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Hanford council starts Prop 218 process for sewer rates, selects no‑capitalized‑interest financing to lower lifetime costs
Summary
Council authorized printing Prop 218 notices and set an Aug. 18, 2026 public hearing on wastewater rate changes. After debate the council chose a financing option that avoids capitalized interest, trading higher near‑term rate increases for about $8 million less in total financing cost over 30 years (vote recorded 4‑1).
The Hanford City Council on June 16 authorized staff to begin the Proposition 218 process for a revised wastewater rate schedule tied to a planned wastewater treatment plant upgrade and expanded capital program, and set a public hearing for August 18, 2026. After hearing staff and consultants, the council selected the option that avoids capitalizing interest on the bonds — a decision that raises near‑term rates more steeply but reduces total financing costs over the life of the debt by roughly $8 million.
Utilities staff and consultants detailed a multi‑year capital improvement program tied to a design‑build project for the wastewater treatment plant and to increased citywide pipeline rehabilitation and lift station upgrades. Staff said the project will require outside financing in the neighborhood of $60 million and that the revised 5‑year CIP increases pipeline rehabilitation funding to begin addressing decades of deferred maintenance.
Allison Lejovich, a rate consultant, explained two rate/financing scenarios: option 1 uses some capitalized interest to phase in debt service (smaller initial rate increases but ~$8M higher interest over 30 years); option 2 skips capitalized interest (larger near‑term increases but lower total cost). Lejovich noted that the current single‑family wastewater rate is about $30.95/month and that a preprogrammed 5% increase will take effect July 1; Proposition 218 notices would allow the council to set a maximum lawful rate and adjust annually up to that maximum.
Bond advisor Christian Sprunger explained the present‑value comparison of the two options and said the present‑value difference between them is roughly $575,600 under their assumptions (reflecting the time value of money), while the nominal total interest difference over three decades is about $8 million.
Council members debated affordability for ratepayers against intergenerational equity and total cost to the community. Several members urged easing near‑term impacts; others favored saving ratepayers money over the life of the bonds. After discussion Council adopted option 2 (no capitalized interest) by council vote (motion passed; roll call recorded as 4‑1). The council also authorized staff to prepare and mail Prop 218 notices by July 2 and scheduled the Prop 218 public hearing for Aug. 18, 2026; absent a majority protest the first adjusted rate could take effect Sept. 1.
Staff said the proposed sewer rates and the Prop 218 notice would be a legal maximum; the council may adopt a lower actual rate in future years if financial conditions allow, but cannot raise rates above the mailed maximum without repeating the Prop 218 process.
Staff will return with the formal Prop 218 notice language, debt sizing and schedule details, and the Aug. 18 public hearing packet.
