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5/23/2005 ORIGINAL RESOLUTION NO. 14645 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF REDWOOD CITY ADOPTING A POLICY FOR THE PRICING OF RECYCLED WATER. WHEREAS, the City of Redwood City ( "City ") currently provides water services to a variety of customers, and WHEREAS, in December 2002, a Water Financing Plan (the "Plan ") was completed Bartle Wells Associates, Independent Public Finance Advisors as part of the feasibility planning process for a recycled water project; and WHEREAS, on January 24, 2005, the City Council approved the Plan's 2004 update which, in part, discussed outstanding policy issues including the pricing of recycled water; and WHEREAS, the Plan's 2004 update includes Policy Assumption No. 10, Table A- 1 which reads: "Recycled water rates are assumed to be set at 75% of potable water rates for financial planning purposes and will not be subject to drought rate increases. We recommend that the Council consider the pricing policy for recycled water carefully and in the context of the adopted policy of no mandatory connection requirements to ensure that sufficient voluntary connections are achieved pursuant to the approved [project] Alternative 'TF'. "; and WHEREAS, the practice of delivering recycled water at a lower retail cost than drinking water is wide - spread in the water utility sector to generate timely momentum and interest in the initiative; and WHEREAS, with regard to landscape irrigation uses, the above described pricing practice takes into account the following rationales: • Projects must be able to connect customers quickly once expensive pipelines are built, so financial incentives for gaining commitments are an effective tool. • Customers will be inconvenienced during retrofit of their sites and during construction of pipelines. A cost reduction helps decision - makers find long term benefit to mitigate short term inconveniences and disruptions. • Once connected, recycled water customers are regulated by the City, and usually need to spend more time — and money — managing their sites to meet use requirements which include annual system audits. Other agencies have reported that lower water costs help customers maintain their commitments; and WHEREAS, in the case of Redwood City industrial users, staff has heard consistently that this customer group expects to pay for and perform all facilities retrofits, as they are the most knowledgeable about their plants and processes and in Atty /Reso /Reso.1539 1 14645 051605 Muff # 506