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:7ð.z/ Table A-5 Redwood City Water Financing Plan Outstanding Policy Issues Outstanding Policy Issues 1 Water Rate Structure Adjustments - The financing plan calculates the total rate and revenue increases required from annual water sales and service charges. The City will need to determine how the various components of the rate structure will be adjusted to achieve the overall revenue target each year. 2 Annual Updates to Financial Projections - The cash flow projections are based on the best information currently available and incorporate many assumptions (e.g. project cost estimates, water demand projections, SFPUC rate projections, operating cost inflation, future bond interest rates, etc.) The City should update the financial projections annually based on the best available information and adjust future rates accordingly. Proposition 218 - In light of recent court ruling, the City Attorney should re-evaluate the applicability of Prop. 218 to the City's water service charges. The prevailing legal consensus has shifted in recent years and most agencies are now opting to adhere to the procedural requirements of Prop. 218 when adopting water and sewer rate adjustments. Prop. 218, enshrined as Articles 13C and 130 of the California Constitution, states that: a) proposed rates may not exceed the cost of providing service, b) notification of the proposed rates and a public hearing must be mailed to affected property owners, and c) the City must hold the public hearing at least 45 days after the notice is mailed and subject the proposed adjustments to majority protest (new rates cannot be adopted if more than 50% of affected parcels formally protest the increases). Facilities Fees Update - Water Facilities Fees have not been adjusted since 1994 and should be updated to account for the costs of the recycled water project and capital improvements completed over the past 10 years. These fees are governed by California Government Code Section 66000 et. seq. (AB1600). 3 4 5 Facilities Fees Policy Considerations - The City Council will need to resolve a number of policy issues when developing new Facilities Fees including: A) New fees should recover the costs of capacity in recycled water infrastructure and should account for other City policy objectives such as affordable housing; and B) Supplemental Facilities Fees for remodeling projects should be collected for actual increases in water demand, but not for mandatory meter upsizings due to fireflow requirements alone. BARTLE WELLS ASSOCIA TES F:\Jobs\Redwood City\1921\ \Redwood City Tables 1-13-06\Assumptions 5,1/13/2006,3:17 PM