La Verne study session: consultant warns of large water fund shortfall; council seeks bill impacts and outreach plan

LA VERNE, Calif. — City consultants presented preliminary financial scenarios for La Verne’s water and sewer utilities on April 7, telling the council’s ad hoc water and sewer rates study committee that the water enterprise faces a substantial funding gap if no action is taken and that the city will need either very large rate increases or a combination of increases and external financing to maintain reserves.

Ryan Wright of Ruff Talis, the consultant firm, said the study’s financial planning work forecasts revenues at existing rates and future costs through 2030 and then calculates the funding gap. “If the city did nothing, … your cash reserve situation for water … would be almost negative $50 million by 2030,” Wright said, summarizing the most extreme ‘status quo’ projection. He said an immediate, one‑time increase large enough to close the gap (about 110% in 2026 in the presentation) is unrealistic, so the firm modeled two more practical approaches: a series of large near‑term revenue adjustments, or a mix of rate increases and roughly $7 million in external debt to fund major capital projects such as an advanced metering infrastructure (AMI) conversion and a treatment‑plant project.

The first modeled profile (rates only) starts with revenue adjustments of 35% in 2026 and 30% in 2027 and continues through 2030; under that profile reserves stay negative until about FY2030 and cumulative adjustments in the presentation reached a very high level. The second profile adds a $7 million debt infusion (assumed at 5% interest over a 20‑year amortization), which improves cash reserves earlier in the forecast though it still requires multi‑year revenue adjustments.

Wright identified several cost drivers used in the forecasts: a 12% annual inflation assumption for purchased water tied to Metropolitan Water District/Three Valleys increases, a 7.5% assumption for electricity tied to Southern California Edison, and a 7% assumption for employee benefit cost growth. He also noted that La Verne is largely built out, so customer account growth is low (about 0.3–0.4% annually in the model).

By contrast, the sewer enterprise fund currently holds sizable reserves (the presentation showed FY25 sewer reserves at about $14.9 million) and the modeled sewer rate profile — lower, staged increases (10% for three years followed by two increases of 6%) — produces positive ending cash reserves, although those reserves would be drawn down over time to roughly $3.8 million by 2030 under the model.

Council members and ad hoc committee participants pressed consultants and staff on several technical and public‑facing matters. Committee member Bochamp asked whether the account‑growth assumptions included known pending development and whether Proposition 218 notices are mailed separately (staff and consultant said Prop 218 notices are typically mailed separately as a dedicated notice). Other members asked that consultants check cumulative percentage calculations and provide five‑year historical inflation context to justify flat multi‑year escalation assumptions.

Several elected officials asked for clear, example bill impacts in dollar terms (for a typical single‑family household) and for comparisons with neighboring utilities so residents can put percentage changes into context. Council Member Laauo asked how CIP projects that reduce reliance on imported water would be reflected in the models, noting that locally produced water could lower Three Valleys purchases but increase electrical pumping costs. The mayor and other members emphasized equity concerns for seniors and residents on fixed incomes and urged staff to design outreach that reaches mobile‑home parks and other community locations in addition to evening town halls.

Staff said they will review the committee’s feedback, check cumulative calculations and coordinate with communications staff to schedule community meetings before any Prop 218 mailing. The consultant’s project timeline presented a sequence that includes a preliminary cost‑of‑service study by the end of April and a full council presentation of finalized scenarios and example bill impacts on May 19; the presentation also showed a potential Prop 218 public hearing on Aug. 4 and an October 1 effective date under the schedule, though several council members signaled they would prefer more time and discussed a Jan. 1 implementation as an alternative.

No action or vote was taken during the study session; the committee recessed at 5:47 p.m. and reconvened later for the regular council meeting. Next steps identified by staff and the consultant include incorporating committee feedback, producing bill‑impact examples, verifying the cumulative calculations in the presentation, assembling comparative rate data from peer cities, and scheduling public outreach prior to any Prop 218 notice.