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Council Meeting: June 28, 1983 Santa Monica, California
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T0: Mayor and City Council JUN 2gly$3
FROM: City Staff
SUBJECT: Proposed Water Rate Decrease
Introduction
This report recommends a 43% reduction in the Capital
Improvements Charge component of the Commercial Water sales rate
due to an anticipated change in the financing method for major
water system capital projects.
Background
In 1981, the City Council adopted a series of water rate
increases recommended by staff. One component of the commercial
sales rate increase was a capital improvements charge. This
charge is not related to the amount- of water used but varies by
the size and type of development on a particular parcel and was
intended to provide a cash financing reserve for anticipated
major capital improvements needed in the years to come.
However, since adoption of this rate component, the City's
anticipated method of capital financing has changed from a cash
(pay-as-you-go) approach to some form of long-term financing
(pay-as-you-use). In fact, developing a series of alternative
financing options is an objective for the Water Division 1983-84.
Reducing the Capital Improvements Charge portion of the rate
structure is preferred to reducing other portions of the rate
because it is not based on consumption. It is not desirable to
take any actions which would discourage water conservation.
Secondly, a decrease in this charge proportionately benefits A
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Council Meeting: June 28, 1983 Santa Monica, California
those. customers who have contributed to the existing fund
balance.
Fiscal Impact
The proposed 43% reduction in the Capital Improvements Charge
would result in an approximately $750,000 revenue decrease in
1983-84. Balanced against the proposed expenditure rates, the
effect is to eliminate growth in the fund balance between June
30, 1983 and June 30, 1984. The fund balance would thus remain
at approximately $6 million.
Recommendation
It is recommended that the City Council adopt the attached
resolution reducing Water Capital Improvements Charge by 43%
effective July 1, 1983.
Prepared by: Lynne Barrette, Deputy City Manager
Stan Scholl, Director of General Services
Ed Lash, Enterprises Manager
Attachment: Resolution
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