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Notice of Proposed Rate Increase
& Public Hearing Date
Proposed Rate Increase
SRCSD is proposing a rate increase of 50¢ per month per single family household (or equivalent). If approved by the District's Board of Directors, this increase would become effective July 2010.
Reasons for the Rate Increase
Historically, most of SRCSD's funding is generated from two sources: monthly customer rates and sewer impact fees paid by growth (new users to the system). For many years, the average ratio between these two funding sources has been 63% from monthly rates and 22% from sewer impact fees. The remaining 15% of funding is derived from interest and other sources.
During the course of the last several years, growth in the region has taken a substantial downward turn. While revenue from monthly customer service rates has remained fairly constant, revenue from new sewer impact fees has dropped dramatically. Sewer impact fees collected from 2003 to 2007 varied between $40 million and $58 million. In 2008, those revenues dropped to $19.5 million, and in 2009 dropped to about $13 million.
Why is this Important?
What is a "Bond Covenant"?
Think of a home mortgage - a lender requires the borrower to meet a minimum monthly "income" or revenue stream in order to approve their loan. Bonds are similar. Bond issuers require that the agencies they lend to guarantee their revenues will meet minimum levels. If an agency does not meet the minimum levels, they violate their bond "covenants" or legal conditions. This can have serious negative impacts, including downgraded bond ratings or increased financing costs. SRCSD could also be forced by lenders to raise rates.
SRCSD uses bond financing (debt) to fund major infrastructure improvement projects that benefit existing customers for many decades. To remain in compliance with our existing bond requirements (known as "bond covenants"), SRCSD is required to meet a minimum level of revenue (income) in relation to its debt (expenses). As previously explained, SRCSD collected a significantly reduced amount of revenue from sewer impact fees from new users. This means SRCSD's revenue is lower than projected.
To reduce expenses, SRCSD has made a number of significant adjustments to its overall financial plan to meet legally required bond conditions. These adjustments include significantly reducing expenses by eliminating or delaying projects and programs; paying off some existing bonds early to eliminate $5 million in annual debt payments over the next five years; and using cash reserves prudently. However, a rate increase is still necessary.
What does this mean?
The SRCSD Board of Directors considered a number of alternatives to minimize the required monthly rate increase, aiming to reduce the impact on our customers. Ultimately, a 50¢ per month increase per single family household - to begin on July 1, 2010 - was recommended. This will allow SRCSD to comply with its legally-mandated bond requirements.
How was the Proposed Rate Increase Calculated?
The basis of this proposed rate increase is the need to generate an annual $3.5 million from monthly sewer rates. A cost of service analysis has been done to allocate the required additional revenue among the residential, commercial and industrial customer classes.
The proposed rate increase totals 50¢ and is scheduled to start on July 1, 2010.
| Current Monthly SRCSD Rate |
Proposed SRCSD Rate Increase (July 2010) |
Proposed 2010 Monthly SRCSD Rate Total |
|---|---|---|
| $19.75 | 50¢ | $20.25 |
Notification & Hearing Process
The SRCSD Board of Directors will consider the proposed rate increase at a public hearing on Wednesday, March 24, 2010 at 9:30 a.m. at the Sacramento County Administration Center Board Chambers, 700 H Street, Sacramento, CA 95814.
Under Proposition 218, if you are the owner of record of a parcel or parcels subject to the proposed rate, you may file a written protest before the public hearing. If written protests are filed by a majority of the affected parcel owners, the rate will not be imposed. Written protests must be received prior to the March 24, 2010 public hearing. E-mail protests are not acceptable. Protests must contain a description of the legal property, such as address or parcel number. The protest should also indicate the rate being protested (regional sewer service). If you were not the owner of the property as of the last tax roll, include written confirmation that you presently own the property. Written protests can be sent to:
Sacramento Regional County Sanitation District
P.O. Box 269128
Sacramento, CA 95827-9128
Rate Assistance is Available!
Low or fixed-income customers may be eligible for up to $100 per year in rebates through SRCSD's Sewer Lifeline Rate Assistance Program. For more information and to find out if you qualify, call (916) 875-5500 or visit the Sewer Lifeline Rate Assistance Web site.
Informational Documents
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