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BACKGROUND The Ruby Hill development was annexed to the City in 1993. Prior to annexation, it was determined that the most cost effective way to handle the sewer from this area was through the City of Livermore. The City entered into an agreement with Livermore for the treatment and disposal of the Ruby Hill sewage through Livermore's facilities at the same cost paid by other similar residential and commercial customers in Livermore. On March 14, 2008 the City of Livermore informed Pleasanton that it will be raising the wastewater fees within Livermore effective July 1, 2008, which will result in an increase in the sewer charges currently collected in the Ruby Hill development. The Ruby Hill development consists of approximately 820 utility accounts of which approximately 810 are residential accounts and ten are commercial accounts. The sewer service charges imposed by the City of Livermore (Livermore) in the Ruby Hill area, are used to fund the operations and maintenance of the Livermore Water Reclamation Plant and the sewer mains carrying wastewater to the plant. Sewer charges also pay for renewal and replacement projects that keep the plant operating efficiently. DISCUSSION The reason this item is before the City Council is that under the agreement with the City of Livermore, the City of Pleasanton is required to collect the charges and as a result, the City of Pleasanton must approve the updated charges as a part of the City's fee schedule. The Livermore City Council opened its public hearing on May 12, 2008 regarding the proposed increase in the sanitary sewer service charges for its customers. At our request, the second reading of the ordinance implementing the new rates was continued to June 9 in order for Livermore to consider any protests in these increases from the Ruby Hill community. Livermore's increase is mainly due to the increase in costs of staffing, materials, supplies and energy due to inflation over the past four years. Livermore has not increased its sanitary sewer service charges since 2004. The proposed increase in residential rates from the current level of $37.70 to $39.70 is a 5% increase. This increase is 4.5% less than the rate of inflation over the past four years, which rose by approximately 9.5% between 2004 and 2008 based on the consumer price index (CPI) for the San Francisco Bay Area. In addition to the residential rates, Livermore is increasing its sewer rates for commercial customers. Commercial accounts are billed based on their water consumption; therefore, the rates are a function of the amount of water consumed and vary based on type of commercial usage. Included in the 820 utility accounts in the Ruby Hill area, 10 accounts are commercial. These commercial accounts include the restaurant, pro shop, tennis facility and clubhouse at the Ruby Hill Golf Course. Therefore, based on these types of commercial accounts the rate increase is approximately 6%. Page 2 of 4