ADMINISTRATIVE REPORT
MEETING DATE: March 26, 2025 AGENDA CATEGORY: CONSENT - Miscellaneous TO: Honorable Mayor and City Council
FROM: Kristina Budak, Water Director
DATE: March 14, 2025
SUBJECT: Authorization to issue Proposition 218 notices for Sewer User Rates beginning Fiscal Year 2025/2026
[Document Description]
RECOMMENDATION:
Staff recommend granting authorization to mail notices.
BACKGROUND:
The Water Department – Wastewater Division provides services for the collection and treatment of the City’s wastewater. The Sewer Enterprise is self -sustaining, supported primarily by user fees that provide for the daily operations of the sewer and stormwater collection systems and the two wastewater treatment plants. The single -family residential fee is collected via the homeowner’s property tax bill.
Commercial and industrial customers pay a flat rate on their property tax bill and are subject to sewer surcharge fees based on their wastewater strength classification and water consumption.
In 2020 the City contracted with a consultant to conduct a revenue rate study to assess the revenue requirements needed to cover costs of operating and maintaining the existing systems and infrastructure.
Significant capital improvement projects to address aging infrastructure were not addressed at that time.
The study was completed in 2022 and a five-year rate plan was adopted. The five-year plan provided for an initial 2.3% rate increase in FY 2022/23 and an annual increase based on consumer price index through FY 2026/27.
Since the previous adopted rate went into effect, the cost of operating and maintaining the sewer collection system, storm drain system, and treatment plants have significantly exceeded consumer price index increases. Factors contributing to the exceedance include higher costs of electricity, chemicals, and replacement parts for equipment. Additionally, staff have identified significant infrastructure deficiencies within the above -mentioned systems an d treatment plants that will require the construction of major capital improvement projects. The anticipated constructions costs for these capital improvements projects exceed projected revenue.
Based on the above, City staff has determined that a rate increase, beyond what was previously approved, is necessary to help meet these costs.
Annual sewer fees are viewed as property -related fees for utility service and are subject to Proposition 218. This requires that fees adopted by City for services rendered do not exceed the reasonable estimated cost for providing the services. Staff have determined that the proposed rates do not exceed the cost of services. Proposition 218 also requires a public hearing in which the public may support or protest the rate increase.
Proposition 218 process entails a protest -ballot whereby property owners are notified of a proposed fee or fee increase and have a 45-day period to issue a protest against the fee increase, either in writing or at a public hearing. Notices would be mailed out in April. The public hearing to consider the proposed update is scheduled for the May 28, 2025, City Council meeting. City Council is not voting tonight to approve the proposed Sewer User Rate increase.
Tonight' s Council action authorizes staff to mail out Proposition 218 to sewer customers notifying them of the proposed Sewer User Rate beginning FY 2025/26.
FISCAL IMPACT:
Sufficient funds are budgeted to fund the costs associated with mailing out the notices; therefore, there is no impact to the General Fund.
COUNCIL GOAL:
Reliable Infrastructure
ATTACHMENTS:
Wastewater – Prop 218 Draft Notice
2025-0326 - Sewer User Rate Presentation