AgdaPkt 2016-06-27 Closed and Joint SA PFA

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Water Utility Finances & Rates 5 Water & Sewer Financial Plans & Rate Studies 2 WATER UTILITY FINANCES & RATES 2.1 Water System Overview Redwood City provides water service to most of the corporate area of the City as well as limited areas adjacent to the City. The water utility currently serves a population of approximately 85,000 through roughly 24,000 service connections within a roughly 17‐square mile service area. The City relies on wholesale water purchased from the San Francisco Public Utilities Commission (SFPUC) for 100% of the City’s potable water supply. The City is a member of the Bay Area Water Supply and Conservation Agency (BAWSCA), which represents the collective interests of 26 agencies that purchase wholesale water from the SFPUC. The City also provides recycled water produced by Silicon Valley Clean Water’s regional wastewater treatment plant, located in Redwood Shores, predominantly for landscape irrigation. The City’s potable water system consists of 2 water supply turnouts from the SFPUC, 12 storage tanks and reservoirs with a combined capacity of over 21 million gallons (mg), 10 pump stations, 26 pressure reducing valves, roughly 2,400 hydrants, and over 260 miles of water distribution pipelines. 2.2 Water Financial Overview Redwood City’s water utility is a financially self‐supporting enterprise that relies primarily on revenues from water rate revenues to fund the costs of providing service. Water rate revenues have historically accounted for over 95% of total annual revenues, with the remaining revenues coming from interest earnings, facilities fees and capacity charges from new development, and other miscellaneous revenues. As such, water rates must be set at levels adequate to fund the costs of operating and maintaining the water system, pay for wholesale water supplied by the SFPUC, and fund necessary capital improvements to keep the water system in good operating condition. The City has provided good financial stewardship of the water utility by gradually raising rates each year to keep revenues in line with the City’s cost of providing water service. The water utility fund has historically been in good financial health but has faced increased financial pressures in recent years, particularly due to large increases in SFPUC’s wholesale water rates coupled with a substantial decline in the volume of water sales due to customer response to drought. At the same time, water finances have benefited from a) a temporary reduction in staffing costs due to vacancies and positions funded by the City’s meter replacement program, b) an increase in development impact fees, and c) relatively stable City operating costs in recent years, partly due to reduced City benefit contributions and a staffing reorganization. 6.4.A. - Page 32