Form revised: October 21, 2011

FISCAL NOTE FOR NON-CAPITAL PROJECTS

Department:	Contact Person/Phone:	CBO Analyst/Phone:
Seattle Public Utilities	Craig Omoto 615-0025	Karen Grove 684-5805

Legislation Title:

AN ORDINANCE relating to rates and charges for water services of Seattle Public Utilities; revising water rates and charges and amending Seattle Municipal Code Chapter 21.04 in connection therewith, removing Water District 61 and Richmond Beach Area meter surcharges and amending Seattle Municipal Code 21.12 in connection therewith, and revising credits to low-income customers and amending Seattle Municipal Code Chapter 21.76 in connection therewith.

Summary of the Legislation:

This ordinance would revise water rates for residential, general service, wholesale and public fire customers and adjust low-income assistance credits for water customers.  This ordinance would increase rates to meet debt service coverage (DSC) requirements driven largely by past capital financing decisions, including debt restructuring and heavy debt reliance over the past 20 years for large capital projects.

Background:  

(Include a brief description of the purpose and context of legislation and include record of previous legislation and funding history, if applicable.)

The cost of water services is supported by rates charged to water customers, which were last adopted by the City Council in 2008 for the period 2009 to 2011, and are set according to financial policies adopted by the City Council.  Those rates were based on cost, revenue and demand assumptions from 2008.  They did not account for the impacts of the economic downturn that ensued during the rate recovery period.  The slowdown in the economy significantly impacted both water demand and new development, creating a revenue shortfall that is addressed in this water rate proposal.

In addition, current rates are not sufficient to provide the debt service coverage prescribed by SPU financial targets.  Heavy debt reliance for large capital projects over the past 20 years along with a decision to replace variable rate debt with fixed rate debt in 2008 pushed DSC below the financial target of 1.7.

Please check one of the following:

____ This legislation does not have any financial implications.

(Please skip to “Other Implications” section at the end of the document and answer questions a-f. Earlier sections that are left blank should be deleted. You may also delete the instructions provided in parentheses at the end of each question.)

_X_     This legislation has financial implications.

(If the legislation has direct fiscal impacts (e.g., appropriations, revenue, positions), fill out the relevant sections below.  If the financial implications are indirect or longer-term, describe them in narrative in the “Other Implications” Section. You may also delete the instructions provided in parentheses at the end of each title and question.)

Appropriations:

(This table should reflect appropriations that are a direct result of this legislation.  In the event that the project/programs associated with this ordinance had, or will have, appropriations in other legislation please provide details in the Appropriation Notes section below. If the appropriation is not supported by revenue/reimbursements, please confirm that there is available fund balance to cover this appropriation in the note section.)

Fund Name and Number	Department	Budget Control Level*	2011 Appropriation	2012 Anticipated Appropriation
TOTAL

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

Appropriations Notes: 

Anticipated Revenue/Reimbursement: Resulting from this Legislation:

(This table should reflect revenues/reimbursements that are a direct result of this legislation.  In the event that the issues/projects associated with this ordinance/resolution have revenues or reimbursements that were, or will be, received because of previous or future legislation or budget actions, please provide details in the Notes section below the table.)

Fund Name and Number	Department	Revenue Source	2011 Revenue	2012 Revenue
Water Fund 43000	Seattle Public Utilities	Water Sales	$0	$18,302,837
TOTAL

Revenue/Reimbursement Notes:

Additional Water Fund revenue of $18.3 million reflects the combined effect of the proposed legislation applied to current demand forecasts of retail, general service, wholesale, and public fire (hydrant) demand, as compared to that same demand at 2011 rates.  Because these customer classes are discussed in various sections of the attached 2012-2014 Water Rate Study, this $18.3 million does not appear in one location in the document.  The 2012-2014 Water Rate Study also proposes 2013 and 2014 rates, which, when applied to the current demand forecast, will increase 2013 and 2014 revenues by $31.9 million and $46.2 million , respectively, over current law.

Total Regular Positions Created, Modified, or Abrogated through this Legislation, Including FTE Impact:

(This table should only reflect the actual number of positions affected by this legislation.   In the event that positions have been, or will be, created as a result of other legislation, please provide details in the Notes section below the table.)

Position Title and Department	Position # for Existing Positions	Fund Name & #	PT/FT	2011 Positions	2011 FTE	2012 Positions*	2012 FTE*
TOTAL

* 2012 positions and FTE are total 2012 position changes resulting from this legislation, not incremental changes.  Therefore, under 2012, please be sure to include any continuing positions from 2011.

Position Notes:

Do positions sunset in the future? 

(If yes, identify sunset date)

Spending/Cash Flow:

(This table should be completed only in those cases where part or all of the funds authorized by this legislation will be spent in a different year than when they were appropriated (e.g., as in the case of certain grants and capital projects).  Details surrounding spending that will occur in future years should be provided in the Notes section below the table.)

Fund Name & #	Department	Budget Control Level*	2011 Expenditures	2012 Anticipated Expenditures
TOTAL

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

Spending/Cash Flow Notes:

Other Implications:

a) Does the legislation have indirect financial implications, or long-term implications?

(If yes, explain them here.)

b) What is 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.)

The Water Fund would not fully recover the cost of its business operations and meet its financial policy targets.  This could result in a downgrade in the Fund’s bond ratings and increase the cost of borrowing in the future.

c) Does this legislation affect any departments besides the originating department? 

(If so, please list the affected department(s), the nature of the impact (financial, operational, etc), and indicate which staff members in the other department(s) are aware of the proposed legislation.) 

Several City departments have facilities that incur water costs.  The water fees for these departments will increase commensurate with the rate increases proposed in this legislation.  The impacts will be included in the 2012-2013 Proposed Budget.  The impacted departments include:  Seattle Center, the City Budget Office, Seattle City Light, the Department of Neighborhoods, the Seattle Department of Transportation, the Seattle Fire Department, the Department of Finance and Administrative Services, the Department of Parks and Recreation, the Seattle Police Department, Seattle Public Utilities, and the Seattle Public Library. 

d) What are the possible alternatives to the legislation that could achieve the same or similar objectives? (Include any potential alternatives to the proposed legislation, such as reducing fee-supported activities, identifying outside funding sources for fee-supported activities, etc.)

Not raising the rates at this time would result in the Water Fund failing to recover the cost of its operations and to meet its financial policies.  Alternatively, the Water Fund could meet its financial policies without raising rates by cutting the cost of its operations by the amounts shown above; however, this would result in an inability to pay for basic operations or make important investments in the water system.

e) Is the legislation subject to public hearing requirements? 

(If yes, what public hearings have been held to date, and/or what plans are in place to hold a public hearing(s) in the future?)

No.

f) Other Issues:

None.

List attachments to the fiscal note below:

None.