City of Camarillo
Camarillo Sanitary District
AGENDA REPORT
Date: February 26, 2025
To: Honorable Mayor and City Councilmembers
From: Greg Ramirez, City Manager
Submitted by: Mark Uribe, Finance Director
Subject: FY 2024/25 Water and Sewer Rate Study Preliminary Results
BACKGROUND
The City has historically adjusted water and sewer rates on a two-year cycle. A comprehensive rate study is conducted to analyze the costs of providing water and sewer services to the community. The last rate study was completed in 2023, with rates effective January 1, 2024, and July 1, 2024.
The City of Camarillo retained an independent consultant, Raftelis Financial Consultants, Inc., to prepare a comprehensive rate study. The study establishes water rates that are based on the cost of providing the service and incorporates the expected cost of the capital improvement plan, operating budgets, customer billing and water use data, and future growth and inflationary assumptions for the study period. The results of the rate study have been discussed at five Utilities Committee (UC) meetings since November 2024. Summaries of discussion points from each meeting are below.
November 26, 2024: Staff and the consultant presented the committee with high-level drivers of changes since the 2023 study; then, staff and the consultant went into detail on anticipated changes in water sales revenues, non-rate revenues, operating expenses, and the capital programs. Preliminary rate results and alternatives were provided, namely alternatives for the Water Enterprise around higher or lower levels of future water demand; and larger or smaller support from a General Fund loan.
December 18, 2024: At the committee’s request, staff returned to provide insights on changes to specific cost centers, key CIP projects, a cost analysis on groundwater versus imported water production, and changes to the Metropolitan Water District of Southern California (MWD) Local Resources Program (LRP) credit expectations.
FY 2024/25 Water and Sewer Rate Study Preliminary Results February 26, 2025
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2 January 23, 2025: Staff returned with additional information on the changes in expenditure assumptions from the last rate model as compared to the current rate model and explored in more detail the history of actual revenues and expenditures in both water and sewer and their impacts on available cash.
February 4, 2025: Staff presented the Committee with an updated timeline, details of Proposition 218 mailing, and further detailed cost analysis of water and sewer rates for the next four years. Staff provided a history of actuals as well as projections for water production revenues and purchased water, electricity, and chemical expenses.
February 13, 2025: Staff revisited the rate study schedule through July 1, 2025, discussed the timeline related to community meeting dates and deadlines on outreach materials including the Proposition 218 notice to customers and reviewed draft public outreach materials. The Utilities Committee endorsed a recommended rate proposal and presentation to Council on February 26, 2025.
Staff is proposing water rate increases, effective July 1, 2025, to users of the City Water Enterprise (Water) and the Camarillo Sanitary District (CSD). Before this occurs, staff will return to the City Council twice more to allow ample time for discussion. Staff also proposes changing the two-year cycle of rate studies to a four-year cycle. Transitioning to a four-year cycle not only gives customers transparency in what to expect over the next four years, it shows potential bond agents that the City and CSD have a reliable revenue source to meet minimum debt coverage should the City need to bond future capital projects.
DISCUSSION
The last rate study was conducted in 2023 and included two rate increases of 9% for water and 12% for sewer that went into effect on January 1, 2024, and again on July 1, 2024. At the time of those studies, it was anticipated that similar future rate increases would be required for both Water and CSD to address increases in operational costs and future capital/infrastructure needs. The current rate study confirms the need for rate increases for both water and sewer.
Water
Since the last rate study, the underlying estimates that comprise the rate study have been updated and refined to best align with changes experienced over the past two years.
These changes include water use, economic factors like inflation, changes in the capital improvement program (CIP) cost estimates and planned timing schedule, and external factors like purchased water costs. All of these factors influence revenues generated from rates, the City’s ability to borrow externally for capital projects, and cash on hand.
Operational expenditures such as electricity, chemicals, purchased water, and the cost of personnel have risen. Based on observed trends over the past several years, estimated future water sales are anticipated to be lower than those estimated in prior rate models.
FY 2024/25 Water and Sewer Rate Study Preliminary Results February 26, 2025
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2 These factors, while taking into consideration a change in the fund’s available cash balance, require increases to existing water rates.
Over the last few years, Camarillo Water customers have adjusted their water usage to conserve water and use water more efficiently. While conservation is important, it also reduces water revenues. Costs of serving City Water, however, are predominantly fixed.
Moreover, the primary projects in the Water CIP are designed to produce and serve more local water while reducing reliance on far more expensive imported water. The rate proposal aims to balance conservation with cost control, without hindering the City’s ability to invest in procuring more water from local resources.
Sewer
Like water, sewer has experienced increases in operating costs as compared to the last rate study. Unlike water, proposed rate increases in sewer are largely due to an aging infrastructure that must be addressed including major upgrades to the treatment plant.
CSD has a robust capital improvement plan that includes improvements that represent a generational investment in the district’s sewer infrastructure that will benefit the community for decades to come. Increases greater than anticipated in the last study are required to be able to finance these generational investments, while also managing incrementally higher operating costs.
Future Actions
This City Council meeting is the first step in a multi-step process towards adopting new water and sewer rates. Staff will present an overview of the history of Water and Sewer funds and provide preliminary rates for the next four years. Staff will return to City Council on March 12, 2025, for an additional opportunity to discuss the proposed rates and answer additional questions. Staff will return again on March 26, 2025, to request that the City Council/CSD Board authorize a Proposition 218 notice to City Water and CSD customers. A tentative schedule of future timeline milestones is below.
Meeting Date Decision Points / Content
City Council Meeting February 26
Preliminary Rates Discussion;
Establish Procedures for Owner
Objections
City Council Meeting March 12 Second Rates Discussion
City Council Meeting March 26 Third Rates Discussion; Authorize Proposition 218
Mail Prop 218 Notice to Customers March 28
Informational Open House #1 April TBD Proposed Rates, Value of Services Informational Open House #2 April/May TBD Proposed Rates, Value of Services FY 2024/25 Water and Sewer Rate Study Preliminary Results February 26, 2025
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2 Public Hearing May 14 Public Comment, Count Protests, Council Deliberation
Second Reading of Ordinance May 28 N/A
Rates Effective July 1 N/A
Proposition 218
In July 2006, the California Supreme Court ruled that utility rates like water and sewer are subject to Proposition 218. As a result, these fees may not be imposed or increased without a 45-day mailed notice of the proposed rate increase to all property owners and a majority protest proceeding in which silence is consent.
In order to comply with Proposition 218, all notices of the proposed rate increase will be mailed by March 28, 2025, to all billing customers, as well as affected property owners within the City of Camarillo who are not utility billing customers (e.g., landlords). The notices will describe the rate proposal, the basis for the rates, why rate adjustments are required, explain the method for protesting the rate increase, and provide the day, time, and place of the Public Hearing.
Pursuant to Government Code Sections 6062a, 54354.5 and 66016 regarding Proposition 218 noticing requirements, the Public Hearing Notice and the Resolution will be published in the local newspaper.
Noticed rates represent the maximum fee or charge implementable in a given year. Future Councils/Boards will have the discretion to implement a rate lower than notice as a matter of policy or if financially prudent. The City historically updates the financial needs of the Water Enterprise and CSD annually to ensure that the rates noticed are still required. As part of this four-year proposal, that practice would continue.
FISCAL IMPACT
There is no fiscal impact as a result of this recommended discussion. If Council elects to adjust the rates following staff’s future recommendation, the adjustments will be included FY 2025/26 budget.
RECOMMENDATION
Provide feedback and further direction to staff.
ATTACHMENTS
None
REFERENCE MATERIALS – AVAILABLE FOR REVIEW AT CITY HALL None