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Table A-1 Redwood City Water Financing Plan Policy Assumptions Policy A.ssumptions 1 Redwood City has overdrafted its potable water supply assurance from SFPUC in recent years and faces long-term water reliability deficits, especially during periods of drought. 2 Redwood City has historically been able to purchase adequate supply from SFPUC to meet full demand, including demand in excess of its supply assurance, due to the temporary availability of excess SFPUC supply. This excess supply is temporarily avaiiable because other BAWSCA agencies are not currently purchasing their full supply assurances. However, in future years the potable water purchases are projected to be below the supply assurance, primarily due to the implementation of an aggressive water conservation program and the construction of a recycled water system. 3 Redwood City has funded an aggressive water conservation program of $4.1 million through the water rates, with the goal of reducing potable water purchases from SFPUC in the amount of 632 AF/Yr. 4 Together, the City's water conservation program and recycled water project will help 1) resolve existing reliability and supply deficiencies, 2) provide additional water supply to meet the needs of growth, and 3) minimize the potential for financial penalties for overdrafting the City's supply assurance when excess SFPUC supply is no longer available or during periods of drought. 5 The Financing Plan makes no assumptions about revenues from new Water Capacity Charges or adjustments to Facilities Fees charged to new connections, and therefore the full burden of constructing the recycled water system, including debt service on bonds is 100% loaded into the water rates. 6 Redwood City is implementing Phase 1 of recycled water project Alternative 'IF'. Phase 1 of the project is projected to cost $72.3 million and includes a recycled water distribution system serving areas east of Highway 101. Cost estimates for each component of the project account for cost inflation to construction date and include contingency allowances. Phase 2, if eventually built, will extend the distribution system west of Highway 101 at an estimated cost of $12.8 million. 7 The recycled water project will reduce potable demand as irrigation and industrial customers switch from potable to recycled water supply. This will free up potable supply to improve reliability for existing and future customers, and provide water supply for new development. To ensure equity between current and future water customers, the City is planning to implement a Water Capacity Fee, Oil the basis of projected water use by new customers to ensure the fees recover the cost of 8 Recycled water rates will be discounted and will not be subject to drought rate increases. The Council considered the pricing policy for recycled water carefully, and in the context of the adopted policy of no mandatory connection requirements, decided to ensure that sufficient voluntary connections are achieved pursuant to approved project Alternative 'IF' (see Appendix B). 9 Redwood City is implementing a very proactive program to prepare sites and users for successful long-term use of recycled water, in full compliance with all federal, state and city safety regulations and policies. 10 A single family residential customer who completes a remodeling project may be required to install a larger meter size due to fire service requirements, even if the customer's water demand does not increase. Additional Facility Fees should be collected for actual increases in water demand, but not for mandatory meter upsizing due to fire flow requirements. The City anticipates adopting a policy 1 deal with this issue based on addITional analysis. BARTLE WELLS ASSOCIATES F:\Jobs\Redwood City\ 1921\ \Water Financial Plan Update 2007 FlAssumptions 1,4/12/2007,6:52 PM 8e Page 102 Attachment 5