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CITY OF GLENDALE, CALIFORNIA
REPORT TO THE CITY COUNCIL
AGENDA ITEM
Report: Water Cost of Service Analysis and Authorization to Initiate Proposition 218 Rate Notification Process
1. Motion authorizing the General Manager of Glendale Water & Power Department to commence the Proposition 218 notification process for the purpose of adopting water rate adjustments, including issuance of the required notices to affected property owners and customers.
COUNCIL ACTION
Item Type: Action Item
Approved for September 1, 2026 calendar
EXECUTIVE SUMMARY
In 2025, Glendale Water & Power (GWP) engaged Raftelis Financial Consultants, Inc. (Raftelis) in 2025 to conduct a comprehensive Water Financial Plan and Cost of Service Analysis (COSA). The study evaluates the financial obligations of the Water Utility over a five-year period and develops a rate structure designed to generate sufficient revenues to fund ongoing operations, water supply costs, capital improvements, debt obligations, and reserve requirements. The study also evaluates the allocation of costs among customers, consistent with industry-standard cost-of-service principles and Proposition 218 requirements.
Raftelis evaluated multiple financial alternatives with varying levels of capital investment and debt financing. The proposed financial and rate plan is intended to provide sufficient revenues to operate and maintain the water system, address priority infrastructure needs, maintain appropriate reserves and debt coverage, and establish rates that proportionately recover the cost of providing water service. The proposed rates would become effective beginning January 1, 2027, subject to completion of Proposition 218 process and subsequent City Council approval (see Exhibit 1).
RECOMMENDATION
Authorize the General Manager of GWP to commence the Proposition 218 notification process for the proposed water rate adjustments, including issuance of the required notices to affected property owners and customers.
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ANALYSIS
GWP operates an extensive and complex water system that requires continued investment to provide reliable water service. In addition to approximately 400 miles of transmission and distribution pipelines, the system includes numerous reservoirs, pump stations, wells, and treatment facilities that must be maintained, rehabilitated, and ultimately replaced as they age.
The recently completed Water Master Plan (WMP) provides the long-term planning framework for these investments (see Exhibit 2). While the WMP identifies infrastructure needs extending beyond the five-year rate-setting period, the proposed financial plan focuses on a phased program of priority improvements that can reasonably be implemented and funded during the next five years.
The proposed five-year Capital Improvement Program includes investments in pipeline replacement, fire-flow improvements, pump and reservoir rehabilitation, electrical and facility upgrades, permanent generators, water system SCADA improvements, Advanced Metering Infrastructure (AMI), and other improvements necessary to maintain and improve system reliability.
In addition to infrastructure investment, GWP continues to experience increasing costs associated with providing water service. Purchased water represents a significant component of the Water Utility's operating expenses. The Metropolitan Water District of Southern California (MWD) increased its volumetric rates by approximately 11 percent and 9.5 percent in FY 2025 and FY 2026, respectively, and has also introduced additional fixed charges.
Conversely, GWP's internal operating expenses are not identified as the principal driver of the proposed revenue adjustments. The Water Utility's Operations and Maintenance budget increased by just under five percent between FY 2025 and FY 2026 and is projected to decrease by approximately 0.7 percent from FY 2026 to FY 2027. The study therefore identifies purchased water costs and capital investment as the dominant financial pressures facing the Water Utility.
Rather than attempting to immediately fund all identified infrastructure needs, staff worked with Raftelis to evaluate several levels of investment options. These alternatives considered average annual capital expenditures of approximately $40 million, $25 million, $20 million, and $11 million, with additional alternatives evaluating the use of debt financing.
In seeking a balance between unavoidable capital costs while mitigating the financial impacts on the utility’s customer base, staff recommend a phased approach of approximately $20 million in average annual capital investment, coupled with approximately $40 million in bond financing. This approach advances priority infrastructure improvements, while distributing a portion of the cost of long-lived assets over their useful lives and reducing the immediate impact on existing customers. 10b3
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The proposed financial plan represents the first five years of a longer-term effort to address GWP's infrastructure needs. The WMP identifies needs extending beyond the period covered by the current COSA; therefore, the approximately $20 million annual capital program should not be interpreted as addressing all of GWP's long-term infrastructure requirements. Rather, it represents a phased investment strategy focused on advancing priority projects while considering affordability and GWP's ability to execute the proposed capital program.
The financial plan assumes approximately $100.3 million in repair and replacement projects during the five-year study period as outlined below:
Capital Improvement Category Five-Year Investment
Facility Upgrades (Pumps, Tanks, Reservoirs) $ 42.3M
Pipeline Replacement Program $ 30.4M
Meter Replacement (On-going) $ 15.3M
Fire Flow Improvement Program $ 10.6M
Additional Studies $ 1.15M
FY 26 CIP Carryover $ 0.5M
Total $ 100.3M
The below referenced table summarizes the proposed revenue adjustments over the five-year study period under the proposed alternative. The proposed financial plan assumes that adjustments would take effect on January 1st of each year, beginning January 1, 2027.
FY 2027 FY 2028 FY 2029 FY 2030 FY 2031
Effective
Date
Jan 1, 2027 Jan 1, 2028 Jan 1, 2029 Jan 1, 2030 Jan 1, 2031 Revenue
Adjustment
53% 11% 10% 10% 7%
In addition to determining the overall amount of revenue required, the COSA also determined how the costs of providing water service should be allocated to customers.
The COSA was developed using principles established by the American Water Works Association's Principles of Water Rates, Fees and Charges (M1 Manual). The methodology evaluates costs associated with base water demand, system capacity, customer service, meter maintenance, fire protection, water supply, and other components of providing service. The purpose of the analysis is to proportionately allocate costs based upon the cost of serving customers and customer classes.
Based upon these principles, the proposed rate structure includes revisions to fixed customer charges and volumetric water rates, and establishes separate charges associated with pumping water to customers located at different elevations. The proposed structure is intended to closely align the revenues collected from customers with the underlying costs incurred by GWP to provide service. 10b4
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The COSA can be accessed by visiting GlendaleCA.gov/ProposedWaterRates. Hard copies will be available for review during normal business hours at the GWP Customer Service Counter located at 141 N. Glendale Avenue, 2nd Level, Glendale, CA 91206.
STAKEHOLDERS/OUTREACH
The proposed water rate adjustments are subject to the procedural requirements of Article XIII D of the California Constitution, commonly referred to as Proposition 218.
Prior to adoption of the proposed rates, GWP will conduct the required public notification and hearing process, providing affected property owners and customers with information regarding the proposed rate adjustments and an opportunity to submit written protests.
GWP will also provide information regarding the proposed financial plan, infrastructure needs, rate structure, and anticipated customer bill impacts through its public outreach efforts leading up to the Proposition 218 public hearing. Following completion of the required notice period, the proposed rates will be presented to the City Council for consideration at a public hearing.
GWP will hold four community meetings to discuss the proposed water rate changes with customers as follows:
October 7, 2026, 6:00 – 7:30 p.m. at the Adult Recreation Center October 15, 2026, 6:00 – 7:30 p.m. at Sparr Heights Community Center October 17 , 2026, 9:00 – 10:30 a.m. at Brand Park Library and Art Center October 24, 2026, 10:00 – 11:30 a.m. Virtual (Zoom)
The above dates and times will be included in the Proposition 218 Notice.
FISCAL IMPACT
The proposed Water COSA rate adjustments will generate the revenues needed to meet the Water Utility’s operating and Capital Improvement Program (CIP) needs over the next five years. The proposed rates are designed to comply with Proposition 218 requirements by allocating costs based on the actual cost of providing water service to each customer category.
ENVIRONMENTAL REVIEW (CEQA/NEPA)
This item is not a project for the purposes of the California Environmental Quality Act (CEQA) and thus is not subject to CEQA review.
CAMPAIGN DISCLOSURE
Not applicable.
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ALTERNATIVE TO STAFF RECOMMENDATION
The City Council may choose not to authorize, or may choose to delay, issuing Proposition 218 notifications. This would delay the public hearing and planned bond issuance, resulting in a negative Water Fund balance this fiscal year, which would impact future debt service rates, impact the completion of the recently authorized AMI replacement project and result in the need for an even larger increase in subsequent years to offset the negative fund balance and mounting capital improvement needs.
Doing so, not only will reduce system reliability, but also impact public health and safety.
ADMINISTRATIVE ACTION
Submitted by:
Scott K. Mellon, P.E., General Manager - Glendale Water and Power Prepared by:
Chisom Obegolu, P.E., Assistant General Manager - Water Approved by:
Roubik R. Golanian, P.E., City Manager
EXHIBITS/ATTACHMENTS
Exhibit 1: Draft Proposition 218 Notice
Exhibit 2: Water Master Plan Fact Sheet