ORDINANCE __________

AN ORDINANCE relating to the municipal water system of the City; redesignating the Rate Stabilization Account previously established within the Water Fund as a subfund of the Water Fund; and establishing additional conditions for deposits into and withdrawals from that subfund.

WHEREAS, The City of Seattle (the "City") owns and operates a municipal water system (the "Water System"); and

WHEREAS, reduced revenue from water sales due to extraordinary variances in weather, such as drought curtailments or cool wet summer weather, can jeopardize the financial condition of the Water System; and

WHEREAS, water rates to direct service customers effective September 16, 2002 have been set slightly higher than the amounts necessary to meet the projected 2002 revenue requirements of the Water System, in order to provide financial protection against unforeseen, extraordinary weather events and to avoid a rate surcharge in the event such circumstances occur; and

WHEREAS, the City intends that, in the future, water rates to direct service customers will be set in a similar manner; and

WHEREAS, the Rate Stabilization Account of the Water Fund was created by Ordinance 116705 with the objective of minimizing adverse effects on the Water System when actual revenues from water sales are below projections, due to extraordinary, unforeseen circumstances; and

WHEREAS, it is in the best interests of the Water System and its ratepayers to redesignate the Rate Stabilization Account for accounting purposes as a subfund of the Water Fund which will be known as the "Revenue Stabilization Subfund" and to establish additional conditions under which revenues of the Water System shall be deposited into and withdrawn from that subfund;

WHEREAS, the purpose of the Revenue Stabilization Subfund is to have funds available to meet the debt service coverage target for the Water Fund set in financial policies approved by Council; and

WHEREAS, the City intends to set future water rates so that the Revenue Stabilization Subfund will have a balance of Nine Million Dollars ($9,000,000) in approximately four years if no money is withdrawn to meet the debt service coverage target; and

WHEREAS, the City intends to use money in the Revenue Stabilization Subfund in excess of Nine Million Dollars ($9,000,000) to provide part of the funds for Water System capital projects, thereby reducing the future debt of the Water System; NOW, THEREFORE,

BE IT ORDAINED BY THE CITY OF SEATTLE AS FOLLOWS:

Section 1. Revenue Stabilization Subfund. The Rate Stabilization Account previously created in the Water Fund by Ordinance 116705 shall be redesignated for accounting purposes as a subfund of the Water Fund to be known as the "Revenue Stabilization Subfund."

Section 2. Deposits to the Revenue Stabilization Subfund. By December 31 of each year, commencing in 2003, there shall be deposited in the Revenue Stabilization Subfund Two Million Five Hundred Thousand Dollars ($2,500,000); provided, that such amount may be revised from time to time by ordinance. In addition, upon the earlier of completion of Water System accounting for each fiscal year or ninety (90) days after the end of the closed fiscal year (commencing with closed fiscal year 2003), there shall be deposited in the Revenue Stabilization Subfund, after payment of State and City taxes, all revenue collected from metered water sales to retail and wholesale customers in the closed fiscal year in excess of the planned revenue from such sales contained in the adopted Water System budget for that year together with all interest earnings thereon.

Section 3. Withdrawals from the Revenue Stabilization Subfund. Money deposited in the Revenue Stabilization Subfund and all interest earnings thereon shall remain in that subfund until withdrawals are authorized by ordinance of the City Council.

Section 4. Water System Budget. The adopted Water System budget for 2003 and thereafter shall indicate the planned deposits into the Revenue Stabilization Subfund for that year. The Director of Seattle Public Utilities periodically shall revise projections of deposits to the Revenue Stabilization Subfund and revenues from metered water sales based on weather conditions, demand and unforeseen circumstances that have occurred in the current year. On each May 1 and September 1, the Director

shall report these revised projections to the City Council.

Section 5. Ratification of Prior Acts. Any act consistent with the authority and prior to the effective date of this ordinance is hereby ratified and confirmed.

Section 6. Effective Date. This ordinance shall take effect and be in force thirty (30) days from and after its approval by the Mayor, but if not approved and returned by the Mayor within ten (10) days after presentation, it shall take effect as provided by Municipal Code Section 1.04.020.

Passed by the City Council the _____ day of ____________, 2002, and signed by me in open session in authentication of its passage this _____ day of _________________, 2002.

_____________________________________

President _______ of the City Council

Approved by me this _____ day of _________________, 2002.

___________________________________________

Mayor

Filed by me this _____ day of ____________________, 2002.

___________________________________________

City Clerk

(Seal)

valles

08/01/02

rev stab fund ord

(Ver. 1 )