Form revised March 16, 2004

FISCAL NOTE FOR NON-CAPITAL PROJECTS

Department:	Contact Person/Phone:	DOF Analyst/Phone:
Seattle Public Utilities	Chris Potter 6-1576	Cameron Keyes 4-8048

Legislation Title: AN ORDINANCE relating to Seattle Public Utilities; authorizing the Director to enter into a Fixed Block Water Supply Agreement between the City of Seattle and the Northshore Utility District

· Summary of the Legislation:

This legislation authorizes Seattle Public Utilities (SPU) to sign a contract to supply Northshore Utility District with water. Under the contract, SPU will supply water up to a contract ceiling of 8.55 million gallons per day (MGD) starting January 1, 2005 and ending January 1, 2062.

· Background:

Cities and utility districts surrounding Seattle purchase water from SPU under long-term wholesale supply contracts. Water supply contracts were originally signed in the early 1980’s and expire in 2011, and a new 60-year contract has been signed by fifteen of these original customers. Other current customers are also negotiating with SPU in order to secure their water supply beyond 2011.

To date, these “new” contracts have taken form of Full or Partial Requirements contracts (in which customers can increase water consumption from Seattle as they grow over time) or a Declining Block contract (where the block size decreases over time in anticipation of new, external sources of supply).

Northshore Utility District is a current customer that would like to sign a Block contract where:

- the block size (8.55 MGD, or about 5% of system capacity) is constant for the life of the contract, and

- Northshore continues to participate in regional conservation programs.

Under this contract, Northshore will pay about 5% of each year’s wholesale system costs whether the full block volume is used or not. Northshore will pay penalties for consuming water in excess of the block.

· Please check one of the following:

____ This legislation does not have any financial implications.

__X_ This legislation has financial implications.

Appropriations:

Fund Name and Number	Department	Budget Control Level*	2004 Appropriation	2005 Anticipated Appropriation
Water Fund (43000)	SPU	N/A	N/A	N/A
TOTAL

*See budget book to obtain the appropriate Budget Control Level for your department.

Notes: The budget for providing water to wholesale and retail customers is provided through the annual budget process. SPU costs are not expected to change as a result of this contract.

Anticipated Revenue/Reimbursement: Resulting From This Legislation:

Fund Name and Number	Department	Revenue Source	2004 Revenue	2005 Revenue
Water Fund (43000)	SPU	Wholesale water rates	$0	1.1 million
Water Fund (43000)	SPU	Wholesale water rates (one time refund of past overpayments)	$0	(1.0 million)
TOTAL			0	$100,000

Notes: The $100,000 shown above is the net increase in revenue expected from Northshore in 2005, assuming that the block contract goes into effect on January 1, 2005. The $100,000 includes $1.1 million in increased revenue from the new contract and a $1 million credit due to Northshore in 2005 as a result of overpayments by Northshore in the past. In the long term, the block contract is expected to result in $700,000 - $800,000 per year more revenue to the Water Fund than Northshore’s current contract.

Total Regular Positions Created Or Abrogated Through This Legislation, Including FTE Impact:.

Position Title and Department*		Fund Name	Fund Number	Part-Time/ Full Time	2004 Positions	2004 FTE	2005 Positions**	2005 FTE**
	N/A
	TOTAL

* List each position separately

** 2005 positions and FTE are total 2005 position changes resulting from this legislation, not incremental changes. Therefore, under 2005, please be sure to include any continuing positions from 2004

Notes:

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

Spending/Cash Flow:.

Fund Name and Number	Department	Budget Control Level*	2004 Expenditures	2005 Anticipated Expenditures
N/A
TOTAL

* See budget book to obtain the appropriate Budget Control Level for your department.

Notes:

· What is the financial cost of not implementing the legislation?

Without this legislation, Northshore would continue to be served under its 1982 contract, or could switch to a Full Requirements contract, both of which produce less revenue than the proposed Block contract. By providing Northshore with a Block contract option, Seattle increases its certainty for long range water demand planning and increases revenue stability.

· What are the possible alternatives to the legislation that could achieve the same or similar objectives?

There are no alternatives that allow SPU to enter into a Block agreement with Northshore.

· Is the legislation subject to public hearing requirements:

No.

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

None.

Please list attachments to the fiscal note below: