HomeMy WebLinkAbout06-16-2015 PH1 Ashbaugh_ �S
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Office of the City Council
990 Palm Sf, °et Sian Luis Obispo CA 93401 -3249
805 781 P14
locity orq
June 16, 2015
To: City Council Colleagues
From: John Ashbaugh, Vice Mayor
Re: Water Rate Subsidy from the General Fund
Dear colleagues,
JUN 16 ?015
COUNCIL MEETING: OCP
ITEM NO.: _ _ Pte_.__
It has been suggested that the Council should consider, as part of our review of the proposed water
rate increase, subsidizing our Water Utility with General Fund revenues. The rationale for this
proposal, as I understand it, is to provide rate relief to our water customers.
We should not, in my opinion, give this proposal any further consideration. Here are my reasons for
rejecting this proposal:
It is inconsistent with long - standing City budget policy: I cited these policies at our last meeting
on June 2. Here is the applicable policy, taken verbatim from our adopted Budget Policies and
contained on page 62 -45 of the Financial Plan document we are reviewing now: "Water, Sewer
and Parking. The City will set fees and rates at levels which fully cover the total direct and
indirect costs — including operations, capital outlay, and debt service —of the following enterprise
programs: water, sewer and parking."
This policy is further augmented by this policy concerning enterprise fund debt capacity:
"Enterprise Fund Debt Capacity. The City will set enterprise fund rates at levels needed to
fully cover debt service requirements as well as operations, maintenance, administration and
capital improvement costs. The ability to afford new debt for enterprise operations will be
evaluated as an integral part of the City's rate review and setting process."
2. It would violate our promises to the voters: To use general fund revenues to subsidize any of our
enterprise funds would fly in the face of the commitments we made regarding fiscal
responsibility in asking them to approve Measure G last year.
3. It conflicts with our Goal - Setting Process: Any General Fund revenue that is diverted to subsidize
our enterprise funds will reduce the funds available to public safety, code enforcement, open
space, affordable housing, and other Major Council Goals forged by a consensus of the Council
after extensive public outreach through our Goal- Setting Process.
4. It sends exactly the wrong message to our ratepayers: At a time when we are relying on them
more than ever before to reduce water use in the face of a catastrophic statewide drought, we
would be telling them that it's OK to use more water because we have magically discovered
unused revenues in our General Fund for which no higher purpose exists than to enable them to
avoid further conservation efforts.