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I . I . - Chairperson La Berge advised that Option No. I would reduce the Lifeline rate (1-10 units) uom $ .84 to $ .79 per unit. The average water user, using around 25 units over sixty days, would experience a small increase of $ .75 over that sixty day period. - Public Works Services Director Ingram explained that by the summer of 1993 the City Council and Utilities Committee (Water Use Policy Committee) were conuonted with a need to change the operating policies of the enterprise funds. In 1993 a recovery and business plan was worked through with the Committee and staff driven by the fact that the water fund at that point was $I.I million in the negative, and the projections indicated that if something dramatic was not done immediately the deficit would soon reach $3 million plus by 1995. Director Ingram advised that at that time there were no active Capital Improvement Programs for the water and sewer systems, and that policy caused delays in replacing the systems which drove up maintenance costs. Also, there were no emergency reserves for this system, estimated to be worth $100 million. Director Ingram explained that there were equity issues that also needed to be addressed. Director Ingram described the work of the Council during 1993 and the options the Council chose to establish which put the water and sewer systems "on the road to solvency, and set out some rigorous and fairly clear cut principles on how (the City) would operate the funds." The moderate recovery program chosen by the Council has achieved what the Council set out to do, and the emergency reserves now stand at nearly $1 million. Director Ingram showed an overhead slide and described the seven - guiding principles "that we can uphold to the citizens and the rate payers as the basis for our decisions." (Report, Attachment 1.) Director Ingram described the water service areas as they extend outside Redwood City's borders, and said the City's water system operates much like a Water District. Director Ingram described the open, cooperative efforts by the City and the Emerald Lake Hills Homeowners to bring to fruition one of the guiding principles, "equitable distribution of costs across the entire water system", which is an integral part of Option No.1 Director Ingram described the three options and identified the GroundruIes used to assess them: I) do not impact the Lifeline user more than necessary to simply balance the budget, which for a 2-year period would be I.I6%; 2) do not impact commercial users more than necessary to simply balance the budget, which for a 2-year period would be 1.7%; and 3) achieve the goal set for the emergency reserves as quickly as possible. Director Ingram advised that Option No. I would create $500,000 additional revenues out of an $11 million plus fund; Option No.2 would create $100,000; and Option 3 would create $220,000. MINUTE BOOK NO. 54 Page No. 271 - MINUTES JUNE 10, 1996 REGULAR MEETING PAGE 7