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The Drought Rates are in addition to the City's regular water rate fee schedule as outlined in the City's Master Fee Schedule in Table 1 below: Table 1 Drought rates are added to the current water rates, at the time the drought state is declared Stage 1 Stage 2 Stage 3 Stage 4 Single Family 0-20 Ccf $0.18 $0.65 $1.39 $2.91 21 -40 Ccf $0.18 $0.65 $1.39 $2.91 41 -60 Ccf $0.18 $0.65 $1.39 $2.91 over 60 Ccf $0.18 $0.65 $1.39 $2.91 Commercial/Multi-Family $0.16 $0.62 $1.33 $2.87 Irrigation $0.17 $0.65 $1.40 $3.03 Per Municipal Code 9.30, Excess Use Penalties can be imposed on customers during periods of water shortage for exceeding a defined water allocation. The goal of imposing an excess use penalty is to recover the costs of administering the enforcement of mandatory water conservation levels. There are limits to how the excess use penalty fee revenue may be spent. Excess use penalties cannot be used to offset water sales revenue, but rather to offset staff costs to find violators and to inform the public about water conservation limits. Therefore, collecting excess use penalties will not aide in sustaining the Water Enterprise and reserve policy target. Thus, Drought Rates generate revenues for the purpose of recovering costs to serve customers, whereas Excess Use Penalties aim to dissuade behavior and are not designed to be a revenue-generating mechanism as also depicted in the chart below: Purpose Use Drought Rates Keep City utility financially Offset loss of revenue due to sustainable and incentive for conservation conservation Excess Use Discourage wasteful or Limited use/Offset staff costs to Penalties inefficient water use find violators and conservation outreach The estimated loss of revenue for FY 2021/22 due in part to the 15 percent mandatory conservation is $3.2 million, which was included in the Midyear FY 2021/2022 Budget report which Council accepted by resolution on March 1, 2022. Year to date water sales revenues from July 2021 through January 2022 are 46 percent of the budget. If the City Council approves the implementation of the Stage 2 Drought Rates effective on May 1, 2022, any revenues from the drought rates will be collected in FY 2022/23 as they would be applied after a customer's full bi-monthly billing cycle begins on or after May 1, 2022. For example, for water usage between May 1, 2022 to June 30, 2022, the customer would be billed in July 2022 and would be subject to the Stage 2 Drought Rates. When the City Council declared the local drought emergency and imposed The Stage 2 mandatory conservation target of 15 percent on October 5, 2021, it was decided not to Page 4 of 6