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7.A. - Page 22 <br /> reservoirs, and other infrastructure. The financial projection include a gradual ramp-up of <br /> capital improvement funding from $3 million in 2016/17 to $6 million per year in 6 years. <br /> • Substantial Decline in Water Sales - Water sales have declined by 25% to 30% from historic <br /> norms resulting in a substantial reduction in water sales revenues. This decline has been <br /> partially offset by a corresponding reduction in expenses for wholesale water purchases. <br /> Customers who have conserved have been able to mitigate the impact of water rate <br /> increases implemented in recent years via a reduction in the amount of water purchased. <br /> • Ongoing Cost Inflation — In addition to rate increases for other financial needs, small annual <br /> rate increases are needed each year to keep rates in line with ongoing cost inflation. <br /> Updated water utility financial projections indicate the need for water rates to increase by an <br /> overall level of approximately 22% over the next three fiscal years. The proposed rates also <br /> incorporate a few modifications to the City's water rate structure designed to align rates with the <br /> cost of providing service. Due to these modifications, impacts to water bills will vary based on <br /> customer class and water use. Proposed rate structure modifications include: <br /> • Revision of the tier breakpoints for residential water quantity charges, resulting in a decrease in <br /> the volume of water sold in each rate tier. <br /> • Transition of non-residential quantity charges from a two-tiered rate structure to a uniform rate <br /> for all commercial water use. <br /> • Small reduction in the overall share of water rate revenues recovered from the City's fixed water <br /> service charges coupled with larger increases to water quantity charges in response to the <br /> recent and projected increases in wholesale water rates. <br /> The table on the following page shows a schedule of proposed water rates for the next three fiscal <br /> years. With the proposed rate increases, the City's water rates are projected to remain in the <br /> lower-to-middle range compared to other regional agencies. <br /> B Executive Summary ES-2 <br /> 1A' Water&Sewer Financial Plans&Rate Studies <br />