San Francisco Apartment Association

Feature

San Franciscos New Water Revenue Bond Passthrough

by Michelle Horneff-Cohen

Remember when San Francisco voters approved Proposition A to rebuild the Hetch Hetchy water system? That was back in 2002. Now, fast forward to November 2005 and look over your completely revised water bill you received for the property you own. The new water bill does not look anything like the old bill, does it? After reviewing the bill and searching for exactly how much Proposition A is going to cost you in increased rates, you should find a paragraph that breaks down the amount you will be able to pass through to your tenants. This amount may be found to the left of the Summary of Charges and reads: “Your current water charge includes $XX.XX for cost attributable to water rate increases resulting from the issuance of Water System Improvement Revenue Bonds …” Under the passthrough provision of Prop. A, you are now able to pass 50% of this detailed amount onto your tenants on a monthly basis.

Now this is where this bill differs from other utility passthroughs. A landlord is only eligible to collect the passthrough amount for the number of months equal to the water bill(s). To explain further: if you receive a bimonthly statement in November (for a billing cycle between August and October 2005) and you decide to pass through this amount now, you must do so immediately—meaning you need to serve it within 60 days of the receipt of the bill and with the appropriate notice. This amount then does not need to be imposed on the tenant's anniversary date.

Alternatively, you are permitted to “save-up” your water bills and pass through the amount on a calendar-year basis. I recommend this option; this way you can pass through the amount on the tenant's anniversary date.

With either option, the amount attributable to the water-revenue bond never becomes a part of the tenant's base rent; and it must be discontinued after the number of months that the bill is covered.

Additionally, the unit must also be in compliance with any applicable laws requiring water conservation devices in order to impose any of the amounts attributable to this measure.

Once you have calculated the appropriate amounts attributable to water-rate increases, you must serve the appropriate notice with the following applicable rules and explanations:

  • notice must be in writing and must be served with the appropriate amount of the time, that is with a 30- or 60-day notice;
  • notice must specify the dollar amount of the monthly passthrough, the period of time covered by the water bills(s) that are used to calculate the passthrough and the number of months that the tenant is required to pay the passthrough;
  • explain that the passthrough is based on the issuance of Water System Improvement Revenue Bonds;
  • include a copy of the completed Water Revenue Bond Passthrough Worksheet;
  • state that the tenant can receive a copy of the applicable water bill(s) from the landlord upon request; and
  • state that the unit is in compliance with any applicable laws requiring water-conservation devices.

The staff of the San Francisco Rent Board has been instrumental in the adoption of this legislation and should be commended for attempting to simplify legislation that was poorly and haphazardly written. They have developed a simple form for landlords to use, and it can be downloaded from their Web site at www.sfgov.org/rentboard (the same form can be found on the following two pages).

At the present time, the water-revenue bond amounts may seem small, but we are recommending that you begin the process now so that you can become familiar with it, for these amounts are expected to increase over 300% in the next 20 years. If you do so now, the process will become second nature to you.

The opinions expressed in this article are those of the author and do not necessarily reflect the viewpoint of SFAA or the San Francisco Apartment Magazine. Michelle Horneff-Cohen is the owner of Property Management Systems, a full-service property-management company specializing in matters pertaining to the San Francisco Rent Board. She can be contacted at 415-661-3860. Copyright © 2005 by the San Francisco Apartment Magazine. All rights reserved.