CITY OF
LANCASTER
SEWER SERVICE CHARGE REPORT AND
COST OF SERVICE ANALYSIS
FISCAL YEARS 2026-27 THROUGH 2030-31
May 2026
Prepared by
Harris & Associates
101 Progress, Suite 250
Irvine, CA 92618
www.weareharris.com
Sewer Service Charge Report and Cost of Service Analysis Fiscal Years 2026-27 through 2030-31
City of Lancaster
SEWER SERVICE CHARGE REPORT AND COST OF SERVICE ANALYSIS FOR FISCAL YEARS 2026-27 THROUGH 2030-31
City of Lancaster
State of California
I HEREBY CERTIFY THAT THE ENCLOSED SEWER SERVICE CHARGE REPORT AND COST OF SERVICE ANALYSIS,
TOGETHER WITH SEWER SERVICE CHARGE ROLL THERETO ATTACHED, WAS APPROVED AND CONFIRMED BY THE CITY COUNCIL OF THE CITY OF LANCASTER, CALIFORNIA, AND FILED WITH ME ON THE _____ DAY OF ____________, 2026.
_________________________________
ANDREA ALEXANDER, CITY CLERK
CITY OF LANCASTER
LOS ANGELES COUNTY, CALIFORNIA
Sewer Service Charge Report and Cost of Service Analysis Fiscal Years 2026-27 through 2030-31
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TABLE OF CONTENTS
Executive Summary ................................................................................................................................. iv 1 Introduction ......................................................................................................................................0
1.1 Purpose ................................................................................................................................................0
1.2 Background ..........................................................................................................................................0
1.3 Scope of Analysis and Data Sources ....................................................................................................0
1.4 Proposition 218 Requirements ............................................................................................................1 2 Financial Planning Assumptions ..........................................................................................................2
2.1 Planning Period ....................................................................................................................................2
2.2 Inflation Assumptions ..........................................................................................................................2
2.3 Debt Service .........................................................................................................................................2
2.4 Reserve Policies ...................................................................................................................................2
2.5 Interest Earnings ..................................................................................................................................3
2.6 Capital Funding Strategy ......................................................................................................................4
2.7 Growth Assumptions ...........................................................................................................................4 3 Overview of Sewer System .................................................................................................................5 4 Capital Improvement Program ...........................................................................................................6
4.1 Capital Improvement Program ............................................................................................................6
4.2 Existing User vs Growth-Related Capital .............................................................................................7 5 Revenue Requirement Analysis ..........................................................................................................8
5.1 Operations and Maintenance Costs ....................................................................................................8
5.2 Administrative Costs ............................................................................................................................8
5.3 Capital Replacement and Asset Management Costs ...........................................................................8
5.4 Reserve Funding ..................................................................................................................................9
5.5 Total Revenue Requirement ............................................................................................................. 10
5.6 Five-Year Financial Forecast ............................................................................................................. 11 6 Customer Classification & Sewer Demand Analysis ........................................................................... 12
6.1 Customer Classifications /Land Use Summary ................................................................................. 12
6.2 Wastewater Demand Characteristics ............................................................................................... 13
6.3 Sewer Unit (SU) Methodology .......................................................................................................... 13 Sewer Service Charge Report and Cost of Service Analysis Fiscal Years 2026-27 through 2030-31
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6.4 Customer Demand Allocation Factors .............................................................................................. 13 7 Cost of Service Analysis .................................................................................................................... 15
7.1 Cost Allocation Methodology ........................................................................................................... 15
7.2 Existing Sewer Service Charges ........................................................................................................ 15
7.3 Proportional Cost Allocation............................................................................................................. 15 8 Service charge Design & Proposed Service Charges ........................................................................... 17 9 Sewer Service Charges Comparison .................................................................................................. 19 10 Proposition 218 Compliance Findings ............................................................................................... 20 11 Sewer Service Area .......................................................................................................................... 21
Tables
Table 1. Inventory of Existing Improvements ............................................................................................... 5 Table 2: Estimated Capital Improvement Program Costs ............................................................................. 7 Table 3: Estimated Annual Capital Replacement Costs by Asset Type ......................................................... 9 Table 4: Estimated Annual Revenue Requirement ..................................................................................... 10 Table 5: Five-Year Revenue and Expense Projection .................................................................................. 11 Table 6: Summary of Parcels and Existing Sewer Units by Land Use .......................................................... 12 Table 7: Total Proposed Sewer Units by Customer Class ........................................................................... 14 Table 8: Calculation of Sewer Service Charge Unit Service Charge ............................................................ 17 Table 9: Typical Annual Sewer Service Charges by Customer Class ........................................................... 17 Table 10: Typical Annual Sewer Service Charges by Customer Class ......................................................... 19
Appendices
Appendix A – Sewer Unit Tables
Appendix B – Sewer System History & Service Area Map
Appendix C – Proposed Sewer Service Charge Roll
Sewer Service Charge Study Report
Lancaster Sewer Service Charge Update
City of Lancaster
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EXECUTIVE SUMMARY
The City of Lancaster has prepared this Sewer Service Charge Study to evaluate the financial requirements of the City’s wastewater collection system and to develop updated sewer service charges that equitably recover the cost of providing sewer service in compliance with Article XIII D of the California Constitution (Proposition 218).
The City owns, operates, and maintains approximately 440 miles of sewer pipelines, 9,300 manholes, and associated wastewater collection infrastructure serving developed residential, commercial, industrial, institutional, and other properties within the sewer service area. Wastewater collected within the City is conveyed to regional treatment facilities operated by the Los Angeles County Sanitation Districts.
The City’s existing sewer service charges are no longer sufficient to fully support the long-term costs of operating, maintaining, rehabilitating, and replacing the wastewater collection system. Increasing operating costs, aging infrastructure, inflation, and ongoing capital reinvestment needs have resulted in a projected funding shortfall under existing sewer service charges.
This study evaluates the City’s revenue requirements over a five-year planning period from Fiscal Year 2026– 27 through Fiscal Year 2030–31. The analysis includes projected operating and maintenance costs, capital rehabilitation and replacement funding, reserve requirements, debt service obligations, and offsets from non-service charge revenues.
Cost-of-Service Methodology
The proposed sewer service charges are developed using a cost-of-service methodology based on estimated wastewater demand. Sewer system costs are allocated among customer classes using “sewer units,” where one sewer unit represents the estimated wastewater generation of a typical single-family residential dwelling.
Wastewater generation factors for other land uses are based on regional wastewater loading data, industry- standard engineering assumptions, and parcel-level land use information. This approach ensures that sewer system costs are allocated proportionally based on estimated use of the wastewater collection system.
Vacant and undeveloped parcels that do not currently generate wastewater flow were excluded from the charge calculation, as they do not place demand on the existing wastewater collection system.
Revenue Requirement and Service Charge Structure
The proposed sewer service charges are designed to generate sufficient revenue to:
fund ongoing operation and maintenance of the wastewater collection system; support long-term rehabilitation and replacement of aging infrastructure; maintain prudent operating and capital reserves;
meet existing debt service obligations; and
ensure continued regulatory compliance and reliable service delivery.
Sewer Service Charge Study Report
Lancaster Sewer Service Charge Update
City of Lancaster
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The total revenue requirement is allocated across customer classes based on estimated sewer units, and a uniform cost per sewer unit is developed. Each parcel’s annual charge is calculated by multiplying its assigned sewer unit factor by the adopted service charge per sewer unit.
Capital and Reserve Funding
The financial plan includes funding for long-term capital reinvestment and prudent reserve levels to ensure system reliability and financial stability. Capital improvements are funded primarily through pay-as-you-go financing supported by annual revenues and accumulated capital reserves.
Growth Costs
Costs associated with future development and system expansion are not included in the proposed sewer service charges. Growth-related facilities and capacity costs are intended to be funded separately through connection fees, capacity charges, developer-funded improvements, or other applicable growth funding mechanisms.
Proposition 218 Compliance
The proposed sewer service charges are intended to comply with the requirements of Article XIII D of the California Constitution because:
revenues will not exceed the cost of providing sewer service; revenues will be used exclusively for wastewater-related purposes; charges are based on a proportional cost-of-service methodology tied to estimated wastewater generation;
costs associated with future growth are excluded from the service charge calculation and funded separately; and
charges do not include costs associated with general governmental services.
Service Charge Impact Summary
Based on the cost-of-service analysis presented in this report, the proposed sewer service charges result in an estimated unit service charge of $164.70 per sewer unit per year. For a typical single-family residential customer assigned one sewer unit, this equates to an estimated annual sewer service charge of $164.70, or approximately $13.73 per month.
The proposed service charges reflect the cost of providing wastewater collection services, including operations, maintenance, capital rehabilitation and replacement, reserve funding, and debt service obligations.
Summary
This Sewer Service Charge Study provides the technical basis for the City’s proposed sewer service charges and supports the required Proposition 218 noticing, protest process, and public hearing prior to service charge adoption. The proposed service charges are designed to ensure long-term financial sustainability while equitably allocating costs among users based on wastewater demand.
This summary is provided for informational purposes. The detailed technical analysis supporting the proposed sewer service charges is contained in Sections 1 through 11 of this report Sewer Service Charge Report and Cost of Service Analysis Fiscal Years 2026-27 through 2030-31
City of Lancaster
0 1 INTRODUCTION
1.1 Purpose
This Sewer Service Charge Study has been prepared for the City of Lancaster (“City”) to evaluate the adequacy of existing sewer service charges and to develop updated service charges that equitably recover the cost of providing wastewater collection and conveyance services.
The study evaluates the City’s projected operating costs, capital improvement needs, reserve requirements, and customer wastewater demand characteristics over a multi-year planning horizon. The proposed sewer service charges are intended to provide sufficient revenue to operate, maintain, repair, rehabilitate, and replace the City’s wastewater collection system in a financially sustainable manner.
The proposed service charges are based on estimated wastewater demand by customer class and are designed to comply with the substantive requirements of Article XIII D of the California Constitution (Proposition 218), including the requirement that revenues derived from sewer service charges not exceed the funds required to provide the service and that charges be proportional to the cost of service attributable to each parcel or customer class.
This report serves as the technical basis for the proposed sewer service charges and the associated Proposition 218 notice and public hearing process.
1.2 Background
The City of Lancaster owns, operates, and maintains the Lancaster Sanitary Sewer Collection System, which serves residential, commercial, industrial, institutional, and other developed properties within the City’s sewer service area.
The City assumed responsibility for operation and maintenance of the sewer collection system on July 1, 2008, following withdrawal from the Consolidated Sewer Maintenance District of Los Angeles County.
Sewer service charges are used to fund the operation, maintenance, repair, and replacement of sewer infrastructure and related wastewater collection services.
Since the City assumed responsibility for the sewer system, the system has continued to expand through private development and capital improvement projects. At the same time, aging infrastructure, increasing maintenance needs, inflationary pressures, and evolving regulatory requirements have increased the cost of providing reliable sewer service.
This study evaluates the City’s current and projected financial needs and develops updated sewer service charges intended to support long-term system reliability, regulatory compliance, and financial sustainability.
1.3 Scope of Analysis and Data Sources
Sewer Service Charge Report and Cost of Service Analysis Fiscal Years 2026-27 through 2030-31
City of Lancaster
1 This study incorporates available financial, operational, infrastructure, and customer data provided by the City, together with industry-standard engineering and financial planning assumptions where detailed information was not available.
Key elements of the analysis include:
Evaluation of operating and maintenance costs;
Review of capital improvement and rehabilitation needs; Development of reserve funding targets;
Projection of future revenue requirements;
Evaluation of customer classifications and wastewater demand characteristics; and Development of cost-based sewer service charges.
Primary sources used in the analysis include:
City adopted budgets and capital improvement programs; Sewer System Management Plan (SSMP) documents and audits; GIS infrastructure data;
Sewer system annual reports;
Los Angeles County Sanitation District loading factors and sewer unit classifications; Assessor parcel and land use information; and
Information provided by City staff.
This study is intended to establish reasonable and proportional sewer service charges based on the best available information at the time of preparation. Actual future revenues and expenditures may vary due to changes in customer demand, inflation, regulatory requirements, emergency repairs, and capital project delivery schedules.
1.4 Proposition 218 Requirements
Article XIII D of the California Constitution, commonly referred to as Proposition 218, establishes substantive and procedural requirements applicable to property-related fees, including sewer service charges.
Under Proposition 218:
Revenues derived from sewer service charges shall not exceed the funds required to provide wastewater service;
Revenues shall be used only for purposes related to wastewater service; Charges imposed on a parcel or customer class shall not exceed the proportional cost of service attributable to that parcel or customer class; and
Agencies must provide written notice, conduct a public hearing, and consider protests prior to adopting increased charges.
The sewer service charges developed in this study are based on estimated wastewater demand characteristics and are intended to proportionally allocate wastewater system costs among customer classes in a manner consistent with Proposition 218 requirements.
Sewer Service Charge Report and Cost of Service Analysis Fiscal Years 2026-27 through 2030-31
City of Lancaster
2 2 FINANCIAL PLANNING ASSUMPTIONS
2.1 Planning Period
This study evaluates the financial needs of the sewer utility over a five-year planning horizon from Fiscal Year 2026–27 through Fiscal Year 2030–31. The planning period is intended to support long-term financial stability while minimizing significant year-to-year service charge fluctuations.
2.2 Inflation Assumptions
Projected operating and capital costs were escalated annually to reflect anticipated increases in labor, materials, utilities, equipment, contracted services, and construction costs. For planning purposes, this study assumes an annual inflation rate of approximately 3 percent, consistent with recent municipal utility and construction cost trends in California.
Annual adjustments to adopted sewer service charges may be tied to the Consumer Price Index for All Urban Consumers (CPI-U) for the Los Angeles-Long Beach-Anaheim region, subject to City Council approval and any limitations identified in the Proposition 218 notice.
Any future annual inflationary adjustments would be limited to the maximum adjustment authority identified in the Proposition 218 notice and would remain subject to applicable legal requirements and City Council approval.
2.3 Debt Service
Debt service obligations include scheduled principal and interest payments associated with prior sewer system capital improvements. Debt service payments are included in the revenue requirement analysis as legally obligated costs of providing sewer service.
This study assumes no additional debt issuance during the planning period. Future financing options may be evaluated as part of future capital planning efforts if significant infrastructure investments are required.
2.4 Reserve Policies
The City maintains reserve funds within the sewer enterprise to support operational stability, emergency response, capital reinvestment, and long-term financial sustainability.
The primary reserve categories evaluated in this study include:
Operating reserves - funds maintained to provide sufficient liquidity for routine operations, unexpected expenses, emergency response activities, and short-term cash flow fluctuations within the sewer enterprise fund. These reserves provide a financial buffer to address timing differences between revenue collection and operating expenditures, unanticipated maintenance or repair needs, equipment failures, regulatory compliance issues, and other unforeseen operational conditions.
Sewer Service Charge Report and Cost of Service Analysis Fiscal Years 2026-27 through 2030-31
City of Lancaster
3 Maintaining operating reserves supports continuity of service, financial stability, and prudent utility management practices by reducing the risk of operational disruptions or sudden and significant service charge increases resulting from unexpected expenditures. Industry utility practices commonly maintain operating reserves ranging from approximately 10 to 50 percent of annual operating and maintenance expenditures, depending on system characteristics, financial condition, revenue stability, and operational risk exposure.
For purposes of this study, the City evaluated an operating reserve target equivalent to approximately 20 percent of annual operating and maintenance expenditures. This reserve level is intended to provide a reasonable balance between financial stability, emergency response capability, cash flow management, and property owner impacts. Capital reserves - funds maintained to support the rehabilitation, replacement, renewal, and reinvestment needs of the City’s wastewater collection infrastructure. Capital reserves provide financial flexibility to address major repair and replacement needs, reduce reliance on debt financing, and support implementation of the City’s long-term capital improvement and asset management programs.
The City’s wastewater system includes aging infrastructure assets that require ongoing rehabilitation and replacement over time to maintain system reliability, reduce the risk of sanitary sewer overflows, and support compliance with applicable regulatory requirements.
Because capital expenditures can vary significantly from year to year, maintaining capital reserves allows the City to accumulate funding for planned infrastructure reinvestment and emergency capital repairs in a financially sustainable manner.
Industry utility practices commonly maintain capital reserve funding levels based on anticipated capital reinvestment needs, system age and condition, asset management objectives, and long- term financial planning considerations.
For purposes of this study, the City evaluated a capital reserve target equivalent to approximately 20 percent of the annual Capital Improvement Program funding level. This reserve target is intended to provide reasonable financial flexibility for planned and unplanned capital expenditures while supporting long-term infrastructure sustainability and minimizing significant service charge volatility.
Reserve targets were evaluated in consideration of the City’s financial policies, operational characteristics, infrastructure condition, and industry utility planning practices.
2.5 Interest Earnings
Interest earnings on available fund balances and reserves provide a modest source of non-rate revenue to the sewer enterprise fund. For planning purposes, this study assumes conservative investment earnings based on typical public agency investment practices and current market conditions.
Projected interest earnings are applied as an offset to the overall sewer revenue requirement.
Sewer Service Charge Report and Cost of Service Analysis Fiscal Years 2026-27 through 2030-31
City of Lancaster
4 2.6 Capital Funding Strategy
The City’s capital funding strategy emphasizes long-term infrastructure sustainability while minimizing reliance on debt financing. Existing infrastructure capital improvements are intended to be funded primarily through a combination of annual service charge revenues, accumulated reserves, and pay-as- you-go financing.
The financial plan includes funding for ongoing rehabilitation and replacement of aging sewer infrastructure in order to reduce the risk of system failures, emergency repairs, and service disruptions.
2.7 Growth Assumptions
This study incorporates reasonable assumptions regarding customer growth, wastewater demand growth, and future development within the sewer service area.
Growth-related capital improvements are intended to be funded separately through connection fees, capacity charges, developer-funded improvements, or other applicable growth funding mechanisms.
Accordingly, the proposed sewer service charges are intended to recover the cost of serving existing customers and maintaining the existing sewer system.
Sewer Service Charge Report and Cost of Service Analysis Fiscal Years 2026-27 through 2030-31
City of Lancaster
5 3 OVERVIEW OF SEWER SYSTEM
The City’s wastewater collection system includes approximately 440 miles of sewer pipelines, approximately 9,300 manholes, and a sewer lift station. Wastewater collected within the City is conveyed to facilities operated by the Los Angeles County Sanitation Districts for treatment.
The sewer system serves residential, commercial, industrial, institutional, and other developed land uses throughout the City’s sewer service area.
Much of the system infrastructure is aging and requires ongoing maintenance, rehabilitation, and replacement to maintain reliable service and regulatory compliance. The City conducts routine cleaning, inspection, repair, and emergency response activities in accordance with its Sewer System Management Plan and industry best practices.
Table 1 summarizes the City’s existing sewer infrastructure inventory.
Table 1. Inventory of Existing Improvements
Infrastructure TypeEstimated QuantityUnitSewer Pipe6 inch 2,632 LF8 inch 1,897,651 LF10 inch 124,759 LF12 inch 110,151 LF14 inch 1,086 LF15 inch 104,654 LF18 inch 32,558 LF21 inch 15,628 LF24 inch 4,933 LF28 inch 1,331 LF30 inch 50 LFSewer Laterals4" Lateral (average length 35LF) 38,553 EASewer Manholes48-inch Manhole 9,290 EA54-inch Manhole 5 EA60-inch Manhole 2 EASewer Lift StationsSubmersible Pump 437 gpm, 20HP 2 EAWet Well 6-foot diameter 1 EAAve H-8 abd 35th St. E Lift Station 1 EADiesel Standby Generator Set 1 EA Sewer Service Charge Report and Cost of Service Analysis Fiscal Years 2026-27 through 2030-31
City of Lancaster
6 4 CAPITAL IMPROVEMENT PROGRAM
4.1 Capital Improvement Program
The City’s Capital Improvement Program (CIP) includes planned rehabilitation, replacement, and improvement projects necessary to maintain the long-term reliability and functionality of the wastewater collection system.
Planned capital improvements may include:
Sewer pipeline rehabilitation and replacement;
Manhole rehabilitation;
Lift station improvements;
Emergency repair projects; and
System modernization and asset management improvements.
The City intends to implement a phased Rehabilitation and Replacement (“R&R”) Program to address aging infrastructure, deferred maintenance, and identified system deficiencies within the wastewater collection system. Rather than undertaking full system-wide replacement at one time, capital replacement funding generated through the sewer service charge will be allocated based on an asset management prioritization framework over time to the highest-priority assets based on condition, risk of failure, operational impacts, regulatory requirements, and available funding.
The R&R Program is intended to provide a structured and financially sustainable approach to infrastructure reinvestment by prioritizing rehabilitation and replacement activities that maintain system reliability, reduce the risk of sanitary sewer overflows, extend useful asset life, and support compliance with State wastewater regulations. Projects may include sewer main rehabilitation or replacement, manhole rehabilitation, lift station improvements, spot repairs, and other related system improvements identified through CCTV inspections, maintenance records, SSMP implementation activities, and asset management evaluations.
Because the City’s wastewater system contains significant long-term reinvestment needs, annual funding levels will be balanced with ratepayer impacts, operational priorities, and the City’s ability to effectively deliver capital projects. Accordingly, annual R&R expenditures may vary from year to year due to project scheduling, asset condition, inflation, funding availability, and emergency repairs. Funds accumulated for capital replacement purposes may be retained in designated reserves until sufficient funding is available to efficiently implement priority projects or programs.
This phased approach allows the City to incrementally improve system condition while maintaining financial stability and avoiding significant fluctuations in annual sewer service charges.
Table 2 summarizes current and projected estimated capital improvement program costs.
Sewer Service Charge Report and Cost of Service Analysis Fiscal Years 2026-27 through 2030-31
City of Lancaster
7 Table 2: Estimated Capital Improvement Program Costs
4.2 Existing User vs Growth-Related Capital
This study distinguishes between capital costs associated with maintaining existing system capacity and costs associated with serving future growth and development.
Costs associated with rehabilitation, replacement, and maintenance of existing infrastructure are included in the sewer service charge analysis. Costs associated with future growth-related capacity improvements are anticipated to be funded separately through connection fees, developer-funded improvements, or other growth-related funding mechanisms.
This distinction is intended to support compliance with Proposition 218 by ensuring that existing customers are not charged for costs attributable to future development.
Project # Project Name FY2022-23 FY2023-24 FY2024-25 FY2025-26Annual EstimateCP12SR001 Manhole and Sewer Line Repairs 230,000.00$ -$ -$ -$ -$ CP13SR001 Sewer Condition Assessment/Lift Station & Force Main 300,000.00$ -$ -$ -$ -$ CP15ST058 Lancaster Health District -$ -$ 200,000.00$ -$ -$ Future Rehabilitation and Replacement Program -$ -$ -$ -$ 500,000.00$ 530,000.00$ -$ 200,000.00$ -$ 500,000.00$ Sewer Service Charge Report and Cost of Service Analysis Fiscal Years 2026-27 through 2030-31
City of Lancaster
8 5 REVENUE REQUIREMENT ANALYSIS
5.1 Operations and Maintenance Costs
Operations and maintenance costs include the day-to-day expenses required to safely and reliably operate the City’s wastewater collection system. These costs include staffing, utilities, routine sewer cleaning, inspection activities, emergency repairs, regulatory compliance, equipment maintenance, contracted services, customer service, and administrative support.
The City currently performs ongoing sewer cleaning and inspection activities consistent with Sewer System Management Plan requirements and industry practices. Additional maintenance and rehabilitation activities may be required over time as infrastructure ages and system demands increase.
Projected operating costs are based on historical expenditures, adopted budgets, current service levels, and anticipated operational enhancements.
5.2 Administrative Costs
Administrative and regulatory costs include billing, accounting, financial reporting, regulatory compliance, permitting, customer service, and general program administration necessary to support operation of the sewer utility.
These costs are necessary components of providing wastewater service and are appropriately included within the sewer enterprise revenue requirement.
5.3 Capital Replacement and Asset Management Costs
Capital replacement costs represent the long-term funding necessary to rehabilitate and replace aging sewer infrastructure assets over time. The capital replacement analysis was developed using a lifecycle- based infrastructure funding approach that estimates the long-term annualized cost of rehabilitating and replacing existing wastewater system assets over their projected useful lives. Under this methodology, estimated replacement costs for major asset categories were annualized over the estimated service life of each asset type to calculate an equivalent annual replacement funding need.
This approach provides a reasonable planning-level estimate of long-term infrastructure reinvestment requirements and supports development of sustainable sewer service charges intended to fund ongoing rehabilitation and replacement of aging wastewater infrastructure over time. The analysis is intended to support long-term financial planning and asset management and does not represent a project-specific replacement schedule.
Table 3 summarizes estimated annual capital replacement funding needs based on the City’s existing infrastructure inventory, estimated useful lives, and typical replacement costs.
Sewer Service Charge Report and Cost of Service Analysis Fiscal Years 2026-27 through 2030-31
City of Lancaster
9 Table 3: Estimated Annual Capital Replacement Costs by Asset Type
The annual funding equivalents shown in Table 3 represent planning-level estimates of the average annual reinvestment funding necessary to sustain the City’s wastewater collection infrastructure over the long term.
5.4 Reserve Funding
The revenue requirement analysis includes funding for operating and capital reserves necessary to support the financial stability, operational reliability, and long-term sustainability of the City’s wastewater collection system.
Consistent with the reserve planning assumptions described in Section 2.4, the analysis includes:
an operating reserve target equivalent to approximately 20 percent of annual operating and maintenance expenditures; and
a capital reserve target equivalent to approximately 20 percent of annual Capital Improvement Program funding levels.
Reserve funding is intended to support cash flow stability, emergency response capability, infrastructure reinvestment, and financial flexibility associated with planned and unplanned wastewater system expenditures.
Sewer Service Charge Report and Cost of Service Analysis Fiscal Years 2026-27 through 2030-31
City of Lancaster
10 Reserve funds generated through sewer service charges will remain within the sewer enterprise fund and will be used solely for wastewater-related purposes.
5.5 Total Revenue Requirement
The total annual revenue requirement includes projected operating and maintenance costs, capital program funding, reserve contributions, debt service obligations, and other allowable wastewater system expenses, less projected non-service charge revenues such as interest earnings, inspection fees, and connection-related revenues.
Projected revenue requirements were developed over the five-year planning period to support long- term financial sustainability and minimize significant service charge fluctuations. Table 4 summarizes the estimated annual revenue requirement needed to fund current and anticipated sewer program expenditures.
Table 4: Estimated Annual Revenue Requirement
ExpensesFY23/24 ActualFY24/25 ActualFY25/26 BudgetEstimated Annual Cost Enhanced1Operating Expenses 5,268,027$ 4,825,158$ 4,363,465$ 5,751,262$ Salary and Benefits22,561,304$ 2,693,612$ 2,081,728$ 3,188,228$ Administrative Overhead1,686,377$ 1,380,779$ 1,203,541$ 1,243,258$ Government Fees/Licenses24,178$ 25,929$ 28,250$ 29,182$ Electric5,787$ 8,808$ 12,000$ 12,396$ Equipment Rentals14,359$ -$ 10,450$ 10,795$ Fuel64,983$ 52,540$ 44,900$ 46,382$ Operating Materials and Supplies19,085$ 45,685$ 57,200$ 59,088$ Repair & Maintenance Supplies47,422$ 52,632$ 128,500$ 132,741$ Special Activity Supplies1,761$ 469$ 600$ 620$ Vehicles327,531$ -$ -$ -$ Vehicles/Equipment/Inventory310,627$ 298,692$ 417,761$ 431,547$ Water for flushing8,486$ 11,867$ 17,000$ 17,561$ Uniforms21,135$ 18,596$ 20,575$ 21,254$ Training Program14,554$ 39,703$ 66,209$ 68,394$ Professional/Technical Services160,437$ 195,847$ 274,750$ 283,817$ Sewer Inspection (CCTV) Program Enhancement3-$ -$ -$ 27,000$ Deferred PM Program Enhancement4-$ -$ -$ 179,000$ Capital Replacement Costs5-$ -$ -$ 2,000,000$ Capital Improvement Program300,420$ 3,420$ -$ 500,000$ Debt Service-$ -$ -$ -$ Administrative Costs (3% of Operating Expenses)-$ -$ -$ 172,538$ Operating Reserves (20% of Operating Expenses)-$ -$ -$ 1,150,252$ Capital Reserves (20% of CIPs)-$ -$ -$ 100,000$ Total Expenses 5,568,447$ 4,828,578$ 4,363,465$ 9,674,053$ Notes:12345Includes reduced Capital Replacement Program.Based on FY2025-26 Approved Budget with annual increase based on CPI-U for Los Angeles-Long Beach-Anaheim as published by the U.S. Bureau of Labor Statistics, maintenance program enhancements, and CIPs per City's Proposed FY 2025-26 Budget.Includes enhancements consisting of new positions: Assistant Manager and two Utility Maintenance Worker I/II position in Year 1, two Utility Maintenance Worker I/II in Year 2, and one Lead Utility Maintenance Worker in Year 4.Includes enhancement of annual LF inspected to meet typical best practice of 10-year cycle for inspections.Includes enhancement of deferred maintenance due to previous budgetary constraints.
Sewer Service Charge Report and Cost of Service Analysis Fiscal Years 2026-27 through 2030-31
City of Lancaster
11 5.6 Five-Year Financial Forecast
A five-year financial forecast was prepared to evaluate the long-term financial sustainability of the sewer utility and to ensure that projected revenues remain sufficient to fund anticipated operating, maintenance, capital, and reserve obligations throughout the planning period. The forecast incorporates projected operating costs, capital improvement funding, capital replacement contributions, reserve targets, inflationary adjustments, debt service obligations, and estimated non-service charge revenues.
The forecast is intended to demonstrate that the proposed sewer service charges will provide stable and adequate funding for ongoing wastewater collection system operations while supporting long-term rehabilitation and replacement of aging infrastructure.
Table 5 presents the estimated five-year revenue and expense projection for the sewer program based on the recommended level of service and financial planning assumptions described in this report.
Revenues collected in excess of current-year expenditures may be retained in reserve funds and applied solely toward future eligible sewer system costs.
Table 5: Five-Year Revenue and Expense Projection
Sewer Service Charge Report and Cost of Service Analysis Fiscal Years 2026-27 through 2030-31
City of Lancaster
12 6 CUSTOMER CLASSIFICATION & SEWER DEMAND ANALYSIS
6.1 Customer Classifications /Land Use Summary
Land use classifications were developed using Assessor parcel information, City records, and other available land use data. Customer classes within the sewer service area include residential, multi-family residential, commercial, industrial, institutional, and other land use categories.
Because vacant and undeveloped parcels do not currently generate wastewater flow or place demand on the existing wastewater collection system, no proportional cost of service is attributable to such parcels at this time.
Future development-related costs associated with undeveloped properties are anticipated to be funded separately through connection fees, capacity charges, developer-funded improvements, or other applicable growth-related funding mechanisms.
Table 6 summarizes the existing land use classifications within the sewer service area, including parcel counts, acreage, and currently assigned sewer units based on the City’s existing methodology.
Table 6: Summary of Parcels and Existing Sewer Units by Land Use
Land Use ParcelsResidential UnitsArea (Acres)Sewer Units (Existing)ResidentialSingle Family 37,520 37,520 7,627 37,469.6 Condominium 1,180 1,180 3,755 1,179.0 Mobile Home Park 29 29 309 2,607.5 Multi-Family - 2 units 372 744 105 740.0 Multi-Family - 3 units 148 444 33 436.0 Multi-Family - 4 units 127 508 36 508.0 Multi-Family - 5+ units 160 419 8,040.5 Residential Sub-total 39,536 40,425 12,284 50,980.6 Non-ResidentialCommercial 1,026 1,680 4,161.0 Industrial 76 146 557.5 Cemetery 2 1 2.0 Hospital 14 33 478.0 Hotel/Motel/Resorts 23 35 933.0 School 14 57 151.5 Non-Residential Sub-total: 1,155 1,952 6,283.0 VacantVacant/Exempt 104 185 221.0 Vacant 292 398 285.7 Vacant Sub-total 396 583 506.7 TOTAL 41,087 14,819 57,770.2 Sewer Service Charge Report and Cost of Service Analysis Fiscal Years 2026-27 through 2030-31
City of Lancaster
13 6.2 Wastewater Demand Characteristics
Different land uses generate wastewater at varying volumes and characteristics. Wastewater demand characteristics considered in this study include estimated flow generation, customer type, land use intensity, and other wastewater demand factors relevant to sewer system usage.
Where appropriate, loading factors and wastewater generation estimates were developed using available Los Angeles County Sanitation District data and industry-standard planning assumptions. These wastewater generation factors were reviewed for reasonableness against historical sewer unit assignments, regional agency practices and available wastewater planning data.
6.3 Sewer Unit (SU) Methodology
A sewer unit (“SU”) is a standardized measure of wastewater demand used to allocate sewer system costs proportionally among customer classes. Because different land uses generate wastewater at varying volumes and intensities, a common unit of measure is necessary to equitably distribute the cost of operating, maintaining, rehabilitating, and replacing the wastewater collection system.
For purposes of this study, one sewer unit is defined as the estimated wastewater flow generated by a typical single-family residential dwelling unit. Consistent with methodologies used by the Consolidated Sewer Maintenance District of Los Angeles County (CSMD) and the Los Angeles County Sanitation Districts (LACSD), a single-family residence is estimated to generate approximately 260 gallons per day (GPD) of wastewater flow.
Estimated wastewater generation factors for other land uses were developed using published LACSD loading characteristics and standard industry references. Depending on the land use type, sewer units may be assigned based on dwelling units, building square footage, number of rooms or beds, seating capacity, acreage, or other relevant measures of wastewater generation.
This flow-based methodology allocates costs proportionally based on estimated demand placed on the sewer collection system and supports compliance with Proposition 218 requirements that sewer service charges not exceed the proportional cost of service attributable to each parcel.
6.4 Customer Demand Allocation Factors
Sewer unit factors were applied to parcels within the sewer service area to estimate total wastewater demand by customer class. Estimated sewer units were then used as the basis for allocating sewer system costs proportionally among benefiting parcels and customer classes.
Supporting sewer unit calculations and land use loading factors are provided in Appendix A. These wastewater generation factors were applied to parcels within the sewer service area to estimate the total sewer units attributable to each land use classification, as summarized in Table 7.
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14 Table 7: Total Proposed Sewer Units by Customer Class
Only developed parcels that currently receive or contribute wastewater flow to the City’s sewer collection system were included in the sewer unit allocation analysis.
The proposed sewer unit totals differ from existing assigned units due to updated land use classifications, removal of non-contributing parcels, and application of revised wastewater loading factors.
Land Use ParcelsArea (Acres)Sewer Units (Proposed)Percentage by AreaResidentialSingle Family 37,520 7,627 37,082.00 64.3%Condominium 1,180 3,755 884.25 1.5%Mobile Home Park 29 309 1,622.10 2.8%Multi-Family - 2 units 372 105 446.40 0.8%Multi-Family - 3 units 148 33 266.40 0.5%Multi-Family - 4 units 127 36 304.80 0.5%Multi-Family - 5+ units 160 419 4,895.40 8.5%Residential Sub-total 39,536 12,284 45,501.35 78.9%Non-ResidentialCommercial 1,026 1,680 9,216.56 16.0%Industrial 76 146 724.32 1.3%Cemetery 2 1 5.71 0.0%Hospital 14 33 1,334.13 2.3%Hotel/Motel/Resorts 23 35 716.35 1.2%School 14 57 201.65 0.3%Non-Residential Sub-total: 1,155 1,952 12,198.73 21.1%VacantVacant/Exempt 104 185 - Vacant 292 398 - Vacant Sub-total 396 583 - TOTAL 41,087 14,819 57,700.08 100.0%Note: several properties are currently under development, resulting in parcel counts and acreages that may not exactly match recent sewer service information.
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15 7 COST OF SERVICE ANALYSIS
7.1 Cost Allocation Methodology
The City’s wastewater collection system costs are primarily driven by the volume and intensity of wastewater conveyed through the system. These costs include system operations, cleaning, inspection, maintenance, rehabilitation, replacement, and regulatory compliance activities necessary to collect and convey wastewater generated by connected properties. Accordingly, estimated wastewater flow generation was determined to be the most reasonable and proportional basis for allocating sewer system costs among customer classes.
The sewer service charges developed in this study are based on a proportional cost-of-service methodology intended to allocate wastewater system costs based on estimated customer demand characteristics.
Under this approach:
A sewer unit represents the estimated wastewater contribution of a typical single-family residence;
Other land uses are assigned proportional sewer unit factors based on estimated wastewater generation; and
Sewer system costs are allocated proportionally based on estimated wastewater demand.
This methodology is intended to reasonably reflect the relationship between customer wastewater generation and the cost of providing sewer service.
7.2 Existing Sewer Service Charges
The City’s existing sewer service charges are based on sewer unit classifications originally established following the City’s assumption of sewer system operations in 2008. Existing charges are calculated by multiplying the applicable sewer unit factor for a parcel’s land use classification by the adopted sewer service charge per sewer unit.
The existing sewer service charge structure has remained substantially unchanged for many years despite increasing operating costs, aging infrastructure needs, and inflationary pressures.
7.3 Proportional Cost Allocation
The proposed sewer service charges allocate costs proportionally among customer classes based on estimated wastewater demand characteristics and relative sewer system usage.
The cost allocation methodology considers:
Estimated wastewater flow generation;
Relative sewer system demand by land use;
Ongoing operation and maintenance requirements;
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16 Capital rehabilitation and replacement needs; and
Other costs necessary to provide wastewater collection and conveyance services.
The proposed charges are intended to ensure that each customer class pays no more than its proportional share of the cost of providing sewer service.
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17 8 SERVICE CHARGE DESIGN & PROPOSED SERVICE CHARGES
The proposed sewer service charges were developed by dividing the total annual revenue requirement by the total estimated sewer units within the sewer service area to determine the cost per sewer unit as shown in Table 8.
Table 8: Calculation of Sewer Service Charge per Sewer Unit
Each parcel’s annual sewer service charge is calculated by multiplying the applicable sewer unit factor by the adopted cost per sewer unit.
Annual Sewer Service Charge = Unit of Basis x SU x Annual Unit Service Charge For example:
Single Family Residential = 1 Parcel x 1.00 SU x $164.70 = $164.70 Commercial Shopping Center = (10,000 Sq Ft ÷ 1,000) x 1.25 SU x $164.70 = $2,058.75 Commercial Office Building = (8,000 Sq Ft ÷ 1,000) x 0.77 SU x $164.70 = $1,014.55 Table 9 illustrates the estimated annual sewer service charges for representative land uses based on the proposed sewer unit methodology and calculated sewer service charges.
Table 9: Typical Annual Sewer Service Charges by Customer Class
Item AmountAnnual Revenue Requirement $9,503,331Total Sewage Units 57,700.08 Rate per SU $164.7022Land UseProposed Annual Service Charge BasisSU (per Unit of Basis)Typical Use (per Unit of Basis)Current Annual Sewer Service Charge for Typical UseEscalated Annual Sewer Service Charge1SU Associated with Typical UseEnhanced Sewer Program with Capital Repl.ResidentialSingle Family Per Parcel 1.00 1 $78.00 $115.88 1.00 $164.70Condominium Dwelling Unit 0.75 50 $78.00 $115.88 37.50 $6,176.33Mobile Home Park No. of Spaces 0.60 50 $3,900.00 $5,793.95 30.00 $4,941.07Multi-Family - 2 units Per Parcel 1.20 1 $156.00 $231.76 1.20 $197.64Multi-Family - 3 units Per Parcel 1.80 1 $234.00 $347.64 1.80 $296.46Multi-Family - 4 units Per Parcel 2.40 1 $312.00 $463.52 2.40 $395.29Multi-Family - 5+ units Dwelling Unit 0.60 50 $3,900.00 $5,793.95 30.00 $4,941.07Non-ResidentialCommercial Per 1,000 SqFt 0.1 to 10.38 20000 $546.00 $811.15 7.60 $1,251.74Industrial Per 1,000 SqFt 0.1 to 0.77 20000 $390.00 $579.40 15.40 $2,536.41Cemetery Per 1,000 SqFt 0.38 7500 $78.00 $115.88 6.00 $988.21Hospital Bed 1.92 200 $3,900.00 $5,793.95 384.00 $63,245.64Hotel/Motel/Resorts Room 0.48 50 $3,120.00 $4,635.16 24.00 $3,952.85School 1,000 SqFt 0.77 15300 $390.00 $579.40 11.78 $1,940.36Notes:1 Current annual sewer service charge escalated from July 2008 to February 2026 using CPI-U for LA-Long Beach-Anaheim.
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18 This approach proportionally allocates wastewater system costs among customer classes based on estimated wastewater demand and supports compliance with Proposition 218 cost-of-service requirements.
The parcel-level sewer service charge roll identifying proposed charges by Assessor Parcel Number is provided in Appendix C.
Any future annual inflationary adjustments to adopted sewer service charges may be tied to the Consumer Price Index for All Urban Consumers (CPI-U) for the Los Angeles-Long Beach-Anaheim region, and would remain subject to applicable legal requirements and City Council approval.
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19 9 SEWER SERVICE CHARGES COMPARISON
A benchmarking analysis was conducted to compare the City’s proposed sewer service charges with wastewater charges adopted by selected Southern California agencies providing similar collection and/or treatment services as shown in Table 10.
Table 10: Benchmark Comparison of Annual Sewer Service Charges
The benchmarking analysis is provided for informational purposes only and was not used as the basis for establishing the proposed sewer service charges.
Agency BasisMonthly ChargeAnnual ChargeCity of Lancaster (Current) SU $78.00City of Lancaster (Current Escalated) SU $115.88City of Lancaster Proposed SU $164.70City of Palmdale SU $103.63City of Santa ClaritaSFDU1$57.56$690.72Inland Empire Utilities Agency EDU $27.02 $324.24Eastern Municipal Water District2EDU$43.51$522.12Yucaipa Valley Water District EDU $47.72 $572.64Notes:1 SFDU - Single Family Dwelling Units2 Varies by Area ($1.219 to $2.274 per EDU per day) Sewer Service Charge Report and Cost of Service Analysis Fiscal Years 2026-27 through 2030-31
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20 10 PROPOSITION 218 COMPLIANCE FINDINGS
The proposed sewer service charges satisfy the substantive requirements of Article XIII D of the California Constitution because:
Revenues derived from the charges are not anticipated to exceed the funds required to provide wastewater service;
Revenues will be used only for wastewater-related purposes; Charges are allocated proportionally based on estimated wastewater demand characteristics; Vacant and undeveloped parcels that do not currently generate wastewater flow or place demand on the existing wastewater collection system had no proportional cost of service attributed to them at this time.
Costs associated with future growth are funded separately through connection fees, developer- funded improvements, or other growth-related funding mechanisms where appropriate; and The proposed charges do not include costs associated with general governmental services.
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21 11 SEWER SERVICE AREA
The sewer service area generally includes developed properties within the City of Lancaster that are connected to and receive wastewater collection and conveyance service from the City’s sewer system.
Vacant or undeveloped parcels that are not currently generating wastewater flow were not included in the proposed sewer service charge analysis.
Parcel identification information used in this report is based on Los Angeles County Assessor parcel data available at the time the analysis was prepared.
A sewer service area map is provided in Appendix B.
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APPENDIX A – SEWER UNIT TABLES
Land Use Unit of MeasureFlow (GPD)Sewage UnitResidentialSingle Family Home Parcel 260 1.00Duplex Parcel 312 1.20Triplex Parcel 468 1.80Fourplex Parcel 624 2.40Condominiums Dwelling Unit 195 0.75Single Family Home (reduced rate) Parcel 156 0.60Five Units or More Dwelling Unit 156 0.60Mobile Home Parks No. of Spaces 156 0.60Non-ResidentialCommercial:Animal Kennels 1000 ft² 100 0.38Auditorium, Amusement 1000 ft² 350 1.35Auto Sales/Repair 1000 ft² 100 0.38Bowling/Skating Club 1000 ft² 150 0.58Car Wash Tunnel - Recycling 1000 ft² 2700 10.38Car Wash Wand 1000 ft² 700 2.69Church 1000 ft² 50 0.19Club 1000 ft² 125 0.48Financial Institution 1000 ft² 100 0.38Golf Course, Camp, and Park (Structures and Improvements)1000 ft² 100 0.38Health Spa, Gymnasium With Showers 1000 ft² 600 2.31Indoor Theatre 1000 ft² 125 0.48Lumber Yard 1000 ft² 25 0.10Mortuary/Cemetery 1000 ft² 100 0.38Office Building 1000 ft² 200 0.77Open Storage 1000 ft² 25 0.10Professional Building 1000 ft² 300 1.15 Recreational Vehicle Park No. of Spaces 55 0.21Restaurant 1000 ft² 1000 3.85Service Shop 1000 ft² 100 0.38Service Station 1000 ft² 100 0.38Shopping Center 1000 ft² 325 1.25Store 1000 ft² 100 0.38Supermarket 1000 ft² 150 0.58Warehousing 1000 ft² 25 0.10Wholesale Outlet 1000 ft² 100 0.38Industrial:Dry Manufacturing 1000 ft² 25 0.10Manufacturing 1000 ft² 200 0.77Mortuary/Cemetery1000 ft² 100 0.38Hospital Bed 500 1.92Hotel/Motel/Rooming House Room 125 0.48School:College/University Student 20 0.08Private School 1000 ft² 200 0.77Vacant/Exempt (no wastewater generation) - 0 0 Sewer Service Charge Report and Cost of Service Analysis Fiscal Years 2026-27 through 2030-31
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APPENDIX B – SEWER SYSTEM HISTORY & SERVICE AREA MAP
Sewer System History
On April 2, 1979, the City of Lancaster authorized inclusion of certain territories within the Consolidated Sewer Maintenance District of Los Angeles County (“CSMD”) for purposes of sewer system maintenance and servicing.
In 2006, the State of California implemented updated Waste Discharge Requirements (“WDRs”) applicable to owners and operators of sanitary sewer systems. Because the City owned the local sewer infrastructure while the CSMD provided system maintenance and operations, the City evaluated alternatives for providing direct operation and maintenance of the wastewater collection system in order to improve operational coordination, regulatory compliance, and overall system management.
A Sewer Feasibility Study was subsequently prepared and presented to the City Council in December 2006.
Based on the findings of the study, the City Council authorized withdrawal from the CSMD and directed staff to prepare for direct operation and maintenance of the City’s wastewater collection system effective July 1, 2008.
To support operation, maintenance, rehabilitation, and replacement of the wastewater collection system, the City established sewer service charges pursuant to applicable provisions of the California Constitution and Lancaster Municipal Code. In accordance with Proposition 218 requirements, notices were mailed to affected property owners and a public hearing was conducted prior to adoption of the sewer service charges.
The City’s sewer service charge structure was based on sewer units (“SU”), which allocate costs proportionally based on estimated wastewater demand characteristics. A single-family residential dwelling unit serves as the base unit and is assigned one sewer unit.
In January 2008, the City established the Utility Services Division to oversee operation, maintenance, and management of the Lancaster Sanitary Sewer Collection System (“LSSCS”). On July 1, 2008, the City formally assumed responsibility for operation and maintenance of the wastewater collection system.
At the time of system transfer, the wastewater collection system included approximately 429 miles of sewer pipelines and approximately 8,965 manholes. Since that time, the system has continued to expand through private development, capital improvement projects, and additional customer connections.
The City currently owns, operates, and maintains the wastewater collection system serving developed properties within the sewer service area. Sewer service charges are used exclusively for wastewater- related purposes, including operation, maintenance, inspection, repair, rehabilitation, replacement, regulatory compliance, and related sewer system activities.
Sewer service charges may be collected through the County property tax roll or through direct billing procedures as authorized by the Lancaster Municipal Code.
The City’s wastewater utility is operated in accordance with applicable State regulations, Sewer System Management Plan (“SSMP”) requirements, and industry utility management practices. In general, sewer service charges are intended to provide sufficient funding to:
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support ongoing operation and maintenance of the wastewater collection system; fund rehabilitation and replacement of aging infrastructure; maintain financial stability and reserve funding; and satisfy applicable debt service or regulatory obligations.
Consistent with Article XIII D of the California Constitution, revenues derived from sewer service charges are used solely for wastewater-related services and facilities, and charges are intended to remain proportional to the estimated cost of providing wastewater collection and conveyance service.
Still Meadow Lane Sewer Improvements
Properties located along Still Meadow Lane were previously subject to separate assessments associated with City-financed sewer improvement construction that enabled conversion from private septic systems to public sewer service. Those assessments were levied in addition to annual sewer service charges.
Repayment obligations associated with the Still Meadow Lane sewer improvement financing were satisfied as of Fiscal Year 2023–24. Properties within the area are now subject only to the standard annual sewer service charges applicable to other similarly classified properties within the sewer service area.
Sewer Service Area
The sewer service area generally includes developed properties within the City of Lancaster that are connected to and receive wastewater collection and conveyance service from the City’s sewer system.
Vacant or undeveloped parcels that are not currently generating wastewater flow were not included in the proposed sewer service charge analysis because they do not currently place demand on the wastewater collection system. Future development-related costs are anticipated to be funded separately through connection fees, capacity charges, developer-funded improvements, or other applicable growth- related funding mechanisms.
Parcel identification information used in this report is based on Los Angeles County Assessor parcel data available at the time the analysis was prepared.
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APPENDIX C – PROPOSED SEWER SERVICE CHARGE ROLL