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Staff outlines multi-year water and wastewater rate plan to shore up utility finances
Summary
Public Works and consultants presented a recovery plan for water and wastewater that could include early 9% increases and a projected five-year water increase of roughly 40% and wastewater increase of roughly 75% under the modeled scenario; staff proposed a Prop 218 schedule with a possible June protest hearing and July effective date.
City staff and the city’s rate consultant presented a utility rate study and a multi-year recovery plan to address revenue shortfalls and upcoming capital needs for water and wastewater enterprises.
Michael James, director of Public Works, framed the issue: revenues have not kept pace with rising operating and capital costs, particularly labor, regulatory compliance and electrical services. Brian Bass, the project manager with the consultant team, said the recommended strategy emphasizes a gradual recovery plan (for example, a sequence of early-year increases—modeled as three years with 9% increases—followed by lower increases) to meet fiscal targets such as debt-service coverage and reserve goals while reducing the need for sudden large spikes later.
The presentation called out a wastewater treatment plant rebuild/expansion estimated at roughly $50 million and explained that the city’s one-third contractual share of the current plant (7.5 million gallons per day combined capacity) equates to a 2.5 million gallon per day allocation; current usage was presented at about 1.5 million gallons per day. The consultant presented projected bill impacts: first-year residential increases of roughly $5–$7 per month for typical meters under the modeled scenarios. Over a five-year horizon staff estimated a cumulative water increase of about 40% and a larger wastewater increase (presented as approximately 75%), depending on financing choices and participation in the treatment-plant expansion.
Councilors pressed for clarity about how the percentage increases translate to dollars for different meter sizes and customer classes; staff explained that first-year adjustments are derived from a cost-of-service analysis and therefore vary by meter size and customer class, and that subsequent annual increases would be applied as percentage escalators. Staff confirmed that existing solar installations reduce but do not eliminate PG&E charges and that solar benefits were included in the analysis.
On timing and public process, staff proposed preparing written notices required under Proposition 218, holding a public workshop (targeted for May) and scheduling a Prop 218 protest hearing in June with the potential to put rates into effect in July or at the start of the next fiscal year. No rate ordinance or adjustment was adopted at the meeting; staff will return with required notices and continue public outreach and the formal Prop 218 process.
The council received the presentation; no formal action was taken tonight beyond direction to proceed with public-notice steps.
