Consultant outlines multiyear water and wastewater rate increases, proposes baseline cut and new drought surcharge

Mark Hildebrand, the rate consultant hired by the city, told the Merced City Council that the city must align its rates with legal limits under Proposition 218 and finance a backlog of repair and rehabilitation projects while maintaining minimum reserves. "You can't charge more than the cost of providing service," Hildebrand said, summarizing the legal constraint that frames the study.

Hildebrand said the water enterprise currently holds healthy reserves — an operating fund roughly $40 million and a capital facility fund of about $53 million — but the next decade will draw those reserves down as capital delivery increases. The consultant showed average historic capital spending near $272,000 and a planned increase to about $8.7 million per year to clear an encumbered backlog (about $23 million), saying the study assumes no new debt for water at this time.

To close forecast gaps, the presentation proposed a five‑year rate adoption window (legal maximum for adoption at one time) with an illustrative five‑year revenue plan shown as 8% increases per year for three years followed by 7% in…