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Table A-1 Redwood City Water Financing Plan Policy Assumptions Policy Assumptions 1 Redwood City is currently overdrafting its potable water supply assurance from SFPUC and faces increasing supply and reliability deficits, especially during drought years. 2 Redwood City has been able to purchase adequate supply to meet its overdraft demands due to a temporary surplus of SFPUC water capacity. The surplus capacity is projected to evaporate a water demands increase from other BAWSCA agencies which are not currently using their fully supply assurance. According to the most recent projections, the BAWSCA water demands will hit full capacity of 184 mgd in 2007-2010. 3 Redwood City anticipates it will be able to purchase adequate supply to meet its overdraft demands for the foreseeable future. However, overdraft water demand will likely be priced at substantially higher rates. During historical SFPUC supply shortages, water usage over allocated levels has been priced at rates as high as 10 times the standard unit rate. 4 Water recycling and related projects are needed to 1) resolve reliability and supply deficiencies for current customer base (1,100 AF deficiency), and 2) provide additional supplies to meet demands of new development (860 AF); total project to provide up to 1,960 AF by 2015. 5 Recycled water supply required for existing water reliability and supply deficits (1,100 AF) will be predominantly funded through water rates. 6 Recycled water supply that will free up potable water capacity for growth (860 AF) to be funded over time by new development through adjustments to existing Facilities Fees and/or creation of a new water supply capacity fee. 7 A 20% reduction in SFPUC water supply due to a drought will currently result in a 30% cutback in the amount of potable water allocated to the City based on the SFPUC's Interim Water Shortage Allocation Plan. Based on historical SFPUC drought pricing, water use in excess of the City's reduced drought allocation may be priced at exorbitant rates, potentially 10 times as high as normal-year SFPUC rates. 8 Redwood City is in the process of implementing an aggressive conservation program to reduce potable water demand. However, conservation measures alone will not be sufficient to solve the City's long-term water supply and reliability deficits. 9 Of all the water supply alternatives available, recycled water is the most reliable new source of supply that can be implemented before 2007-2009. 10 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 approved project Alternative 'TF'. 11 Redwood City will implement project Alternative 'TF' at a revised and refined estimated cost of $84 million over the period 2005 to 2015. The cost estimates for each component of the project account for cost inflation to construction date and include prudent contingency allowances. 12 Redwood City will implement a very proactive program to prepare sites and users for successful long-term use of recycled water, in full compliance with all federal, state and city safety regulations and policies. BARTLE WELLS ASSOCIA TES F:\Jobs\Redwood City\1921\ \Redwood City Tables 12-20-04\Assumptions 1,12/21/2004,5:48 PM