Norco staff outline steep choices to shore up water and sewer funds; borrowing could blunt near-term rate shock

Norco officials told a joint workshop that the city’s water and sewer enterprise funds face mounting pressure from falling sales, rising costs and needed capital replacements, and that residents can expect some form of rate adjustments or borrowing to keep systems solvent.

The presentation, led by Director of Public Works Chad Blaze and consultant David Hyder of Stantec, laid out 10-year financial projections for the water and sewer funds and three financing scenarios for the water fund: modest annual increases to cover operations, borrowing to spread capital costs, or spreading capital projects over a longer time frame to reduce near-term rate impacts.

Blaze said the meeting was “the first discussion” in a multi-step rate-study process meant to narrow likely scenarios the council might consider. He told the group the city originally planned a rate study in 2023 but delayed to complete an internal public-works efficiency review. David Hyder said the analysis models revenue requirements (operations, capital reinvestment and debt service) against a no-rate baseline and alternative rate paths.

The water fund faces the greatest stress. Hyder said the city’s current water operating budget is about $12 million for fiscal 2024–25, serving roughly 27,000 people with about 7,500 service connections and roughly 100 miles of distribution mains. The system produces about 6,000 acre-feet annually, Hyder said, with about 85% of that volume purchased from outside vendors (averaging about $1,200 per acre-foot) and roughly 15% from local wells (about $500 per acre-foot). Hyder added the water system shows an estimated 800 acre-feet of reported losses over the past four years and that water sales have declined about 18% since fiscal 2021.

“These trends mean revenues are insufficient to fund the annual operations of the water system,” Hyder said.

Under a baseline “no rate increase / no capital” scenario, the model showed water-fund cash balances falling below the city’s minimum target in the later part of the 10-year projection and going negative thereafter. A modest scenario…