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Chico council authorizes Prop. 218 notice for large sewer-rate increase after staff warns $134.5M need
Summary
After an 18-minute staff presentation and public comment, the Chico City Council approved the finance-committee recommendation (Option 1) to initiate a Proposition 218 notice setting maximum sewer rates to address a $134.5 million five-year capital-improvement plan; the substitute motion passed 4-3.
Deputy Director David Keene told the City Council the sewer enterprise faces a $134,500,000 capital improvement plan over five years and that the fund''s operating reserves are well below target, leaving the city with limited options to maintain regulatory compliance and system reliability. "We are in a position now where we need to catch up and establish a sustainable rate moving forward," Keene said during an 18-minute presentation.
The presentation outlined drivers for the work ' regulatory mandates, aging infrastructure and capacity needs ' and three cash-funded and three debt-financing scenarios staff and the finance committee reviewed. Keene said a cash-funded "Option 1" would require a large first-year increase followed by smaller annual adjustments; debt options would reduce short-term impacts but raise long-term costs. He also noted the sewer fund's one-year operating-reserve target of about $11,000,000 compared with forecasted actual reserves near $4.4 million.
The nut of the debate was how to balance fiscal sustainability against affordability. Dozens of participants from property managers to local business organizations urged caution: Annalise Ulrig of MWS Properties said the first-year jump "is extremely difficult to absorb" and warned it will affect rents and affordability. Representatives of the Chico Chamber and local real-estate groups asked for more time to assess impacts and alternatives.
Council discussion focused on whether the council had exhausted other options, the degree to which industrial users already pay higher strength-based fees, and pending technical uncertainties. Council member Van Overbeck urged waiting for the results of heavy-metal testing tied to a key regulatory project, saying the testing could reduce the most expensive component by an estimated amount staff had not yet finalized. Keene said additional clarity from the Regional Water Quality Control Board should be available by August and that reduced project scope could lower initial rate impacts.
Councilmember Hawley moved a substitute motion to approve Option 1; Councilmember Goldstein seconded. The substitute motion passed 4-3 (Goldstein, Hawley, Winslow and Vice Mayor Bennett voting yes; O'Brien, Van Overbeck and Mayor Reynolds voting no). The council's action authorizes staff to initiate the Proposition 218 notice process to set maximum rates; staff said it would return with a resolution in June and, if adopted, new rates could take effect in August.
The vote marks a procedural step, not a final rate adoption. Keene and staff repeatedly noted that Prop. 218 sets a maximum and that any future downward adjustments could be made if technical studies or regulatory direction reduce the required project scope. Council members who opposed the motion said they worried about immediate economic stress for renters and small businesses if rates rise sharply.
Next steps: staff will initiate the Prop. 218 notice and schedule the required public hearing; council will consider a rate-adoption resolution in June with implementation projected for August if approved.
