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7.A. - Page 25 <br /> ES-2 Sewer Rate Recommendations <br /> The City's sewer utility is in strong financial health but faces a number of financial challenges in <br /> upcoming years that can be addressed via small, annual sewer rate increases. These challenges <br /> include: <br /> • Reconstruction of the Regional Wastewater Treatment Plant & Conveyance System - SVCW <br /> is in the process of completing a $790 million capital improvement program to rebuild its <br /> regional wastewater treatment plant and conveyance system. Redwood City is responsible <br /> for funding approximately 48.57%, or approximately $385 million, of SVCW's capital <br /> improvement program. The City's share of remaining SVCW financing needs is estimated at <br /> $280 million. SVCW has been pursuing a combination of low-rate State Revolving Fund (SRF) <br /> loans supplemented by bond financing. The City's share of debt service for SVCW's capital <br /> program is projected to ramp up from the current level of $5.2 million in 2015/16 to about <br /> $20 million per year within the upcoming decade. <br /> • Replacement of Aging Sewer System Infrastructure - Many of the City's sewer collection <br /> system pipelines are over 50 years old and are in need of rehabilitation and replacement as <br /> they reach the end of their useful lives. The financial projections include $6 to $7 million per <br /> year for ongoing repairs and replacements to the City's sewer collection system pipelines <br /> and other capital improvements. <br /> • Ongoing Cost Inflation — In addition to rate increases for other financial needs, small annual <br /> rate increases are needed to each year to keep rates in line with ongoing cost inflation. <br /> Updated sewer utility financial projections indicate the need for sewer rates to increase by an <br /> overall level of approximately 9% over the next three fiscal years. The proposed rates also <br /> incorporate a few modifications to the City's sewer rate structure designed to align rates with the <br /> cost of providing service. Due to these modifications, impacts to sewer bills will vary based on <br /> customer class and water use. Proposed rate structure modifications include: <br /> • Maintain fixed residential sewer rates, but implement a reduced charge equal to 90% of the <br /> standard residential rate for multi-family dwelling units on parcels with 10 or more total <br /> residential dwelling units. <br /> • Transition the City's commercial rate structure from a) current rates that include a uniform fixed <br /> charge which includes the first 10 units of billed usage regardless of customer class, to b) a rate <br /> structure that bills non-residential customers for every unit of usage, subject to a minimum <br /> monthly charge. <br /> • Consolidation of the City's non-residential sewer customer classes from current classes based on <br /> business type to classes based on wastewater strength. <br /> B Executive Summary ES 5 <br /> 1 Water&Sewer Financial Plans&Rate Studies <br />