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7.A. - Page 1 <br /> RE PO RT <br /> To the Honorable Mayor and City Council <br /> From the Cit Mana er <br /> May 7, 2012 <br /> SUBJECT <br /> Approval of Water Utility Service Rates and Charges <br /> RECOMMENDATION <br /> Waive First Reading and Introduce Ordinance amending Redwood City Code Section <br /> 38.5 —Water Service Charge. <br /> BACKGROUND <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, system repair and <br /> replacement. Revenues must be segregated from other municipal funds and uses and <br /> cannot be commingled with other activities. The Water Fund is completely separate <br /> from the City's General Fund. <br /> The Water fund is sustained by water related charges collected through customer utility <br /> bills. Among other things, the Customer Utility Bill has two components related to water <br /> charges working independently of each other; these are: <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. The City Council's Guiding Principles (attached) for the Water Enterprise <br /> Fund state that fixed costs and basic service charge revenues shall be in balance. <br /> b. Variable usage rates, based on the principle of rewarding conservation and the <br /> methodology "the more you use, the more you pay," have been in existence since <br /> the drought of 1989, created for the purpose of promoting water conservation. This <br /> component provides the financial support for the purchase of wholesale water from <br /> the San Francisco Regional Water System, electrical power from PG&E, capital <br /> improvements, the City's water conservation programs, and the City's recycled <br /> water bond payment. <br /> ANALYSIS <br /> The City Council approved a consecutive two-year increase to the discussed water rate <br /> components for Fiscal Years 2010/12, as recommended by the Utilities Committee, on <br /> April 12, 2010. This increased the monthly Water Service Charge and the monthly <br /> Water Quantity Rate by 9% each of the two years. In contrast, the San Francisco <br />