HomeMy WebLinkAbout1996-04-18 City Council (25)BUIIGET 1996-98
City of Palo Alto
City Manager’ Report
TO:
FROM:
AGENDA DATE:
SUBJECT:
.HONORABLE CITY COUNCIL
CITY MANAGER
APRIL 18, 1996
BUDGET ISSUE:
DEPARTMENT: UTILITIES
CMR:217:96
Proposed Utilities Rate Adjustments
RECOMMENDATIONS
This is an informational report and no Council action is required. This report provides a brief
summary of the Utilities Department’s proposed rate adjustments for FY96-98.The rate
proposal staff reports will be included in the packet of April 18, 1996.
POLICY. IMPLICATIONS
This report does not represent any change to existing policies.
EXECUTIVE SUMMARY
In FY96-97, a number of rate adjustments will be proposed. Rate decreases are proposed for
the Gas Fund (12 percent) and the Wastewater Collection Fund (9 percent). The rate change
in the Gas Fund reflects lower gas purchase costs and the need to reduce the Rate Stabilization
Reserve (RSR) to be more in line with Council guidelines. The Wastewater Collection rate
decrease is intended to suspend funding of the RSR and begin lowering the RSR balance
within the Council approved guidelines. No electric rate adjustment is proposed.
In the Water Fund, a double digit rate increase has been split between two years. In FY96-97,
a 6 percent water rate increase will be proposed; and a 7 percent rate increase may be
necessary for FY97-98. There are several reasons for the adjustments. First, the Capital
Improvement Program is higher than presently budgeted. Secondly, additional revenue is
needed to accommodate a higher equity transfer to the General Fund in accordance with the
Council approved Enterprise Fund methodology. Finally, since the drought, water sales have
not rebounded as projected, and a rate increase may be necessary in FY97-98 to achieve the
Fund’s revenue target. Approval of the rate adjustments will prevent a substantial draw on the
RSR.
Currently, there are no rate adjustments planned for the Electric Fund during FY97-98.
Pending staff’s comprehensive review of stranded costs, the appropriate Calaveras Reserve
target, and other factors with the Utilities Advisory Commission, staff may propose an electric
rate increase during the interim budget process for FY97-98.
CMR:217:96 Page 1 of 2
FISCAL IMPACT
The proposed 12 percent gas rate decrease is projected to reduce revenue to the fund by
approximately $2.3 million in FY96-97. The RSR is projected above the maximum guideline
during FY96-98, but is expected to gradually decline and fall within the Council approved
guidelines in FY98-99.
The proposed 9 percent wastewater collection rate decrease is projected to reduce revenue to
the fund approximately $870,000 in FY96-97. The RSR is projected above the maximum
guideline during FY96-98, but is expected to gradually decline and fall within the Council
approved guidelines in FY98-99.
The proposed water rate increases of 6 percent and 7 percent will increase revenue
approximately $665,000 and $835,000 in FY 96-97 and FY97-98 respectively. During FY96-
98, the Water Fund RSR is projected between the minimum and target level guidelines.
PREPARED BY:
DEPARTMENT HEAD REVIEW:
Randy Baldschun, Director of Utilities,
Administrative Service
Director of Utilities
CITY MANAGER APPROVAL:
FLEMING
City er
CMR:217:96 Page 2 of 2