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BACKGROUND <br /> On August 17, 2010 Zone 7 sponsored a water retailer's workshop during which Zone 7 <br /> staff discussed and reviewed their budget forecast for 2011. They also presented three <br /> water rate alternatives that they were planning to present to the Zone 7 Finance <br /> Committee for recommendation to the Board. A summary of the three alternatives is as <br /> follows: <br /> Alternative 1- Smoothing of Water Rate Increases. This alternative includes a rate <br /> increase of 4.5% in 2011 and the next four years. This alternative does not affect the <br /> Zone's current fund balances and does not use its rate stabilization reserve of $5 <br /> million. This alternative intends to implement a steady increase over the next four years <br /> with increases totaling 18% over that time period. <br /> Alternative 2- Minimize Fund Balance. This alternative includes a 2% water rate <br /> increase in 2011 with larger increases in each subsequent year totaling 20% over the <br /> next four years. This alternative uses a minimum amount of Reserve funds to mitigate <br /> the water rate increases in the early years (2011) and reduces the available fund <br /> balances. <br /> Alternative 3- No Increase in 2011. This alternative does not have an increase in <br /> 2011 but has larger increases in subsequent years totaling 21.5 % over the next four <br /> years. This alternative uses the available Zone's rate stabilization fund to mitigate an <br /> increase 2011 and reduces most of the reserve funds available. <br /> All of the Tri- Valley retailers supported Alternative 3 - No Increase in 2011. Additionally, <br /> the retailers recommended that Zone 7 consider using restraint on 2012 Capital <br /> Improvement Program (CIP) fund transfers such that the rate increase is in the range of <br /> 2% to 4 %. <br /> DISCUSSION <br /> City staff values its relationship with the Zone 7 Board and staff and supports its <br /> approach to consider alternative water rate options that reflect the current economic <br /> environment. Further, while staff recognizes the pros and cons of all three water rate <br /> alternatives, it is important that any new rate schedule reflect both Zone 7's economic <br /> realities and the region's overall financial conditions. As a result, staff is recommending <br /> Alternative 3 No Rate Increase in 2011. <br /> Subr..ied Fiscal review Approved y: <br /> i� h f e-7 <br /> Daniel Smit Emily Wagner Nelson Fialho <br /> Director, Finance Director City Manager <br /> Operations Services Department <br /> Attachment: <br /> 1. Resolution <br /> Page 2 of 2 <br />