Fiscal Note

Each piece of legislation that appropriates funds, creates position authority, or will create a financial impact through policy direction or otherwise, requires a fiscal note.  The fiscal note should be drafted by department staff and should include all relevant financial information.  After preparation by departmental staff, the Department of Finance will review and make necessary revisions before transmittal to Council. 

 

Department:

Contact Person/Phone:

DOF Analyst/Phone:

 

 

 

 

Legislation Title:

AN ORDINANCE relating to water services of Seattle Public Utilities; revising water rates and charges, and amending Seattle Municipal Code Chapter 21.04 in connection therewith.

 

 

Summary of the Legislation:

This legislation would revise the third tier block rate for residential customers (summer season only) by increasing the threshold from 15 ccf to 18 ccf, and reducing the rate from $11.40 per ccf for every ccf over 18 to $8.55 (three times the 2001 2nd tier rate) for Seattle customers.  The rate would drop for customers outside of Seattle from $13.00 to $9.75. 

 

 

Appropriations (in $1,000’s):

Department/Fund Name and Number

Line of Business/ Program

2002

Appropriation

2003 Anticipated Appropriation

 

 

 

 

TOTAL

 

 

 

 

Notes:  The administrative costs of altering the 3rd tier in mid-summer are estimated to range from $5,000 - $10,000.  This amount would include costs associated with reprogramming the billing system and testing, (probably run several thousand dollars of analysts' time) and the cost of informing/training the 100 or so customer service representatives and others. 

 

Anticipated Revenue/Reimbursement (in $1,000’s):

Department/Fund Name and Number

Revenue Source

2002

Revenue

2003

Revenue

Seattle Public Utilities

Water rates

($1,200)

 

General Fund

Utility Taxes

($72)

 

TOTAL

 

 

 

 

Notes:  The revenue reduction to SPU and the related reduction in General Fund utility taxes that would result from revising the third tier water rate are anticipated to be one-time.  Lost revenues will be made up in the upcoming water rates for late 2002 and 2003.

 

Total FTE Created Through Legislation or Estimated FTE Impacts (TES, etc.):  NA

Department/Fund Name and Number

Position Title

2002

FTE

2003

FTE

 

 

 

 

TOTAL

 

 

 

 

Do positions sunset in the future?  (If yes, identify sunset date):

 

 

 

Background  (Include brief description which states the purpose and context of legislation and include record of previous legislation and funding history, if applicable):

The weather conditions during the latter part of 2000 into 2001 were dry and the resultant drought conditions led SPU to implement several measures including initiation of a voluntary stage of the Water Shortage Contingency Plan (April 5th).  In June of 2001, the City Council passed legislation creating a third tier residential peak use rate for purposes of sending a strong price signal to high water users.   Certain households that have high water usage due to medical equipment are exempt from the third tier rate.  In September of 2001 Council passed legislation relating to water conservation, increasing voluntary, cost-effective water conservation in Seattle, establishing a Water Bank and Environmental Block, creating the "Everyone Can Conserve" program to fund water conservation in low-income housing, and establishing that a primary source for funding for the conservation program shall be rates charged on residents and businesses that use extraordinary amounts of water. 

 

The financial cost of not implementing the legislation  (Estimate the costs to the City of not implementing the legislation, including estimated costs to maintain or expand an existing facility or the cost avoidance due to replacement of an existing facility, potential conflicts with regulatory requirements, or other potential costs if the legislation is not implemented):

 

 

Possible alternatives to the legislation which could achieve the same or similar objectives  (Include any potential alternatives to the proposed legislation, including using an existing facility to fulfill the uses envisioned by the proposed project, adding components to or subtracting components from the total proposed project, contracting with an outside organization to provide the services the proposed project would fill, or other alternatives):

 

Option 1—Maintain the current third tier rate for the entire summer peak use period.  Under this Option, there would be about 17,300 customers in the 3rd tier this year with about 470,000 ccf of consumption subject to the 3rd tier rate.  This would generate almost $4 million more than what this consumption would produce at the 2nd tier rate of $3.07/ccf.  In addition, the General Fund utility tax generated from the sales of the third tier water at this rate is $240,000

 

Option 2—Revise the third tier block rate for residential customers (summer season only) by increasing the threshold from 15 ccf to 20 ccf, and reducing the rate from $11.40 per ccf for every ccf over 20 to $5.70/ccf (twice the 2001 2nd tier rate).  Only about 6,200 customer would remain with consumption in the 3rd tier.  Third tier revenue for the second half of the summer would be less than $400,000, a reduction of more than 80%.  Revenue from the 3rd tier for the whole summer would now be only $2.2 million compared to the original $4 million.  In addition, the General Fund utility tax generated from the sales of the third tier water at this rate is $132,000.  Increasing the breakpoint from 15 ccf to 20 ccf would reduce the number of 3rd tier customers by over 60% and reduce 3rd tier revenue by about 45%.  Slightly higher proportions of low-income utility credit families would escape the 3rd tier with these increases in the threshold. 

 

Other Issues (including long-term implications of the legislation):