AgdaPkt 2006-01-09 - Laserfiche WebLink

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ð'A - 9 incorporate a number of policy, financing, and other assumptions as detailed on the attached tables. The updated financial projections indicate the City should adjust rates on July 1,2006 in order to generate a 10% increase in rate revenues. The rate adjustment projections developed for this financing plan update are slightly different than last year's projections. It now appears the City can get by with lower rate increases for the next two years (10% each year vs. the prior projections of 12%), but will need slightly higher rate increases for most of the following years. The overalllO-year cumulative rate increases are virtually the same under both scenarios. The projected rate increases will enable Redwood City to: a. fully fund the water enterprise's operating and capital programs, including continuation of the City's active conservation program and the recycled water project, b. roughly maintain current levels of water operating fund reserves and continue to meet minimum fund reserve targets over the long-tenn c. meet future debt service obligations and debt service coverage requirements. Projected Water Rate Adjustments 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 New Projections 12% 10% 10% 8% 8% 8% 8% 8% 5% 5% Projections From 2004 Update 12% 12% 12% 6.5% 6.5% 6.5% 6.5% 6.5% 6.5% 6.5% The projected rate adjustments account for a number of anticipated cost increases over the next 10 years. Key factors driving the rate projections include: . SFPUC wholesale water rate increases - SFPUC rates are projected to more than triple over the next 10 years. The resulting increase to the City's cost of water supply is estimated to account for over 50% of total water enterprise cost increases through 2014/15. . Recycled water project financing - Total net annual debt service for the project is projected at $5.7 million, accounting for roughly a little over 25% of to tal lO-year cost increases. Operating cost inflation - With 3.5% cost inflation, operating and maintenance costs are estimated to account for a little less than 25% of total water enterprise cost increases through 2014/15. . The financing plan calculates the overall rate and revenue increases required from annual water sales and service charges. The City will need to detennine how various components of the rate structure will be adjusted to achieve the overall rate and revenue 5