Salinas Council OKs start of Prop. 218 process to raise sewer rates to fund $115M in repairs

The Salinas City Council voted 6–1 on March 11 to begin the Proposition 218 public hearing process to increase sanitary sewer rates, selecting the finance committee’s recommended scenario that starts at $16.35 per equivalent dwelling unit (EDU) with a 2% annual escalator.

The action starts the formal Prop. 218 noticing and hearing timeline; staff said the council will be asked on April 8 to authorize the Prop. 218 process and staff expects to set a public hearing on June 3 with rates proposed to take effect July 1 if approved. Councilmember Sandoval cast the lone no vote.

Why it matters: City staff and outside consultants told the council the sewer enterprise fund is underfunded after more than a decade without substantive rate increases. The sewer master plan and a new rate study identify roughly $115 million in capital needs over a 10‑year planning window to address maintenance, lift‑station upgrades and upsizing to serve future growth. Finance staff said the fund faces a more than $400,000 shortfall this fiscal year and that credit rating agencies have placed the fund on watch; continued weakness could increase borrowing costs.

Andrea Ress, the financial consultant from DTA, summarized the rate model for council and framed two scenarios staff tested: a lower initial rate that escalates faster and a slightly higher starting rate that grows more slowly. "Both of these scenarios achieve the city's goals of fully funding the costs," Ress said. The scenario the finance committee recommended and the council advanced would raise the current monthly residential charge from $5.45 to $16.35 per EDU and escalate 2% annually.

Wallace Group project manager Carrie Wagner and city engineering staff walked council through the system condition and hydraulic modeling. The city reported more than 280 gravity sewer mains, numerous force mains and 11 lift stations; existing dry‑weather system flows were estimated in the master plan at 10,460,000 gallons per day with an additional 2,330,000 gallons per day expected from planned development north of Bridal (the Future Growth Area). Council members and staff showed photos of collapsed or heavily degraded pipe sections and pump station failures to illustrate the consequences of deferred capital work.

Selena Andrews, Salinas finance director, told the council the city’s sewer rating had declined from an A– to the mid‑BBB range because of weak cost recovery and that a sustained low rating could increase annual debt service costs. Craig Hill of NHA Advisors explained that bond covenants require debt‑service coverage and that restoring stronger coverage through rates would make future borrowing less costly.

Council members pressed staff on equity and other design choices: whether accessory dwelling units (ADUs) would be treated differently, how developers share costs, and options to shield low‑income residents. City staff and consultants said Monterey One Water uses a flat EDU model (not metered water consumption) and that Monterey One’s customer assistance program would be examined as a potential template. City manager Andrew Mendez said staff will return with proposals for a rate‑payer assistance program and further analysis of ADU impacts if the Prop. 218 process moves forward.

Public commenters and several council members urged robust outreach. "We are planning to do extensive outreach to the property owners, to the business community and to the general public," city staff told the council, noting a short but intense public engagement schedule if the council authorizes Prop. 218 on April 8.

Council action and next steps: Councilmember Barrera made the motion to accept the rate study findings and move forward with the scenario recommended by the finance committee; the motion passed on a roll call that recorded "yes" votes from Councilmembers Barajas, Barrera, De La Rosa, Bridal, Salazar and Mayor Donahue, with Sandoval voting no. Staff will return April 8 to request authorization to initiate the Prop. 218 process and to set the public hearing date, with rates proposed to take effect July 1 if the public hearing and Prop. 218 proceedings result in approval.

Additional details: The study assumes approximately 60,000 EDUs in the city, escalated at 1% for growth in the model. Staff said about 41% of the capital cost of future growth‑related upsizing would be borne by development impact fees and 59% by rate revenue. The study built in a $2 million operating reserve and debt‑service coverage consistent with existing bond covenants.

Council members and staff said they will seek grant opportunities and consider assistance programs for vulnerable ratepayers, but staff stressed that those programs do not replace the need to stabilize the sewer enterprise through rates.

Ending: By initiating the Prop. 218 process the council set a public schedule that will include outreach and at least one public hearing before any rate change takes effect. If a Prop. 218 ballot or hearing result ultimately approves the rates, staff said the increase would be implemented July 1 and used to fund maintenance and capital work identified in the master plan.