Agenda — Hemet City Council, December 9, 2025 (part 8 of 8)

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The ordinance also codifies preventative measures by requiring routine litter patrols and adequate container maintenance for drive-throughs, outdoor dining areas, and similar operations. These measures help sustain visual quality, enhance pedestrian safety, and protect the City’s storm drain infrastructure from debris and contamination.

PREVIOUS COUNCIL ACTION:

The City Council has provided direction to strengthen enforcement tools related to littering and dumping in the current Strategic Plan, as noted above.

STRATEGIC PLAN INTEGRATION:

GOAL ONE: QUALITY OF LIFE:

To ensure that Hemet is safe, clean, attractive and comfortable for all who live, work, and visit.

Objective 1: Enhance the visual appearance of the community to make it attractive and reduce blight.

Objective 2: Explore and implement homelessness solutions for the City of Hemet.

Objective 3: Increase Public Safety visibility and response.

FISCAL IMPACT:

Implementation of this ordinance will not result in significant direct costs to the City’s General Fund.

Enforcement will occur within existing staffing resources. The ordinance’s cost-recovery provisions ensure that abatement and cleanup expenses may be recouped from responsible parties through administrative citations, liens, or special assessments. Over time, consistent enforcement is expected to reduce illegal dumping incidents and related City expenditures.

ALTERNATIVE(S):

The City Council could decline to adopt the ordinance at this time. Failure to adopt the ordinance would allow existing deficiencies in enforcement authority and property maintenance standards to persist until an alternative solution is adopted.

ATTACHMENT(S):

Attachment 1: Hemet Ordinance - Littering and Dumping Ordinance

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CITY OF HEMET ORDINANCE NO. XXXX 1

CITY OF HEMET

HEMET, CALIFORNIA
ORDINANCE NO. xxxx

AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF HEMET,
CALIFORNIA, ADDING SECTIONS 53-15, 53-16, AND 53-17 TO
CHAPTER 53 (PERSONAL CONDUCT), ARTICLE I (DISORDERLY

CONDUCT) OF THE HEMET MUNICIPAL CODE TO PROHIBIT

LITTERING AND ILLEGAL DUMPING AND ESTABLISH PROPERTY

MAINTENANCE STANDARDS
WHEREAS, the City of Hemet (“City”) has the authority under its police powers, including California Constitution article XI, section 7, to adopt ordinances to protect the public health, safety, and welfare; and
WHEREAS, littering and illegal dumping degrade neighborhoods, pose risks to public health and safety, attract vermin and scavengers, create traffic and pedestrian hazards, and impose significant cleanup and enforcement costs on the City; and WHEREAS, litter and dumped materials obstruct and contaminate the municipal separate storm sewer system (MS4), gutters, inlets, and local waterways, impairing water quality and hindering compliance with the City’s stormwater/NPDES obligations; and
WHEREAS, the City Council finds it necessary to adopt clear prohibitions on littering in public places and on private property without consent, and to distinguish and prohibit illegal dumping, including unauthorized use of public litter baskets and private receptacles, so as to deter and rapidly abate such conduct; and WHEREAS, effective prevention of litter and dumping requires shared responsibility by those who own, occupy, manage, or maintain property and conduct

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CITY OF HEMET ORDINANCE NO. XXXX 1
operations that generate waste, including minimum standards for refuse, recycling, and organics container capacity, servicing, enclosure maintenance, and routine litter patrols; and
WHEREAS, the City Council further finds that strict-liability enforcement is appropriate for these offenses because intent is difficult to prove, the harms are diffuse and cumulative, and the regulated conduct is within the reasonable control of responsible persons; and
WHEREAS, the ordinance incorporates the definition of “Responsible Person” in Hemet Municipal Code section 1-20, and provides joint and several responsibility for compliance, costs, and penalties, ensuring accountability by owners, tenants/occupants, property management companies, contractors, and others with care, custody, or control; and
WHEREAS, the ordinance authorizes the City to order immediate abatement when necessary to protect public health and safety, and provides that failure to comply after such an order constitutes a separate violation; and WHEREAS, the ordinance provides that violations are enforceable through all remedies available under Hemet Municipal Code Chapter 1, Article II (Enforcement of the Code), including administrative citations, hearings, nuisance abatement, cost recovery, liens, and special assessments, and also establishes that violations are misdemeanors subject to prosecutorial discretion to charge or reduce to infractions; and
WHEREAS, the City Council finds this ordinance is consistent with and complementary to state and federal law governing solid waste management,

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CITY OF HEMET ORDINANCE NO. XXXX 1
stormwater protection, and public nuisances, and is not preempted.

NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF HEMET,
CALIFORNIA, DOES HEREBY ORDAIN AS FOLLOWS:

Section 1. Municipal Code Amendment. Sections 53-15, 53-16, and 53-17 are hereby added to the Hemet Municipal Code to read as follows:

Sec. 53-15. Littering and Dumping Prohibited.

A. Littering Prohibited.

No person shall place, throw, drop, sweep, track, spill, pour, discharge, deposit, or otherwise cause or permit any litter to be or remain (1) in or upon any public place; (2) upon any private property without the consent of the owner or lawful occupant; or (3) into any municipal separate storm sewer system facility (“MS4”), waterway, gutter, inlet, catch basin, storm drain, channel, or appurtenance.

B. Dumping Prohibited.

1. General Prohibition. No person shall place, deposit, leave, or cause to be left any solid waste, recyclables, organics, bulky item, household or business waste, construction or demolition debris, green waste, hazardous waste, or other discarded material in or upon any public place or private property without both: (i) the owner’s or lawful occupant’s consent, and (ii) lawful collection arrangements with the City or its authorized hauler.

2. Unauthorized use of receptacles.

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CITY OF HEMET ORDINANCE NO. XXXX 1
a. No person shall deposit any household, business, construction, demolition, landscaping, or other accumulated waste into a public litter basket or similar receptacle. Public litter baskets are for incidental pedestrian waste only. b. No person shall deposit any material into a private or shared receptacle (including commercial dumpsters, carts, or compactors) without the receptacle owner’s or account holder’s consent.
c. No person shall deposit materials into any receptacle in a manner that prevents closure of the lid or causes overflow, spillage, windblown displacement, or access by animals or scavengers.
d. No person shall place materials on the ground, pavement, alley, parkway, or adjacent to any receptacle, bin, cart, or enclosure in a manner that results in or risks overflow, spillage, windblown displacement, or access by animals or scavengers, unless expressly authorized in writing by the City or as part of a scheduled bulky-item pickup compliant with a program operated by the City’s franchised hauler.

Sec. 53-16. Duty to Maintain Property Free of Litter.

A. Commercial and Residential Premises.

1. All private property within the City of Hemet, including but not limited to, adjacent sidewalks, parkways, landscaped areas, alleys, parking lots, loading areas, drive aisles, and all other areas visible from the public right-of-way, shall be maintained at all times free of litter, with any litter promptly abated.

2. Containers.

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CITY OF HEMET ORDINANCE NO. XXXX 1
a. All private property within the City of Hemet shall be equipped with adequate refuse, recycling, and organics containers and, where required, enclosures, in number, size, and type sufficient for the use conducted. b. Containers shall be serviced at a frequency sufficient to prevent overflow, leakage, spillage, odors, or windblown litter. Lids or closures shall remain closed except when actively in use.
c. Container enclosures and collection areas shall be kept clean, sanitary, and in good repair. Any spills shall be promptly cleaned and surfaces maintained to prevent tracking or stormwater conveyance of debris.

3. Drive-through, take-out, sidewalk vending, outdoor dining, special events, and similar operations shall:
a. Provide conveniently located, clearly visible containers for patrons; b. Inspect and empty such containers as needed to prevent overflow and windblown litter; and
c. Conduct daily litter patrols of associated seating, parking, drive aisles, landscaping, and frontage areas, and promptly remove litter.

Sec. 53-17. Enforcement.

A. Strict liability; Responsible Person.

1. Violations of §§53-15 through 53-17 are strict-liability offenses. Intent, knowledge, mistake, or negligence are not elements.

2. Violations of §§53-15 through 53-17 may be cited or charged against any “Responsible Person,” as defined in HMC §1-20. Each Responsible Person is jointly and severally liable for compliance and for all administrative penalties, civil penalties,

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CITY OF HEMET ORDINANCE NO. XXXX 1
fines, fees, and costs (including inspection, investigation, abatement, cleanup, and enforcement) imposed or incurred under this Section and Chapter 1, Article II.

B. Orders to Abate.

1. An Enforcement Official may issue an order or notice requiring immediate abatement of any violation of §§53-15 or 53-16, including on-scene cleanup, temporary controls, or other measures necessary to protect public health or safety.

2. Upon issuance of such order or notice, the Responsible Person shall immediately abate the violation or, if immediate abatement is not safely feasible, shall commence and diligently pursue abatement to completion within the time specified.

3. Failure to comply with an order or notice to abate is a separate and distinct violation for each day or portion thereof the condition remains unabated after the deadline.

C. In addition to any enforcement action authorized by this Code (including but not limited to Chapter 1 Article II) any violation of §§53-15, 53-16 or 53-17(C) is a misdemeanor, enforceable by citation issued by an Enforcement Official or by criminal complaint filed by the City Attorney, and punishable as provided in Chapter 1 Article II.

In the discretion of the City Attorney, a violation may be charged or reduced to an infraction, whether at filing or thereafter.

D. Each day (or portion thereof) a violation continues, and each separate act in violation, constitutes a separate offense.

E. The remedies and penalties in this section are cumulative, not exclusive, and are in addition to any other remedies provided by this Code, permit, franchise, contract, or applicable state or federal law.

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CITY OF HEMET ORDINANCE NO. XXXX 1
Section 2. CEQA.

The City Council finds that this Ordinance is not a project or is otherwise exempt from CEQA because it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment (CEQA Guidelines § 15061(b)(3)).

Section 3. Severability.

If any section, subsection, sentence, clause, phrase, or portion of this Ordinance is for any reason held to be invalid or unconstitutional by a court of competent jurisdiction, such decision shall not affect the validity of the remaining portions. The City Council declares that it would have adopted this Ordinance and each section, subsection, sentence, clause, phrase, or portion thereof, irrespective of the fact that any one or more portions may be declared invalid or unconstitutional.

Section 4. Repeal of Inconsistent Provisions.

All provisions of the Hemet Municipal Code, resolutions, or City Council policies that are in conflict with the provisions of this Ordinance are to the extent of such conflicts hereby repealed or superseded.

Section 5. Codification.

The City Clerk, in consultation with the City Attorney, is authorized to make nonsubstantive edits and numbering or formatting changes necessary to codify this Ordinance into the Hemet Municipal Code.

Section 6. Effective Date.

This Ordinance shall take on the 31st day following adoption.

Section 7. Certification and Publication.

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CITY OF HEMET ORDINANCE NO. XXXX 1
The City Clerk shall certify the passage of this Ordinance and shall cause the same to be published as required by law.

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CITY OF HEMET ORDINANCE NO. XXXX 1
INTRODUCED at the regular meeting of Hemet City Council on December 9, 2025.

APPROVED, AND ADOPTED at the regular meeting of Hemet City Council on January 12, 2026.
_________________________
, Mayor
ATTEST:
_________________________
John Paul Maier, City Clerk

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CITY OF HEMET ORDINANCE NO. XXXX 1
State of California )
County of Riverside )
City of Hemet )
I, John Paul Maier, City Clerk of the City of Hemet, do hereby certify that the foregoing Ordinance is the actual Ordinance adopted by the City Council of the City of Hemet and was passed at a regular meeting of the City Council on the 12th day of January, 2026.

AYES: Council Members:

NOES: Council Members:

ABSTAIN: Council Members:

ABSENT: Council Members:
_________________________________
John Paul Maier, City Clerk

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City of Hemet
City Council Meeting

STAFF REPORT
Meeting: City Council Meeting - Dec 09 2025
Department: Administration
Submitted by: Mark Prestwich, City Manager
Benigno Sandoval, Economic Development Director;
☐ Receive and File ☐ Consent Calendar ☒ Business Item ☐ Public Hearing TITLE:

A Resolution of the City Council of the City of Hemet, California, Amending the Downtown Kitchen Grant Program and Authorizing Waiver of Planning and Building Permit Fees for Program Participants; Consideration of a Kimball's Bistro Request for an Exemption to Their $150,000 Grant Award; Consideration of Initiating a Second Round of Kitchen Grant Applications Invitations and the Appropriation of Additional Funding
RECOMMENDED ACTION:

It is respectfully recommended that the City Council:

Adopt a Resolution of the City Council of the City of Hemet, California, Amending the City's Downtown Kitchen Grant Program, Authorizing Waiver of Planning and Building Permit Fees for Program Participants; Consideration of a Request by Kimball's Bistro Request for an Exemption to Their $150,000 Grant Award; Consideration of Initiating a Second Round of Kitchen Grant Applications Invitations and the Appropriation of Additional Funding.

BACKGROUND:

On August 13, 2024, the City Council adopted the Hemet RISES Economic Strategy, which included a strategic initiative to incentivize restaurant investment in the City's Downtown. The City desires to support business creation and restore the vibrancy of Downtown as a place to visit, shop, and dine.

The City Council appropriated $300,000 in the Fiscal Year 2024-25 budget and an additional $200,000 in the Fiscal Year 2025-26 budget to supplement the existing funding for a total available allocation of $500,000. The program provides funding to offset the start-up costs of opening a restaurant(s), including kitchen equipment, renovations, and other related expenses.

When approved, the Hemet Downtown Kitchen Grant Program was designed to revitalize the heart of Hemet by fostering a thriving culinary scene. Recognizing the profound impact of a vibrant food scene on a community's economic vitality, social fabric, job creation, and overall quality of life, this program supports the establishment and expansion of high-quality restaurants within a designated Downtown Hemet district.

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The program envisions a transformed downtown, a culinary destination that attracts both residents and visitors alike. It seeks to create a dynamic and diverse food scene that not only enhances the dining experience but also contributes significantly to the economic and social well-being of the community. Applicants must demonstrate a 20% financial commitment as a matching contribution toward their project.

The Downtown Kitchen Grant Program was presented to the Planning Commission on April 15, 2025, and was met with a supportive response. The Planning Commission recommended approval of the program but provided feedback that $300,000 might not be enough to support potential projects and encouraged the City Council to consider adding more funding if available to attract higher-quality investment.

ANALYSIS:

The City of Hemet advertised and opened the Downtown Kitchen Grant for 30 days from May 6, 2026, to June 5, 2025. A total of four applications were received in the 30-day application period.

The City Council's Business Ad-Hoc Committee, consisting of Mayor Jackie Peterson and Council Member Joe Males, reviewed and considered the four applications received. After discussing options, the Business Ad Hoc Committee recommended, and the Council approved, a total of $450,000 be awarded to three applicants as follows:

Table 1 - Grant Awards
Business Location Amount
Kimball's Bistro Kimball & Harvard $150,000
Carlton's Steakhouse Florida & Harvard $300,000
Samurai Sam's Sandwiches Florida & Inez Waiver of City & Permit Fees Monetary grant recipients were required to sign an agreement that authorizes reimbursement of eligible expenses up to the award amount.

On October 1, 2025, Kimball's Bistro submitted a letter to the City requesting consideration of an exemption to the reimbursement provisions outlined in the Downtown Grant Agreement executed on August 20, 2025, to reimburse them for expenses incurred prior to the signing of the contract (see attached letter below). Because the City's grant requires the use of prevailing wage and no documentation prevailing wage was utilized, the City Attorney had significant reservations about the legality of this proposal. It is recommended, however, that Kimball's Bistro receive the benefit of retroactive fee waivers and building permit waivers previously granted to them. Therefore, $200,000 remains available in unused grant funds ($50,000 not originally awarded and $150,000 from the unused Kimball's Bistro grant).

Since the 30-day grant application period ended, City staff were approached by several other promising restaurant proposals in the downtown area as well as in other Hemet locations that have the potential to ignite economic activity and enhance the community's overall quality of life and social fabric.

DISCUSSION:

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Given the level of continuing interest in the Kitchen Grant Program and the potential to accelerate job creation and the community's economic vitality, the Economic Development Director and City Manager recently met with the City Council Business Ad Hoc Committee to discuss the concept of launching a second application period this fiscal year for at least 30 days. The Ad Hoc Committee is supportive of the recommendation. To incentivize quality proposals, the Ad Hoc Committee is also supportive of augmenting the remaining $200,000 in grant funds with an additional appropriation of between $200,000 and $500,000.

The City's Fiscal Year 2024-25 General Fund Surplus is expected to be approximately $67 million when the audit is completed for the close of the June 30, 2025, fiscal year, which is well above the City's 40% minimum reserve requirement of $28.9 million. Consideration of a larger appropriation of one-time funds would be expected to yield more interest in the proposed second round application process.

Further, because the decision to award funds to applicants will be made by the full City Council, supported by recommendations from the Ad Hoc Committee, the Council reserves the right to award or not award funds appropriated based on the quality of the proposal and impact on the community.

Staff is recommending that the application communicate that grants are not expected to exceed $300,000 per business.

Table 2 - Summary of Kitchen Grant Appropriations and Funds Available Fiscal Year Amount Budgeted for
Program
2024-25 $300,000
2025-26 $200,000
Total $500,000
Remaining Grant Dollars Available
Unused $50,000
Unused $150,000 Kimball's Bistro Grant $150,000
Total Available $200,000
PREVIOUS COUNCIL ACTION:

The City Council approved the Downtown Kitchen Grant Program on April 29, 2025, and awarded $450,000 on July 8, 2025, to two grant recipients and authorized fee waivers for one.

STRATEGIC PLAN INTEGRATION:

GOAL ONE: QUALITY OF LIFE:

To ensure that Hemet is safe, clean, attractive and comfortable for all who live, work, and visit.

Objective 1: Enhance the visual appearance of the community to make it attractive and reduce blight.

Objective 2: Explore and implement homelessness solutions for the City of Hemet.

Objective 3: Increase Public Safety visibility and response.

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GOAL TWO: ECONOMIC OPPORTUNITY
To ensure that Hemet is a hub, with access to quality jobs, shopping options, and a varied and sustained tax base.

Objective 1: Develop business practices that welcome new development by streamlining processes.

Objective 2: Provide resources for new businesses to enhance the customer service experience.

GOAL THREE: COMMUNITY ENGAGEMENT
To connect and participate in a constant dialogue between members of the community, City staff, and elected officials to promote togetherness and positivity.

Objective 1: Deliver messaging to the Community that connects, is consistent, and relevant.

Objective 2: Increase transparency for the public.

Objective 3: Increase the community's pride within the City.

GOAL FOUR: PARTNERSHIP & COLLABORATION
To pursue partnerships that will increase the opportunities available to the community, including our businesses, unemployed, and youth populations.

Objective 1: Develop concepts and programs to increase opportunities for youth recreation.

Objective 2: Develop concepts and programs to enhance the quality of life services.

Objective 3: Develop programs to offer support to the community's businesses GOAL FIVE: ORGANIZATIONAL EFFECTIVENESS
To identify the work needed inside the City organization to effectively provide services to the community and ensure financial stability.

Objective 1: Operate in a financially sustainable manner.

Objective 2: Evaluate existing practices to ensure continuity with industry best practices.

Objective 3: Provide Council with policies that are consistent while lessening liabilities.

Objective 4: Increase employee retention by training and creating a positive workplace.

Objective 5: Streamline fire prevention coordination efforts.

FISCAL IMPACT:

The City Council appropriated $300,000 in the Fiscal Year 2024-25 General Fund budget and an additional $200,000 in the Fiscal Year 2025-26 General Fund budget for a total of $500,000 (see Table 1 above).

ALTERNATIVE(S):

1. Do not approve modifications to the Kitchen Grant Program.

2. Provide alternative direction to the City Manager.

ATTACHMENT(S):

Attachment 1: Resolution - City of Hemet Kitchen Grant
Attachment 2: Exhibit A - AMENDED DRAFT City of Hemet - Kitchen Grant Program Guidelines -

TRACK CHANGE VERSION
Attachment 3: Exhibit A - AMENDED DRAFT City of Hemet - Kitchen Grant Program Guidelines -

CLEAN VERSION
Attachment 4: Kimball's Bistro Letter to City of Hemet

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CITY OF HEMET RESOLUTION NO. 2025-XXX 1
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CITY OF HEMET

HEMET, CALIFORNIA
RESOLUTION NO. 2025-xxx

A RESOLUTION OF THE CITY COUNCIL OF THE CITY

OF HEMET, CALIFORNIA, AMENDING THE CITY OF

HEMET KITCHEN GRANT PROGRAM
The City Council of the City of Hemet, California (hereafter referred to as the “City Council”) does resolve as follows:

WHEREAS, the City Council adopted the Hemet Economic Strategic Plan, Hemet: RISES, outlining restaurant investment in the Hemet Downtown District; and WHEREAS, the Downtown Kitchen Grant is a new City of Hemet business incentive program to enhance the physical appearance and attract new visitors to the City’s major commercial corridors; and
WHEREAS, the Hemet City Council has appropriated $300,000 towards the program for Fiscal Year 2024-25 and $200,000 towards the program for Fiscal Year 2025-26 for a total budget of $500,000.

WHEREAS, the City Council desires to waive Application and Processing Fees Associated with Kitchen Grant awardees; and
WHEREAS, the waiver of fees has been reviewed by the City Council and staff in accordance with the California Environmental Quality Act (“CEQA”) and the CEQA Guidelines, and it has been determined that the adoption of this ordinance is exempt from CEQA pursuant to Section 15061(b)(3) of the CEQA Guidelines.

WHEREAS, the Downtown Kitchen Grant Program is a strategic initiative designed to support the establishment and expansion in the City of Hemet as described in the Kitchen Grant Program Guidelines (Exhibit A).

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CITY OF HEMET RESOLUTION NO. 2025-XXX 2
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WHEREAS, City staff have continued to receive inquiries from potential impactful restaurant projects in and beyond the downtown that show promise to ignite economic activity and enhance the community’s overall quality of life and social fabric.

NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF HEMET FINDS, DETERMINES, ORDERS, AND RESOLVES AS FOLLOWS:

SECTION 1. The City Council hereby approves the Amended City of Hemet Kitchen Grant Program and Authorizes Waiver of Planning and Building Permit Fees for Program Participants.

SECTION 2. AUTHORIZATION. The City Manager is authorized to execute any necessary documents related to the grant program and implementation on behalf of the City.

SECTION 3. The Administrative Services Director is authorized to establish expenditure accounts and a budget for the grant activity as required to implement the grant-funded program.

SECTION 4. This Resolution shall take effect immediately upon its adoption.

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CITY OF HEMET RESOLUTION NO. 2025-XXX 3
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PASSED, APPROVED AND ADOPTED this _____ day of _______, 2025. ____________________________
Jackie Peterson, Mayor
ATTEST:
_____________________________
John Paul Maier, City Clerk

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CITY OF HEMET RESOLUTION NO. 2025-XXX 4
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State of California )
County of Riverside )
City of Hemet )
I, John Paul Maier, City Clerk of the City of Hemet, do hereby certify that the foregoing resolution was adopted by the Hemet City Council on the ___ day of______, 2025, and was passed by the following vote:

AYES: Council Members:

NOES: Council Members:

ABSTAIN: Council Members:

ABSENT: Council Members:
_____________________________
John Paul Maier, City Clerk

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Commercial Kitchen Grant Program Guidelines
Guidelines
1 | P a g e
City of Hemet – Economic Development
City of Hemet
Downtown Kitchen Grant
Program Guidelines
April 2025
Amended December 2025 City of
Hemet
https://www.hemetca.gov/econdev

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Commercial Kitchen Grant Program Guidelines
Guidelines
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City of Hemet – Economic Development

PROGRAM OVERVIEW
The Hemet Downtown Kitchen Grant Program is a strategic initiative designed to revitalize the heart of Hemet by fostering a thriving culinary scene. Recognizing the profound impact of a vibrant food scene on a community's economic vitality, social fabric, and overall quality of life, this program aims to support the establishment and expansion of high-quality restaurants with preference for in the designated Downtown Hemet district and other locations that present meaningful investment and the potential to foster job creation and improve the community’s social fabric.

The program envisions a transformed downtown, a culinary scene destination that attracts both residents and visitors alike. It seeks to create a dynamic and diverse food scene that not only enhances the dining experience but also contributes significantly to the economic and social well-being of the community. By attracting new businesses, supporting existing restaurants, and fostering a culture of innovation, the program aims to revitalize the downtown district, create new jobs, and enhance the overall quality of life for all Hemet residents.

PROGRAM GOALS & OBJECTIVES
This program strives to achieve several key goals:
• Revitalize Downtown Hemet: Transform the downtown district into a vibrant and attractive destination for residents and visitors. This involves increasing foot traffic, enhancing the overall ambiance, and creating a more inviting and engaging environment. A thriving restaurant scene will contribute to a more vibrant and active downtown, attracting residents and visitors alike to dine, shop, and explore. • Stimulate Economic Growth: Attract new businesses, create local jobs, and increase revenue streams for businesses within the downtown district. The program aims to contribute to the overall economic vitality of Hemet by supporting the growth of the local hospitality industry. This includes creating new employment opportunities for residents, increasing tax revenue for the city, and stimulating economic activity throughout the downtown area.
• Enhance Quality of Life: Improve the quality of life for residents by providing access to a diverse range of high-quality dining options. A vibrant culinary scene enhances the overall livability of a community, offering residents a greater variety of dining experiences, opportunities for social interaction, and a more engaging and enriching environment.
• Support Local Entrepreneurship: Provide a valuable platform for aspiring and established restaurateurs to launch and grow their businesses. The program aims to foster a culture of entrepreneurship and innovation within the community by

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Commercial Kitchen Grant Program Guidelines
Guidelines
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City of Hemet – Economic Development
supporting local businesses, encouraging creativity, and providing opportunities for growth and expansion.
• Preserve Local Character: Encourage the development of restaurants that reflect the unique character and cultural heritage of Hemet. This may include adaptive reuse of existing buildings, supporting the use of locally sourced ingredients, incorporating local flavors and traditions into menu offerings, and showcasing the unique character and history of the Hemet community.
• Promote Sustainability: Encourage sustainable practices within the restaurant industry.

This includes supporting the use of locally sourced ingredients, minimizing food waste, implementing energy-efficient technologies, and promoting environmentally conscious practices.

PROGRAM COMPONENTS
Downtown Kitchen Grant
The Hemet Kitchen Grant offers financial assistance to aspiring restaurateurs. in the Hemet Downtown District. This program aims to stimulate economic growth and revitalize the communityarea by supporting the creation of new culinary businesses. Specifically, the grant provides funding of up to $300,000 to offset cover the costs associated with building a restaurant kitchen. To qualify, applicants must demonstrate a 20% financial commitment as a matching contribution towardsto the project.

Project must be completed within eighteen (18) months of building permit issuance. The Downtown Kitchen Grant program is limited to the Downtown Specific Plan area with a preference for improvements on Florida Avenue. This requirement ensures that recipients have a vested interest in the success of their ventures and fosters a sense of ownership and responsibility.

The City of Hemet will provide periodic reimbursement of expenses after it deems the project is advancing completed, and upon the certificate of occupancy, submission of invoices, and proof of payment. If the project is anticipated to extend beyond the required completion date, prior written City Manager approval is required to extend the performance period.

Grant funding is to be used for labor and materials directly related to the Downtown Kitchen Grant construction only. Program funds are to be used for Kitchen development and revitalization rather than a simple routine maintenance or equipment (e.g. tools).

Fee Exemption

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Commercial Kitchen Grant Program Guidelines
Guidelines
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City of Hemet – Economic Development
Applicants for the Downtown Kitchen Gran Program are exempt from Planning and Building permit fees. Note, fee exemption does not apply to any mandated fees by the State of California or fees required by other public agencies.

Figure 1:

Hemet Downtown District Map

PROGRAM REQUIREMENTS AND PRIORITIES
Eligibility Criteria
To be eligible for the Hemet Downtown Kitchen Grant Program, applicants must meet specific criteria.
• Applicant Type:

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Commercial Kitchen Grant Program Guidelines
Guidelines
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City of Hemet – Economic Development
o New Restaurants: Businesses planning to establish a new restaurant within the designated Downtown Hemet district are eligible to apply. This includes both new businesses and existing businesses that are expanding to the downtown area.
o Existing Restaurants: Established restaurants within the district mayare also be eligible to apply for funding to significantly expand their operations. This may include implementing major kitchen renovations, expanding their menu offerings, enhancing customer experience, improving operational efficiency, and implementing innovative technologies.
• Location: All applicants must be located within the clearly defined boundaries of the designated Downtown Hemet district, as determined by the City of Hemet. • Project Scope: Grant funds can be utilized for a wide range of eligible expenses, including:
o Kitchen Equipment and Infrastructure: Purchase and installation of essential commercial kitchen equipment, such as high-performance ovens, grills, refrigeration units, specialized food preparation equipment, and upgrades to plumbing, electrical, and ventilation systems.
o Commercial-grade range/oven: Core piece of equipment for any restaurant kitchen.
o High-volume refrigerator: Storing perishable ingredients and keeping them at safe temperatures.
o Commercial dishwasher: Improves efficiency and sanitation in the kitchen. o Hood system and ventilation: For safety and compliance with health codes. o Three-compartment sink: Required for proper handwashing and food preparation.
o Walk-in freezer: For storing frozen ingredients and minimizing food waste. o Food processor: Speeds up food preparation tasks like chopping, mixing, and pureeing.
o Ice machine: Provides consistent ice supply for drinks and cooling. o Grease trap installation: Required for proper waste disposal and to prevent plumbing issues.
o Professional-grade knives and cutting boards: Essential tools for any chef.

APPLICATION PROCESS & SELECTION CRITERIA
The application process for the Hemet Downtown Restaurant Kitchen Grant Program will be rigorous and competitive.

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performance. The business plan should demonstrate a clear understanding of the market, a competitive advantage, and a solid plan for achieving success. o Detailed budget and cost breakdown: A comprehensive budget outlining all project costs and a detailed breakdown of how grant funds will be utilized. The budget should be realistic, well-documented, and clearly demonstrate how the funds will be used to achieve the project goals.
o Supporting documentation: This may include a business license application, lease agreement, proof of business insurance, and any other relevant permits or approvals.
o Financial statements:
▪ For new restaurants: Include personal financial statements of the owners/partners.
▪ For existing restaurants: Include recent financial statements (e.g., income statements, balance sheets) to demonstrate the financial health of the business.

2. Review and Selection: A highly qualified review panel, comprised of representatives from the City of Hemet will carefully evaluate each application. The selection criteria will include:
o Feasibility and Viability: The panel will assess the feasibility and viability of the business plan, including its market potential, financial projections, and overall sustainability.
o Culinary Innovation: Preference may be given to applicants who demonstrate a commitment to culinary innovation, offering unique and distinctive dining experiences, such as innovative menu concepts, locally sourced ingredients, and unique dining atmospheres.
o Community Impact: The panel will consider the potential impact of the project on the downtown districtCity, including its ability to attract new visitors, create jobs, and enhance the overall quality of life for residents. o Financial Responsibility: The panel will evaluate the applicant's financial responsibility and their ability to effectively manage grant funds. o Sustainability: The panel will assess the applicant's commitment to sustainability, including environmental practices, sourcing local ingredients, and minimizing waste.

PROGRAM PROCEDURES
Applicant Intake and Eligibility

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of Good Business Standing (https://bizfileonline.sos.ca.gov). Applications will be reviewed in the order in which they were received. The City will maintain a waiting list for all prospective participants. Incomplete applications will not be processed.

2. Review of application. All complete applications will be date stamped when received and processed in that order. Application may be subject to additional review by the Planning Commission, when applicable.

Incomplete applications will not be processed until all requested information is submitted. A notification letter will be sent to applicants concerning the approval or denial of the Application. Eligible applicants will be contacted to enter into an agreement with the City and schedule a property inspection.

Property Inspection

1. Initial Inspection. A site visit will be arranged between the Economic Development staff and the property owner and/or business owner to undertake an inspection of the building and to develop specifications for the Program.

2. Follow-Up Inspection. If City Staff finds code violations during the initial inspection, the property owner and/or applicant will be required to correct those violations before continuing in the Program process. A follow-up inspection will be arranged between City Staff and the property owner and/or business owner to ensure the property is up to code.

Contractor Selection

1. Procurement. Applicants are free to select their contractor and submit at least one quote to the City of Hemet. The chosen contractcontract must comply with the City’s requirements for contractors. The City reserves the right to require or obtain additional bids/estimates to determine the validity of the proposed project.

2. Contractor Requirements. The City shall maintain a file for each contractor performing work pursuant to the terms and conditions of this program. The file shall include the following information:
a. Copies of the contractor's current liability and worker’s compensation insurance policies;
b. Copies of the contractor's current California Contractor's License; c. Copy of contractor’s City Business License; and City Business License d. Provide a subcontractor list as applicable.

Any contractor with an expired General Liability and/or Workers Compensation insurance or a valid state contractor's license shall be removed from the job until

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he/she is able to provide proof of current insurance and/or license. All contractors shall be required to obtain a City Business License prior to the issuance of a building permit.

3. Ineligible Contractors
a. The City and the applicant(s) shall agree not to award any contract for rehabilitation work, to be paid for in whole or impart with proceeds from the Program, to any contractor who does not have a valid State contractor’s license, who cannot produce sufficient evidence of current Worker’s Compensation and Liability Insurance coverage, or who is on the federal Housing and Urban Development's (HUD's) Debarred Contractor list.
b. All owner/builders, or any member of the applicant's family or extended family, are considered ineligible, regardless of credentials or license. Any ineligible contractor found working at the job site will be removed immediately, without compensation.

Award of Grant

1. Notification. The City shall notify the selected contractor of the award of the grant award and shall establish date, time and place for the pre-construction conference.

The pre-construction conference will include City Staff, property/business owner(s) and contractor.

2. Private Arrangements. The City cautions the property/business owner and the contractor not to enter “side deals" for additional work or deviations from the approved scope of work.

3. Pre-Construction. Prior to construction, the City will arrange a pre-construction meeting which shall be attended by the contractor, the property/business owner(s), and representative City staff. The purpose of this meeting is to explain all Program requirements and procedures, coordinate and schedule the work start date, and answer questions related to contract documents.

4. Start of Construction. No work shall commence until a “Notice to Proceed” has been issued to the contractor, signed by the property/business owner(s) and the City. In addition, no work shall commence until all required permits have been issued by the City’s Building Division.
a. The contractor shall contact the Community Development Department to obtain all requirements for plan submittal to obtain building permits. Plans will be reviewed by the City’s Building and Planning divisions.

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b. Applicants for this program are exempt from City Planning and Building permit fees. This fee exemption does not apply to fees mandated by the State of California including, but not limited to, the California Green Building Standards fees.

Reimbursement Process

1. Upon approval, the City of Hemet will enter into agreement with the applicant and approved work may begin immediately after the agreement is fully executed.

2. Applicants are responsible for obtaining all necessary permits (including building permits) and authorities from the City.

3. Staff will inspect the project to ensure compliance with grant.

4. Work must be completed within eighteen (18) months of grant award.

5. All work must comply with approved plans.

6. Grant funds will only be disseminated to the contractor not the applicant, once the construction of the City approved improvements has been advanced (via progress payments) and upon certifcate of occupancy upon project completedion and has been inspected by City Staff.

7. Grant funds will be disseminated upon the issuance of a Notice of Completion has been issued by City Staff.

Applicant Responsibilities:

1. Property Maintenance. The property/business owner(s) is/are responsible for property maintenance during the rehabilitation work (contractor is responsible for keeping the property clean of all construction material). The property/business owner(s) is/are responsible for insuring that the rehabilitation work is not impeded because of their actions or the actions of their tenant(s). The City shall encourage the contractor and his/her employees to provide adequate pedestrian and property protection at the construction site.

2. Property Tax Bills. Current property tax bills for the subject property must be current.

The property owner(s) is/are responsible for insuring that the property taxes are current. The City will verify that the property taxes for the property are current. If the property’s tax statement indicates a delinquency, at the time of the Program application, the City shall not proceed with grant processing until it is supplied with a Certificate of Redemption or other appropriate documentation of proof of payment.

3. Notice of Completion. The property/business owner(s) is/are responsible for scheduling a final job completed inspection with the City’s BuildingCommunity Development, Life and Safety Department. The City will verify that the project received a passing final inspection. After all requirements have been met, the City will issue a Notice of Completion to the property/business owner(s).

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FUNDING
Funding for the Downtown Kitchen Grant Program is allocated by the City of Hemet City Council, and the amount of funds available each year is not guaranteed. The grant funds are distributed on a first come, first served basis. If grant funds are depleted at the time of application submission, City Staff will keep your application on file. However, if additional funds become available, City Staff will contact the applicant in the order in which the applications were received.

The City of Hemet reserves the right to cancel or modify this Program at any time prior to grant approval, with notice to the applicant by the Economic Development ManagerDirector.

Continuation of the Program is subject to sufficient funding as appropriated by the Hemet City Council.

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APPLICANT CERTIFICATION
Please read the statements below and initial and sign certify that you understand:
____I/we certify that the building owner is the owner of the property. ____I/we certify that there are no current code enforcement actions pending against this property*.
____I/we have attached a copy of all current leases.
____I/we have reviewed the program overview and guidelines, have familiarity with responsibilities of each party and understand that:
____All services to be performed by contractors shall be the subject of agreement between applicant and contractor(s).
____The Agency shall not assume any liability for such agreements, except as specifically authorized by the program.
____I/we have read and understand the City of Hemet program guidelines, accept the qualifications and conditions and through signature(s) below, certify that I/we are qualified and will abide by such conditions set forth in this application and all reasonable conditions which may be issued by the City of Hemet in the implementation of this program. I understand that this is a voluntary program, under which the City of Hemet has the right to approve or deny any project or proposal or portions thereof.

Signature: _________________________________________ Date: ___________________ Property Owner Signature ____________________________ Date: ___________________ (If Tenant is Applying)

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Downtown Kitchen
Grant Program Application
___________________________________________________________________________ Please fill out the application completely and submit to [email protected] or send to:

City of Hemet
Attention: Economic Development Department
445 E. Florida Ave
Hemet, CA 92543
(951) 669 – 0265
* SECTION 1 - APPLICANT INFORMATION:

Name: ____________________________________________________________________ Circle All That Apply: Property Owner Business Owner/Tenant Business Name: _____________________________________________________________ Property Address: ____________________________________________________________ Mailing Address: ____________________________________________________________ Phone Number: _____________________________________________________________ Email: _____________________________________________________________________ Total Number of Businesses in Building: _________________________________________ Name(s) of Other Businesses:
___________________________________________________________________________ ___________________________________________________________________________ * SECTION 2 - PROPERTY OWNER INFORMATION (Complete even if the current tenant is the applicant):

Property Owner Name: _______________________________________________________

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Property Owner Mailing Address: _______________________________________________ Property Owner Daytime Phone Number: ________________________________________ As the legal owner of the above property, I hereby grant authorization to complete the façade improvements indicated on this application.

Signature: __________________________________________________ Date: __________ * SECTION 3 - FUNDING:

Grant Available
Downtown Kitchen Grant
Grant Amount Requested: $__________________
Estimated Total Project Cost: $_______________
* SECTION 4 - SCOPE OF WORK:

General Description of Work:
___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ * SECTION 5 - ACKNOWLEDGMENT:

We certify that the owner is the property owner of record and that there are no current zoning code enforcement actions pending against the property. I have read and understand the Program Guidelines and accept them. I certify that I am qualified and will abide by such conditions set forth in this application and all reasonable conditions which may be issued by the City of Hemet in the implementation of this project.

Property Owner(s) Signature: __________________________________ Date: ___________ Business Owner(s) Signature: __________________________________ Date: ___________

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City of Hemet
Kitchen Grant
Program Guidelines
Amended December 2025
https://www.hemetca.gov/econdev

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PROGRAM OVERVIEW
The Hemet Kitchen Grant Program is a strategic initiative designed to revitalize the heart of Hemet by fostering a thriving culinary scene. Recognizing the profound impact of a vibrant food scene on a community's economic vitality, social fabric, and overall quality of life, this program aims to support the establishment and expansion of high-quality restaurants with preference for the Downtown Hemet district and other locations that present meaningful investment and the potential to foster job creation and improve the community’s social fabric.

The program envisions a transformed culinary scene that attracts both residents and visitors alike. It seeks to create a dynamic and diverse food scene that not only enhances the dining experience but also contributes significantly to the economic and social well-being of the community. By attracting new businesses, supporting existing restaurants, and fostering a culture of innovation, the program aims to revitalize the downtown district, create new jobs, and enhance the overall quality of life for all Hemet residents.

Support Local Entrepreneurship: Provide a valuable platform for aspiring and established restaurateurs to launch and grow their businesses. The program aims to foster a culture of entrepreneurship and innovation within the community by supporting local businesses, encouraging creativity, and providing opportunities for growth and expansion.

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• Preserve Local Character: Encourage the development of restaurants that reflect the unique character and cultural heritage of Hemet. This may include adaptive reuse of existing buildings, supporting the use of locally sourced ingredients, incorporating local flavors and traditions into menu offerings, and showcasing the unique character and history of the Hemet community.
• Promote Sustainability: Encourage sustainable practices within the restaurant industry.

This includes supporting the use of locally sourced ingredients, minimizing food waste, implementing energy-efficient technologies, and promoting environmentally conscious practices.

PROGRAM COMPONENTS
Downtown Kitchen Grant
The Hemet Kitchen Grant offers financial assistance to aspiring restaurateurs. This program aims to stimulate economic growth and revitalize the community by supporting the creation of new culinary businesses. Specifically, the grant provides funding to offset the costs associated with building a restaurant kitchen. To qualify, applicants must demonstrate a 20% financial commitment as a matching contribution to the project.

Project must be completed within eighteen (18) months of building permit issuance. This requirement ensures that recipients have a vested interest in the success of their ventures and fosters a sense of ownership and responsibility.

The City of Hemet will provide periodic reimbursement of expenses after it deems the project is advancing , and upon the certificate of occupancy, submission of invoices, and proof of payment. If the project is anticipated to extend beyond the required completion date, prior written City Manager approval is required to extend the performance period.

Grant funding is to be used for labor and materials directly related to the Kitchen Grant construction only. Program funds are to be used for Kitchen development and revitalization rather than a simple routine maintenance or equipment (e.g. tools).

Fee Exemption
Applicants for the Kitchen Gran Program are exempt from Planning and Building permit fees.

Note, fee exemption does not apply to any mandated fees by the State of California or fees required by other public agencies.

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PROGRAM REQUIREMENTS AND PRIORITIES
Eligibility Criteria
To be eligible for the Hemet Kitchen Grant Program, applicants must meet specific criteria. • Applicant Type:
o New Restaurants: Businesses planning to establish a new restaurant within Hemet are eligible to apply. This includes both new businesses and existing businesses that are expanding.
o Existing Restaurants: Established restaurants are also eligible to apply for funding to expand their operations. This may include implementing major kitchen renovations, expanding their menu offers, enhancing customer experience, improving operational efficiency, and implementing innovative technologies.
• Location: All applicants must be located within the City of Hemet. • Project Scope: Grant funds can be utilized for a wide range of eligible expenses, including:
o Kitchen Equipment and Infrastructure: Purchase and installation of essential commercial kitchen equipment, such as high-performance ovens, grills, refrigeration units, specialized food preparation equipment, and upgrades to plumbing, electrical, and ventilation systems.
o Commercial-grade range/oven: Core piece of equipment for any restaurant kitchen.
o High-volume refrigerator: Storing perishable ingredients and keeping them at safe temperatures.
o Commercial dishwasher: Improves efficiency and sanitation in the kitchen. o Hood system and ventilation: For safety and compliance with health codes. o Three-compartment sink: Required for proper handwashing and food preparation.
o Walk-in freezer: For storing frozen ingredients and minimizing food waste. o Food processor: Speeds up food preparation tasks like chopping, mixing, and pureeing.
o Ice machine: Provides consistent ice supply for drinks and cooling. o Grease trap installation: Required for proper waste disposal and to prevent plumbing issues.
o Professional-grade knives and cutting boards: Essential tools for any chef.

APPLICATION PROCESS & SELECTION CRITERIA
The application process for the Hemet Kitchen Grant Program will be rigorous and competitive.

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1. Application Submission: Interested applicants must submit a comprehensive application package, including:
o A detailed business plan: This plan should outline the restaurant's concept, menu offerings, target market, marketing strategy, and projected financial performance. The business plan should demonstrate a clear understanding of the market, a competitive advantage, and a solid plan for achieving success. o Detailed budget and cost breakdown: A comprehensive budget outlining all project costs and a detailed breakdown of how grant funds will be utilized. The budget should be realistic, well-documented, and clearly demonstrate how the funds will be used to achieve the project goals.
o Supporting documentation: This may include a business license application, lease agreement, proof of business insurance, and any other relevant permits or approvals.
o Financial statements:
▪ For new restaurants: Include personal financial statements from the owners/partners.
▪ For existing restaurants: Include recent financial statements (e.g., income statements, balance sheets) to demonstrate the financial health of the business.

2. Review and Selection: A highly qualified review panel, comprised of representatives from the City of Hemet will carefully evaluate each application. The selection criteria will include:
o Feasibility and Viability: The panel will assess the feasibility and viability of the business plan, including its market potential, financial projections, and overall sustainability.
o Culinary Innovation: Preference may be given to applicants who demonstrate a commitment to culinary innovation, offering unique and distinctive dining experiences, such as innovative menu concepts, locally sourced ingredients, and unique dining atmospheres.
o Community Impact: The panel will consider the potential impact of the project on the City, including its ability to attract new visitors, create jobs, and enhance the overall quality of life for residents.
o Financial Responsibility: The panel will evaluate the applicant's financial responsibility and their ability to effectively manage grant funds. o Sustainability: The panel will assess the applicant's commitment to sustainability, including environmental practices, sourcing local ingredients, and minimizing waste.

PROGRAM PROCEDURES
Applicant Intake and Eligibility

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1. Application and Required Documents. Applications are available at Hemet City Hall or online at www.hemetca.gov/econdev Each application must be completed in its entirety, signed and submitted with all required documents as listed in the application, signed proof of ownership or lease agreement, and submit a Certificate of Good Business Standing (https://bizfileonline.sos.ca.gov). Applications will be reviewed in the order in which they were received. The City will maintain a waiting list for all prospective participants. Incomplete applications will not be processed.

Property Inspection

Contractor Selection

1. Procurement. Applicants are free to select their contractor and submit at least one quote to the City of Hemet. The contract must comply with the City’s requirements for contractors. The City reserves the right to require or obtain additional bids/estimates to determine the validity of the proposed project.

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c. Copy of contractor’s City Business License; and City Business License d. Provide a subcontractor list as applicable.

Any contractor with an expired General Liability and/or Workers Compensation insurance or a valid state contractor's license shall be removed from the job until he/she is able to provide proof of current insurance and/or license. All contractors shall be required to obtain a City Business License prior to the issuance of a building permit.

Award of Grant

1. Notification. The City shall notify the selected contractor of the award of the grant award and shall establish date, time and place for the pre-construction conference.

The pre-construction conference will include City Staff, property/business owner(s) and contractor.

2. Private Arrangements. The City cautions the property/business owner and the contractor not to enter “side deals" for additional work or deviations from the approved scope of work.

4. Start of Construction. No work shall commence until a “Notice to Proceed” has been issued to the contractor, signed by the property/business owner(s) and the City. In

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addition, no work shall commence until all required permits have been issued by the City’s Building Division.
a. The contractor shall contact the Community Development Department to obtain all requirements for plan submittal to obtain building permits. Plans will be reviewed by the City’s Building and Planning divisions.
b. Applicants for this program are exempt from City Planning and Building permit fees. This fee exemption does not apply to fees mandated by the State of California including, but not limited to, the California Green Building Standards fees.

Reimbursement Process

1. Upon approval, the City of Hemet will enter into agreement with the applicant and approved work may begin immediately after the agreement is fully executed.

2. Applicants are responsible for obtaining all necessary permits (including building permits) and authorities from the City.

3. Staff will inspect the project to ensure compliance with grant.

4. Work must be completed within eighteen (18) months of grant award.

5. All work must comply with approved plans.

Applicant Responsibilities:

2. Property Tax Bills. Current property tax bills for the subject property must be current.

3. Notice of Completion. The property/business owner(s) is/are responsible for scheduling a final job completed inspection with the City’s Community Development Department.

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The City will verify that the project received a passing final inspection. After all requirements have been met, the City will issue a Notice of Completion to the property/business owner(s).

The City of Hemet reserves the right to cancel or modify this Program at any time prior to grant approval, with notice to the applicant by the Economic Development Director. Continuation of the Program is subject to sufficient funding as appropriated by the Hemet City Council.

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Signature: _________________________________________ Date: ___________________ Property Owner Signature ____________________________ Date: ___________________ (If Tenant is Applying)

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Downtown Kitchen
Grant Program Application
___________________________________________________________________________ Please fill out the application completely and submit to [email protected] or send to:

City of Hemet
Attention: Economic Development Department
445 E. Florida Ave
Hemet, CA 92543
(951) 669 – 0265
* SECTION 1 - APPLICANT INFORMATION:

Property Owner Name: _______________________________________________________

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Property Owner Mailing Address: _______________________________________________ Property Owner Daytime Phone Number: ________________________________________ As the legal owner of the above property, I hereby grant authorization to complete the façade improvements indicated on this application.

Signature: __________________________________________________ Date: __________ * SECTION 3 - FUNDING:

Grant Available
Downtown Kitchen Grant
Grant Amount Requested: $__________________
Estimated Total Project Cost: $_______________
* SECTION 4 - SCOPE OF WORK:

Property Owner(s) Signature: __________________________________ Date: ___________ Business Owner(s) Signature: __________________________________ Date: ___________

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City of Hemet
Attn: Honorable Mayor and City Council
445 E. Florida Avenue
Hemet, CA 92543
10/01/25
Re: Request for Exemption – Downtown Kitchen Grant (Kimball’s Bistro, 130 E. Kimball Ave.)
Honorable Mayor and Members of the City Council,
On behalf of Simon Chu and Kimball’s Bistro, I respectfully request the Council’s consideration of a limited exemption to the reimbursement provisions outlined in the Downtown Kitchen Grant Agreement executed on August 20, 2025 First, we wish to express our sincere gratitude for the award of $150,000 through the Downtown Kitchen Grant Program. This grant reflects the City’s commitment to revitalizing Downtown Hemet, and we deeply appreciate being entrusted as a partner in that vision.

At the same time, the current stipulation that expenses incurred prior to the signing of the contract and issuance of the Notice to Proceed are not reimbursable greatly limits the scope of qualifying expenditures. In our case, the Kimball’s Bistro project was already underway prior to the City’s adoption of the grant program, and substantial investments in eligible equipment—such as commercial-grade ranges, refrigeration, and ventilation systems—had already been made in good faith to advance the project. These expenses directly align with the program’s intent, yet under the current language they are excluded from reimbursement.

We respectfully request that the Council authorize an exemption to allow reimbursement for eligible expenses incurred prior to the grant’s execution, provided that:

1. The restaurant has not previously opened to the public;

2. The expenditures fall within the program’s eligible equipment and improvement categories; and

3. Complete invoices and proof of payment are submitted for City verification.

Recognizing these early investments would ensure that the Downtown Kitchen Grant fully achieves its purpose: supporting serious operators who have committed to downtown revitalization, regardless of whether their investment preceded the program’s rollout.

Without such an exemption, businesses like Kimball’s—who took initiative and acted early—are inadvertently disadvantaged.

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We are grateful for the City’s partnership and leadership in fostering a thriving culinary scene and respectfully submit this request for your consideration.

Sincerely,
Jason Strain
Assistant to Mr. Simon Chu
Simon Chu Properties

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City of Hemet
City Council Meeting

STAFF REPORT
Meeting: City Council Meeting - Dec 09 2025
Department: City Attorney
Submitted by: Mark Prestwich, City Manager
Steven Graham, City Attorney;
☐ Receive and File ☐ Consent Calendar ☒ Business Item ☐ Public Hearing TITLE:

Adoption of Resolution Waiving Planning and Building Permit Fees for Permanent Signs Through April 30, 2026
RECOMMENDED ACTION:

It is respectfully recommended that the City Council:

Adopt a Resolution of the City Council of the City of Hemet, California, waiving specific City planning and building permit fees for permanent business signage submitted on or before April 30, 2026.

BACKGROUND:

The City of Hemet Municipal Code regulates signage to ensure the safety of the public and to maintain the aesthetic character of the community. In recent years, staff have observed a proliferation of temporary signage, such as canvas and vinyl banners, portable A-frames, and flags, being utilized by businesses as permanent identification.

While temporary signs are permitted for limited durations (e.g., grand openings or special sales), their permanent use creates visual clutter, contributes to a perception of blight, and violates the City’s Sign Code. Code Enforcement efforts to address these violations are ongoing; however, many business owners cite the high cost of permitting and installation as a barrier to installing compliant, permanent signage. Code Enforcement Staff estimates the number of temporary canvas/vinyl signs on buildings requiring permanent signage exceeds 160 citywide.

To address this issue, the City Manager is recommending the creation of a business-friendly incentive program that encourages voluntary compliance and aesthetic enhancement of the City’s commercial corridors.

ANALYSIS:

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The recommended Resolution establishes a temporary fee waiver program designed to bridge the financial gap for businesses seeking to install high-quality, permanent wall, or monument signs. The waiver would apply to all substantially complete applications received from the date of adoption through April 30, 2026 (typically, new businesses are provided 45 days to install permanent signage).

The program is applicable to both new businesses and existing businesses.

Based on the current Master Fee Schedule, the following City-controlled fees would be waived:

Planning Fees:

Permanent Sign Permit (Activity #53): Currently $214.

This fee covers the review of the sign for zoning compliance, size, and placement.

Building Fees:

Wall Signs (Activity #33 & #34): Currently $296.00 (non-illuminated) to $494 (illuminated).

Monument Signs (Activity #35 & #36): Currently $593.00 (non-illuminated) to $740 (illuminated).

Electrical Fees:

For illuminated signs, electrical circuit fees (Activity #15) of approximately $49 plus $10 per additional circuit would be waived.

Fees NOT Waived: The City cannot waive fees collected on behalf of third parties or the State of California. Therefore, the applicant will still be responsible for:

SMIP Fees (State Mandate): Strong Motion Instrumentation Program fees.

Building Standards Fee (SB 1473): A state-mandated surcharge based on valuation.

By waiving these fees, the City removes a "barrier to entry" for compliance. A business installing an illuminated wall sign could save approximately $750 to $800 in City fees. These savings can be reinvested by the business owner into higher-quality materials or professional installation, directly improving the "curb appeal" of Hemet’s business districts.

This "carrot" approach complements the City's Code Enforcement efforts. Following the expiration of the waiver on April 30, 2026, staff anticipates a return to strict enforcement regarding illegal temporary signage.

STRATEGIC PLAN INTEGRATION:

GOAL TWO: ECONOMIC OPPORTUNITY
To ensure that Hemet is a hub, with access to quality jobs, shopping options, and a varied and sustained tax base.

Objective 1: Develop business practices that welcome new development by streamlining processes.

Objective 2: Provide resources for new businesses to enhance the customer service experience.

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FISCAL IMPACT:

The fiscal impact is determined by the "unrealized revenue" from permits that would otherwise be paid. However, it should be noted that many of these businesses are currently non-compliant and are not paying any fees. Therefore, the waiver does not represent a loss of current revenue, but rather a strategic investment of staff time to secure long-term code compliance and aesthetic improvements.

The cost of processing these permits will be absorbed by the General Fund through existing staffing levels.

ALTERNATIVE(S):

1. Approve the Resolution as presented; or

2. Modify the Resolution. The Council may wish to change the expiration date or limit the waiver to specific zones (e.g., Downtown Specific Plan only); or

3. Decline to Adopt. The Council may choose to maintain the current fee structure. This may result in slower abatement of illegal temporary signs.

ATTACHMENT(S):

Attachment 1: Resolution Sign Fee Waiver

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CITY OF HEMET RESOLUTION NO. 2025-XXX 1
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CITY OF HEMET

HEMET, CALIFORNIA
RESOLUTION NO. 2025-xxx

A RESOLUTION OF THE CITY COUNCIL OF THE CITY

OF HEMET, CALIFORNIA, WAIVING CERTAIN BUILDING

AND PLANNING FEES FOR PERMANENT SIGNS TO

PROMOTE COMPLIANCE WITH THE CITY SIGN CODE

AND IMPROVE COMMUNITY AESTHETICS, EFFECTIVE
THROUGH APRIL 30, 2026
The City Council of the City of Hemet, California (hereafter referred to as the “City Council”) does resolve as follows:

WHEREAS, the City of Hemet ("City") enforces a Sign Code to ensure that signage within the community is safe, aesthetically pleasing, and consistent with the character of the City; and
WHEREAS, the City Council has identified a proliferation of temporary signs, such as banners and portable signs, being utilized by businesses as permanent identification in violation of the Hemet Municipal Code; and WHEREAS, the extended use of temporary signage as permanent fixtures negatively impacts community aesthetics and creates an environment of noncompliance; and WHEREAS, the City Council desires to encourage local businesses to bring their properties into compliance by installing high-quality, permanent signage that meets current City standards; and

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CITY OF HEMET RESOLUTION NO. 2025-XXX 2
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WHEREAS, the City Council recognizes that the costs associated with permitting fees can be a financial barrier for businesses seeking to transition from temporary to permanent signage; and
WHEREAS, the City Council has determined that it is in the public interest to temporarily waive specific planning and building fees associated with permanent signs to incentivize voluntary compliance and enhance the visual quality of the City’s commercial corridors; and
WHEREAS, this waiver is intended to be a temporary incentive program available to any business that submits a complete application for a new permanent sign on or before April 30, 2026.

NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF HEMET DOES HEREBY RESOLVE AS FOLLOWS:

SECTION 1. Recitals. The City Council hereby finds and determines that the recitals set forth above are true and correct and are incorporated herein by this reference.

SECTION 2. Waiver of Sign Fees. Notwithstanding the rates established in the City of Hemet Master Fee Schedule, the City Council hereby waives the following fees for the construction, installation, or replacement of permanent business signage:

A. Planning Fees: The "Permanent Sign Permit" fee (Activity #53).

B. Building Fees: The Plan Review and Permit Inspection fees for "Signs" (Activity #33 through #37), including Wall Signs and Monument Signs.

C. Electrical Fees: The Electrical Permit fees specifically applicable to "Signs, Outline Lighting and Marquees" (Activity #15 and #16)

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CITY OF HEMET RESOLUTION NO. 2025-XXX 3
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SECTION 3. Eligibility and Term. The fee waiver established in Section 2 shall apply to any business submitting a substantially complete application for a permanent sign permit on or after the effective date of this Resolution and on or before April 30, 2026. This waiver applies to new permanent signs and the replacement of existing signs, provided the new signage complies with all applicable provisions of the Hemet Municipal Code.

SECTION 4. Exclusions. This Resolution waives only the City fees specified in Section 2. It does not waive:

A. State-mandated fees (e.g., SMIP fees).

B. Surcharges or Technology Fees, unless interpreted by the City Manager as part of the permit fee.

C. Fees for remediation of code enforcement violations other than the specific installation of the new sign.

SECTION 5. CEQA Findings. The City Council finds that this action is exempt from the California Environmental Quality Act (CEQA) pursuant to Section 15061(b)(3) of the CEQA Guidelines, as it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment.

SECTION 6. Severability. If any section, subsection, subdivision, sentence, clause, or phrase of this Resolution is for any reason held to be invalid or unconstitutional by the decision of any court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of the Resolution.

SECTION 7. Conflicting Resolutions. All resolutions or parts of resolutions in conflict herewith are hereby repealed to the extent of such conflict.

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CITY OF HEMET RESOLUTION NO. 2025-XXX 4
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SECTION 8. Effective Date. This Resolution shall take effect immediately upon its adoption.

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CITY OF HEMET RESOLUTION NO. 2025-XXX 5
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PASSED, APPROVED, AND ADOPTED this 9th day of December, 2025. ____________________________
Jackie Peterson, Mayor
ATTEST:
_____________________________
John Paul Maier, City Clerk

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CITY OF HEMET RESOLUTION NO. 2025-XXX 6
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State of California )
County of Riverside )
City of Hemet )
I, John Paul Maier, City Clerk of the City of Hemet, do hereby certify that the foregoing resolution was adopted by the Hemet City Council on the 9th day of December, 2025, and was passed by the following vote:

AYES: Council Members:

NOES: Council Members:

ABSTAIN: Council Members:

ABSENT: Council Members:
_____________________________
John Paul Maier, City Clerk

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City of Hemet
City Council Meeting

STAFF REPORT
Meeting: City Council Meeting - Dec 09 2025
Department: Public Works
Submitted by: Mark Prestwich, City Manager
Travis Holyoak, Water/Waste Water Superintendent;
☐ Receive and File ☐ Consent Calendar ☒ Business Item ☐ Public Hearing TITLE:

A Resolution of the City Council of the City of Hemet, California, Accepting the 2025 Comprehensive Water and Sewer Rate Study Report; Approving the Proposed Five-Year Rate Schedules Effective March 1, 2026; Setting a Public Hearing Date of February 10, 2026, for Adoption of Proposed Rates; and Authorizing the Mailing of Proposition 218 Public Hearing Notices to Property Owners and Utility Customer
RECOMMENDED ACTION:

It is respectfully recommended that the City Council:

Adopt a Resolution of the City Council of the City of Hemet, California, Accepting the 2025 Comprehensive Water and Sewer Rate Study Report; Approving the Proposed Five-Year Rate Schedules Effective March 1, 2026; Setting a Public Hearing Date of February 10, 2026, for Adoption of Proposed Rates; and Authorizing the Mailing of Proposition 218 Public Hearing Notices to Property Owners and Utility Customer
BACKGROUND:

The City owns and operates a Water and Sewer system that provides water service to over 9,600 connections and sewer collection to over 11,000 connections.

The City of Hemet Water Division of the Public Works Department is directly responsible for water production, treatment, and distribution systems covering an area of approximately 5.25 square miles.

The area served runs generally from Oakland Avenue to the North to Stetson Avenue to the South, and from Sanderson Avenue on the West to San Jacinto Street on the East with several variations to these general boundaries. Two other water districts, Eastern Municipal Water District (EMWD) and Lake Hemet Municipal Water District (LHMWD), serve the remaining 22.45 square miles of incorporated City area.

The City relies almost entirely on local groundwater production as its main water supply source for domestic water. Groundwater is pumped from the Hemet-San Jacinto Groundwater Management Area. Water production facilities currently include three operating wells, and four storage reservoirs

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with a maximum capacity of 5.0 million gallons. Of the four storage reservoirs, the oldest one in service was built in 1954 and the last one was built in 1979. The City maintains exchange agreements with both EMWD and LHMWD to provide two-way sharing of water supplies during emergencies. Water is distributed through a network of 132.3 miles of water mains ranging in size from four inches to 24 inches in diameter. Pipeline materials include steel, asbestos-cement, and PVC.

The City owns, operates, and maintains the gravity portion of the wastewater collection and conveyance system that that currently serves over 11,000 sewer connections and covers approximately 6.75 square miles. The City’s sewer collection system consists of 140 miles of sewer mains and over 1,800 sewer manholes. However, the City does not own or operate any wastewater treatment facilities. Wastewater treatment and disposal services are provided by and through an agreement with EMWD. The wastewater from the City’s collection system flows directly into the EMWD sewer system through a series of inter-connections between the two systems and is conveyed to EMWD's San Jacinto Regional Wastewater Reclamation Facility.

The cost of operation and maintenance of the Water and Sewer systems is supported through separate rate charges billed to City of Hemet Water and Sewer customers for the services provided.

The Water and Sewer rates were last reviewed and adopted in 2015, with the last adjustment made in 2020.

Periodic rate studies are necessary to review and evaluate the current rate structure to ensure that billing is recouping the ongoing cost of providing service. Multiple facets impact the water and sewer rates including, increase in labor cost, electricity, equipment and materials, along with the cost of construction and engineering for Capital Improvement Projects. Conducting rate studies periodically, ensures that necessary increases are made gradually to cover the costs of providing consistent services and acceptable levels of maintenance to infrastructure.

Funding to conduct this rate study was included in the fiscal year 24/25 operating budget for the Water and Sewer Division. In June of 2024, the City solicited proposals from firms to conduct a Water and Sewer rate analysis, and five proposals were received and reviewed. The City selected Willdan to conduct the Water and Sewer Rate Study and evaluate the financial stability of the Water and Sewer Enterprise.

ANALYSIS:

As part of its ongoing strategic planning efforts, the City commissioned Willdan to perform a Water and Sewer rate study to assess the current financial condition of the utilities, develop a financial plan to analyze revenue sources and expenditures for the Water and Sewer utility systems over a five-year projection period, and provide recommendations for proposed rate and/or rate structure adjustments to meet the financial and administrative goals and objectives of the City.

This study includes the development and presentation of a pro-forma Water and Sewer financial plan for a five-year planning period, as well as the development of cost-based rates through cost-ofservice and rate design analyses. Utility rates must be set at a level that ensures operating, maintenance, debt, and capital expenses are fully funded by the revenues received from customers.

Additionally, the revenues generated from utility rates must be exclusively used for their intended purpose, and each system’s revenues must remain separate. This is a critical point, as failure to achieve the necessary revenue levels can result in unacceptable service levels, inadequately maintained facilities, degradation of system components, and potential failures.

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Rate studies typically consist of the following three interrelated analyses:
 Financial Planning/Revenue Requirement Analysis – Compares revenues to expenses.  Cost of Service Analysis – Allocates revenue expenses to fixed and variable costs.  Rate Design – Considers various levels of rate structures to collect the appropriate revenues.

The rate study methodology applied in the development of updated Water and Sewer rates, as outlined in this report, included reviewing the historical operating results of the Water and Sewer utility systems, analyzing budgets and other financial data, and considering policy objectives to identify the net revenue requirements to be recovered from user rate revenues. The methodology also involved performing general cost-of-service allocations based on rate components and functional cost categories, and revising the rates based on the applicable costs and expenditures to be recovered from user rates. Additionally, an analysis of system customers and usage characteristics was conducted to identify rate determinants, as these factors drive the recommended rates, which are the primary source for generating revenues. The allocated revenue requirements were then used in conjunction with the rate determinants and rate structure to develop the proposed Water and Sewer rates.

The rate study also includes the establishment of drought water rates. A drought water rate schedule is a critical tool for ensuring compliance with State-mandated water‐use reduction requirements implemented during periods of declared drought. When the State imposes conservation targets, agencies must achieve measurable reductions in consumption to avoid potential penalties, enforcement actions, or loss of funding. Drought rates are designed to send a clear price signal that reflects the scarcity of water supplies and the increased cost of administering conservation programs, outreach, and enforcement. By temporarily adjusting the rate structure, the City can both encourage customers to reduce discretionary water use and recover the revenue needed to maintain essential operations despite reduced water sales. Implementing drought rates therefore supports statewide conservation objectives, promotes long-term resource sustainability, and preserves the financial stability of the water utility throughout periods of constrained supply.

DISCUSSION:

The findings and conclusions of the rate analysis, as well as the resulting rate recommendations, were utilized to develop a projection of future operating results for a 5-year planning period from Fiscal Year (FY) 2026 (beginning July 1, 2025) through FY 2030 (ending June 30, 2030), herein referred to as the “Projection Period”. The purpose for developing the 5-year projections is to demonstrate the financial capability of the water and sewer revenues to support system operations, maintenance and policy goals, and fund planned capital improvements. The analyses, findings, and accompanying recommendations are presented in the subsequent sections of the Report.

The Study was presented to the Planning Commission for comments and recommendation on December 2, 2025. The following comments, questions, and recommendations received from the Planning Commission are as follows:
 Is the City in compliance with SB 1157? Yes, the City is currently in compliance with SB 1157.  How does the drought rate procedure work? The procedure is detailed in the City's Conservation Ordinance (Chapter 82, Article III, Division 3).  Will the City need another rate study in 5 years and what does that forecast look like? The short answer is yes; the City should conduct another study in 5 years. Some forecasting has been done for these current years 6-10 but this is far enough away that it is not known exactly how that will look after the next 5 years.

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 What type of property uses an 8" diameter water meter and can we show the effect on these bills? Large apartment complexes or private communities. There are very few large meters like this so it represents a very small percentage of customer, however, an illustration will be created.
 Will there be a description of the drought rates provided and how will people be notified? Yes, customers will be notified through the drought rate implementation process in accordance with Chapter 82, Article III, Division 3 of the ordinance.
 There could be requests to downsize meters, how does that process work and is it an option.

Yes, we would review the property that is requesting to downsize and make sure the smaller water meter would still have the ability to meet maximum demands.

PREVIOUS COUNCIL ACTION:

N/A
STRATEGIC PLAN INTEGRATION:

GOAL THREE: COMMUNITY ENGAGEMENT
To connect and participate in a constant dialogue between members of the community, City staff, and elected officials to promote togetherness and positivity.

Objective 1: Deliver messaging to the Community that connects, is consistent, and relevant.

Objective 2: Increase transparency for the public.

Objective 3: Increase the community's pride within the City.

GOAL FIVE: ORGANIZATIONAL EFFECTIVENESS
To identify the work needed inside the City organization to effectively provide services to the community and ensure financial stability.

Objective 1: Operate in a financially sustainable manner.

Objective 2: Evaluate existing practices to ensure continuity with industry best practices.

Objective 3: Provide Council with policies that are consistent while lessening liabilities.

Objective 4: Increase employee retention by training and creating a positive workplace.

Objective 5: Streamline fire prevention coordination efforts.

FISCAL IMPACT:

The cost of the 2025 Water and Sewer Rate Study was funded entirely through the Water and Sewer Enterprise Funds in the approved Operating Budget for Fiscal Year 2024-2025. As the Water and Sewer systems are self-supporting, the cost will be covered by the revenue generated through user fees from water and sewer services, and not from the City’s General Fund.

ALTERNATIVE(S):

1. Do not approve of the Comprehensive Water and Sewer rate study and proposed rate schedule.

2. Provide alternative direction to the City Manager.

ATTACHMENT(S):

Attachment 1 - Resolution Approving 2025 Water and Sewer Rate Study Attachment 2 - Hemet Water & Sewer Rate Study - Final Draft Report

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Attachment 3 - Hemet 2025 Prop 218 Water-Sewer Consolidated Rate Notice w Drought Rates - Final Draft v2 - 11.7.25

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CITY OF HEMET RESOLUTION NO. 2025-XXX 1
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CITY OF HEMET

HEMET, CALIFORNIA
RESOLUTION NO. 2025-xxx

A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF HEMET, CALIFORNIA, ACCEPTING THE 2025

COMPREHENSIVE WATER AND SEWER RATE STUDY
REPORT; APPROVING THE PROPOSED FIVE-YEAR
RATE SCHEDULES EFFECTIVE MARCH 1, 2025;
SETTING A PUBLIC HEARING DATE OF FEBRUARY 10,
2026, FOR ADOPTION OF PROPOSED RATES; AND
AUTHORIZING THE MAILING OF PROPOSITION 218

PUBLIC HEARING NOTICES TO PROPERTY OWNERS

AND UTILITY CUSTOMER
The City Council of the City of Hemet, California (hereafter referred to as the “City Council”) does resolve as follows:

WHEREAS, the City owns and operates a Water and Sewer system that provides water service to over 9,600 connections and sewer collection to over 11,000 connections; and
WHEREAS, the cost of operation and maintenance of the Water and Sewer systems is supported through separate rate charges billed to City of Hemet water and sewer customers for the services provided; and
WHEREAS, the water and sewer rates were last reviewed and adopted in 2015 and the last adjustment from the last that adoption was in 2020; and WHEREAS, as part of its ongoing strategic planning efforts, the City commissioned Willdan to perform a Water and Sewer rate study to assess the current financial condition of the utilities, develop a financial plan to analyze revenue sources and expenditures of the Water and Sewer utility systems over a five-year projection

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CITY OF HEMET RESOLUTION NO. 2025-XXX 2
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period, and provide recommendations for proposed rate and/or rate structure adjustments to meet the financial and administrative goals and objectives of the City; and
WHEREAS, this study includes the development and presentation of a pro-forma water and sewer financial plan for a 5-year planning period, as well as the development of cost-based rates through cost-of-service and rate design analyses. Utility rates must be set at a level such that operating, maintenance, debt, and capital expenses are funded with the revenues received from customers; and
WHEREAS, the rate study methodology applied in the development of updated water and sewer rates, and outlined in this report, consisted of reviewing the historical operating results of the Water and Sewer utility systems, analyzing budgets and other financial data and policy objectives to identify the net revenue requirements to be recovered from user rate revenues, performing general cost-of-service allocations based on the rate components and functional cost categories, and revising the rates based on the applicable costs and expenditures to be recovered from user rates; and WHEREAS, the findings and conclusions of the rate analysis, as well as the resulting rate recommendations, were utilized to develop a projection of future operating results for a five-year planning period from Fiscal Year (FY) 2026 (beginning July 1, 2025) through FY 2030 (ending June 30, 2030), herein referred to as the “Projection Period.” The purpose of developing the five-year projections is to demonstrate the financial capability of the Water and Sewer revenues to support system operations, maintenance, and policy goals, and to fund planned capital improvements; and

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CITY OF HEMET RESOLUTION NO. 2025-XXX 3
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WHEREAS, the rate study also includes the establishment of drought water rates as a critical tool for ensuring compliance with State-mandated water‐use reduction requirements implemented during periods of declared drought. By temporarily adjusting the rate structure in state declared droughts, the City can both encourage customers to reduce discretionary water use and recover the revenue needed to maintain essential operations despite reduced water sales.

NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF HEMET FINDS, DETERMINES, ORDERS AND RESOLVES AS FOLLOWS:

SECTION 1. RECITALS - The recitals set forth above are hereby adopted as findings in support of this resolution.

SECTION 2. APPROVAL - Approves the 2025 City of Hemet Water and Sewer Comprehensive Rate Study and the proposed 5-year rate schedule as presented effective March 1, 2026.

SECTION 3. PUBLIC HEARING – Sets the public hearing date of February 10, 2026 for adoption of proposed rates based on the Comprehensive Rate Study.

SECTION 4. APPROVAL OF MAILERS - The Proposition 218 Public Hearing Notices are authorized to be mailed to utility customers and property owners, informing them of the proposed rate changes and the upcoming Public Hearing.

SECTION 5. EFFECTIVE DATE - This resolution shall become effective upon adoption.

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CITY OF HEMET RESOLUTION NO. 2025-XXX 4
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PASSED, APPROVED AND ADOPTED this 9th day of December, 2025. ____________________________
Jackie Peterson, Mayor
ATTEST:
_____________________________
John Paul Maier, City Clerk

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CITY OF HEMET RESOLUTION NO. 2025-XXX 5
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State of California )
County of Riverside )
City of Hemet )
I, John Paul Maier, City Clerk of the City of Hemet, do hereby certify that the foregoing resolution was adopted by the Hemet City Council on the 9th day of December, 2025, and was passed by the following vote:

AYES: Council Members:

NOES: Council Members:

ABSTAIN: Council Members:

ABSENT: Council Members:
_____________________________
John Paul Maier, City Clerk

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City of Hemet, CA
Comprehensive Water & Sewer
Utility Rate Study
Report

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i Water & Sewer Rate Study
November 5, 2025

TABLE OF CONTENTS
TABLE OF CONTENTS.................................................................................................................................i Section 1 – Executive Summary...........................................................................................................1

1.1 Introduction ..............................................................................................................................1

1.1.1 Water System Background .............................................................................................1

1.1.2 Sewer System Background .............................................................................................1

1.1.3 Rate Study Background..................................................................................................2

1.2 Overview of the Rate Study Process.....................................................................................2

1.3 Summary of Proposed Rates..................................................................................................4 Section 2 – Revenue Sufficiency Analysis ..........................................................................................7

2.1 Financial Planning Principles..................................................................................................7

2.2 Existing Rates ............................................................................................................................7

2.3 Revenue Sufficiency Process .................................................................................................9

2.3.1 Budget.............................................................................................................................10

2.3.2 Capital Improvement Plan (CIP) .................................................................................10

2.3.3 Debt Service ...................................................................................................................11

2.3.4 Gross and Net Revenue Requirement ........................................................................11

2.4 Customers & Billable Flows ...................................................................................................12

2.4.1 Customer Billing Analysis ...............................................................................................13

2.5 Financial Projections Under Existing Rates..........................................................................13 Section 3 – Cost-of-Service (COS) Analysis .....................................................................................16

3.1 General ...................................................................................................................................16

3.2 Water Cost-of-Service...........................................................................................................16

3.2.1 Peaking Factors..............................................................................................................16

3.2.2 Functional Unbundling of Revenue Requirements....................................................18

3.2.3 Classification of Water System Costs...........................................................................19

3.2.4 Allocation to Customer Classes and Unit Cost Development.................................21

3.2.5 Rate Design by Unit Cost...............................................................................................23

3.2.6 Cost-of-Service and Revenue Check .........................................................................27

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ii Water & Sewer Rate Study
November 5, 2025

3.3 Sewer Cost-of-Service...........................................................................................................28

3.3.1 Functional Unbundling of Revenue Requirements....................................................28

3.3.2 Classification of Revenue Requirements ....................................................................29

3.3.3 Allocation to Customer Classes and Unit Cost Development.................................30

3.3.4 Cost-of-Service and Revenue Check .........................................................................31 Section 4 – Proposed Test Year Rates ...............................................................................................33

4.1 General ...................................................................................................................................33

4.2 Typical Monthly Bill Comparison ..........................................................................................36

4.3 Rate Comparison with Other Utilities ..................................................................................38 Section 5 – Projected Operating Results...........................................................................................40

5.1 General ...................................................................................................................................40

5.2 Projected User Rate Revenues ............................................................................................40

5.3 Debt Service Coverage........................................................................................................43

5.4 Summary of Projected Operating Results ..........................................................................44 Section 6 – Drought Surcharge ...........................................................................................................46

6.1 General ........................................................................................................................................46

6.2 Purpose of a Drought Surcharge ..............................................................................................46

6.2.1 The City’s Water Shortage Contingency Plan ...........................................................47

6.3 Proposed Drought Surcharge Rates.........................................................................................48 Section 7 – Conclusions and Recommendations ............................................................................50

7.1 Disclaimers ...................................................................................................................................50

7.1.1 General Disclaimer ........................................................................................................50

7.1.2 Municipal Advisory Disclaimer......................................................................................50

7.2 Conclusions ............................................................................................................................51

7.3 Recommendations................................................................................................................52

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1 | P a g e
Section 1 – Executive Summary

1.1 Introduction
Willdan Financial Services (Willdan) is pleased to submit to the City of Hemet (City) this Water and Sewer Rate Study Report (Report) for your consideration. Willdan has completed the study of the City’s water and sewer rates and summarized the results of the investigations, analyses, conclusions, and recommendations in this Report.

1.1.1 Water System Background
The City of Hemet water production and distribution system covers an area of approximately

5.25 square miles. The area served runs generally from Menlo Avenue on the North to Stetson Avenue on the South, and from Sanderson Avenue on the West to San Jacinto Street on the East. Two other water districts, Eastern Municipal Water District (EMWD) and Lake Hemet Municipal Water District (LHMWD), serve the remaining 22.45 square miles of incorporated City area.

The City relies almost entirely on groundwater production as their main water supply source.

Groundwater is pumped from the Hemet-San Jacinto Groundwater Management Area.

Water production facilities currently include three operating wells, and four storage reservoirs with a maximum capacity of 5.0 million gallons, with the first storage reservoir being built in 1954 and the last one built in 1979. The City also has exchange agreements with both EMWD and LHMWD to provide two-way sharing of water supplies during emergencies. Water is distributed through a network of 132.3 miles of water mains ranging in size from four inches to 24 inches in diameter. Pipeline materials include steel, asbestos-cement, and PVC.

1.1.2 Sewer System Background
The City of Hemet owns and operates a wastewater collection system that currently serves over 9,600 sewer connections. However, the City does not own or operate any wastewater treatment facilities. The City has an agreement with the Eastern Municipal Water District for treatment and disposal of all sewage generated within the City of Hemet and conveyed to EMWD.

The City owns, operates, and maintains the gravity portion of the wastewater collection system covering 6.75 square miles within the 17.33 square miles of the developed portion of the City boundaries. The City’s sewer collection system consists of 140 miles of sewer mains and over 1,800 sewer manholes. Both EMWD and LHMWD also own and operate wastewater collection systems within the City boundaries for customers that they serve.

Wastewater treatment and disposal services are provided by and through an agreement with EMWD. The wastewater from the City’s collection system flows directly into the EMWD sewer system through a series of inter-connections between the two systems. The City’s wastewater is treated at the EMWD San Jacinto Regional Water Reclamation Facility.

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1.1.3 Rate Study Background
The City has focused a significant amount of attention and effort on strategic planning measures in all areas of utility operations to ensure that it is able to maintain the critical utility infrastructure necessary to provide a stable and well-functioning utility system that delivers uninterrupted service to its customers and ensures that system remains prepared for the future. As part of its ongoing strategic planning efforts, the City commissioned Willdan to perform a water and sewer rate study to assess the current financial condition of the utilities, develop a financial plan to analyze revenue sources and expenditures of the water and sewer utility systems over a five-year projection period, and provide recommendations for proposed rate and/or rate structure adjustments to meet the financial and administrative goals and objectives of the City. The primary objectives of the rate study include:
• Full recovery of costs related to utility operations (i.e., operating and maintenance costs, capital projects, debt repayment and coverage requirements, and other expenditures);
• Development of cost-based rate structures;
• Consistency with American Water Works Association (AWWA) and Water Environment Federation (WEF) guidelines;
• Equity among customer classes;
• Meeting substantive and procedural Proposition 218 requirements; • Administrative efficiency (i.e., easy to understand and implement); and • 5-Year capital funding plan.

1.2 Overview of the Rate Study Process
This study includes the development and presentation of a pro-forma water and sewer financial plan for a 5-year planning period, as well as the development of cost-based rates through cost-of-service and rate design analyses. Utility rates must be set at a level such that operating, maintenance, debt, and capital expenses are funded with the revenues received from customers. In addition, the revenues generated from utility rates must only be used for this purpose and for each system separately. This is a significant point, as failure to achieve the revenues needed can lead to unacceptable service levels, inadequately maintained facilities, degradation of system components and potential failures. Therefore, a rate study typically consists of the following three interrelated analyses:

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1. Financial Planning/Revenue Requirement Analysis : Creates a five-year financial plan to support an orderly, efficient program of funding for on-going maintenance and operating costs, capital improvement and routine system component replacement activities, debt financing, and retirement of outstanding debt. In addition, the plan should fund and maintain appropriate reserve balances based on industry standards, as well as the City’s fiscal policies and specific needs.

2. Cost-of-Service Analysis: Identifies and apportions annual revenue requirements (i.e., expenditures) to operational and functional cost components based on the demands placed on the utility system by various groups or classes of customers. The purpose of this analysis is to develop a foundation for customer rates that will generate revenues that are proportionate to their share of each utility’s costs.

This objective is consistent with industry standards as well as the requirements of Proposition 218 (Prop 218).

3. Rate Design: Develops an equitable and proportionate fixed/variable schedule of rates for the City’s customer base that ultimately generates the revenue needed to satisfy the revenue requirement. The policy objectives are coordinated with Prop 218 requirements and cost-of-service objectives to achieve a balance between customer equity and financial stability goals. The balance of fixed and variable charges considers the need for a stable revenue source (the fixed charge) and accounts for customers placing higher costs on the system (through higher water and sewer use) by incurring a higher bill reflective of their impact on the system (the variable component).

Rate Design Analysis
Considers both the level and structure of the rate design to collect the appropiate and targeted level of revenues.

Cost-of-Service Analysis
Allocates the revenue requirements to the fixed/variable cost components based on cost of service.

Revenue Requirement Analysis
Compares the revenues to the expenses of the utility
to determine the overall rate adjustment required.

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This rate study utilizes generally accepted rate-making principles and standards established by industry experts such as the AWWA in its “M1 - Principles of Water Rates Fees and Charges” manual and WEF in its “Financing and Charges for Sewer Systems, Manual of Practice No. 27”. The principles established by these entities are used as guidelines in the development of the proposed water and sewer rates. A discussion of some of the key principles of ratemaking is presented in the following subsection of this Report.

1.3 Summary of Proposed Rates
The rate study methodology applied in the development of updated water and sewer rates, and outlined in this Report, consisted of reviewing the historical operating results of the water and sewer utility systems, analyzing budgets and other financial data and policy objectives to identify the net revenue requirements to be recovered from user rate revenues, performing general cost-of-service allocations based on the rate components and functional cost categories, and revising the rates based on the applicable costs and expenditures to be recovered from user rates. In addition, an analysis of the system customers and usage characteristics was performed to identify the rate determinants since they drive the recommended rates, which are the primary source for generating revenues.

The allocated revenue requirements were utilized in conjunction with the rate determinants and rate structure to develop the proposed water and sewer rates.

The findings and conclusions of the rate analysis, as well as the resulting rate recommendations, were utilized to develop a projection of future operating results for a 5- year planning period from Fiscal Year (FY) 2026 (beginning July 1, 2025) through FY 2030 (ending June 30, 2030), herein referred to as the “Projection Period”. The purpose for developing the 5-year projections is to demonstrate the financial capability of the water and sewer revenues to support system operations, maintenance and policy goals, and fund planned capital improvements. The analyses, findings, and accompanying recommendations are presented in the subsequent sections of the Report.

The water and sewer rate analyses described in the Report are performed based on the general guidelines of the defined objectives, as well as common industry standards for setting utility rates. In addition to focusing on these major objectives, the rate analyses performed herein will consider other factors in designing rates. As will be discussed in detail later in the Report, such other rate considerations generally include sensitivity to the impact on existing customers, the relative comparability with neighboring utilities, and the City’s existing rate structure. The proposed water and sewer rates for assumed implementation effective March 1, 2026 (or other such date as determined by the City) for FY 2025/26 (FY 2026, herein referred to as the “Test Year”) are provided in Tables 1 and 2, respectively. The existing rates are provided in Tables 3 and 4, respectively.

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Table 1 – Proposed Monthly Water Rates
Monthly Fixed Charge:
5/8 Inch $ 29.93
3/4 Inch $ 44.53

1.0 Inch $ 73.73

1.5 Inch $ 146.73

2.0 Inch $ 234.33

3.0 Inch $ 438.74

4.0 Inch $ 730.74

6.0 Inch $ 1,460.76

8.0 Inch $ 2,336.78
Flow Meter $ 146.73
Volumetric Rates Per 100 Cubic Feet:

All Flows $ 4.79
Description Proposed Rate

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Table 2 – Proposed Monthly Sewer Rates
Description Proposed
Rate
Monthly Fixed Charge:

All Customers - per Sewage Unit $ 9.37
All Customers - per Stormwater Unit $ 4.30
EMWD Related Charge [1]:

Capital Sewer Charge $ 4.68
Sewer (per Sewage Unit) $ 36.60
Notes:
[1] Eastern Municipal Water District (EMWD)
provides sewer treatment services to the City of
Hemet. These charges are independent of the City's
sewer collection rates and will be charged in
addition to the City's rates. The City of Hemet has no
control over EMWD's rates. The EMWD rates
provided in this table are subject to change. No
analysis of EMWD's rates was conducted, they are
provided for informational purposes only.

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Section 2 – Revenue Sufficiency Analysis

2.1 Financial Planning Principles
While the individual rates for each of the utility systems vary based on a variety of factors, rates should be consistent with common rate-making principles within the utility industry. The guiding principle is that rates designed for any utility should provide a reasonable balance between several key factors. In general, the utility rates should:
• Generate a stable revenue stream that, when combined with other sources of funds, is sufficient to meet the expenditure requirements and goals of the system; • Be based upon the proportionate cost of providing the service and not exceed the cost of providing the service – in compliance with California Proposition 218; • Be equitable – that is, they should generate revenue from customer classes in a manner which is reasonably in proportion to the cost to provide service to that customer class;
• Be easy to understand by customers; and
• Be easy to administer by the utility.

2.2 Existing Rates
The City has established user rates for water and sewer service that are applied to retail customers of the system. The rates charged for water and sewer services are approved by the City Council and are not subject to administrative review or approval by any other local or state agency. The City has historically adjusted rates, as necessary, to provide for recovery of financial obligations including operating expenses, debt service, capital expenditures, and any other expenses and transfers.

The existing water rates consist of 1) a monthly fixed charge that designates the minimum amount a customer will pay regardless of their water usage, and 2) a uniform volumetric rate per 100 cubic feet. The monthly fixed charge varies based on the meter size for all customers.

The volumetric rates are uniform such that the rate per 100 cubic feet remains the same for each respective customer type regardless of the amount of water usage. The existing rates for water service are provided in Table 3.

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Table 3 – Existing Monthly Water Rates
The existing sewer collection rates consist of 1) a monthly fixed charge per sewage unit, and 2) a monthly fixed charge per stormwater unit. Since the City only provides sewer collection services, the City’s sewer rates only reflect the costs of providing sewer collection services.

Sewer treatment services are provided by Eastern Municipal Water District (EMWD). In addition to the City’s collection rates, City customers also pay sewer treatment rates set and established by EMWD. The existing rates for sewer service are provided in Table 4.

Monthly Fixed Charge:
5/8 Inch $ 30.15
3/4 Inch $ 33.81

1.0 Inch $ 41.16

1.5 Inch $ 74.42

2.0 Inch $ 97.91

3.0 Inch $ 261.43

4.0 Inch $ 359.54

6.0 Inch $ 563.88

8.0 Inch $ 711.85
Flow Meter $ 152.98
Volumetric Rates Per 100 Cubic Feet:

All Flows $ 4.79
Description Existing Rate

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Table 4 – Existing Monthly Sewer Rates

2.3 Revenue Sufficiency Process
In evaluating whether the existing rates will generate sufficient revenue to meet the expenditure requirements of the water and sewer systems, the annual expenditures required for each utility (herein referred to as the “Revenue Requirements”) were developed. The Revenue Sufficiency Analysis compares the forecasted revenues for each utility system under existing rates (including customer growth) to the projected Revenue Requirements.

Description Existing Rate
Monthly Fixed Charge:

All Customers - per Sewage Unit $ 8.00
All Customers - per Stormwater Unit $ 3.30
EMWD Related Charge [1]:

Capital Sewer Charge $ 4.53
Sewer (per Sewage Unit) $ 33.31
Notes:
[1] Eastern Municipal Water District (EMWD)
provides sewer treatment services to the City of
Hemet. These charges are independent of the City's
sewer collection rates and will be charged in
addition to the City's rates. The City of Hemet has no
control over EMWD's rates. The EMWD rates
provided in this table are subject to change. No
analysis of EMWD's rates was conducted, they are
provided for informational purposes only.

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2.3.1 Budget
The Revenue Sufficiency Analysis performed as part of this study and summarized in this Report utilizes the City’s Adopted Budget for FY 24/25 (the “Budget” for FY ending June 30, 2025) as one variable to determine the gross Revenue Requirement to be recovered from user rates over the Projection Period. The Budget, as prepared by the City, is provided on a line-item basis, and is used for projecting the budgeted financial needs for the Test Year and the remainder of the Projection Period. In developing the rate analysis, certain adjustments are made such that expenditures are categorized into either Operating and Maintenance (O&M) expenses or non-operating expenses. In addition, only recurring costs included in the current Budget were included as part of the Revenue Sufficiency Analysis for the entirety of the Projection Period. One-time costs were identified and evaluated in discussions with City Staff and removed from future projections if appropriate. Recurring annual costs were escalated using suitable indexes or escalation factors, again in discussion with City Staff. The O&M expenses are primarily those ongoing costs for labor, materials, chemicals, purchased water, electricity, supplies, services, etc., required to manage and operate the utility systems on a day-to-day basis while maintaining a dependable level of service. The O&M requirements are generally a function of a budgetary process and are directly related to the level of service provided to customers of the utility system. The non-operating expenses include such items as capital outlay and any other expenses and transfers.

The Budget also identifies estimated revenues to be derived from sources other than the retail water and sewer user rates. Such other revenue sources include interest earnings on investments, set-up fees, late charges, permits, and various other miscellaneous service charges. The revenues generated from the other sources are applied to the gross Revenue Requirements to reduce the amount of revenue required from user rates. The result is the net Revenue Requirement.

2.3.2 Capital Improvement Plan (CIP)
The City provided a list of anticipated capital projects to be funded over the Projection Period which are also included in the development of the gross Revenue Requirements. The capital projects provided by and identified by the City in the CIP are required to modernize and upgrade the system to maintain uninterrupted service to customers by investing in improvements, undertaking repairs, or replacing aging system components as they wear and degrade over time. The CIP also includes projects necessary to maintain compliance with State mandated standards for water quality. The City provided cost estimates for the identified capital projects by the fiscal year in which they are estimated to be undertaken for each system. The planned funding for these capital projects was then used in the analysis, along with O&M and non-operating expenses, to determine the gross Revenue Requirements for both the water and sewer systems. The capital projects included in the CIP, along with the assumed funding sources by fiscal year, for the Projection Period are provided in Tables 5 and 6.

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Table 5 – Water CIP
Table 6 – Sewer CIP

2.3.3 Debt Service
The City currently has no outstanding debt associated with either the water or sewer utility systems. Based on discussions with the City, there are also no anticipated future debt issuances expected to occur over the Projection Period. Therefore, no annual debt service payments or debt service ratio calculations are included in the analysis and Projection Period.

2.3.4 Gross and Net Revenue Requirement
The proposed water and sewer rates developed in the Report are designed for assumed implementation in FY 2025/26 (the Test Year as previously defined). The projected Test Year gross and net Revenue Requirements are estimated by utilizing the Budget, capital project cost estimates and assumed funding sources for capital projects as provided by the City, along with anticipated transfers to reserves for funding capital projects. The Test Year Revenue Requirements that are used for developing the user rates proposed herein are detailed in Appendix A at the end of this Report and summarized in Table 7. 2026 2027 2028 2029 2030
Water projects
Echo Hills Tank Site And Waterline Improvements Cash $ - $ 1,653,750 $ - $ - $ - 4" To 8" Water Main Upgrade - Taylor, Apricot And Harvard Cash 630,000 716,625 - - - Stetson Ave And Lyon Ave Water M Cash 682,500 - - - -
Backup Generators For Well Sites Cash 367,500 330,750 - - - Well 10A Rehab Cash - - 578,813 - -
2026/27 Citywide Water Main Replacements, Locations Tbd Cash - 1,653,750 - - - 2027/28 Citywide Water Main Replacements, Locations Tbd Cash - - 1,736,438 - - 2028/29 Citywide Water Main Replacements, Locations Tbd Cash - - - 1,823,259 - Well 2A Rehab Cash - - - - 638,141
2029/30 Citywide Water Main Replacements, Locations Tbd Cash - - - - 1,914,422 Total Water projects $ 1,680,000 $ 4,354,875 $ 2,315,251 $ 1,823,259 $ 2,552,563 Description Funding
Source
Fiscal Year Ending June 30
2026 2027 2028 2029 2030
Sewer projects
2023/24 Citywide Sewer Main Replacments, Locations Tbd Cash $ 1,575,000 $ - $ - $ - $ - Well 3 & Lift Station Abandonment Cash 105,000 - - - -
2026/27 Citywide Sewer Main Replacments, Locations Tbd Cash - 1,764,000 - - - 2027/28 Citywide Sewer Main Replacments, Locations Tbd Cash - - 1,967,963 - - 2028/29 Citywide Sewer Main Replacments, Locations Tbd Cash - - - 2,187,911 - 2029/30 Citywide Sewer Main Replacments, Locations Tbd Cash - - - - 2,424,935 Total Sewer projects $ 1,680,000 $ 1,764,000 $ 1,967,963 $ 2,187,911 $ 2,424,935 Description Funding
Source
Fiscal Year Ending June 30

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Table 7 – Test Year Revenue Requirements – FY 2026
The projected Revenue Requirements for the water and sewer systems over the entire Projection Period are provided in Tables 8 and 9.

Table 8 – Water Revenue Requirements for the Projection Period Table 9 – Sewer Revenue Requirements for the Projection Period

2.4 Customers & Billable Flows
The rate study is heavily reliant upon a detailed historical analysis of system customers and their accompanying usage and demand characteristics. Data reflecting the existing utility customer base and metered/billable flows provide the determinants utilized in the cost-ofservice analysis, and ultimately in calculating the monthly user rates and charges, which become the foundation for projecting future revenues generated by the water and sewer systems.

Description Water Wastewater Total
Total O&M $ 12,708,078 $ 3,582,281 $ 16,290,359
Debt Service - - -
Other Expenditures & Transfers 3,124,065 1,289,595 4,413,660 Gross Revenue Requirement $15,832,143 $ 4,871,876 $20,704,019 Less Other Revenues (3,051,128) (95,000) (3,146,128)
Net Revenue Requirement $12,781,015 $ 4,776,876 $17,557,891 2026 2027 2028 2029 2030
Total O&M $ 12,708,078 $ 13,389,511 $ 14,111,148 $ 14,875,662 $ 15,685,925 Existing Debt Service - - - - -
Future Debt Service - - - - -
Other Expenditures & Transfers 3,124,065 3,252,015 4,063,353 2,279,570 3,224,123 Gross Revenue Requirement $15,832,143 $16,641,526 $18,174,501 $17,155,232 $18,910,048 Less Other Revenues (3,051,128) (3,145,838) (3,244,040) (638,000) (638,000) Net Revenue Requirement $12,781,015 $13,495,688 $14,930,461 $16,517,232 $18,272,048 Description Fiscal Year Ending June 30
2026 2027 2028 2029 2030
Total O&M $ 3,582,281 $ 3,761,405 $ 3,949,477 $ 4,146,953 $ 4,354,303 Existing Debt Service - - - - -
Future Debt Service - - - - -
Other Expenditures & Transfers 1,289,595 1,258,985 1,357,477 1,463,153 1,576,694 Gross Revenue Requirement $ 4,871,876 $ 5,020,390 $ 5,306,954 $ 5,610,106 $ 5,930,997 Less Other Revenues (95,000) (95,000) (95,000) (95,000) (95,000) Net Revenue Requirement $ 4,776,876 $ 4,925,390 $ 5,211,954 $ 5,515,106 $ 5,835,997 Description Fiscal Year Ending June 30

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It is important to note that the customer and flow analysis focuses primarily on the customer classifications that will be subject to and impacted by the user rates and charges to be developed in the Report. This consists of the general service (retail) customers who currently pay for utility services pursuant to the existing user rates and charges as previously detailed.

For the purposes of the rate study, it is these customers and their accompanying usage characteristics that will generate revenues based upon the proposed user rates and charges.

2.4.1 Customer Billing Analysis
For the rate study, detailed historical monthly billing information was provided for each customer. This data offered a breakdown of water and sewer customers by class, usage characteristics, and billed charges. The historical billing data was queried from the City’s electronic billing records. An analysis of the billing data was conducted to obtain an understanding of existing customers, customer classes, demand and usage characteristics, and metered usage per customer class. In accordance with the data, as well as discussions with City staff, the utility system provides service to various identifiable retail customer classes consisting of:
• Single-Family Residential
• Multi-Family Residential
• Commercial/Non-Residential
• Irrigation
• Institutional
Each of these customer classes embodies certain common characteristics in their utility use and service demand profiles that provide the basis for establishing an equitable allocation of system costs. The billing data was utilized to identify the number of customer accounts and dwelling units within each class, the applicable equivalent residential units (ERUs), and the metered/billable usage profiles.

The historical customer data was also utilized, along with other City planning data and discussions with City staff, to establish growth trends for each customer classification. The growth trends were then used to project the average number of customers within each class for the Test Year plus the remaining years of the Projection Period.

2.5 Financial Projections Under Existing Rates
The projected customers and accompanying billable flows were applied to the existing rates to develop a projection of user revenues that would be generated under existing rates. The revenues are then compared to the projected Revenue Requirements/expenditures to determine if revenue adjustments would be needed to meet the calculated Revenue Requirements shown in Tables 8 and 9.

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Based on this comparison, it is projected that under the existing rates, neither the water nor the sewer system will meet its collective projected O&M financial obligations, cost of capital projects, and transfers to maintain cash reserves.

Therefore, revenue increases are required and recommended to generate additional cash to fund projected costs of operations, capital projects, and maintain adequate cash reserves. In addition, the City has an established policy objective of maintaining at least 180 days of cash reserves to help fund ongoing operations in the event of periodic fluctuations in cash flow, and to address unexpected needs that may require immediate cash funding.

The cash-flow statements outlining the projected operating results under existing rates are summarized in Tables 10 and 11 for the water and sewer systems, respectively. The proposed rates and projected financial results are addressed in the subsequent sections of this Report.

Table 10 – Water System Projected Operating Results Under Existing Rates ($1,000s) Existing
2026 2027 2028 2029 2030
Revenues:

Water Sales $ 11,618 $ 11,684 $ 11,751 $ 11,818 $ 11,885 Other Revenues [1]
3,051 3,146 3,244 638 638
Total Revenues $ 14,670 $ 14,830 $ 14,995 $ 12,456 $ 12,523 Less O&M Expenses (12,708) (13,390) (14,111) (14,876) (15,686) Net Income For Debt $ 1,962 $ 1,440 $ 884 $ (2,420) $ (3,163) Debt Service:

Existing $ - $ - $ - $ - $ -
Future - - - - -
Total Debt Service $ - $ - $ - $ - $ -
Net Results $ 1,962 $ 1,440 $ 884 $ (2,420) $ (3,163)
Fund Balance Activity:

Cash Reserves
Beginning Balance $ 4,839 $ 5,120 $ 2,206 $ 774 $ (3,469) Deposit/(Withdrawal) from Operations 1,962 1,440 884 (2,420) (3,163) Capital Projects From Capital Improvement Plan (1,680) (4,355) (2,315) (1,823) (2,553) Total Cash Reserves $ 5,120 $ 2,206 $ 774 $ (3,469) $ (9,184) Days Cash on Hand 147 60 20 (85) (214)
Debt Coverage N/A N/A N/A N/A N/A
Notes:

Description
Projected for Fiscal Year Ending June 30 ($1,000s)
[1] Other Revenues decrease starting in FY 2029 due to the expiration of an interagency agreement between EMWD and the City for the purchase of groundwater carry-over credits.

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Table 11 – Sewer System Projected Operating Results Under Existing Rates ($1,000s) Existing
2026 2027 2028 2029 2030
Revenues:

Wastewater Sales $ 3,924 $ 3,940 $ 3,956 $ 3,971 $ 3,987 Other Revenues 95 95 95 95 95
Total Revenues $ 4,019 $ 4,035 $ 4,051 $ 4,066 $ 4,082
Less O&M Expenses (3,582) (3,761) (3,949) (4,147) (4,354) Net Income For Debt $ 437 $ 274 $ 101 $ (81) $ (272)
Debt Service:

Existing $ - $ - $ - $ - $ -
Future - - - - -
Total Debt Service $ - $ - $ - $ - $ -
Net Results $ 437 $ 274 $ 101 $ (81) $ (272)
Fund Balance Activity:

Cash Reserves
Beginning Balance $ 10,113 $ 8,870 $ 7,380 $ 5,513 $ 3,245 Deposit/(Withdrawal) from Operations 437 274 101 (81) (272) Capital Projects From Capital Improvement Plan (1,680) (1,764) (1,968) (2,188) (2,425) Total Cash Reserves $ 8,870 $ 7,380 $ 5,513 $ 3,245 $ 548 Days Cash on Hand 904 716 510 286 46
Debt Coverage N/A N/A N/A N/A N/A
Projected for Fiscal Year Ending June 30 ($1,000s)
Description

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Section 3 – Cost-of-Service (COS) Analysis

3.1 General
The costs incurred by a utility system are generally driven by specific service requirements imposed on the system by its customers. For water systems, the primary service requirements that drive costs include annual flow volumes, peak flow volumes (i.e., peak day, and peak hour), the number of customers, and the types of customers served. For sewer systems, the primary service requirements that drive costs typically include annual sewer volumes, sewer treatment strength, such as Biochemical Oxygen Demand (BOD) and Total Suspended Solids (TSS), and the number and types of customers served. Treatment related costs are not considered in this analysis since wastewater from City customers is conveyed to EMWD for treatment.

There are several different options that can be used to perform a COS analysis, and the allocation methodology depends upon the operating profile of the utility and the basis applied. The water COS analysis performed for this rate study utilizes a common industry approach known as the base-extra capacity method. The sewer COS analysis involves an examination of the types of customers being served in accordance with the California State Water Resources Control Board (SWRCB) Revenue Program Guidelines for Wastewater Agencies.

3.2 Water Cost-of-Service
The COS utilizes the Revenue Requirements for the Test Year as a cost basis. The Test Year Revenue Requirements, as identified in the previous section of the Report, are functionally unbundled, classified and allocated to customer classes to determine the proportionate COS by class. More detail relating to the water COS approach can be found in Appendix B.

3.2.1 Peaking Factors
System-wide peaking factors are used to derive the cost component allocation basis for Base Delivery and Max Day costs. Base Delivery represents average daily demand during the year, which has been normalized to a factor of 1.00. Based on data provided by City staff, the average water demand was 3.3 million gallons per day (MGD) and the Max Day water demand was 5.3 MGD in the most recent full year. The Max Day peaking factor shows that the system-wide Max Day demand is 1.61 (5.3 Max Day MGD divided by 3.3 Base Delivery) times greater than the average daily demand. The system-wide peaking factors are shown in Table 12.

The Max Day allocations are calculated as follows:

Base Delivery: 3.3 / 5.3 x 100% = 62.26%
Max Day: (5.3-3.3) / 5.3 x 100% = 37.74%

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Table 12 – Peaking Factors System-Wide
Max Day customer-specific peaking factors are then developed based on the maximum monthly usage divided by average monthly usage for each customer class. Since daily peaking statistics are not available for individual customer classes, the maximum month peaking factor from the customer/billing data is used as a proxy for the Max Day peaking factors. Using the customer billing data, peaking factors by customer class were calculated as shown in Table 13.

Table 13 – Peaking Factors by Customer Class
Once peaking factors are determined, the Max Day demand of each customer class is calculated and shown in Table 14. Total annual usage is derived from the customer data and then converted to an average daily usage by dividing the total annual usage by 365 days in a year. Total Max Day capacity is developed by multiplying the customer-specific peaking factor (from Table 13) by the average daily usage to arrive at the total capacity required to meet each class’s Max Day demand. The extra capacity required to meet Max Day demand is calculated by subtracting the average daily usage from the total required Description Demand
(MGD) Factor Base Max Day Max Hour Total
Avg Day 3.30 1.00 100.00% 0.00% 0.00% 100.00%
Max Day 5.30 1.61 62.26% 37.74% 0.00% 100.00%
Description Max Day
Peaking Factor
Single-Family
All Flow 1.40
Multi-Family
All Flow 1.28
Commercial
All Flow 1.38
Institutional
All Flow 1.61
Irrigation
All Flow 1.79
City
All Flow 2.17

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capacity for Max Day. The calculation of additional capacity to meet the Max Day demand for each customer class is shown is shown in Table 14.

Table 14 – Usage and Extra Capacity

3.2.2 Functional Unbundling of Revenue Requirement s
The water system costs are unbundled into operating components consisting of Supply/Treatment, Transmission, Distribution, Customer, and Administration functions. These are the primary services provided by most water utility systems to their customers. A brief description of each component is as follows:
• Supply/Treatment – The costs associated with obtaining and converting raw water to potable water;
• Transmission – The costs associated with major pumping and large diameter line facilities that transmit potable water throughout the system at-large; • Distribution – The costs associated with smaller diameter lines that carry water to individual customer properties;
• Customer – The costs associated with metering, billing, and providing other services to customers (e.g., printing, delivering and collecting utility bills, recordkeeping, etc.); and
• Administration – Various overhead and other non-operating costs.

Total Annual
Flow (CCF)
Average
Daily Flow
(CCF)
Peaking
Factor
Total
Capacity
(CCF/Day)
Additional
Capacity
(CCF/Day)
Single-Family
All Flow 649,939 1,781 1.40 2,498 718
Multi-Family
All Flow 473,459 1,297 1.28 1,661 363
Commercial
All Flow 266,726 731 1.38 1,010 279
Institutional
All Flow 41,473 114 1.61 183 70
Irrigation
All Flow 81,582 224 1.79 401 177
City
All Flow 76,686 210 2.17 457 247
Total 1,589,866 4,356 6,210 1,854
Description
Flow Max Day

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The allocation of the functionally unbundled Revenue Requirements for the Test Year are summarized in Table 15.

Table 15 – Functionally Unbundled Cost Allocations

3.2.3 Classification of Water System Costs
As previously addressed, the functionally unbundled water system Revenue Requirements are then classified using the base-extra capacity cost allocation method. Applying this methodology, costs are classified into the following categories:
• Base Costs – Capital costs and O&M expenses associated with service to customers under average demand conditions. This category does not include any costs attributable to variations in water use resulting from peaks in demand. Base costs tend to vary directly with the total quantity of water used.

Description Test Year
2026
Total O&M $ 12,708,078
Existing Debt Service -
Future Debt Service -
Other Expenditures & Transfers 3,124,065
Gross Revenue Requirement $ 15,832,143
Less Other Revenues (3,051,128)
Net Revenue Requirement $ 12,781,015
Functional Unbundled Revenue Requirement
Treatment $ -
Transmission & Distribution 2,620,084
Customer Service 92,505
Admin 7,712,884
Source of Supply 2,014,005
Soboba Settlement Agreement [1] 268,600
CIP 1,680,000
Non-Rate Revenue (3,051,128)
Fund Balance [2] 1,444,065
Total $ 12,781,015
[2] Represents a transfer to/(from) reserves to provide funding for capital outlay and CIP costs.

Notes:
[1] Represents a groundwater management plan
agreement between the City, other public agencies, and
the Soboba Band of Luiseño Indians.

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• Maximum Day/Extra Capacity Costs – Costs attributable to facilities that are designed to meet peaking requirements. These costs include capital and operating costs for additional plant and system capacity beyond that required for average usage.
• Meter Costs - Costs associated with meter maintenance, meter service, and other meter maintenance and operation-related costs.
• Customer Costs – Costs associated with any aspect of customer service, such as billing, collection, accounting, and recordkeeping. These costs are independent of the amount of water used and the size of the customer’s meter and are not subject to peak demand factors.

As the name would indicate, using the base-extra capacity method, the costs are separated between those attributed to base capacity (and demand) and those attributed to extra capacity (and demand). Components, such as treatment, transmission, and distribution are allocated based on flows and peaking factors. Administrative and customer-related costs are allocated based on ERUs.

Based on discussions with City staff, the general makeup of the customer base is not expected to change, so it is anticipated that the allocation percentages and factors will not change materially during the Projection Period. However, it is important to note that COS analyses are based on the data at a specific point in time (i.e., the most recent fiscal year).

To the extent that weather conditions, economic conditions, and customer usage characteristics change during the Projection Period, the cost allocators can be impacted.

The system-wide costs by service characteristics are shown in Table 16.

Table 16 - Classification of Unbundled Revenue Requirements Component Billing &
Collection
Meters &
Services Base
Extra
Capacity
Max Day
Total
Treatment $ - $ - $ - $ - $ -
Transmission & Distribution - - 1,631,373 988,711 2,620,084 Customer Service 92,505 - - - 92,505
Admin - 5,446,839 1,410,934 855,111 7,712,884
Source of Supply - - 1,254,003 760,002 2,014,005
Soboba Settlement Agreement [1]
- 268,600 - - 268,600
CIP - - 1,046,038 633,962 1,680,000
Non-Rate Rev & Fund Balance (10,331) (638,381) (596,709) (361,642) (1,607,063) Total $ 82,174 $ 5,077,058 $ 4,745,639 $ 2,876,144 $12,781,015 [1] Represents a groundwater management plan agreement between the City, other public agencies, and the Soboba Band of Luiseño Indians.

Notes:

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3.2.4 Allocation to Customer Classes and Unit Cost
Development
The functionalized and classified Revenue Requirements are allocated to customer classes utilizing a unit cost approach as follows:
• Base Costs – Based on relative percentage of Base Annual Usage. • Maximum Day/Extra Capacity System Costs – Based on relative percentage of Extra Capacity for the entire system.
• Maximum Day/Extra Capacity Distribution Costs – Based on relative percentage of Extra Capacity for the distribution system. • System Operating/Demand Costs and Meter Maintenance – Based on the relative percentage of ERUs the system serves through the varying capacity of different water meter sizes. These are costs representing the potential demand that a respective customer class can place on the water system due to the capacity of their assigned water meters, relative to other sized meters.
• Customer Costs – Based on the relative percentage of customers being served.

The units of service for each component of cost by customer class (if applicable) are provided in Table 17. The units of service consist of the number of accounts, ERUs (the total customer accounts being served and the calculation of system ERUs based on a factor of meter-size is provided in Table 21), annual flows in 100 cubic feet (CCF), and Max Day extra capacity in CCF/Day. Accounts are based on the number of customers as provided in the customer data. ERUs are based on the number of meter equivalencies being served in accordance with AWWA standards. For reference, Table 20, showing meter equivalency factors, follows in the next section (3.2.5) of this Report. Base Delivery is the total annual usage projected for the test year based on historical customer data. Max Day is the extra capacity demand result as previously developed in Table 14.

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Table 17 – Units of Service
The Revenue Requirement for each cost component is divided by its respective unit of service to calculate a unit cost. The unit cost for each cost component is demonstrated in Table 18.

Table 18 – Cost Per Unit
The allocation of the Revenue Requirement to each customer class is determined by multiplying the units of service for each customer class (from Table 17) by the cost per unit for each cost component (from Table 18). The resulting total cost to be recovered from each customer class by cost component is shown in Table 19. To calculate the account and ERU COS by customer class, the monthly units of service from Table 17 are multiplied by twelve (12), representing the number of billing periods, to determine the total annual accounts and Description Accounts ERUs Base (CCF) Max Day
(CCF/Day)
Single-Family 7,925 8,349 649,939 718
All Flow 649,939 718
Multi-Family 618 2,166 473,459 363
All Flow 473,459 363
Commercial 565 2,211 266,726 279
All Flow 266,726 279
Institutional 49 418 41,473 70
All Flow 41,473 70
Irrigation 142 805 81,582 177
All Flow 81,582 177
City 112 541 76,686 247
All Flow 76,686 247
Total 9,411 14,489 1,589,866 1,854
Description Billing &
Collection
Meters &
Services Base
Extra
Capacity
Max Day
Total
Total Revenue Requirement $ 82,174 $ 5,077,058 $ 4,745,639 $ 2,876,144 $ 12,781,015 Units of Service 9,411 14,489 1,589,866 1,854
Bills/Monthly ERU/Monthly CCF CCF/Day
Cost Per Unit $ 0.73 $ 29.20 $ 2.98 $ 1,550.96

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ERUs being served, then that result is multiplied by the cost per unit shown in Table 18. For the Base Delivery and Max Day Costs, the units of service from Table 17 are multiplied by the costs per unit from Table 18.

Table 19 – Cost of Service by Customer Class and Cost Component

3.2.5 Rate Design by Unit Cost
The unit costs developed in the previous section are used to develop the proposed rates for the Test Year. The fixed rate components are based on accounts, ERUs and the allocated customer-related costs. The volumetric rate component is based on the annual usage and extra capacity requirements (Max Day).

The first component of the fixed meter charge is calculated on an ERU basis. It is common practice in the utility rate-making industry to establish a rate structure that includes an incremental service availability charge (i.e., meter charge, sometimes also called a fixed charge) such that customers placing a greater potential demand requirement on the system (those with larger meters) will pay proportionately more for the service availability component.

The methodology for increasing the service availability charge is based upon standardized meter/capacity criteria established by the AWWA relative to the size and capacity of water meters. The AWWA equivalent meter capacity criteria are commonly used to establish a standard unit of measure for customers, referred to as an ERU. Based upon established Description Accounts ERUs Base (CCF) Max Day
(CCF/Day) Total Costs
Single-Family $ 69,199 $ 2,925,379 $ 1,940,023 $ 1,113,156 $ 6,047,757 All Flow $ 1,940,023 $ 1,113,156
Multi-Family $ 5,396 $ 758,808 $ 1,413,243 $ 563,677 $ 2,741,124 All Flow $ 1,413,243 $ 563,677
Commercial $ 4,933 $ 774,752 $ 796,159 $ 433,096 $ 2,008,941 All Flow $ 796,159 $ 433,096
Institutional $ 428 $ 146,470 $ 123,793 $ 108,066 $ 378,757 All Flow $ 123,793 $ 108,066
Irrigation $ 1,240 $ 282,078 $ 243,517 $ 275,293 $ 802,128 All Flow $ 243,517 $ 275,293
City $ 978 $ 189,571 $ 228,904 $ 382,857 $ 802,309
All Flow $ 228,904 $ 382,857
Total $ 82,174 $ 5,077,058 $ 4,745,639 $ 2,876,144 $ 12,781,015

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standards, an ERU is equivalent to one single-family residential connection with a 5/8-inch water meter (the typical standard meter size for a single-family residential customer in the City of Hemet). The applicable ERU factors for larger water meters are based upon the incremental increase in potential hydraulic capacity of those meters as compared to the standard meter size. These factors are derived from actual flow testing results as performed and defined by the AWWA and commonly utilized by the water and sewer utility industry.

The AWWA equivalency factors can be applied to the meter charge for a 5/8-inch meter to calculate the applicable meter charges for each meter size. A full summary of the AWWA meter-size equivalency factors, and how they are determined, is provided in Table 20.

Table 20 - AWWA Meter Equivalency Factors
Table 21 provides an illustration of how the AWWA meter-size equivalency factors are applied to the total customer accounts by meter-size to determine the total ERUs that the water system serves.

Description AWWA
Factors [1]
Meter Size
5/8 Inch 1.00
3/4 Inch 1.50

1.0 Inch 2.50

1.5 Inch 5.00

2.0 Inch 8.00

3.0 Inch 15.00

4.0 Inch 25.00

6.0 Inch 50.00

8.0 Inch 80.00
Flow Meter [2] 5.00
Notes:
[1] Meter-size equivalency factors established by
the AWWA and identified in AWWA Standards C700,
M1 and M22.
[2] Based on discussions with City staff, it was
determined that "Flow Meter" customer's potential
demand is equivalent to a 1.5-inch meter.

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Table 21 – Total Monthly Accounts & ERUs
The second component of the fixed charge is the customer charge. Unlike meter-related costs, customer costs do not vary based on meter size. Therefore, the customer unit cost of $0.73 is applied equally to each customer account. The two fixed charge components are added together to develop the total proposed fixed charge for each respective meter size.

The proposed fixed charges for the Test Year are shown in Table 22.

AWWA
Factor
Total
Accounts
by Meter
Size
Total
Equivalent
Residential
Units
[A] [B] [C]=[A]*[B]
Meter Size
5/8 Inch 1.00 7,925 7,925
3/4 Inch 1.50 576 864

1.0 Inch 2.50 426 1,065

1.5 Inch 5.00 24 120

2.0 Inch 8.00 420 3,360

3.0 Inch 15.00 8 120

4.0 Inch 25.00 16 400

6.0 Inch 50.00 4 200

8.0 Inch 80.00 5 400
All Customer Total 9,404 14,454
Plus:

Flow Meter 5.00 7 35
Total 9,411 14,489
Description

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Table 22 – Monthly Fixed Charge Calculation
The water volumetric rates are made up of two different rate components. The first component is for base usage and related costs. The second component represents peak usage and peaking costs, the Max Day cost component. The total system Max Day peak demand costs (from Table 19) are divided by the total system annual usage to calculate the peaking unit costs shown in Table 23.

Table 23 – Peaking Unit Cost Calculation
The total system peaking unit cost of $1.81 is then added to the base unit cost of $2.98 per 100 cubic feet (as previously identified in Table 18) to calculate the proposed volumetric rate per 100 cubic feet as shown in Table 24.

Table 24 – Volumetric Rate Calculation
Meter Size Capacity
Ratio
Meter
Charge
Customer
Charge
Proposed
Fixed
Charge
5/8 Inch 1.00 $ 29.20 $ 0.73 $ 29.93
3/4 Inch 1.50 $ 43.80 $ 0.73 $ 44.53

1.0 Inch 2.50 $ 73.00 $ 0.73 $ 73.73

1.5 Inch 5.00 $ 146.00 $ 0.73 $ 146.73

2.0 Inch 8.00 $ 233.61 $ 0.73 $ 234.33

3.0 Inch 15.00 $ 438.01 $ 0.73 $ 438.74

4.0 Inch 25.00 $ 730.02 $ 0.73 $ 730.74

6.0 Inch 50.00 $ 1,460.03 $ 0.73 $ 1,460.76

8.0 Inch 80.00 $ 2,336.05 $ 0.73 $ 2,336.78
Flow Meter 5.00 $ 146.00 $ 0.73 $ 146.73
Peaking
Costs
Annual Use
(CCF)
Peaking Unit
Cost
[A] [B] [C]=[A]/[B]
Total Water System $ 2,876,144 1,589,866 $ 1.81
Description
Base Peaking Proposed
Rate ($/CCF)
[A] [B] [C]=[A]+[B]
All Customers
All Flow $ 2.98 $ 1.81 $ 4.79
Description

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3.2.6 Cost-of-Service and Revenue Check
Once the rates are developed from the unit cost analysis, as shown in Sections 3.2.4 and

3.2.5, they are then applied to the customer service units identified in Table 17. The unit cost rates are applied to the customer service units to ensure that the rates calculated under the base-extra capacity method generate revenues from each customer classification proportionately and equitably, and in a manner that reflects the costs associated with serving them. The revenues generated by customer classification and the cost allocated to each customer classification are provided in Table 25.

Table 25 – Proposed Rate Revenues vs. COS
Monthly
Accounts Monthly ERUs
Monthly
Customer
Charge/
Account
Monthly
Meter
Charge/ERU
Total Fixed
Charge
Revenues
[A1] [B1] [C1] [D1] [E1]={[A1]*[C1]
+[B1]*[D1]}*12
Single-Family
All Flow 7,925 8,349 $ 0.73 $ 29.20 $ 2,994,578
Multi-Family
All Flow 618 2,166 $ 0.73 $ 29.20 $ 764,204
Commercial
All Flow 565 2,211 $ 0.73 $ 29.20 $ 779,685
Institutional
All Flow 49 418 $ 0.73 $ 29.20 $ 146,898
Irrigation
All Flow 142 805 $ 0.73 $ 29.20 $ 283,318
City
All Flow 112 541 $ 0.73 $ 29.20 $ 190,549
Total Water System 9,411 14,489 $ 5,159,232
Annual Use
(CCF)
Proposed
Rate ($/CCF)
Total
Volumetric
Revenues
Total
Revenues
Allocated
Costs
[A2] [B2] [C2]=[A2]*[B2] [D2]=[E1]+[C2] [E2]
Single-Family
All Flow 649,939 $ 4.79 $ 3,115,795 $ 6,110,373 $ 6,047,757 Multi-Family
All Flow 473,459 $ 4.79 $ 2,269,753 $ 3,033,958 $ 2,741,124 Commercial
All Flow 266,726 $ 4.79 $ 1,278,680 $ 2,058,365 $ 2,008,941 Institutional
All Flow 41,473 $ 4.79 $ 198,819 $ 345,718 $ 378,757
Irrigation
All Flow 81,582 $ 4.79 $ 391,102 $ 674,420 $ 802,128
City
All Flow 76,686 $ 4.79 $ 367,633 $ 558,182 $ 802,309
Total Water System 1,589,866 $ 7,621,783 $ 12,781,015 $ 12,781,015 Description
Description

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3.3 Sewer Cost-of-Service
As with the water system, the COS analysis for the sewer utility utilizes the Revenue Requirements for the Test Year as the cost basis. The Test Year Revenue Requirements are functionally unbundled, classified, and allocated to customer classes to determine the COS by class. As stated in Section 3.1, the sewer COS analysis involves an examination of the number and type of customers served in accordance with the California State Water Resources Control Board (SWRCB) Revenue Program Guidelines for Wastewater Agencies.

More detail relating to the sewer COS approach can be found in Appendix C.

3.3.1 Functional Unbundling of Revenue Requirements
The sewer system costs are unbundled into Collection, Customer, and Administration functions. A brief description of each component is as follows:
• Collection – Costs associated with lines and facilities that transport wastewater from customer properties to treatment facilities;
• Customer – Costs associated with billing, and providing other services to customers (e.g., printing, delivering and collecting utility bills, recordkeeping, etc.); and • Administration – Various overhead and other non-operating costs.

The allocation of the functionally unbundled Revenue Requirements for the Test Year are summarized in Table 26.

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Table 26 - Functional Unbundled Cost Allocations

3.3.2 Classification of Revenue Requirement s
The functionally unbundled Revenue Requirements for the sewer system are classified into sewer and stormwater customer components. As discussed for the water COS analysis, it is anticipated that the allocation percentages will not change materially during the Projection Period. However, it is important to note that COS analyses are based on the data at a specific point in time (i.e., the most recent fiscal year). To the extent that weather conditions, economic conditions, and customer usage characteristics change during the Projection Period, the cost allocators can be impacted. The system-wide costs by service characteristic are shown in Table 27.

Description Test Year 2026
Total O&M $ 3,582,281
Existing Debt Service -
Future Debt Service -
Other Expenditures & Transfers 1,289,595
Gross Revenue Requirement $ 4,871,876
Less Other Revenues (95,000)
Net Revenue Requirement $ 4,776,876
Functional Unbundled Revenue Requirement
Treatment [1] $ -
Collection 416,120
Administration 3,119,961
Customer Service 46,200
CIP 1,680,000
Non-Rate Revenue (95,000)
Fund Balance [2] (390,405)
Non-Rate Rev & Fund Balance $ 4,776,876
Notes:
[2] Represents a transfer to/(from) reserves to provide funding for capital outlay and CIP costs.
[1] Treatment services are not provided by the City.

Treatment services are provided by and through an
agreement with EMWD.

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Table 27 - Classification of Unbundled Revenue Requirements

3.3.3 Allocation to Customer Classes and Unit Cost
Development
The functionalized and classified Revenue Requirements are allocated to customer classes utilizing a unit cost approach as follows:
• Sewer – Based on relative percentage of annual sewer related costs; and • Stormwater – Based on relative percentage of annual stormwater related costs.

The units of service for each component of cost by customer class (if applicable) are provided in Table 28. The units of service consist of the number of customer accounts and associated customer units as provided by the City in their billing data.

Table 28 – Units of Service
Component Sewer Stormwater Total
Treatment [1] $ - $ - $ -
Collection 233,310 182,810 416,120
Administration 1,352,774 1,767,187 3,119,961
Customer Service 23,100 23,100 46,200
CIP 1,680,000 - 1,680,000
Non-Rate Rev & Fund Balance (303,402) (182,003) (485,405) Total $ 2,985,782 $ 1,791,094 $ 4,776,876
Notes:
[1] Treatment services are not provided by the City. Treatment services are provided by and through an agreement with EMWD.

Total Total
Accounts Units
Sewer
City & LHMWD - Sewer Units 10,344 18,495
EMWD - Sewer Units 3,048 8,070
Sub-Total Sewer 13,392 26,565
Stormwater
City & LHMWD - Stormwater Units 10,344 18,495
EMWD - Stormwater Units 10,352 16,208
Sub-Total Stormwater 20,696 34,703
Sewer System Total 34,088 61,268
Description

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The Revenue Requirement for each cost component is divided by its respective unit of service to calculate the cost per unit. The unit cost for each cost component is demonstrated in Table 29.

Table 29 – Cost Per Unit
The allocation of the Revenue Requirement to each customer class is based on the cost per unit for each component multiplied by the units of service for each customer class. The total costs to be recovered from each customer class by rate component are shown in Table 30.

Table 30 – Cost-of-Service by Customer Class and Cost Component

3.3.4 Cost-of-Service and Revenue Check
Once the unit costs are developed and the costs associated with each customer class based on the units of service are determined in Section 3.3.3, rates can be developed to ensure that each customer class generates sufficient revenues to cover their allocated costof-service. The proposed rate structure for the sewer rates are as follows:
• Sewer Customers – For sewer customers, the proposed rates will consist of only a flat fixed charge per customer unit, regardless of usage.
• Stormwater Customers – For stormwater customers, the proposed rates will consist of only a flat fixed charge per customer unit, regardless of usage.

The revenues generated by customer class versus the cost allocated to each customer class are provided in Table 31.

Description Sewer Stormwater Total
Total Revenue Requirement $ 2,985,782 $ 1,791,094 $ 4,776,876 Units of Service 26,565 34,703
Units/Monthly Units/Monthly
Cost Per Unit $ 9.37 $ 4.30
Rate Class Sewer Stormwater Total
City & LHMWD - Sewer Units $ 2,078,752 $ - $ 2,078,752
EMWD - Sewer Units 907,030 - 907,030
City & LHMWD - Stormwater Units - 954,565 954,565
EMWD - Stormwater Units - 836,529 836,529
Total $ 2,985,782 $ 1,791,094 $ 4,776,876

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Table 31 – Proposed Rate Revenues vs. COS
Monthly Units
Proposed
Monthly Fixed
Fee
Total Fixed
Fee Revenue
Total COS
Revenues
[A] [B] [C]=[A]*[B]*12 [D]
City & LHMWD - Sewer Units 18,495 $ 9.37 $ 2,078,752 $ 2,078,752 EMWD - Sewer Units 8,070 $ 9.37 $ 907,030 $ 907,030
City & LHMWD - Stormwater Units 18,495 $ 4.30 $ 954,565 $ 954,565 EMWD - Stormwater Units 16,208 $ 4.30 $ 836,529 $ 836,529 Total 61,268 $ 4,776,876 $ 4,776,876
Description

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Section 4 – Proposed Test Year Rates

4.1 General
The methodology used to calculate the recommended water and sewer rates proposed herein involves applying the projected customer units of service to the user rates developed in the preceding COS and rate design analyses to calculate the estimated revenues (separately for water and sewer) that would be generated. Then, these projected revenues are compared to the estimated Test Year Revenue Requirements, and the water and/or sewer rates are adjusted on a percentage basis as necessary until the revenues generated are sufficient to meet the revenue needs of each utility system, respectively.

When reviewing potential rate structure options in conjunction with the need for additional revenues, it was determined that revenue adjustments are needed, and the existing rate structure needs to be adjusted based on the COS analysis. The proposed water and sewer rates for the Test Year are provided again in Tables 32 and 33, respectively. [The rest of this page is intentionally left blank]

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Table 32 – Proposed Monthly Water Rates

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Table 33 – Proposed Monthly Sewer Rates
Description Proposed
Rate
Monthly Fixed Charge:

All Customers - per Sewage Unit $ 9.37
All Customers - per Stormwater Unit $ 4.30
EMWD Related Charge [1]:

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4.2 Typical Monthly Bill Comparison
In addition to reviewing
the effect that a change
in the rates will have on
the system revenues, it is
also important for City
utility management to
understand the impact
that a change will have
on the existing customers.

Tables 34, 35, and 36
provide a comparison of
several monthly bills at
various flow levels for
water and sewer, as well as the combined utility bills under the existing and proposed rates.

All sewer bills reflect the City’s collection rates as well as EMWD’s treatment rates. A graphical illustration of a bill comparison at various units of flow is provided in Figure 1 for a single-family residential customer with both water and sewer service. It was determined after conducting a historical billing analysis that an average single-family residential customer uses approximately 800 cubic feet monthly. Based on the proposed rates, a typical single-family residential customer will experience an increase of $2.18 ($121.05 current bill vs. $123.23 proposed bill) in their combined monthly water and sewer bill.

Table 34 – Single-Family Residential Water Bill Impact
Existing Proposed
Residential
5/8 Inch 0 $ 30.15 $ 29.93 $ (0.22)
5/8 Inch 100 $ 34.94 $ 34.72 $ (0.22)
5/8 Inch 200 $ 39.73 $ 39.52 $ (0.21)
5/8 Inch 300 $ 44.52 $ 44.31 $ (0.21)
5/8 Inch 400 $ 49.31 $ 49.10 $ (0.21)
5/8 Inch 500 $ 54.10 $ 53.90 $ (0.20)
5/8 Inch 600 $ 58.89 $ 58.69 $ (0.20)
5/8 Inch 700 $ 63.68 $ 63.49 $ (0.19)
5/8 Inch 800 $ 68.47 $ 68.28 $ (0.19)
5/8 Inch 1,000 $ 78.05 $ 77.87 $ (0.18)
5/8 Inch 1,200 $ 87.63 $ 87.46 $ (0.17)
5/8 Inch 1,400 $ 97.21 $ 97.04 $ (0.17)
5/8 Inch 1,600 $ 106.79 $ 106.63 $ (0.16)
5/8 Inch 2,000 $ 125.95 $ 125.81 $ (0.14)
5/8 Inch 2,400 $ 145.11 $ 144.98 $ (0.13)
Description Monthly
Flow
Monthly Charges $ Amount
Difference

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Table 35 – Single-Family Residential Sewer Bill Impact
Table 36 – Single-Family Residential Combined Bill Impact Existing Proposed
Residential
5/8 Inch 0 $ 52.58 $ 54.95 $ 2.37
5/8 Inch 100 $ 52.58 $ 54.95 $ 2.37
5/8 Inch 200 $ 52.58 $ 54.95 $ 2.37
5/8 Inch 300 $ 52.58 $ 54.95 $ 2.37
5/8 Inch 400 $ 52.58 $ 54.95 $ 2.37
5/8 Inch 500 $ 52.58 $ 54.95 $ 2.37
5/8 Inch 600 $ 52.58 $ 54.95 $ 2.37
5/8 Inch 700 $ 52.58 $ 54.95 $ 2.37
5/8 Inch 800 $ 52.58 $ 54.95 $ 2.37
5/8 Inch 1,000 $ 52.58 $ 54.95 $ 2.37
5/8 Inch 1,200 $ 52.58 $ 54.95 $ 2.37
5/8 Inch 1,400 $ 52.58 $ 54.95 $ 2.37
5/8 Inch 1,600 $ 52.58 $ 54.95 $ 2.37
5/8 Inch 2,000 $ 52.58 $ 54.95 $ 2.37
5/8 Inch 2,400 $ 52.58 $ 54.95 $ 2.37
Monthly Charges $ Amount
Difference Description Monthly Flow Existing Proposed
Residential
5/8 Inch 0 $ 82.73 $ 84.88 $ 2.15
5/8 Inch 100 $ 87.52 $ 89.67 $ 2.15
5/8 Inch 200 $ 92.31 $ 94.46 $ 2.15
5/8 Inch 300 $ 97.10 $ 99.26 $ 2.16
5/8 Inch 400 $ 101.89 $ 104.05 $ 2.16
5/8 Inch 500 $ 106.68 $ 108.85 $ 2.17
5/8 Inch 600 $ 111.47 $ 113.64 $ 2.17
5/8 Inch 700 $ 116.26 $ 118.43 $ 2.17
5/8 Inch 800 $ 121.05 $ 123.23 $ 2.18
5/8 Inch 1,000 $ 130.63 $ 132.82 $ 2.19
5/8 Inch 1,200 $ 140.21 $ 142.40 $ 2.19
5/8 Inch 1,400 $ 149.79 $ 151.99 $ 2.20
5/8 Inch 1,600 $ 159.37 $ 161.58 $ 2.21
5/8 Inch 2,000 $ 178.53 $ 180.76 $ 2.23
5/8 Inch 2,400 $ 197.69 $ 199.93 $ 2.24
Monthly Charges $ Amount
Difference Description Monthly Flow

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4.3 Rate Comparison with Other Utilities
To provide the City with additional insight and context regarding the proposed rate levels, the analysis includes a comparison of both the existing and proposed user rates relative to the user rates imposed by other water and sewer utility systems located in the same region.

A summary analysis is provided comparing the cost of monthly water and sewer service for a typical single-family residential customer calculated under the existing and proposed rates of the City with those of the other utilities. The rates utilized for the other neighboring utilities shown in Figure 2 were in effect as of October 2025 and are exclusive of local taxes, outside surcharges, franchise fees, regulatory fees, or other rate adjustments. A summary comparison with other utilities for a single-family residential customer receiving 800 cubic feet of service per monthly billing is illustrated in Figure 2.

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It should be noted that when making comparisons of water and sewer service with other providers, several factors affect the level of rates and charges. Such factors may include:

1. Terms of wholesale service agreements;

2. Time since last rate update for comparison providers;

3. Level of treatment required before the distribution of water to the ultimate customers;

4. Level of treatment and effluent disposal or discharge methods of sewer service;

5. Anticipated capital improvement programs and capital financing methods;

6. Plant capacity utilization, age of facilities, and assistance in construction by federal or state grants, connection fees, developer contributions, etc.;

7. General Fund and/or administrative fee transfers made by other systems which may account for differences in the level of rates charged; and

8. Bond covenants and funding requirements of the rates.

For the utilities included in the rate comparisons, no analysis has been carried out with consideration of the above-mentioned factors as they relate to the reported water and sewer rates currently being charged.

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Section 5 – Projected Operating Results

5.1 General
As a conclusion to the study, individual pro-forma operating statements are developed for both the water and sewer systems. The statements summarize the projected financial results based on the system revenues, expenses, and other Revenue Requirements anticipated in future years.

The individual operating statements cover the 5-fiscal year Projection Period through June 30, 2030, and are prepared on a cash-flow basis. In addition, the individual statements include the applicable annual percentage rate adjustments necessary to meet the projected Revenue Requirements. The annual rate adjustments are considered separately for both water and sewer and are further separated by the fixed charge and volumetric rate components. The following discussions describe the development of the major components of the projected operating results.

5.2 Projected User Rate Revenues
The user rate and charge revenues are estimated by applying the existing and proposed rates to the projected customer units of service. The revenues for the Projection Period are estimated separately for both water and sewer. The resulting revenues are then compared to the projected Revenue Requirements (i.e., O&M expenses, debt service, capital outlay, CIP, transfers, etc.) in each fiscal year to determine if the revenues are sufficient to satisfy the expenditure needs of the system. To the extent that there are revenue shortfalls in any given year of the Projection Period, the water and/or sewer rates developed by the COS and rate design analyses outlined previously in Section 3 of this Report are adjusted on a percentage basis, as necessary, to generate the required level of revenues. The projected water, sewer, and combined user rate revenues are provided in Table 37.

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Table 37 – Projected User Rate Revenues
The projected revenues include the annual water and sewer rate adjustments anticipated for the remaining years of Projection Period beyond the Test Year. The proposed user rates for which the projected operating results are developed for the entire 5-fiscal year Projection Period are provided in Tables 38 and 39. The rates identified in the proceeding tables reflect the cost of providing service to individual customer classes based on the number and types of customers being served, peak demand factors, and volume of flow.

Table 38 – Proposed Monthly Water Rates
Existing Proposed
2026 2026 2027 2028 2029 2030
Water
Single-Family $ 6,018,106 $ 6,047,757 $ 6,390,294 $ 7,073,888 $ 7,830,297 $ 8,667,248 Multi-Family 2,669,283 2,741,124 2,892,493 3,197,747 3,535,128 3,908,002 Commercial 1,683,559 2,008,941 2,121,285 2,347,682 2,598,145 2,875,223 Institutional 269,539 378,757 398,956 440,269 485,851 536,152 Irrigation 519,933 802,128 845,983 934,772 1,032,861 1,141,218 City 458,062 802,309 846,679 936,106 1,034,951 1,144,206 Total Water Revenue $ 11,618,482 $ 12,781,015 $ 13,495,690 $ 14,930,464 $ 16,517,233 $ 18,272,049 Sewer
City & LHMWD - Sewer Units $ 1,775,520 $ 2,078,752 $ 2,148,268 $ 2,278,387 $ 2,416,295 $ 2,562,589 City & LHMWD - Stormwater Units 732,402 954,565 986,487 1,046,238 1,109,566 1,176,744 EMWD - Sewer Units 774,720 907,030 931,520 981,822 1,034,841 1,090,722 EMWD - Stormwater Units 641,837 836,529 859,115 905,507 954,404 1,005,942 Total Sewer Revenue $ 3,924,479 $ 4,776,876 $ 4,925,390 $ 5,211,954 $ 5,515,106 $ 5,835,997 Total Combined Revenue $ 15,542,961 $ 17,557,891 $ 18,421,080 $ 20,142,418 $ 22,032,339 $ 24,108,046 Projected Fiscal Year Ending June 30 System
2026 2027 2028 2029 2030
Monthly Fixed Charge:
5/8 Inch $ 30.15 $ 29.93 $ 32.92 $ 36.21 $ 39.83 $ 43.82 3/4 Inch $ 33.81 $ 44.53 $ 48.98 $ 53.88 $ 59.27 $ 65.19

1.0 Inch $ 41.16 $ 73.73 $ 81.10 $ 89.21 $ 98.13 $ 107.95

1.5 Inch $ 74.42 $ 146.73 $ 161.40 $ 177.54 $ 195.30 $ 214.83

2.0 Inch $ 97.91 $ 234.33 $ 257.77 $ 283.54 $ 311.90 $ 343.09

3.0 Inch $ 261.43 $ 438.74 $ 482.61 $ 530.87 $ 583.96 $ 642.36

4.0 Inch $ 359.54 $ 730.74 $ 803.82 $ 884.20 $ 972.62 $ 1,069.88

6.0 Inch $ 563.88 $ 1,460.76 $ 1,606.84 $ 1,767.52 $ 1,944.27 $ 2,138.70

8.0 Inch $ 711.85 $ 2,336.78 $ 2,570.46 $ 2,827.50 $ 3,110.25 $ 3,421.28 Flow Meter $ 152.98 $ 146.73 $ 161.40 $ 177.54 $ 195.30 $ 214.83 Volumetric Rates Per 100 Cubic Feet:

All Flows $ 4.79 $ 4.79 $ 5.27 $ 5.80 $ 6.38 $ 7.02
Description Existing
Rates
Projected For Fiscal Year Ending June 30

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Table 39 – Proposed Monthly Sewer Rates
The projected user rates provided herein for the periods beyond the Test Year are intended for strategic planning purposes, and to provide the City with the estimated future rates that may be needed to satisfy the projected cash flow requirements. The rates are developed in accordance with the assumed customer, flow, expenditure, and revenue estimates projected in this rate study. It is important to note that, since it is necessary to utilize numerous assumptions to develop the projected operating results, to the extent that actual customers, flows, and/or system expenditures differ from those assumed herein, additional rate adjustments may be required. For informative purposes, a calculation of the typical monthly bill for a representative single-family residential customer based on the projected rates, for each year of the Projection Period, is included herein. An illustration of the projected bill path is provided in Figure 3.
2026 2027 2028 2029 2030
Monthly Fixed Charge:

All Customers - per Sewage Unit $ 8.00 $ 9.37 $ 9.87 $ 10.41 $ 10.97 $ 11.56 All Customers - per Stormwater Unit $ 3.30 $ 4.30 $ 4.53 $ 4.78 $ 5.04 $ 5.31 EMWD Related Charge [1]:

Capital Sewer Charge $ 4.53 $ 4.68 $ 4.92 $ 4.92 $ 4.92 $ 4.92 Sewer (per Sewage Unit) $ 33.31 $ 36.60 $ 39.00 $ 39.00 $ 39.00 $ 39.00 Notes:
[1] Eastern Municipal Water District (EMWD) provides sewer treatment services to the City of Hemet. These charges are independent of the City's sewer collection rates and will be charged in addition to the City's rates.

The City of Hemet has no control over EMWD's rates. The EMWD rates provided in this table are subject to change. No analysis of EMWD's rates was conducted, they are provided for informational purposes only.

Description Existing
Rates
Projected For Fiscal Year Ending June 30

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5.3 Debt Service Coverage
As stated previously in Section 2.3.3, the City currently has no outstanding debt associated with either the water or sewer utility system, and based on discussions with the City, there are no anticipated debt issuances expected to occur over the Projection Period. Therefore, no annual debt service payments or debt service ratio calculations are included in the analysis and Projection Period.

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5.4 Summary of Projected Operating Results
The cash-flow statements outlining the projected operating results are summarized in Tables 40 and 41 for the water and sewer systems, respectively. The results demonstrate that the proposed rates and charges along with the other respective system revenues are anticipated to be sufficient to satisfy the projected Revenue Requirements and capital needs for each respective utility system. To see the full cash-flow statement for each respective utility system over the Projection Period, please refer to Appendix D.

Table 40 – Water System Projected Operating Results
Proposed
2026 2027 2028 2029 2030
Revenues:

Water Sales $ 12,781 $ 13,496 $ 14,930 $ 16,517 $ 18,272 Other Revenues [1]
3,051 3,146 3,244 638 638
Total Revenues $ 15,832 $ 16,642 $ 18,175 $ 17,155 $ 18,910 Less O&M Expenses (12,708) (13,390) (14,111) (14,876) (15,686) Net Income For Debt $ 3,124 $ 3,252 $ 4,063 $ 2,280 $ 3,224 Debt Service:

Existing $ - $ - $ - $ - $ -
Future - - - - -
Total Debt Service $ - $ - $ - $ - $ -
Net Results $ 3,124 $ 3,252 $ 4,063 $ 2,280 $ 3,224
Fund Balance Activity:

Cash Reserves
Beginning Balance $ 4,839 $ 6,283 $ 5,180 $ 6,928 $ 7,384 Deposit/(Withdrawal) from Operations 3,124 3,252 4,063 2,280 3,224 Capital Projects From Capital Improvement Plan (1,680) (4,355) (2,315) (1,823) (2,553) Total Cash Reserves $ 6,283 $ 5,180 $ 6,928 $ 7,384 $ 8,056 Days Cash on Hand 180 141 179 181 187
Debt Coverage N/A N/A N/A N/A N/A
Notes:
[1] Other Revenues decrease starting in FY 2029 due to the expiration of an interagency agreement between EMWD and the City for the purchase of groundwater carry-over credits.

Description
Projected for Fiscal Year Ending June 30 ($1,000s)

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Table 41 – Sewer System Projected Operating Results
Proposed
2026 2027 2028 2029 2030
Revenues:

Wastewater Sales $ 4,777 $ 4,925 $ 5,212 $ 5,515 $ 5,836 Other Revenues 95 95 95 95 95
Total Revenues $ 4,872 $ 5,020 $ 5,307 $ 5,610 $ 5,931
Less O&M Expenses (3,582) (3,761) (3,949) (4,147) (4,354) Net Income For Debt $ 1,290 $ 1,259 $ 1,357 $ 1,463 $ 1,577 Debt Service:

Existing $ - $ - $ - $ - $ -
Future - - - - -
Total Debt Service $ - $ - $ - $ - $ -
Net Results $ 1,290 $ 1,259 $ 1,357 $ 1,463 $ 1,577
Fund Balance Activity:

Cash Reserves
Beginning Balance $ 10,113 $ 9,723 $ 9,218 $ 8,607 $ 7,882 Deposit/(Withdrawal) from Operations 1,290 1,259 1,357 1,463 1,577 Capital Projects From Capital Improvement Plan (1,680) (1,764) (1,968) (2,188) (2,425) Total Cash Reserves $ 9,723 $ 9,218 $ 8,607 $ 7,882 $ 7,034 Days Cash on Hand 991 894 795 694 590
Debt Coverage N/A N/A N/A N/A N/A
Description
Projected for Fiscal Year Ending June 30 ($1,000s)

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Section 6 – Drought Surcharge

6.1 General
In accordance with the American Water Works Association (AWWA) Manual M1, a rate surcharge is a separate charge added to the existing rate structure to collect either:
• A targeted amount of revenue; or
• To assess an appropriate charge for usage characteristics outside of those covered in the standard charge for service.

Surcharges are often separate from the standard rate structure and are labeled for a specific purpose for which the funds will be used, or they are connected directly to an event that causes the need for the surcharge. Drought rates are a specific form of a surcharge.

6.2 Purpose of a Drought Surcharge
Drought surcharges are a specific form of surcharge used during a period of drought that is intended to ensure that revenue collected during a period when water sales are reduced because of drought will still meet the financial requirements of the utility. Most often this is due to mandated water use restrictions enacted as part of specific administrative action, such as a declaration of drought by a legislative body (i.e. City Council) or public official (i.e.

City Manager). Reduction in water demand is usually achieved by multiple actions, such as:
• Appealing to customers to voluntarily reduce their water usage; and • Placing mandatory restrictions on discretionary water usage often related to outdoor usage (e.g., irrigation, filling pools, pressure washing, car washing, etc.).

When water demand is reduced, there may be a negative impact on utility revenues.

Because less water is sold, there is a corresponding reduction in variable water rate revenue which can result in the water utility not being able to generate sufficient revenue to cover the water system’s Revenue Requirements. This is because the standard variable water rates, such as those described in previous sections of this Report, are developed based on a calculated Revenue Requirement and expected water use/sales during normal conditions.

If the volume of water sold is reduced because of drought, the variable rates will no longer be in balance with the required revenue.

To address this situation, a drought surcharge can be created and enacted to help prevent a revenue shortfall and ensure that the water system’s Revenue Requirements are met. If a revenue shortfall were to occur, this could result in the water utility having to draw down on available cash reserves which are designated for other purposes, reduce maintenance activities, delay capital projects, or otherwise cause the water utility to not generate enough revenue to meet its current financial obligations.

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To calculate drought rates adjustments are made to certain expenses that decline as less water is purchased, pumped, treated, and delivered. However, most expenses do not decrease during drought periods, which leads to an imbalance between rate revenue and the revenue required, so the variable rates are adjusted upward to ensure adequate revenue is generated to meet the Revenue Requirement.

6.2.1 T ’
The City adopted a Water Shortage Contingency Plan (WSCP) that is designed to prepare for and respond to water shortages. This WSCP complies with the California Water Code (CWC) Section 10632, which requires that every urban water supplier shall prepare and adopt a WSCP as part of its Urban Water Management Plan (UWMP).

The WSCP establishes water use restrictions and prohibitions to be implemented during times of declared water shortages or declared water shortage emergencies. It establishes six stages of response actions to be implemented in times of shortage, with increasing restrictions on water use in response to different severities of drought conditions or decreasing available supplies. During times of a water shortage and based on the severity of the water shortage, the City Council shall direct the City Manager, the Public Works Director, the Water/Wastewater Superintendent, or a designated City representative to implement the provisions of this division. An emergency water shortage response can go into effect:

1. If the City Manager invokes emergency water shortage restrictions when a major failure occurs, whether temporary or permanent, in the supply, the water quality, the distribution lines, or the reservoirs of the city's water system; or

2. When the Governor and State Water Board find and declare that an emergency exists due to severe drought conditions and that adoption of proposed emergency regulations is necessary to address the emergency.

To provide a consistent regional and statewide approach for conveying the relative severity of water supply shortage conditions, the 2018 Water Conservation Legislation mandates that water suppliers plan for six standard WSCP Levels that correspond to progressive reductions of up to 10, 20, 30, 40, 50 percent, and greater than 50 percent from the normal reliability condition. Each shortage condition should correspond to additional actions water suppliers would implement to meet the severity of the impending shortages. For each declared water supply shortage level, customers will be required to reduce consumption by the percentage specified in the WSCP Level found in the City’s Ordinance No.1997 Sec 82-141. More details regarding the six water shortage contingency plan levels and the demand reduction actions at each stage can be found in the City’s Ordinance No.1997 Sec 82-144.

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6.3 Proposed Drought Surcharge Rates
As described previously, only the volumetric rates are increased when a certain drought stage and the corresponding drought surcharge goes into effect. As stated previously in Section 3 of the Report, this is because of the functional unbundling of the Revenue Requirements (costs). When the drought surcharge rates go into effect at a certain WSCP level due to a water supply shortage, there is less water demand (customer usage) through which to recover the Revenue Requirements allocated to the volumetric rate cost components. Therefore, volumetric rates need to increase to recover the portion of the Revenue Requirements needed from the volumetric rates, while the base charge remains unchanged. Table 42 shows the standard (no drought) rates and demonstrates the volumetric drought rates that were developed for the Test Year at each WSCP stage.

Drought rates are based on the adjusted volumetric rate Revenue Requirements (i.e., reductions in water purchases, electricity, and water booster pumping costs) which correspond to the reduction in water usage at each WSCP stage.

Table 42 – Stage 2 Through Stage 5 Drought Surcharge Rate Development The analysis and proposed drought surcharge water rates herein reflect the drought rates per 100 cubic feet that would need to go into effect for WSCP stages (levels) 2 through 5 over the Projection Period. The proposed drought surcharge rates for stages 2 through 5, and a comparison of the standard water rates to the drought rates for stages 2 through 5 over the Projection Period, can be found in Table 43.

Total
Volumetric
Component
Costs
Total Billable
Water Units
(Billable
Usage)
Rate per CCF
[A] [B] [A]/[B]
Drought Stage
Standard (No Drought) $ 7,621,783 1,589,866 $ 4.79
Stage 2 Drought (20% Reduction) $ 7,163,409 1,271,893 $ 5.63 Stage 3 Drought (30% Reduction) $ 6,935,777 1,112,906 $ 6.23 Stage 4 Drought (40% Reduction) $ 6,749,455 953,920 $ 7.08 Stage 5 Drought (50% Reduction) $ 6,709,123 794,933 $ 8.44 Description

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Table 43 – Stage 2 Through Stage 5 Drought Surcharge Rates & Comparison to Standard Water Rates per CCF
Proposed
2026 2027 2028 2029 2030
Drought Stage
Standard (No Drought) Rate per CCF $ 4.79 $ 5.27 $ 5.80 $ 6.38 $ 7.02 Stage 2 Drought Rate per CCF (20% Reduction) $ 5.63 $ 6.18 $ 6.81 $ 7.48 $ 8.25 Stage 3 Drought Rate per CCF (30% Reduction) $ 6.23 $ 6.82 $ 7.54 $ 8.26 $ 9.12 Stage 4 Drought Rate per CCF (40% Reduction) $ 7.08 $ 7.74 $ 8.56 $ 9.37 $ 10.36 Stage 5 Drought Rate per CCF (50% Reduction) $ 8.44 $ 9.22 $ 10.21 $ 11.17 $ 12.36 Difference per CCF ($)
Stage 2 vs. Standard $ 0.84 $ 0.90 $ 1.01 $ 1.10 $ 1.23 Stage 3 vs. Standard $ 1.44 $ 1.55 $ 1.74 $ 1.88 $ 2.11 Stage 4 vs. Standard $ 2.28 $ 2.47 $ 2.76 $ 2.99 $ 3.34 Stage 5 vs. Standard $ 3.65 $ 3.95 $ 4.41 $ 4.79 $ 5.34 Fiscal Year Ending June 30
Description

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Section 7 – Conclusions and Recommendations

7.1 Disclaimers

7.1.1 General Disclaimer
In the development of the proposed user rates and charges, certain historical reviews and analyses have been performed, together with the application of assumptions based on prudent financial, operational, and ratemaking relationships. The cost criteria and customer usage characteristics associated with general ratemaking procedures are representative of averages and are not intended as indicators of any individual customer.

In the preparation of the rate study, certain assumptions have been made with respect to conditions that may occur in the future. While it is believed that these assumptions are reasonable for the purpose of this rate study, they are dependent upon future events and actual conditions may differ from those assumed. In addition, the study has used and relied upon certain information that was provided by other parties not associated with Willdan.

Such information includes, among other things, the City’s audited financial statements, annual operating budgets, periodic reports, and other information and data provided by the City, its independent auditors, and other sources. While the sources are believed to be reliable, there has been no independent verification of the information, and no assurances are offered with respect thereto. To the extent that future conditions differ from those assumed herein or provided by others, the actual results may vary from those projected.

7.1.2 Municipal Advisory Disclaimer
Unless the City of Hemet, California (the “City”) has a written engagement from Willdan Financial Services (“Willdan”) for municipal advisory services, Willdan is not advising or recommending any action be taken by the recipient of this information with respect to any prospective, new, or existing municipal financial products or issuance of municipal securities (including with respect to the structure, timing, terms, and other similar matters concerning such financial products or issues). The City shall discuss any such information and material contained in Willdan’s work product with any and all internal and/or external advisors and experts, including its own municipal advisor, that it deems appropriate before acting on the information and material.

For the avoidance of doubt and without limiting the foregoing, in connection with any revenue projections, cash-flow analyses, feasibility studies and/or other analyses Willdan may provide the City with respect to financial, economic or other matters relating to a prospective, new or existing issuance of municipal securities of the City, (A) any such projections, studies and analyses shall be based upon assumptions, opinions or views (including, without limitation, any assumptions related to revenue growth) established by the City, in conjunction with such of its municipal, financial, legal and other advisers as it deems appropriate; and (B) under no circumstances shall Willdan be asked to provide, nor shall it

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provide, any advice or recommendations or subjective assumptions, opinions or views with respect to the actual or proposed structure, terms, timing, pricing or other similar matters with respect to any municipal financial products or municipal securities issuances, including any revisions or amendments thereto.

7.2 Conclusions
As previously addressed, the purpose of this study is to provide a review of the City’s existing utility rates to determine if rate adjustments are necessary to meet the budgeted and/or projected financial needs in future years. This Report is the result of the collaborative efforts of representatives from both the City and Willdan. City staff were diligent and cooperative in their efforts to ensure the availability and quality of source data on financial and operating matters. Based on the reviews, analyses and assumptions discussed herein, it is concluded that:

1. The proposed user rates and charges are anticipated to generate sufficient revenues to meet the Revenue Requirements of each respective system based upon the projected expenditures, capital project timing and costs, transfers, and billable customer units estimated for the Test Year. The proposed rates are based on an assumed implementation date of March 1, 2026. To the extent that the actual implementation date varies from the assumed implementation date, additional rate adjustments and/or appropriations from existing reserves may be necessary.

2. The estimated revenues and resulting rate adjustments for the remaining years of the Projection Period beyond the Test Year are developed based on the customer growth assumptions generated from the historical analyses and discussions with City staff.

3. Customer growth for the water and sewer systems is projected based on historical customer data as provided by the City as well as discussions with City staff regarding developer activity and anticipated construction. If it turns out that the customer growth assumptions are not realized, the resulting revenues could be different than projected.

4. The projection of billable water and sewer units is based on historical trends regarding the average units per user for each customer class. The average water and sewer units per account is developed from historical customer data and is assumed to remain relatively constant for the Projection Period. The historical billing data provided by the City was utilized to identify and calculate the average unit statistics for system customers. For the analysis developed herein, it is assumed that the average statistics for the Projection Period will be consistent with recent historical average levels as realized in recent years, or as otherwise assumed based on discussions with staff.

When applying the estimated average statistics, it is assumed that the water and sewer sales will increase with the estimated growth in customers. However, it is important to note that annual variations in rainfall and other climatological factors may influence the level of future billable demands for the City.

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5. Future capital improvement projects are assumed to occur as reported by the City in its CIP. To the extent that the timing of such projects may change from that estimated herein, the cost of such projects and resulting impact on future rates and charges may vary from those indicated.

6. The proposed rates and rate structure are consistent with industry standards for ratesetting practices, comply with Proposition 218, and conform to the City’s financial policies with respect to:
a. Equitably recovering costs;
b. Being based upon the proportionate cost of providing services; and c. Generating sufficient revenue to recover system Revenue Requirements, fund capital needs, and meet reserve requirements.

7.3 Recommendations
Based on the reviews, analyses, and assumptions addressed herein, as well as the resulting conclusions provided above, it is respectfully recommended that the City:

1. Adopt the proposed water and sewer rates.

2. Adopt the proposed drought surcharge rates.

3. Enact the proposed rates to become effective as of March 1, 202 (or other such date as determined by the City). Based on the timing of the project and the required public hearing procedures and noticing requirements, it is expected that the proposed water and sewer rates will become effective on the recommended date.

4. Readdress the COS analysis portion of this study every three to five years to ensure costs are recovered consistently with COS principles and customer characteristics.

We appreciate the opportunity to be of service to the City in this engagement. In addition, we would like to thank City staff for the valuable assistance provided during the completion of the rate study.

Respectfully Yours,

WILLDAN FINANCIAL SERVICES

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City of Hemet, CA
Comprehensive Water & Sewer Utility Rate
Study Update
Appendices
A Revenue Requirement for User Rates
B Water Cost-of-Service Analysis
C Sewer Cost-of-Service Analysis
D 5-Year Financial Projections

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City of Hemet, CA
Comprehensive Water & Sewer Utility Rate
Study Update
Appendix A
Revenue Requirement for
User Rates

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APPENDIX - A

CITY OF HEMET, CA
Development of Rate Revenue Requirements
[A] [B] [C]=[A]*[B] [D] [E]=[A]*[D]
FY 2026 % to Water Water % to Sewer Sewer
1 Total Operating Revenues $ 20,704,019 $ 15,832,143 $ 4,871,876 Less:

Other Operating Revenues
2 Interest Earnings $ 150,000 100% $ 150,000 0% $ -
3 Energy Capacity Payments 12,000 100% 12,000 0% -
4 Water Facilities Fees 60,000 100% 60,000 0% -
5 Um: Backflow Fee 78,000 100% 78,000 0% -
6 Sale Of Water Credits 2,413,128 100% 2,413,128 0% -
7 Other Revenue 30,000 100% 30,000 0% -
8 Prepaid Water Services 250,000 100% 250,000 0% -
9 Um: Other Water Charges 50,000 100% 50,000 0% -
10 Water Waste Fine 5,000 100% 5,000 0% -
11 Collection Agency Receipts 3,000 100% 3,000 0% -
12 Investment Earnings 35,000 0% - 100% 35,000
13 Sewer Connection Fees 60,000 0% - 100% 60,000
14 Total Other Operating Revenues 3,146,128 3,051,128 95,000 15 Total Rate Revenue Requirement $ 17,557,891 73% $ 12,781,015 27% $ 4,776,876 Test Year for Rate Revenue Requirement Line No: Description

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City of Hemet, CA
Comprehensive Water & Sewer Utility Rate
Study Update
Appendix B
Water Cost-of-Service
Analysis

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APPENDIX - B

CITY OF HEMET, CA
Allocation of Test Year Costs to Water Function
Line Expense Group FY 2026
1 Treatment $0
2 Transmission & Distribution 2,620,084
3 Customer Service 92,505
4 Admin 7,712,884
5 Source of Supply 2,014,005
6 Soboba Settlement Agreement 268,600
7 CIP 1,680,000
8 Total $ 14,388,078
Test Year Revenue Requirement
B - 1

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APPENDIX - B

CITY OF HEMET, CA
Water Customer and Equivalent Residential Unit Calculation - Test Year FY 2026 [A - 1] [B - 1] [C - 1] [D - 1] [E - 1] [F - 1]
Class --> Single-Family Multi-Family Commercial Institutional Irrigation City Billing Basis--> Units Units Units Units Units Units
1 0.625 1.00 1.00 1.00 1.00 1.00 1.00
2 0.75 1.50 1.50 1.50 1.50 1.50 1.50
3 1.00 2.50 2.50 2.50 2.50 2.50 2.50
4 1.50 5.00 5.00 5.00 5.00 5.00 5.00
5 2.00 8.00 8.00 8.00 8.00 8.00 8.00
6 3.00 15.00 15.00 15.00 15.00 15.00 15.00
7 4.00 25.00 25.00 25.00 25.00 25.00 25.00
8 6.00 50.00 50.00 50.00 50.00 50.00 50.00
9 8.00 80.00 80.00 80.00 80.00 80.00 80.00
10 Flow Meter 5.00 5.00 5.00 5.00 5.00 5.00
[A - 2] [B - 2] [C - 2] [D - 2] [E - 2] [F - 2]
Class --> Single-Family Multi-Family Commercial Institutional Irrigation City Billing Basis--> Units Units Units Units Units Units
11 0.625 7,296 348 226 10 20 25 7,925
12 0.75 531 28 13 1 2 1 576
13 1.00 96 135 123 5 38 29 426
14 1.50 - 7 8 1 1 7 24
15 2.00 2 86 181 23 79 49 420
16 3.00 - 1 4 2 - 1 8
17 4.00 - 4 3 7 2 - 16
18 6.00 - 4 - - - - 4
19 8.00 - 5 - - - - 5
20 Flow Meter - - 7 - - - 7
21 Total Monthly Customers 7,925 618 565 49 142 112 9,411 [A - 1] * [A - 2] [B - 1] * [B - 2] [C - 1] * [C - 2] [D - 1] * [D - 2] [E - 1] * [E - 2] [F - 1] * [F - 2] Class --> Single-Family Multi-Family Commercial Institutional Irrigation City Billing Basis--> Units Units Units Units Units Units
22 0.625 7,296 348 226 10 20 25 7,925
23 0.75 797 42 20 2 3 2 864
24 1.00 240 338 308 13 95 73 1,065
25 1.50 - 35 40 5 5 35 120
26 2.00 16 688 1,448 184 632 392 3,360
27 3.00 - 15 60 30 - 15 120
28 4.00 - 100 75 175 50 - 400
29 6.00 - 200 - - - - 200
30 8.00 - 400 - - - - 400
31 Flow Meter - - 35 - - - 35
32 Total Monthly Customers 8,349 2,166 2,211 418 805 541 14,489 Meter Size
Customer Accounts
Total Equivalent Residential Units
Line
Line
Line
Total
Total
Meter Equivalencies
Meter Size
Meter Size
B - 2

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APPENDIX - B

CITY OF HEMET, CA
Water Max Day/Hour Allocation Factors - Test Year FY 2026 [A] [B] [C] [D] [E] [F]
Flow Peak Month
(CCF)
Average
Month (CCF)
Max
Day/Avg
Day Factor
Max Day Total
Capacity
(CCF/Day)
Max Day
Extra
Capacity
(CCF/Day)
Operating Statistics: MGD Factor
1 Avg Day Flow (MGD) 3.30 1.00
2 Max Day Flow (MGD) 5.30 1.61
3 Cost Allocation Factors: Base Max Day Max Hour
4 Base/Max Day 62.26% 37.74% 0.00%
Peaking Factors: [B] / [C]
Single-Family
5 All Flow 75,525 53,829 1.40
Multi-Family
6 All Flow 51,251 40,035 1.28
Commercial
7 All Flow 30,940 22,385 1.38
Institutional
8 All Flow 5,598 3,470 1.61
Irrigation
9 All Flow 12,155 6,775 1.79
City
10 All Flow 14,081 6,474 2.17
[D] x [B] [E] - [B]
Estimated Flows:

Total Annual
Flow (CCF)
Average
Daily Flow
(CCF)
Peaking
Factor
Total
Capacity
Extra
Capacity
Single-Family
11 All Flow 649,939 1,781 1.40 2,498 718
Multi-Family
12 All Flow 473,459 1,297 1.28 1,661 363
Commercial
13 All Flow 266,726 731 1.38 1,010 279
Institutional
14 All Flow 41,473 114 1.61 183 70
Irrigation
15 All Flow 81,582 224 1.79 401 177
City
16 All Flow 76,686 210 2.17 457 247
17 Total 1,589,866 4,356 6,210 1,854
Maximum Day
Line Description
B - 3

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APPENDIX - B

CITY OF HEMET, CA
Water Units of Service by Cost Component - Test Year FY 2026 [A] [B] [C] [D]
ERUs Accounts Base (CCF)
Max Day
(CCF/Day)
1 Single-Family 8,349 7,925 649,939 718
2 All Flow 649,939 718
3 Multi-Family 2,166 618 473,459 363
4 All Flow 473,459 363
5 Commercial 2,211 565 266,726 279
6 All Flow 266,726 279
7 Institutional 418 49 41,473 70
8 All Flow 41,473 70
9 Irrigation 805 142 81,582 177
10 All Flow 81,582 177
11 City 541 112 76,686 247
12 All Flow 76,686 247
13 Total 14,489 9,411 1,589,866 1,854
Line Description
B - 4

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APPENDIX - B

CITY OF HEMET, CA
Allocation of Water Costs - Test Year FY 2026
Line Description Water Costs Base Extra Capacity
Max Day
Meters &
Services
Billing &
Collection Total (Check)
Allocation Factors:
1 Treatment 62.26% 37.74% 0.00% 0.00% 100.00%
2 Transmission & Distribution 62.26% 37.74% 0.00% 0.00% 100.00% 3 Customer Service 0.00% 0.00% 0.00% 100.00% 100.00%
4 Admin 18.29% 11.09% 70.62% 0.00% 100.00%
5 Source of Supply 62.26% 37.74% 0.00% 0.00% 100.00%
6 Soboba Settlement Agreement 0.00% 0.00% 100.00% 0.00% 100.00% 7 CIP 62.26% 37.74% 0.00% 0.00% 100.00%
Allocation of Costs:
8 Treatment $ - $ - $ - $ - $ - $ -
9 Transmission & Distribution 2,620,084 1,631,373 988,711 - - 2,620,084 10 Customer Service 92,505 - - - 92,505 92,505
11 Admin 7,712,884 1,410,934 855,111 5,446,839 - 7,712,884 12 Source of Supply 2,014,005 1,254,003 760,002 - - 2,014,005 13 Soboba Settlement Agreement 268,600 - - 268,600 - 268,600 14 CIP 1,680,000 1,046,038 633,962 - - 1,680,000
15 Non-Rate Rev & Fund Balance (1,607,063) (596,709) (361,642) (638,381) (10,331) (1,607,063) 16 Total $ 12,781,015 $ 4,745,639 $ 2,876,144 $ 5,077,058 $ 82,174 $ 12,781,015 Total Units of Service 1,589,866.44 1,854.43 14,489.00 9,411.00 Units CCF CCF/Day ERU/Monthly Bills/Monthly
Cost Per Unit $ 2.9849 $ 1,550.9616 $ 29.2006 $ 0.7276
Units CCF CCF/Day ERU/Monthly Bills/Monthly
B - 5

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APPENDIX - B

CITY OF HEMET, CA
Water Cost of Service by Cost Component and Customer Class - Test Year FY 2026 [A] [B] [C] [D] [F]
ERUs Accounts Base (CCF) Max Day
(CCF/Day) Total
1 Single-Family $ 2,925,379 $ 69,199 $ 1,940,023 $ 1,113,156 $ 6,047,757 2 All Flow $ 1,940,023 $ 1,113,156
3 Multi-Family $ 758,808 $ 5,396 $ 1,413,243 $ 563,677 $ 2,741,124 4 All Flow $ 1,413,243 $ 563,677
5 Commercial $ 774,752 $ 4,933 $ 796,159 $ 433,096 $ 2,008,941 6 All Flow $ 796,159 $ 433,096
7 Institutional $ 146,470 $ 428 $ 123,793 $ 108,066 $ 378,757 8 All Flow $ 123,793 $ 108,066
9 Irrigation $ 282,078 $ 1,240 $ 243,517 $ 275,293 $ 802,128 10 All Flow $ 243,517 $ 275,293
11 City $ 189,571 $ 978 $ 228,904 $ 382,857 $ 802,309
12 All Flow $ 228,904 $ 382,857
13 Total $ 5,077,058 $ 82,174 $ 4,745,639 $ 2,876,144 $ 12,781,015 Line Description
B - 6

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APPENDIX - B

CITY OF HEMET, CA
Water Rate Calculation - Test Year FY 2026
[A] [B] [C] [D] [E] [F]
Capacity
Ratio Meter Charge Customer Charge
Proposed
Fixed Charge
Existing Fixed
Charge Difference
General Service
1 5/8 Inch 1.00 $ 29.20 $ 0.73 $ 29.93 $ 30.15 $ (0.22) 2 3/4 Inch 1.50 $ 43.80 $ 0.73 $ 44.53 $ 33.81 $ 10.72
3 1.0 Inch 2.50 $ 73.00 $ 0.73 $ 73.73 $ 41.16 $ 32.57
4 1.5 Inch 5.00 $ 146.00 $ 0.73 $ 146.73 $ 74.42 $ 72.31 5 2.0 Inch 8.00 $ 233.61 $ 0.73 $ 234.33 $ 97.91 $ 136.42 6 3.0 Inch 15.00 $ 438.01 $ 0.73 $ 438.74 $ 261.43 $ 177.31 7 4.0 Inch 25.00 $ 730.02 $ 0.73 $ 730.74 $ 359.54 $ 371.20 8 6.0 Inch 50.00 $ 1,460.03 $ 0.73 $ 1,460.76 $ 563.88 $ 896.88 9 8.0 Inch 80.00 $ 2,336.05 $ 0.73 $ 2,336.78 $ 711.85 $ 1,624.93 10 Flow Meter 5.00 $ 146.00 $ 0.73 $ 146.73 $ 152.98 $ (6.25) Line Customer Class Base Rate Peaking Rate Proposed
Rate ($/CCF)
Existing Rate
($/CCF) Difference Tier Differential
Single-Family
1 All Flow $ 2.98 $ 1.81 $ 4.79 $ 4.79 $ 0.00 1.00
Multi-Family
2 All Flow $ 2.98 $ 1.81 $ 4.79 $ 4.79 $ 0.00 1.00
Commercial
3 All Flow $ 2.98 $ 1.81 $ 4.79 $ 4.79 $ 0.00 1.00
Institutional
4 All Flow $ 2.98 $ 1.81 $ 4.79 $ 4.79 $ 0.00 1.00
Irrigation
5 All Flow $ 2.98 $ 1.81 $ 4.79 $ 4.79 $ 0.00 1.00
City
6 All Flow $ 2.98 $ 1.81 $ 4.79 $ 4.79 $ 0.00 1.00
Line Customer Class Annual Use
(CCF) Peaking Costs Peaking Unit Cost
1 Total Flows 1,589,866 $ 2,876,144 $ 1.81
Line Description
B - 7 Page 76 of 94

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APPENDIX - B

CITY OF HEMET, CA
Water Revenue vs Cost of Service Check - Test Year FY 2026 Total Rates - Cost of Service Component $12,781,015
Rate Units Revenue

0.625 $ 29.93 7,925 $2,846,180

0.750 44.53 576 307,782

1.000 73.73 426 376,904

1.500 146.73 24 42,258

2.000 234.33 420 1,181,037

3.000 438.74 8 42,119

4.000 730.74 16 140,303

6.000 1,460.76 4 70,116

8.000 2,336.78 5 140,207
Flow Meter 146.73 7 12,325
-------------------------
Total Service Charge Revenue $5,159,232
Volume Charge Revenue to be Recovered $7,621,783
% Volume in Billed Cumulative Volume Rate
Block Block Volume Factor Rate Revenue
All Flow HCF 100.0% 1,589,866 1.00 $ 4.79 $7,621,783
------------------------- --------------------------------------------- ------------------------- Total 100% 1,589,866 $7,621,783
Annual Surplus/(Deficiency) $0
COS Check Calculated COS
Variance
From COS
Percent
Variance
Total $12,781,015 $12,781,015 $0 0.00%
Service Charge, $ per Bill
B - 8

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City of Hemet, CA
Comprehensive Water & Sewer Utility Rate
Study Update
Appendix C
Sewer Cost-of-Service
Analysis

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APPENDIX - C

CITY OF HEMET, CA
Allocation of Test Year Costs to Sewer Function
Line Expense Group FY 2026
1 Collection $416,120
2 Treatment 0
3 Administration 3,119,961
4 Pumping 0
5 Customer Service 46,200
6 Transfers 0
7 Existing Bond DS 0
8 New Bond DS 0
9 CIP 1,680,000
10 Capital Outlay 0
11 Total $ 5,262,281
Test Year Revenue Requirement
C - 1 Page 79 of 94

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APPENDIX - C

CITY OF HEMET, CA
Sewer Customer Account & Stength Characteristics by Customer Class - Test Year FY 2026 Total Total
Accounts Units
Sewer
1 City & LHMWD - Sewer Units 10,344 18,495
2 EMWD - Sewer Units 3,048 8,070
3 Sub-Total Sewer 13,392 26,565
Stormwater
4 City & LHMWD - Stormwater Units 10,344 18,495
5 EMWD - Stormwater Units 10,352 16,208
6 Sub-Total Stormwater 20,696 34,703
7 Sewer System Total 34,088 61,268
Line Description
C - 2

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APPENDIX - C

CITY OF HEMET, CA
Allocation of Sewer Costs - Test Year FY 2026
Line Description Sewer Costs Sewer Stormwater Total (Check) Allocation Factors:
1 Treatment 0.00% 0.00% 0.00%
2 Collection 56.07% 43.93% 100.00%
3 Administration 43.36% 56.64% 100.00%
4 Customer Service 50.00% 50.00% 100.00%
5 CIP 100.00% 0.00% 100.00%
Allocation of Costs:
6 Treatment $ - $ - $ - $ -
7 Collection 416,120 233,310 182,810 416,120
8 Administration 3,119,961 1,352,774 1,767,187 3,119,961 9 Customer Service 46,200 23,100 23,100 46,200
10 CIP 1,680,000 1,680,000 - 1,680,000
11 Non-Rate Rev & Fund Balance (485,405) (303,402) (182,003) (485,405) 12 Total $ 4,776,876 $ 2,985,782 $ 1,791,094 $ 4,776,876 Total Units of Service 26,565 34,703
Units Units/Monthly Units/Monthly
Cost Per Unit $ 9.37 $ 4.30
Units Units/Monthly Units/Monthly
C - 3

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APPENDIX - C

CITY OF HEMET, CA
Sewer Cost of Service by Cost Component and Customer Class - Test Year FY 2026 [A] [B] [C]
Sewer Stormwater Total
1 City & LHMWD - Sewer Units $ 2,078,752 $ - $ 2,078,752 2 EMWD - Sewer Units 907,030 - 907,030
3 City & LHMWD - Stormwater Units - 954,565 954,565
4 EMWD - Stormwater Units - 836,529 836,529
5 Total $ 2,985,782 $ 1,791,094 $ 4,776,876
Line Description
C - 4

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APPENDIX - C

CITY OF HEMET, CA
Sewer Rate Calculation - Test Year FY 2026
[A] [B] [C] [D] [E]=[C]-[D]
Fixed Fee
Costs Monthly Units
Proposed
Monthly Fixed
Fee
Existing
Monthly Fixed
Fee
Monthly Fixed
Fee
Difference
1 City & LHMWD - Sewer Units $ 2,078,752 18,495 $ 9.37 $ 8.00 $ 1.37 2 EMWD - Sewer Units $ 907,030 8,070 $ 9.37 $ 8.00 $ 1.37 3 City & LHMWD - Stormwater Units $ 954,565 18,495 $ 4.30 $ 3.30 $ 1.00 4 EMWD - Stormwater Units $ 836,529 16,208 $ 4.30 $ 3.30 $ 1.00 Line Customer Class
C - 5

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APPENDIX - C

CITY OF HEMET, CA
Sewer Revenue vs Cost of Service by Customer Class Check - Test Year FY 2026 [A] [B] [C]=[A]*[B]*12 [D] [E]=[D]-[C]
Monthly Units
Proposed
Monthly Fixed
Fee
Total Fixed
Fee Revenue
Total COS
Revenues
Difference
Calc vs COS
1 City & LHMWD - Sewer Units 18,495 $ 9.37 $ 2,078,752 $ 2,078,752 $ - 2 EMWD - Sewer Units 8,070 $ 9.37 $ 907,030 $ 907,030 $ - 3 City & LHMWD - Stormwater Units 18,495 $ 4.30 $ 954,565 $ 954,565 $ - 4 EMWD - Stormwater Units 16,208 $ 4.30 $ 836,529 $ 836,529 $ - 5 Total 61,268 $ 4,776,876 $ 4,776,876 $ -
Line Customer Class
C - 6

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City of Hemet, CA
Comprehensive Water & Sewer Utility Rate
Study Update
Appendix D 5-Year Financial Projections

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CITY OF HEMET, CA APPENDIX D

WATER & WASTEWATER SYSTEM

PROJECTED OPERATING RESULTS - WATER
Existing Proposed
2026 2026 2027 2028 2029 2030

REVENUES
Operating Revenues
1 Water Service Charges $ 11,618,482 $ 12,781,015 $ 13,495,690 $ 14,930,464 $ 16,517,233 $ 18,272,049 Other Operating Revenues
2 Miscellaneous Revenues $ 2,901,128 $ 2,901,128 $ 2,995,838 $ 3,094,040 $ 488,000 $ 488,000 Other Non-Operating Revenues
3 Interest 150,000 150,000 150,000 150,000 150,000 150,000 4 Total Revenues $ 14,669,610 $ 15,832,143 $ 16,641,528 $ 18,174,504 $ 17,155,233 $ 18,910,049 Current Expenses
5 Water Administration $ 12,708,078 $ 12,708,078 $ 13,389,511 $ 14,111,148 $ 14,875,662 $ 15,685,925 6 Sewer Maintenance - - - - - -
7 Storm Drain Maintenance - - - - - -
8 Total Current Expenses $ 12,708,078 $ 12,708,078 $ 13,389,511 $ 14,111,148 $ 14,875,662 $ 15,685,925 9 Income Available for Debt Service $ 1,961,532 $ 3,124,065 $ 3,252,017 $ 4,063,356 $ 2,279,571 $ 3,224,124

DEBT SERVICE
New Debt
10 Water System Improvements - SRF Loan - - - - - -
11 Water System Improvements - Installment Debt - - - - - - 12 Water System Improvements - Revenue Bond - - - - - - 13 Total New Debt $ - $ - $ - $ - $ - $ -
14 Total Indebtedness $ - $ - $ - $ - $ - $ -
15 Net Results of Operations $ 1,961,532 $ 3,124,065 $ 3,252,017 $ 4,063,356 $ 2,279,571 $ 3,224,124 Line Description Fiscal Year Ending June 30
D - 1

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CITY OF HEMET, CA APPENDIX D

WATER & WASTEWATER SYSTEM

PROJECTED OPERATING RESULTS - WATER
Existing Proposed
2026 2026 2027 2028 2029 2030 Line Description Fiscal Year Ending June 30

RESERVE FUND BALANCE ACTIVITY
Operating Fund - Water
16 Beginning Fund Balance $ 4,838,720 $ 4,838,720 $ 6,282,785 $ 5,179,927 $ 6,928,033 $ 7,384,345 17 Deposit/(Withdrawal) from Operations 1,961,532 3,124,065 3,252,017 4,063,356 2,279,571 3,224,124 18 Cash Funded Capital Projects From CIP (1,680,000) (1,680,000) (4,354,875) (2,315,251) (1,823,259) (2,552,563) 19 Ending Fund Balance $ 5,120,252 $ 6,282,785 $ 5,179,927 $ 6,928,033 $ 7,384,345 $ 8,055,906 20 Targeted Fund Balance $ 6,266,997 $ 6,266,997 $ 6,603,047 $ 6,958,922 $ 7,335,943 $ 7,735,525 21 Variance $ (1,146,745) $ 15,788 $ (1,423,119) $ (30,890) $ 48,402 $ 320,381 22 Days Cash on Hand 147 180 141 179 181 187
23 Targeted Days Cash on Hand 180 180 180 180 180 180
D - 2

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CITY OF HEMET, CA APPENDIX D

WATER & WASTEWATER SYSTEM

PROJECTED OPERATING RESULTS - WASTEWATER
Existing Proposed
2026 2026 2027 2028 2029 2030

REVENUES
Operating Revenues
1 Wastewater Service Charges $ 3,924,479 $ 4,776,876 $ 4,925,390 $ 5,211,954 $ 5,515,106 $ 5,835,997 Other Operating Revenues
2 Wastewater Connection Fees $ 60,000 $ 60,000 $ 60,000 $ 60,000 $ 60,000 $ 60,000 3 Miscellaneous Revenues - - - - - -
Other Non-Operating Revenues
4 Interest 35,000 35,000 35,000 35,000 35,000 35,000
5 Total Revenues $ 4,019,479 $ 4,871,876 $ 5,020,390 $ 5,306,954 $ 5,610,106 $ 5,930,997 Current Expenses
6 Water Administration $ - $ - $ - $ - $ - $ -
7 Sewer Maintenance 1,599,001 1,599,001 1,678,956 1,762,905 1,851,052 1,943,605 8 Storm Drain Maintenance 1,983,280 1,983,280 2,082,449 2,186,572 2,295,901 2,410,698 9 Total Current Expenses $ 3,582,281 $ 3,582,281 $ 3,761,405 $ 3,949,477 $ 4,146,953 $ 4,354,303 10 Income Available for Debt Service $ 437,198 $ 1,289,595 $ 1,258,985 $ 1,357,477 $ 1,463,153 $ 1,576,694

DEBT SERVICE
New Debt
11 Wastewater System Improvements - SRF Loan - - - - - - 12 Wastewater System Improvements - Installment Debt - - - - - - 13 Wastewater System Improvements - Revenue Bond - - - - - - 14 Total New Debt $ - $ - $ - $ - $ - $ -
15 Total Indebtedness $ - $ - $ - $ - $ - $ -
16 Net Results of Operations $ 437,198 $ 1,289,595 $ 1,258,985 $ 1,357,477 $ 1,463,153 $ 1,576,694 Line Description Fiscal Year Ending June 30
D - 3

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CITY OF HEMET, CA APPENDIX D

WATER & WASTEWATER SYSTEM

PROJECTED OPERATING RESULTS - WASTEWATER
Existing Proposed
2026 2026 2027 2028 2029 2030 Line Description Fiscal Year Ending June 30

RESERVE FUND BALANCE ACTIVITY
Operating Fund - Wastewater
17 Beginning Fund Balance $ 10,112,979 $ 10,112,979 $ 9,722,574 $ 9,217,559 $ 8,607,073 $ 7,882,315 18 Deposit/(Withdrawal) from Operations 437,198 1,289,595 1,258,985 1,357,477 1,463,153 1,576,694 19 Cash Funded Capital Projects From CIP (1,680,000) (1,680,000) (1,764,000) (1,967,963) (2,187,911) (2,424,935) 20 Ending Fund Balance $ 8,870,177 $ 9,722,574 $ 9,217,559 $ 8,607,073 $ 7,882,315 $ 7,034,074 21 Targeted Fund Balance $ 1,766,604 $ 1,766,604 $ 1,854,939 $ 1,947,687 $ 2,045,073 $ 2,147,328 22 Variance $ 7,103,572 $ 7,955,969 $ 7,362,619 $ 6,659,385 $ 5,837,242 $ 4,886,746 23 Days Cash on Hand 904 991 894 795 694 590
24 Targeted Days Cash on Hand 180 180 180 180 180 180
D - 4

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27368 Via Industria, Suite 200
Temecula, CA 92590
800.755.6864 | Fax: 888.326.6864
www.willdan.com

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NOTICE OF PUBLIC HEARING REGARDING

PROPOSED CHANGES TO WATER AND SEWER RATES
Hearing Date & Time: February 10, 2026, 6:00 PM
Hearing Location: Hemet Public Library, Second Floor
300 East Latham Avenue, Hemet, California 92543
Why are you receiving this notice?
The City of Hemet (City) is mailing this notice to you because you are a water and/orsewer (wastewater) customer, or record owner of property that receives one or both services. This notice is being provided pursuant to California Constitution Article XIIID (also known as “Proposition 218”), which requires the City to notify property owners and system users (customers) of proposed changes to property-related fees such as those for water or sewer service. This notice describes proposed changes to the rates for these services and provides information about a public hearing to be held on February 10, 2026, at the Hemet Public Library, Second Floor, 300 East Latham Avenue, Hemet, California 92543. If adopted, the proposed rates for water and sewer service will be in effect for the first full billing cycle following March 1, 2026.

What do water and sewer rates fund?
The City operates stable, well-functioning systems that provide water and wastewater service to residents and customers and maintains critical infrastructure that ensures continued uninterrupted service, and safeguards health and safety of the community.

The water production and distribution system covers an area of approximately 5.25 square miles that serves an area from Menlo Avenue on the north to Stetson Avenue on the south, and from Sanderson Avenue to the west to San Jacinto Street to the east. The City relies on groundwater from the Hemet-San Jacinto Groundwater Management Area, supplemented as needed by treated water from the State Water Project. Water production facilities include three operating wells, and four reservoirs. The City also has agreements with EMWD and LHMWD to provide sharing of water supplies during emergencies.

Groundwater is treated at one of two City treatment facilities and distributed via a network of 132.3 miles transmission and distribution pipelines ranging in size from 2 to 14 inches in diameter. Significant portions of the system were built nearly 100 years ago, and many pipelines are past their planned service life and require rehabilitation and/or replacement to maintain system reliability. Newer portions of the system are also approaching the age where they require rehabilitation or extensive maintenance. The City’s Capital Improvement Plan (CIP) identifies several rehabilitation projects needed to maintain a high level of service, however adequate funding is lacking for some critical projects. In addition, wells have been decommissioned in the past due to water quality degradation, lease expiration, and reliability issues, and the current CIP includes projects to restore some of those to service.

The City owns, operates and maintains the wastewater collection system within the developed portion of the City boundaries.

The system consists of 140 miles of sewer mains, over 1,800 sewer manholes, and over 9,600 sewer connections. Wastewater pumping, treatment and disposal is provided through agreement with the Eastern Municipal Water District (EMWD). The wastewater from City-owned collection facilities flows directly into the EMWD system through a series of inter-connections between the two systems and is treated at the EMWD San Jacinto Regional Water Reclamation Facility.

The purpose of a Water and Sewer Rate Study is to evaluate the current financial condition of both utilities, examine the costs necessary to provide service and determine the funding required over the next five years. The result is a recommended plan that ensures each utility fund can meet projected financial obligations, assure continued safe and efficient operations, and maintain sufficient reserves for cash flow management and emergencies. Updating rates to keep up with the costs of providing reliable, high-quality water and wastewater service is a key component of maintaining financial stability of the utilities. Rates for each utility were designed so that revenues from proposed rates do not exceed the amount required to provide the services, nor will rate revenue be used for purposes other than those for which they are imposed.

Why are water and sewer rate changes needed?
The utility rate study and financial plan determined that the City’s current rates are not sufficient to meet increasing costs, including system operations and maintenance, capital improvement projects necessary to ensure uninterrupted service and compliance with regulatory mandates, repair and replacement of aging or worn system components, maintenance of designated reserves and administrative support for operations.

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The City has not increased water or sewer rates since January 2020, while costs have continued to escalate over that same time period. The City has carefully managed revenues and expenses to mitigate the impacts of inflation. However, budget impacts make it necessary to seek increases to the rates. The proposed rates are based on a comprehensive utility rate study and financial plan completed by an independent consultant. This report is available for review with the City Clerk.

The amount of the proposed rates imposed on any parcel or person as an incidence of their property ownership will not exceed the proportional cost of the service(s) attributable to such parcel, and no rate will be imposed for service unless that service is actually used by, or immediately available to, the property owner or customer in question.

How the water and sewer rates are determined and how they work To develop rates that generate sufficient revenue to meet the fiscal and policy objectives of the City for each utility, a determination of the annual revenue requirements from water and sewer rates was completed. As previously mentioned, revenue requirements include projected expenditures for operations, maintenance, repair and replacement of aging system components, equipment and capital projects and funding of designated reserves. Maintaining appropriate reserves is critical to the ability of the City to serve its customers, manage cash flow fluctuations, and respond to unforeseen and unpredictable costs. The reserves may only be used to fund costs associated with those systems.

Revenue requirements were compared to sources of available funds under existing rates during each year of the forecast period, to determine whether projected revenues would be sufficient to meet those requirements. Where a shortage of revenue was found, revenue adjustments were calculated, which if implemented, will provide sufficient revenue to meet those needs.

The City is proposing to implement new water and sewer rates as a series of annual adjustments starting on March 1, 2026, and then each January 1 thereafter until January 2030. The following sections summarize the proposed rates, which will go into effect and remain in effect unless superseded by Council action.

Proposed Monthly Water Rates - March 1, 2026 through January 1, 2030 Proposed water rates consist of 1) a monthly fixed charge for all customersthat varies based on meter size and isthe minimum amount a customer will pay regardless of the amount of water used; and 2) a uniform volumetric rate per 100 cubic feet (100 cubic feet = 1 unit of water = 748 gallons) for customers based upon monthly metered use. The fixed charge recovers fixed costs of maintaining and operating utility infrastructure and facilities, while the volumetric rate recovers variable costs of pumping, treating, and distributing water. The rate structure was designed so that each customer will be charged an amount that represents their proportional share of the City’s cost of serving them, based on their demand and usage characteristics.

Please note: The rates shown above for the Calendar Year beginning January 1, 2026 will be implemented beginning March 1, 2026.

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Drought Surcharge for Water
The City adopted a Water Shortage Contingency Plan (WSCP) in compliance with California Water Code Section 10632, to prepare for and respond to water shortages due to drought. All California urban water suppliers are required to prepare and adopt a WSCP as part of their Urban Water Management Plan.

The provisions of the WSCP take effect upon a declaration of a water shortage made by resolution of the City Council.

Recommendations for the implementation of the WSCP shall be brought to the City Council when the City Manager, upon engineering analysis of water supplies, or due to regulatory requirements, notices, or orders, finds and determines that a water shortage emergency exists or is imminent within the City water service area. The WSCP shall remain in effect for the duration of the water shortage or until rescinded by the Council.

The analysis and proposed drought surcharge water rates shown here reflect drought rates per 100 cubic feet that would go into effect for WSCP stages 2 through 5. These Drought Surcharge rates are intended to ensure adequate revenue is recovered through the rates under reduced water demand periods at each stage. The surcharges are calculated using the same cost-ofservice approach employed for the basic water rates and reflect percentage reductions in water use at each drought stage and the proportional cost of providing water to customers at varying stages of reduced demand. Regardless of the drought stage enacted, only the volumetric rate per 100 cubic feet will be affected. Monthly fixed charges will remain unchanged from the Proposed Monthly Water Rates table on the previous page of this notice. As with basic water rates, revenues generated through the Drought Surcharge will only be used to fund costs associated with the provision of water service.

Proposed Monthly Drought Rates - March 1, 2026 through January 1, 2030 Proposed Monthly Sewer Rates - March 1, 2026 through January 1, 2030 Proposed sewer rates consist of 1) monthly fixed charges for all customers per sewage and stormwater unit, regardless of usage, that recover fixed costs for operation and maintenance of sewer collection and conveyance facilities. Rates were designed so that each customer will be charged an amount proportional to the cost of serving them, based on their demand and usage characteristics. In addition, as shown in the following table, customers receive charges from EMWD for treatment and disposal of wastewater. The EMWD charges were not reviewed or analyzed as part of this study for the City, are not being changed pursuant to this notice and scheduled public hearing and are shown here for informational purposes only.

Please note: The rates shown above for the Calendar Year beginning January 1, 2026 will be implemented beginning March 1, 2026.

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Impact on your water and sewer bill
Per the proposed rates effective March 1, 2026, the combined water and sewer bill for a typical single-family home using 800 cubic feet of water per monthly billing period would increase from $121.05 currently, to $123.24 per monthly billing period.

The accompanying graph provides a summary of existing and proposed rates under various usage scenarios.

How do you file a protest or participate in the public hearing? The City will consider the new water and sewer rates at a Public Hearing on Tuesday, February 10, 2026, at 6:00 p.m. at the Hemet Public Library, Second Floor, 300 East Latham Avenue, Hemet, California 92543. You are invited to present oral or written testimony at the Public Hearing. Any owner, or customer of record, of a parcel subject to the proposed rates may submit a written protest against the proposed rate revisions. If written protests are filed for a majority of the affected parcels, the proposed rates will not be adopted. If you do not object to the proposed rate revisions to fund the operation, maintenance, and capital improvements for City water and wastewater services, you do not need to take any action.

In order for a written protest to be counted, it must include the following: a statement indicating that the identified property owner or customer of record is in opposition to the proposed water or sewer rate changes; the street address or Assessor's Parcel Number (APN) for the parcel(s) with respect to which the protest is made; and the name and signature of the owner or customer. Protests may be mailed to: City Clerk, City of Hemet City Hall, 445 East Florida Avenue, Hemet CA 92543, or hand delivered to the City Clerk at the same address, prior to 2:00 p.m. on February 10, 2026, or hand delivered to the City Clerk at the Public Hearing on February 10, 2026, at the Hemet Public Library, Second Floor, Hemet, CA.

To be counted, a signed written protest must be received by the City Clerk before the conclusion of the Public Hearing.

Protests submitted via e-mail or other electronic means will not be accepted. For any written protest, whether mailed or submitted in person to the City Clerk, please identify on the front of the envelope that the enclosed protest is for the Public Hearing on the Proposed Rate Changes – Water and Sewer Rates.

The City Council will consider all written and oral protests related to the proposed rate changes at the Public Hearing. Oral comments at the Public Hearing will not qualify as formal protests unless accompanied by a written protest. Upon the conclusion of the Public Hearing, there will be no more written protests accepted and no more testimony taken, and the City Council will consider adoption of the proposed rates described in this notice. If written protests, as outlined above, are not presented by a majority of property owners or customers of record, the City Council will be authorized to adopt the proposed rates. While both property owners and customers of record may submit written protests, only one protest will be counted for each parcel. If adopted, the rates for water and sewer service will be in effect beginning March 1, 2026.

In accordance with Government Code section 53759, there is a 120-day statute of limitations for challenging any new, increased, or extended fee or charge, commencing from the later of the effective date of the new rates or of the date of the final passage, adoption, or approval of the resolution adopting the new rates. $101.89
$121.05
$159.37
$178.53
$104.05
$123.24
$161.58
$180.76
$-
$20.00
$40.00
$60.00
$80.00
$100.00
$120.00
$140.00
$160.00
$180.00
$200.00
400 CF 800 CF 1600 CF 2000 CF
Existing Bill Proposed Bill

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City of Hemet
City Council Meeting

An Urgency Ordinance of the City Council of the City of Hemet, California, Amending Hemet Municipal Code Section 62-16(n) to Extend the Deadline for the Trash Enclosure Upgrade Program from January 1, 2026, to January 1, 2028
RECOMMENDED ACTION:

It is respectfully recommended that the City Council:

Adopt, by at least a four-fifths vote, an Urgency Ordinance of the City Council of the City of Hemet, California, Amending Hemet Municipal Code Section 62-16, Subsection (n), to Extend the Deadline for the Trash Enclosure Upgrade Program from January 1, 2026, to January 1, 2028.

BACKGROUND:

The City Council previously adopted the Trash Enclosure Upgrade Program to encourage existing commercial and certain residential properties in the City to upgrade their trash enclosures to the current standards set forth in the Hemet Municipal Code. The provisions established a compliance deadline of January 1, 2026, to upgrade or retrofit trash enclosures consistent with the City’s design and operational standards.

Since adoption, the City has implemented a Trash Enclosure Pilot Program and coordinated with affected commercial centers, property managers, and waste-hauling providers to facilitate compliance, as well as seeking competitive bids from contractors to perform this work on a bulk basis.

These efforts revealed that many existing developments face practical and logistical barriers, including contractor availability and affordability, as well as physical site constraints such as utility clearances, ADA path-of-travel, and fire-lane conflicts.

Without a deadline extension, numerous properties would face imminent non-compliance on January 1, 2026, exposing property owners to enforcement action, appeals, and operational disruption of solid-waste service.

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ANALYSIS:

The proposed ordinance extends the compliance date from January 1, 2026 to January 1, 2028 while retaining all substantive enclosure design, health, and safety standards. This limited amendment provides time for phased implementation and continued coordination between property owners, contractors, and City staff.

Because the City Council’s final regular meeting of 2025 occurs on December 9, 2025, and a nonurgency ordinance would not become effective until 30 days after adoption, after the current compliance date, urgency adoption is necessary to ensure the ordinance takes effect immediately on January 1, 2026.

DISCUSSION:

The urgency ordinance includes detailed findings supporting the immediate preservation of the public peace, health, and safety.

The ordinance does not weaken any substantive requirements, it simply provides an additional twoyear compliance window to allow for a controlled, safe, and effective implementation period.

STRATEGIC PLAN INTEGRATION:

N/A
FISCAL IMPACT:

There is no direct fiscal impact to the City’s General Fund. Indirectly, the extension may reduce enforcement costs by minimizing premature citations and appeals.

ALTERNATIVE(S):

The City Council could take no action, which would cause the current compliance deadline to lapse on January 1, 2026 and subject numerous properties to enforcement exposure.

ATTACHMENT(S):

Attachment 1 - Hemet Ordinance - Trash Enclosure Extension

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CITY OF HEMET ORDINANCE NO. XXXX 1
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CITY OF HEMET

HEMET, CALIFORNIA
ORDINANCE NO. xxxx

AN URGENCY ORDINANCE OF THE CITY COUNCIL OF THE CITY OF

HEMET, CALIFORNIA, AMENDING HEMET MUNICIPAL CODE
SECTION 62-16, SUBSECTION (n), TO EXTEND THE DEADLINE FOR THE TRASH ENCLOSURE UPGRADE PROGRAM FROM JANUARY 1,
2026, TO JANUARY 1, 2028
WHEREAS, Chapter 62 of the Hemet Municipal Code governs solid waste handling and related standards within the City; and
WHEREAS, Hemet Municipal Code (“HMC”) section 62-16 establishes requirements for refuse and recycling areas and enclosures, and subsection (n) currently provides that, effective January 1, 2026, all existing developments (with specified residential exceptions) must comply with Section 62-16 and Section 90-1428 of Chapter 90 (Zoning), Article XL (Off-Street Parking) (the City’s “Trash Enclosure Upgrade Program”); and
WHEREAS, since the adoption of these requirements, the City has implemented a Trash Enclosure Pilot Program and engaged with local businesses and property owners, identifying supply-chain, cost, design, and site-constraint challenges affecting timely compliance for many existing developments; and
WHEREAS, extending the compliance date will provide additional time for phased design, financing, and construction, while preserving the City’s ability to enforce enclosure standards and the Community Development Director’s discretion to grant adjustments or exceptions in appropriate cases; and

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CITY OF HEMET ORDINANCE NO. XXXX 2
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WHEREAS, the City Council desires to extend the deadline in HMC section 62- 16(n) from January 1, 2026, to January 1, 2028, to facilitate orderly implementation and improved outcomes without weakening the substantive standards.

NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF HEMET,
CALIFORNIA, DOES HEREBY ORDAIN AS FOLLOWS:

SECTION 1. Municipal Code Amendment. Hemet Municipal Code section 62- 16, subsection (n), is amended in its entirety to read as follows:
(n) Effective January 1, 2028, all existing developments, except single-family or multifamily residential development projects that do not necessitate communal or shared trash and recycling areas/containers, must also comply with the provisions of this section and section 90-1428 (trash enclosure upgrade program) of chapter 90 (zoning), article XL (off-street parking). The regulations in this section and section 90-1428 apply to refuse and recycling areas not accessible to the public and used exclusively by the tenants/owners of the development site. The community development director, or their designee, shall have the discretion, as outlined in this section and section 90-1428, to provide adjustments or exceptions to assist existing businesses with compliance with the city’s trash enclosure upgrade program.

SECTION 2. CEQA.

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CITY OF HEMET ORDINANCE NO. XXXX 3
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SECTION 3. Severability.

SECTION 4. Repeal of Inconsistent Provisions.

All provisions of the Hemet Municipal Code, resolutions, or City Council policies that are in conflict with the provisions of this Ordinance are, to the extent of such conflicts, hereby repealed or superseded.

SECTION 5. Codification.

SECTION 6. Effective Date.

This Urgency Ordinance shall take effect immediately upon adoption by at least a four-fifths vote of the City Council.

SECTION 7. Certification and Publication.

The City Clerk shall certify the passage of this Ordinance and shall cause the same to be published as required by law.

SECTION 8. Urgency Findings.

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The City Council finds and declares that the immediate preservation of the public peace, health, and safety requires this ordinance to take effect immediately, based on the following facts:

Existing Compliance Date. Hemet Municipal Code (HMC) section 62- 16(n) currently requires specified existing developments to comply with refuse and recycling enclosure requirements by January 1, 2026.

Council Action Timing. The City Council is considering this ordinance on December 9, 2025, the final regular meeting of calendar year 2025. If adopted as a non-urgency ordinance, it would not become effective for 30 days, resulting in effectiveness after the current compliance date has passed.

Immediate Risk of Non-Compliance. Absent immediate effectiveness, extending the compliance date to January 1, 2028, numerous properties will become non-compliant on January 1, 2026, precipitating abrupt enforcement exposure, appeals, and operational disruptions for solid-waste service at affected sites.

Public Health and Safety Impacts. Sudden non-compliance at commercial and multi-tenant properties risks impacting public health and safety and diverting code enforcement and public safety resources.

Documented Implementation Constraints. The City, businesses, and property owners face ongoing design delays, contractor and material availability constraints, and site-specific conflicts (utilities, access, and fire/life-safety clearances) that necessitate an extension of implementation of HMC sections 62- 16 and 90-1428.

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Orderly, Safe Transition. Immediate effectiveness will avoid a compliance “cliff,” ensure consistent application of the Community Development Director’s adjustment/exception authority, and provide time for safe, coordinated upgrades that maintain sanitary and fire-safe conditions.

No Relaxation of Standards. This ordinance only revises a compliance date; it does not weaken or repeal any health, safety, or design standards, nor authorize construction. Existing protections and enforcement tools remain in place during the extended period.

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CITY OF HEMET ORDINANCE NO. XXXX 6
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INTRODUCED, APPROVED, AND ADOPTED at the regular meeting of Hemet City Council on December 9, 2025, by at least four-fifths vote of the City Council. _________________________
Jackie Peterson, Mayor
ATTEST:
_________________________
John Paul Maier, City Clerk

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CITY OF HEMET ORDINANCE NO. XXXX 7
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State of California )
County of Riverside )
City of Hemet )
I, John Paul Maier, City Clerk of the City of Hemet, do hereby certify that the foregoing Ordinance is the actual Ordinance adopted by the City Council of the City of Hemet and was passed at a regular meeting of the City Council on the 9th day of December, 2025.

AYES: Council Members:

NOES: Council Members:

ABSTAIN: Council Members:

ABSENT: Council Members:
_________________________________
John Paul Maier, City Clerk

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Hemet City CouncilDecember 9, 2025

Hemet City Council
December 9, 2025