REPORT ON SEWER RATE STUDY
AND PROPOSED RATE INCREASE
MARCH 4, 2025
Item 11.2
• CITY OF NATIONAL CITY MUNICIPAL SEWER SYSTEM
• Collection system only
– Miles of Pipe – approximately 100
– Customers
Residential – 14,627
Commercial – 2,851
• Metropolitan Joint Powers Authority (Metro JPA) member • Treatment by the City of San Diego (Metro)
• LAST NATIONAL CITY RATE STUDY: 2017
• Adopted Rates for FY 2018 through FY 2023
• FY 2023 Extended rates with no increase for 2 years
• FY 2026 – FY 2030 rates proposed to increase by 3% per year for Single Family and Multifamily Properties
Background
• CITY HAS SIGNIFICANT CAPITAL NEEDS FOR THEIR SYSTEM
• Aging System
• Increased Densification
• INCREASED OPERATION & MAINTENANCE TO MEET REGULATORY
REQUIREMENTS (State and Federal laws)
• PERSONNEL COSTS INCREASED
• GENERAL INFLATIONARY IMPACTS
• TREATMENT COST INCREASES FROM METRO & THE CITY OF SAN DIEGO
PURE WATER PROGRAM
What Has Changed?
• EVALUATE THE ADEQUACY OF PROJECTED REVENUES UNDER EXISTING
CHARGES
• DEVELOP A WASTEWATER COST OF SERVICE AND RATE MODEL FOR BOTH OPERATIONS AND CAPITAL OVER A 5-YEAR TIMEFRAME (FY2026 TO FY2030) • EVALUATE AND ALLOCATE REVENUE REQUIREMENTS ACROSS THE
VARIOUS CUSTOMER CLASSES PROPORTIONATELY
• DEVELOP A 5-YEAR SEWER SERVICE CHARGE THAT IS ANTICIPATED TO
PRODUCE SUFFICIENT REVENUE TO MEET THE OPERATION &
MAINTENANCE AS WELL CAPITAL NEEDS
• QUANTIFY APPROPRIATE RESERVE LEVELS
Goals of the Rate Study
Revenue Requirement Analysis
Compares the sources of funds (revenue) to
the expenses of the utility to determine the
overall rate adjustment required
Cost of Service Analysis
Allocates the revenue requirements to the
various customer classes of service in a "fair
and equitable manner
Rate Design Analysis
Considers both the level and structure of the
rate design to collect the target level of
service
Rate Study Process
Major Cost Components of the City of National
City’s FY 2026 Revenue Requirements
National City Annual Sources and Uses of
Funds vs. Cash Reserves and Reserves Targets
Components of FY 2026 Single Family
Monthly Rate
Recommended Annual Revenue
Adjustment
FY 2026 National City Single Family
Rate vs. FY 2025 Metro Agencies
Average Metro FY
2025 Monthly Rate:
$62.21/month
National City 15%
lower than Average
Metro FY 2025 Rate
• THE CITY HAS AN ADMINISTRATIVE POLICY FOR FINANCIAL SERVICES – “POLICY 201 MAINTENANCE OF RESERVE FUNDS”
• THE CITY’S RESERVE POLICY GENERALLY PROTECTS THE FINANCIAL
INTEGRITY OF THE SEWER SERVICE FUND
• CAPITAL RESERVES WILL FLUCTUATE BEFORE THEY NORMALIZE
OVER TIME WITH REVENUES AND EXPENSES
• MINOR CHANGES ARE RECOMMENDED IN ORDER TO HAVE
SUFFICIENT RESERVES TO MEET THE FUNDING NEEDS FOR CURRENT
AND FUTURE SEWER CIP PROJECTS
Policy 201 –Revisions Recommended
• Sewer Service Fund Operations/Cash Flow Reserve: between 25& At least 50% of a single year’s budgeted Sewer Service Fund Operating Expenditures.
• Sewer Service Fund Metro Cash Flow Reserve: an amount equal to the City’s estimated portion of the projected cash needs for capital costs of the San Diego Metropolitan Sewerage’s Wastewater Treatment Program. This amount is assumed to be $850,000 for fiscal year 2025-26 through fiscal year 2029-30 • Sewer Service Fund Emergency/Natural Disaster Reserve: an amount equal to a minimum of 15% of a single year’s budgeted Sewer Service Fund operating expenditures, including both operational and capital improvement program costs.
• Sewer Service Fund Capital Replacement Reserve: an amount equal to between 10% & 15% of a single year’s budgeted Sewer Service Fund operating expenditures user fees. • Sewer Service Fund Capital Expansion Reserve: an amount equal to between 10% & 15% of a single year’s budgeted Sewer Service Fund operating expenditures user fees.
Recommended Reserve Policy Revisions
• PURSUANT TO STATE PROP 218 – ANY INCREASE TO SEWER RATES REQUIRE
NOTIFICATION OF ALL PROPERTY OWNERS
• MAILERS WILL BE SENT OUT 45 DAYS PRIOR TO A PUBLIC HEARING • FIRST READING AND PUBLIC HEARING AT MAY 6TH CITY COUNCIL MEETING • where protest votes are counted and heard in public
• SECOND READING AND ADOPTION ON MAY 20TH –
• If approved to proceed at the First Reading
• 30 DAYS AFTER SECOND READING THE ORDINANCE WILL BE IN EFFECT • IF APPROVED, NEW RATES WILL BE INCLUDED ON THE 2025-2026 TAX ROLL Public Noticing & Rate-setting Process
THE FOLLOWING ARE ACTIONS RECOMMENDED FOR THE CITY COUNCIL
OF THE CITY OF NATIONAL CITY TO TAKE BASED ON THE RESULTS OF THE 2025 CITY OF NATIONAL CITY SEWER RATE STUDY:
1. Accept the sewer rate study;
2. Approve revisions to policy No. 201 Maintenance of Reserve Funds; and
3. Schedule a public hearing and directing staff to mail out a notice of public hearing as required by proposition 218
Recommended City Council Actions