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depreciation expense is needed, plus the $90 million which is unfunded. That is done by <br />increasing the accrual each year and by earning interest income on the reserves until they are <br />used for replacements. <br /> <br /> Ms. Mohr asked if current users would be double-billed for replacement. <br /> <br /> Mr. Lawson indicated that was the case, but that is the equity argument for having <br />replacement charges in the first place. It is not practical at this point to differentiate between <br />current customers and new customers. It is not just new development, it also includes when a <br />home is sold and someone new moves into the home. It is not administratively practical to do <br />otherwise. In the long run, it will equal out. <br /> <br /> Mr. Tarver asked how long we have run without replacement charges. <br /> <br /> Mr. Lawson indicated the replacement charge commenced in 1983 for equipment. The <br />rationale is that equipment lasts froin five to fifteen years and during that time, consideration <br />must be given for repair costs. In 1987, LAVWMA started a replacement fund and after that, <br />the City commenced its fund. <br /> <br /> Mr. Tarver asked what happened in 1992 when there was a big increase. <br /> <br /> Mr. Lawson indicated that was about the time when there was a reorganization of the <br />District and growth dropped off. Part of the increases were because there had been six years <br />with no rate increases. <br /> <br /> Mr. Tarver clarified that growth stopped in the late 80's and 90's and there was a <br />recession. Rates had to go up in order to continue operation. <br /> <br /> Mr. Lawson agreed. When a facility is built, most of the costs are fixed. If there is a <br />lot of growth, the only addition would be the 17% for power and chemicals and the same people <br />are on staff. That will be true until there is an expansion, at which time more people are added, <br />replacement costs are increased and there is more insurance necessary. Then you need more <br />growth to fill the gap for what was built. <br /> <br /> Mayor Tarver declared the public hearing open. <br /> <br /> There being no speakers, the public hearing was closed. <br /> <br /> Ms. Mohr inquired if the senior discount could be on a need basis such as PG&E, <br />telephone or Viacoin, would it be possible to increase the discount. <br /> <br />02/21/95 <br /> - 13- <br /> <br /> <br />