AgdaPkt 2016-06-13 Interview and Joint SA PFA

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7.A. - Page 78 • In recent years, the City's sewer finances have benefited from a) rate increases coupled with b) a deferral of SVCW CIP funding needs and related debt service resulting in lower-than-previously- projected expenses, and c) a higher-than-normal level of sewer connection fee revenues from new development. • The City anticipates drawing down fund reserves to a level of approximately $19.7 million by the end of 2015/16. This accounts for a cash payment made to SVCW for a portion of the City's share of SVCW's infrastructure projects financed in 2015/16. • The City's single family residential monthly residential sewer bill is in the middle range compared to other regional agencies. • The City's sewer enterprise is in strong financial health, but faces financial challenges. 3.6 Financial Challenges The City's sewer enterprise is facing a number of financial challenges that can be addressed via relatively small, gradual sewer rate increases in upcoming years. Key drivers of future sewer rate increases are summarized below. 3.6.1 Reconstruction of Regional Wastewater Treatment Facilities SVCW is in the process of completing a $790 million capital improvement program to rebuild its regional wastewater treatment plant and conveyance system. These facilities were originally constructed more than 35 years ago and have reached the end their useful lives. The capital program will replace aging, substandard facilities to ensure SVCW can meet stringent regulatory requirements and provide reliable and cost-effective service in future years. Redwood City is responsible for funding approximately 48.57% of SVCW's capital program costs, equating to approximately $385 million. A portion of SVCW's capital program has already been financed. Redwood City's share of the remaining $570 million in total future financing needs is estimated at $280 million. SVCW has been pursuing a combination of low-rate State Revolving Fund (SRF) loans supplemented by bond financing. SVCW has also obtained a $30 million revolving line of credit to provide interim project funding as needed. The City's share of SVCW debt service is projected to ramp up from the current level of$5.2 million to about $20 million per year within the upcoming decade. SVCW-related debt service has come online slower than previously projected by SVCW, but is projected to ramp up steeply in upcoming years as SVCW is approaching an intensive phase in its capital program. Table S3 shows Redwood City's share of outstanding debt service for SVCW's capital program. B Sewer Utility Finances& Rates 51 W Water&Sewer Financial Plans&Rate Studies