HomeMy WebLinkAboutStaff Report 5.A 12/05/2011 Memo S upp ca./ Merv- for Item, # .A
MEMO TO: REMLEH SCHERZINGER INTERIM DIRECTOR l , ''
FROM: BOB REED
SUBJECT: WASTEWATER RATES AND RECYCLED WATER
DATE: NOVEMBER 30, 2011 THE REED GROUP, INC.
One of the questions asked by the City Council during the water and wastewater rate workshop
on October 24, 2011 pertained to how the wastewater rate recommendations might be affected if
recycled water projectsare - deferred. This memo is intended to answer that question.
Recycled water projects are intended to be funded through water capacity fees paid by new
development. The analysis to develop the water capacity fees prepared in 2008 by Bartle Wells
Associates included recycled water projects as the water supply component of the water
capacity fee. Accordingly, the water and wastewater rate study has recommended that 56
percent of water capacity fee revenue be transferred to the wastewater utility for the purpose of
funding recycled water projects.
Recycled water projects are shown in the wastewater financial plan as scheduled as described in
the rate study report. However, it is our understanding that these projects will proceed once
sufficient developer funding is available to pay for them. Recycled water projects are not
dependent on wastewater rate revenues, and the deferral of recycled water projects would not
create an opportunity for reducing the proposed increase to wastewater rates.
Secondarily, the proposed wastewater rate increases are driven primarily by the need to satisfy
certain debt covenants, including meeting debt service: coverage obligations. Even with the
proposed wastewater rate increases, it is anticipated that the City will need to utility a portion
of the Rate Stabilization :.Fund to meet the debt service coverage requirements. Reducing the
proposed increases in wastewater rates would require greater use of the Rate Stabilization Fund
and could present greater financial risk to the utility in upcoming years. Therefore, deferral of
any capital improvement projects would not impact the wastewater rate recommendations
contained in this rate study.
In summary, the deferral of recycled water projects has no impact on the need for increasing
wastewater rates as proposed in the water and wastewater rate study.