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If) -g -5 <br />REPORT <br />To the Honorable Mayor and City Council <br />From the City Manager <br />July 14, 2003 <br />Subject <br />Amendment of Water Basic Service Charge and Conservation Usage Rates <br />Recommendation <br />A. Introduce Ordinance Amending Redwood City Code - Section 38.5 - Water Basic <br />Service Charge <br />B. Approve Resolution amending water conservation usage rates <br />Background <br />Due to a large increase in the cost of wholesale water from the San Francisco Hetch <br />Hetchy regional water system, Redwood City must increase its retail rates and charges in <br />order to balance revenues and expenditures for the fiscal year which began July 1, 2003. <br />The Water Fund is an "enterprise" fund, which by law must be self- sustaining. All <br />expenditures must be directly related to operations, maintenance, repair and system <br />replacement. Revenues must be segregated from other municipal funds and uses, and <br />cannot be commingled with other activities. <br />There are two components of the water utility bill for all customers, which work <br />independently of each other: <br />A. A fixed, monthly basic service charge that provides the financial support for the <br />operations and maintenance of the City's water system, i.e.; salaries, benefits, <br />equipment, supplies and services, which are within the direct control of the City <br />Council. <br />The City Council's Guiding Principles (attached) for the Water Enterprise Fund state <br />that fixed costs and basic service charge revenues shall be in balance. The <br />Enterprise fixed costs for Fiscal Year 2003/04 will increase, primarily due to labor <br />and retiree medical cost increases. <br />In October, 2002, Council approved an increase in the monthly Basic Service <br />Charge of 3.5 %, from $10.44 to $10.80 per month, to cover increases in "fixed" <br />costs. The 10 -year business plan projected annual inflationary adjustments of <br />3.5 %. <br />On June 30, 2003, staff presented a summary of Water Enterprise budget changes <br />to the City Council the for Fiscal Year 2003/04 and advised the Council that a 3.5% <br />increase in the Basic Service Charge will be needed to balance revenues and <br />"direct" expenditures. The City Council Utilities Committee supports the following <br />- package of changes as this matter now goes to the full City Council for public <br />hearing and final decision. <br />Page 1 of 3 <br />