Seal Beach study session outlines steep water and sewer rate increases to pay for aging system

Seal Beach public works staff and consultants told the City Council at a study session that the city’s water and sewer enterprise funds are operating in the red and that large rate increases will be needed to fund repairs and meet debt covenants.

Public Works Director Iris Lee, the presenter and moderator for the session, said, “we are in the red, we have failing infrastructure, and we need to adjust the rates to protect your health and safety.” The meeting was explicitly a study session and the council took no formal vote.

The presentation by Raftelis project manager Steve Gagnon and Raftelis analyst Nick Kennedy laid out two capital improvement program (CIP) packages and the rate changes that would be needed to pay for them. The staff‑recommended option (scenario 1) would fund roughly $44 million in water and sewer projects over five years; the lower alternative (scenario 2) would fund about $34 million by delaying or reducing some work.

Why the increases: consultants cited higher construction costs from inflation, rising wholesale water charges from outside agencies, weather‑driven revenue declines and aging facilities. Kennedy summarized the legal backdrop, noting, “Prop 218 requires the city to comply with certain procedural requirements prior to increasing the city's water and wastewater fees, including holding a public protest hearing,” and reiterated the city must show fees do not exceed the cost to provide service.

Key numbers and scenarios

- Water CIP: scenario 1 (staff recommended) $44,000,000 over five years; scenario 2 $34,000,000. Scenario 1 assumes $25,000,000 in market debt, nearly $10,000,000 in a State Revolving Fund (SRF) loan and a $4,400,000 Orange County Water District loan for the Lampson Well treatment project.

- Water rate impacts: scenario 1 would increase water revenue about 38% in the first year and total about 96% growth over five years; scenario 2 would increase about 29% the first year and about 82% over five years.

- Sewer CIP: scenario 1 $19,000,000 over five years; scenario 2 $16,000,000. To meet bond debt‑coverage covenants (minimum 1.2), sewer rates would need a roughly 34% first‑year revenue increase in the consultant’s model; Raftelis reported scenario 1 produces about 117% total revenue growth over five years, scenario 2 about 102%.

- Typical residential bill: under scenario 1 the consultant estimated a typical single‑family bimonthly bill would rise roughly $60 (about $30 per month); under scenario 2 about $50 bimonthly. By the end of the five‑year period Raftelis showed substantially higher bills (the presentation showed residential increases that accumulate to the five‑year model totals).

Leisure World recalculation and customer impacts

Raftelis said a revised meter‑sizing assumption for Leisure World produced a large reallocation of fixed charges. Under the revised assumption Leisure World’s billing units change from a previously assumed single 6‑inch equivalent to two 12‑inch meters to account for peak and fire‑flow needs. Gagnon described the effect: Leisure World’s bimonthly fixed charge would move from roughly $1,800 (rounded in the presentation) to about $7,500 per 12‑inch meter (about $15,000 total bimonthly under the revision). Raftelis estimated that change would increase Leisure World’s bills by roughly $750,000 annually under scenario 1 and about $600,000 annually under scenario 2.

Raftelis emphasized the meter‑size allocation reduces fixed charges for many smaller meters; the presentation showed the most common 3/4‑inch meter increasing from roughly $52 to $71 bimonthly under scenario 1 and to $66 under scenario 2.

Recent failures and high‑priority projects

Staff and consultants pointed to recent emergencies to illustrate the system’s vulnerability: a failed arterial water valve on Westminster Avenue that would cost about $100,000 to replace and a near‑overflow at the Sunset Aquatic Center sewer lift station that required repeated emergency pumping. Staff said the Sunset pump station relies on two 2‑inch force mains that clog frequently and that upsizing to a completed 4‑inch force main and pump upgrades are high priorities.

System overview and debt posture

Presenters said Seal Beach has about 73 miles of water pipe, four wells, two reservoirs and multiple booster stations; many mains are well beyond typical useful lives. The sewer system has roughly 34 miles of pipe, about 800 manholes and six pump stations; some mains and pump stations have poor condition ratings in the city’s assessment.

The sewer enterprise is not meeting required debt‑coverage ratios without the proposed increases, and staff noted the city previously reduced sewer rates by roughly 25% around 2020, a factor Raftelis said contributed to current shortfalls. The presentation also described the city’s reserve targets (an operating reserve target and a capital reserve target set at 25% in the model) and noted that many agencies target higher reserve levels.

Public comment and staff responses

Residents pressed for more current infrastructure planning and transparency. Ellery Deaton (resident) urged a new city water and sewer master plan before adopting rates: “the first thing we need to do to do this right is to do a new water and sewer master plan so we get it right this time.” Several speakers urged the city to audit prior expenditures and staffing paid from the enterprise funds and questioned whether major customers such as the Naval Weapons Station and Leisure World were paying a fair share.

Staff answered procedural questions about Prop 218 and protests; staff said the council will consider Prop 218 procedures at the May 12 meeting and that staff anticipates publishing an eligibility count for Leisure World parcels (an estimated number in the low‑to‑mid 200s was mentioned, to be confirmed in the May 12 materials). Public works staff said the city pays for some of its own water from general fund sources but is billed as any other customer; city staff and Raftelis reiterated that the consultant’s analysis follows standard cost‑of‑service allocation methods.

What the council must do next

No formal action was taken at the study session. Staff and consultants said the next steps include publishing Prop 218 notices, holding a public protest hearing required by Proposition 218, and returning to the City Council for any vote to adopt rates. Raftelis and staff also offered to refine assumptions and to provide additional detail on multi‑family, commercial and large‑customer allocations if the council requests it.

Ending

The session closed with staff repeating the schedule of outreach and the May 12 council meeting for procedural actions on the Prop 218 process. Because this was an informational study session, council members did not vote on rates; any final rate decisions will be scheduled for a future council meeting after the Prop 218 notice and protest period.