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6.F. - Page 3 of 7 o Staff had anticipated that water rates would need to increase in January 2021 in order to fund cost increases for wholesale water purchases; however, the City's water provider, San Francisco Public Utilities Commission, has announced the wholesale water rates will not increase July 1, 2020 through June 30, 2021. o Currently, the Water Fund has a projected year-end fund balance of $11.41VI for FY 2019/20; the fund balance is typically used for the City's water related capital improvement projects. Feasibilitv of Postooned Rate Increases Based on the above information, any delay of a rate increase for solid waste would cause financial strain for the City, since this utility does not have a sufficient balance to offset the increased costs for the City's solid waste service provider. However, both the Sewer and Water Funds have substantial fund balances that would typically be used for sewer and water related capital improvement projects to ensure the effective functioning of these systems. While the water rate increase can and will be postponed, deferring the sewer rate increase would result in a complex accounting issue. This is due to six neighboring agencies using Redwood City's sewer conveyance system to convey their sewage and therefore using Redwood City's sewer rate as a reference point to calculate their sewer rates. Utility Bill Credit Various other alternatives were considered, such as providing a discount as a flat rate or to only residential customers. However, both of these options would not be equitable, since the former provides a discount disproportional to the utility customer's usage, and the latter dismisses a group significantly impacted by the virus, business owners. Therefore, in lieu of postponing a sewer rate increase and in an effort to alleviate any financial burden caused by utility fee increases during these challenging times, staff recommends adopting a resolution that appropriates $600,000 from the Water Fund to fund a three percent utility bill credit for all Redwood City water utility account holders billed from July through October 2020 and appropriates $360,000 from the Sewer Fund to fund a three percent utility bill credit for all Redwood City sewer utility account holders billed from July through October 2020 in response to the COVID-19 pandemic. Since Redwood City is anticipating to transition to a new utility billing system by the end of June, implementing this credit no sooner than July would greatly reduce issues with the discount, since staff can focus resources on the new billing system. On an account level, this means that residential and commercial customers will see this credit on bill statements received between July and October, either on a bimonthly or monthly basis. While actual savings will vary, the average single family customer who pays for water and sewer services will receive an estimated savings of around $10 per bill statement. It is also important to note that any rate payers who currently qualify for the ongoing Water and Sewer Rate Assistance Program (WSRAP), based on income, would receive this temporary credit as additional relief. Page 3 of 5 City of Redwood City 1017 Middlefield Road, Redwood City, CA. 94063 Tel: 650-780-7000 www.redwoodcity.ore 152