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San Diego officials warn higher water rates ahead after five‑year PUD outlook
Summary
City staff and the independent budget analyst told the City Council the Public Utilities Department's five‑year outlook shows rising wholesale water costs, heavy use of rate stabilization funds and project deferrals that could push future rate increases unless mitigation steps are taken.
City staff and the Independent Budget Analyst on Monday told the San Diego City Council that the Public Utilities Department (PUD) faces significant fiscal pressures over the next five years that will put upward pressure on water and wastewater rates.
"Even with the rate increases that were approved by this council, the debt service coverage ratio is going to go down," Jordan Moore of the IBA said during the presentation, warning that the water system would rely heavily on the rate stabilization fund in FY 2027. "This really does show that the system is under financial strain," he said.
PUD deputy director of finance Adam Jones said the department updated assumptions based on the San Diego County Water Authority's long‑range financial plan and that wholesale water purchase costs are a primary driver of needed rate increases. "In all of these years, even in years where we assume that we need to buy less water, the overall cost to buy that water keeps increasing," Jones said, noting County Water Authority charges could increase substantially over the period.
Staff said the department will extend a planned two‑year deferral of some capital improvement projects (CIP) to three years because only a two‑year rate increase was approved. Lisa Salai, executive assistant director for PUD, said the department prioritized large treatment and dam safety projects while delaying less‑critical neighborhood pipeline work.
Council members pressed staff on mitigation options. Council Member Foster asked when the council would see a document laying out internal efficiency options and non‑rate revenue strategies; staff and the IBA pointed to the upcoming budget development process as the venue to "lift the hood" on internal spending and potential alternative revenue sources. Council Member Elo Rivera highlighted holdover leases in PUD's portfolio and asked for progress on bringing those to market rates.
The IBA reiterated recommendations to pursue changes at the County Water Authority — including updating its business plan and selling excess supplies — and to explore non‑rate revenue and debt smoothing for wastewater CIP to reduce pressure on ratepayers. City staff said they will continue condition assessments and work through budget processes to identify further options.
This item was informational; no council motion was required. The council will consider PUD's budget and related rate actions in the coming months as part of the citywide budget process.
