REPORT TO THE CITY COUNCIL FROM: PAUL AMICO, PE, Director Department of Public Utilities BY: PAUL AMICO, PE, Director Department of Public Utilities JUAN RIOS, Business Manager Department of Public Utilities - Water Division SUBJECT ..Title ***RESOLUTION - Adopting the 46th Amendment to the Annual Appropriation Resolution (AAR) No. 2025-179 to appropriate $816,600 in the Water Connection Charge Fund for the completion of citywide water system connection projects (Requires Five Affirmative Votes) (Subject to Mayor's Veto) ..Body RECOMMENDATION Staff recommends that the City Council adopt the 46th Amendment to the Annual Appropriation Resolution No. 2025-179 to appropriate $816,600 in the Water Connection Charge Fund to provide for the completion of citywide water system connection projects performed by Department of Public Utilities (DPU) Water staff. EXECUTIVE SUMMARY Approval of this AAR will appropriate $816,600 in the Water Connection Charge Fund from retained earnings for the construction of 1-inch through 2-inch service connections to the City of Fresno (City) water system. The construction work is performed by DPU Water staff. The fees charged for this work have not been updated since 2009, and actual costs are projected to exceed the budgeted funding due to escalation in material prices and labor costs. The additional funding of $816,600 for a total of $2,565,600 in appropriations is needed to complete construction of 1-inch through 2-inch water system connections through the end of fiscal year (FY) 2026. BACKGROUND The Water Connection Charge Fund, codified in the Fresno Municipal Code, receives revenue obtained from transmission grid main charges, frontage charges, and service connection charges that are expended for acquisition, construction, and reconstruction of the City's water system. The construction work is performed by DPU Water staff. The fees charged for this work have not been updated since 2009, and actual costs are projected to exceed revenue generated from the charges due to escalation in material prices and labor costs. During the preparation of the FY 2026 budget, the requested appropriation of $1,749,000 was based on taking an average of prior year expenditures and adding in a percentage for anticipated growth. This request was subsequently approved by the City Council as part of the adoption of the FY 2026 budget. During the fiscal year, expenditures for constructing 1-inch through 2-inch water service connections are projected to exceed the budgeted amount and additional funding is needed to cover the projected FY 2026 costs. Therefore, staff requests that additional funding from retained earnings totaling $816,600 be appropriated for FY 2026 actual costs that have been incurred but have yet to be posted, and projected costs to complete construction of 1-inch through 2-inch connections through the end of the fiscal year. This funding is from developers and other customers who have previously paid connection fees that were deposited in this fund. ENVIRONMENTAL FINDINGS By the definition provided in the California Environmental Quality Act (CEQA) Guidelines Section 15378, this item is not a "project." LOCAL PREFERENCE Local preference was not implemented because this action does not include a bid, an award of a construction contract, or approval of a services contract. FISCAL IMPACT This action will not have any impact on the General Fund or the Water Enterprise Fund. The projects in the Water Connection Charge Fund are all fully funded through water connection fees paid by developers and other customers. Attachments: AAR - 46th Amendment to the Annual Appropriation Resolution (AAR) No. 2025-179 Connection Fee Charges and Cost Breakdown Package FY 2026 Connection Fee Charges and Cost Breakdown by Cost Description FY 2026