Council hears water-rate study recommending multiyear increases; staff to begin Prop 218 process

At a study session on April 8, Millbrae officials reviewed a consultant’s water rate study that recommends a multiyear rate plan to fund aging water infrastructure, rising wholesale water costs from the San Francisco Public Utility Commission (SFPUC), and ongoing operating expenses.

Alex Handlers, the consultant from Bartle Wells Associates, presented the draft findings and recommended a five-year rate plan that would broadly raise rates about 7% annually to reach a long-term capital funding target of roughly $5 million per year (in current dollars). The report includes an option to adopt a wholesale-rate “pass-through” mechanism for unanticipated SFPUC increases above a $7-per-unit threshold.

Handlers told the council the city needs to increase revenue to cover three main items: an aging distribution system with more replacement needs, SFPUC wholesale cost increases, and general cost inflation for operations and materials. “Nobody likes rate increases,” Handlers said. “But it’s part of the financial stewardship required to keep the system reliable.”

Finance Director Mike Sung and City Manager Tom Williams answered council questions and noted the study assumes a five-year phase-in; the draft schedule calls for staff to mail Prop 218 notices, hold a required hearing (tentatively June 10) and set the proposed new rates to take effect July 1 if the Prop 218 process proceeds without a majority protest. Under Proposition 218, a majority protest by property owners can block rate changes.

Council members debated the size and timing of increases. Councilmember Riley asked whether a smaller increase (e.g., 4–5%) would be feasible; staff and the consultant warned that smaller increases would delay capital work, potentially increasing long-term costs. Vice Mayor Oliver and others urged caution but said underfunding capital needs could lead to higher, steeper increases later. Councilmember O’Malley noted that Prop 218 approvals set maximums and said the council could re-evaluate if economic conditions change.

Anne Schneider, Millbrae’s representative to the Bay Area Water Supply and Conservation Agency (BAWSCA), told the council that regional wholesale costs at SFPUC include long-term capital financing and that Bosca member agencies have limited direct authority to alter SFPUC’s capital program. Schneider said she would raise questions about SFPUC capital program priorities and the pace of rate increases at future BAWSCA meetings.

After discussion, the council voted 5-0 to receive the report as presented and directed staff to proceed with the Prop 218 schedule and notices. The item is scheduled to return to the council for formal rate-setting action following the public notice and hearing timetable.