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Fact Sheet 10 - Water Revenue Bond Passthroughs

Frequently Asked Questions (FAQs)
About Water Revenue Bond Passthroughs

What is a Water Revenue Bond Passthrough?

On November 5, 2002, the voters of San Francisco passed Proposition A, which authorized the issuance of Water System Improvement Revenue Bonds. Water rates were increased in July 2005 as a result of the issuance of these water revenue bonds. Pursuant to Rent Ordinance Section 37.3(a)(5)(B) and Rules and Regulations Section 4.14, 50% of the water bill charges attributable to water rate increases resulting from the issuance of water revenue bonds can be passed through to tenants.

How can a landlord determine the amount of the water bill charges resulting from the issuance of water revenue bonds?

Water bills issued after July 1, 2005 specify the amount of the water charges resulting from the issuance of water revenue bonds. The bill states, "Your current water charge includes $XX.XX for costs attributable to water rate increases resulting from the issuance of Water System Improvement Revenue Bonds authorized by voters at the November 5, 2002 election (Proposition A)." Fifty percent (50%) of the amount specified on the water bill may be passed through to the tenants.

How is the Water Revenue Bond Passthrough calculated?

The procedure for calculating the Water Revenue Bond Passthrough is set forth in Rules and Regulations Section 4.14(c), and is also provided on the Water Revenue Bond Passthrough Worksheet that must be completed by the landlord in order to impose a Water Revenue Bond Passthrough. The landlord must calculate the amount of the passthrough as follows:

Step 1: Compile the water bill(s) to be included in the calculation of the Water Revenue Bond Passthrough. The landlord may base the calculation on a single water bill OR, in the alternative, on all of the water bills for any calendar year. Where the landlord elects to calculate the passthrough based on any calendar year, the passthrough shall be based on actual costs incurred by the landlord during the relevant calendar year, regardless of when the water bills were received or paid.

Note: It is not necessary to prorate water bills for service periods that fall into two different calendar years. The landlord can elect to include such bills in either calendar year, but cannot include the same bill in both years. For example, if the service period is 12/9/05 to 2/8/06, the landlord can include this bill in the calculation for either calendar year 2005 or calendar year 2006, but not both.

Step 2: Add up the eligible water bill charges resulting from the issuance of water revenue bonds. These charges are listed separately on each of the water bills. Divide that figure by two (since a 50% passthrough is permitted) in order to obtain the total amount of eligible charges that can be passed through to tenants.

Step 3: Divide the amount determined in Step 2 above by the total number of units covered by the water bill(s), including commercial units, to obtain the allowable passthrough per unit.

Step 4: Divide the amount determined in Step 3 above by the number of months covered by the water bill(s) to determine the monthly passthrough amount for each unit covered by the water bill(s). The passthrough shall remain in effect for the same number of months covered by the water bill(s) used to calculate the passthrough.

Note: In determining the number of months covered by the water bill, the landlord should choose the number of months closest to the actual service period. For example, if the service period is 5/3/05 to 7/1/05, the landlord should consider this to be two months.

Does the Rent Board have a form for calculating the Water Revenue Bond Passthrough?

Yes. In order to impose a Water Revenue Bond Passthrough, the landlord must complete a Water Revenue Bond Passthrough Worksheet, which is a form available from the Rent Board. The Worksheet form must be attached to the notice of rent increase given to the tenant when imposing the passthrough. The Worksheet form can be obtained at the Rent Board's office and is also available on the Rent Board's website at www.sfgov.org/rentboard and through our Fax Back system by calling 252-4660.

How long does the Water Revenue Bond Passthrough remain in effect?

The monthly passthrough amount can be imposed only for the same number of months covered by the water bills that are used in the passthrough calculation. For example, if the landlord imposes a passthrough based on a single water bill with a two-month bill cycle, the monthly passthrough remains in effect for two months only. If the landlord imposes a passthrough based on water charges incurred during an entire calendar year, the monthly passthrough remains in effect for twelve months. This assures that the landlord collects only the permitted passthrough amount.

When can a landlord impose a Water Revenue Bond Passthrough?

It is easiest for both landlords and tenants if the Water Revenue Bond Passthrough is calculated on a calendar year basis. A once-a-year passthrough must be imposed on the tenant's next rent increase anniversary date and would include 50% of the eligible water bill charges incurred during the previous calendar year. In the alternative, a landlord can elect to calculate the passthrough after receipt of each water bill. Such passthroughs need not be imposed on the tenant's anniversary date, but the landlord must serve notice of each such passthrough within 60 days of receiving each water bill.

In addition, Civil Code Section 827 requires service of a 60-day notice of rent increase if the increase, either by itself or combined with any other rent increases in the one year period before the effective date, is more than 10%. If the increase, either by itself or combined with any other rent increases in the one year period before the effective date, is 10% or less, a 30-day notice is required. If the rent increase notice is served by mail, the required notice period must be extended by an additional 5 days. If the Water Revenue Bond Passthrough is calculated annually and imposed on the tenant's anniversary date, it can be included in the notice of annual rent increase. If a passthrough is calculated for each water bill, separate 30/35 or 60/65 day rent increase notices are required each time.

Are there special notice requirements for imposing a Water Revenue Bond Passthrough?

Yes. In addition to Civil Code Section 827, Rules and Regulations Section 4.14(b) sets forth the notice requirements and provides as follows:

The landlord shall give the tenant(s) legal notice of any water revenue bond passthrough.

(1) The notice shall specify the dollar amount of the monthly passthrough, the period of time covered by the water bill(s) that are used to calculate the passthrough and the number of months that the tenant is required to pay the passthrough.

(2) The notice shall explain that the passthrough is based on increased water bill charges attributable to water rate increases resulting from issuance of water revenue bonds authorized at the November 2002 election.

(3) The charges and the calculation of the passthrough shall be explained in writing on a form provided by the Board, which form shall be attached to the notice. [The form is called "Water Revenue Bond Passthrough Worksheet" and can be obtained at the Rent Board's office and is also available on the Rent Board's website at www.sfgov.org/rentboard and through our Fax Back system by calling 252-4660.]

(4) The notice shall state that the tenant is entitled to receive a copy of the applicable water bill(s) from the landlord upon request.

(5) The notice shall state that the unit is in compliance with any applicable laws requiring water conservation devices.

Is the landlord required to file a petition for approval of the Water Revenue Bond Passthrough?

No. The landlord is not required to file a petition with the Rent Board for approval of a Water Revenue Bond Passthrough. However, a tenant who believes that the passthrough was not properly calculated can file a petition for arbitration with the Rent Board to challenge the passthrough. The petition must be filed within one year of the effective date of the passthrough. At the hearing, the landlord shall have the burden of proving the accuracy of the passthrough calculation and the Administrative Law Judge will determine the proper amount (if any) of the passthrough.

Can the landlord include water revenue bond charges in an Operating and Maintenance Petition instead of calculating a separate Water Revenue Bond Passthrough?

Yes, but if the landlord includes any water charges resulting from the issuance of water revenue bonds in the Operating and Maintenance Petition, the landlord is not entitled to impose a separate Water Revenue Bond Passthrough. In order to impose a separate Water Revenue Bond Passthrough, the landlord must exclude 100% of the separate water bill charges resulting from the issuance of water revenue bonds from the Operating and Maintenance Petition.

How can a tenant challenge an improper Water Revenue Bond Passthrough?

Within one year of the effective date of a water revenue bond passthrough, a tenant may file a petition with the Rent Board for an arbitration hearing on the following grounds:

The landlord has not properly calculated the passthrough;

The passthrough is calculated using an incorrect unit count;

The landlord failed to provide a clear written explanation of the charges and the calculation of the passthrough;

The unit is not in compliance with applicable laws requiring water conservation devices;

The tenant requested a copy of the applicable water bill(s) and the landlord has not provided them;

The tenancy began during or after the billing period(s) included in the passthrough calculation;

The landlord failed to discontinue the passthrough after it was fully paid. (The passthrough may remain in effect only for the same number of months covered by the water bill(s) that were used to calculate the monthly passthrough amount.)

Note: The filing of a petition by a tenant does not relieve the tenant of his or her obligation to pay the passthrough pending a final determination.

What if payment of the Water Revenue Bond Passthrough is a financial hardship for the tenant?

A tenant may file a hardship application with the Rent Board requesting relief from all or part of the Water Revenue Bond Passthrough. A hardship application must be filed within one year of the effective date of the Water Revenue Bond Passthrough. Hardship applications are available at the Rent Board's office and are also available on the Rent Board's website at www.sfgov.org/rentboard and through our Fax Back system by calling 252-4660.

Note: Once a hardship application is filed, the tenant need not pay the passthrough until a decision is made by an Administrative Law Judge after a hearing on the tenant's hardship application.

In order to impose a Water Revenue Bond Passthrough, must the tenant's unit be in compliance with any applicable laws requiring water conservation devices?

Yes. The landlord is not entitled to impose a Water Revenue Bond Passthrough if the tenant's rental unit is not in compliance with any applicable laws requiring water conservation devices. In general, installation of water conservation devices is required only when certain events occur, such as the sale of a building. See Chapter 12A of the San Francisco Housing Code (Residential Water Conservation Ordinance) for specific requirements. A copy of Chapter 12A can be reviewed at the Rent Board's office and on the Rent Board's website at www.sfgov.org/rentboard.

Does a Water Revenue Bond Passthrough become part of the tenant's base rent?

No. The passthrough shall not become part of the tenant's base rent – it must be kept separate and must be discontinued after it is fully paid.

Does a rental agreement or lease affect a Water Revenue Bond Passthrough?

If justified based on the landlord's water bill charges, the landlord is entitled to impose a Water Revenue Bond Passthrough regardless of the existence of a rental agreement or lease, unless the lease specifically provides that the landlord will not pass through any charges based on water rate increases resulting from issuance of Water System Improvement Revenue Bonds.

Are all tenants eligible for a Water Revenue Bond Passthrough?

No. Only those tenants in residency during the entire billing period(s) in which the water bill charges were incurred may be assessed the passthrough.

Note: If the passthrough is calculated based on a calendar year and a tenant moved in during that calendar year, the monthly amount of the passthrough for that tenant should be calculated using only the water bills beginning with the next service period after the tenancy commenced. For that tenant, the calculation will not be based on a full calendar year and the passthrough will remain in effect only for the same number of months covered by the water bills that were used to calculate that tenant's monthly passthrough amount.

Sample Water Bill (10 units)

Water Bill Sample


Sample Worksheet For Passthrough Based On Single Water Bill

List Each
Bill Date

List The Service Period For Each Water Bill

List Each Eligible Water Bill Charge

7/13/2005

From 5/3/05 to 7/1/05

$38.84


From to

$


From to

$


From to

$


From to

$


From to

$

Add Lines 1 through 6 to get Total Eligible Charges:

$38.84

Divide Line 7 by two to get 50% of Eligible Charges:

$19.42

List Total # of Residential & Commercial Units Covered by the Water Bills:

10 Units

Divide Line 8 by Line 9:

$1.94

List Total # of Months Covered by the Water Bills Listed in Lines 1-6:

2 months

Divide Line 10 by Line 11 to get Monthly Passthrough Amount Per Unit:

$0.97

Last updated: 12/24/2013 3:04:16 PM