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/Ø-6 REDWOOD CITY - WATER FINANCING PLAN Background Redwood City faces substantial water reliability and supply deficiencies. The City relies on a single source of potable water supply: the San Francisco Public Utility Commission's (SFPUe) Retch Retchy regional water system. The City's water demands have exceeded its annual SFPUC contractual supply assurance of 12,243 .acre-feet (AF) by an average of about 800 AF over the past five years, with the annual overdraft peaking at over 1,400 AF in 2003/04. Without a reliable, supplemental source of supply, the City will: . Remain at high risk for not meeting its existing customers' water needs during periods of drought; . Be vulnerable to future SFPUC rate surcharges on water use that exceeds the City's supply assurance when SFPUC system demand reaches full capacity; . Not be able to provide adequate water supply to meet the demands of new development; . Remain vulnerable to severe financial impacts during periods of drought. In August 2002, Kennedy/Jenks Consultants submitted the "Water Recycling Feasibility Study for Redwood City". The study evaluated options for reducing the City's reliance on SFPUC water and concluded that the only viable, and most cost-effective way to meet the City's water reliability and supply deficiencies is via construction of a recycled water system coupled with an effective water conservation program. Kennedy/Jenks also developed a preliminary recommendation for a recycled water system based on analysis of a number of project alternatives. In late 2003, the City Council appointed a 20-member Community Task Force on Recycled Water (the "Task Force") to evaluate recycled water project options and recommend potential solutions to resolve the City's water supply deficit. In the spring of 2004, after five months of meetings and evaluation, the Task Force unanimously recommended implementation of a revised recycled water project coupled with an aggressive conservation program. Soon thereafter, the City began implementing the Task Force recommendations. Purpose & Objectives Bartle Wells Associates was initially retained as a subcontractor to Kennedy/Jenks to develop a financing plan for the recycled water project. In December 2002, Bartle Wells Associates submitted the "Redwood City Water Financing Plan" detailing findings and recommendations. The financing plan was updated in December 2004, in anticipation of the City's first bond issuance for the recycled water project. In February 2005 the City issued about $35.8 million of water revenue bonds to finance the first year of project costs. In July 1