AgdaPkt 2005-01-24 - Laserfiche WebLink

Browse Search

Table A-5 Redwood City Water Financing Plan Outstanding Policy Issues For Consideration Outstanding Policy Issues 1 Water Rate Structure Adjustments - The financing plan calculates the total rate and revenue increases required from annual water sales and service charges. However, the City Council still needs to determine how the various components of the rate structure will be adjusted to achieve the overall revenue target. 2 Recycled Water Pricing - The City Council anticipates providing a pricing incentive for recycled water use and will need to establish a recycled water pricing policy in conjunction with the adoption of new rates. As an initial placeholder for financial planning purposes, the financing plan assumes that recycled water rates will be set at 75% of potable water rates. 3 Annual Updates to Financial Projections - The cash flow projections are based on the best information currently available and also incorporate many assumptions (e.g. recycling project cost estimates, water demand projections, SFPUC rate projections, operating cost inflation, future interest rates, etc.) The City should update the financial projections annually to ensure it adopts adequate rates to support the City's operating and capital programs including recycled water project financing requirements. 4 Annual Rate Increases - Future rate increases will be driven by a number of factors including recycled water project financing, operating cost inflation, water conservation, and SFPUC wholesale water rates, which are projected to almost triple over the next 10 years. The City Council should re-evaluate its current policy of directly linking annual rate increases to annual cost increases in order to facilitate a steadier and more gradual phase-in of rate adjustments to mitigate the annual impact on ratepayers. Timing of Annual Rate Increases - Rate adjustments should be adopted annually prior to the issuance of each new bond issue to ensure the City can meet the legal requirements for issuing additional parity debt. This may require the adoption of new rates prior to the adoption of a new budget. Minimum Fund Reserve Target - The City Council should consider adopting a minimum fund reserve target for the water operating fund. A fund reserve target provides future policy guidance and promotes prudent long-term financial stewardship. The financing plan recommends a minimum reserve target comprised of two components: A) Emergency operating reserves of $2 million (existing Council policy); plus B) Drought contingency reserves based on the estimated annual financial impact of a drought -- higher water costs and reduced revenues from lower water sales -- assuming a 20% SFPUC systemwide drought and 10% reduction in demand due to drought conservation. 5 6 7 Facilities Fees Update - Water Facilities Fees have not been adjusted since 1994 and should be updated to account for the costs of the recycled water project and capital improvements completed over the past 1 0 years. These fees are governed by California Government Code Section 66000 et. seq. and can recover the estimated reasonable costs for capacity available in existing infrastructure plus costs for capacity in new facilities required to serve growth. Facilities Fees Policy Considerations - The City Council will need to resolve a number of policy issues when developing new Facilities Fees including: A) New fees should recover the full costs of infrastructure required to provide service, but at the same time should account for other City policy objectives such as affordable housing; and B) Supplemental Facilities Fees for remodeling projects should be collected for actual increases in water demand, but not for mandatory meter upsizings due to fireflow requirements alone. 8 BARTLE WELLS ASSOCIA TES F:\Jobs\Redwood City\1921\ \Redwood City Tables 12-20-04\Assumptions 5,12/21/2004,5:51 PM