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Director Ingram said the overhaul about five years ago changed a troubled system into a well-controlled program with a $2 million emergency reserve and a $2 million per year planned capital improvement program. He said the Council was being asked to act upon that part of the program it directly controlled, the rates. Director Ingram said the Utilities Committee's recommendation covers the next four years based on what is known about future costs. He said those costs were averaged over four years and resulted in a proposed 3.5% increase. Director Ingram said rather than have the rate go up and down from year to year, the Committee recommended that the City establish "a cost of business increase per year of 3.5%." Director Ingram said, "This is also the third full year since you have adjusted this item in your water service charges. We have held the line for three years, and to make sure that your Fund is healthy for the next several years out, this increase is required." He said the proposal would result in an increase from $9.10 per month to $9.42 per month, or a 32-cent increase per month. He said that at the same time, "the projected rates from San Francisco on a wholesale level to us... will go down next year by almost 12%, increase 26% the year after that, they will increase 22% in the third year, and are projected to increase 8% in the fourth year, for an average increase of 11 % per year over the next four years. That is completely out of this Council and every other Council and Board of Director's control who buys water from them." Director Ingram said the "real driver for this (increase) is a long delayed and much needed capital improvement program of the Hetch Hetchy water delivery system." He said that the City supported the proposed improvements, but, "The real dilemma is whether San Francisco is going to be able to deliver those improvements in a way that we get tangible results for the money we will be paying through our rates.... The Bay Area Water Users is actively watching out for your interests in that respect." Director Ingram said that a household using 20 units of water per billing period, twice the Lifeline use, the average increase would be about 1.5% on the bill, from $43.60 to $44.24 for two months. In response to Mayor Howard's questions regarding an appeal process for someone who felt it was urJfair or unjustified, Director Ingram said there were no plans for an appeal process at this time, but suggested that this public hearing was the vehicle for people to bring their concerns to Council. He said the Council will set the rates after this public hearing. Director Ingram described the very strong conservation program that the Public Works Services Department provides to everyone who is interested, including going to customer's homes to help in landscaping and home use conservation. 2. Open public hearing; Mayor Howard declared the public hearing open at 8:50 p.m. REGULAR COUNCIL MEETING MINUTE BOOK NO. 56 JUNE 22,1998 MINUTES Page No. 574 PAGE 12