Seal Beach outlines $34M–$44M water and sewer capital plans and proposed rate increases at study session

Seal Beach city staff and consultants told the City Council at a study session that the city must raise water and sewer revenue to pay for aging pipes, several near-term pump‑station and well projects, and to restore the utilities’ financial reserves and debt covenants.

The study session, an informational meeting with no formal council vote, centered on a Raftelis financial analysis that modeled two capital- and debt‑funding scenarios: a more aggressive scenario that programs about $44 million in water capital and $19.2 million in sewer capital and a lower-cost scenario that delays some projects and programs about $34 million in water capital and $15.5 million in sewer capital. Raftelis told the council the study period for rate-setting is five years and that staff expects to return with proposed rate schedules and public hearings under Proposition 218 if the council decides to proceed.

The details: why it matters

Public Works Director Iris Lee introduced the evening as “the first of a series of public outreach meetings and study sessions related to the city's sewer and water financial analysis and rate study.” Raftelis project manager Steve Gagnon summarized drivers for the study: inflation and higher construction costs, two wet years that reduced water sales, higher wholesale water costs from regional suppliers, and aging infrastructure dating in places to the early 1900s. Gagnon said the city already implemented a water rate increase effective Jan. 1, 2025.

Raftelis showed two financing approaches. The more comprehensive (recommended) water scenario programs about $44 million in water capital including Lampson well treatment and transmission improvements, Beverly Manor pump station upgrades, a Navy Reservoir rehabilitation, well rehabilitations (including Bolsa Chica), advanced metering infrastructure (AMI), SCADA upgrades, and pipeline replacement. A lower-cost alternative delays or omits several pipeline projects and reduces up‑front cash funding of CIPs but increases the recurring water infrastructure replacement allowance.

For sewer, Raftelis emphasized an immediate need to correct a debt‑coverage shortfall. The sewer system carries roughly $500,000 a year in debt service and must meet a 1.2 debt‑coverage covenant; Raftelis reported the system is currently below that covenant and said rate increases are required to restore compliance. Suggested sewer capital includes pump‑station rehabilitations (Pump Station 35, Adolfo Lopez, Boeing), mainline replacements where condition surveys show sections in poor or moderate condition, and a Sunset Aquatic Park pump-station plan to replace makeshift 2‑inch cross‑bridge mains.

How the city would pay

Raftelis modeled combinations of cash funding and borrowing. Scenario 1 (larger capital program) assumes roughly $25 million of market debt, a state revolving fund loan in the single‑digit millions, and an Orange County Water District (OCWD) loan “over $4 million” for Lampson well work; Raftelis later modeled that OCWD loan at about $4.4 million in the capital financing table. Borrowing spreads the cost over decades but requires maintaining debt‑coverage ratios. Raftelis projected five‑year revenue increases under each scenario that would restore reserves and keep debt coverage above the 1.2 covenant for sewer, though with slim margins in some years.

Reserves, timing and public process

Raftelis and staff said the utility funds currently lack a robust mix of operating and capital reserves; staff described operating‑reserve targets of 25% of annual expenses and a capital reserve equal to roughly 25% of annual cash‑funded CIP as common practice. The consultants estimated a target reserve range roughly between $2 million and $3.5 million depending on scenario and timing.

Staff reiterated that a Proposition 218 notice and public hearings would be required before any final rate adoption; Gina DiPinto (Raftelis) and staff said the city will schedule community open houses and post materials at utilityratestudy.sealbeachca.gov and that any Prop 218 notice would include at least a 45‑day public notice before a hearing.

Fire‑safety context

The Orange County Fire Authority’s Captain Kyle Kane gave a short demonstration of why reliable water supply matters for firefighting, summarizing that “water is our primary extinguishing agent” and describing how fire engines, hydrant types and flow volumes affect firefighting operations. Kane’s presentation was given as context for why the council should consider system‑wide capacity and redundancy when planning water infrastructure.

Public comments and council concerns

During public comment, several residents said they opposed large or rapid rate increases without clearer accountability for past delays and greater transparency on staffing and billing. One resident, identified in the record as James, summarized his concern this way: “This is a captive audience” and urged greater transparency on how utility funds are spent. Patty Campbell asked whether a pending neighboring development and legal dispute over sewer service (Los Alamitos project on Lampson) had been factored into the city’s model; Raftelis said their analysis is based on existing infrastructure and demand and that any new development or litigation would be addressed separately. Michael Thomas, a resident and water engineer, urged the council to set realistic, politically sustainable annual increases rather than very large single‑year jumps.

What was not decided

No formal action or votes were taken at the study session. Staff and consultants presented options and asked for direction on outreach and next steps; councilmembers and staff discussed prioritization, phasing, and the tradeoffs between cash‑funding projects and borrowing.

Next steps

Staff said they will continue outreach, refine cost estimates, and return with proposed rate schedules, a Proposition 218 notice and public hearings if the council directs staff to proceed. The city’s dedicated rate study website and planned open houses will provide detailed project lists, FAQs and timelines for public review.

Ending

The session closed with staff emphasizing that water and sewer utilities are enterprise funds supported by user fees, not the general fund, and with a reminder that the study session is the first step in a multi‑meeting public process that will include additional briefings, community meetings and required public hearings.