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7.B. - Page 1 <br /> REPORT <br /> To the Honorable Mayor and City Council <br /> From the City Manager <br /> June 13, 2016 <br /> SUBJECT <br /> Public Hearing on Proposed Increase to Sewer Service Rates and Charges <br /> RECOMMENDATION <br /> Conduct Proposition 218 Public Hearing on Proposed Increase to Sewer Service Rates <br /> and Charges; Waive First Reading and Introduce Ordinance Amending Redwood City <br /> Municipal Code Section 27.100 (Sewer Service Charges) <br /> BACKGROUND <br /> In 2015, the City retained Bartle Wells Associates to develop a long-term financial plan <br /> and rate study for the City's sewer utility enterprise. While the City has annually <br /> reviewed and adjusted sewer rates, the actual rate structure has not been <br /> independently reviewed in many years. With guidance from City Council's Utilities <br /> Committee, staff's key goals while developing the proposed sewer rates and structure <br /> are to: (1) recover the costs of providing service; (2) ensure charges are fair and <br /> equitable to all customers; (3) create rates that are easy to understand and implement; <br /> (4) comply with the requirements of the California Constitution, Article 13D, Section 6 <br /> (i.e. Proposition 218); and (5) support the long-term operational and financial stability of <br /> the sewer utility. <br /> Conclusions from the rate study support a proposed average annual sewer rate <br /> increase of approximately 3.0% per year for the next three fiscal years, starting with <br /> 2016-17 and continuing to 2018-19. Even with the proposed increases, the City's sewer <br /> rates are projected to remain in the middle range compared to other regional agencies <br /> and remain the lowest of the four Silicon Valley Clean Water (SVCW) member <br /> agencies. <br /> ANALYSIS <br /> As an "Enterprise" fund, the City's sewer utility is legally required to be self-sustaining. <br /> All sewer fund expenditures must be directly related to operations, maintenance, repair, <br /> and replacement of the utility. Revenues collected from rates and other sewer charges <br /> are segregated from other municipal funds and uses, and cannot be commingled with <br /> other activities. <br /> Sewer rate increases are being proposed to pay for increased costs including: <br />