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EP:CP:SM:PhaseII Santa Monica, California
council Meeting: February 11, 1992
TO: Mayor and city council
FROM: city staff
SUBJECT: Recommendation to Approve Phase II of the BAYSAVER
Plumbing Fixture Rebate Program
INTRODUCTION
This report presents Phase II of the BAY SAVER Plumbing Fixture
Rebate Program which will achieve the retrofit of an additional 25
percent of the residential households in the city and the retrofit
of 25 percent of the commercial toilet fixtures in the city.
BACKGROUND
Since its implementation in December 1989, the BAYSAVER Residential
Fixture Rebate Program has replaced 23,200 toilets and showerheads
in Santa Monica, thus exceeding the program's 25 percent retrofit
goal (19,200 bathrooms) three years sooner than originally planned.
The City's water consumption and wastewater flows in 1991 were at
their lowest levels in over twenty years. Achievement of the 25
percent retrofit goal has thus far represented savings of about
$250,000 per year on imported water purchases from the Metropolitan
Water District. Wastewater savings are represented through reduced
costs for sewage treatment of about $340,000 per year as well as
avoided costs for future treatment capacity expansion at the
Hyperion Sewage Treatment Facility totalling over $4.0 million.
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Recently, the Metropolitan Water District informed staff that the
Conservation Credits Program which supported about one-half of
BAYSAVER program costs would not be available for Phase II due to
proposed MWD budget cuts. The proposed Phase II of the BAYSAVER
program has been designed to reflect this change as well as other
modifications to ensure program goals are achieved with maximum
cost effectiveness.
DISCUSSION
The City anticipates that local demand for water-conserving
fixtures will continue to increase based on growing acceptance of
ultra low flow toilet performance/reliability and the need for
conservation beyond the duration of the current drought. Ultra low
flow toilet replacement programs have been approved by the Urban
Water Management Council (Santa Monica is a member of the steering
committee) as a Best Management Practice, thereby becoming a
required program by signatories to the recently enacted Memorandum
of Understanding Regarding Urban Water Conservation in California.
California's Health and Safety Code has been amended to require
that all new construction use 1.6 gallon per flush toilets and 1
gallon per flush urinals effective January 1, 1992. Plumbing
fixture manufacturers have responded to these and other State
legislative actions by marketing ultra low flush fixtures for every
type of plumbing configuration and occupancy.
Establishment by City council on April 1, 1991 of a mandatory 20
percent water cutback and penalty surcharges for exceeding water
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targets had a dramatic impact on overall city water consumption
levels and expedited achievement of the BAYSAVER program's 25
percent retrofit goal. Approximately 845,000 gallons per day of
the City's total water savings are attributable to the BAYSAVER
program, and these savings represent permanent water consumption
reductions.
Many behavioral changes motivated by the mandatory cut backs will
most likely not continue after cessation of the drought. Even with
a possible end to the drought, however, water supplies from the
state and from the Metropolitan Water District may remain at
current reduced levels. Therefore, participation in the BAYSAVER
program should remain strong and allow the City to achieve the
permanent water savings necessary to maintain our greatly reduced
water consumption levels well into the foreseeable future.
Residential Program Modifications
Phase II of the BAYSAVER Fixture Rebate Program will accommodate
ongoing public demand by achieving the retrofit of an additional 25
percent of the residential households in the City within three
years. To achieve a fifty percent residential retrofit target, an
additional 19,200 ultra low flush toilets and low-flow showerheads
will be installed in Santa Monica, or 6,400 per year in each of the
three years. The rebate program and the direct installation option
will function similarly to previous years with the following
exceptions:
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1) Rebates will be lowered from $100 to $75 for each bathroom
retrofitted as a cost-cutting measure, which is also justified
by the fact that the cost of ultra low flush toilet have
dropped as availability has increased; and
2) The direct installation option customer co-payment will be
increased from $25 to $35 per bathroom since program costs are
higher than originally estimated due to higher plumbing
contractor installation rates and storage/handling costs.
Non-Residential proqram
Phase II proposes a 25 percent retrofit target for non-residential
business/commercial occupancies. It is estimated that there are
approximately 20,000 non-residential toilets in Santa Monica of
which 16,700 are older, water-wasting models. A $75 rebate in the
form of a utility bill credit will be offered for every toilet
retrofitted. The direct installation option will not be offered to
non-residential customers as such occupancies often have property
maintenance services available, are capable of completing necessary
plumbing work without the use of plumbing contractors, or have
leasing agreements in which lessees pay their own utility bills.
Non-residential fixture configurations are generally of two types:
elongated tank toilets or flushometer valve/bowl combinations.
Either configuration can be retrofitted with 1.6 gallon per flush
models which have passed American National standards Institute
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(ANSI) tests and are readily available at local plumbing suppliers.
New ultra low flow models for commercial plumbing configurations
are continually being introduced and the level of confidence in
these products will increase as more businesses use them and
experience significant water savings.
The $75 rebate credit covers approximately half of the cost of the
less expensive commercial models, and it is estimated that total
customer out-of-pocket costs can be easily recovered through water
and wastewater bill savings within two years, depending on the
amount of water use and the type of installation which was
required. It is estimated that, on average, each commercial toilet
retrofit will save approximately 60 gallons of water per day. Low
flow showerheads and faucet aerators will also be required to
obtain the rebate credit, where applicable. Showerheads can be
obtained free of charge from the city. Rebates will be issued
through a credit on the customer's utility bill and will be
administered by Conservation Office staff. Any ultra low flush
plumbing fixtures installed in new construction or building
remodels as a requirement of the City'S plumbing code will not be
eligible for a rebate credit.
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Implementation/Customer Outreach strateay
Notification of the lower rebate and increased direct installation
fee for the residential program will be made through utility bill
inserts, local media advertisements, and printed materials
distributed at City facilities. Residents will be able to take
advantage of the current rebate amount of $100 provided that the
rebate application is received by the City's rebate processing
contractor before a targeted date. This targeted date will be
noticed on the billing inserts, ads, and printed materials. After
that date, all applications for rebate or direct installation will
receive the $75 rebate or pay the $35 installation fee. All
existing BAYSAVER printed materials will be revised and reprinted
to reflect the new rebate/fee structure.
To ensure that the non-residential rebate program receives a
favorable reception from the local business community, staff will
meet with the Chamber of Commerce and other groups to present the
proposed program, and will work with these groups to accommodate
their particular needs. Notification of the non-residential
program will be made via utility bill inserts to non-residential
water customers, targeted direct mailings to specific businesses,
and presentations to local business organizations. Conservation
staff will be available to visit local establishments to perform
water use audits, discuss the rebate program, and respond to any
other questions/concerns.
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Proposed proqram Budqet
The FY 1991-92 Budget for the Environmental Programs Division
includes funding for the retrofit of 10,000 residential bathrooms
in the city. This one year budget goal of 10,000 retrofits was
actually reached within five months, by December 1, 1991. The much
higher than expected demand for the BAY SAVER program has been
primarily related to the City's emergency water conservation
ordinance and the popularity of the direct install option for
mUlti-family property owners. For purposes of the proposed Phase II
program, it should be noted that the completion of the budgeted
10,000 retrofits results in a BAYSAVER total, since the inception
of the program two years ago, of 23,200 bathroom retrofits. This
number is 4,000 bathrooms more than the original 25 percent
BAYSAVER goal of 19,200 bathrooms. The 25 percent retrofit
milestone was actually reached on about October 1, 1991. The city,
therefore, has already accomplished 4,000 residential retrofits
towards the new 25 percent residential retrofit goal which is
proposed for the Phase II BAYSAVER program. The budget estimates
for Phase II reflect the reduced costs due to this "headstart" of
4,000 retrofits.
The estimated total budgets for the residential and non-residential
BAYSAVER programs are listed below. As with the previous BAYSAVER
program, the City intends to contract with a private firm for
application processing, inspection services, scheduling of plumbing
contractors for the direct install program, data collection and
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other related services. It is proposed that the City enter into a
new contract with DMC Services, Inc. , the firm currently under
contract with the City, to provide implementation assistance for
the proposed Phase II program. This recommendation is based on the
City's experience to date with DMC's performance under their
current BAYSAVER contract.
Residential BAYSAVER proqram Budqet*
Cateqories FY 91-92** FY 92-93** FY 93-94** TOTALS
Direct Install $ 186,079 $ 291,654 $ 229,411 $ 707,054
Rebates 178,865 272,340 214,285 665,490
Contract Insp/ 92,029 157,764 127,192 376,985
Processing
Advertising 20,000 20,000 10,000 50,000
Software Lease 8,750 15,000 12,500 36,250
Workshops 5,833 10,000 8,333 24,166
Toilet Recycling 20,417 35,000 29,167 84,584
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TOTALS $ 511,973 $ 801,668 $ 630,888 $1,944,529
*Amounts reflect 1991-92 dollars. It is assumed that one-half of
the retrofits will be under the Direct Install option and one-half
of the retrofits will be under the rebate option. Also assumes a
$75 per retrofit rebate and $35 customer co-payment per direct
install retrofit starting March 1, 1992.
** FY 91-92 represents period December 1, 1991 through June 30,
1992 and reflects 3,738 bathroom retrofits. FY 92-93 represents
period July 1, 1992 through June 30, 1993 and reflects 6,408
bathroom retrofits. FY 93-94 represents period July 1, 1993 through
May 1, 1994 and reflects 5,042 bathroom retrofits.
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Non-Residential BAYS AVER Program Budget*
Cateqories FY 91-92** FY 92-93** FY 93-94** TOTALS
Rebates $ 59,160 $ 177,480 $ 118,320 $ 354,960
Contract Insp/ 14,616 43,848 29,232 87,696
Processing
Advertising 10,000 10,000 5,000 25,000
Workshops 5,000 5,000 0 10,000
Toilet Recycling 3,333 10,000 6,667 20,000
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TOTALS $ 92,109 $ 246,328 $ 159,219 $ 497,656
* Amounts reflect 1991-92 dollars. Assumes a $75 rebate per toilet
retrofit.
**FY 91-92 represents period March 1, 1992 through June 30, 1992
and reflects 696 retrofits. FY 92-93 represents period July 1, 1992
through June 30, 1993 and reflects 2,088 retrofits. FY 93-94
represents period July 1, 1993 through March 1, 1994 and reflects
1,392 retrofits.
Sources of proqram Fundinq
Approximately one-half of the BAYSAVER program costs dur ing the
first phase of the program have been paid through a conservation
credit from the Metropolitan Water District. The city has recently
been informed by the MWD that they are not able to fund a
continuation of the BAYSAVER program at this time due primarily to
MWD budget constraints. Given this loss of MWD funding support, it
is proposed that the Phase II program be funded through a
combination of BAY SAVER Fees (a monthly amount charged to all
residential households who have not yet retrofitted their toilet
fixtures); Water Mitigation Fees (a charge for mitigation of water
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demand from new development); and a very minimal amount of water
user charges during the last fiscal year of the program. This
proposed financing strategy represents an almost completely self-
funded BAYSAVER program since only special fees which have been
specifically established in order to support the city'S plumbing
fixture retrofit efforts would be tapped. It is estimated that
$51,185 of general water revenues would be required to support the
proposed $2.4 million BAYSAVER budget.
BAYSAVER Phase II Sources of Funding
Fundinq Source FY 91-92 FY 92-93 FY 93-94 TOTALS
BAYSAVER Fee* $ 274,000 $ 415,500 $ 295,500 $ 985,000
Mitigation Fee** 330,082 632,496 443,422 1,406,000
Water User 0 0 51,185 51,185
charges*** ---------- ---------- ---------- ----------
TOTALS $ 604,082 $1,047,996 $ 790,107 $2,442,185
*Assumes continuation of the $2.00 per month single-family BAYSAVER
fee and the $1.35/month{dwelling unit mUlti-family BAYSAVER fee.
This fee is removed once a household/dwelling unit has been
retrofitted with ULF toilets and low-flow showerheads.
**Assumes that the current emergency ordinance requirement for
mitigation of two times (2X) gross flow from new development
(including substantial remodels) remains in effect until May 1,
1992 at which time it is replaced with a permanent requirement for
the mitigation of one times ( 1X) gross flow from new development.
***These user charges represent the bi-monthly fees based on water
meter size and actual water usage which are paid by all residential
and commercial customers. General user charges would not be
required to subsidize the Phase II program until FY 1993-94.
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BAYSAVER and Water Mitiqation Fees
It is proposed that the Baysaver Fee be continued for the duration
of Phase II at its current level of $2.00 per month for single-
family dwelling units and $1.35 per month per dwelling unit for
multi-family buildings. The BAYSAVER fee is removed when a dwelling
unit has been retrofit with ultra low-flow toilet fixtures and low
flow showerheads. As more residential dwelling units participate in
the BAYSAVER program, the proceeds from the BAYSAVER fee decline.
This decrease has been built into the revenue estimates presented
above.
There are two main reasons why it is not recommended that a new
BAYSAVER Fee be established for non-residential customers who will,
for the first time, be eligible for the retrofit program. First,
the residential BAY SAVER fee is charged based on the number of
dwelling units represented by a particular customer account.
Information on the number of dwelling units is readily accessible
on the utility billing system and allows for consistent tracking of
fee amounts and fee removals. Non-residential accounts do not
possess a similar common denominator for purposes of charging an
equitable BAY SAVER fee. If a fee were to be charged to non-
residential customers for financing their portion of the BAYSAVER
budget it would probably have to be in the form of a surcharge on
each billing unit of water used by a particular customer. staff
does not feel that this would be an equitable system, however,
since the proportion of water use related to toilet flushing varies
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significantly from business to business. Also, there are hundreds
of accounts which would need to be manually exempted from such a
charge due to the fact that they have already installed ULF toilets
either through their own retrofit efforts or due to the fact that
they were constructed after July, 1988 when ULF fixtures became a
code requirement.
An additional reason for not implementing a commercial BAYSAVER fee
is tied to the fact that revenues which have been and are
anticipated to be realized from the city's water mitigation fee
program are sufficient to cover the costs of all of the commercial
retrofit program and much of the residential retrofit program. The
water mitigation fee program is charged to all new single-family
residential construction which results in an increase in total
square footage of more than 50 percent; all new mUlti-family
residential construction which results in the addition of one or
more units; and all new non-residential construction which results
in an increase in the total number of plumbing fixtures. Currently,
each applicable building permit applicant is required to mitigate
two times the projected total water demand from the new project by
paying $3 for each gallon per day (gpd) which must be mitigated.
Between April 1 and December 1, 1991, approximately $600,000 in
water mitigation fee revenues were collected. To date, about
$300,000 of these mitigation fees have been used to retrofit almost
1,600 fixtures in city buildings, public schools, Santa Monica
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College, numerous non-profit facilities, and low/moderate income
housing. It is proposed that the remaining balance of water
mitigation fees as well as the future revenue stream be used to
offset the Phase II BAYSAVER program budget over the next two to
three years. It is further proposed that council direct staff to
evaluate the best way in which the present emergency water
mitigation program can be replaced by a permanent water mitigation
requirement for new development tied perhaps to a one times (lx)
rather than a two times (2x) mitigation threshold (each new project
would be required to mitigate one times the total projected water
usage) . The revenue projections presented above and in Exhibit I
assume that such a permanent water mitigation ordinance would be in
effect by May 1, 1992.
Reduced Water Usage and Sewage Flows
The estimated water savings (and sewage flow reductions) from the
proposed Phase II BAYSAVER program are presented below for both the
residential and commercial components of the program. Upon the
completion of Phase II in March, 1994, the city will have achieved
a permanent reduction in water usage and wastewater flows of 1.1
million gallons per day (mgd). When combined with the results of
the Phase I BAYSAVER program, the cumulative savings will total
over 1. 9 mgd. These 1.9 million gallons per day of reduced water
usage and decreased sewage flows represent a 15 percent reduction
in Santa Monica's average total daily water demand and a 19
reduction in average total daily sewage flows. This magnitude of
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permanent flow reductions would represent a tremendous
accomplishment by Santa Monica residents and businesses. A ten year
analysis of the cumulative financial costs and benefits from the
completed Phase II BAYSAVER program is presented in Exhibit I.
If a comparison is made solely between the cost of imported MWD
water and the cost of water savings through the retrofit program,
it becomes clear that by the end of ten years the retrofit option
will result in a significant cost savings to the city. Analyses of
imported water costs over the next ten years vs. costs for both
residential and commercial retrofits under the proposed Phase II
program are presented in exhibit II and exhibit III.
BUDGET/FISCAL IMPACT
The various revenue and expenditure impacts in FY 1991-92 which
will result from approval of the proposed retrofit program are
summarized in Exhibit I. Approval of the staff recommendation will
result in an appropriation increase of $604,082 to the BAY SAVER
account in the Environmental Programs Division (financed by a
transfer from the Water Fund). This amount is offset by the
estimated revenues which will be collected from BAYSAVER Fees and
Water Mitigation Fees. After considering the savings from reduced
MWD water purchases and decreased revenues from reduced water
usage, the net impact on the Water Fund in FY 1991-92 would be a
loss of $69,000.
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In the Wastewater Fund, the proposed Phase II program would result
in a revenue loss which from FY 1992-93 on will be largely offset
by a reduction in Hyper ion sewage treatment costs from lessened
sewage flows. The net impact on the Wastewater Fund in FY 1991-92
would be a loss of $169,000. Without a reduction in sewage flows,
it is expected that by FY 1999-2000 the city will be required to
purchase additional treatment capacity rights from the city of Los
Angeles. without the Phase II BAYSAVER Program, it is estimated
that the cost for the purchase of additional sewage treatment
capacity by the City in FY 1999-2000 would be $8.2 million. It
should be noted, however, that the need to purchase additional
sewage treatment capacity is subject to a complex set of legal and
policy determinations which will require future resolution.
One of the consequences of the increased water conservation which
is made possible by BAYSAVER program retrofits is a permanent
reduction in revenues accruing to both the Water and Wastewater
Funds. This decrease in revenues is expected to create short-term
cash flow issues in the Wastewater Fund until such time that the
substantial long-term benefits from reduced sewage treatment
capacity needs are fully realized. In order to address this short-
term revenue shortfall caused by the BAY SAVER program it is
proposed that emergency conservation surcharge penalty payments be
split evenly between the Wastewater and Water Funds starting July
1, 1992. Currently, 100 percent of these penalty payments are
credi ted to the Water Fund. This is a more equitable method for
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distributing emergency surcharge revenues and allows the city to
more effectively direct the funds toward their intended purpose,
the support of on-going conservation efforts such as the BAYSAVER
program. Adjustments in interfund transfer amounts between the
Water and Wastewater Funds will also be requested as a part of the
Proposed FY 1992-93 Budget to more equitably distribute the program
costs and revenue impacts associated with the BAYSAVER program and
other water conservation/wastewater reduction programs.
There are currently sufficient reserves in the Water and Wastewater
Funds to finance the projected costs of the BAYSAVER Phase II
program in FY 1991-92. The specific budget changes which would be
necessary following council approval of the Phase II program are
listed below.
FY 1991-92 Proposed Budget Changes
Expenditive Account Number Increase/(Decrease)
31-110-662-00000-4439-00000 $ 604,000
25-700-695-00000-5566-00000 604,000
31-700-695-00000-5566-00000 (604,000)
25-500-671-00000-2213-00000 (112,000)
Revenue Account Number Increase/(Decrease)
25-500-671-00000-0231-10000 (181,000)
31-500-671-00000-0165-10000 (169,000)
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RECOMMENDATIONS
It is recommended that City Council:
1) Approve the Phase II BAYSAVER plumbing fixture retrofit
program as presented in this report and authorize the budget
changes presented in the Budget/Fiscal Impact section above;
2) Authorize the city Manager to negotiate and execute a contract
with DMC Services, Inc. to provide BAYSAVER program services
to the city; and
3) Direct Staff to evaluate alternative approaches to the
establishment of a permanent water mitigation requirement for
new development in Santa Monica, to include examination of
mitigation thresholds and fee levels, and submit
recommendations to Council by March, 1992.
Prepared by: Stanley Scholl, Director of General Services
John Mundy, utilities Manager
Craig Perkins, Environmental Services Manager
Susan Munves, Conservation Coordinator
Exhibits
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EXHIBIT II
City of Santa MOnica
TEN YEAR ANALYSIS OF WATER COSTS
Imported Water Costs Compared to Cost of Water Savings
Obtained Through Residential Plumbing Fixture Retrofits
Projected Cost Cost of Retrofit Retrofit
of MWD Water Water Savings* CosV(Benefit)**
Fiscal Year (per acre foot) (per acre foot) (per acre foot)
1991-92 $261 $2,600 $2,339
1992-93 322 187 (1 35)
1993-94 465 176 (289)
1994-95 495 153 (342)
1995-96 579 126 (453)
1996-97 573 90 (483)
1997-98 571 51 (520)
1998-99 585 9 (576)
1999-00 599 0 (599)
2000-01 641 0 (641 )
2001 - 02 684 0 (684)
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TOTALS $5,775 $3,393 ($2,382)***
"'Based on the City of Santa Momca s BA YSA VER Phase II proposal. Assumes $75 per
retrofit rebate and City per retrofit cost of $130.
Also assumes that each retrofit sa~'es an average of 40 gpd lfl single famIly and 46
gpd lfl multifamIly households (this results in a weighted average saVings of 44 gpd per
retrofit assuming 30% SF and 70% MF partICIpants). &sed on the average saVIngs It IS
necessary to retrofit approXImately 20 bathrooms lfl order to reduce water usage by one acre
foot per year. The total cost for retrofittmg 20 bathrooms totals $2,600. The amounts listed
for each fiscal year also mclude an 8% dIscount {actor and are net of the cost of ongomg
MWD purchases (I.e., the cost benefit assumptIOn IS that a chOlce would be made at the start
of year one to eIther spend $2.600 on retrofits in order to save one acre foot of water per
year, or to invest $2,600 at 8% annual interest and use the accumulated funds to purchase
one acre foot ot MWD water per year at the prevailJflg MWD rate.
"'*This column shows the relative benefit "0" or cost of retrofit savlflgs compared to the
ongoing purchase of MWD water. The analYSIS IS earned forward for only ten years since
this was the conservative tOJlet/showerhead lifecycle assumptIOn that was incorporated into
previous CityMWD agreements.
"'**Yields a Net Present Value of $1.20l/acre foot. Based on 951 acre feet per year
savings from the Phase II residentIal program, the total NPV would be $1,142.253
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EXHIBIT III
City of Santa Monica
TEN YEAR ANALYSIS OF WATER COSTS
Imported Water Costs Compared to Cost of Water Savings
Obtained Through Commercial Plumbing Fixture Retrofits
Projected Cost Cost of Retrofit Retrofit Cost!
of MWD Water Water Savlngs* (Benefit)**
Fiscal Year (per acre foot) {per acre foot} {per acre foot}
1991 -92 $261 $1,800 $1,539
1992-93 322 123 (199)
1993-94 465 107 (358)
1994-95 495 79 (416)
1995-96 579 45 (534)
1996-97 573 3 (570)
1997-98 571 0 (571 )
1998-99 585 0 (585)
1999-00 599 0 (599)
2000-01 641 0 (641 )
2001 - 02 684 0 (684)
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TOTALS $5,775 $2,157 ($3,618)***
*Based on the City of Santa Monica s BA YSA VER Phase II proposal. Assumes $75 per
retrofit rebate and Oty per retrofit cost of $120 Also assumes that each retrofit saves an
average of 60 gpd. Based on the average savIngs It is necessary to retrofit approXlmately 15
toilets m order to reduce water usage by one acre foot per year. The total cost for
retrofittIng 15 tOlJets totals $1,800. The amounts l1sted for each fiscal year also include an
8% discount factor and are net of the cost of ongoing MWD purchases (i.e., the cost benefit
assumptlOn IS that a choice would be made at the start of year one to either spend $1.800 on
retrofits m order to save one acre foot of water per year, or to mvest $1,800 at 8% annual
interest and use the accumulated funds to purchase one acre foot of MWD water per year at
the prevailmg MWD rate.
uThIS column shows the relative benefit "0" or cost of retrofit savlflgs compared to the
ongomg purchase ofMWD water. The analYSIS is earned forward tor only ten years SInce
this was the conservatIve tOllet/showerhead I1fecyc1e assumptIOn that was Incorporated into
preVIOUS City/MWD agreements.
*"'*Yields a Net Present Value of$1,898/acre foot. Based on a 281 acre footiyear
estimated savings from the Phase II commercial program. the total NPVwould be $533,433.
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