Tracy council adopts lower five‑year water‑rate plan after hours of public comment

After two hours of public comment and lengthy questioning of staff and consultants, the Tracy City Council on June 2 approved a five‑year water rate plan aimed at addressing more than $60 million in identified capital needs and recurring operating shortfalls.

City staff presented the May 2026 water rate study and told council the utility had a structural problem: operating revenues of about $25.2 million in the most recent fiscal year against $27.5 million in operating expenses, widespread deferred maintenance and a debt‑coverage covenant that requires a 1.2 ratio. “Currently, the city is experiencing more than $60,000,000 in identified necessary CIP projects related to the public water system,” Assistant Director Stephanie Reyna Heistand said. Staff said that without a change the fund could fall into a technical default, risk a lower credit rating and face higher borrowing costs.

The study presented three scenarios. Council members debated the tradeoff between a sharp, immediate increase for ratepayers and the financial risks of delaying repairs. Council voted to adopt the lowest of the three scenarios studied — labeled here as scenario 3 — which staff said would raise revenues approximately 28% in the first year, 28% in the second and then 4% annually in years three through five. The council also adopted an enterprise fund reserve policy and a utility rate stabilization policy and authorized a $1,000,000 interfund loan from the general fund to the water fund, to be repaid with interest over five years. The loan’s interest rate was described in the meeting as roughly the local agency investment fund rate; staff estimated interest expense of about $88,000 over the loan term.

The public hearing drew a strong turnout. Dozens of residents told the council the proposed increases would be unaffordable for seniors, people on fixed incomes, renters and families. “A 32% increase this year followed by additional increases…is simply too extreme and financially disruptive,” Danielle Smith told the council during public comment. Multiple speakers urged a longer phase‑in, expanded low‑income discounts and greater pursuit of grants before imposing steep increases. The clerk reported that the city received 2,629 written protests — fewer than a majority of the 27,599 parcels noticed — so council could proceed with a vote.

Council members pressed staff and the city’s consultant about alternative models, whether developers already pay sufficient impact fees, and how federal or state grants might alter the plan. Consultant Greg Baird and finance staff said the lower scenario would be tight against required debt‑service coverage: “’28 in the first year is very tight at meeting that debt service coverage,’” the consultant said, and council would need to monitor results closely.

Councilmembers who supported the lower scenario said it balanced protecting the city’s fiscal health while reducing some near‑term pain for residents; those voting no said the increases remained too large. The motion passed with a majority of councilmembers voting in favor.

Council directed staff to continue pursuing grant opportunities, to return with options to expand the city’s low‑income rate assistance program, and to report back on measures that could soften near‑term impacts while protecting the water system’s solvency. Staff also noted the city will continue periodic rate studies and can adjust future year increases downward if outside funding materializes.

The new rates adopted by the council are scheduled to take effect July 1, 2026; staff said exact bill impacts will vary by meter size and consumption and reiterated that the adopted structure moves toward a single uniform volumetric consumption charge compliant with Prop 218.