AgdaPkt 2017-01-23 Closed and Joint

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-42- implement mandatory water reductions in cities and towns across California to reduce water usage by an average of 25 percent. The required conservation standard for the City is 8%. The mandatory reduction for the City is 8%. Regarding local water agencies, the Governor’s order directs adjustments to their rate structures and other pricing mechanisms to implement surcharges, fees, and penalties, to maximize water conservation consistent with statewide water restrictions. The Water Board has been directed to work with state agencies and water suppliers to identify mechanisms that encourage and facilitate the adoption of rate structures and other pricing mechanisms that promote water conservation. Local water agencies will also be required to provide monthly information on water usage, conservation, and enforcement on a permanent basis. For more information please see the complete text of Executive Order B-29-15 (http://gov.ca.gov/docs/4.1.15_Executive_Order.pdf). On April 20, 2015, a State appeals court ruled that, notwithstanding the Governor’s order, local water agencies cannot charge higher rates to big users simply because those customers use more water. Instead, the court said that water agencies can charge only as much as it costs them to provide service to customers. The court held that tiered rates can be legal when additional water costs more to supply. But the court said Proposition 218 requires that water rates and other government fees be linked to the costs of providing the service and not to other factors such as government’s desire to encourage conservation. Notwithstanding the foregoing, the City does not believe its rate structure is affected by the court of appeals ruling because its rates correlate with the actual costs of providing service to the various tiers. Wholesale Water Costs San Francisco is expected to substantially raise wholesale water rates for the Suburban Customers, including the Enterprise, due to the costs of San Francisco’s capital improvement program, which is described above under “THE ENTERPRISE – Water Supply – San Francisco Capital Improvement Plan and Long-Range Financial Plan” above. The City projects that these rates may increase by up to 38% through Fiscal Year 2022-2023, from $1,415 per acre foot in Fiscal Year 2014-15 to $1,960 per acre foot in Fiscal Year 2022-2023 (exclusive of the BAWSCA Surcharge). Including the BAWSCA Surcharge, rates may increase up to 54% through Fiscal Year 2022-2023, from $1,415 per acre foot in Fiscal Year 2014-15 to $2,178 per acre foot in Fiscal Year 2022-2023. The City has covenanted in the 2017 Installment Purchase Contract to prescribe and collect rates, fees and charges in connection with the Enterprise in an amount sufficient to allow the Enterprise to pay Operation and Maintenance Costs and amounts due under the 2017 Installment Purchase Contract and any Parity Obligations. Further, the Enterprise has agreed, in the 2017 Installment Purchase Contract, to prescribe and collect rates, fees and charges in connection with the Enterprise during each Fiscal Year which are sufficient to yield estimated Net Revenues which are at least equal to one hundred twenty percent (120%) of the aggregate amount of the 2017 Installment Payments, and principal of and interest on any Parity Obligations (including the 2013 Installment Purchase Contract and the 2015 Installment Purchase Contract) payable from Net Revenues coming due and payable during such Fiscal Year. In order to issue Parity Obligations in the amounts currently anticipated based on future expected operating and non-operating expenses (see Table 18), the City will be required to raise its rates and charges by the percentages set forth above under the caption “THE ENTERPRISE— Water Rate Increases—Future Rate Increases.” 8.C. - Page 67