AgdaPkt 2019-06-24 Joint SA PFA - Laserfiche WebLink

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6.U. - Page 18 of 47 ES -1 Introduction Redwood City's sewer utility is a financially self-supporting enterprise that relies primarily on revenues from sewer service charges to fund the costs of providing service. As such, the City's sewer rates need to be set at adequate levels to a) fund the costs of operating and maintaining the City's sewer system, b) fund capital improvements to repair and replace the City's aging sewer system infrastructure, and c) pay for the City's share of costs for the regional wastewater treatment plant operated by Silicon Valley Clean Water (SVCW). SVCW costs include the City's share of costs for rebuilding and upgrading SVCW's aging and outdated wastewater treatment plant and 9 -mile pipeline that conveys sewage from Redwood City and other regional agencies to SVCW. The City has engaged in proactive financial stewardship by gradually raising sewer rates each year over the past decade to keep revenues in line with the cost of providing service. The gradual rate increases have enabled the City to strengthen the sewer enterprise's financial health and avoid the need for large rate spikes despite a number of financial challenges that have faced the sewer enterprise in recent years. ES -2 Sewer Enterprise Funding Requirements The City's sewer utility is in strong financial health but faces substantial cost increases in future years that can be addressed via relatively small, gradual, annual sewer rate increases. Sewer rate increases are needed to provide funding for: ➢ Rehabilitation & Reconstruction of Regional Wastewater Treatment Facilities — SVCW is in the process of completing an $850 million capital improvement program to rebuild and rehabilitate its aging and outdated wastewater treatment plant and the 9 -mile pipeline that conveys sewage from Redwood City and other regional agencies to the treatment plant. Redwood City is contractually responsible for approximately 48.57% of total project costs, which equates to over $410 million. The improvements will enable SVCW to replace and upgrade its outdated facilities to meet regulatory requirements and provide reliable service in future years. SVCW has been pursuing a combination of low -rate financing from the State Revolving Fund (SRF) and the Water Infrastructure Financing and Innovation Act (WIFIA) financing programs supplemented by bond financing. The City's share of debt service for SVCW's capital program is projected to ramp up from the level of $11.1 million in the current fiscal year 2018/19 to about $21.6 million per year over the next 8 years. ➢ Replacement of Aging Sewer Collection System Pipelines — Redwood City owns and operates a wastewater collection system with roughly 200 miles of sewer pipelines and 31 pump stations. Many of the City's sewer pipelines are over 50 years old and are approaching the end of their useful lives. Some pipelines are undersized and need to be replaced with larger pipelines. The proposed rate increases will enable the City to continue funding high-priority pipeline replacements, pump station ®BARTLE WELLS ASSOCIATES 1 Sewer Financial Plan & Rate Update 697