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7.A. - Page 21 <br /> ES EXECUTIVE SUMMARY <br /> ES-1 Introduction <br /> Redwood City's water and sewer utilities are financially self-supporting enterprises that rely <br /> primarily on revenues from water and sewer service charges to fund the costs of providing service. <br /> As such, the City's water and sewer rates need to be set at adequate levels to a) fund the costs of <br /> operating and maintaining the water and sewer systems, b) fund necessary capital improvements to <br /> keep the City's aging infrastructure in good operating condition, c) pay for the wholesale costs of <br /> water supply from the San Francisco Public Utilities Commission (SFPUC), and d) pay for the City's <br /> share of costs for the regional wastewater treatment plant operated by Silicon Valley Clean Water <br /> (SVCW). <br /> The City has provided proactive financial stewardship by gradually raising water and sewer rates <br /> each year over the past decade to keep revenues in line with the cost of providing service. The <br /> gradual rate increases have enabled the City to maintain the financial health of its utilities while <br /> avoiding the need for large rate spikes despite a number of financial challenges that have faced the <br /> water and sewer utilities in recent years. <br /> In 2015, the City retained Bartle Wells Associates (BWA) to develop updated financial projections <br /> and rate studies for the City's water and sewer utilities. Final recommendations incorporate input <br /> from City staff and the City Council's Utilities Committee, and independent legal review for <br /> compliance with the substantive provisions of Proposition 218. The proposed rates are designed to <br /> fund the operating and capital needs of the City's water and sewer utilities and equitably recover <br /> costs from all customers. With the proposed rates, the City's combined water and sewer rates are <br /> projected to remain in the middle range compared to other regional agencies. <br /> ES-2 Water Rate Recommendations <br /> The City's water utility has faced increased financial pressures in recent years, particularly due to <br /> large increases in SFPUC's wholesale water rates coupled with a substantial decline in the volume of <br /> water sales due to customer response to drought. The water utility is facing a number of financial <br /> challenges that will require rate increases in upcoming years. These challenges include: <br /> • SFPUC Wholesale Rate Increases - SFPUC wholesale water rates have more than doubled <br /> over the past 5 years, including a net 52% increase over the past 2 years. Wholesale water <br /> rates are projected to increase by an additional 37% over the next 4 years. <br /> • Capital Improvement to an Aging Water System - Many of the City's water distribution <br /> pipelines were installed over 50 years ago and are approaching the end of their useful lives. <br /> The City also needs to periodically rehabilitate or replace pump stations, storage tanks and <br /> B Executive Summary ES-1 <br /> 1A' Water&Sewer Financial Plans&Rate Studies <br />