Arcata City Council
February 4, 2026

Bartle Wells Associates
City of Arcata – 2025 Water and Wastewater Rate Study 6 |Page 3) The amount of a fee or charge imposed upon any parcel or person as an incident of property ownership shall not exceed the proportional cost of the service attributable to the parcel. 4) No fee or charge may be imposed for a service unless that service is used by, or immediately available to, the owner of the property in question.

3.2 Statute of Limitations
Pursuant to California Government Code 53759, there is a 120-day statute of limitations for challenging any new, increased, or extended fees. This statute of limitations applies to the wastewater rates proposed in this rate study and is included in the Proposition 218 Notice.

3.3 Water and Wastewater Rate-Setting Methodology
The California Constitution does not give agencies leeway to arbitrarily set rates purely based on policy preferences. Instead, it provides agencies with flexibility to implement rates within a framework established by Articles 10 and 13D. Together, these Articles establish that rates should both a) discourage waste and encourage conservation of water, and b) not exceed the costs of service attributable to each parcel or customer.

Water and wastewater utilities have used a wide range of approaches or perspectives for allocating and recovering their costs for providing service, and these costs are most commonly recovered from a combination of fixed and variable charges. The percentage of revenues derived from the fixed and variable charges varies for each agency. They should be proportional to each utility’s expenditures and must not exceed the system’s cost of providing service. A higher level of fixed charges provides better revenue stability and less dependence on variable sales. On the other hand, higher dependence on volumetric revenues provides a greater conservation incentive.

Depending on perspective, the same costs can reasonably be allocated one hundred percent to fixed revenue recovery, one hundred percent to variable rate recovery, or to some combination of the two.

For example, debt service used to fund treatment facilities can legitimately be treated as a) a fixed annual cost that should be recovered from fixed charges, b) a cost related to providing supply to meet customer demand and therefore a cost that should be recovered from variable rates, or c) a cost that can be recovered from both fixed and variable rates in recognition of the two alternative perspectives.

Many of the utility’s costs are variable costs that vary by the size of the system including personnel, supplies, and utilities. However, a portion of these variable costs can reasonably be apportioned to fixed rate recovery, and vice versa with fixed costs. For example, a share of the fixed cost of salaries related to treatment plant operations can reasonably be recovered from usage-based charges as these costs are incurred to meet demand flows. For debt service, payments may be fixed annual costs, but it

Bartle Wells Associates
City of Arcata – 2025 Water and Wastewater Rate Study 7 |Page is reasonable to recover some of these costs from usage-based rates as the costs are incurred to fund infrastructure that will improve the wastewater system. Ultimately, there is no single correct way to allocate or attribute costs. Hence, five similar agencies may have five different rate structures provided each agency can establish a reasonable cost basis for their own particular rate structure within the parameters of meeting the various requirements of the California Constitution.

While there is no single correct approach, BWA believes that costs should be allocated within a reasonable range of fixed and variable allocation that reflects both a) underlying cost causation, to the extent such causation can reasonably be determined or estimated, and b) the policy preferences of the agency in cases where a range of reasonable approaches can be justified.

BWA uses a straightforward methodology to establish equitable charges that recover the cost of providing service and fairly apportion costs. The general methodology is summarized in the following figure.

Figure 1: Cost of Service Rate-Setting Methodology
Key elements of this study include:
• Project Initiation and Data Collection – Review financial policies; collect financial and other relevant data; and review rate structures;
• Demand Analysis – Analyze past customer demands and customer characteristics to forecast future demands;
• Long Range Financial Plans – Develop financial projections to evaluate annual revenue requirements from rates and the overall level of rate increases needed to fund the costs of providing service and support long-term financial stability; • Cost Allocation – Group the City’s costs in terms of the function they serve as a basis to proportionally allocate the revenue requirement from rates; • Cost-of-Service Rate Design – Develop rates that proportionately recover costs; and • Prop 218 Process – Ensure compliance with the substantive and procedural requirements of Proposition 218.

Revenue Requirements
Determine future funding
requirements from rates
Cost Allocation
Equitably apportion costs
to rate components
Rate Design
Develop rates that recover
revenues in proportion to
the cost of providing service

Bartle Wells Associates
City of Arcata – 2025 Water and Wastewater Rate Study 8 |Page 4 WATER DEMAND AND CUSTOMER CHARACTERISTICS

4.1 Projected Water Demand
The City’s primary water source is water purchased from Humboldt Bay Municipal Water District.

Projected FY 25/26 water demand is based on historical metered demand but projected somewhat conservatively due to the financial challenges facing the water enterprise.

Table 4. Historic and Projected Metered Water Demand
Metered Water Use FY 22-23 FY 23-24 FY 24-25 FY 25-26
Actual Actual Actual Projected
Water Use (HCF)1 620,540 596,621 606,996 590,000
1, HCF = One Hundred Cubic Feet

4.2 Water Services and Equivalent Capacity
The size of a customer’s meter reflects the portion they require of the water system’s capacity. A significant percentage of the costs of any water system is related to its requirement to deliver water to any customer instantaneously at any time, up to the maximum safe flow capacity of a customer’s meter. Simply put, as the size of a customer’s water meter increases, the instantaneous demand it can place on the City’s water system increases.

Fixed charges for each meter size are based on the capacity of a meter relative to the capacity of smallest meter size (e.g., a 5/8-inch meter) in the City’s system. In this study, the relative capacity of a meter size, referred to as an Equivalent Demand Unit (EDU), is calculated by dividing the capacity of a given meter size by the capacity of a 5/8” meter. The meter equivalent ratios used are proportional to the maximum safe flow of a 5/8" meter. The sum of all EDU’s reflects the total capacity of the water enterprise.

The following table contains the counts of water services and calculations of meter equivalent units.

Total meter equivalent units for each meter size are derived by multiplying the meter equivalent ratio by the number of services at each meter size.

Bartle Wells Associates
City of Arcata – 2025 Water and Wastewater Rate Study 9 |Page Table 5. Water Services and Meter Equivalent Units

Meter Size
Total
Meters
AWWA
Capacity
Factor1
Equivalent Demand
Units (EDUs)
Annual
EDUs
5/8" 5,540 1.00 5,540 66,480
3/4" 429 1.00 429 5,148
1" 359 1.67 600 7,194
1 1/2" 71 3.33 236 2,837
2" 192 5.33 1,023 12,280
3" 31 10.00 310 3,720
4" 8 16.67 133 1,600
6" 10 33.33 333 4,000
8" 1 53.33 53 640
10" 1 76.67 77 920
Totals 6,642 8,735 104,820
1, Based on the safe maximum operating capacity as published by the American Water Works Association (AWWA).

Bartle Wells Associates
City of Arcata – 2025 Water and Wastewater Rate Study 10 |Page 5 WATER FINANCES & CASH FLOW PROJECTIONS

5.1 Water Financial Overview
Bartle Wells Associates conducted an independent evaluation of the water enterprise’s finances. Key observations include:
• The approved loan from the Wastewater Fund is not sufficient to fund the capital projects that are under way. It is very helpful to temporarily bridge the gap until new debt funding can be secured after rate increases are effective.
• The water enterprise will need rate increases to keep revenues in line with rising costs and fund needed capital improvements.
• Over the next five years it is projected that priority capital projects will cost $36.0 million. • The enterprise needs to maintain prudent reserves to be prepared for water use fluctuations, remain able to operate during a disaster, and qualify for grants or low-cost financing.

BWA developed long-term cash flow projections to determine the water enterprise’s annual revenue requirements and project required water rate revenue increases. The financial projections incorporate the latest information available as well as reasonable and slightly conservative assumptions. This report explores the financial plan and rates for two different revenue recovery scenarios which are described throughout the remainder of this report.

5.2 Water Financial Plan Assumptions
Assumptions were developed based on input from City Staff, historical escalation factors, and conservative projections for future escalation factors to reasonably ensure that the maximum rates adopted by the City will provide sufficient revenues to support the City’s water operations.

Key information and assumptions include:

Reserves
• BWA recommends the City aim to maintain prudent fund reserves of a least one year of operating costs. BWA recommends the water enterprise maintain one year of operating expenses in reserves for cash flow and liquidity purposes in case of revenue loss/interruption, and to provide additional funds during unforeseen emergencies. Fund reserves will fluctuate based on the timing of revenues and expenses, but the proposed rates are projected to provide the water enterprise with sufficient fund reserves. At a minimum, the water enterprise should aim to hold at least three months of operating expenses in reserve.

Bartle Wells Associates
City of Arcata – 2025 Water and Wastewater Rate Study 11 |Page Revenue Assumptions
• The water enterprise is projected to begin FY 2025-26 with $9.2 million in reserves. This amount approximately meets BWA’s recommended level of operating reserves. • BWA did not escalate revenues for miscellaneous non-rate water revenues in its projections.

Recommended rates are the maximum rates the City can adopt, which is why BWA uses conservative estimates when making revenue projections. • As new construction can be unpredictable, BWA did not escalate revenues for growth or connection charges in its projections. Recommended rates are the maximum rates the City can adopt, which is why BWA uses conservative estimates when making revenue projections. • Interest income is estimated based on projected reserve levels. Future projections are estimated based on a conservative interest earning estimate of 2%. Actual interest amounts will vary based on reserves and future interest earning rates.

Expense Assumptions
• Operating and maintenance costs are based on the FY 2025-26 budget and include updated estimates developed with the help of City Staff.
• General operating and capital cost inflation is projected to escalate at an annual rate of 4% in FY 2026-27 and at an annual rate of 4% thereafter. This is a conservative estimate to account for future cost inflation and is based on recent and historic inflation. • The Water Enterprise will need to cash fund at least $6.7 million in capital spending in the next five years.
• Debt service projections are based on outstanding debt schedules and projected issuances of new debt. The financial plan assumes the issuance of thirty-year bonds at 5.5% interest for $9.5 million in FY 2025-26 and $20.0 million in FY 2028-29 to fund critical waterline and tank improvement projects.

5.3 Financial Plan Drivers
The City is anticipating a number of financial challenges that will require rate increases in upcoming years. Key drivers of future rate increases are:

Current Capital Project Funding
The approved loan from the Wastewater Fund is not sufficient to fund the capital projects that are under way. It is very helpful to temporarily bridge the gap until new debt funding can be secured after rate increases are effective. BWA recommends implementing rate increases at the beginning of 2026 to support issuing bonds for $9.5 million to be used for refunding the wastewater enterprise and maintaining prudent reserves. Without securing additional financing, the water fund reserves are expected to drop to $500,000 which is imprudent and will have a significant impact on the ability of the enterprise to borrow funds in the future.

Bartle Wells Associates
City of Arcata – 2025 Water and Wastewater Rate Study 12 |Page Capital Improvement Needs & Rehabilitation of Aging Infrastructure The City takes a proactive approach to maintaining its water system which requires a steady stream of repair, improvement, and replacement projects. Accounting for construction cost inflation, the City has identified approximately $36.0 million of capital improvement projects over the next 5 years.

The largest upcoming capital project is the Citywide Steel Waterline Replacement project. This project involves the removal and replacement of leaking steel and asbestos waterlines throughout the City, approximately 10% of the total water system. This study assumes the City will finance the majority of waterline replacement project costs by issuing new debt. While the recommended rate increases ensure the City will meet its new debt servicing requirements, it is important to note that the additional debt servicing will impact the City’s ability to use future water revenues to fund other ongoing water projects.

The following table shows the projected capital funding sources for the next five years.

Table 6. Capital Funding Sources
Capital Improvement Projects 2025-26 2026-27 2027-28 2028-29 2029-30 Projected Projected Projected Projected Projected
Total Project Cost
(Inflation $) $12,090,000 $572,000 $162,000 $11,368,000 $11,774,000 Capital Funding $12,090,000 $572,000 $162,000 $11,368,000 $11,774,000 Grants $0 $0 $0 $0 $0
Use of New Debt Proceeds 9,100,000 400,000 0 10,000,000 10,000,000 Cash Funded $2,990,000 $172,000 $162,000 $1,368,000 $1,774,000 Ongoing Cost Inflation
The City’s water enterprise faces ongoing operating cost inflation due to annual increases in a range of expenses including staffing, utilities, insurance, supplies, etc. On top of rate increases needed for other purposes, annual rate increases are needed to keep revenues aligned with cost inflation and prevent rates from falling behind the cost of providing service. Historically, inflation consistently hovered between 2% and 3%. Currently, inflation has mostly normalized after forty-year highs, but remains near 3%. Given the recent volatility, BWA designed the inflation projections to be slightly conservative to leave the City in a strong financial position while not driving excessive rate increases.

Bartle Wells Associates
City of Arcata – 2025 Water and Wastewater Rate Study 13 |Page

5.4 Cash Flow Projection Scenarios
Long-term cash flow projections were developed based on the assumptions and key drivers of future rate increases described above. The projections were used to determine the water utility’s annual revenue requirements and project required water rate revenue increases. The long-term cash flow projections incorporate the latest information available from the City’s budget, annual reports, capital spending projections, metered water demand data, as well as a number of reasonable assumptions developed with input from the City. The overall rate revenue increases are designed to fund the City’s cost of providing service, maintain roughly balanced budgets, maintain healthy debt service coverage, and maintain prudent reserves.

The projections indicate the need for rate increases. Actual impacts to customers water bills will vary based meter size and water use due to the outcome of the updated cost-of-service analysis.

This report explores the financial plan and rates for two different rate revenue scenarios which are as follows:
• Scenario 1, Immediate Revenue Increase – In this scenario rate revenues are increased as soon as possible, at the beginning of 2026 but the next increase is not until (July 1, 2027). There are also increases at the beginning of the following two fiscal years. In FY 2029-30, the final year of noticed rate increases, this scenario will have the lowest rates and highest reserve level of the two scenarios.
• Scenario 2, Phased-In Revenue Increase – In this scenario, rate revenues are increased as soon as possible, at the beginning of 2026 and then on January 1st of the subsequent four years. In final year of noticed rate increases, this scenario will have the highest rates and lowest reserve level of the two scenarios.

The following table shows a comparison of the two scenarios.

Bartle Wells Associates
City of Arcata – 2025 Water and Wastewater Rate Study 14 |Page Table 7. Water Cash Flow Scenario Comparison
Water Rate Scenarios FY 25-26* FY 26-27 FY 27-28 FY 28-29 FY 29-30 Scenario 1: Immediate Revenue Recovery
Rates Effective: May 1, 2026 Jul. 1, 2027 Jul. 1, 2028 Jul. 1, 2029 Jul. 1, 2030 Rate Revenue Increase ($) $1,017,063 $0 $798,857 $878,743 $773,294 Rate Revenue Increase (%) 44.0% 0.0% 10.0% 10.0% 8.0%
Ending Reserve Balance $6,935,088 $7,745,508 $9,088,705 $9,127,187 $8,516,465 Scenario 2: Phased-In Revenue Recovery
Rates Effective: Apr. 1, 2026 Jan. 1, 2027 Jan. 1, 2028 Jan. 1, 2029 Jan. 1, 2030 Rate Revenue Increase ($) $531,647 $614,121 $483,109 $450,901 $495,992 Rate Revenue Increase (%) 23.0% 18.0% 12.0% 10.0% 10.0% Ending Reserve Balance $6,449,671 $6,699,504 $7,769,227 $7,584,132 $6,918,910 * Initial bill impacts will vary based on customer class and usage due to rate structure adjustments realigning rates with cost of service.

In future years, the City can re-evaluate its finances and revenue requirements and adjust rates as needed based on updated projections. However, while the City always has the flexibility to implement rate adjustments that are lower than adopted pursuant to Proposition 218, future rates cannot exceed adopted increases without going through the Proposition 218 process again. Rates adopted pursuant to Proposition 218 are essentially future rate caps.

Bartle Wells Associates
City of Arcata – 2025 Water and Wastewater Rate Study 15 |Page

5.5 Water Financial Plan Scenario 1: Immediate Revenue Increase The following section presents a financial plan for the water enterprise for a scenario which immediately recovers the annual operating revenue requirements. A summary of the key elements of the five-year cash flow projection for this scenario is displayed in the following table.

Table 8. Water Scenario 1 Cash Flow Projection Summary
Scenario 1: Immediate
Revenue Increase FY 25-26 FY 26-27 FY 27-28 FY 28-29 FY 29-30 Ending Reserves $6,935,088 $7,745,508 $9,088,705 $9,127,187 $8,516,465 Rate Revenue Increase $1,017,063 $0 $798,857 $878,743 $773,294 The following figure shows cash flow projections incorporating the assumptions described above.

Figure 2: Water Scenario 1 Projected Cash Flow Graph
$0
$2
$4
$6
$8
$10
$12
2024-25 2025-26 2026-27 2027-28 2028-29 2029-30
Millions
City of Arcata
Projected Water Revenues & Expenses
O&M Debt Service Cash Funded Capital
Revenue Reserves

Bartle Wells Associates
City of Arcata – 2025 Water and Wastewater Rate Study 16 |Page The rate projections shown on the following table are designed to fund the City’s cost of providing service while maintaining balanced budgets and building prudent minimal levels of fund reserves each year.

Table 9. Projected Revenues & Expenses: Water Scenario 1 Fiscal Year 2025-26 2026-27 2027-28 2028-29 2029-30
Proposed Revenue Increase 44.0% 0.0% 10.0% 10.0% 8.0%
Beginning Reserve Balance $9,179,175 $6,935,088 $7,745,508 $9,088,705 $9,127,187

REVENUES
Rate Revenues
Current Rate Revenue $5,547,618 $7,988,570 $7,988,570 $8,787,426 $9,666,169 Revenue from Rate Increases 2,440,952 0 798,857 878,743 773,294 Timing adjustment 1 ($1,423,889)
Total Rate Revenues $6,564,681 $7,988,570 $8,787,426 $9,666,169 $10,439,463 Non-Rate Revenues
Connection Fees $680,000 $100,000 $100,000 $100,000 $100,000 Other Revenues 93,800 89,950 85,965 81,841 77,572
Interest on Pooled Cash 2 $183,584 $138,702 $154,910 $181,774 $182,544 Total Non-Rate Revenues $957,384 $328,652 $340,875 $363,615 $360,116 Total Revenue $7,522,064 $8,317,221 $9,128,302 $10,029,784 $10,799,579

EXPENDITURES
Total O&M $6,276,646 $6,525,387 $6,813,700 $7,115,048 $7,430,033 Existing Debt Service 139,089 138,562 138,551 139,028 138,666 New Debt Service 261,250 670,853 670,853 1,369,227 2,067,602 Interfund Loan 99,167 0 0 0 0
Rate Funded Capital $2,990,000 $172,000 $162,000 $1,368,000 $1,774,000 Total Expenditures $9,766,152 $7,506,802 $7,785,104 $9,991,303 $11,410,301 Net Revenue ($2,244,087) $810,420 $1,343,198 $38,481 ($610,722) Ending Fund Balance $6,935,088 $7,745,508 $9,088,705 $9,127,187 $8,516,465 Debt Service Coverage 2.49 2.21 2.86 1.93 1.53
1, Reflects rates effective May 1, 2026, and July 1 each year thereafter. 2, 2% earnings on fund balance.

Bartle Wells Associates
City of Arcata – 2025 Water and Wastewater Rate Study 17 |Page

5.6 Water Financial Plan Scenario 2: Phased-In Revenue Increase The following section presents a financial plan for the water enterprise for a scenario which includes a prolonged schedule for recovery of financial sustainability for the water enterprise than Scenario 1. A summary of the key elements of the long-term cash flow projections for this scenario is displayed in the following table.

Table 10. Water Scenario 2 Cash Flow Projection Summary Scenario 2: Phased-In Revenue
Recovery FY 25-26 FY 26-27 FY 27-28 FY 28-29 FY 29-30
Ending Reserves $6,449,671 $6,699,504 $7,769,227 $7,584,132 $6,918,910 Rate Revenue Increase $531,647 $614,121 $483,109 $450,901 $495,992 The following figure shows cash flow projections incorporating the assumptions described above. The rate projections shown on the following table are designed to fund the City’s cost of providing service.

Figure 3: Water Scenario 2 Projected Cash Flow Graph
$0
$2
$4
$6
$8
$10
$12
2024-25 2025-26 2026-27 2027-28 2028-29 2029-30
Millions
City of Arcata
Projected Water Revenues & Expenses
O&M Debt Service Cash Funded Capital
Revenue Reserves

Bartle Wells Associates
City of Arcata – 2025 Water and Wastewater Rate Study 18 |Page Detailed, long-term, cash flow projections for this scenario are shown in the following table.

Table 11. Projected Revenues & Expenses: Water Scenario 2 Fiscal Year 2025-26 2026-27 2027-28 2028-29 2029-30
Proposed Revenue Increase 23.0% 18.0% 12.0% 10.0% 10.0% Beginning Reserve Balance $9,179,175 $6,449,671 $6,699,504 $7,769,277 $7,584,132

REVENUES
Rate Revenues
Current Rate Revenue $5,547,618 $6,823,570 $8,051,812 $9,018,030 $9,919,833 Revenue from Rate Increases 1,275,952 1,228,243 966,217 901,803 991,983 Timing adjustment 1 ($744,305) ($614,121) ($483,109) ($450,901) ($495,992) Total Rate Revenues $6,079,264 $7,437,691 $8,534,921 $9,468,931 $10,415,824 Non-Rate Revenues
Connection Fees $680,000 $100,000 $100,000 $100,000 $100,000 Other Revenues 93,800 89,950 85,965 81,841 77,572
Interest on Pooled Cash 2 $183,584 $128,993 $133,990 $155,386 $151,683 Total Non-Rate Revenues $957,384 $318,943 $319,955 $337,227 $329,255 Total Revenue $7,036,648 $7,756,635 $8,854,876 $9,806,158 $10,745,080

EXPENDITURES
Total O&M $6,276,646 $6,525,387 $6,813,700 $7,115,048 $7,430,033 Existing Debt Service 139,089 138,562 138,551 139,028 138,666 New Debt Service 261,250 670,853 670,853 1,369,227 2,067,602 Interfund Loan 99,167 0 0 0 0
Rate Funded Capital $2,990,000 $172,000 $162,000 $1,368,000 $1,774,000 Total Expenditures $9,766,152 $7,506,802 $7,785,104 $9,991,303 $11,410,301 Net Revenue ($2,729,504) $249,833 $1,069,772 ($185,145) ($665,221) Ending Fund Balance $6,449,671 $6,699,504 $7,769,277 $7,584,132 $6,918,910 Debt Service Coverage 1.52 1.52 2.52 1.78 1.50
1, Reflects rates effective May 1, 2026 and January 1 for each year thereafter. 2, 2% earnings on fund balance.

Bartle Wells Associates
City of Arcata – 2025 Water and Wastewater Rate Study 19 |Page 6 WATER COST OF SERVICE RATE DERIVATION

6.1 Cost of Service Analysis
There must be a cost-based nexus between the revenue requirement from the cash flow and the proposed rates. This section describes the steps BWA took to determine the rate revenue requirement need from each customer class that is proportional to their cost of service.

6.2 Cost Allocation Rate Revenue Requirements
Cost allocation categories are groupings of the water enterprise’s non-rate revenues and expenses that are then allocated to the utility’s functional components (capacity, all volume, as all other, described below). A functional component reflects a grouping of the utility’s expenses whose magnitude is driven by the quantity of a specific unit-of-measure. For example, costs allocated to the all volume functional component are driven in part by the volume of water purchases cost component.

The functional components used in this study are as follows:
• Capacity – Fixed costs are recovered per meter. Fixed costs or costs related to system capacity were allocated to this category.
• All Volume – Costs reasonably recovered volumetrically were allocated to this category.

Volumetric costs are recovered per unit of volume (HCF) based on all projected demand. • As All Other – Items in this category do not impact the functional allocation because they are driven by the overall activity of the utility. This includes interest earnings on fund balances. Interest is allocated entirely to the “As All Other” functional component and does not impact the allocation.

To ensure the rates derived for the next five years are proportional to the costs, the amounts in the cost allocation categories are based on an average of the projected revenues and expenses for the next five years. For each cost allocation category, the expenses are reduced by non-rate revenues to determine the amount in each cost allocation category that needs to be funded by rates.

Related expenses and non-rate revenues were grouped into the following allocation categories before being allocated to each functional category:
• Administration – Expenses were allocated 40% to Capacity and 60% to All Volume to reflect that these costs are driven by the overall capacity of the system which is driven both by the projected volume of water sold and the standing capacity in the system. • Maintenance – Expenses are related to maintaining and operating the water system. These costs are allocated 25% to Capacity and 75% to All Volume because these costs related to the overall capacity of the system which is driven both by the projected volume of water sold and the standing capacity in the system.
• Utilities – The allocation represents that most of these costs are variable and caused by pumping and treatment, but some of these costs are fixed. Utility expenses are allocated 10% to Capacity

Bartle Wells Associates
City of Arcata – 2025 Water and Wastewater Rate Study 20 |Page and 90% to All Volume because these costs related primarily driven by the projected volume of water sold.
• Water Purchases – Expenses consist of imported water purchases. They are allocated 100% to All Volume to reflect that these costs are driven by the projected volume of water sold. • Water Treatment – Expenses consist of the cost to treat water to potable standards. They are allocated 100% to All Volume to reflect that these costs are incurred to meet the volumetric needs of the City.
• Interest – Interest earned on fund balance is allocated entirely to the “As All Other” functional component and does not impact the allocation because interest is driven by the overall activity of the utility.
• Debt Service – Expenses are allocated 15% to Capacity and 85% to All Volume because these costs related to the overall capacity of the system both by the projected volume of water sold and the standing capacity in the system.
• Capital – Expenses are allocated 15% to Capacity and 85% to All Volume because these costs related to the overall capacity of the system both by the projected volume of water sold and the standing capacity in the system.

6.3 Functional Allocation
The following table shows a breakdown of the water utility’s expenses and offsetting revenues and how they are allocated by function. The proportional allocation is then applied to the rate revenue requirement so that the rates are proportional to the cost of service provided.

Table 12. Functional Allocation
5-Year Average
Allocation Category Expenses
Less NonRate
Revenue
Revenue
Requirement Capacity All Volume Total
Administration $4,258,016 $254,128 $4,003,888 40% 60% 100% Maintenance 434,812 0 434,812 25% 75% 100%
Utilities 92,077 0 92,077 10% 90% 100%
Water Purchases 1,925,476 0 1,925,476 0% 100% 100%
Water Treatment 121,781 0 121,781 0% 100% 100%
Debt Service 1,103,134 0 1,103,134 15% 85% 100%
Capital 1,293,200 216,000 1,077,200 15% 85% 100%
Functional Allocation $ $2,046,516 $6,711,852 $8,758,368 Functional Allocation % 23.37% 76.63% 100.00%
Revenue Requirement $1,296,279 $4,251,339 $5,547,618

Bartle Wells Associates
City of Arcata – 2025 Water and Wastewater Rate Study 21 |Page

6.4 Water Rate Structure Recommendations
Bartle Wells Associates reviewed the City’s water rates and recommends charging outside city customers the same rates charged to inside city customers to improve compliance with the requirements of Proposition 218.

6.5 Rate Derivation
The allocated revenue requirements need to be recovered on a reasonable per unit basis to be proportional to the service provided.

Monthly Fixed Service Charge
This charge applies to all active services. It recovers the Capacity functional component revenue requirement on a per EDU basis. The unit costs per EDU varies by meter size. EDU ratios are based on the AWWA meter equivalent ratio for each meter size as described in Section 4.

Volumetric Charge
This charge applies to every unit of water sold. It recovers the All Volume functional component revenue requirement on a unit (hundred cubic feet, HCF) basis.

The following table shows the unit rate derivation of the fixed and volumetric charges.

Table 13. Unit Rate Derivation
Allocation Units Capacity All Volume
Unit of Measure EDU HCF
Allocation Units 104,820 590,000
Revenue Requirement $1,296,279 $4,251,339
Unit Cost ($/Unit) $12.53 $7.18
While the All Volume unit rate can be recovered on the basis of every HCF sold, the EDU rate must be calculated for each meter size. This is shown in the following table.

Bartle Wells Associates
City of Arcata – 2025 Water and Wastewater Rate Study 22 |Page Table 14. Fixed Rate Derivation
Meter Size
AWWA Capacity
Ratio
Monthly
Fixed Charge
5/8" 1.00 $12.53
3/4" 1.00 $12.53
1" 1.67 $20.93
1 1/2" 3.33 $41.73
2" 5.33 $66.80
3" 10.00 $125.33
4" 16.67 $208.92
6" 33.33 $417.72
8" 53.33 $668.37
10" 76.67 $960.88

6.6 Recommended Water Rates
The recommended rates incorporate some modifications to the City’s water rate structure designed to align rates with the current cost of providing service and reflect policy input provided by the City.

Due to these modifications, impacts to water bills will vary based on customer class and water use when the first-year proposed rates are implemented.

The following tables show a 5-year schedule of recommended water rates for each scenario.

Table 15. Scenario 1 Recommended Water Rates
2025/26 5/1/2026 7/1/2027 7/1/2028 7/1/2029 7/1/2030
Current Proposed Proposed Proposed Proposed Proposed
Volumetric Rates ($/HCF)
All Usage $7.15 $10.33 $10.33 $11.37 $12.50 $13.50
Fixed Charges ($/meter)
Meter Size
5/8" and 3/4" $12.23 $18.05 $18.05 $19.85 $21.84 $23.58 1" $20.43 $30.14 $30.14 $33.15 $36.47 $39.39
1 1/2" $40.73 $60.10 $60.10 $66.11 $72.72 $78.53
2" $65.19 $96.19 $96.19 $105.81 $116.39 $125.70
3" $122.31 $180.47 $180.47 $198.52 $218.37 $235.84
4" $203.89 $300.85 $300.85 $330.93 $364.02 $393.14
6" $407.65 $601.51 $601.51 $661.66 $727.83 $786.05
8" $652.27 $962.45 $962.45 $1,058.70 $1,164.57 $1,257.73 10" $937.74 $1,383.67 $1,383.67 $1,522.04 $1,674.24 $1,808.18

Bartle Wells Associates
City of Arcata – 2025 Water and Wastewater Rate Study 23 |Page Table 16. Scenario 2 Recommended Water Rates
2025/26 5/1/2026 1/1/2027 1/1/2028 1/1/2029 1/1/2030
Current Proposed Proposed Proposed Proposed Proposed
Volumetric Rates ($/HCF)
All Usage $7.15 $8.83 $10.42 $11.67 $12.83 $14.12
Fixed Charges ($/meter)
Meter Size
5/8" and 3/4" $12.23 $15.42 $18.19 $20.37 $22.41 $24.65 1" $20.43 $25.74 $30.38 $34.02 $37.42 $41.17
1 1/2" $40.73 $51.33 $60.57 $67.84 $74.63 $82.09
2" $65.19 $82.16 $96.95 $108.59 $119.45 $131.39
3" $122.31 $154.15 $181.90 $203.73 $224.10 $246.51
4" $203.89 $256.97 $303.23 $339.61 $373.58 $410.93
6" $407.65 $513.79 $606.27 $679.03 $746.93 $821.62
8" $652.27 $822.10 $970.07 $1,086.48 $1,195.13 $1,314.64 10" $937.74 $1,181.89 $1,394.63 $1,561.98 $1,718.18 $1,890.00

6.7 Bill Impacts
The following tables show the impacts of the proposed water rates for each scenario on a range of single-family customers with different levels of consumption.

Table 17. Scenario 1 Bill Impacts
Rate Category Existing Rates Proposed Rates
All Usage $7.15 $10.33
5/8" Monthly Fixed $12.23 $18.05
Water Use Existing Rates Proposed Rates Change ($) Change (%) 2 HCF $26.53 $38.71 $12.18 46%
5 HCF $47.98 $69.70 $21.72 45%
10 HCF $83.73 $121.35 $37.62 45%
20 HCF $155.23 $224.65 $69.42 45%
Table 18. Scenario 2 Bill Impacts
Rate Category Existing Rates Proposed Rates
All Usage $7.15 $8.83
5/8" Monthly Fixed $12.23 $15.42
Water Use Existing Rates Proposed Rates Change ($) Change (%) 2 HCF $26.53 $33.08 $6.55 25%
5 HCF $47.98 $59.57 $11.59 24%
10 HCF $83.73 $103.72 $19.99 24%
20 HCF $155.23 $192.02 $36.79 24%

Bartle Wells Associates
City of Arcata – 2025 Water and Wastewater Rate Study 24 |Page The following figures summarize the bill impacts presented in the previous tables.

Figure 4: Scenario 1 Bill Impacts
Figure 5: Scenario 2 Bill Impacts
$26.53 $38.71 $47.98
$69.70
$83.73
$121.35
$155.23
$224.65
$0
$50
$100
$150
$200
$250
Existing
2 HCF
Proposed
2 HCF
Existing
5 HCF
Proposed
5 HCF
Existing
10 HCF
Proposed
10 HCF
Existing
20 HCF
Proposed
20 HCF
City of Arcata
Single Family Residential Monthly Water Bill Comparison Fixed
Variable
$26.53 $33.08
$47.98 $59.57
$83.73
$103.72
$155.23
$192.02
$0
$50
$100
$150
$200
$250
Existing
2 HCF
Proposed
2 HCF
Existing
5 HCF
Proposed
5 HCF
Existing
10 HCF
Proposed
10 HCF
Existing
20 HCF
Proposed
20 HCF
City of Arcata
Single Family Residential Monthly Water Bill Comparison Fixed
Variable

Bartle Wells Associates
City of Arcata – 2025 Water and Wastewater Rate Study 25 |Page 7 WATER SUMMARY AND RECOMMENDATIONS

7.1 Regional Water Rate Survey
BWA conducted a survey of current water rates for single-family residences including the City and other regional water systems. Unfortunately, due to time and cost restrictions, the survey is limited to only providing data in the form of the typical monthly billing amount of each water provider for a single-family residence. This limited comparison does not account for any of the differences that are highly likely to exist among the systems. The City of Arcata currently applies monthly water charges based on meter size and use. While other water agencies use similar metrics, each agency would have developed their own fixed and volumetric rates based on their own cost of service to account for the specific operating, treatment, and infrastructure needs of their water system. Nevertheless, regional surveys can still be used as an informational tool as long as agencies are mindful of the differences that exist in the development of an agency’s water rates.

The following chart comparesthe monthly water bills for a typical single-family home to those of other regional agencies. The City’s current water rates are at the lower end of the range compared to other regional agencies surveyed.

Figure 6: Regional Single Family Residential Water Rate Survey $38.66 $38.73
$47.98
$56.86 $59.57 $61.09 $63.70
$68.31 $69.70 $72.20
$0
$10
$20
$30
$40
$50
$60
$70
$80
Fortuna McKinleyville
CSD
Arcata
Current
Fort Bragg Arcata
Option 2
Humboldt
CSD
Eureka Willits Arcata
Option 1
Ukiah
Single Family Residential Monthly Water Rate Survey
(Average Monthly Use 5 HCF)
Fixed Charge
Variable Charge
HCF = Hundred Cubic Feet = 748 gallons.

Bartle Wells Associates
City of Arcata – 2025 Water and Wastewater Rate Study 26 |Page While the proposed water rates developed in this study are higher than the existing rates, they are developed to reflect the current cost of service for the City’s water system. It is also important to note that many of the agencies included in the survey are facing similar financial pressures and are either in the middle of multi-year rate increases or are anticipating raising rates in upcoming years.

7.2 Water Summary and Recommendations
The water enterprise is facing the need to increase rate revenues in order to 1) have revenues exceed expenses and not need financial support from the Wastewater Fund and 2) have revenues to fund capital and 3) qualify for financing and grants to reduce the burden on the City’s rate payers.

BWA has the following recommendations for the water enterprise:
• The approved loan from the Wastewater Fund is not sufficient to fund the capital projects that are under way. BWA recommends implementing rate increases at the beginning of 2026 to support issuing bonds for $9.5 million to be used for refunding the wastewater enterprise and maintaining prudent reserves. Without securing additional financing, the water fund reserves are expected to drop to $500,000 which is imprudent and will have a significant impact on the ability of the enterprise to borrow funds in the future. • The City should raise water rates in an amount large enough to pay for operating expenses, capital projects and to maintain prudent reserves.
• After the water enterprise’s finances are stabilized, BWA recommends the City continue to adopt consistent, incremental increases to prevent the need for larger, one-time rate increases. • When adopting new rates, BWA recommends the City adopt the recommended rate structure changes to bring the water enterprise’s rates into greater compliance with Prop. 218.

Bartle Wells Associates
City of Arcata – 2025 Water and Wastewater Rate Study 27 |Page 8 WASTEWATER FINANCES & CASH FLOW PROJECTIONS

8.1 Wastewater Financial Overview
Bartle Wells Associates conducted an independent evaluation of the wastewater enterprise finances.

Key observations include:
• The wastewater enterprise is in overall good financial health but will need rate increases to keep revenues in line with rising costs and to cash fund needed capital improvements. • The City projects capital expenses of $51.4 million from FY 2025-26 through FY 2029-30. • Projected grant funding for Capital projects from FY 2025-26 through FY 2029-30 is $26.5 million.

BWA developed long-term cash flow projections to determine the wastewater enterprise’s annual revenue requirements and project required wastewater rate revenue increases. The financial projections incorporate the latest information available as well as reasonable and slightly conservative assumptions.

8.2 Wastewater Financial Plan Assumptions
Assumptions were developed based on input from City Staff, historical escalation factors, and conservative projections for future escalation factors to reasonably ensure that the maximum rates adopted by the City will provide sufficient revenues to support the City’s water operations. Key information and assumptions include:

Reserves
• BWA recommends the City maintain prudent fund reserves. BWA recommends the wastewater enterprise maintain one year of operating expenses in reserves for cash flow and liquidity purposes in case of revenue loss/interruption, and to be able to cover costs during unforeseen emergencies.

Fund reserves will fluctuate based on the timing of revenues and expenses, but the proposed rates are projected to provide the wastewater enterprise sufficient fund reserves. At a minimum, the wastewater enterprise should aim to hold at least three months of operating expenses in reserve.

Revenue Assumptions
• The wastewater enterprise is projected to begin FY 2025-26 with $14.5 million in reserves. • BWA did not escalate revenues for miscellaneous non-rate wastewater revenues in its projections.

Recommended rates are the maximum rates the City can adopt, which is why BWA uses conservative estimates when making revenue projections. • As new construction can be unpredictable, BWA did not escalate revenues for growth, connection charges, or building permit revenue in its projections. Recommended rates are the maximum rates

Bartle Wells Associates
City of Arcata – 2025 Water and Wastewater Rate Study 28 |Page the City can adopt, which is why BWA uses conservative estimates when making revenue projections.
• Interest income is estimated based on projected reserve levels. Future projections are estimated based on conservative interest earning estimate of 2.0%. Actual interest amounts will vary based on reserves and future interest earning rates.
• Projected grant funding for Capital projects from FY 2025-26 through FY 2029-30 is $26.5 million.

Expense Assumptions
• Operating and maintenance costs are based on the FY 2025-2026 budget and include updated estimates developed with the help of City Staff.
• General operating and capital cost inflation is projected to escalate at an annual rate of 4% in FY 2026-2027 and at an annual rate of 4% thereafter. This is a conservative estimate to account for future cost inflation and is based on recent and historic inflation. • The Wastewater Enterprise will need to cash fund at least $16.9 million in capital spending in the next five years.
• The wastewater enterprise does not have any outstanding debt. Debt service projections are based on projected issuances of new debt. The financial plan assumes the issuance of $8 million in FY 2028-29 to fund critical wastewater treatment facility and system improvement projects.

8.3 Financial Plan Drivers
The City is anticipating a number of financial challenges that will require rate increases in upcoming years. Key drivers of future rate increases are:

Ongoing Cost Inflation
The City’s wastewater enterprise faces ongoing operating cost inflation due to annual increases in a range of expenses including staffing, utilities, insurance, supplies, etc. On top of rate increases needed for other purposes, annual rate increases are needed to keep revenues aligned with cost inflation and prevent rates from falling behind the cost of providing service. Historically, inflation consistently hovered between 2% and 3%. Currently, inflation has mostly normalized after forty-year highs, but remains near 3%. Given the recent volatility, BWA designed the inflation projections to be slightly conservative to leave the City in a strong financial position while not driving excessive rate increases.

Capital Improvement Needs & Rehabilitation of Aging Infrastructure The City takes a proactive approach to maintaining its wastewater system which requires a steady stream of repair, improvement, and replacement projects. Accounting for construction cost inflation, the City has identified approximately $51.4 million of capital improvement projects over the next 5 years.

Bartle Wells Associates
City of Arcata – 2025 Water and Wastewater Rate Study 29 |Page There are two critical upcoming capital projects for the wastewater system. The first major project is the Arcata Wastewater Treatment Facility (AWTF) project. The AWTF is located in close proximity to the Humboldt Bay and is at increased risk for flooding events, sea level rise, and other environmental catastrophes such as severe storms, earthquakes, and tsunamis. The AWTF project includes major facility infrastructure upgrades and enhancements to the existing levee protecting the facility’s structural and operational integrity. The second major upcoming capital project is the sewer inflow and infiltration (I&I) reduction project which aims to reduce sewer overflow events by identifying and replacing leaky, undersized, and unlined sewer pipes. This study assumes the City will finance the majority of project costs by issuing new debt. While the recommended rate increases ensure the City will meet its new debt servicing requirements, it is important to note that the additional debt servicing will impact the City’s ability to use future wastewater revenues to fund other ongoing wastewater projects.

The following table shows the projected capital funding sources for the next five years.

Table 19. Capital Funding Sources
Capital Improvement Projects 2025-26 2026-27 2027-28 2028-29 2029-30 Projected Projected Projected Projected Projected
Total Project Cost
(Inflation $) $12,000,000 $5,902,000 $11,610,000 $9,436,000 $12,470,000 Capital Funding $12,000,000 $5,902,000 $11,610,000 $9,436,000 $12,470,000 Grants $11,500,000 $5,000,000 $10,000,000 $0 $0
Use of New Debt Proceeds 0 0 0 4,000,000 4,000,000
Cash Funded $500,000 $902,000 $1,610,000 $5,436,000 $8,470,000

8.4 Wastewater Cash Flow Projections
Long-term cash flow projections were developed based on the assumptions and key drivers of future rate increases described above. The projections were used to determine the wastewater utility’s annual revenue requirements and project required wastewater rate revenue increases. The long-term cash flow projections incorporate the latest information available from the City’s budget, annual reports, capital spending projections, flow data, as well as a number of reasonable assumptions developed with input from the City. The overall rate revenue increases are designed to fund the City’s cost of providing service, maintain roughly balanced budgets, maintain healthy debt service coverage, and maintain prudent reserves.

Bartle Wells Associates
City of Arcata – 2025 Water and Wastewater Rate Study 30 |Page The projections indicate the need for rate increases. Actual impacts to customers wastewater bills will vary based on demand and wastewater strength, due to the outcome of the updated cost-of-service analysis. In future years, the City can re-evaluate its finances and revenue requirements and adjust rates as needed based on updated projections. However, while the City always has the flexibility to implement rate adjustments that are lower than adopted, pursuant to Proposition 218, future rates cannot exceed adopted increases without going through the Proposition 218 process again.

The following figure shows cash flow projections incorporating the assumptions described above.

Figure 7: Projected Wastewater Revenues & Expenses
The rate projections shown on the following table are designed to fund the City’s cost of providing service while maintaining balanced budgets and building prudent minimal levels of fund reserves each year.

Bartle Wells Associates
City of Arcata – 2025 Water and Wastewater Rate Study 31 |Page Table 20. Projected Wastewater Revenues & Expenses
Fiscal Year 2025-26 2026-27 2027-28 2028-29 2029-30
Proposed Rate Increase 0.0% 0.0% 5.0% 5.0% 5.0%
Beginning Fund Balance $14,554,148 $13,899,822 $13,925,486 $11,218,753 $9,133,986

REVENUES
Rate Revenues
Current Wastewater Rates $8,800,000 $8,800,000 $8,800,000 $9,240,000 $9,702,000 Proposed Rates 0 0 440,000 462,000 485,100
Total Rate Revenues $8,800,000 $8,800,000 $9,240,000 $9,702,000 $10,187,100 Non-Rate Revenues
Interest on Pooled Cash2 $291,083 $277,996 $378,510 $400,455 $344,426 Connection Fees 750,000 100,000 100,000 100,000 100,000 Water Loan Repayment 99,167 3,500,000 0 0 0
Other Revenues ($23,800) ($33,800) ($33,800) ($33,800) ($33,800) Total Non-Rate Revenues $1,116,450 $3,844,196 $444,710 $466,655 $410,626 Total Revenues $9,916,450 $12,644,196 $9,684,710 $10,168,655 $10,597,726

EXPENDITURES
Total O&M $6,570,775 $6,716,532 $6,977,458 $7,248,550 $7,530,206 Loan to Water Fund 3,500,000 0 0 0 0
Existing Debt Service 0 0 0 0 0
New Debt Service 0 0 0 285,542 571,085
Rate Funded Capital $500,000 $902,000 $1,610,000 $5,436,000 $8,470,000 Total Expenditures $10,570,775 $7,618,532 $8,587,458 $12,970,093 $16,571,291 Net Revenue ($654,325) $5,025,664 $1,097,252 ($2,801,438) ($5,973,565) Ending Fund Balance $13,899,822 $18,925,486 $20,022,738 $17,221,300 $11,247,736 Debt Service Coverage N/A N/A N/A 10.23 5.37
1, Reflects rates effective July 1, 2026, and July 1 each year thereafter. 2, 2% earnings on fund balance.

Bartle Wells Associates
City of Arcata – 2025 Water and Wastewater Rate Study 32 |Page 9 WASTEWATER COST OF SERVICE ANALYSIS AND RATE

DERIVATION

9.1 Wastewater Cost of Service Rate Derivation Process
BWA derived updated wastewater rates that account for both a) the overall rate increases identified in the financial projections, and b) proposed rate structure modifications. The proposed rates are designed to equitably apportion and recover costs from the City’s customer base. The basic methodology used to develop new rates includes the steps summarized in the figure below.

Figure 8: Wastewater Cost of Service Analysis and Rate Derivation Process Estimate Wastewater Flow & Strength Loadings
Wastewater flow volume, Biochemical Oxygen Demand (BOD) concentrations, and Total Suspended Solids (TSS) concentrations were determined for each customer class.

Allocate Cost to Functional Component
Each cost was allocated to function: fixed (per customer), flow, BOD, and TSS.

Derive Unit Rates for Functional Components Based on FY 25/26 Revenue Divide costs allocated for recovery from functional components by allocation units to derive unit costs for functional components.

Determine FY 25/26 Rate Revenue Requirements by Customer Classes Multiply functional unit rates by the billing units associated with each functional component for each customer class to determine the revenue requirement of each class.

Residential Rate Derivation
Fixed and volumetric portions of the
residential revenue requirement were
identified. Rates were derived for single
family residences by dividing the total
revenue requirement allocated by the total
number of residential units.

Commercial Rate Derivation
Fixed and volumetric portions of the commerical revenue requirement were identified by customer class. Fixed rates were derived based on the identified fixed portion of the revenue requirement divided by the number of customers in each class.

Volumetric rates were derived to recover the remaining revenue requirement divided by the projected demand flows and
estimated wastewater strength of each class.

Bartle Wells Associates
City of Arcata – 2025 Water and Wastewater Rate Study 33 |Page

9.2 Customer Flows and Loadings
Estimated flows and loadings of each customer class are based on analysis of recent annual water consumption data by fiscal year and wastewater strength assignments for each customer class. • Single Family Residential flows per unit are based on the average winter water use per unit.

Residential wastewater strength concentrations are based on estimates previously published by the State Water Resources Control Board (SWRCB), adjusted for water conservation, City specific demands, and input from City Staff.
• Commercial flows are estimated based on projected water use. A return to sewer factor (RTS) is applied to adjust water use to estimated flows into the wastewater system. Wastewater strength assumptions for the customer classes are based on the type of customers grouped in each class.

The resulting flow and strength projections for all wastewater customer classes are shown on the following tables. These projections provide the basis for allocating costs and deriving equitable wastewater rates for each customer class.

Table 21. Wastewater Flows
Customer Class Accounts Units HCF MG5 GPD6
(hcf per EDU) 2 (hcf) 3 (%)
Residential
Single-Family 4,949 4,949 4.00 237,552 100% 237,552 178 486,853 Multi-Family 98 1,352 3.20 51,917 100% 51,917 39 106,401 Commercial
Low 381 91,116 80% 72,893 55 149,390
Medium 136 84,100 80% 67,280 50 137,887
High 48 16,115 80% 12,892 10 26,422
Total 5,612 442,533 331 906,954
Est. Mo Flow1
Projected
Water Use Flow Factor4
Projected Wastewater Flow

Bartle Wells Associates
City of Arcata – 2025 Water and Wastewater Rate Study 34 |Page Table 22. Wastewater Strength Loadings
Projected
Wastewater Flow Strength (mg/l)1 Loadings (lbs)
Customer Class GPD BOD2 TSS3 BOD TSS Annual Bills
(mg/l) (mg/l) (lbs) (lbs) (#)
Residential
Single-Family 486,853 300 300 444,973 444,973 59,388
Multi-Family 106,401 300 300 97,248 97,248 16,224
Commercial
Low 149,390 200 200 91,026 91,026 4,572
Medium 137,887 300 300 126,026 126,026 1,632
High 26,422 600 600 48,299 48,299 576
Total 906,954 807,572 807,572 82,392
1 State Water Resource Control Board (SWRCB) Guidelines for Wastewater Agencies. 2 "BOD" stands for biochemical oxygen demand.
3 "TSS" stands for total suspended solids.

9.3 Cost of Service Analysis
There must be a cost-based nexus between the revenue requirement from the cash flow and the proposed rates. This section describes the steps BWA took to determine the rate revenue requirement need from each customer class that is proportional to their cost of service.

9.3.1 Cost Allocation Rate Revenue Requirements
Cost allocation categories are groupings of the wastewater enterprise’s non-rate revenues and expenses that are then allocated to the utility’s functional components (Fixed, Flow, BOD & TSS, described in the next section).

To ensure the rates derived for the next five years are proportional to the costs, the amounts in the allocation categories are based on an average of the projected revenues and expenses for the next five years. The expenses are reduced by non-rate revenues to determine the amount in each cost allocation category that needs to be funded by rates and then dividing each functional component’s revenue requirements by the allocations units most reasonably related to each function.

Related expenses were grouped into the following cost allocation categories before being allocated to each functional category:
• Collection – Expenses in this category are related to the wastewater collection system. These costs are largely driven by the volume of wastewater flow.

Bartle Wells Associates
City of Arcata – 2025 Water and Wastewater Rate Study 35 |Page • Treatment – Expenses in this category are related to wastewater treatment. These costs are largely driven by the volume and strength of wastewater flows.
• Debt Service – Expenses in this category reflect annual debt service payments. Expenses in this category are allocated to the flow and strength functional components based on the blend of capital collection and treatment projects.
• Capital – Expenses in this category reflect costs for capital projects. These costs are largely driven by the volume of wastewater flow and also impacted by the number of connections to the system.

Expenses in this category are allocated to the fixed and flow and strength functional components based on the blend of capital collection and treatment projects.

9.3.2 Functional Allocation
The purpose of the functional allocation is to determine the portion of rate revenues needed to support each function of the wastewater system. A functional component reflects a grouping of the utility’s expenses whose magnitude is driven by the quantity of a specific unit-of-measure. For example, costs allocated to the flow functional component are driven by the volume of wastewater flows.

The functional components used in this study are as follows:
• Fixed – Costs related to providing service to each customer were allocated to this functional component. These costs are related to the number of customers served by the City. • Flow – Costs related to system flows were allocated to this functional component. These costs are related to the volume of wastewater flows.
• BOD – Costs related to treating biochemical oxygen demand are allocated to this functional component. These costs are allocated related to the pounds of BOD loadings treated. • TSS – Costs related to treating total suspended solids are allocated to this functional component.

These costs are allocated related to the pounds of TSS loadings treated.

Wastewater system costs net of non-rate revenues are assigned to each allocation category for rate revenue recovery via the functional cost components of fixed, flow, BOD, and TSS. While there is no single correct approach for cost allocation, BWA believes that costs should be allocated within a reasonable range that reflects both a) underlying cost causation, to the extent such causation can reasonably be determined or estimated, and b) the policy preferences of the agency in cases where a range of reasonable approaches can be justified. This process is intended to proportionately allocate costs to each functional component to determine the revenue requirement for each component. The allocations to each functional component were based on input from City staff.

The following table shows a breakdown of the wastewater utility’s expenses and offsetting revenues i.e., the revenue recovery needed from rates for each cost category allocated by function. The proportional allocation is then applied to the rate revenue requirement so that the rates are

Bartle Wells Associates
City of Arcata – 2025 Water and Wastewater Rate Study 36 |Page proportional to the cost of service provided. The result of this allocation is the percent of the revenue requirement associated with each functional allocation category.

Table 23. Rate Revenue Requirements by Functional Components Wastewater Cost Component 5-Year Average Fixed Flow BOD TSS Operating Costs
Collection $2,251,662 10% 85% 5% 5%
Treatment 4,757,043 10% 30% 30% 30%
Non-Operating Costs
Debt Service 85,663 0% 33% 33% 33%
Cash-Funded Capital Spending 3,383,600 10% 85% 5% 5%
Sources
Connection Fees (230,000) 10% 85% 5% 5%
Use of Reserves (661,282) 10% 85% 5% 5%
Functional Allocation $ $9,586,685 $950,102 $5,488,049 $1,692,866 $1,692,866 Functional Allocation % 7.44% 57.25% 17.66% 17.66%
Revenue Requirement $8,800,000 $654,402 $5,037,699 $1,553,949 $1,553,949 Approximately $644,000 of the wastewater utility’s costs are fixed expenses that do not vary with changes in customer flow and strength characteristics.

9.3.3 Functional Component Unit Costs
The table below calculates the unit rates for each cost component by function. The wastewater rate revenue requirements from the prior table for each functional component are divided by the units related to each function.

Table 24. Functional Component Unit Costs
Allocation Units Flow BOD TSS Fixed
(hcf) (lbs) (lbs) (per bill)
Demand Units 442,533 807,572 807,572 82,392
Revenue Requirement $5,037,699 $1,553,949 $1,553,949 $654,402 Functional Unit Rates $11.38 $1.92 $1.92 $7.94

9.3.4 Rate Revenue Requirements by Customer Class
The total revenue requirement for each customer class is calculated by multiplying the unit rate for each functional cost component by the units related to each function.

The table below details the units related to each function for each customer class.

Bartle Wells Associates
City of Arcata – 2025 Water and Wastewater Rate Study 37 |Page Table 25. Functional Allocation Units by Class
Allocation Units Flow BOD TSS Annual Bills
(hcf) (lbs) (lbs) (#)
Residential
Single-Family 237,552 444,973 444,973 59,388
Multi-Family 51,917 97,248 97,248 16,224
Commercial
Low Strength 72,893 91,026 91,026 4,572
Medium Strength 67,280 126,026 126,026 1,632
High Strength 12,892 48,299 48,299 576
The table below details the total revenue requirements by functional cost component for each customer class.

Table 26. Total Functional Rate Revenue Requirements by Class Revenue
Requirements Flow BOD TSS
Variable
Revenue
Requirement
Fixed
Revenue
Requirement
Total
Revenue
Requirement
(hcf) (lbs) (lbs) ($)
Residential
Single-Family $2,704,237 $856,227 $856,227 $4,416,692 $471,692 $4,888,384 Multi-Family $591,009 $187,128 $187,128 $965,264 $128,860 $1,094,124 Commercial
Low Strength $829,792 $175,155 $175,155 $1,180,102 $36,313 1,216,415 Medium Strength $765,899 $242,502 $242,502 $1,250,903 $12,962 1,263,865 High Strength $146,763 $92,937 $92,937 $332,637 $4,575 337,212

9.4 Rate Derivation
This section describes how rates for each customer sub-class are derived to reflect the proportional cost of providing wastewater service.

9.4.1 Current Residential Rates
Currently the residential rate class applies to only single-family residential customers which are charged a monthly fixed rate and a volumetric rate.

Monthly Fixed Service Charge
This charge applies to all active services for single-family residences. It recovers the rate revenue requirement on a per customer basis.

Bartle Wells Associates
City of Arcata – 2025 Water and Wastewater Rate Study 38 |Page Volumetric Charges
These charges apply to every unit of monthly water use. There are no use charges for the first four HCF of water use. After the first four units of use per month, the City adjusts for potential irrigation by establishing a monthly sewer cap for each customer. The cap reflects residential sewer flow charges based on water consumption during the winter months (February-April), the period when single family residential customers typically do not have high outdoor water use. The amount a customer is billed in each of the following summer months (June-September), the period when outdoor water use is likely, is based on their usage up to their cap to reflect the lesser of their winter use or actual water use. Essentially, the cap adjusts for irrigation use by setting the maximum units of use that a singlefamily residence will be charged during the period when outdoor water use is likely. There is no irrigation adjustment made to non-summer months (October-January).

9.4.2 Residential Rate Structure Recommendations
BWA reviewed the City’s residential wastewater rates and water demands and has the following recommendations to improve proportionality:

1. Remove all volumetric charges for single-family wastewater customers; and

2. Establish a fixed monthly rate for all single-family wastewater customers

3. Establish a multi-family class with a fixed monthly rate for all residential wastewater customers with more than one dwelling unit on a per dwelling unit basis; and

4. Charge any outside city customers the same rates charged to inside city customers.

9.4.3 Residential Rate Derivation
The total revenue requirements for single-family and multi-family customer classes were calculated above. The monthly rates are derived by dividing the revenue requirements by the number of dwelling unit bills (dwelling units x 12 months). The following table details the calculation for residential wastewater rates.

Table 27. Residential Rate Derivation
Residential Rate
Derivation
Revenue
Requirement
Annual
Bills
Reallocated
FY 2024/25 Rate
($) (#) ($ per bill)
Single-Family $4,888,384 59,388 $82.31
Multi-Family $1,094,124 16,224 $67.44

Bartle Wells Associates
City of Arcata – 2025 Water and Wastewater Rate Study 39 |Page

9.4.4 Current Commercial Rates
Customers in this class are grouped into three different subclasses based on their strength and flow characteristics.

Monthly Fixed Service Charge
This charge applies to all active commercial customers. It recovers the revenue requirement on a per customer basis.

Volumetric Charges
These charges apply to every unit of monthly water use. There are no use charges for the first four HCF of water use. After the first four units of use per month, customers are charged a quantity rate per HCF based on estimated wastewater discharge characteristics.

9.4.5 Commercial Rate Structure Recommendations
BWA reviewed the City’s commercial wastewater rates and has the following recommendations to improve compliance with the requirements of Proposition 218:

1. Set a minimum monthly fixed service charge for each customer subclass based on the minimum fixed costs of each subclass.

2. Charge any outside city customers the same rates charged to inside city customers.

9.4.6 Customer Class Rate Derivation
The total revenue requirement for this class is calculated above. The fixed revenue recovery was set to reflect the fixed costs identified for each customer subclass.

The remaining portion of the revenue requirement was allocated proportionally, based on the wastewater system allocation to flow, BOD and TSS. The volumetric unit cost per HCF is calculated based on strength estimates and the flow, BOD and TSS unit costs for each commercial customer subclass. Volumetric costs are adjusted by the estimated return to sewer factor for each sub-class, this adjustment is necessary to account for the estimated sewer discharge of commercial customers based on year-round water use data, which includes some water use that does not enter the sewer system.

The following table displays the derivation of commercial wastewater rates.

Bartle Wells Associates
City of Arcata – 2025 Water and Wastewater Rate Study 40 |Page Table 28. Commercial Rate Derivation
Commercial Class
Rate Units
Variable Revenue
Requirement Units Unit Rate
Minimum Charge
Monthly Charge
per Connection
($) (HCF) ($ per unit) (Up to 4 HCF)
Low Strength $1,180,102 91,116 $12.95 $51.81
Medium Strength 1,250,903 84,100 14.87 59.50
High Strength 332,637 16,115 20.64 82.56
Commercial Fixed
Rate Derivation
Minimum Charge
Monthly Charge
per Connection Fixed Unit Cost
Total Monthly
Fixed Charge
(per monthly bill) (per monthly bill) (per monthly bill) Low Strength $51.81 $7.94 $59.75
Medium Strength $59.50 $7.94 $67.44
High Strength $82.56 $7.94 $90.51
Volumetric Rev
Requirements
Minimum Charge
per Bill
Annual
Bills
Revenue From
Minimum Charge
Remaining
Variable Revenue
Requirement
Demand
>4 HCF
Variable
Rate
(Up to 4 HCF) (#) (HCF) (per HCF >4)
Low Strength $51.81 4,572 $236,860.44 $943,241.09 79,199 $11.91 Medium Strength $59.50 1,632 $97,097.61 $1,153,805.11 79,060 $14.59 High Strength $82.56 576 $47,556.93 $285,080.10 14,087 $20.24

Bartle Wells Associates
City of Arcata – 2025 Water and Wastewater Rate Study 41 |Page

9.5 Recommended Wastewater Rates
The recommended rates incorporate some modifications to the City’s wastewater rate structure designed to align rates with the current cost of providing service and reflect policy input provided by the City. Due to these modifications, impacts to wastewater bills will vary based on customer class and water use when the first-year proposed rates are implemented.

The following table shows a 5-year schedule of recommended wastewater rates.

Table 29. Proposed Wastewater Rates
Wastewater User 2025/26 7/1/2026 7/1/2027 7/1/2028 7/1/2029 7/1/2030 Current Proposed Proposed Proposed Proposed Proposed
Residential - Fixed Monthly Rate per Unit
Single Family $77.61 $82.31 $82.31 $86.43 $90.75 $95.29 Multi-Family n/a 67.44 67.44 70.81 74.35 78.07
Residential - Volumetric Rates per Hundred Cubic Feet (HCF) of Water Use Greater Than 4 HCF Single Family $11.34 $0.00 $0.00 $0.00 $0.00 $0.00
Commercial - Volumetric Rates per Hundred Cubic Feet (HCF) of Water Use Greater Than 4 HCF Low Strength $9.88 $11.91 $11.91 $12.51 $13.13 $13.79
Medium Strength 12.01 14.59 14.59 15.32 16.09 16.89
High Strength 20.14 20.24 20.24 21.25 22.31 23.43
Commercial - Minimum Monthly Fixed Rate per Connection
Low Strength $81.05 $47.64 $47.64 $50.02 $52.52 $55.15
Medium Strength 81.05 58.38 58.38 61.29 64.36 67.58
High Strength 81.05 80.95 80.95 84.99 89.24 93.71

Bartle Wells Associates
City of Arcata – 2025 Water and Wastewater Rate Study 42 |Page 10 WASTEWATER SUMMARY AND RECOMMENDATIONS

10.1 Regional Wastewater Rate Survey
BWA conducted a survey of current wastewater rates for single-family residences including the City and other regional wastewater systems. Unfortunately, due to time and cost restrictions, the survey is limited to only providing data in the form of the typical monthly billing amount of each wastewater provider for a single-family residence. This limited comparison does not account for any of the differences that are highly likely to exist among the systems. The City of Arcata currently applies monthly wastewater charges based on customer and flow and strength characteristics. While other wastewater agencies use similar metrics, each agency would have developed their own fixed and volumetric rates based on their own cost of service to account for the specific operating, treatment, and infrastructure needs of their wastewater system. Nevertheless, regional surveys can still be used as an informational tool as long as agencies are mindful of the differences that exist in the development of an agency’s wastewater rates.

The following chart compares the monthly wastewater bills for a typical single-family home to those of other regional agencies.

Figure 9: Regional Single Family Residential Wastewater Rate Survey While the proposed wastewater rates developed in this study are higher than the existing rates, they are developed to reflect the current cost of service for the City’s wastewater system. It is also important to note that many of the agencies included in the survey are facing similar financial

Bartle Wells Associates
City of Arcata – 2025 Water and Wastewater Rate Study 43 |Page pressures and are either in the middle of multi-year rate increases or are anticipating raising rates in upcoming years.

10.2 Wastewater Summary and Recommendations
The wastewater enterprise is facing the need to increase rate revenues in order to 1) have revenues exceed expenses and 2) have revenues to fund capital and 3) qualify for financing and grants to reduce the burden on the City’s rate payers.

BWA has the following recommendations for the wastewater enterprise:
• Modify the wastewater rate structure to improve proportionality and administrative efficiency. • The City should raise wastewater rates in an amount large enough to pay for operating expenses, capital projects and to maintain prudent reserves. • After the wastewater enterprise’s finances are stabilized, BWA recommends the City continue to adopt consistent, incremental increases to prevent the need for larger, one-time rate increases.
• When adopting new rates, BWA recommends the City adopt the recommended rate structure changes to bring the wastewater enterprise’s rates into greater compliance with Prop. 218.

Bartle Wells Associates
City of Arcata – 2025 Water and Wastewater Rate Study 44 |Page 11 CONCLUSION & RECOMMENDATIONS
In conclusion, the City's water and wastewater utilities will need rate increases in upcoming years to provide adequate funding for high-priority capital improvement needs and keep rates aligned with escalating costs of operations. The proposed 5-year schedule of rates are designed to recover the costs of providing service while supporting roughly balanced budgets in future years.

Many other regional agencies are facing similar financial challenges with cost inflation and the need to increase investment in aging infrastructure and are also anticipating rate increases in upcoming years.

General rate recommendations for the utilities include:
• BWA recommends the City adopt the proposed rates starting May 1, 2026. • The City should update the water and wastewater financial projections within the next five years to evaluate funding needs and rate increases in subsequent years. • After the proposed rates are implemented, the City should continue to adopt annual rate increases to keep revenues in line with the cost of providing service and minimize the need for larger, periodic rate spikes.

RESOLUTION NO. 256-18

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
ARCATA AUTHORIZING STAFF TO INITIATE A PROPOSITION 218
PROCESS TO ADJUST THE CITY’S WATER RATES TO BE EFFECTIVE MAY 1, 2026, AND WASTEWATER RATES TO BE EFFECTIVE JULY 1, 2026, THROUGH FISCAL YEAR 2029-30
WHEREAS, the City of Arcata (the “City”) provides essential services to residents and businesses, including water and wastewater. The Environmental Services Department is responsible for maintaining and upgrading critical infrastructure to ensure the delivery of safe and reliable services to the community; and
WHEREAS, operation, maintenance and renewal of the City’s water and wastewater systems is entirely funded by the City’s Water and Wastewater Enterprise Funds. The water and wastewater utilities are financially operated as self-supporting enterprises relying primarily on revenues from water and wastewater rates to fund the cost of providing service and maintaining the systems, with grant funding sought, when available; and
WHEREAS, the City last conducted a cost-of-service rate study in 2020, which was approved by City Council on July 1, 2020, and implemented through the City’s annual Master Fee Schedule from FY 2021 to FY 2025. The last increase occurred on July 1, 2024; and WHEREAS, the City is required by state regulations to maintain the integrity of its water treatment and distribution systems and its wastewater collection and treatment system. The City’s Capital Improvement Plan (CIP) includes numerous projects over the next ten years for rehabilitation, replacement and improvement of the City’s water and wastewater utility systems.

Near-term cost for the next five years with a 4% construction cost inflation factor includes approximately $36 million of water system improvements and $51.4 million of wastewater system improvements; and
WHEREAS, on March 5, 2025, the City Council approved a contract with Bartle Wells Associates to conduct a water and wastewater rates study that developed ten-year financial projections for the water and wastewater funds, analyzed the City’s current water and wastewater rates and structure, and recommended increases to the rates for the next five years; and WHEREAS, proposed changes to the water and wastewater rates have been documented in the draft Proposition 218 Notice, which is included as Exhibit A.

NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF ARCATA AS FOLLOWS:

The City finds and determines that the foregoing recitals are true and correct.

1. All of the above recitals are true and correct and incorporated by reference.

2. The City received the Bartle Wells Associates Draft January 14, 2026, Water and Wastewater Rate Study and directs staff to initiate Proposition 218 notification, public hearing and protest process for water and wastewater rate increases not to exceed the amounts shown in the Draft January 14, 2026, Water and Wastewater Rate Study, specifically Scenario 2 for water rate increases. City Council provides that staff may make necessary changes to the draft Proposition 218 Notice to ensure it’s clear, concise and legally sufficient.

3. The City Council declares that a public hearing shall be held tentatively on April 15, 2026, at the regular City Council meeting, provided that staff may set the public hearing at a different date that is at least 45 days after the mailing of the Proposition 218 Notice in the event that April 15, 2026 is not available for any reason, to consider the rate request and to receive and count any protests received by that time in accordance with the procedures required by Proposition 218 (Cal. Const., article XIII D, section 6).

4. The proposed action is exempt from the requirements of the California Environmental Quality Act (CEQA) Public Resource Code Section 21080(b)(8) of the California Environmental Quality Act (CEQA) and CEQA Guidelines Section 15273 provide that CEQA does not apply to the establishment, modification, structuring, or approval of rates, tolls, fares and other charges by public agencies which the public agency find are for the purpose of 1) meeting operating expenses, including employee wage rates and fringe benefits; 2) purchasing or leasing supplies, equipment or materials; 3) meeting financial reserve needs and requirements; and 4) obtaining funds for capital projects necessary to maintain current service levels.

This Resolution shall take effect upon its adoption by this City Council.

DATED:

ATTEST: APPROVED:
___________________________ __________________________
City Clerk, City of Arcata Mayor, City of Arcata

CLERK'S CERTIFICATE
I hereby certify that the foregoing is a true and correct copy of Resolution No. 256-18, passed and adopted at a regular meeting of the City Council of the City of Arcata, Humboldt County, California, held on the 4th day of February, 2026 by the following vote:

AYES:

NOES:

ABSENT:

ABSTENTIONS:
___________________________
City Clerk, City of Arcata

Important information about your WATER and WASTEWATER account! Notice of Public Hearing on Proposed Water and
Wastewater (Sewer) Rate Increases
Public Hearing: April 15, 2026, Arcata City Hall, 736 F Street, Arcata, CA 95521 Meeting starts at 6:00 p.m.

The City of Arcata (“City”) is proposing water and wastewater (sewer) rate increases over the next five years to support operating and maintenance needs and provide adequate funding for capital improvements that will support safe and reliable utility services. Customers, property owners, and community members are invited to attend the public hearing in person or observe the meeting on Zoom for an opportunity to participate, learn the details of, and comment on the proposed rate changes.

What do water and wastewater rates fund?
The City provides water and wastewater services to residences and businesses in Arcata and the surrounding area. These utilities are self-supporting and rely on service charge revenue to meet annual funding needs. As such, water and wastewater rates need to be set at levels adequate to fund the costs of providing service. All revenues generated from utility bills are used to maintain and operate the water and wastewater systems and cannot be used for any other purpose. The revenues must be sufficient to meet system costs such as utility staffing, raw water purchases, electricity, treatment, system maintenance, and capital improvement costs.

The proposed rates are based on the 2025 Water and Wastewater Rate Study developed by Bartle Wells Associates independent rate consultants and reflect input from City staff. The proposed rate increases are phased in over the next five years, with the first rate increase scheduled to become effective for services provided on and after May 1, 2026. Initial bill impacts will vary based on customer class and usage due to rate structure adjustments realigning rates with the cost of service. The rates shown on this Notice are the proposed maximum rates to be authorized. The City will periodically review its financial position to determine the necessary rate increases.

Capital Improvement Needs and Rehabilitation of Aging Infrastructure The City takes a proactive approach to maintaining its water and wastewater systems which requires a steady stream of repair, improvement, and replacement projects. For example, when pipes become weak, damaged, or are simply old, they are in danger of breaking and resulting in failures that can cause property damage and result in expensive emergency repairs. Arcata staff plans for and schedules improvements by strategically identifying pipelines and other critical system infrastructure most in need of repair. The City actively pursues grant funding opportunities to help offset capital improvement costs, whenever available.

How to Learn More:

The City will hold an open house informational meeting at the D Street Neighborhood Center, 1301 D Street, Arcata, CA 95521, on February 25, 2026, at 5:30 p.m. for residents and businesses to come and learn more about the capital improvement plans and how rates were developed for the water and wastewater utilities.

You can also view a copy of the 2025 Water and Wastewater Rate Study at:
https://www.cityofarcata.org/1157/Arcata-2025-Water-and-Wastewater-Rate-St

Proposed Maximum Water Rates:

The City is proposing to phase in a series of annual water rate increases over the next five years with the maximum allowable rates being those shown in the table below. Water rate increases are needed to support water system operating expenses, provide adequate funding for maintenance of facilities and equipment, meet annual debt service funding requirements, keep up with cost inflation, and help ensure continued compliance with regulatory requirements. The proposed water rates also help support high-priority capital improvements for the aging water system infrastructure to support safe and reliable service.

The components of the proposed water rates are as follows:
• Use Charges: As proposed, all customers will be billed a uniform rate for all water use. Water volumetric charges are billed in units of 100 cubic feet. • Fixed Charges: These charges are levied independently of water use and are based on the size of each customer’s water meter.

Current and Proposed
Water Rates
2025/26
Current
5/1/2026
Proposed
1/1/2027
Proposed
1/1/2028
Proposed
1/1/2029
Proposed
1/1/2030
Proposed
Rate Revenue Increase 23.0% 18.0% 12.0% 10.0% 10.0%
Volumetric Rates per Hundred Cubic Feet (HCF) of Water Use All Water Use $7.15 $8.83 $10.42 $11.67 $12.83 $14.12
Fixed Monthly Rates by Meter Size ($ / meter / month)
Meter Size
5/8” and 3/4" $12.23 $15.42 $18.19 $20.37 $22.41 $24.65 1” 20.43 25.74 30.38 34.02 37.42 41.17
1 ½” 40.73 51.33 60.57 67.84 74.63 82.09
2” 65.19 82.16 96.95 108.59 119.45 131.39
3” 122.31 154.15 181.90 203.73 224.10 246.51
4” 203.89 256.97 303.23 339.61 373.58 410.93
6” 407.65 513.79 606.27 679.03 746.93 821.62
8” 652.27 822.10 970.07 1,086.48 1,195.13 1,314.64
10” 937.74 1,181.89 1,394.63 1,561.98 1,718.18 1,890.00 Note: Outside City customers are currently charged 1.5 times the monthly fixed charge. Going forward, Outside City customers will pay the same as Inside City Customers.

Proposed Maximum Wastewater Rates:

The City is proposing to phase in a series of annual wastewater rate increases over the next five years with the maximum allowable rates as shown on the table below. Wastewater rate increases are needed to support wastewater systems operating expenses, provide adequate funding for maintenance of facilities and equipment, meet annual debt service funding requirements, and help ensure continued compliance with regulatory requirements. The proposed wastewater rates also help support high-priority capital improvements for the aging sewer collection system pipelines, sewer lift stations, and the wastewater treatment plant to support safe and reliable service.

Based on the characteristics of their customer class, and to better align rates with the current cost of service, the City is proposing to transition to a flat, per unit fixed monthly charge for all residential customers and to establish a monthly fixed charge for commercial customers. Initial bill impacts will vary based on customer class and usage due to rate structure adjustments realigning rates with the cost of service. The rates shown on the following page are the proposed maximum rates to be authorized. Page 194 of 232 Wastewater User Current
7/1/2026
Proposed
7/1/2027
Proposed
7/1/2028
Proposed
7/1/2029
Proposed
7/1/2030
Proposed
Rate Increase % 0.0% 0.0% 5.0% 5.0% 5.0%
Residential – Fixed Monthly Rates per Dwelling Unit ($ / dwelling / month) Single Family $77.61 $82.31 $82.31 $86.43 $90.75 $95.29 Multi Family n/a 67.44 67.44 70.81 74.35 78.07
Residential – Volumetric Rates per Hundred Cubic Feet (HCF) of Water Use Greater than 4 HCF Single Family $11.34 $0.00 $0.00 $0.00 $0.00 $0.00
Commercial – Volumetric Rates per Hundred Cubic Feet (HCF) of Water Use Greater than 4 HCF Low Strength $9.88 $11.91 $11.91 $12.51 $13.13 $13.79
Medium Strength 12.01 14.59 14.59 15.32 16.09 16.89
High Strength 20.14 20.24 20.24 21.25 22.31 23.43
Commercial – Fixed Monthly Rate per Connection ($ / connection / month) Low Strength $81.05 $47.64 $47.64 $50.02 $52.52 $55.15
Medium Strength 81.05 58.38 58.38 61.29 64.36 67.58
High Strength 81.05 80.95 80.95 84.99 89.24 93.71
Note: Current Single-Family Fixed Monthly Rate includes 4 HCF, Proposed rates are fixed with no volumetric charge. Multi-Family rate applies to residential connections with two or more dwelling units.

Community Input and Written Protest Procedures:

Customers and property owners may submit written protests against the proposed rate increases. Pursuant to California law, protests must be submitted in writing and must a) identify the affected property or properties, such as by service address or Assessor’s Parcel Number, b) include the name and original signature of the customer or property owner submitting the protest, and c) indicate opposition to the proposed rate increases. The proposed rates cannot be adopted if written protests are received from a majority (more than 50%) of parcels subject to the proposed water and wastewater rates. Written protests can be mailed to City Clerk, City of Arcata, 736 F Street, Arcata, CA 95521 or hand delivered to the City Clerk during the Public Hearing at Arcata City Hall on April 15, 2026. Written protests must be received by the City Clerk before the close of the Public Hearing to be counted.

Protests or comments submitted by e-mail, fax or other electronic means are not counted as written protests. One written protest will be counted for each parcel that is mandated to comply with the proposed rates. If there is a majority protest filed from affected properties, the proposed rate changes cannot be imposed.

Pursuant to California Government Code 53759, there is a 120-day statute of limitations for challenging any new, increased, or extended fees. This statute of limitations applies to the water and wastewater service charges proposed in the Notice and future changes to water and wastewater rates and charges.

City of Arcata
2025 Water and
Wastewater Rate Study
February 4, 2026

Presentation
Overview
Rate Study Overview
Proposition 218
Water Financial Plan & Rates
Wastewater Financial Plan & Rates
Next Steps
Questions and Discussion
2 Page 197 of 232
Rate Study
Objectives
Financial Sufficiency
Legal Compliance (Prop. 218)
Rates Aligned with City Objectives
Minimize the Impact on Ratepayers
3 Page 198 of 232
Rate Study Process
Project
Initiation
Customer
Analysis
Financial
Plan
Cost
Allocation
Rate
Design
Prop. 218
Process
4 Page 199 of 232
Proposition
218
• Voter-approved constitutional amendment
1996
o Rates cannot exceed cost of providing service
• Substantive requirements for property-related
charges
o Rates cannot exceed cost of providing service
o Proportionate cost recovery (fair and equitable)
• Procedural requirements for rate increases
o Mail notice of rate increases to all property
owners/customers
o Hold public hearing at least 45 days after the mailing o Rates are subject to “majority protest”
5 Page 200 of 232
Water
Enterprise
Overview
• Water utility is a financially self-supporting
enterprise that provides service to 6,600
customers
o Single Family Residential: 3,900 (60%)
o Commercial: 2,700 (40%)
• Rates are the main source of revenues
• Rates need to be set at levels adequate to fund
the cost of providing service
6 Page 201 of 232
Water Capital
Improvement
Planning
Efforts
7 $12.1
$0.6
$0.2
$11.4 $11.8
$0
$2
$4
$6
$8
$10
$12
$14
25-26 26-27 27-28 28-29 29-30
Millions
City of Arcata
Water System Improvement Projects
Distribution System All Other

Water
Financial
Challenges
(Short-Term)
• FY 25/26 capital improvements $12.1 million
• Steel water line replacement and Plunkett water line
improvements $11.5 million
• Sewer loan of $3.5 million insufficient
• With a 44% rate increase reserves will drop from $9
million to $1.5 million with no additional financing
• Insufficient reserves increase enterprise risk and impede future borrowing
• Recommendation: Issue 30-year bonds for $9.5
million
• $6 million for additional capital funding
• $3.5 million to refund sewer loan
• Sewer loan will bridge gap until rate increases effective 8 Page 203 of 232
Water
Financial
Challenges
(Long-Term)
• Aging infrastructure & capital improvement needs
• Water system upgrades, repairs & replacements needed to maintain safe & reliable operations
• Approximately $36 million over the next 5 years
• Debt service
• Existing annual debt service of $139,000
• Projected need to issue $30 million in new debt to fund capital improvements in the next five years
• Issuances of $10 million in FY 25/26 and $20 million in FY 28/29 • Additional debt service building to $2 million per year in FY 29/30 • Operating cost inflation
• Annual operating cost inflation of 4.0% for the next five years • Annual rate adjustments needed to keep rates in line with escalating costs (chemicals, utilities, staffing, supplies, insurance, etc.) • Maintain Prudent Reserves
• Emergencies, demand fluctuation, cash funding capital, credit 9 worthiness etc. Page 204 of 232
Water Rate
Scenarios
10 Water Rate Revenue Scenarios
Scenario 1: Immediate Revenue Recovery
Rates Effective May 1, 2026 Jul. 1, 2027 Jul. 1, 2028 Jul. 1, 2029 Jul. 1, 2030 Net Rate Revenue Increase
in FY ($) $1,017,063 $0 $798,857 $878,743 $773,294
Rate Revenue Increase (%) 44.0% 0.0% 10.0% 10.0% 8.0%
Ending Reserve Balance $6,935,088 $7,745,508 $9,088,705 $9,127,187 $8,516,465 Scenario 2: Phased-In Revenue Recovery
Rates Effectives May 1, 2026 Jan. 1, 2027 Jan. 1,2028 Jan. 1,2029 Jan. 1, 2030 Net Rate Revenue Increase
in FY ($) $531,647 $614,121 $483,109 $450,901 $495,992
Rate Revenue Increase (%) 23.0% 18.0% 12.0% 10.0% 10.0% Ending Reserve Balance $6,449,671 $6,699,504 $7,769,277 $7,584,132 $6,918,910 *Initial bill impacts will vary based on customer class and usage due to rate structure adjustments realigning rates with cost of service.
• Scenario 1, returning to Fiscal Year (July 1) increases • Scenario 2, maintaining calendar year (January 1) rate increases

5-YR Water
Financial Plan
Scenario 1:

Immediate Revenue
Recovery
11 $0
$2
$4
$6
$8
$10
$12
2024-25 2025-26 2026-27 2027-28 2028-29 2029-30
Millions
Scenario 1
Projected Water Revenues & Expenses

5-YR Water
Financial Plan
Scenario 2: PhasedIn Revenue Recovery
12 $0
$2
$4
$6
$8
$10
$12
2024-25 2025-26 2026-27 2027-28 2028-29 2029-30
Millions
Scenario 2
Projected Water Revenues & Expenses

Proposed
Water Rates
Scenario 1:

Immediate Revenue
Recovery
13 Volumetric
Rates ($/hcf) 2025/26 5/1/2026 7/1/2027 7/1/2028 7/1/2029 7/1/2030 Current Proposed Proposed Proposed Proposed Proposed
All Usage $7.15 $10.33 $10.33 $11.37 $12.50 $13.50
Monthly Fixed
Charges 2025/26 5/1/2026 7/1/2027 7/1/2028 7/1/2029 7/1/2030 Current Proposed Proposed Proposed Proposed Proposed
Meter Size
5/8" and 3/4" $12.23 $18.05 $18.05 $19.85 $21.84 $23.58 1" $20.43 $30.14 $30.14 $33.15 $36.47 $39.39
1 1/2" $40.73 $60.10 $60.10 $66.11 $72.72 $78.53
2" $65.19 $96.19 $96.19 $105.81 $116.39 $125.70
3" $122.31 $180.47 $180.47 $198.52 $218.37 $235.84
4" $203.89 $300.85 $300.85 $330.93 $364.02 $393.14
6" $407.65 $601.51 $601.51 $661.66 $727.83 $786.05
8" $652.27 $962.45 $962.45 $1,058.70 $1,164.57 $1,257.73 10" $937.74 $1,383.67 $1,383.67 $1,522.04 $1,674.24 $1,808.18

Proposed
Water Rates
Scenario 2: PhasedIn Revenue Recovery
14 Volumetric
Rates ($/hcf) 2025/26 5/1/2026 1/1/2027 1/1/2028 1/1/2029 1/1/2030 Current Proposed Proposed Proposed Proposed Proposed
All Usage $7.15 $8.83 $10.42 $11.67 $12.83 $14.12
Monthly Fixed
Charges 2025/26 5/1/2026 1/1/2027 1/1/2028 1/1/2029 1/1/2030 Current Proposed Proposed Proposed Proposed Proposed
Meter Size
5/8" and 3/4" $12.23 $15.42 $18.19 $20.37 $22.41 $24.65 1" 20.43 25.74 30.38 34.02 37.42 41.17
1 1/2" 40.73 51.33 60.57 67.84 74.63 82.09
2" 65.19 82.16 96.95 108.59 119.45 131.39
3" 122.31 154.15 181.90 203.73 224.10 246.51
4" 203.89 256.97 303.23 339.61 373.58 410.93
6" 407.65 513.79 606.27 679.03 746.93 821.62
8" 652.27 822.10 970.07 1,086.48 1,195.13 1,314.64
10" 937.74 1,181.89 1,394.63 1,561.98 1,718.18 1,890.00

15 $38.66 $38.73
$47.98
$56.86 $59.57 $61.09 $63.70
$68.31 $69.70 $72.20
$0
$10
$20
$30
$40
$50
$60
$70
$80
Fortuna McKinleyville
CSD
Arcata Current Fort Bragg Arcata Option
2 Humboldt CSD Eureka Willits Arcata Option
1 Ukiah
Single Family Residential Monthly Water Rate Survey
(Average Monthly Use 5 HCF)
Fixed Charge
Variable Charge
HCF = Hundred Cubic Feet = 748 gallons

Wastewater
Enterprise
Overview
• Sewer utility is a financially self-supporting
enterprise that provides service to 5,600
customers
o Residential: 4,900 accounts (90%)
o Commercial/Other: 700 accounts (10%)
• Rates are the main source of revenues
• Rates need to be set at levels adequate to fund
the cost of providing service
16 Page 211 of 232
Wastewater
Capital
Improvement
Planning
Efforts
17 $12.0
$5.9
$11.6
$9.4
$12.5
$0
$2
$4
$6
$8
$10
$12
$14
25-26 26-27 27-28 28-29 29-30
Millions
City of Arcata
Wastewater System Improvement Projects
WWTP All other

Wastewater
Financial
Challenges
• Aging infrastructure & capital improvement needs
• Wastewater system upgrades, repairs, & replacements needed to maintain safe & reliable operations & long-term climate resiliency
• Approximately $51.4 million over the next 5 years
• Estimated $26.5 million in grant funding
• Debt service
• Projected need to issue $8 million in new debt to fund capital improvements in the next five years
• Additional annual debt service of $571,000 beginning in FY 28/29 • Operating cost inflation
• Annual operating cost inflation of 4.0% for the next five years • Annual rate adjustments needed to keep rates in line with escalating costs (chemicals, utilities, staffing, supplies, insurance, etc.)
• Maintain Prudent Reserves
• Emergencies, demand fluctuation, capital funding, credit 18 worthiness etc. Page 213 of 232
5-YR
Wastewater
Financial Plan
19 Projected Wastewater Revenues & Expenses
Rates Effective Jul. 1, 2026 Jul. 1, 2027 Jul. 1, 2028 Jul. 1, 2029 Jul. 1, 2030 Rate Revenue
Increase ($) $0 $0 $440,000 $462,000 $485,100
Rate Revenue
Increase (%) 0.0% 0.0% 5.0% 5.0% 5.0%
Ending Reserve
Balance $14,554,148 $13,899,822 $18,925,486 $20,022,738 $17,221,300 $0
$5
$10
$15
$20
$25
2024-25 2025-26 2026-27 2027-28 2028-29 2029-30
Millions

Wastewater Rate
Structure
Recommendations
Single-Family Residential
• Move to monthly fixed rates with no volumetric
component
• Current structure has a base of 4 units and cap from June through September based on winter water use (Feb-Apr)
that is on average 5 units
Multi-Family Residential
• Establish a monthly fixed charge per dwelling unit for residential connections with more than one dwelling unit Commercial
• Minimum monthly fixed rates reflect strength differences Reasons for the Recommendations
• Clear, defensible nexus between costs and rates
• Less administrative burden
• Easier to understand and explain
• Improve customer equity
20 • Better reflect current system Page 215 of 232
Proposed
Wastewater
Rates
21 *Initial bill impacts will vary based on customer class and usage due to rate structure adjustments realigning rates with cost of service.

Wastewater User 2025/26 7/1/2026 7/1/2027 7/1/2028 7/1/2029 7/1/2030 Current Proposed Proposed Proposed Proposed Proposed
Residential - Fixed Monthly Rates per Dwelling Unit
Single-Family $77.61 $82.31 $82.31 $86.43 $90.75 $95.29 Multi-Family n/a 67.44 67.44 70.81 74.35 78.07
Residential - Volumetric Rates per Hundred Cubic Feet (hcf) of Water Use Greater Than 4 HCF Single-Family $11.34 $0.00 $0.00 $0.00 $0.00 $0.00
Commercial - Volumetric Rates per Hundred Cubic Feet (hcf) of Water Use Greater Than 4 HCF Low Strength $9.88 $11.91 $11.91 $12.51 $13.13 $13.79
Medium Strength 12.01 14.59 14.59 15.32 16.09 16.89
High Strength 20.14 20.24 20.24 21.25 22.31 23.43
Commercial - Monthly Fixed Rate per Connection
Low Strength $81.05 $47.64 $47.64 $50.02 $52.52 $55.15
Medium Strength 81.05 58.38 58.38 61.29 64.36 67.58
High Strength 81.05 80.95 80.95 84.99 89.24 93.71

22 $56.03
$61.72
$67.33 $70.04
$81.31 $82.31 $84.66 $88.95 $91.51
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
McKinleyville
CSD
Fortuna* Fort Bragg Eureka Ukiah Arcata
Proposed
Willits Arcata
Current
Humboldt
CSD
Single Family Residential Monthly Sewer Rate Survey
(Average Monthly Use 5 HCF)
Fixed Charge Volume Charge

23 $94.76 $100.38
$124.19
$133.74 $136.93 $141.88
$152.01 $152.60 $152.97 $153.51
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
McKinleyville
CSD
Fortuna Fort Bragg Eureka Arcata
Current
Arcata
Option 2
Arcata
Option 1
Humboldt
CSD
Willits Ukiah
Combined Water and Sewer Single Family Residential Monthly Rate Survey (Monthly Use 5 HCF)
Monthly Sewer Bill Monthly Water Bill

Next Steps
24 City Council
Meeting

2.4.26 Send Prop.
218 Notices
by 2.27.26
Open House
Informational
Meeting
Public
Hearing

4.15.26 Water
Rates
Effective

5.1.26 Sewer
Rates
Effective

7.1.26 Prop. 218 Notice Period
February 2026 – March 18, 2026

BARTLE WELLS
ASSOCIATES Page 220 of 232
STAFF REPORT – CITY COUNCIL MEETING
TO: Honorable Mayor and City Council Members
FROM: David Loya, Director of Community Development
PREPARER: Sara Cunha, Community Development Specialist II DATE: February 4, 2026
TITLE: Public Scoping Hearing on Potential Projects the City may Submit for Funding Under the State Community Development Block Grant (CDBG) 2025 Notice of Funds Availability (NOFA).

RECOMMENDATION:

It is recommended that the City Council:
1) Conduct a public hearing to receive public comments on potential projects for funding under the 2025 CDBG Notice of Funds Availability (NOFA); and
2) Direct Staff to contact stakeholders to determine eligibility and competitiveness of potential projects; and
3) Direct Staff to return to Council if the City is eligible to apply, to determine which programs or projects to apply for.

INTRODUCTION:

The State Department of Housing and Community Development (HCD) released the amended 2025 CDBG NOFA on December 15, 2025. The 2025 CDBG NOFA has an application deadline of April 3, 2026. Staff recommend the Council consider the project list (Attachment A) and direct Staff to return with an analysis and recommendation for CDBG activities. This hearing is required to receive public input regarding projects the City should consider applying for.

BACKGROUND:

Approximately $27 million in federal funds will be allocated to eligible jurisdictions through the federal Small Cities Community Development Block Grant (CDBG) for the 2025 funding year, with funds provided as grants to Non-Entitlement Jurisdictions. Of this $27 million, $9.25 million is for housing and economic development projects and programs, while $ 7.3 million is set aside for planning and public services. An additional $2 million is set aside for local administration.

The City currently has two active CDBG grants, one for Economic Development activities, utilizing this funding for its Business Assistance and Microenterprise loan programs, and one for Planning and Technical Assistance for the planning and feasibility of a Valley West Neighborhood Center.

DISCUSSION:

The 2025 CDBG NOFA encompasses the following eligible activities: Public Service and Planning, Housing Programs, Economic Development Programs, Public Facilities Projects, Infrastructure Projects, and Housing Projects.

The 2025 CDBG NOFA limits are as follows:
 All applications will be eligible under a Competitive Application process, with certain submissions competing under defined set-asides. There are no Over-the Counter (OTC) applications.
 Each Jurisdiction may submit up to three (3) applications during this NOFA cycle for a total of $3,600,000.
i) One (1) Project + One (1) Program + One (1) Public Service or Planning - OR
ii) One (1) Project + Two (2) Public Service or Planning -OR iii) One (1) Program + Two (2) Public Service or Planning **Note: Two (2) Projects, Two (2) Programs, Three (3) Public Service, or Three (3) Planning applications are NOT allowed
 Public Service and Planning activities up to $300,000  Projects up to $3.3 million
 $1.5 million for Housing Programs, and $1.5 million for Economic Development Programs.

Applications are rated and ranked competitively. An applicant’s score will be the total of the points received from all scoring criteria including High Poverty Service Area, Community Need Data, Capacity & Knowledge, CDBG as Gap Funding, Application Corrections (Attachment B).

POLICY IMPLICATIONS:

The CDBG program has been used in a variety of projects and programs implementing the City Council’s goals and priority projects over the years. This funding is critical to funding affordable housing, public facilities, the City’s business loan programs, housing rehabilitation programs, and a variety of other public benefit projects. The City must maintain a Certified Housing Element of the General Plan to be eligible for CDBG funds.

ENVIRONMENTAL REVIEW (CEQA):

Environmental review levels are reviewed for each activity. Some projects or programs may be exempt, as noted for each proposed activity (see Attachment A).

BUDGET/FISCAL IMPACT:

The matching funds requirements vary by program and are not required of all activities. Staff will provide a thorough analysis of match and fiscal impact when the projects are determined for the grant.

RECOMMENDED COUNCIL ACTION:

1. Hold a Public Hearing and receive public comments on potential projects for funding under the 2025 CDBG Notice of Funds Availability (NOFA);

2. Direct Staff to contact stakeholders to determine eligibility and competitiveness of potential projects; and

3. Direct Staff to return to Council if the City is eligible to apply, to determine which programs or projects to apply for.

ATTACHMENTS:

A. Potential Community Development Projects
B. CDBG Scoring Matrix

Attachment A

ATTACHMENT A

COMMUNITY DEVELOPMENT BLOCK GRANT
POTENTIAL ACTIVITIES – PROGRAMS AND PROJECTS

ACQUISITION OF REAL PROPERTY

1. Project: Purchase and Development of Affordable Housing Project Project Proponent: Danco Communities
NEPA Environmental Review Level: Unknown
Estimated Cost: Total: $25,000,000 CDBG: $622,000
Description: Funding for the purchase and development of property for an affordable housing mixed-use project at 1622 Old Arcata Road (APN: 500-191-002).

2. Project: Purchase and Development of Valley West Neighborhood Center Project Proponent: City of Arcata
NEPA Environmental Review Level: Unknown
Estimated Cost: Total: $12-$77 million CDBG: Unknown
Description: Funding for the purchase and development of property for Valley West Neighborhood Center.

ECONOMIC DEVELOPMENT ACTIVTIES

1. Program: Business Assistance and Microenterprise Loan Program Program Proponent: City of Arcata
NEPA Environmental Review Level: Categorically Excluded Subject to Section 58.5 Estimated Cost: Up to $1,500,000
Description: The City would apply for up to $1,500,000 for the Business Assistance Loan Program and Microenterprise Loan and Grant Program. Funds would be used to continue the City’s Business Assistance and Microenterprise Programs.

2. Program: Façade Improvement Program
Program Proponent: City of Arcata
NEPA Environmental Review Level: Environmental Assessment Estimated Cost: Unknown
Description: The Façade Improvement Program would encourage property owners and businesses to improve the exterior appearance of their buildings and storefronts.

3. Project: Aldergrove Industrial Park Lot Development
Project Proponent: City of Arcata
NEPA Environmental Review Level: Environmental Assessment Estimated Cost: $500,000 - $1,000,000
Description: The City owns two (2) available parcels (APN’s: 507-251-040, -039) in the Aldergrove Industrial Park that are approximately one (1) acre in size each. The City’s Economic Development Committee has discussed the possibility of building a condominiumstyle business development on one or more of the parcels. The City may construct this type of building, then sell each condominium type unit to a small business or microenterprise.

Attachment A

HOUSING AND COMMUNITY DEVELOPMENT ACTIVITIES

1. Project: Bayview Courtyard Rehabilitation
Project Proponent: Elizabeth Matsumoto
NEPA Environmental Review Level: Unknown
Estimated Cost: $2,000,000
Description: Funding to rehabilitate Bayview Courtyard affordable senior housing development.

2. Program: Homeownership Assistance and Housing Rehabilitation Program Program Proponent: City of Arcata
NEPA Environmental Review Level: Categorically Excluded Subject to Section 58.5 Estimated Cost: Up to $1,500,000
Description: The City would apply for up to $1,500,000 for the Homeownership Assistance and Housing Rehabilitation Combo Program. Funds would be used to continue the City’s Homebuyer Assistance Program and Housing Rehabilitation Program.

PLANNING AND TECHNICAL ASSISTANCE ACTIVITIES

1. Planning: Little Lake Redevelopment (Planning & Technical) Program Proponent: City of Arcata
NEPA Environmental Review Level: Exempt
Estimated Cost: CDBG: Up to $300,000
Description: The approximately 11-acre site located adjacent to the Marsh and, under the City’s agreement with the former redevelopment agency, must be used for economic development. This request would be a planning and technical application to help the City develop a clear redevelopment plan, better understand which uses are feasible given the site’s constraints, and ensure the plan is informed by robust community engagement.

2. Planning: Foodworks Expansion (Planning & Technical) Program Proponent: City of Arcata
NEPA Environmental Review Level: Exempt
Estimated Cost: Unknown
Description: The City’s Foodworks Culinary Center is at capacity and has potential for expansion on-site. This request would be a planning and technical application to determine feasibility and need for expansion.

3. Planning: Workforce Housing Reuse (Planning and Technical) Project Proponent: City of Arcata
NEPA Environmental Review Level: Exempt
Estimated Cost: Unknown
Description: Workforce housing has been identified as a need in the community. The request would be for financial assistance related to the planning and feasibility for this type of housing.

Attachment A

PUBLIC FACILITIES

1. Project: Sea Level Rise Shoreline Revetment
Project Proponent: City of Arcata
NEPA Environmental Review Level: Unknown
Estimated Cost: Unknown
Description: Assist with funding for shoreline revetments that will be necessary due to sea level rise. The focus of this project would be areas adjacent to Jolly Giant Creek.

2. Project: Behavioral Health Triage Center
Project Proponent: Connie Stewart
NEPA Environmental Review Level: Unknown
Estimated Cost: Total: $24,200,000 CDBG: $1,000,000
Description: Assist with the development costs associated with developing a new Behavioral Health Triage Center.

3. Project: Arcata House Partnership Shelter Rehabilitation Project Proponent: Darlene Spoor
NEPA Environmental Review Level: Unknown
Estimated Cost: Unknown
Description: Renovations are various shelters run by Arcata House Partnership, including addition of ADA compliant bathrooms, kitchen renovations, and roof repairs.

PUBLIC IMPROVEMENTS

1. Project: Water Meter Replacement
Project Proponent: City of Arcata
NEPA Environmental Review Level: Unknown
Estimated Cost: CDBG: Up to $3,300,000
Description: Upgrade water meter replacements to provide real time water usage monitoring and faster recognition of potential leaks throughout the City of Arcata.

2. Project: Inflow and Infiltration (I and I) elimination (City owned and maintained) Project Proponent: City of Arcata Public Works
NEPA Environmental Review Level: Categorically Excluded Estimated Cost: Total: $185,000 CDBG: $150,000
Description: The City has previously applied for funding through CDBG to replace sewer main lines and sewer laterals from the sewer main line to the clean-out at the property line for low-income households. However, due to this project only benefiting approximately 52% Low-Income household, it was not competitive enough to be awarded a grant.

3. Project: Public Improvements for Accessibility - benches, bathrooms, trash cans.

Project Proponent: City of Arcata
NEPA Environmental Review Level: Unknown
Estimated Cost: Unknown

Attachment A

Description: Enhance public spaces by improving accessibility for all community members, through the installation of accessible benches, bathrooms and trash cans.

PUBLIC SERVICES ACTIVITIES

1. Project: Homeless Services for Operations at Arcata House Partnership Annex One Stop Project Proponent: Darlene Spoor
NEPA Environmental Review Level: Unknown
Estimated Cost: Unknown
Description: Fund Arcata House Partnership’s homeless services, allowing the organization to continue providing essential services despite expected reduction in other funding sources.

2. Project: Homeless Services for Operations at The Grove and West Village Studios.

Project Proponent: Darlene Spoor and Danco Communities
NEPA Environmental Review Level: Unknown
Estimated Cost: Unknown
Description: Fund Arcata House Partnership’s homeless services, allowing the organization to continue providing essential services despite expected reduction in other funding sources.

STATE OF CALIFORNIA - BUSINESS, CONSUMER SERVICES AND HOUSING AGENCY GAVIN NEWSOM, Governor

DEPARTMENT OF HOUSING AND COMMUNITY DEVELOPMENT

DIVISION OF FEDERAL FINANCIAL ASSISTANCE
651 Bannon Street, 7th Floor
Sacramento, CA 94252-2054
(916) 263-2771
www.hcd.ca.gov
Department of Housing and Community Development 2025 CDBG NOFA Revised 8/15/2025 Page 1
Appendix F: CDBG Scoring Matrix
This scoring matrix will be used to score all applications under the current Notice of Funding Availability (NOFA). An applicant’s score will be the total of the points received from all scoring criteria in the table below. The max score is 230 points.

If you have any questions on how this scoring matrix works, please email [email protected].

Applicant Name:

Application Name:

Reviewer: Total Score:

Department of Housing and Community Development 2025 CDBG NOFA Revised 3/12/2025 Page 2
Criteria Max
Points
High Poverty Service Area – Points are awarded to sub applications for which the service area for the proposed activity occurs in cities, counties or census tracts experiencing a poverty rate of 30 percent or more.

Data is compiled from the most recent ACS 5-Year Estimate and available on: Poverty Status by Census Area.

For activities that occur in multiple census tracts, 50 percent or more of the total number of census tracts for the activity must be above the threshold. i.e.: if an activity occurs in four census tracts, two out of the four census tracts must have a poverty rate of 30 percent or higher.

Where it appears that the service area does not make sense, the CDBG Program Manager may, at their sole and absolute discretion, review and revise the service area.

Applicants will need to define the service area for the activity within the application.

For applications for which the National Objective is Low-Mod Area (LMA), the LMA area used to meet the LMA National Objective must be within the service area.

Additionally, as a reminder Code Enforcement programs may only be used for targeted efforts in deteriorating or deteriorated areas where the enforcement, combined with other actions, is designed to arrest the decline of the area. Therefore, for Code Enforcement programs, the service area will typically not be the entire jurisdiction. 25 Community Need Data – Based on the low- and moderate-income summary data (LMISD) from HUD Exchange 50
Capacity & Knowledge – If applicant has in-house expertise or has already procured or chosen a consultant or subrecipient respectively to operate and/or manage its proposed activity, award up to 10 points. • Fully executed contracts and agreements (up to 10 points) o At least 4 months left on the contract/agreement at the time of application closing date (10 points)
o Less than 4 months left on the contract/agreement at the time of application closing date (5 points)
• In-House expertise with at least 3 years of experience running a CDBG program for the proposed activity (10 points)
• Draft contracts/agreements with draft RFP/RFQ (0 points) 10

Department of Housing and Community Development 2025 CDBG NOFA Revised 3/12/2025 Page 3
Criteria Max
Points
CDBG as Gap Funding – Award points based on the ratio of the amount of leveraging funds to the amount of CDBG funds requested (round to nearest 1/100):
• 1.01:1 or more: 25 points
• 0.76:1 to 1:1: 20 points
• 0.51:1 to 0.75:1: 15 points
• 0.26:1 to 0.50:1: 10 points
• 0.01:1 to 0.25:1: 5 points
• No leveraging funds: 0 points
This must be documented on the Sources and Uses Excel, the Activity Description, and the Threshold section of the application. 25 Application Corrections – Award points based on the number of corrections that would be required for the application if it were to be awarded:
• 4 or less: 50 points
• 5 to 8: 10 points
• 9 or more: 0 points
Any exceptions made to a correction will still count as an application correction under this criterion. Number of corrections will be averaged for Housing and Economic Development Programs applications with multiple Sub Applications.
50

Department of Housing and Community Development 2025 CDBG NOFA Revised 3/12/2025 Page 4
Criteria Max
Points
Community Engagement – Award points based on applicant’s additional community engagement efforts beyond the minimum required by HCD (cumulative; up to 15 points):
• Noticed and held additional public meetings/hearings: award 5 points per additional public meeting/hearing
• Noticed public meetings/hearings in additional locations: award 1 points per additional unique notice location
• Noticed public meetings/hearings using methods other than newspaper publications and bulletin board postings (e.g., social media, flyers, etc.): award 1 points per unique method of noticing • Utilized community meeting spaces other than board/council chambers for public meetings/hearings (e.g., library, neighborhood facility, non-profit halls): award 5 points per public meeting/hearing held at a community meeting space
• Provided resources to remove barriers to participation at public meetings/hearings (e.g., childcare, food, transit fare vouchers, interpreter and/or closed caption services [provided without request]): award 5 points per resource provided
• Solicited community feedback through additional methods of engagement other than speaking at a public meeting (e.g., anonymous questionnaire, online survey, boothing): award 2 points per additional method of engagement
15 Labor Standards Reporting – If applicant is current on labor standards reporting to HCD, award 5 points (if applicant has no active HCD awards, award 5 points) 5
Timely Reporting – Award points based on the number of reports during the past year for which an Activity Report, Financial Report, and/or Closeout Package was submitted late. At a minimum, Activity and Financial Reports must be submitted every three months (up to 20 points):
• 0 late reports: 20 points
• 1 late report: 15 points
• 2 late reports: 10 points
• 3 late reports: 5 points
• 4 late reports: 0 points
Applicants with no active awards during the past year, award 20 points.

Reports must be submitted in the grants management system and pass at least 2 steps of approval by the Submission Portal Opening Date. 20

Department of Housing and Community Development 2025 CDBG NOFA Revised 3/12/2025 Page 5
Criteria Max
Points
Program Income Receipting – Award points based on applicant’s progress in complying with HCD’s CDBG Program Income requirements (cumulative):
• If the applicant has submitted a Program Income Receipting and Reporting application, award 5 points
• If the applicant has accepted a Program Income Receipting and Reporting award in eCivis, award 5 points
• If the applicant’s first Program Income Receipting and Reporting report has been approved by HCD, award 5 points
• If the applicant’s report(s) for FY 2023-2024 and/or FY 2024-2025 have been approved by HCD, award 5 points
• If the applicant has encumbered its Program Income into an award OR applicant does not have any Program income to encumber, award 5 points
Reports must be submitted in the grants management system and pass at least 2 steps of approval by the Submission Portal Opening Date. 25 State-owned Excess Sites (Planning applications only) – Planning applications related to sites identified under Executive Order N-06-19 to create affordable housing on excess state-owned property. 5 Tie Breaker – In the event of a tied score, the application submitted first will be awarded. -
Total 230