Salinas staff recommend new sewer rate plan after study finds aging pipes, $115M in needed projects

Mayor Donahue and members of the Salinas Finance Committee heard a rate study presentation March 4 that concluded the city’s sanitary sewer system needs major investment and that current rates—unchanged since 2012—are insufficient to fund operations, maintenance and capital work.

The presentation by Adriana Robles, assistant public works director and city engineer, and consultants from Wallace Group and DTA described an aging network that serves about 12,000 acres, more than 280 miles of gravity mains, force mains and 11 lift stations. Robles said the city currently estimates 10,460,000 gallons per day of existing sewer flow and an additional 2,330,000 gallons per day from the North of Bridal future growth area.

The study produced two primary rate scenarios to close an identified funding gap and stabilize the sewer enterprise fund: one scenario would begin at roughly $16 per equivalent dwelling unit (EDU) per month with a 2% annual escalator; the other would begin near $15 per EDU per month with a 4% annual escalator. Andrea Ress of DTA summarized the financial model and said annual operations and maintenance are currently about $3.5 million and that the capital program—escalated at 3% to year of construction—totals about $114.8 million.

Why it matters: the committee was told that deferred maintenance has already produced emergency repairs, clogged pipes and pump-station failures. Robles showed CCTV images of clogged and deteriorated pipe and described emergency work at La Paz Park and a detached main line that flooded the Lake Street pump station. Finance Director Selena Andres told the committee the enterprise has seen falling coverage ratios; the system’s credit rating was downgraded and staff warned further downgrades could raise long-term interest costs.

Committee discussion and direction

Committee members and staff discussed ways to present the change to residents, potential assistance for ratepayers and whether accessory dwelling units should be charged separately. Council members expressed support for prompt action. After discussion, the committee voted unanimously to direct staff to prepare a report and recommendation to the full City Council based on the higher-starting, lower-escalator scenario and to include consideration of ADU treatment and ratepayer assistance in outreach.

Key figures and clarifications from the meeting

- Capital need (10-year program, escalated to year of construction): about $114,800,000. - Annual operations and maintenance: roughly $3.5 million now; projected to escalate in modeling by 7% annually in the early years of the 10-year study as modeled by DTA. - Current number of equivalent dwelling units (EDUs) used in model: approximately 60,000, with an assumed 1% annual growth in EDUs for modeling. - Allocation of growth-related costs: the consultant’s analysis indicated roughly 41% of program costs associated with future growth would be borne by developers (via impact fees) and 59% by existing ratepayers. - Shortfall noted for current fiscal-year operations: staff indicated an anticipated $400,000 shortfall for the year (presented as an estimate in the study materials). - 2023 operating revenues reported in discussion: $3,600,000; expenses reported as $2,700,000; net revenues available for debt service reported as approximately $925,000 against debt service of roughly $859,000 for the year discussed. - Present residential sewer rate has not changed since 2012 and was previously $5.45 per month per residential unit or equivalent (EDU) as described in the presentation.

Quotes drawn from the record

"The sanitary sewer system, services an area over 12,000 acres, which is Salinas, and we have over 280 miles of, gravity sewer mains," Adriana Robles said as she introduced the system description.

Andrea Ress (DTA) summarized the financial results: "The total under this program escalated at 3% to the year of construction is a hundred and 14.8, almost a hundred and 15,000,000 in capital costs that the city will need to do to avoid and fix some of these problems."

Selena Andres (Finance Director) described the rating concern: "On December 23 the sanitary sewer rating was downgraded four notches to a B-plus...Anything below a B becomes speculative non-investment grade."

Next steps and outreach

Staff said they will return to the full City Council with a formal recommendation, begin the Proposition 218 public-notice process required for utility-rate changes, and conduct community outreach. Committee members asked staff to prepare visuals, tours and explanatory materials so residents can see the condition of infrastructure and understand the rationale for rate adjustments. Staff noted some ARPA funding was used for near-term repairs but that the ARPA dollars did not replace a sustainable funding solution for the utility.

Ending

The committee’s unanimous direction allows staff to draft a council report recommending the higher-starting / lower-escalator scenario and to include analysis of ADU treatment and assistance options; the City Council will consider the recommendation and the Proposition 218 process before any rate change takes effect.