1997 AGN APR 01 I27 - Laserfiche WebLink

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CITY OF COLTON AGENDA REPORT FOR COUNCIL MEETING OF APRIL 1, 1997 SUBJECT: GENERAL WATER RATE INCREASE The 7.0% increase would result in an average monthly residential water bill (30 cco going from $29.38 to $31.43, an increase of' $2.05. Of course, this difference would vary depending on the amount of water used, but the percentage change would be constant. Staff is not recommending any change in the design of the water rates. Presently there is no supporting data to indicate that the current design is unfair in the allocation and recovery of the revenue requirements. Even following the rate change, residential customers, will only be paying $0.0014 per gallon of water. FINANCIAL IMPACTS The adoption of any type of capital improvement program in the water utility will necessitate a rate increase of some kind. It is the opinion of the utility staff that a 7.0% increase is the minimum level that will sustain the debt service for a $10 million financing. At this level sufficient coverage of the debt will be attained. However, any cash reserves will be used over the ensuing four years, and an additional increase is projected in FY 2000-01. A higher increaseatthis time will protect the cash reserves and afford the utility some protection from unforeseen disasters, changes in service requirements, and uncertainty. The revenue requirements of the water utility will increase essentially due to the debt service. This is currently estimated to be $730,500, annually, for the next 30 years. The other financing options, except for the SRF 'loan would ultimately raise the debt service. The SRF would save some amount, but the timing and administrative costs would negate some of those savings. This matter was presented to the Utilities Commission at both the February and March meetings. Fallowing lengthy discussions at both meetings, the Commission, at the March 10 meeting, voted to limit the staff recommendation of $10 million to $5 million of FARECal participation. Staff can work within these limitations and accomplish a portion of the capital improvement needs. However, it is Staff's position that the full program should be authorized and that the City Councilshould ratify Staffs original recommendation and, proceed with the $10 million, CIP. The alternative would be to concur with the Commission's action and approve the reduced CIP. This would necessitate a smaller rate increase (5.5%) and would require a reassessment of the CIP needs within the next two to three years and the appropriate financial plan to address the capital needs. Thomas K. Clarke, Department Director RECOMMENDATION That City Council adopt the attached resolution for a 7.0% general water rate increase to become effective June 30, 1997. Attachments: Resolution w/Attachment "A"; Water Fund Five Year Financial Projections; Water Revenue Bonds Comparison of Financing Alternatives; Proposed Transmission, Pump Station, Reservoir, and Well Improvements; and Capital improvement Projects Bdiibit 'B" Page 3 of 3 item No.