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Folsom council hears detailed water and wastewater rate study proposing multi‑year increases and reserve targets
Summary
City staff and consultants presented a cost‑of‑service study proposing a 12% water revenue increase in 2026–27 (with staged increases thereafter), reserve policy changes, targeted surcharges by service area, and wastewater rate adjustments to fund capital and operations; council asked for more historical reserve and project timing detail before action.
City utilities staff and consultants gave a multi‑hour briefing on Feb. 24 outlining proposed changes to water and wastewater rates, reserve targets and several surcharges tied to specific supply or treatment costs.
Consultants described a revenue requirement and cost‑of‑service analysis for both utilities. For water, a proposed example scenario would generate a 12% revenue increase in fiscal year 2026–27 followed by additional annual increases (the presentation included illustrative follow‑on percentages: 9% then smaller adjustments). Consultants said the increases are driven primarily by near‑term capital needs, existing debt service and a desire to preserve a multi‑year reserve target. For wastewater, the consultants modeled alternatives that use reserves to fund near‑term capital needs while proposing a multi‑year rate path (an illustrative five‑year pattern such as 5% then 4%/4%) to restore long‑term stability.
Staff and consultants proposed two water‑rate design options: (1) a three‑class, two‑tier structure that treats single‑family/residential, nonresidential (including multi‑family) and landscape/irrigation customers differently with class‑specific tiers; or (2) a single combined customer class with a two‑tier usage structure for all customers. Presenters said the three‑class approach aligns rates to each customer class’s peaking characteristics, while the combined class simplifies billing but could shift burdens between user types. Consultants emphasized Proposition 218 defensibility and said tier breakpoints were chosen to reflect average usage patterns (example: residential tier one breakpoint at roughly 15 units, system average about 24 units).
The presentation also proposed geographically targeted surcharges: a Central Valley Project (CVP) supply surcharge for portions of the city that benefit from CVP water, and a Sutter Street interceptor surcharge for roughly 26 businesses that require additional cleaning because of fats, oils and grease. Staff recommended refining reserve targets (a proposed minimum operating reserve at ~25% of annual O&M plus one year of debt service and 50% of the five‑year average capital) and offered modeling of lower capital‑funding scenarios to show smaller rate impacts.
Council members asked for additional historical context to understand reserve build‑downs, more bill‑impact examples (especially for irrigation and large metered customers), and legal confirmation on how escalators or multi‑year schedules may be implemented under Proposition 218 (a council attorney noted rates may be set up to five years per current rules). Several council members expressed skepticism about steep tier differentials and asked staff to provide clearer justifications for chosen tier breaks. No rate decisions were made; staff will return with more detail, additional bill impacts and historical reserve accounting.
What happens next: staff will refine the capital‑timing scenarios, supply/treatment surcharge calculations and provide a fuller bill‑impact and historical reserve dataset to help council decide whether to proceed with mailing Proposition 218 notices later this year.
