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<br />. <br /> <br />Determine the annual revenue requirements needed to fund the City's operating and <br />capital programs and finance the recycled water project <br /> <br />Recommend necessary rate adjustments <br /> <br />. <br /> <br />. <br /> <br />Phase-in rate adjustments over the 10-year planning period to the extent possible to <br />minimize the annual impact on ratepayers <br /> <br />Evaluate the potential impacts of a drought on wholesale water costs and on the water <br />enterprise's finances <br /> <br />. <br /> <br />. <br /> <br />Establish a prudent level of minimum fund reserves <br /> <br />Identify outstanding policy issues that should be addressed during final development <br />of water rates and update of the City's Facilities Fees. <br /> <br />. <br /> <br />The findings and recommendations presented in this report were developed with a <br />substantial amount of input from City staff, Kennedy/Jenks Consultants, and the City <br />Council's Utilities Committee, and incorporate recommendations developed by the City's <br />Task Force. <br /> <br />Current Finances & Rates <br /> <br />Redwood City's water enterprise is in excellent financial condition. Water revenues are <br />sufficient to fund the City's operating and capital programs. The City budgets <br />approximately $2 million per year for ongoing capital replacements to keep the water <br />system in good working condition. As of June 30, 2004, the water enterprise had an <br />effective operating fund reserve of approximately $12 million including $3.8 in current <br />operating reserves plus an additional $8.3 million temporarily loaned to the Water Capital <br />Improvement Program (CIP) Fund for the recycled water project. The $8.3 million will <br />be repaid to the water operating fund when the first series of bonds are issued for the <br />recycled water project. Current effective operating reserves equal about 80% of annual <br />operating expenses. <br /> <br />The City's current water rates are low compared to other regional agencies (see <br />Appendix E, pages 9-10). An average single family residence uses about 22 hundred <br />cubic feet (ccf) of water per bi-monthly billing period and pays an average of $58.42 per <br />bi-monthly bill, equivalent to $29.21 per month. Rates and service charges are updated <br />annually. <br /> <br />The City's Facilities Fees - one-time fees paid by new customers to purchase capacity in <br />the water system - have not been adjusted since July 1, 1994 and should be updated to <br />account for the cost of capacity in the recycled water proj ect and capital investments in <br />the City's water system since 1994. <br /> <br />Recycled Water Project <br /> <br />In the spring of2004, the City Council appointed a Task Force to provide input on the <br />recycled water project and review alternatives. Based on evaluation of numerous <br />alternatives and Task Force input, the City opted to pursue Kennedy/Jenks recommended <br /> <br />Water Financing Plan <br /> <br />2 <br /> <br />December 2004 <br />