Agenda Item No: N.3
AGENDA REPORT
DATE: October 21, 2025
TO: Mayor and Council
FROM: David Gassaway, City Manager
SUBJECT: Resolution 2025-196 PW Proposition 218 Written Communication Requirements
Responding to Written Communications in Connection with Proposed Increases and Modifications to the City’s Water Rates Received by the City’s Deadline for Submittal of Written Objections to the Proposed Water Rates Pursuant to Assembly Bill 2257
Funding Source: N/A
Contact: Michael Hether, (707) 428-7493
RECOMMENDED ACTION
Adopt resolution.
STATEMENT OF ISSUE
Fairfield Municipal Utility (FMU) provides water to the City of Fairfield on a continuous basis and is responsible for operating the existing water system, as well as ensuring that it is maintained to meet adequate service levels. On May 6, 2025, the City Council a pproved Resolution No. 2025- 71, adopting the Public Utility Master Plan (PUMP), which evaluate d the existing water system and developed a comprehensive water system capital improvement program (CIP).
In conjunction with producing PUMP, the City retained Bartle Wells Associates (BWA) to prepare a water rate study using PUMP as the baseline guidance document for repair and replacement projects within FMU’s CIP. An overview of the water rates study was presented by City and BWA staff at the council meeting on June 17, 2025, where city staff were directed to initiate Proposition 218 process for establishing a new water rates fee schedule.
Adoption of the resolution establishes a determination that none of the eight written communications received by the City by the deadline specified in the City’s Proposition 218 notice for the submittal of written objections pursuant to Assembly Bill 2257 (AB 2257) specifies any grounds for alleging that the proposed water rates do not comply with Proposition 218.
Accordingly, none of the eight written communications warrant any response, clarification to the
proposed water rates, or a reduction of the proposed wat er rates. Further, none of the eight written communications warrant further review or a delay of the public hearing scheduled for November 4, 2025.
DISCUSSION
FMU provides water to the City of Fairfield on a continuous basis and employs staff who are responsible for maintaining a system valued at over $500 million dollars. This system compromises of 2 water treatment plants, 12 storage facilities, 17 pump stations, nearly 400 miles of pipelines and fixtures (hydrants, valves, etc.), and over 30,000 water services. For these extremely valuable community assets to remain in good condition, on -going investment in the proper maintenance and repair of the water infrastructure is critical. The FMU is primarily funded by fees received from the ratepayers.
The last water rate increases were implemented January 1, 2018, through January 1, 2021 (4% annually). The City’s past practice of routine, modest rate increases to avoid large rate spikes has served the community well. Historically, FMU provided strong financial management with small annual rate adjustments to keep revenues in line with the cost of providing service while maintaining healthy fund reserves. While staff have worked hard to ensure efficient operations and continued improvement in controlling costs, FMU has experienced substantial increases in operating and maintenance expenses over the last 4-1/2 years, most of which are market driven.
Since rates were last adjusted on January 1, 2021, FMU has experienced significant cost increases in electri city, chemicals, materials, professional services and public employee’s retirement system (PERS) funding requirements. Generally, utilities face higher inflationary increases than the consumer price index (CPI), which measures consumer inflation. Due to the increase in operating expenses over the past several years, current water rates barely cover the annual operating expenses and debt service and only generate minimal funding for capital improvements.
The water rate study that was conducted in conjunction with PUMP was intended to ensure that FMU can generate enough revenue to carry out minimum prudent CIP needs while meeting all operations and maintenance expenses, debt service and reserve requirements. Water rate increases are subject to Proposition 2 18’s (Article XIII D of the California Constitution) public hearing and majority protest procedures.
On June 17, 2025, the council adopted Resolution 2025 -118 which initiated Proposition 218 process and directed staff to provide notice of the public hearing in accordance with Proposition 218. Concurrently, the council adopted Resolution 2025-119 which established a new optional exhaustion of administrative remedies requirement pursuant to AB 2257 . The exhaustion of administrative remedies requirement req uires a ratepayer to submit a written objection regarding the proposed water rates to the City prior to the deadline established by the City as part of the Proposition 218 process or be barred from a right to challenge the water rates through a legal proce eding. A written objection must specify the grounds alleging why the proposed water rates do not comply with Proposition 218. AB 2257 was designed to provide an opportunity for the council to address objections during the Proposition 218 public participat ion process before making a final decision on whether to approve the proposed water rates. For the exhaustion of administrative remedies requirement to apply, the council must respond in writing to any timely filed written objections that allege that the p roposed water rates violate Proposition 218.
Pursuant to the Proposition 218 proceedings, notice of the public hearing was mailed by July 11, 2025. The last date to submit a written objection pursuant to AB 2257 was August 27, 2025. The City received eight written communications by the August 27 deadline. None of the written communications specify grounds for alleging non -compliance of the proposed water rates with Proposition 218, as required by AB 2257, in order to exhaust a rate payer’ s administrative remedies. Accordingly, no responses, clarifications or reductions to the proposed water rates are warranted by the written communications, and there is no need for further review or a delay of the public hearing.
A public hearing is sche duled for November 4, 2025. If the council approves the proposed modifications and increases to the water rates , the new water rates will become effective on January 1, 2026, with rate increases on each subsequent January 1 through January 1, 2030.
FINANCIAL IMPACT
N/A
PUBLIC CONTACT/ADVISORY BODY RECOMMENDATION
N/A
ALTERNATIVE ACTION
The council may choose not to adopt the resolution, and this would not cause a delay with the public hearing scheduled for November 4, 2025.
COORDINATED WITH
City Attorney’s Office
STAFF CONTACT
Michael J. Hether, Assistant Director of Public Works-Utilities (707) 428-7493
[email protected]
ATTACHMENTS
Attachment 2: Proposed Resolution
Attachment 3: Exhibit A – Written Communications