AgdaPkt 2015-04-13 Closed and Joint SA and PFA REVISED 04_10_2015

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8.A. - Page 67 Capital Improvement Plan and Long-Range Financial Plan" above. The City projects that these rates may increase by up to 38% through Fiscal Year 2022-2023, from $1,415 per acre foot in Fiscal Year 2014-15 to $1,960 per acre foot in Fiscal Year 2022-2023 (exclusive of the BAWSCA Surcharge). Including the BAWSCA Surcharge, rates may increase up to 54% through Fiscal Year 2022-2023, from $1,415 per acre foot in Fiscal Year 2014-15 to $2,178 per acre foot in Fiscal Year 2022-2023. The City has covenanted in the 2015 Installment Purchase Contract to prescribe and collect rates, fees and charges in connection with the Enterprise in an amount sufficient to allow the Enterprise to pay Operation and Maintenance Costs and amounts due under the 2015 Installment Purchase Contract and any Parity Obligations, and to replenish, if necessary, the Reserve Fund to the Reserve Requirement. Further, the Enterprise has agreed, in the 2015 Installment Purchase Contract, to prescribe and collect rates, fees and charges in connection with the Enterprise during each Fiscal Year which are sufficient to yield estimated Net Revenues which are at least equal to one hundred twenty percent (120%) of the aggregate amount of the 2015 Installment Payments, and principal of and interest on any Parity Obligations (including the 2013 Installment Purchase Contract and the 2007 Installment Purchase Contract) payable from Net Revenues coming due and payable during such Fiscal Year. In order to issue Parity Obligations in the amounts currently anticipated based on future expected operating and non-operating expenses (see Table 18), the City will be required to raise its rates and charges by the percentages set forth above under the caption "THE ENTERPRISE - Water Rate Increases—Future Rate Increases." Seismic Considerations The City, like much of California, is subject to seismic activity that could result in interference with the delivery of water from the Regional Water System or the City's operation of the Enterprise. San Francisco's Water System Improvement Plan for the SFPUC (see "THE ENTERPRISE —Water Supply—SFPUC Water System Improvement Plan") is intended, in part, to make seismic upgrades to the Regional Water System. However, a major seismic event could result in water deliveries from the Regional Water System to the Enterprise being interrupted for a significant period of time.As a result,no assurance can be given that a future seismic event will not materially adversely affect the operation of the Enterprise. Additional details about how water is allocated during an emergency can be found in the Water Supply Agreement. The City does not, and does not expect to,maintain earthquake insurance on the Enterprise. Environmental Regulation The kind and degree of water treatment effected through the Enterprise is regulated, to a large extent, by the federal government and the State of California. Treatment standards set forth in federal and state law control the operations of the Enterprise and mandate the use of water treatment technology. In the event that the federal government, acting through the Environmental Protection Agency, or the State of California, acting through the Department of Health Services, or additional federal or state agencies, should impose stricter water quality standards upon the Enterprise, the City's expenses could increase accordingly and rates and charges would have to be increased to offset those expenses. It is not possible to predict the direction federal or state regulation will take with respect to water quality standards, although it is likely that, over time, both will impose more stringent standards with attendant higher costs. -43--