Finance committee directs staff to prepare recommendation for roughly $16 monthly sewer rate after study

The Salinas Finance Committee on March 1 heard a sanitary sewer rate study and directed staff to prepare a report and recommendation to the full City Council based on a higher-rate scenario that would raise the typical monthly residential equivalent charge to about $16.02, staff and consultants said.

The rate study, prepared with consultants Wallace Group and DTA, found the city's sanitary sewer system serves roughly 12,000 acres with more than 280 miles of gravity mains, 11 lift stations and existing average flows of about 10,460,000 gallons per day; development in the North-of-Bridal growth area would add about 2,330,000 gallons per day, Assistant Public Works Director and City Engineer Adriana Robles said. "The sanitary sewer system, services an area over 12,000 acres," Robles said.

Committee members were shown capital needs and operating costs used to produce rate scenarios. DTA consultant Andrea Ress said annual operations and maintenance are currently about $3.5 million and the capital program escalated at 3% to year of construction totals roughly $114,800,000. "We have approximately 60,000 equivalent dwelling units currently," Ress said; the model assumes about 1% annual growth in equivalent dwelling units.

Finance Director Selena Andres warned the system's bond rating has already weakened. "On December 23, the sanitary sewer rating was downgraded 4 notches to a triple B plus," she said, adding that a lower rating would raise annual debt service by about $250,000 per $20 million of borrowing and could add roughly $7.5 million in extra interest over 30 years on a $20 million project. The report projects a $400,000 shortfall for the enterprise this fiscal year.

Consultants presented two broad scenarios that would move the current monthly residential equivalent rate from $5.45 (the last change was in 2012) to roughly $15'$16 per month, using different annual escalators and mixes of pay-as-you-go funding and new bonds. The committee's direction was to send the higher scenario forward for Council consideration and for staff to prepare the necessary Prop 218 notifications, public outreach materials and a report that also examines ADU billing and low-income assistance options.

Public commenters urged attention to both revenue and spending. "I was wondering whether there is a commensurate effort to look at how we are spending money," Peter Zalai of the Measure G Oversight Committee and Salinas Taxpayers Association said during general comment.

Committee members emphasized the problems caused by deferred maintenance and emergency repairs the city has made. Robles and consultants showed photos and notes from recent CCTV inspections, emergency repairs at La Paz Park and a detached main that flooded the Lake Street pump station; staff said some 2024'25 repairs were funded using ARPA dollars rather than sewer rate revenues.

Action and next steps: the committee voted to direct staff to prepare a report and recommendation for the full council based on the higher scenario (approximately $16.02 per residential equivalent per month), including outreach under Proposition 218 procedures and consideration of ADU billing and low-income rate assistance. The committee vote passed (tally: yes 3, no 0). The staff presentation estimated new rates would be proposed to take effect July 1 following the Prop 218 process and council action.

The committee asked staff to return with community engagement materials, visual infrastructure explanations for the public, and options to mitigate impacts on lower-income households and ADU occupants. Staff said they would prepare a public outreach plan, include the ADU issue in their analysis, and bring the recommended ordinance and Prop 218 materials to the full City Council.

Key figures and clarifications from the meeting: annual operations and maintenance about $3.5 million; capital needs estimate roughly $114.8 million (escalated to year of construction); roughly 60,000 equivalent dwelling units in the model; current rate $5.45/month (last increased in 2012); projected shortfall about $400,000 this fiscal year; bond rating downgrade to BBB+ and estimated additional interest and debt-service impacts as described by the finance director. No final rate ordinance was adopted at the committee meeting; the action was to prepare the council package and outreach for consideration under Prop 218.