WHEREAS, the City Council has adopted rate increases for the Water, Solid Waste, and Drainage and Wastewater funds for 2003 and in the case of the Water Fund, 2004; and

WHEREAS, the City Council does not intend to consider and act on any further Solid Waste rate adjustments prior to completion of the draft Solid Waste Facilities Master Plan and Council adoption of financial policies for the Solid Waste Utility; and

WHEREAS, along with the rate increases, the City Council is adopting a budget increase for Seattle Public Utilities (SPU) with the expectation of increased investment in infrastructure renewal and replacement, improved financial performance, a more strategic approach to asset management, and enhanced customer service; and

WHEREAS, the City Council needs to receive more detailed and timely information on financial performance indicators, expenditures, and progress updates for specific projects for each utility fund; and

WHEREAS, to make well informed decisions on future rate proposals, the City Council requires more detailed information to accompany the Executive rate proposals and more time to review the proposals than it received in 2002; and

WHEREAS, several concerns and issues have arisen during the 2003-2004 rate and budget reviews that require additional follow-up and discussion in the Water and Health Committee;

NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SEATTLE, THE MAYOR CONCURRING, THAT:

Section 1: Department-wide issues

A. SPU shall provide quarterly reports to the City Council on a schedule and in a format compatible with that being developed for Seattle City Light (SCL). It is anticipated that these reports will include: variances between adopted and actual expenditures in O&M and CIP expenditures and projected spending for the total year by the program level for each fund as specified in the 2003-04 adopted budget book; financial performance for each fund, including how well each fund is meeting its financial policy goals; a comparison of projected and actual revenues to date and projected revenues for the total year; performance benchmarks and metrics for SPU's services; TES and contract personnel usage; minority and women contractor utilization; and other information which the Council, Mayor or SPU determine should be tracked to ensure effective utility performance. Council Central Staff will work with external consultants and SPU staff to define and develop external summary measures of Seattle Public Utilities' performance in the key areas note above. An appropriate reporting schedule for each proposed measure will also be determined as part of this process. The reporting measures should be based on industry standards, a review of best reporting practices, and where appropriate, will build on internal measures and metrics that currently exist at SPU or that are now being developed as part of SPU's asset management initiative. By January 31, 2003, staff will finalize a specific timeline for the development and implementation of these performance measures. Council anticipates that final reporting measures and formats will be in place by no later than March 31, 2003.

B. SPU shall brief the Water and Health Committee on the work performed by the Engineering Fund and the status of its debt repayment schedule by the second quarter of 2003.

C. By May 1, 2003, SPU shall provide the Water & Health Committee an evaluation of measurable benefits and a cost benefit analysis for each new SPU technology CIP project adopted in the 2003 budget and scheduled for development and implementation in 2003.

D. SPU shall review its processes and practices for estimating capital improvement project expenditures and develop a formal process for re-evaluating planned CIP expenditures once a project has reached a point in the design process where there can be greater certainty about costs. SPU should report back to the Water and Health committee by August 31, 2003.

E. SPU shall review its practices with respect to capitalizing Administrative and General expenses (overhead expenses). Working with the Department of Finance and, as appropriate, with SCL, SPU shall develop guidelines and present its findings to Council by May 31, 2003.

F. SPU shall work with the City's Chief Technology Officer, Department of Information Technology's Business Management Finance Subcommittee, and the Department of Finance to develop guidelines for debt financing information technology projects and present its findings, along with a summary of the technology financing strategies used by other public utilities of similar size and scope, to Council no later than May 31, 2003.

G. In the first quarter of 2003, SPU, in conjunction with Seattle Department of Transportation, Department of Construction and Land Use, Seattle Department of Parks and Recreation, and Seattle City Light, shall brief the Water and Health Committee on City-wide Endangered Species Act (ESA) activities and expenditures. The briefing will include goals, objectives, and outcomes of the City's investment in ESA, liability/legal issues, an update of intergovernmental planning issues and progress, including the "shared strategy", and detailed budgets for ESA project expenditures, including Best Management Practices for road right-of-ways.

H. By August 1, 2003, SPU shall present to Council a review of the Community Services Division's outreach programs that identifies the key objective(s), outcome measures, performance, and cost of each program and indicates how each programs relates to departmental priorities.

Section 2. Proposed 2004 Rate Increases

A. Any proposed rate ordinances must be accompanied by a rate study, which shall include the following information:

1. Revenue requirements;

2. Rate path for the last five years and forecasted rate path for the next five years;

3. Cash flow statement for the previous year and current year and the projected cash flow for the next five years. This should also include projected future bond sales by date, amount of issue, interest rate, and debt service;

4. Results of the fund's financial policies and other performance measures for the preceding five years and forecasted for the next five years;

5. Forecast and actual revenues by year and source for the last five years and forecasted revenues by year and source for the next five years;

6. Forecast and actual operating expenditures for the past five years and forecasted expenditures for the next five years;

7. Detailed cost of service and cost allocation study;

8. Detailed explanation of any proposed changes in internal cost allocation and cost allocation between customer classes from the current methodology used; and

9. Descriptions of any changes between the adopted O&M and CIP budgets and proposed O&M and CIP budgets by program level and the associated rate impact of such changes.

B. The rate study and required accompanying material shall be submitted to Council when the proposed rate ordinances are submitted for introduction and referral. The proposed ordinances and accompanying materials must be submitted to Council a minimum of eight weeks before the desired date of Council action.

C. Prior to submitting any rate proposal, Seattle Public Utilities shall conduct a public process to educate various stakeholders about potential changes in the rates and to receive public input. In addition, SPU shall convene citizen advisory committees to study the proposed rates and provide input.

Section 3: Solid Waste Fund

A. SPU shall complete a draft Solid Waste Facilities Master Plan and present it to the Water and Health Committee of the Council by July 1, 2003. SPU shall brief the Committee on the Plan during the second quarter of 2003 to allow Council time to consider the information as it makes decisions on financial policies and proposed solid waste rates.

B. SPU shall, in collaboration with DOF, develop and present to Council for adoption formal financial policies and guidelines on the use of debt to finance part of the Solid Waste CIP, including but not limited to target debt service coverage levels, targets for rate revenue financing of the CIP, types of CIP projects/expenses that are eligible and ineligible for debt financing, and possible limitations on the ratio of debt to equity or portion of revenue required to service debt. SPU shall present the proposed financial guidelines to the Water and Health Committee no later than July 1, 2003.

C. SPU shall review recycling related services that may not fully recover costs if they were stand alone programs, such as yard waste collection, self-haul recycling and yard waste at the transfer station, and curbside recycling collection, and recommend appropriate funding levels, including the rationale for such funding. This report is due no later than a month before the Executive presents a 2004 solid waste rates and budget proposal.

D. SPU shall evaluate and report on the environmental goals listed in the Solid Waste Utility's 1998 Strategic Plan. This assessment should include the following:

1. An evaluation of progress to date by sector in achieving the goals;

2. Proposed measures that Council may want to consider to achieve goals, along with the costs and benefits; and

3. A recommendation, in light of the costs and benefits, of whether to revise the current recycling and waste reduction goals.

Section 4. Water Fund

A. SPU shall present a report to Council during the first quarter of 2003 on the progress of its asset management planning including how SPU plans to spend the $3 million in additional funds appropriated in the 2003 Water Fund CIP.

B. By June 30, 2003, SPU shall brief Council on the potential to provide more efficient meter-reading services, including potential opportunities for cost-sharing and/or collaboration with other utilities.

C. By the end of 2003, SPU shall present to Council options to collect and improve existing data on the type of commercial enterprise for each commercial customer account to explore the possibility of subdividing the General Service (commercial) class of customers into one or more classes as part of the 2005-2006 or subsequent rate proposals. The proposal shall include the anticipated costs of each option.

D. By the end of 2003, SPU shall present to Council a proposal to update peak week usage data for direct service area residential and commercial customers and the costs and benefits of doing so. The data collection proposal should take into account possible future subdivisions of the General Service (commercial) class of customers, as described in item C above.

E. By June 30, 2004 and prior to submittal of the 2005-2006 rate proposal, SPU shall develop and present to Council recommendations regarding the continuation of and next steps in implementing the lowincome retrofit program.

F. As part of the 2005-2006 rate proposal, SPU shall develop and present to Council options to recover all customer-related costs (e.g., billing, customer service and meter reading costs) and possibly some component of the commodity costs through the water base meter charge, including the possibility of and rationale for including the cost of one to three CCF of water in the base service charge.

G. By January 31, 2003, SPU will provide to the Council recommendations on additional conservation incentives and technical assistance programs for small business.

Section 5: Wastewater and Drainage Fund

A. During the first quarter of 2003, SPU shall report to the Council on asset management strategies for the drainage and wastewater program.

B. SPU shall complete a draft Drainage Comprehensive Plan and present it to the Water and Health Committee of the Council by August 31, 2003, to allow Council time to consider the information as it makes decisions on any proposed drainage or wastewater rates.

C. By July 31, 2003, SPU shall develop and present to Council a revised wastewater volumeforecasting model that includes the possible effects of economic conditions, price signals and other factors. The report shall include a comparison with the water consumption forecast model and wastewater forecasting models used by other utilities.

D. By April 8, 2003 and at least one month prior to the submission of any drainage or wastewater rate proposals for Council consideration, SPU shall present to Council proposed financial policies for the drainage and wastewater fund. At a minimum, the policies shall cover debt service coverage, net income, cash balance, revenue financing of the CIP and debt-to-assets ratios.

Adopted by the City Council the _____ day of _______________, 2002, and signed by me in open session in authentication of its adoption this _____ day of _______________, 2002. ________________________________________ President of the City Council

THE MAYOR CONCURRING: ________________________________________ Mayor

Filed by me this _____ day of _______________, 2002. ________________________________________ City Clerk

12/02/02 V #6 t Timeline

Section Work Product Due Date

1A: Timeline for development and January 31, 2003 Departement-wide implementation of reporting requirements

4G: Water Recommendations on additional January 31, 2003 water conservation incentives and technical assistance for small businesses

3D (and 2003-04 Report on recycling rates, January 31, 2003 SLI): Solid Waste programs, progress

4A: Water Progress on Asset Management for During 1st Quarter water

5A: Drainage and Progress on Asset Management for During 1st Quarter Wastewater drainage and wastewater

5C: Drainage and Financial policies for drainage April 8, 2003 Wastewater and wastewater rate proposals

1F: Develop guidelines for debt May 31, 2003 Department-wide financing IT projects

1E: Develop guidelines for May 31, 2003 Department-wide capitalizing administrative and general expenses

1C: Cost benefit of CIP technology May 1, 2003 Department-wide projects for 2003

4B: Water Report on potential to provide June 30, 2003 more efficient meter reading services

1B: Review of Engineering Fund By end of 2nd Quarter Department-wide

3A: Solid Waste Draft Solid Waste Facilities July 1, 2002 Master Plan

3B: Solid Waste Financial guidelines for debt July 1, 2002 financing for Solid Waste Fund

5C: Drainage and Revised wastewater volume July 31, 2003 Wastewater forecasting model due

1D: Process for re-evaluating CIP August 31, 2003 Department-wide expenditures

1H: Review of Community Services August 31, 2003 Department-wide Division outreach programs

5B: Drainage and Draft Drainage Comprehensive Plan August 31, 2003 Wastewater due

4D: Water Commercial Customer Data Study: End of 2003 Review options to track information on possible sub-classes of customers within the commercial customer class

3C: Solid Waste Proposal to update peak weak End of 2003 usage data

3C: Rate Cost recovery guidelines for One month prior to Proposals solid waste programs submitting 2004 solid waste rate proposal

2: Rate Proposals Requested rate information listed At least 8 weeks prior to in Section 2 Council adoption of rate proposals

2C: Rate Conduct public process on rate Prior to submitting rate Proposals proposal proposals to Council (SPU will report back in first quarter 2003 with more detail on timing and process)

4E: Water Recommendations on low-income June 30, 2004 retro-fit program

4F: Water Options to recover all customer 2005-06 Rate Review related costs process t