earnings $ 92,967 $ 54,860 $ 63,020 $ 9 3,966 $ 169,847 $ 242,988 $ 3 4,156 $ ( 155,705) $ 277,514 $ 1 ,186,631 $ 1,165,218 Miscellaneous $ 525,360 $ 517,064 $ 1,378,011 $ 649,132 $ 336,900 $ 315,312 $ 599,111 $ 196,600 $ 352,449 $ 510,374 $ 1,515,505 Transfers In $ 1,228,612 $ 725,455 $ 1,616,826 $ 1 ,442,138 $ 1 ,270,373 $ 694,017 $ 732,189 $ 754,053 $ 692,520 $ 2 ,273,593 $ 4,473,408 Issuance of Debt $ - $ - $ - $ - $ - $ 9 ,460,000 $ - $ - $ 708,121 $ - $ 6,380,591 Premium from Issuance of Debt $ - $ - $ - $ - $ - $ 356,636 $ - $ - $ - $ - $ - Sale of Real Property $ - $ - $ 746,924 $ - $ - $ - $ - $ - $ - $ - $ - Total Revenue $1 3,751,923 $1 2,087,838 $1 6,187,315 $ 15,117,922 $ 18,698,845 $ 24,747,498 $ 19,086,729 $ 22,091,591 $ 23,866,611 $ 25,708,908 $3 5,427,092 EXPENDITURE Current Liability General Government $ 1,814,779 $ 1,942,389 $ 2,216,039 $ 2 ,134,089 $ 2 ,434,443 $ 3 ,204,004 $ 2 ,983,275 $ 3 ,747,809 $ 4 ,864,024 $ 5 ,694,137 $ 5,979,787 Public Safety $ 4,511,889 $ 4,927,713 $ 4,960,402 $ 5 ,217,774 $ 5 ,238,107 $ 5 ,621,165 $ 5 ,030,108 $ 5 ,959,606 $ 6 ,755,702 $ 7 ,117,350 $ 7,816,665 Planning & Building $ 929,264 $ 1,182,716 $ 1,336,664 $ 1 ,089,776 $ 1 ,277,550 $ 1 ,365,244 $ 1 ,336,531 $ 2 ,195,408 $ 1 ,522,430 $ 1 ,761,216 $ 1,849,040 Public Works $ 1,753,952 $ 1,979,404 $ 1,925,211 $ 2 ,307,435 $ 2 ,026,962 $ 1 ,965,277 $ 1 ,946,247 $ 2 ,464,692 $ 3 ,667,628 $ 5 ,761,539 $ 4,209,877 Recreation $ - $ - $ - $ - $ - $ 783,731 Capital Outlay $ 1,902,961 $ 446,373 $ 1,193,706 $ 1 ,757,388 $ 1 ,901,832 $ 1 ,772,238 $ 2 ,060,807 $ 3 ,672,055 $ 1 ,666,441 $ 2 ,714,612 $ 8,653,973 Debt Service Principal $ 445,000 $ 465,000 $ 470,000 $ 600,000 $ 630,000 $ 870,000 $ 815,000 $ 860,000 $ 915,000 $ 1 ,100,932 $ 1,220,386 Interest & Finance Charges $ 357,388 $ 350,058 $ 342,178 $ 375,670 $ 358,110 $ 273,769 $ 346,896 $ 317,502 $ 291,513 $ 286,175 $ 258,942 Payment to Escrow $ - $ - $ - $ - $ - $ 9 ,639,285 $ - $ - $ - $ - $ - Transfers Out $ 1,239,548 $ 725,510 $ 1,716,224 $ 1 ,360,850 $ 1 ,216,962 $ 993,519 $ 1 ,006,773 $ 1 ,223,672 $ 838,882 $ 2 ,239,416 $ 4,420,471 Total Expenditure $ 12,954,781 $ 12,019,163 $ 14,160,424 $ 14,842,982 $ 15,083,966 $ 25,704,501 $ 15,525,637 $ 20,440,744 $ 20,521,620 $ 26,675,377 $ 35,192,872 Surplus/(Deficit) $ 7 97,142 $ 68,675 $ 2,026,891 $ 274,940 $ 3 ,614,879 $ ( 957,003) $ 3 ,561,092 $ 1 ,650,847 $ 3 ,344,991 $ ( 966,469) $ 2 34,220 CITY OF SCOTTS VALLEY - TOTAL REVENUE $ 17,105,557 $ 15,171,089 $ 19,588,853 $ 19,119,334 $ 22,767,650 $ 28,936,484 $ 22,519,142 $ 26,135,635 $ 27,684,677 $ 29,950,849 $ 40,069,111 CITY OF SCOTTS VALLEY - TOTAL EXPENDITURE $ 17,106,218 $ 16,429,035 $ 19,923,014 $ 21,450,351 $ 19,903,484 $ 30,264,742 $ 19,262,637 $ 26,329,710 $ 24,558,342 $ 31,359,395 $ 40,222,913 CITY OF SCOTTS VALLEY - SURPLUS/(DEFICIT) $ ( 661) $ ( 1,257,946) $ (334,161) $ (2,331,017) $ 2 ,864,166 $ (1,328,258) $ 3 ,256,505 $ ( 194,075) $ 3 ,126,335 $ (1,408,546) $ (153,802) NET POSITION FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) Beginning of Year (as restated) $ 38,175,933 $ 38,965,565 $ 36,966,282 $ 33,210,883 $ 23,116,856 $ 26,698,000 $ 14,262,024 $ 18,637,678 $ 20,288,525 $ 23,607,150 $ 23,397,209 End of Year $3 8,965,565 $3 6,966,282 $3 3,210,883 $ 23,141,455 $ 26,205,353 $ 24,581,945 $ 17,823,116 $ 20,288,525 $ 23,633,516 $ 22,640,681 $2 3,631,429 City of Scotts Valley –Administrative Draft Page 21 of 39 Table 10: Total Assets & Liabilities FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) ASSETS Current Assets: Cash and Cash Equivalents $ 9,386,812 $ 9,315,977 $ 10,649,653 $ 11,626,777 $ 15,541,820 $ 14,453,832 $ 19,109,946 $ 21,862,387 $ 25,400,456 $ 21,470,560 $ 19,723,849 Receivables $ 2,571,376 $ 1,861,165 $ 1 ,651,568 $ 1,967,127 $ 1,660,244 $ 2 ,636,091 $ 2 ,275,048 $ 4,294,421 $ 2,548,044 $ 4,540,748 $ 3 ,186,283 Lease Receivable - Current Portion $ - $ - $ - $ - $ - $ - $ - $ 159,985 $ 155,608 $ 82,084 $ 6 9,310 Prepaids $ - $ - $ - $ - $ - $ - $ - $ - $ 4 5,020 $ 6 9,265 $ 7 6,895 Total Current Assets $ 11,958,188 $ 11,177,142 $ 12,301,221 $ 13,593,904 $ 17,202,064 $ 17,089,923 $ 21,384,994 $ 26,316,793 $ 28,149,128 $ 26,162,657 $ 23,056,337 Non-current Assets: Inventory $ 2 ,688 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - Prepaid Expenses $ 2 ,813 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - Advances to Redevelopment Successor Agency $ 6,697,376 $ 6,686,056 $ 6 ,603,131 $ 6,641,886 $ 6,641,886 $ 6 ,641,886 $ 5 ,746,928 $ 4,932,365 $ 4,932,365 $ 4,932,365 $ 2 ,366,126 Loans Receivable $ 2,371,816 $ 2,921,816 $ 3 ,571,816 $ 3,374,636 $ 3,294,636 $ 3 ,376,109 $ 3 ,310,211 $ 2,909,909 $ 2,909,909 $ 4,554,089 $ 4 ,439,276 Lease Receivable - Noncurrent Portion $ - $ - $ - $ - $ - $ - $ - $ 505,379 $ 350,559 $ 358,189 $ 817,006 Restricted Cash with Fiscal Agent $ 98,920 $ 99,003 $ 9 9,356 $ 100,487 $ 101,461 $ 3,397 $ 3 3,184 $ 25,021 $ 19,946 $ 16,802 $ 2 ,280,474 Capital Assets: Nondepreciable $ 7,448,784 $ 7,507,213 $ 7 ,962,399 $ 8,068,949 $ 8,137,171 $ 9 ,338,297 $ 8 ,923,679 $ 11,751,852 $ 9,069,729 $ 11,006,429 $ 16,667,751 Depreciable, Net $ 37,839,351 $ 36,056,956 $ 34,616,531 $ 34,528,828 $ 34,358,227 $ 32,912,876 $ 33,501,373 $ 32,918,675 $ 35,838,770 $ 35,940,116 $ 37,643,625 Net Capital Assets $ 45,288,135 $ 43,564,169 $ 42,578,930 $ 42,597,777 $ 42,495,398 $ 42,251,173 $ 42,425,052 $ 44,670,527 $ 44,908,499 $ 46,946,545 $ 54,311,376 Total Noncurrent Assets $ 54,461,748 $ 53,271,044 $ 52,853,233 $ 52,714,786 $ 52,533,381 $ 52,272,565 $ 51,515,375 $ 53,043,201 $ 53,121,278 $ 56,807,990 $ 64,214,258 Total Assets $6 6,419,936 $ 64,448,186 $ 65,154,454 $ 66,308,690 $ 69,735,445 $ 69,362,488 $ 72,900,369 $ 79,359,994 $ 81,270,406 $ 82,970,647 $ 87,270,595 DEFERRED OUTFLOWS OF RESOURCES Deferred Outflows from Pension $ - $ 1,619,831 $ 3 ,690,903 $ 4,773,546 $ 4,033,631 $ 3 ,993,748 $ 3 ,978,587 $ 4,076,489 $ 9,434,312 $ 9,273,817 $ 7 ,163,471 Deferred Outflows from OPEB $ - $ - $ - $ 426,690 $ 480,332 $ 1 ,192,078 $ 1 ,364,066 $ 1,320,689 $ 1,214,274 $ 1,009,532 $ 3 ,674,414 Deferred Loss on Refunding $ - $ - $ - $ - $ - $ 794,889 $ 761,768 $ 728,648 $ 695,528 $ 662,408 $ 640,288 Total Deferred Outflows of Resources $ - $ 1,619,831 $ 3 ,690,903 $ 5,200,236 $ 4,513,963 $ 5 ,980,715 $ 6 ,104,421 $ 6,125,826 $ 11,344,114 $ 10,945,757 $ 11,478,173 LIABILITIES Current Liabilities: Accounts Payable $ 401,804 $ 362,999 $ 457,031 $ 734,314 $ 458,929 $ 896,903 $ 727,413 $ 1,360,515 $ 1,621,725 $ 855,450 $ 1 ,436,853 Accrued Liabilities $ 159,792 $ 209,274 $ 249,424 $ 249,435 $ 258,766 $ 305,336 $ 6 1,106 $ 106,429 $ 375,307 $ 248,940 $ 293,097 Deposits Payable $ - $ - $ - $ 725,745 $ 724,674 $ 716,785 $ 719,359 $ 720,779 $ 623,994 $ 626,499 $ 621,150 Unearned Revenue $ 296,674 $ 173,537 $ 131,662 $ 176,566 $ 141,736 $ 3 7,768 $ 7,336 $ 1,373,993 $ 1,000 $ 7,493 $ 117,320 Accrued Interest $ - $ - $ - $ - $ - $ - $ - $ 70,541 $ 64,921 $ 175,046 $ 5 2,149 OPEB Liability $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ 701,911 Long-term Debt (Current Portion) $ 911,428 $ 925,980 $ 959,225 $ 1 ,247,290 $ 1 ,140,681 $ 1 ,363,992 $ 1 ,144,879 $ 1 ,396,317 $ 1 ,643,716 $ 1 ,864,412 $ 1 ,512,083 Total Current Liabilities $ 1,769,698 $ 1,671,790 $ 1 ,797,342 $ 3,133,350 $ 2,724,786 $ 3 ,320,784 $ 2 ,660,093 $ 5,028,574 $ 4,330,663 $ 3,777,840 $ 4 ,734,563 Non-current Liabilities: Accrued Interest $ 2,800,950 $ 2,956,294 $ 3 ,111,638 $ 3,277,394 $ 3,423,420 $ 118,594 $ 8 9,135 $ - $ - $ - $ - Long-term Debt (Non-current Portion) $ 9,337,561 $ 23,239,459 $ 28,845,734 $ 39,562,189 $ 7,927,505 $ 10,735,733 $ 10,102,438 $ 8,971,615 $ 8,281,392 $ 7,093,600 $ 13,128,329 Net Pension Liability $ 9,088,772 $ - $ - $ - $ 17,021,799 $ 18,424,996 $ 19,903,650 $ 12,883,534 $ 23,030,789 $ 24,516,069 $ 24,226,956 Net OPEB Liability $ 2,559,438 $ - $ - $ - $ 14,102,811 $ 15,524,839 $ 15,675,983 $ 16,143,282 $ 13,203,423 $ 13,133,373 $ 13,314,410 Total Non-current Liabilities $ 23,786,721 $ 26,195,753 $ 31,957,372 $ 42,839,583 $ 42,475,535 $ 44,804,162 $ 45,771,206 $ 37,998,431 $ 44,515,604 $ 44,743,042 $ 50,669,695 Total Liabilities $2 5,556,419 $ 27,867,543 $ 33,754,714 $ 45,972,933 $ 45,200,321 $ 48,124,946 $ 48,431,299 $ 43,027,005 $ 48,846,267 $ 48,520,882 $ 55,404,258 DEFERRED INFLOWS OF RESOURCES Deferred Inflows from Pension $ 2,919,953 $ 1,234,192 $ 1 ,879,760 $ 1,195,604 $ 1,169,454 $ 1 ,313,124 $ 930,348 $ 10,743,449 $ 2,036,888 $ 1,161,212 $ 684,823 Deferred Inflows from OPEB $ - $ - $ - $ 1,198,936 $ 1,674,280 $ 1 ,323,188 $ 1 ,627,422 $ 1,159,310 $ 3,498,557 $ 2,857,308 $ 4 ,448,323 Deferred Inflows from Lease $ - $ - $ - $ - $ - $ - $ - $ 665,363 $ 506,166 $ 440,273 $ 886,316 Total Deferred Inflows of Resources $ 2,919,953 $ 1,234,192 $ 1 ,879,760 $ 2,394,540 $ 2,843,734 $ 2 ,636,312 $ 2 ,557,770 $ 12,568,122 $ 6,041,611 $ 4,458,793 $ 6 ,019,462 NET POSITION Net Investment in Capital Assets $ 39,313,692 $ 43,564,169 $ 42,578,930 $ 36,312,189 $ 34,476,629 $ 35,261,698 $ 34,278,715 $ 36,983,815 $ 37,246,360 $ 39,953,218 $ 41,163,870 Restricted $ 6,862,674 $ 7,774,737 $ 8 ,576,975 $ 8,758,440 $ 8,775,618 $ 9 ,056,603 $ 10,529,435 $ 12,109,666 $ 11,962,117 $ 12,224,746 $ 15,165,457 Unrestricted $ (7,210,801) $ ( 14,372,624) $ (17,945,022) $ ( 21,929,174) $ ( 17,046,894) $ ( 19,736,356) $ ( 16,792,429) $ ( 19,202,788) $ ( 11,481,835) $ ( 11,241,235) $ ( 19,004,279) Total Net Position $ 38,965,565 $ 36,966,282 $ 33,210,883 $ 23,141,455 $ 26,205,353 $ 24,581,945 $ 28,015,721 $ 29,890,693 $ 37,726,642 $ 40,936,729 $ 37,325,048 City of Scotts Valley –Administrative Draft Page 22 of 39 GOVERNANCE Legal Authority The City of Scotts Valley operates under Title 4: Government of Cities (Section 34000 et seq. of the California Government Code) for the purpose of establishing and enforcing local ordinances in the Scotts Valley community. The California Constitution gives cities the power to become charter cities. The distinction between general law and charter cities is that charter cities have superseding authority over certain “municipal affairs.” Examples of municipal affairs include election matters, land use designations, and budgetary practices. Cities that have not adopted a charter are general law cities, such as Scotts Valley. General law cities are bound by the State’s general law, even with respect to municipal affairs. Based on LAFCO staff’s analysis, there are 482 cities in California – 361 or 75% are general law cities and 121 or 25% are charter cities. Local Accountability & Structure The City of Scotts Valley is governed by a five-member City Council elected every four years. The Council is responsible for the establishment of policy guided by Scotts Valley’s mission, goals, and operations. The Council has the authority to establish all laws and regulations with respect to municipal affairs, subject to limitations of the City Municipal Code and State legislation. The City Council’s current composition is as follows: Table 11: Scotts Valley City Council Board Member Term of Office First Elected: 2008 Donna Lind, Mayor Current Term Ends: 2028 First Elected: 2024 Steve Clark, Vice Mayor Current Term Ends: 2028 First Elected: 2024 Krista Jett, Council Member Current Term Ends: 2028 First Elected: 2018 Derek Timm, Council Member Current Term Ends: 2026 Appointed: 2025 Greg Wimp, Council Member Current Term Ends: 2026 The City Council appoints a City Manager to serve as the City’s chief administrative officer. The City Manager administers the day-to-day operations of the City in accordance with policies and procedures established by the City Council. Scotts Valley currently employs a full-time staff of approximately 66 employees, as shown in Table 12 on page 24. Efforts to hire and retain staff have resulted in the City’s vacancy rate being at its lowest level since before the COVID-19 pandemic. The City Council meets regularly, meetings are publicly noticed, and citizens are encouraged to attend. Council meetings are typically held on the first and third Wednesday of each month at 6:00 p.m. The City’s administrative offices and chambers are located at 1 Civic Center Drive in Scotts Valley. Despite the ongoing pandemic, the City has held virtual public meetings to continue operations and receive Council direction. City of Scotts Valley –Administrative Draft Page 23 of 39 Table 12: Full-Time Employees (FY 2020-21 to FY 2024-25) Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year Department 2020-21 2021-22 2022-23 2023-24 2024-25 General Government Administrative 1.50 3.00 3.00 3.50 3.00 Legislative .50 .50 .50 .50 0 Finance 3.65 4.10 4.10 4.85 4.85 Sub-total 5.65 7.60 7.60 8.85 7.85 Police Officers 20.00 20.00 20.00 20.00 20.00 Dispatch & 8.00 8.00 8.00 8.00 8.00 Support Sub-total 28.00 28.00 28.00 28.00 28.00 Building & Planning Building 3.00 1.00 1.00 2.50 3.50 Planning 3.00 3.25 3.25 2.50 2.50 Sub-total 6.00 4.25 4.25 5.00 6.00 Public Works Engineering 4.00 5.00 5.00 6.00 4.30 Street 2.55 2.00 2.00 2.00 2.30 Maintenance Vehicle 0 0 0 0 0.70 Maintenance Park 2.00 2.00 2.00 2.00 2.90 Maintenance Building 2.00 2.00 2.00 2.50 1.60 Maintenance Sub-total 10.55 11.00 11.00 12.50 11.80 Park & Recreation Sub-total 1.00 3.00 3.00 3.00 3.65 Wastewater Sub-total 7.15 7.15 7.15 7.15 8.45 Total 58.35 61.00 61.00 64.50 65.75 City of Scotts Valley –Administrative Draft Page 24 of 39 Website Transparency Recent laws have passed requiring more transparency for local governments, including Senate Bill 929 for independent special districts. Since 2020, LAFCO has been analyzing agencies’ websites as part of the service review process by evaluating various benchmarks. Table 13 summarizes staff’s findings as to whether the website meets the transparency benchmarks. At present, the City meets all benchmarks, excluding one. The only item that is not found in the City’s website is LAFCO’s adopted service reviews. It is LAFCO’s understanding that the City will include the latest service review once adopted by the commission. Overall, the City has a transparent website filled with useful information and resources that are easily accessible. Table 13: Website Transparency Website Components Status (Yes = X) 1. Names and Contract Information of Board Members X 2. Board Member Term Limits X 3. Names of Key Staff, including City Manager X 4. Contract Information for Staff X 5. Election / Appointment Procedure & Deadlines X 6. Board Meeting Schedule X 7. Mission Statement X 8. Description of City’s Functions & Service Area X 9. Authorizing Statute / Enabling Act X 10. Adopted Annual Budgets X 11. Audited Financial Statements / Financial Audits X 12. Archive of Board Meeting Agendas & Minutes X 13. Policies & Procedures / Bylaws X 14. Home Page Link to Agendas / Meetings X 15. SB 272 – Compliance-Enterprise Catalogs X 16. Machine Readable / Searchable Agendas X 17. Recipients of Grant Funding or Assistance X 18. Link or Copies of LAFCO’s Service & Sphere Reviews - Total Score 17 (94%) City of Scotts Valley –Administrative Draft Page 25 of 39 2023 General Plan Update In the State of California, a General Plan serves as a constitution that guides all future development for cities. It provides the fundamental basis for a city’s physical, social, economic, and environmental policy, and represents the basic values, character, and aspirations to be pursued over the life of said plan. California Government Code Section 65300 requires that a General Plan be comprehensive, internally consistent, and serve the needs of its respective community for a period of 20+ years. Although State law requires General Plans to address specified issues, they must also be organized in a way that best benefits the residents of a given community, or in this particular case, the City of Scotts Valley. Finally, a General Plan should be clearly written, available to all those concerned with the community’s development, and easy to access or administer. The first general plan for the City of Scotts Valley was adopted in 1972, and the most recent update was completed and adopted in 2023. The updated General Plan, adopted in November 2023, emphasizes sustainable growth, environmental stewardship, and maintaining a high quality of life through coordinated regional and local efforts. The plan is divided into eight sections (ranging from Land Use to Safety/Noise), and includes an Environmental Impact Report (EIR) assessing potential environmental effects and mitigation measures associated with the updated General Plan. Additionally, the three-year update process incorporated the most current data, complied with relevant state laws, and incorporated extensive public input (led by the General Plan Advisory Committee) to guide Scotts Valley's future development in a manner consistent with community values and legal requirements. The updated General Plan also includes an acknowledgement of LAFCO’s last municipal service review and a statement declaring no intention to change the current City limits. The General Plan includes information on Specific Plans for the proposed Town Center, Gateway South Special Treatment Area, and the Glenwood planning area. Finally, the General Plan conducted various workshops and collected survey data during its three- year process and found that the community placed a high value on maintaining the “small- town character” of Scotts Valley and in retaining their quality of life into the future. Capital Improvement Plan The City prepares a five-year capital improvement project (CIP) and capital outlay plan as part of its annual budget. The development of the CIP program is more complex than planning the purchase of a piece of equipment that would be the subject of a capital outlay expenditure. This document provides background information on the process of developing a budget within the CIP portion of the five-year plan. Funding Source Once costs have been identified and projected, a financial analysis is prepared to determine whether the projects can be funded. Consideration is given to a variety of sources of funds, including grant funds, revenues dedicated for such purposes (ex. gas tax or Measure D funds), development impact fees, wastewater revenue rate projections, interest earnings, and existing undesignated funds. Funding sources are then compared to project cost estimates to develop the Five-Year CIP Plan. The timing of these projects is taken into consideration given the status of existing infrastructure, risk management City of Scotts Valley –Administrative Draft Page 26 of 39 considerations, Council Policy initiatives, bidding environment, and available funding. The funding analysis identifies projects based on priority level and determine the extent to which funding is available. Priority Level Throughout the fiscal year, City staff members continually monitor the functional status and performance of the City’s physical plant. Maintenance activities supporting City infrastructure are documented and analyzed to determine if rehabilitation or replacement is necessary. In addition, throughout the year, policy direction from the City Council may be received to construct, enhance or rehabilitate City facilities. Staff make notes on these projects and begin to define the scope, nature and extent of these projects as required. Each project is assigned a priority category based on staff’s professional judgment using the factors and priority levels identified below: • Priority A – project is essential/critical to health and safety or legal/regulatory requirements; • Priority B – project is important to maintaining health and safety or maintaining quality of life, but not critical; and • Priority C – project is deferrable and would only be implemented to the extent that higher priority projects are first funded. Current Status The Five-Year CIP Plan consists of projects that maintain and enhance the City’s infrastructure such as its roads, parks, facilities and wastewater treatment plant for the benefit of the community. It also includes the capital outlay associated with equipment, vehicles and information technology, both hardware and software that support the City’s operations. In FY 2023-24, 14 projects were completed and at present, the City has 23 active projects, as shown in Table 14 on page 28. Photo Courtesy of Robert Aldana City of Scotts Valley –Administrative Draft Page 27 of 39 Table 14: FY 2024-25 through FY 2028-29 CIP Projects (By Priority) Project Estimated Cost Status Priority A 1) PLC/SCADA Upgrades Appx. $562,000 Completed 2) Aeration Basin System Upgrade $1,200,000 Completed 3) Effluent Pump Replacement $142,000 Postponed 4) Collection System Inspection & Monitoring $200,000 Active 5) New Technology – from Wastewater Option Study Appx. $145,000 Active – Design 6) Generator Transfer Switch and UPS Upgrades $150,000 Active – Purchased 7) Annual Street Maintenance/Resurfacing $1,125,000 Completed 8) Mt. Hermon Road Corridor Improvements – Signal Appx. $349,000 Completed 9) Mount Hermon Road Improvements $723,000 Active – Design 10) Annual Citywide Street Striping $50,000 Active – Construction 11) Granite Creek Overcrossing Paving Appx. $723,000 Active – Design 12) Bean Creek Road – Storm Repair $630,000 Active – Design 13) Scotts Valley Drive Corridor Improvements $500,000 Active - Design 14) Scotts Valley Drive – Culvert Repair $150,000 Active – Bidding 15) Granite Creek – Culvert Repair $100,000 Active – Design 16) Senior Center ADA Improvements – Phase 2 $74,000 Active - Construction 17) Siltanen Park Irrigation System Replacement NA Postponed 18) Skypark Play Structure Replacement $200,000 Completed 19) Shugart Park Buildout $500,000 Active – Planning Appx. 20) Public Works Facility Improvements Postponed $1,568,000 21) Computerized Maintenance Mgmt. Software $249,000 Active - RFP Priority B 22) Basketball Court Resurfacing $31,000 Completed Priority C 23) Skypark Tennis/Pickleball Resurfacing Appx. $129,900 Active City of Scotts Valley –Administrative Draft Page 28 of 39 Opportunities and Challenges Scotts Valley has been a City for 60 years and it has endured significant events such as economic recessions and natural disasters. In 2025, the City is still recovering from the COVID pandemic and the CZU Lightning Complex Wildfire which occurred in 2020. Such unanticipated events place a pressure test on local agencies, including cities. While cities struggled to maintain the same level of service to its residents during the pandemic, there have also been opportunities during this recovery phase. The following sections presents opportunities that Scotts Valley can explore with neighboring municipalities to maximize resources, increase strategic partnerships, and identify possible cost-savings for the City’s residents. Water Service Providers The Scotts Valley community currently receives water service from either the Scotts Valley Water District (SVWD) or the San Lorenzo Valley Water District (SLVWD). Figure 8 on page 30 shows that most Scotts Valley residents receive water from SVWD. Only a portion of the City receives water from SLVWD. By having two water providers, the residents of Scotts Valley are subject to two different board members, policies, and water rates. It may be a benefit to the City, the two water districts, and LAFCO to collaborate on determining the most efficient method to provide water service to the entire jurisdiction of the Scotts Valley community. This joint effort may lead to potential boundary changes, an improvement in water distribution, or a consistent water rate for constituents within the same city. LAFCO Staff Recommendation: Coordination between the City of Scotts Valley, San Lorenzo Valley Water District, Scotts Valley Water District and LAFCO to determine whether there is a more efficient way to provide water service to the Scotts Valley community beyond the status quo. City of Scotts Valley –Administrative Draft Page 29 of 39 Figure 8: Water Districts City of Scotts Valley –Administrative Draft Page 30 of 39 Extraterritorial Service Agreements The Cortese-Knox-Hertzberg Act (“LAFCO Law”) authorizes LAFCO to consider the extension of municipal services beyond the jurisdictional boundary of a local agency, where the subject territory is outside an agency’s service or sphere boundaries (Government Code Section 56133). The Commission has also adopted a policy to set clear standards for applying state and local laws governing the extension of services beyond the jurisdictional boundaries of a city or special district, which are known in Santa Cruz County as extraterritorial service agreements (“ESAs”). At present, the City of Scotts Valley has 13 ESAs involving 21 parcels for a total of approximately 12 acres, all for wastewater services. An application for a 14th ESA was submitted in March 2026. The first ESA was approved in 2001 to provide sewer services to nine parcels totaling two acres. The next 11 ESAs, one for each single parcel, were approved between 2005 to 2023, ranging from 0.2 to 1.4 acres. The last two were approved in November 2023 (APN: 067-103-17; 0.21 acres) and March 2024 (APN: 056- 102-07; 1.06 acres). Figure 9 on page 32 illustrates the location of the ESAs and Table 15 below provides additional information about each agreement. Table 15: List of Active ESAs # of ESAs LAFCO Project No. Original Parcel No. Approval Year Size (Acres) 1 878 067-101-11, 10, 09, 08, 07, 06, 05, & 04 2001 1.8 2 902 067-101-12 2005 0.2 3 916 068-282-01 2007 1.2 4 920 056-101-01 2007 1.0 5 935 067-561-04 2010 0.5 6 939 056-102-05 2011 1.1 7 942 067-281-08 2012 1.4 8 ESA 20-26 056-101-17 2020 1.0 9 ESA 21-06 056-101-11 2021 1.0 10 ESA 21-19 056-102-02 2022 0.41 11 ESA 22-02 056-131-09 2022 1.01 12 ESA 23-15 067-103-17 2023 0.21 13 ESA 24-03 056-102-07 2024 1.06 Total Acreage 11.89 As shown on the map, all 13 ESAs lie within the City’s sphere of influence, planning area, and immediately adjacent to its jurisdictional boundary. The current general plan update does not reference sewer service to these areas outside the city limits. LAFCO is therefore requesting that the City identify and incorporate the ESAs into the general plan to reflect existing service to parcels located outside the City but within its sphere and planning area. Doing so would also support long-term annexation planning, if and when appropriate. This update may additionally be an opportunity to review the City’s annexation policy, which has not been revised since 1995. At minimum, the City should evaluate the 13 ESAs and determine whether any are viable for annexation, allowing affected landowners to become full constituents rather than customers of a single service. LAFCO Staff Recommendation: Scotts Valley should analyze and consider annexation of existing extraterritorial service agreements and provide an update to LAFCO before the next service review cycle (April 2031). City of Scotts Valley –Administrative Draft Page 31 of 39 Figure 9: ESA Map City of Scotts Valley –Administrative Draft Page 32 of 39 SPHERE OF INFLUENCE Cortese-Knox-Hertzberg Act City and special district spheres of influence define the probable physical boundaries and service area of a local agency, as determined by the Commission (Government Code Section 56076). The law requires that spheres be updated at least once every five years either concurrently or subsequent to the preparation of Municipal Service Reviews. Spheres are determined and amended solely at the discretion of the Commission. In determining the sphere of influence for each local agency, the Commission is required by Government Code Section 56425(e) to consider certain factors, including: ➢ The present and planned uses in the area, including agricultural and open-space lands; ➢ The present and probable need for public facilities and services in the area; ➢ The present capacity of public facilities and adequacy of public services that the agency provides or is authorized to provide; ➢ The existence of any social or economic communities of interest in the area if the commission determines that they are relevant to the agency; and ➢ For an update of a sphere of influence of a city or special district that provides public facilities or services related to sewers, municipal and industrial water, or structural fire protection, that occurs pursuant to subdivision (g) on or after July 1, 2012, the present and probable need for those public facilities and services of any disadvantaged unincorporated communities within the existing sphere. Current & Proposed Sphere Boundary Santa Cruz LAFCO adopted the City’s first sphere of influence on October 16, 1985. The current sphere excludes areas outside the City’s jurisdictional boundary. The last sphere update occurred in March 2021 as part of a previous service and sphere review cycle. Figure 10 on page 34 shows the 11 areas (totaling 547 acres) within the City’s sphere. Table 15 identifies the land use designations for these areas based on the County’s General Plan. The City should consider zoning these areas. In the interim, LAFCO staff is recommending that the sphere boundary be reaffirmed, as shown in Figure 11. Table 15: County Land Use Designations Areas Acres Land Use Designation A 1 Mountain Residential (R-M) B 3 Mountain Residential (R-M) C 67 Mountain Residential (R-M) D 41 Mountain Residential (R-M) Mountain Residential (R-M), Rural Residential (R-R), and Urban Very E 78 Low Residential (R-UVL) F 3 Mountain Residential (R-M) G 47 Mountain Residential (R-M), and Rural Residential (R-R) Existing Parks & Rec (O-R), Rural Residential (R-R), Urban Very Low H 209 Residential (R-UVL), and Urban Open Space I 45 Urban Low Residential (R-UL), and Urban Very Low Residential (R-UVL) J 7 No Designation K 46 Mountain Residential (R-M), and Rural Residential (R-R) City of Scotts Valley –Administrative Draft Page 33 of 39 Figure 10: Areas Outside City Limits (within Sphere of Influence) City of Scotts Valley –Administrative Draft Page 34 of 39 Figure 11: Proposed City Sphere Reaffirmation City of Scotts Valley –Administrative Draft Page 35 of 39 CITY SUMMARY City of Scotts Valley Formation California Government Code, section 34000 et seq. Board of Directors Five members, elected at-large to four-year terms Contact Person Mali LaGoe, City Manager Employees Approximately 66 Full-Time Employees City Area 5 square miles Larger than the City (i.e., sphere boundary goes beyond existing Sphere of Influence City limits) Total Revenue = $40,069,111 FY 2024-25 Audit Total Expenditure = $40,222,913 Projected Net Position (Ending Balance) = $23,631,429 Mailing Address: 1 Civic Center Drive, Scotts Valley, CA 95066 Phone Number: (831) 440-5600 Contact Information Email Address: mlagoe@scottsvalley.org Website: https://www.scottsvalley.org/ Meetings are typically held on the first and third Wednesday of Public Meetings each month at 6:00 p.m. As Scotts Valley is a General Law City, its Council must act within the framework of limitations and procedures established by State Law. Local laws are established by ordinance and are compiled in City Overview a book called the Municipal Code. These laws are enforceable by the City, and violations thereof constitute an infraction. Other directives and policies of the City Council are recorded in Council resolutions and Council minutes. City of Scotts Valley –Administrative Draft Page 36 of 39 SERVICE AND SPHERE REVIEW DETERMINATIONS The following service and sphere review determinations fulfill the requirements outlined in the Cortese-Knox-Hertzberg Act. Service Provision Determinations Government Code Section 56430 requires LAFCO to conduct a municipal service review before, or in conjunction with, an action to establish or update a sphere boundary. Written statements of determination must be prepared with respect to each of the following: 1. Growth and population projections for the affected area. The City currently provides various municipal services to a population of 11,718. A slow growth is projected to occur for the next twenty years. LAFCO staff estimates that the entire population of Scotts Valley will reach 12,010 by 2045. 2. The location and characteristics of any disadvantaged unincorporated communities within or contiguous to the sphere of influence. LAFCO did not identify any DUCs within or contiguous to the City’s sphere boundary. That said, Scotts Valley has adopted strategic plans and capital improvement plans to ensure the adequate delivery of municipal services to its constituents. 3. Present and planned capacity of public facilities, adequacy of public services, and infrastructure needs or deficiencies including needs or deficiencies related to sewers, municipal and industrial water, and structural fire protection in any disadvantaged, unincorporated communities within or contiguous to the sphere of influence. The City General Plan within its jurisdictional limits designates areas for residential, commercial, and other city-related zoning. The County General Plan designates the unincorporated Scotts Valley community principally for mountain residential, rural residential, and parks and recreational uses. 4. Financial ability of agencies to provide services. Scotts Valley is financially stable, but its business activity continues to struggle. Audited financial statements from Fiscal Years 2019 to 2025 indicate that the balance has slightly decreased from $25 million to $23 million. As of June 30, 2025, the City is operating with a net position of approximately $23.6 million. 5. Status of, and opportunities for, shared facilities. Scotts Valley continues to explore opportunities for collaborative efforts to improve efficiencies. The City is currently a member in various joint powers agreements with local agencies and the County for services such as animal control, library, and criminal justice. 6. Accountability for community service needs, including governmental structure and operational efficiencies. As part of the last census redistricting process in 2021, 2,300 people were shifted from Supervisorial District No. 1 to District No. 5, reunifying the City. 7. Any other matter related to effective or efficient service delivery, as required by commission policy. No additional local LAFCO policies are specifically relevant to this service review. City of Scotts Valley –Administrative Draft Page 37 of 39 Sphere of Influence Determinations Government Code Section 56425 requires LAFCO to periodically review and update spheres of influence in concert with conducting municipal service reviews. Spheres are used as regional planning tools to discourage urban sprawl and encourage orderly growth. Written statements of determination must be prepared with respect to each of the following: 1. The present and planned land uses in the area, including agricultural and open- space lands. The present and planned land uses are based on general plans from the City and the County which range from urban to rural uses. General plans anticipate growth centered on existing urban areas and the maintenance of agricultural production, rural residential uses, and environmental protection in rural areas. Planned land uses within the five applicable general plans are a mix of urban, rural and mountain residential, agricultural, timber, public recreation, and open-space lands. 2. The present and probable need for public facilities and services in the area. Scotts Valley has identified and prioritized its infrastructure needs in the Five-Year CIP Plan. The CIP is evaluated each year as part of their annual budget’s adoption. The principal needs are categorized by priority. 3. The present capacity of public facilities and adequacy of public services that the agency provides or is authorized to provide. Scotts Valley provides various types of municipal services, which can be categorized in two activities (Government and Business). Government activities include animal control, public safety, and public works. Business activities include recreation and wastewater services. In 2025, the City’s population was estimated to be 11,718. LAFCO staff projects that the City’s population will reach 12,010 by 2045. 4. The existence of any social or economic communities of interest in the area if the commission determines that they are relevant to the agency. The last census redistricting process took place in 2021. That process saw 2,300 people shift from Supervisorial District No. 1 to District No. 5, reunifying the City. 5. For an update of a sphere of influence of a city or special district that provides public facilities or services related to sewers, municipal and industrial water, or structural fire protection, that occurs pursuant to subdivision (g) on or after July 1, 2012, the present and probable need for those public facilities and services of any disadvantaged unincorporated communities within the existing sphere of influence. LAFCO did not identify any DUCs within the City’s sphere boundary. With that said, Scotts Valley has adopted strategic plans and capital improvement plans to ensure the adequate delivery of water service to its constituents. City of Scotts Valley –Administrative Draft Page 38 of 39 APPENDICES Appendix A: Past Boundary Changes (1966 to 2024) Appendix B: Status of Projects (as of January 2025) Appendix C: Wastewater Annual Report (2023) Appendix D: Wastewater Rate Study (2021 - 2026) City of Scotts Valley –Administrative Draft Page 39 of 39 APPENDIX A PAST BOUNDARY CHANGES (1966 TO 2024) # TITLE ACTION DATE 98 RC Johnson / Glenwood Dr. Annexation 12/19/1966 105 Bustichi / Bean Creek Rd. Annexation 4/19/1967 118 Seapy / El Rancho Annexation 11/15/1967 121 Hick / Bean Creek Rd. Annexation 1/17/1968 127 Cadillac Dr. Annexation 4/17/1968 135 Miller / Glen Canyon Annexation 10/16/1968 161 Santa's Village Annexation 4/16/1969 162 College of Personology / Highway 17 Billboard Annexation 5/21/1969 172 Santos / Glenwood Dr. Annexation 6/18/1969 171 Bean Creek Annexation 6/18/1969 183 Casa Way / Hacienda Dr. Annexation 10/15/1969 186 Granite Creek Annexation 11/19/1969 204 Hacienda Annexation 3/18/1970 206 Lockewood Lane Annexation 5/20/1970 211 Manzanita Knolls Annexation 10/21/1970 322 Hanser / Rother Annexation 5/17/1972 318 Wallace Annexation 5/17/1972 371 Kaiser Annexation 1/9/1974 410 Park Land Annexation 3/5/1975 461 Doughty Annexation 6/2/1976 462 Twin Pines Annexation 12/1/1976 573 Crescent Court (B) Reorganization 7/2/1980 599 Sequoia / Green Hills Rd. Reorganization 4/1/1981 664 Scotts Valley Annexation to CSA # 9 & Zone C 11/2/1983 652 Hacienda Dr. / Mills No. 652 Reorganization 12/19/1983 647-C City of Scotts Valley SOI 10/16/1985 718 Lockwood / Boyd Reorganization 4/2/1986 706 Crescent Court Reorganization 12/2/1987 737 Southwood / Niland Reorganization 12/7/1988 744 Casa Way Reorganization 4/5/1989 791 Skypark Reorganization 3/10/1994 829 Kaiser Reorganization (Detachment) 8/7/1996 831 Latos / La Cuesta Reorganization 12/4/1996 831-A Latos / La Cuesta Amendment to SVWD SOI 12/4/1996 878 Upper Manana Woods Extraterritorial Sewer 2/7/2001 897 Cities Annexation to CSA # 53 Mosquito Abatement 5/4/2005 902 La Cuesta Extraterritorial Sewer 8/3/2005 916 3128 Glen Canyon Road Extraterritorial Sewer 3/7/2007 920 Old Coach Road Extraterritorial Sewer 5/2/2007 933 Old Coach Road / Collishaw Annexation 5/5/2010 935 Extraterritorial Sewer Service to 151 Miraflores 8/4/2010 939 Extraterritorial Sewer Service to 340 Old Coach Road 6/1/2011 942 Extraterritorial Sewer Service to 125 Elena Drive 3/7/2012 965-A Cumbre Lane Amendment to SOIs 3/6/2019 965-B Cumbre Lane Reorganization 3/6/2019 ESA 20-26 Navarra Drive / Bellflower Way Extraterritorial Service Agreement 10/7/2020 ESA 21-06 Pippin Way / Bellflower Way Extraterritorial Service Agreement 4/7/2021 ESA 21-16 Ervine / Old Coach Road Extraterritorial Service Agreement 1/5/2022 ESA 22-02 Blossom Way / Stephen Bell Extraterritorial Service Agreement 8/3/2022 ESA 23-15 La Cuesta Drive / Ricahrd Latos Extraterritorial Service Agreement 10/4/2023 ESA 24-03 Old Coach Road / John Hall Extraterritorial Service Agreement 3/6/2024 APPENDIX B STATUS OF PROJECTS (AS OF JANUARY 2025) CITY OF SCOTTS VALLEY Status of Projects - January 2025 ADDRESS - NAME DESCRIPTION STATUS Projects Under Construction 12 Blake Lane 3 -Townhomes Under Construction Sandraya Heights Road 9 - Lot Subdivision and Construction of 9 Single-Family Dwelling Units Under Construction Projects Approved 4575 Scotts Valley Drive 100 Apts Approved 440 Kings Village Road Conversion of two bldgs to a mini-warehouse storage facility (222 units) Approved 4860 Scotts Valley Drive Canepa - Automobile Showroom (17,660 sf bldg) Approved 3640 Glen Canyon - Oak Creek Park 52 Apts & 25,000 SF Commercial Approved 200 Polo Ranch Road 120 Rooms / Marriott Residences Inn Approved Projects Under Review La Madrona - Gateway South 182 Units, 180 Room Hotel, & 3,500 SF Commercial Under Review Mt. Hermon - Valley Gardens 190 Units & 5000 SF Commercial Under Review 4200 Scotts Valley Drive Mixed Use Conversion - 6 Studio Apartments & 2,292 SF Commerical Under Review 125 Bethany Drive 67,450 SF Storage Building w/offices Under Review 75 Mt Hermon Road 40 Apts Under Review 4444 Scotts Valley Drive 25 Apts Under Review 4627 Scotts Valley Drive 12 -Townhome-Style Condominiums with 3-Commercial Condominiums (1500 sf) Under Review Erba Lane 19- Townhome-Style Condominiums Under Review 10 Victor Square Mini-Storage Facility Under Review 5060 Scotts Valley Drive Boys and Girls Club - Expansion Project Under Review APPENDIX C WASTEWATER ANNUAL REPORT (2023) APPENDIX D WASTEWATER RATE STUDY (2021 – 2026) 2625 Alcatraz Ave, #602 Berkeley, CA 94705 Tel 510 653 3399 www.bartlewells.com May 7, 2021 Tina Friend, City Manager City of Scotts Valley 1 Civic Center Drive Scotts Valley, CA 95066 Re: 2021 Wastewater Rate Study Update Bartle Wells Associates is pleased to submit the attached 2021 Wastewater Rate Study Update following the 2017 Wastewater Financial Plan and Rate Study completed by our firm. The updated rate study reflects the latest wastewater revenue and expenditures, develops long-term financial projections for the wastewater enterprise, and calculates wastewater rates that equitably recover the cost of providing service over the next five years. Before this study, BWA conducted the 2017 Water Rate Study and recommended three years of 15% annual increases from FY 2019-20 through FY 2021-22. The City last adjusted its wastewater rates in FY 2019-20, and, primarily due to the COVID-19 pandemic, has not adopted any wastewater rate increases in almost two years. The wastewater utility is currently experiencing an operating deficit and faces over $28 million in planned capital improvement projects over the next 10 years. Annual wastewater rate increases are needed to restore financial sustainability. BWA worked closely with City Staff to refine operations and capital expenditure projections over the next 10 years. We used this projection to develop proposed rates that establish financial sustainability in the wastewater fund over the next five years. BWA proposes that the City increase rates 9% each year for the next 5 years. A summary of proposed rates is provided below. Year Current 1 2 3 4 5 Fiscal Year (FY) 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26 Rate Adoption Date 7/1/2022 7/1/2021 7/1/2022 7/1/2023 7/1/2024 7/1/2025 Rate increase 9.0% 9.0% 9.0% 9.0% 9.0% Single Family Residence Flat Monthly Fee $46.49 $50.67 $55.23 $60.21 $65.62 $71.53 (Low- Income) $40.91 $44.59 $48.61 $52.98 $57.75 $62.95 Multi-family Residential Flat Monthly Fee $32.56 $35.49 $38.68 $42.17 $45.96 $50.10 (Low-Income) $28.65 $31.23 $34.04 $37.10 $40.44 $44.08 Mobile Home Flat Monthly Fee $31.02 $33.81 $36.85 $40.17 $43.79 $47.73 (Low-Income) $27.29 $29.75 $32.42 $35.34 $38.52 $41.99 Commerical and Industrial Monthly Minimum Fee $46.49 $50.67 $55.23 $60.21 $65.62 $71.53 Charge per 100gal – by Strength Factor Low $0.83 $0.90 $0.99 $1.07 $1.17 $1.28 Medium $1.11 $1.21 $1.32 $1.44 $1.57 $1.71 High $1.42 $1.55 $1.69 $1.84 $2.00 $2.18 April readings for Tax-Roll customers and mid December to mid Febuary for Direct Billing Customers See Commercial Classifications Based on Strength attachment for more details City of Scotts Valley 1 2021 Wastewater Rate Study Update Key elements of the recommended rates include: a) complete funding of annual wastewater operations and capital expenses, b) phased-in rates based on flexible payment terms on proposed debt financing for capital projects (estimated using 5 to 6-year bank loans at 4% interest) c) at least 110% debt service coverage as required on proposed financing, and d) minimum wastewater fund balance targets met within 5 years (6 months annual operating expenses + $1 million emergency capital reserve) BWA also conducted a survey of single-family monthly wastewater bills in the surrounding community. Scotts Valley’s wastewater rates are among the lowest in the area. The proposed rates will remain below the area average of $61.30 in fiscal year (FY) 2021-2022. Please find our detailed findings in the calculation tables below. We have enjoyed working with the City and welcome any questions or feedback. Sincerely, BARTLE WELLS ASSOCIATES Doug Dove, CIPM Abigail Seaman Principal Consultant City of Scotts Valley 2 2021 Wastewater Rate Study Update City of Scotts Valley 2021 Wastewater Rate Study Update Final Tables 5/7/2021 3 Table 1 City of Scotts Valley - Wastewater Rate Study Current 2016 BWA Reccomendation Current Rates & Prior Recommendation 2020-21 2020-21 2021-22 15.0% 15.0% Residential Rates Single-family Residential Flat Monthly Fee $46.49 $53.47 $61.49 (Low- Income) $40.91 $47.05 $54.11 Multi-family Residential Flat Monthly Fee $32.56 $37.45 $43.06 (Low-Income) $28.65 $32.95 $37.89 Mobile Home Flat Monthly Fee $31.02 $35.68 $41.03 (Low-Income) $27.29 $31.39 $36.10 Commercial & Industrial Rates Commerical and Industrial Monthly Minimum Fee $46.49 $53.47 $61.49 Charge per 100gal - With Strength Factor -Low Strength: Schools, Banks $0.83 $0.96 $1.11 -Medium Strength: Offices, Hospitals $1.11 $1.28 $1.47 -High Strength: Restaurants, Bakeries $1.42 $1.64 $1.89 April readings for Tax-Roll customers and mid December to mid Febuary for Direct Billing 4 Table 2 City of Scotts Valley - Wastewater Rate Study Current Fund Balance 7/1/2020 Wastewater Operations $2,444,863 Tertiary Operating ($123,004) Wastewater Capital Reserve $416,440 Wastewater Equipment Replacement $122,457 TTP District Reserve $28,353 Beginning Wastewater Reserve Fund $2,889,109 50% Operating Costs $1,269,299 Emergency Capital Replacement $1,000,000 Total Emergency Reserve Fund Target $2,269,299 5 Table 3 City of Scotts Valley - Wastewater Rate Study Estimated Annual Wastewater Revenues- From Current Service Charges Low-Income Current Accounts Dwelling Units** Total Demand Revenue Current Rate Fixed Volumetric Discount Single-family Residential: Flat Monthly Fee 2,249 2,249 $46.49 $1,254,672 2,331 (Low- Income) 82 82 $40.91 $40,255 $5,490.72 Multi-family Residential: Flat Monthly Fee 660 1,320 $32.56 $515,750 1,361 (Low-Income) 35 41 $28.65 $14,096 $1,923.72 Mobile Home: Flat Monthly Fee 170 719 $31.02 $267,641 768 (Low-Income) 48 49 $27.29 $16,047 $2,193.24 Total Residential 3,244 4,460 4,460 $2,108,461 $9,607.68 Current Consumption Commercial and Industrial: Monthly Minimum Fee Users 281 $46.49 $156,764 Charge users* 240 614,222 $1.11 $681,786 Total Commercial 281 $838,551 Total Wastewater Charges $2,947,012 *Rate based on two months data collection from Mid December to Mid February *Contain directly billed accounts to Finance Department 6 Table 4 City of Scotts Valley - Wastewater Rate Study 2019/20 Operating Revenue Fund 10 2017/18 2018/19 2019/20 2020/21 Actual Actual Projected Budget Revenue Sewer Service Fees $2,128,732 $2,513,648 $2,915,832 $2,900,000 Penalties for Deliquences $1,643 $1,456 $3,540 $3,500 Subtotal - Service Charges $2,130,375 $2,515,104 $2,919,372 $2,903,500 Investment Earnings Other Revenue $2,700 $3,458 $4,717 $5,000 State Grants $12,500 $0 $0 $0 Subtotal - Other Revenues $15,200 $3,458 $4,717 $5,000 Total - Wastewater Operations Fund 10 $2,145,575 $2,518,562 $2,924,089 $2,908,500 *2020/21 Amended Budget 7 Table 5 City of Scotts Valley - Wastewater Rate Study Other Revenues Total Other Revenues 2017/18 2018/19 2019/20 2020/21 Actual Actual Projected Budget Fund 11: Tertiary Treatment Plant SV Water Department Reimbursements $125,007 $97,126 $133,627 $110,000 Transfers from Fund 10 $0 $0 $0 $110,000 Total Fund 11 $125,007 $97,126 $133,627 $220,000 Fund 12: Capital Reserve Investment Earnings $10,186 $21,941 $13,240 $12,500 Impact Fee - Recurring $318,981 $225,624 $41,605 $50,000 Impact Fee - Significant Subtotal Capital Reserve $329,167 $247,565 $54,845 $62,500 Fund 14: Wastewater Equipment Replace Investment Earnings $7,644 $14,154 $2,483 $5,000 Fund 15- TTP -District Reserve Fund Investment Earnings $158 $381 $450 $400 Other Revenue $5,123 $1,406 $3,972 $5,000 Subtotal District Reserve Fund $5,281 $1,787 $4,422 $5,400 Total Other Revenue $467,099 $360,632 $195,377 $182,900 8 Table 6 City of Scotts Valley - Wastewater Rate Study 2016/17 Operating Expenses Fund 10 2018/19 2019/20 2020/21 Actual Proj. Actual Budget Salaries & Benefits $342,778 $305,094 625,791 102 Salaries/Wages - Holiday $20,324 $23,996 $0 103 Salaries/Wages - Sick Leave $20,755 $12,903 $0 104 Salaries/Wages - Vacation $29,410 $19,691 $0 108 Salaries/Wages - C/T Taken $4,041 $38,629 $0 109 Salaries/Wages - Overtime $34,543 $42,679 $30,000 110 Salaries/Wages - Covid-19 $0 $4,567 $0 203 Fica $34,504 $34,624 $52,310 204 Retirement $443,384 $177,782 $220,380 205 Group Insurance $171,632 $147,121 $191,659 206 Workers' Compensation $28,025 $33,295 $30,614 208 Uniform Allowance $10,514 $5,786 $12,000 301 Office Expense $3,810 $5,269 $4,000 302 Special Department Expense $143,703 $170,907 $150,000 303 Small Tools & Supplies $12,714 $8,383 $12,000 305 Advertising $585 $0 $0 306 Communications $7,921 $9,712 $9,000 307 Utilities $351,257 $316,680 $365,000 308 Rent & Lease Expense $8,110 $2,709 $0 310 Recruitment $384 $1,451 $0 312 Professional/Specialized Svc $717 $0 $0 313 Other Contractual Services $82,860 $162,075 $130,000 314 Insurance & Surety Bonds $48,122 $4,420 $0 315 Memberships & Dues $1,522 $973 $3,000 316 Travel/Conferences/Meetings $1,506 $308 $5,000 320 Laboratory $47,508 $58,735 $65,000 322 Training & Education $4,799 $7,086 $8,000 349 Miscellaneous $3,550 $333 $0 401 Maint Of Bldgs/Struct/Grnds $8,302 $8,117 $8,000 402 Maint & Operation Of Eqmt $87,858 $202,251 $100,000 403 Maint & Operation Of Vehicle $20,506 $38,320 $25,000 708 Cost Allocation $224,799 $266,376 $270,000 904 Improvements O/T Bldgs-Other $12,469 $0 $0 905 Machinery & Eqmt - Other $20,462 $46,487 $0 907 Engineering $0 $0 $0 912 Safety Equipment $0 $0 $0 915 Other Equipment $2,953 $0 $0 999 Interfund Transfer Out $130,029 $170,779 $157,044 General Fund Cost Allocation Total $2,366,355 $2,327,537 $2,473,798 Fixed Assets 910 Office Equipment & Furniture $57,800 90 Office Equipment & Furniture $7,000 Total $64,800 Total Operating Expenditures $2,366,355 $2,327,537 $2,538,598 9 Table 7 City of Scotts Valley - Wastewater Rate Study Other Expenses Total Other Expenses 2018/19 2019/20 2020/21 Actual Proj. Actual Budget Fund 11: Tertiary Treatment Plant Salaries/Wages - Regular $15,442 $4,797 $28,000 Salaries/Wages - Overtime $1,280 $1,055 $1,500 Fica $1,276 $447 $2,257 Retirement $5,975 $4,571 $8,198 Group Insurance $0 $0 $0 Special Department Expense $46,392 $77,475 $55,000 Small Tools & Supplies $210 $937 $300 Utilities $69,362 $53,441 $62,000 Insurance & Surety Bonds $5,794 $0 $5,000 Laboratory $10,384 $20,223 $18,000 Maint & Operation Of Eqmt $14,055 $56,461 $25,000 Machinery & Equipment $6,751 $0 $0 Total $176,922 $219,406 $205,255 Fund 12: Capital Reserve Office Expense $2,191 $969 $2,000 Rights-Of-Way $0 $0 $0 Machinery & Equipment $62,998 $299,995 $212,151 Engineering $132,964 $30,409 $213,757 Vehicles $33,150 $0 $0 Office Equip & Furniture $5,000 $0 $0 Total $236,302 $331,373 $427,908 Fund 14: Wastewater Equipment Replace Office Expense $1,200 $212 $0 Total $1,200 $212 $0 Fund 15- TTP -District Reserve fund Office Expense $22 $38 $0 Total $22 $38 $0 Total Other Expenses $414,446 $551,029 $633,163 10 Table 8 City of Scotts Valley - Wastewater Rate Study 10-Year Capital Improvement Plan & Proposed Funding Rate Study Projection Year 1 2 3 4 5 6 7 8 9 10 Total Fiscal Year FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 Capital Improvement Projects Master Plan for Plant and Sewer System $50,000 $100,000 $50,000 $200,000 Treatment System Projects PLC Upgrades 40,000 $40,000 Clarifier Super Structure Replacement 150,000 150,000 150,000 $450,000 Aeration System Upgrade 250,000 750,000 $1,000,000 Storm Water LID 100,000 100,000 100,000 $300,000 Vactor Truck 250,000 $250,000 Dump Truck 110,000 $110,000 Replace Pumps - 110,000 110,000 $220,000 Bar Screen #2 250,000 $250,000 Upgrade Tertiary 50,000 100,000 100,000 100,000 50,000 $400,000 Replace Pumps 200,000 200,000 $400,000 Facility Maintenance 100,000 $100,000 Facility Vehicle, F150 55,000 $55,000 New Technology, i.e. membranes Phase 1 5,000,000 $5,000,000 Phase 2 5,000,000 $5,000,000 Phase 3 10,000,000 $10,000,000 Collection System Projects $0 Lift Stations 420,000 530,000 160,000 260,000 330,000 $1,700,000 Pipeline Upgrades 200,000 50,000 430,000 260,000 290,000 $1,230,000 Inspection & Monitoring Programs 100,000 100,000 100,000 100,000 100,000 $500,000 Placeholder Projects through 2027 $ (325,000) $ 125,000 $ 200,000 200,000 200,000 200,000 200,000 200,000 $1,000,000 Total CIP $1,395,000 $2,240,000 $1,480,000 $1,120,000 $970,000 $5,200,000 $200,000 $5,200,000 $200,000 $10,200,000 $28,205,000 Rate Study Projection Year 1 2 3 4 5 6 7 8 9 10 Total Fiscal Year 2021/22 2022/23 2023/24 2024/25 2025/26 2026/27 2027/28 2028/29 2029/30 2030/31 Proposed CIP Funding Pay go Funded $1,395,000 ($2,260,000) $1,480,000 $1,120,000 $970,000 $200,000 $200,000 $200,000 $200,000 $200,000 $3,705,000 Grant Funding 0 0 0 0 0 0 0 0 0 0 0 Debt Funded $4,500,000 5,000,000 5,000,000 10,000,000 24,500,000 Total CIP Funding $1,395,000 $2,240,000 $1,480,000 $1,120,000 $970,000 $5,200,000 $200,000 $5,200,000 $200,000 $10,200,000 $28,205,000 11 Table 9 City of Scotts Valley - Wastewater Rate Study Proposed Debt Detail Proposed CIP Financing Annual Principal Issuance Year Term Interest Rate Debt Service Payment Calculations Payment* Rate Study Projection Years 1-5 Proposed Debt $4,500,000 FY 2022/23 5 years 4.00% $1,002,000 CIP Expenditures FY 2022/23 - 2024/25 Projection Years 6-10 New Technology Loans Bank Loan - Phase 1 $5,000,000 FY 2026/27 20 years 4.00% $366,000 Bank Loan - Phase 2 $5,000,000 FY 2028/29 20 years 4.00% $366,000 Bank Loan - Phase 3 $10,000,000 FY 2030/31 20 years 4.00% $731,000 *Payments begin the year following issuance Debt Service Payment Projection Rate Study Projection Year 1 2 3 4 5 6 7 8 9 10 2021/22 2022/23 2023/24 2024/25 2025/26 2026/27 2027/28 2028/29 2029/30 2030/31 Bank Loan 2 $180,000 $1,002,000 $1,002,000 $1,002,000 $1,002,000 $1,002,000 New Tech Loans Phase 1 $366,000 $366,000 $366,000 $366,000 Phase 2 $366,000 $366,000 Total Debt Service $0 $0 $180,000 $1,002,000 $1,002,000 $1,002,000 $1,368,000 $1,368,000 $732,000 $732,000 12 Table 10 City of Scotts Valley - Wastewater Rate Study Wastewater Cashflow Projection, Proposed Rate Increases Year 1 2 3 4 5 6 7 8 9 10 Rate Study Future Projection Fiscal Year (FY) 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26 2026/27 2027/28 2028/29 2029/30 2030/31 Rate Adoption Date 7/1/2022 7/1/2021 7/1/2022 7/1/2023 7/1/2024 7/1/2025 7/1/2026 7/1/2027 7/1/2028 7/1/2029 7/1/2030 Rate increase 9% 9% 9% 9% 9% 4% 4% 3% 3% 3% Growth rate 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Projected SFR Monthly Bill (Flat) $46.49 $50.68 $55.24 $60.21 $65.63 $71.54 $74.40 $77.37 $79.69 $82.08 $84.55 Opening Balance $2,889,109 $2,859,520 $1,957,986 $4,901,197 $4,136,424 $3,146,120 $2,569,131 $2,831,806 $2,801,448 $2,799,242 $3,461,412 Operating Revenues Sewer Fees $2,900,000 $3,161,000 $3,445,490 $3,755,584 $4,093,587 $4,462,009 $4,640,490 $4,826,109 $4,970,893 $5,120,020 $5,273,620 Other Revenue 0% 8 ,500 8,500 8 ,500 8,500 8,500 8,500 8,500 8,500 8,500 8,500 8,500 Total Operating Revenues $2,908,500 $3,169,500 $3,453,990 $3,764,084 $4,102,087 $4,470,509 $4,648,990 $4,834,609 $4,979,393 $5,128,520 $5,282,120 Other Revenues - - - - - - - - - - - Fund 11 3% $110,000 $113,300 $116,699 $120,200 $123,806 $127,520 $131,346 $135,286 $139,345 $143,525 $147,831 Fund 12 0% 62,500 6 2,500 62,500 6 2,500 62,500 62,500 62,500 62,500 62,500 62,500 62,500 Fund 14 0% 5 ,000 5,000 5 ,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 Fund 15 0% 5 ,400 5,400 5 ,400 5,400 5,400 5,400 5,400 5,400 5,400 5,400 5,400 Total Other Revenues $182,900 $186,200 $189,599 $193,100 $196,706 $200,420 $204,246 $208,186 $212,245 $216,425 $220,731 Bank Loan Proceeds $4,500,000 $5,000,000 $5,000,000 $10,000,000 Total Revenues $3,091,400 $3,355,700 $8,143,589 $3,957,184 $4,298,793 $4,670,930 $9,853,236 $5,042,796 $10,191,637 $5,344,945 $15,502,851 Fund 10 Operating Expenses Salaries and Benefits 4% 1,162,754 1,252,800 1,302,912 1,355,028 1,409,230 1 ,465,599 1 ,524,223 1,585,192 1,648,599 1,714,543 1,783,125 Other Expenditures 3% 1,375,844 1,452,119 1,495,683 1,540,553 1,586,770 1 ,634,373 1 ,683,404 1,733,906 1,785,924 1,839,501 1,894,686 Budgetary Savings 2% (50,772) (54,098) (55,972) (57,912) (59,920) ( 61,999) ( 64,153) ( 66,382) (68,690) ( 71,081) (73,556) Total Fund 10 2,487,826 2,650,821 2,742,623 2,837,670 2,936,080 3 ,037,972 3 ,143,474 3,252,716 3,365,832 3,482,964 3,604,255 Other Operating Expenses - - - - - - - - - - Fund 11 3% $205,255 $211,413 $217,755 $224,288 $231,016 $237,947 $245,085 $252,438 $260,011 $267,811 $275,846 Fund 12* 3% 427,908 Fund 14 3% 0 Fund 15 3% 0 Total Other O&M $633,163 $211,413 $217,755 $224,288 $231,016 $237,947 $245,085 $252,438 $260,011 $267,811 $275,846 Total Operating Expenses $3,120,989 $2,862,234 $2,960,378 $3,061,958 $3,167,096 $3,275,919 $3,388,560 $3,505,154 $3,625,843 $3,750,775 $3,880,101 CIP & Debt Service CIP Pay-go $1,395,000 $2,240,000 $1,480,000 $1,120,000 $970,000 $5,200,000 $200,000 $5,200,000 $200,000 $10,200,000 CIP Debt Finance Debt Service - - 180,000 1,002,000 1 ,002,000 1 ,002,000 $1,368,000 $1,368,000 $732,000 $732,000 Total CIP & Debt Service $0 $1,395,000 $2,240,000 $1,660,000 $2,122,000 $1,972,000 $6,202,000 $1,568,000 $6,568,000 $932,000 $10,932,000 Total Expenses $3,120,989 $4,257,234 $5,200,378 $4,721,958 $5,289,096 $5,247,919 $9,590,560 $5,073,154 $10,193,843 $4,682,775 $14,812,101 Net Operating Revenues ($212,489) $307,266 $493,612 $702,126 $934,991 $1,194,590 $1,260,430 $1,329,456 $1,353,549 $1,377,745 $1,402,019 Net Annual Revenues ($29,589) ($901,534) $2,943,211 ($764,774) ($990,303) ($576,990) $262,676 ($30,358) ($2,206) $662,170 $690,750 Closing Balance $2,859,520 $1,957,986 $4,901,197 $4,136,424 $3,146,120 $2,569,131 2,831,806 2,801,448 2,799,242 3,461,412 4 ,152,162 50% Operating Expenditures 1,269,299 1,325,410 1,371,312 1,418,835 1,468,040 1 ,518,986 1 ,571,737 1,626,358 1,682,916 1,741,482 1,802,128 Emergency Capital Replacement 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1 ,000,000 1 ,000,000 1,000,000 1,000,000 1,000,000 1,000,000 Total Reserve Target $2,269,299 $2,325,410 $2,371,312 $2,418,835 $2,468,040 $2,518,986 2,571,737 2,626,358 2,682,916 2,741,482 2 ,802,128 Ratio to Reserve Target 1 .26 0 .84 2 .07 1 .71 1.27 1.02 1.10 1.07 1.04 1.26 1.48 Debt Service Coverage Ratio 6 .29 1.39 1.46 1.53 1.14 1.17 2.22 *Fund 12 expenditures projected using CIP 13 Table 10-S City of Scotts Valley - Wastewater Rate Study Cash Flow Summary Year 1 2 3 4 5 Rate Study Fiscal Year (FY) 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26 Rate Adoption Date Current 7/1/2021 7/1/2022 7/1/2023 7/1/2024 7/1/2025 Wastewater Cashflow Projection, Proposed Rate Increases Rate increase 9% 9% 9% 9% 9% Projected SFR Monthly Bill (Flat) $46.49 $50.68 $55.24 $60.21 $65.63 $71.54 Bank Loan Proceeds - - 4,500,000 - - - Total Debt Service - - - 180,000 1,002,000 1,002,000 Closing Balance $2,859,520 $1,957,986 $4,901,197 $4,136,424 $3,146,120 $2,569,131 Ratio to Reserve Target 1.26 0.84 2.07 1.71 1.27 1.02 Debt Service Coverage Ratio - - - - 6.29 1.39 14 Table 11 Scotts Valley - Wastewater Rate Study Proposed Wastewater Rate Summary (Scenario 3) Year Current 1 2 3 4 5 Fiscal Year (FY) 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26 Rate Adoption Date 7/1/2022 7/1/2021 7/1/2022 7/1/2023 7/1/2024 7/1/2025 Rate increase 9.0% 9.0% 9.0% 9.0% 9.0% Single Family Residence Flat Monthly Fee $46.49 $50.67 $55.23 $60.21 $65.62 $71.53 (Low- Income) $40.91 $44.59 $48.61 $52.98 $57.75 $62.95 Multi-family Residential Flat Monthly Fee $32.56 $35.49 $38.68 $42.17 $45.96 $50.10 (Low-Income) $28.65 $31.23 $34.04 $37.10 $40.44 $44.08 Mobile Home Flat Monthly Fee $31.02 $33.81 $36.85 $40.17 $43.79 $47.73 (Low-Income) $27.29 $29.75 $32.42 $35.34 $38.52 $41.99 Commerical and Industrial Monthly Minimum Fee $46.49 $50.67 $55.23 $60.21 $65.62 $71.53 Charge per 100gal - With Strength Factor Low $0.83 $0.90 $0.99 $1.07 $1.17 $1.28 Medium $1.11 $1.21 $1.32 $1.44 $1.57 $1.71 High $1.42 $1.55 $1.69 $1.84 $2.00 $2.18 April readings for Tax-Roll customers and mid December to mid Febuary for Direct Billing Customers See Commercial Classifications Based on Strength attachment for more details 15 Table 12 Scotts Valley User Classifications - Low, Medium/Domestic, and High Strength Dischargers Low Strength Banks & Financial Institutions Barber Shops/Hair Salons (hair cutting only) Post Offices/Government Retail Stores Libraries Schools Churches, Halls & Lodges Medium/Commercial/ Appliance Repair Domestic Strength Beauty Shops ( hair cutting w/additional treatments) Dry Cleaners Nail Salons Pet Groomers Commercial Laundromats Bars & Taverns Tasting Rooms Breweries (with Pretreatment) Hospitals - General, Convalescent & Veterinarian Hotels, Motels, B&Bs, and Vacation Rentals Offices - Business and Professional Offices - Medical/Dental Pools with Restrooms (Clubhouse) Theaters Warehouses Car Washes High Tech Medical Manufacturing Light Manufacturing/Industrial Gym or Health Club Machine Shops Service Stations, Garages, Auto Repair Shops Mini Marts - W/O Dish Washer or Garbage Disposal Mini Mart with Gas Pumps - W/O Dish Washer or Garbage Disposal Spa with Various Beauty Treatments Parking Garages High Strength Restaurants Coffee Shops Ice Cream Parlors Catering Eatery Bakeries Butcher Shops Fish Market/Shop Markets - with Dish Washer or Garbage Disposal Markets - with Bakeries or Butcher Shops Mini Marts - with Dish Washer or Garbage Disposal Breweries (without Pretreatment) Wineries Market Dairies (milk producers, yogurt, ice cream maker) Specialty Foods Manufacturing (e.g., cheese or olive oil maker) Source: Developed using State Water Resources Control Board's Revenue Program Guidelines for Wastewater Agencies 16 Figure 1 Scotts Valley Wastewater Rate Survey $90.00 $80.00 $70.00 Average, $61.30 $60.00 $50.00 $40.00 $30.00 $20.00 $10.00 $0.00 sonaB soL yeretnoM DSC edisaeS DW tsaoC aniraM ellivnostaW yorliG yellaV sttocS )tnerruC( sanilaS yellaV sttocS )esaercni %9( DS yellaV tseW evorG cificaP zurC atnaS lliH nagroM zurC atnaS DS ytnuoC DWW aerA lemraC retsilloH atsituaB nauJ naS Single Family Monthly Wastewater Bill Survey FY 2020-21 Treatment Charge (Monterey One) Collection Charge Total Charge 17