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Director Ingram said strategies were being set to position the City and the fund for the future. The proposed Option No. I is for a 2-year period, the end of which should find the City in a "maximum flexibility position." Director Ingram advised that the City's water supplier, San Francisco Water Company wi!! dramatically raise wholesale rates of water beginning in 1998 and continuing through the next decade. "The PUC will have to spend multiple biIIions of dollars in the Hetch Hetchy Reservoir Storage Treatment System that is now reaching its first century ofIife.....Option No.1 provides for the retirement of that $2 mi!!ion emergency reserve by the end of the 2 years, and after that you will not have to pay money out of the rates to accumulate (reserves), which means more flexibility." Manuel Rosas, Public Works Superintendent in charge of rate setting, budget, the customer side of the water system and the water conservation program among other duties, showed overhead slides of Attachments 3 through 7 of the aforementioned Report. Superintendent Rosas described how basic service charges on the revenue side should balance out the fixed costs on the expenditure side - the basic service charges pay for the operational costs. "On the revenue side, the water sales are directly related to the water rates.....on the expenditure side the water sales support the variable costs (cost of water, power, in lieu fees and C.I.P. program, and emergency reserve fund.)" Superintendent Rosas explained Attachment 4 Distribution of Residential Water Usage showing percentage of Lifeline users (1-10 units) at 28%, (11-25 units) at 46%, (II-50 units) at 21%, and top 2 users at 3.9% and 1%, and said compared to other cities, Redwood City "had very good water conservation practices." Superintendent Rosas described the three options, with Option 3 employing a minimum increase to maintain balance between revenues and expenditures and Options 1 and 2 employing all three GroundruIes. He said the difference between Option 3 and Option I for Lifeline users was zero, and for water users using between 11-25 units over a 60 day period would be $ .75; and for the third group the difference is $8.00. The group that uses 75 units would be $22.00 more every two months, and the 100 unit users bi-monthIy water bi!!s will go up by $45.00. Superintendent Rosas showed Attachment No.5 and said the "water bi!!s in the Emerald Lake Hi!!s service area wi!! go down by $8.46 for all water users and that is directly related to the basic service charge - water rates remain the same as they are now." Superintendent Rosas said "by the second year (1997/98) we wi!! implement parity across the entire distribution system on the basic service charge and the water rates....This accomplishes the principle of an equitable distribution of cost across the entire water system." Superintendent Rosas said the cost increase for the operation and maintenance of the water system will impact all water users by $ .30 per month, and the cost for City service areas.....to bring all service zones into parity will be zero for MINUTE BOOK NO. 54 Page No. 272 MINUTES JUNE 10, 1996 REGULAR MEETING PAGE 8