Ukiah council starts Prop. 218 process to raise sewer rates; hearing set for Sept. 17

The Ukiah City Council voted unanimously Wednesday to begin the Proposition 218 protest process for proposed sewer rate increases and authorized mailing notices to property owners and customers, with a public hearing set for Sept. 17.

The move starts a 45‑day protest window under Proposition 218, the procedural requirement in California law that gives ratepayers a chance to object before a local government may raise utility rates. If a majority of affected ratepayers file timely protests, council cannot adopt the proposed increases.

Rate consultant Mark Hildebrand told the council the city’s sewer utility needs revenue adjustments primarily to rebuild cash reserves drained by recent, grant‑driven capital work, to cover sharply higher insurance costs and a new allocation of recycled‑water debt and operating costs to the sewer enterprise, and because connection‑fee revenue ran below earlier projections. Hildebrand recommended a five‑year schedule that starts with a 6% increase on Oct. 1 (if approved after the hearing) and then 4% increases in each of the next four years as projections allow.

The financial plan shows the sewer utility currently holding about $1.8 million in operating reserves (roughly 25% of annual operating expenses under the city’s reserve policy) but drawing reserves down over the next year unless action is taken. The plan’s target is to build toward a combined operating and capital reserve of roughly $3.5 million by the end of the 10‑year forecast.

To smooth the near‑term cash shortfall while rate increases take effect, staff and consultant proposed a $2 million internal loan from city funds, assumed at 5% interest with a roughly 10–13 year amortization. City staff said the internal loan would use pension‑liability savings set aside earlier and that the loan would be repaid to the city’s reserve pool; the loan repayment was modeled as an operating expense in the plan.

Hildebrand explained the city will not be changing cost allocation or rate structure in this review, only overall revenue levels. He also noted that Ukiah’s current typical single‑family sewer bill sits near the lower third of regional comparables and that being at the very low end can reflect deferred capital reinvestment.

Council members pressed for clarification on several items, including the timing of recycled‑water contract terms (some are staggered 10‑year agreements, with some recipients five years into their terms), whether future customer growth assumed annexation (it did not), and how the internal loan payback appears in the expense forecasts (it is built into operating costs). Staff said more detail on any loan brought back later if council elects that path.

Action: Council adopted a resolution to initiate the Proposition 218 process, authorize mailing of notices and set a Sept. 17 public hearing. Roll call recorded: Council Member Bridal — yes; Council Member Chris — yes; Council Member Orozco — yes; Vice Mayor Schurr — aye; Mayor Douglas F. Crane — aye.

The council directed staff to proceed with the mailed notice and return with final rates for council consideration after the protest period and the public hearing.

Council documents and the consultant presentation list the primary drivers of the proposal: reserve rebuilding after higher than‑anticipated capital spending (much of it grant‑enabled), increased insurance allocations, the newly shared recycled‑water debt and operating costs, lower than projected connection fees, and a preference to fund more capital with cash (PAYGO) rather than new long‑term debt.