City of Fontana
Sewer Rate Study
Authorization of Proposition 218 Notice
April 28, 2026
1 Agenda
2 • Sewer rate study project scope
• Overview of the rate study process
• Recommended sewer utility financial plan
• Proposed sewer rates
• Comparison to adjacent utilities
3 Project Scope
Project Scope
4 • Sewer utility financial plan for FY 2027 - FY 2031
• Proposed rates for FY 2027 - FY 2031
• Rate benchmarking to adjacent utilities
• Proposition 218 notice assistance
• Assistance at public meetings
• Financial modeling tool
5 Rate Study Process
Rate
Study
Process
Study
Framework
Financial Planning
and Revenue
Requirement
Forecasting
Cost of Service
and Rate Design
Rate
Adoption
Process
New Rates
Effective on
July 1st
Public Outreach
Proposition 218 Compliance
6 Rate Study Process
7 Financial Planning: Long-Term Utility Revenue Sufficiency • How much rate revenue is required each year?
Cost-of-Service: Equitable Allocation of Costs
• What costs should be allocated to each customer class? Rate Design: Equitable Recovery of Costs
• What rates should each customer class pay?
Proposition 218 (Non-Legal)
• Rate revenues cannot exceed costs
• Rate revenues must be used for utility service
• Rates must be proportional to the costs incurred to provide utility service
• Utility service must be available
• 45-day notice period before formal rate adoption
8 9
Financial Planning
Bridging the Funding Gap
10 Revenues at Current Rates
Less: Projected Costs
• Operating Costs
• PAYGO CIP
• Debt Service
• Cash Reserve Target
• Debt Service Coverage Target
Funding Gap
Optimal Financing
Strategy
Annual Revenue
Requirement
Recommended Rate Revenue
Adjustments
11 Effective Date % Increase $ Increase
July 1, 2026 15% $1.92
July 1, 2027 10% $1.46
July 1, 2028 10% $1.60
July 1, 2029 10% $1.76
July 1, 2030 10% $1.94
Key Financial Plan Elements
12 • Capital Improvement Expenditures
➢ No External Debt Financing – All CIP paid by cash from rate revenues
Projected Capital Improvement Program Expenditures
FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 Total
$5,492,891 $5,077,873 $4,620,864 $5,492,227 $7,139,895 $27,823,751 Key Financial Plan Elements
13 • Operations and Maintenance Expenses
➢ 85% of O&M is for IEUA and Rialto treatment services
Projected O&M
Description FY 2027 FY 2028 FY 2029 FY 2030 FY 2031
Wholesale Treatment $25.9 $26.0 $26.0 $26.1 $26.1
Total O&M $30.6 $30.8 $31.1 $31.3 $31.5
% Wholesale Treatment 85% 84% 84% 83% 83%
14 Description FY 2027 FY 2028 FY 2029 FY 2030 FY 2031
Annual Rate Revenue % Increase 15% 10% 10% 10% 10%
Revenue from Existing Rates $9.9 $9.9 $9.9 $9.9 $9.9
Revenue from Rate Increases $1.5 $2.6 $3.9 $5.3 $6.8
Total Rate Revenues $11.4 $12.5 $13.7 $15.1 $16.6
Non-Rate Revenues $26.8 $26.8 $26.9 $26.9 $27.0
Total Revenues $38.2 $39.3 $40.6 $42.0 $43.6
O&M Expenses $30.6 $30.8 $31.1 $31.3 $31.5
Transfers to Other Funds $10.2 $10.8 $9.7 $10.5 $12.3
Total Expenditures $40.8 $41.6 $40.8 $41.8 $43.9
Net Cash Flow ($2.7) ($2.3) ($0.2) $0.2 ($0.3)
Ending Operating Reserves $7.8 $5.5 $5.3 $5.5 $5.2
Target Reserves (60 Days of O&M) $5.0 $5.1 $5.1 $5.1 $5.2 Variance from Target $2.7 $0.4 $0.2 $0.4 $0.0
Operating Fund Financial Plan
15 -$10
$0
$10
$20
$30
$40
$50
FY 2027 FY 2028 FY 2029 FY 2030 FY 2031
Millions
Operating Fund Financial Plan
O&M Expenses Reserve Funding Transfers Out
Current Revenues Proposed Revenues
16 $5.5
$5.1
$4.6
$5.5
$7.1
$4
$5
$6
$7
$8
FY 2027 FY 2028 FY 2029 FY 2030 FY 2031
Millions
Rate Funded Capital Improvements
Rate Funded
17 18
Cost-of-Service
and
Rate Design
19 Sewer Collection vs. Sewer Treatment
Sewer Collection
(City of Fontana)
➢ The City operates a sewer
collection and conveyance
system
➢ The City does not provide
wastewater treatment service
➢ City customers pay a monthly
$/EDU rate
Sewer Treatment
(IEUA and Rialto)
➢ Wastewater treatment is
provided by IEUA and Rialto
➢ IEUA and Rialto treatment
rates vary by customer type
➢ Fontana has no control over
IEUA or Rialto treatment rates
Cost-of-Service Concepts
20 • Customers should pay rates proportional to costs incurred to meet their unique demand characteristics
• Differences in sewer rates are defined by the strength of customer sanitary discharges which increase wastewater treatment costs Fontana and Cost-of-Service
• Fontana does not provide wastewater treatment services – it merely transports sanitary sewer flows to IEUA or Rialto
➢ Regardless of their strength loadings, there is no difference in the costs incurred by the City to transport the sanitary flows from different types of customers ➢ There is no need for unique rates
Calculation of the Proposed FY 2027
Sewer Rate (Applies to All Customers)
21 Line Description Amount
1 Required Revenue from Rates from Financial Plan $11,351,018 2 Number of EDUs on Served by the City 65,015
3 Annual Collection and Conveyance $/EDU (Line 1/Line 2) $174.59 4 Monthly Collection and Conveyance $/EDU $14.55
5 6 Current Monthly Collection and Conveyance $/EDU $12.63 7 $ Difference $1.92
8 % Difference 15%
Proposed FY 2027 – FY 2031 Sewer Rates
(Applies to All Customers)
22 Current FY 2027 FY 2028 FY 2029 FY 2030 FY 2031
Monthly Collection
and Conveyance
$/EDU
$12.63 $14.55 $16.01 $17.61 $19.37 $21.31
Presentation of Rates on the Proposition
218 Notice
23 • The City includes IEUA and Rialto wastewater treatment services on customer bills
• The amounts collected from customers for the wastewater treatment charges are passed-through to IEUA and Rialto
• IEUA and Rialto wastewater treatment rates must be included in the City’s Proposition 218 notice
Summary of Rates for Proposition 218
Notice (1 of 2)
24 Wastewater Rate($/EDU) Current FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 Regular
City Collection Charge $12.63 $14.55 $16.01 $17.61 $19.37 $21.31 Treatment Charge $27.02 $29.45 Pass-Through Pass-Through Pass-Through Pass-Through Total Charge $39.65 $44.00
Apartments
City Collection Charge $12.63 $14.55 $16.01 $17.61 $19.37 $21.31 Treatment Charge $18.91 $20.62 Pass-Through Pass-Through Pass-Through Pass-Through Total Charge $31.54 $35.17
Commercial and Industrial*
City Collection Charge $12.63 $14.55 $16.01 $17.61 $19.37 $21.31 Treatment Charge $27.02 $29.45 Pass-Through Pass-Through Pass-Through Pass-Through Total Charge $39.65 $44.00
Outside City
City Collection Charge $18.95 $14.55 $16.01 $17.61 $19.37 $21.31 Treatment Charge $40.53 $29.45 Pass-Through Pass-Through Pass-Through Pass-Through Total Charge $59.48 $44.00
Apartments Outside City
City Collection Charge $18.95 $14.55 $16.01 $17.61 $19.37 $21.31 Treatment Charge $28.37 $20.62 Pass-Through Pass-Through Pass-Through Pass-Through Total Charge $47.32 $35.17
Total Charge Dependent on the Pass-Through
Total Charge Dependent on the Pass-Through
Total Charge Dependent on the Pass-Through
Total Charge Dependent on the Pass-Through
Total Charge Dependent on the Pass-Through
Summary of Rates for Proposition 218
Notice (2 of 2)
25 Wastewater Rate($/EDU) Current FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 Outside City Commercial and Industrial*
City Collection Charge $18.95 $14.55 $16.01 $17.61 $19.37 $21.31 Treatment Charge $40.53 $29.45 Pass-Through Pass-Through Pass-Through Pass-Through Total Charge $59.48 $44.00
Extra Territorial
City Collection Charge $12.63 $14.55 $16.01 $17.61 $19.37 $21.31 Treatment Charge $27.02 $29.45 Pass-Through Pass-Through Pass-Through Pass-Through Extra Territorial Charge $23.53 Pass-Through Pass-Through Pass-Through Pass-Through Pass-Through Total Charge $63.18
Extra Territorial Apartments
City Collection Charge $12.63 $14.55 $16.01 $17.61 $19.37 $21.31 Treatment Charge $18.91 $20.62 Pass-Through Pass-Through Pass-Through Pass-Through Extra Territorial Charge $23.53 Pass-Through Pass-Through Pass-Through Pass-Through Pass-Through Total Charge $55.07
Rialto
City Collection Charge $12.63 $14.55 $16.01 $17.61 $19.37 $21.31 Treatment Charge** $89.90 $89.90 $92.61 $95.39 $98.26 $101.21 Total Charge $102.53 $104.45 $108.62 $113.00 $117.63 $122.52 Rialto Commercial*
City Collection Charge $12.63 $14.55 $16.01 $17.61 $19.37 $21.31 Treatment Charge** $89.90 $89.90 $92.61 $95.39 $98.26 $101.21 Total Charge $102.53 $104.45 $108.62 $113.00 $117.63 $122.52 Total Charge Dependent on the Pass-Through
Total Charge Dependent on the Pass-Through
Total Charge Dependent on the Pass-Through
26 Comparison to Adjacent
Communities
27 28
29 Thank you!
Contacts:
Angie Flores – 512-790-2108 / [email protected]
John Wright – 951-395-1674 / [email protected]
Nick Kennedy – 213-262-9301 / [email protected]
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