Salinas council votes to begin Prop. 218 process after sewer rate study recommends $16.35 monthly charge

The Salinas City Council voted 6–1 on March 11 to accept a consultant—prepared sanitary sewer rate study and to begin the Proposition 218 public-notice and hearing process for a rate scenario that would raise the monthly charge per equivalent dwelling unit (EDU) to $16.35, escalating 2% annually.

The study and recommendation followed a detailed presentation from city staff and outside consultants about aging collection infrastructure, recent emergency repairs and a projected capital program estimated at roughly $115 million over a 10-year modeling window. Andrea Reis, the financial consultant from DTA, said the city—s annual operation and maintenance costs are "currently at about 3 and a half million" and that capital improvements plus debt service drove the recommended rate scenarios.

Why it matters: City staff told the council the sewer enterprise fund is underfunded, the system has sections with frequent failures, and the city—s bond rating has been lowered. Selena Andrews, the city—s finance director, warned that continued weak coverage could increase borrowing costs and that a persistent downgrade could trigger additional financial consequences for the city.

Details of the study and debate

City Engineer (presenting lead) gave the initial overview: the collection system covers roughly 12,000 acres, includes over 280 miles of gravity sewer mains, several force mains and 11 lift stations, and the 2023 sanitary sewer master plan estimated current outflows at about 10,460,000 gallons per day with an additional 2,330,000 gpd tied to the planned North of Baranda growth area.

Andrea Reis (DTA) described the financial model on which the board relied: the model combined annual operation-and-maintenance costs, capital program costs and debt service and used EDUs (about 60,000 in the model) to allocate cost. Reis presented two rate scenarios: a lower-start, faster-escalating $15 with 4% annual increases, or the staff-preferred $16.35 with 2% escalation; both were modeled to fully fund operations, capital needs and debt-service coverage.

Carrie Wagner of Wallace Group and the city—s staff explained the capital needs: field surveys, pipe condition photos and examples of past emergency repairs were shown to illustrate failing pipes, grease and root intrusions, and lift-station vulnerabilities. The consultants said total capital needs identified for the modeled period were just under $115 million.

Finance director Selena Andrews summarized credit impacts: S&P had placed the city on negative watch and downgraded the sanitary-sewer rating earlier; remaining at the lower rating could increase annual debt service and overall borrowing costs. Andrews said, "For instance, if the current downgrade holds, it would increase the annual debt service by $250,000 per year for every $20,000,000 of projects."

Public comment and council concerns

Public commenters ranged from landlords concerned about cost impacts to neighborhood residents calling for more preventive maintenance. Several residents and council members pressed staff on protections for seniors and low-income households and on whether accessory dwelling units (ADUs) should be treated differently. Council Member Sandoval led questions about ADU treatment; staff said Monterey One Water and other local providers do not currently classify ADUs separately and that implementing a usage-based or tiered structure would require additional study.

Council deliberations centered on two trade-offs in the scenarios: an initially higher rate to provide earlier capacity to bond and complete projects (and thus moderate future increases), versus a lower initial rate that escalates more steeply over time. Craig Hill of NHA Advisors said the city had a covenant to maintain sufficient rate structure for prior bonds and that action was needed to avoid further rating pressure.

Action and vote

Council Member Barrera moved to receive the rate study findings and recommend the scenario that sets the monthly rate at $16.35 with a 2% escalator; the motion was seconded and passed 6——1 (Council Member Sandoval voted no). The council instructed staff to return on April 8 seeking authorization to begin the Proposition 218 process and to set a public hearing (staff projected a June 3 hearing and potential rate effectiveness on July 1, if adopted).

Next steps and staff commitments

Staff said they will perform extensive outreach to property owners, the business community and community groups; they will also research a rate-payment assistance program and explore ADU impacts and possible mitigation measures. Finance staff emphasized they had not set any rates today; the March 11 vote initiated the public-noticing and Prop. 218 process.

Ending

Council members said they understood the unpopular nature of a steep rate increase but framed it as necessary to stabilize the sewer enterprise, reduce emergency repair costs and limit future borrowing costs. Staff will return with Prop. 218 authorization and more detailed outreach and assistance proposals.