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Nevada City directs staff to begin Prop 218 process after consultants present water and sewer rate options
Summary
After consultants reported a $368,795 water fund shortfall and a $60,176 wastewater shortfall, the council directed staff to begin a Prop 218 public-notice and outreach process using staff-recommended options (water scenario up to 25% annual increases; wastewater near 12%) while seeking affordability measures and further public engagement.
Nevada City Council on Jan. 28 heard a detailed water and wastewater rate study from the Rural Community Assistance Corporation and directed staff to begin the Prop 218 public-notice and hearing process using the staff‑recommended rate options while expanding outreach and researching affordability measures.
Consultants Abigail Seaman, Sarah Bixler and Jean Thompson told council that the water fund operating expenses exceeded revenues by about $368,795, creating a shortfall that would require a substantial rate change to avoid drawing on other city funds. Consultants said one option that funds operating costs and restores reserves would be 25% annual increases in early years coupled with smoothing in later years; other options included smaller annual increases (10% or 20%) that leave the fund exposed and could defer capital projects.
For wastewater, consultants reported an operating and debt gap of roughly $60,176 and proposed a lower smoothing option (around 12% annual increases) tied to a three‑ to five‑year capital-improvement plan. Consultants noted Prop 218 constraints that water and sewer rates must be proportionate to cost of service and warned that low‑income rate assistance programs cannot be funded from the utility fund directly; such programs require non‑rate revenues, donations or grant funds.
Council members weighed affordability concerns and directed staff to proceed with public engagement, to include clear, accessible notices and graphics, community workshops, and to research possible low‑income assistance options that could be funded outside the water fund. Council asked staff to provide a schedule so future rate reviews are not deferred. Council indicated preference for bringing a publicly noticed rate package that would be the maximum the council could adopt initially (with the ability to adopt lower rates after public input).
No final rate ordinance was adopted at the meeting; council provided direction to staff to proceed with the Prop 218 notice and community outreach, and staff will return to council with the noticed rates and additional outreach materials for the public hearing process.
