Hayward Council unanimously adopts multi‑year sewer rate increases to fund $488 million treatment upgrade

The Hayward City Council on Feb. 18 adopted resolutions amending the master fee schedule to approve new sewer rates for fiscal years 2026–2030 and updated sewer connection fees for fiscal years 2026–2027, finding the actions exempt from review under the California Environmental Quality Act.

Council members voted unanimously to approve the package after a public hearing and city staff presentation. The vote followed a staff report that described the primary driver of the increases as a San Francisco Bay regional water board watershed permit adopted in July that for the first time requires wastewater agencies to design and construct improvements to reduce nutrients in treated wastewater.

The item matters because the project and debt service will create sustained higher utility bills for Hayward ratepayers. Public works staff said the city estimates the Water Resource Recovery Facility (WRF) Phase 2 upgrade at $488,000,000 and plans to fund it with a mix that includes a currently‑pursued U.S. EPA WIFIA loan of $243,000,000 and about $215,000,000 in revenue bonds; staff also said the city expects to issue roughly $458,000,000 of new debt for capital projects tied to the sewer enterprise. To meet debt service and reserve targets, staff recommended annual sewer rate increases averaging 12% per year starting in fiscal 2026.

Nancy Fan, principal consultant at Water Resources Economics, described the technical approach staff used to set rates and connection fees, including a long‑term financial plan and a cost‑of‑service analysis required by Proposition 218. Nancy Fan said sewer rates pay for service for current customers while connection fees are intended to make growth pay its share. Fan told the council that ‘‘these two components . . . are separate but related’’ and explained that the cost allocations follow usage patterns.

Public works director Alex Amiri said the new watershed permit forced a much larger project than originally planned and characterized the regulation as ‘‘the 800‑pound gorilla’’ driving the financial need. Trảng Nguyen, management analyst, and consultant Nancy Fan explained the recommended rate schedule: an 8% increase for standard residential customers in the first year and roughly a 1% first‑year increase for restaurants, with a 12% across‑the‑board increase in years two through five. Staff estimated the current weighted residential sewer bill averages about $35 per month; the consultant said a standard residential customer would see an approximate $3.64 monthly change in the first year under the proposal.

Staff told the council the connection fee study shows a 22% increase in fees, but recommended phasing that increase as two 10% steps over two years to smooth developer impacts. Effective dates posted by staff were July 1, 2025, through July 1, 2029, for the sewer rates and Sept. 1, 2025, and Sept. 1, 2026, for the two staged connection‑fee increases.

Staff described the city’s public outreach: about 50,000 mailed notices to property owners, tenants and bill payers on Dec. 20; publication in the Daily Review; targeted notices to developers, the Building Industry Association and the Chamber Government Relations Council; and attendance at a joint GRC/Chamber meeting. Under Prop. 218 rules staff said the council cannot adopt the rates if the city receives at least 17,000 written protests; staff reported receiving 42 timely written protests and one after the deadline, plus 22 letters citing financial hardship and 12 comment letters that staff responded to. The city included an application for a low‑income water discount with the notices.

During council questions, members pressed staff about advocacy to the state and regional water board and about ways to reduce impacts to low‑income and fixed‑income customers. Amiri said Hayward had participated in advocacy via regional associations and testified at water board hearings but that the board’s position was that nonaction would be costlier. Staff also said no low‑interest state funding was available at the time of the study and that the city must borrow in the market and pursue the WIFIA loan.

Members and staff discussed mitigation and assistance: the city’s tiered sewer billing tied to water use (economy/lifeline tiers) means customers who use less water pay lower sewer charges; qualifying low‑income residents can access a discount tied to the PG&E low‑income program. Staff said Hayward’s advanced metering infrastructure (AMI) can alert customers to unusual usage that may indicate leaks, and the city operates a leak‑adjustment/rebate program when customers actively repair legitimate leaks.

Public comment during the hearing raised concerns about impacts on fixed‑income residents, the mechanics of the tiering system (bimonthly billing can produce large step changes if a household crosses tiers), and requests for clearer, more visible outreach about low‑income discounts and leak‑adjustment processes. Several council members urged the city to make assistance information more prominent and to encourage residents to contact state legislators to seek broader funding relief for wastewater upgrades.

Action: Council adopted the resolutions as presented. The clerk recorded a unanimous vote and the item passed.

What was decided: The council approved a five‑year rate schedule that begins with a first‑year residential increase (about 8% for standard residential customers) and 12% increases in years two through five, and approved staged increases to sewer connection fees (staff‑recommended 10% increases in 2025 and 2026). The council also adopted the required updates to the master fee schedule and found the actions exempt from CEQA.

Looking ahead: Staff will proceed with the WRF Phase 2 project planning and financing steps, continue outreach on customer assistance programs and return with implementation details as financing and project procurement move forward.