TO:
Honorable Mayor and Members of the City Council
THROUGH:
Talyn Mirzakhanian, City Manager
FROM:
Erick Lee, Public Works Director
Jeff Page, Utilities Manager
SUBJECT: Title
Consideration of a Resolution Approving a Pass-Through Increase for Cost Recovery Related to Wholesale Water Purchases and Discussion of the Need for an Updated Water Rate Study, Sewer Rate Study, and Financial Plan (Budgeted Fiscal Year 2026) (Public Works Director Lee).
(Estimated Time: 30 Mins.)
A) ADOPT RESOLUTION NO. 25-0046
B) DISCUSS AND PROVIDE DIRECTION
Body
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RECOMMENDATION:
Staff recommends that the City Council:
1. Adopt Resolution No. 25-0046, approving the fiscal year (FY) 2025 pass-through water rate adjustment of $0.38 per centum cubic foot to recover increased wholesale water costs.
2. Direct staff to begin the process of updating the City's water and sewer rate studies and align them on the same schedule.
FISCAL IMPLICATIONS:
Based on updated assumptions and actual wholesale water rates, the City is projected to incur approximately $647,000 in additional water purchase costs for FY 2025 compared to the estimates in the 2022 Rate Study. The proposed pass-through rate of $0.38 per ccf (centum cubic feet and equal to 748 gallons) is expected to generate approximately $638,004 in revenue over 12 months, enabling near-full cost recovery for these additional wholesale water charges?. This adjustment is necessary to maintain the financial health of the Water Fund, which is not meeting fund balance requirements due to higher costs and declining water sales.
City financial policies require enterprise funds to maintain reserves equal to four months or 33% of operating expenses. At the end of FY 2025, the Water Fund is projected to have operating reserves of $2.4 million, which is $2.6 million short of the reserve requirement total of $5.1 million. The Sewer Fund is projected to have operating reserves of $974,906, w...
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