Cloverdale council hears case for multi‑year water and wastewater rate increases tied to capital needs

Consultants and city staff told the Cloverdale City Council the city must raise water and wastewater rates over several years to pay for a queue of overdue capital projects and to avoid much larger increases later.

Mark, the rate study presenter, said the study follows three steps — revenue requirements, cost of service and rate design — and that Proposition 218 requires a public notification and protest process before any increases take effect. "You can't charge more than the cost of providing service," the presenter said, summarizing the legal constraint that prevents cross‑subsidies between customer classes.

Why it matters: staff emphasized the council should adopt a budget before June 30 to preserve spending authority; the rate study shows capital spending planned over the next decade will draw reserves down unless new revenue is added. The consultant presented a 10‑year cash‑flow scenario showing reserves falling under the proposed capital program and argued modest staged rate increases now would avoid emergency spikes later.

What the study shows: the consultant said rate revenue makes up the bulk of utility funding. Water faces a larger near‑term shortfall because consumption is roughly 19% below 2020 forecasts, creating an estimated annual revenue gap of about $400,000. The proposed schedule includes a roughly 7% increase in the first and second years, with subsequent years sized to sustain the capital program and reserve policy.

Council questions and concerns: several council members pushed back that utilities currently hold reserves that are above target and that prior projects have not always been delivered on schedule. One council member summarized that "we're taking in way more than we're spending," pressing staff to reconcile high bank balances with proposed rate hikes. Staff replied that while reserves are currently elevated, the proposed capital spending profile will draw those balances down, and delaying increases risks much larger, disruptive spikes later.

Capital delivery and reserves: staff and public‑works personnel described projects in the queue — wells, tank and piping replacements, SCADA upgrades and preemptive pipe replacements. Staff said some grants and timing shifts have left funds idle while projects await procurement and scheduling; the consultant said reserves are intended to be drawn down as projects are executed.

Growth, meters and scenario requests: council members asked whether near‑term development and additional meters were included in the forecast. The presenter said the base projection includes a 0.5% annual customer growth assumption (~17 meters per year) but does not include capacity‑charge revenue from developers; council requested alternative scenario runs (for example, 2% growth for the first two years then 0.5%) to quantify how known upcoming multifamily units and master‑metered developments would affect the need for immediate increases.

Reserve policy and credit considerations: the consultant defended a 25% operating reserve target (about a three‑month operating reserve) as standard practice that supports credit ratings and prudent fiscal management, while acknowledging that excessively high reserves can be perceived as holding too much cash. Councilmembers debated whether current reserve levels and the existence of unspent project funds justify a smaller near‑term increase.

Next steps: staff agreed to run additional scenarios that show the rate impacts if near‑term growth or specific projects produce additional revenue, and to present those results at the final public hearing on June 24. Any rate action will follow the Proposition 218 notice and protest requirements before becoming effective.