City Council Memorandum
TO: HONORABLE MAYOR AND CITY COUNCIL DATE: SEPTEMBER 22, 2026 FROM: PUBLIC WORKS DEPARTMENT WARDS: ALL
SUBJECT: SEWER SERVICE FIVE-YEAR RATE PLAN PROPOSAL
ISSUE:
Receive a report and set a public hearing for a proposed five-year sewer service rate plan for residential, commercial, institutional, and industrial customers and authorize the preparation and mailing of all documents necessary for public noticing of the rate proposal and public hearing.
RECOMMENDATION:
That the City Council:
Receive a report on a proposed five-year rate plan for residential, commercial, institutional, and industrial sewer services through July 1, 2031; and Direct staff to prepare all documents necessary for public noticing and set a public hearing for sewer rate increases for residential, commercial, institutional, and industrial sewer services through July 1, 2031, on a date at least 45 days after mailing said notice in accordance with Proposition 218.
LEGISLATIVE AND CITY POLICY HISTORY:
Regional Water Quality Control Plant (RWQCP) Regulation Pursuant to the Clean Water Act and California Water Code, the Santa Ana Regional Water Quality Control Board renewed the City of Riverside’s Water Quality Control Plant’s discharge permit (“NPDES Permit”) on November 1, 2013. The NPDES Permit regulates discharges from the RWQCP to the Santa Ana River and requires the City to properly operate and maintain the RWQCP. In 2018, the City applied to renew the NPDES Permit and is still awaiting its issuance. Based on recent local examples, staff anticipate the new permit will be more onerous and require a prioritized and funded equipment rehabilitation and replacement program.
Sewer Collection System Regulation
In 2022, the State Water Resources Control Board adopted renewed requirements for sewer collection systems in California (Order WQ 2022-0103-DWQ). It requires the City to routinely evaluate the condition and capacity of the sewer system, prioritize corrective actions, and implement a capital improvement program (CIP), including timelines and finding to address deficiencies. Notably, the regulation compels agencies to “develop and implement a plan to facilitate adequate local funding” for the management of their sewer systems.
Funding availability has been a recurring point of discussion between the State Water Boards and the regulated community during the development of permits and regulations. Recent permits are more direct than ever – regulated entities such as the City of Riverside are expected to increase revenues and direct any resources necessary to meet its compliance obligations.
Sewer Enterprise Fund Reserve Policy
In November 2016, the City Council adopted a Sewer Enterprise Fund Reserve Policy (Reserve Policy) to establish guidelines which ensure the fiscal stability of the Sewer Enterprise Fund and provide guidance to staff on the Fund’s management. In October 2022, the City Council revised the Reserve Policy to define as a “Reserve Goal” an annual reserve ending balance of at least the Reserve Policy minimum reserve target plus 10%.
Bond Obligations
The City currently has two outstanding bond obligations (2018A and 2025A Bonds) secured by sewer enterprise revenues. As of August 5, 2026, the outstanding balance is $251.9 million. Annual debt service averages $25.6 million from FY 2029-2040, with slightly lower payments, $22.6-$24.9 million between FY 2026-2028 to minimize near-term sewer rate increases on residents while maintaining required minimum debt service coverage ratios. The 2018A Bonds mature in FY 2040, while the 2025A Bonds mature in FY 2041. These bonds were issued to fund major capital improvements to the sewer system, and most notably, the RWQCP.
The City’s Sewer Enterprise currently maintains credit ratings of “AA-” from Standard and Poor’s and an equivalent rating of “Aa3” by Moody’s. These ratings upgraded in 2018 and 2023 reflect strong management, historically healthy reserves and improving debt service coverage ratio. Strong credit enables competitive borrowing for future capital needs and refinancing opportunities.
However, both the debt service coverage and reserve levels are projected to decline sharply. Without the proposed rate increases, the City is at risk of falling below its legally required debt service coverage covenants this Fiscal Year (FY 2026/27), and would be unable to meet full debt service in FY 2027/28. These risks are further defined in the discussion section of this report.
Over the past eight years, City Finance and Sewer staff, supported by its Municipal Advisor NHA Advisors and the City Council, have aggressively and proactively executed several debt management restructuring strategies to avoid emergency rate increases and maintain its legal bond obligations to investors. These opportunities were made possible by favorable market conditions (low interest rates). Without the more than $20 million in near-term savings achieved last May, the Sewer Enterprise’s financial standing would be materially worse.
Key refinancing actions include:
2018, refinancing of the 2009B Bonds, realizing $17.5 million of cash flow savings between FY 2019-26.
Savings were front-loaded using principal deferral, with over $13 million realized in the first five years. 2025, refinancing of the 2015A Bonds, realizing $21 million of cash flow savings through maturity Principal deferral and capitalized interest allowed over $8 million in savings the first 3 years, FY 2026-28.
Even with these measures, the City still required a $4 million transfer from the prior year’s working capital into its rate stabilization fund in FY 2024/25 to remain above minimum coverage. Most available debt-management tools have now been fully exhausted.
As disclosed to investors during the 2025A Bond issuance, a 5-year sewer rate increase was assumed to be initiated in FY 2026/27. The proposed rate increases, while slightly delayed (by 6 months) from the assumptions made during the 2025 bond issuance, should be sufficient to allow the City to meet its coverage requirements in FY 2026/27 and beyond based on the rate consultant projections.
Bond Legal Covenants
The City’s Sewer Bonds include several legal covenants protecting bondholders, primarily the Additional Bonds Test and the Rate Covenant, which require that the City maintain at least 110% debt service coverage (Net Revenues ÷ Annual Debt Service). The City cannot issue any Additional Bonds unless it can demonstrate compliance and falling below 110%, requires immediate rate increases.
Based on the proforma developed by the City’s rate consultant, without rate increases, the City is projected to fall near the minimum debt service coverage this fiscal year FY 2026/27 and would fall well below this threshold by FY 2027/28. Previous risks were mitigated through creative debt restructuring techniques, but these options are now exhausted. Declining debt service coverage metrics and lower reserve levels will place downward pressure on the City’s credit rating.
Credit Rating
The Sewer Enterprise’s strong ratings, (upgraded by S&P in 2018 and Moody’s in 2023) were driven by improved coverage and large reserves. However, coverage is projected to decline from the recent range of 139% to 171% to below 125%/130% in FY 2026, to 110% in FY 2027, and below 100% starting in FY 2028 without any rate increases. Rating agencies were informed during the 2025 credit rating process of the need for a five-year rate increase beginning in FY 2026/27.
Reserves are projected to decline even with rate increases as the team tactically spends to fund critical capital projects, a strategy already communicated to rating agencies in 2025.
A one-notch downgrade (for example “AA-” to “A+”), is estimated to increase borrowing costs from 0.20% to 0.25%, which translates to approximately $2,000-$2,500 in additional interest for every $1 million borrowed, or $60,000 - $75,000 over a 30-year bond. A downgrade by more than one-notch would lead to even larger increases in borrowing costs, potentially doubling or tripling these figures, and would further limit the City’s ability to refinance debt in the future and add borrowing costs to future new financing.
Ultimately, rating agency actions are uncertain, but “willingness to raise rates to meet financial obligations” is a key criterion of scoring methodology. Approving rate increases is both financially necessary and will be viewed positively. Delaying or declining rate increases will significantly weaken the City’s Sewer credit profile, potentially trigger a downgrade and increasing long-term costs for the enterprise and its rate payers.
BACKGROUND:
The Sewer Division is responsible for the collection and treatment of wastewater for over 100,000 customers within City limits. The wastewater collection system consists of over 800 miles of gravity sewers, 400 miles of laterals, and 19 wastewater lift stations.
Through capacity right contracts, the City also provides treatment services for the Rubidoux, Edgemont, and Jurupa Community Service Districts (CSDs) and the community of Highgrove. Flows to the Water Quality Control Plant are distributed across City residential, City commercial, and Community Service District contractual contributions at 68%, 12%, and 20% respectively.
At the end of each year, the City and CSDs reconcile actual treatment costs against projected treatment costs. The reconciliation results in the CSDs being issued a refund for overpayment or an invoice for costs owed to the City. Accordingly, CSDs always pay current treatment costs for service and are thus not subject to the rates discussed in this report.
In 2019, the Sewer Division updated its Integrated Wastewater Master Plan (Master Plan). It evaluated the collection and treatment systems to develop a Capital Improvement Program (CIP) and a rate structure to fund the identified projects. To date, approximately $588M ($2026) in CIP projects from the master plan have not been completed. This translates to a potential annual CIP need of up to $29.4M per year.
Sewer Financial Model Development
A Sewer Financial Model (Model) was developed as part of the Master Plan. Projections and forecasts from the Model are based on reasonable expectations of future requirements, escalation of costs, operating expenditures, and capital needs. It is used to periodically evaluate the financial position of the Sewer Fund, including whether rates are adequate to address current and future operations, maintenance, and capital needs.
Rate History from 2014 to Present
In May 2014, the City Council approved a five-year sewer rate plan of annual 8.5% increases through June 30, 2019. Only four of the five increases were implemented.
In December 2017, due to the Fund’s favorable financial position and reserve levels, the City Council unanimously voted to pause the final increase planned for July 1, 2018. There has not been a sewer rate increase since Fiscal Year 2017/18, as shown in Table 1.
Date:
7/1/14
7/1/15
7/1/16
7/1/17
7/1/18
7/1/19
7/1/20
7/1/21
7/1/22
7/1/23
7/1/24
7/1/25
7/1/26
Adopted
8.5%
8.5%
8.5%
8.5%
8.5%
-
-
-
-
-
-
-
-
Implemented
8.5%
8.5%
8.5%
8.5%
0%
0%
0%
0%
0%
0%
0%
0%
0%
Since 2022 Sewer staff have provided the City Council and City Council committees updates on the Sewer Fund. The City Council reviewed staff’s recommendations on sewer rates and evaluated alternatives to rate increases considering the fragile and uncertain economic conditions during that period. The proposed five-year rate plan is a continuation of those discussions and incorporates feedback provided to staff throughout those efforts.
Interim Efforts to Reduce Rate Pressure and Delay Increases City Council and both Sewer and Finance staff have implemented various interventions to help mitigate the consequences of stagnant revenues, rising costs, and other inflationary pressures. These have also helped maintain low rates and sustain a competitive rate advantage compared to other local municipalities. These interventions are summarized in Table 2 below.
Table 2: Sewer Enterprise Fund Interventions
Intervention
Date
Measure
Estimated Savings/Revenues
Capital Projects
Ongoing
Pared project listing down to minimum mandatory projects. Delayed others TBD
Bond Restructuring
2018
Refi 2009B Bonds; Principal deferral to avoid rate increases & meet bond covenants $17.5M total savings from FY 2019 to FY 2026
Non-rate Revenue
2019
Unused WQCP Property Lease (5 yr.)
$150,000 total
Define Reserve Policy Goal and Utilize Reserves
2022
City Council defined reserve minimum level. Allowed reserves above the minimum to be used for projects Projects completed 35% below estimated costs
Utilize Settlement Funds
2022
City Council authorized use of held settlement funds for projects $15.0M
Grant Award
2022
Digester 5 Rehabilitation
$2.0M
Grant Award
2023
Riverside Bioenergy Facility Development
$10.0M
Chemical Costs
2025
Re-bid bulk chemicals
$620,000 / yr
Chlorine Contact Study & Approval
2025
Optimized disinfection process & received State authorization to reduce chemical use $1.0M / yr
Non-rate Revenue
2025
Unused WQCP Property Lease (3 yr.)
$120,000 total
Bond Restructuring
2025
Refi 2015A Bonds; Principal deferral to avoid rate increases & meet bond covenants $21M total savings ($8M from FY 2026 to FY 2028)
Rate Stabilization Fund
2026
$4M withdrawal from RSF to ensure debt coverage requirements are met $4M additional revenue applied to coverage calc
Capital Improvement Accomplishments from Prior Rate Plan The CIP represents the minimum set of projects required to maintain regulatory compliance, protect treatment reliability, and sustain the longterm performance of Riverside’s aging sewer collection and treatment systems. A stable and adequately funded CIP is essential to ensuring environmental protection, supporting community growth, and avoiding emergency repairs that significantly disrupt other planned work.
Current state regulations for both collection systems and treatment plants now make many capital improvements mandatory rather than discretionary, underscoring the need for consistent funding and timely implementation. Attachment 1, Table 1 summarizes notable capital improvements completed or underway since 2018 and those still needed, Table 2.
Cost of Services Analysis and California Association of Sanitation Agencies Wastewater Study Broadly, sewer rate development involves determining revenues needed, comparing those to existing revenues, evaluating reserve and capital needs, and then designing rates to recover the required revenue. Traditionally this approach has relied on assumptions of flow and loading across individual customer classes to calculate a flat “across the board” rate increase for all.
The California Association of Sanitation Agencies (CASA), which is organized under California Nonprofit Mutual Benefit corporation laws, represents more than 150 public agencies. Over the last decade CASA has led a multi-agency research initiative (CASA Study) to help provide guidance on wastewater flow and concentration assumptions that are commonly used in cost of service studies, to fairly allocate wastewater treatment costs based on flow and concentration and establish defensible sewer capacity and connection fees across California. The results increase the ability of sewer agencies to use more recent data rather than prior assumptions in developing rates, and more accurately consider the collection and treatment demands unique to each customer category.
The proposed five-year Sewer Rate Plan uses a cost of service analysis (COSA) to design rates to appropriately recover the cost for providing sewer service. The COSA compiles the projected costs, and system usage demands (informed by City-conducted flow monitoring data and the CASA Study) across customer categories over the term of the rate plan to calculate the revenue requirement to achieve the necessary funding levels. The projections include costs not only to operate and maintain the sewer collection and treatment systems, but also capital debt service expenses and adjustments to meet minimum reserve levels established by City Council.
DISCUSSION:
Current State of the Sewer Fund
The Sewer Fund remains under significant financial strain due to rising operating, regulatory, and capital costs, while revenues have remained flat for eight years, causing reserves and debtcoverage metrics to continue declining.
The absence of rate increases, ongoing inflation in the general economy, and even higher rates of inflation for chemicals, construction, and equipment have required the sewer fund to absorb 29% in operations and maintenance (O&M) increases along with utilizing the O&M budget to subsidize capital improvements. Additionally, projects have been delayed, shuffled, or reduced in scope as the availability and reach of funding has chronically dwindled.
Cumulatively, these persistent pressures have created an urgent need to consider an updated sewer rate plan as they continue to impair the Sewer Division’s ability to:
Remain adequately prepared for major sewer emergencies; Implement Capital Improvement Program which ensures reliable service for our customers and positions the City for growth; Maintain reserves levels at or above the reserve goal set by City Council; Meet its current bond obligations, and risk its ability to issue additional bonds; Maintain strong financial fundamentals and a stable operating environment to support a high-grade credit rating; and Remain in compliance with current regulatory requirements and proactively plan for future ones due to an increasingly modest and diminishing capital improvement program.
Emergency Preparedness
Riverside’s sewer collection system is aging. The average age of the system is 50 years old, with 55% of the system over 50 years old. Fifty-seven miles of sewer pipe, currently in service, is over 80 years old.
In 2016 the pressurized sewer pipe (force main) which runs under Alessandro Blvd and serves the Orangecrest and Mission Grove neighborhoods failed and spilled 1.5 million gallons of sewage. It failed again in 2017, spilling 580,000 gallons. In 2020 the Magnolia force main serving most of Riverside west of Van Buren Blvd failed and spilled 330,000 gallons of sewage. Repairs required the installation of a liner within the Alessandro and Magnolia force mains at an unplanned cost of $6.5M and $6.6M ($2026) respectively. These projects were necessary to continue reliable sewer service to large portions of the City. The Sewer Fund is not presently positioned to absorb an emergency of similar magnitude without deferring critical projects or destabilizing operating reserves.
Capital Improvement Needs and Regulatory Compliance Implications Attachment 1, Table 2 summarizes the proposed CIP across broad project categories which include 32 individual projects. These projects represent the minimum investment required to maintain service levels, remain in compliance with state and regional regulations, and preserve essential capacity for future growth and development.
Staff believes that the inability to fund a CIP to the satisfaction of the State and Regional Water Quality Control Boards may create an avoidable level of regulatory exposure and uncertainty in the future. Similarly, the inability to advance major projects in response to emergencies would create additional risk.
Overview of Sewer Rate Structure
Revenues generated from the monthly sewer service charge fund the daytoday operations and maintenance of the sewer collection and treatment systems, as well as the replacement of aging infrastructure and maintaining compliance. Sewer rates and sewer capacity fees are designed to distribute the cost of the operation and improvement of the RWQCP equitably among all users.
Residential, and some commercial customers, pay a monthly flat rate whereas other commercial and institutional customers pay based on actual wastewater flows. Monthly billing for industrial customers is based on the amount of flow in hundred cubic feet (CCF), pounds of Chemical Oxygen Demand (COD), and pounds of Total Suspended Solids (TSS) in their waste stream. The City currently has 14 permitted industrial users.
Across all customers, a surcharge is applied in areas where sewer must be pumped to the Water Quality Control Plant versus gravity flow (Attachment 4 shows these “pumping zones”). The surcharge accounts for the incremental operations, maintenance, and utility costs associated with the sewer pump stations. Across residential customers, 27% reside within a pumping zone (26,962 out of 100,020).
Overview of Rate Plan Proposal and Timing
To help ensure emergency preparedness, financial stability, meet regulatory obligations, and fund the capital improvements necessary to maintain Riverside’s aging sewer collection and treatment systems, the Public Works Department developed a fiveyear rate plan that aligns revenues with verified system needs using updated flow and loading assumptions from recent monitoring and the CASA Study.
The Public Works Department Sewer Division is proposing a five-year sewer rate plan which will result in a system average rate increase of 4.2% in January 2027 followed by system average annual rate increases of 7.2% each July through Fiscal Year 2030/31. The proposed adjustments vary across customer classes to reflect actual service demands, incorporate costofservice principles, and maintain fairness in how sewer costs are distributed. The following provides a summary of how the recommended rate plan would affect each major customer category, with specific monthly and annual impacts explained in greater detail in the tables below. The full proposed rate adjustments across all customer categories are provided in Attachment 3.
The proposed rates incorporate updated flow and load assumptions from the CASA Study and specific results from City sampling and monitoring. The updated methodology and data account for the slight variance in percent increase seen across customers and align rates with actual flow and loading by customer category.
Timing for implementation of the recommended rate plan was evaluated using the Financial Model. A delay in implementation would result in continued deferral of capital projects, further draw on reserves, and any future rate increases would likely need to be inflated in the first year whenever implemented. It is projected that delaying the proposed January 2027 initial increase to July 1, 2027, would require an initial increase of 12.5% to offset increases in construction, chemical, disposal, and labor costs reasonably anticipated over the same period and to accelerate the replenishment of reserves.
Proposed Residential Rates
Table 1 below shows the proposed rates for residential customers along with a comparison of Riverside’s rates against most sewer agencies in the greater Southern California region.
Table 1 - Proposed Residential Sewer Service Rate – Single Family Residential Proposed Sewer Service Rates - Residential ($/Month)
Effective
Jan 1, 2027
July 1, 2027
July 1, 2028
July 1, 2029
July 1, 2030
Basic Single Family (non-pumping)
Current Rate = $39.59
$41.36
$44.45
$47.78
$51.35
$55.19
Increase (%)
4.47%
7.47%
7.49%
7.47%
7.48%
Basic Single Family (pumping)
Current Rate = $45.73
$47.51
$50.77
$54.26
$57.99
$61.97
Increase (%)
3.89%
6.86%
6.87%
6.87%
6.86%
Basic Multi-Family (non-pumping)
Current Rate = $35.73
$37.31
$40.07
$43.05
$46.24
$49.67
Increase (%)
4.42%
7.40%
7.44%
7.41%
7.42%
Basic Multi-Family (pumping)
Current Rate = $41.26
$42.84
$45.76
$48.88
$52.22
$55.78
Increase (%)
3.83%
6.82%
6.82%
6.83%
6.82%
Proposed Commercial Rates
Table 2 shows the proposed rates for selected commercial customer classes from Attachment 3.
Table 2 – Proposed Commercial Sewer Service Rates – Selected Commercial & Institutional Proposed Sewer Service Rates – Selected Commercial & Institutional ($/CCF) Effective
Jan 1, 2027
July 1, 2027
July 1, 2028
July 1, 2029
July 1, 2030
Professional Offices (non-pumping)
Current Rate = $2.36
$2.45
$2.61
$2.79
$2.98
$3.18
Increase %
3.81%
6.53%
6.90%
6.81%
6.71%
Professional Offices (pumping)
Current Rate = $2.84
$2.94
$3.14
$3.35
$3.58
$3.81
Increase %
3.52%
6.80%
6.69%
6.87%
6.42%
Restaurants (non-pumping)
Current Rate = $7.64
$7.98
$8.58
$9.22
$9.91
$10.66
Increase %
4.45%
7.52%
7.46%
7.48%
7.57%
Restaurants (pumping)
Current Rate = $8.22
$8.58
$9.22
$9.90
$10.63
$11.42
Increase %
4.38%
7.46%
7.38%
7.37%
7.43%
Hotels & Motels (non-pumping)
Current Rate = $3.50
$3.63
$3.87
$4.13
$4.41
$4.71
Increase %
3.71%
6.61%
6.72%
6.78%
6.80%
Hotels & Motels (pumping)
Current Rate = $4.01
$4.17
$4.45
$4.76
$5.09
$5.44
Increase %
3.99%
6.71%
6.97%
6.93%
6.88%
Recommended Industrial Rates
Table 3 shows the proposed rates for industrial users.
Table 3 – Proposed Industrial Sewer Service Rates
Proposed Sewer Service Rates – Industrial Users
Effective
Jan 1, 2027
July 1, 2027
July 1, 2028
July 1, 2029
July 1, 2030
Flow, per CCF (non-pumping)
Current Rate = $2.440
$2.551
$2.744
$2.952
$3.175
$3.415
Increase %
4.55%
7.57%
7.58%
7.55%
7.56%
Flow, per CCF (pumping)
Current Rate = $3.240
$3.262
$3.506
$3.768
$4.050
$4.354
Increase %
0.68%
7.48%
7.47%
7.48%
7.51%
COD, per pound (non-pumping)
Current Rate = $0.440
$0.455
$0.484
$0.515
$0.548
$0.583
Increase %
3.41%
6.37%
6.40%
6.41%
6.39%
COD, per pound (pumping)
Current Rate = $0.440
$0.455
$0.484
$0.515
$0.548
$0.583
Increase %
3.41%
6.37%
6.40%
6.41%
6.39%
TSS, per pound (non-pumping)
Current Rate = $0.440
$0.474
$0.524
$0.579
$0.639
$0.705
Increase %
7.73%
10.55%
10.50%
10.36%
10.33%
TSS, per pound(pumping)
Current Rate = $0.440
$0.474
$0.524
$0.579
$0.639
$0.705
Increase %
7.73%
10.55%
10.50%
10.36%
10.33%
Current Sewer Financial Model Projections
With the gap between revenues and expenditure increasing year over year and, by continuing to use reserves to subsidize O&M and capital, the Sewer Fund is projected to be:
Unable to maintain reserves at or above the Reserve Goal, Unlikely to maintain a favorable debt-coverage; potentially impacting credit and bond ratings, Out of funds and unable to maintain its Capital Improvement Program, and in not doing so:
Risk future treatment effectiveness
Risk capacity for growth
Risk regulatory non-compliance and through its exposure to regulatory penalties and third-party lawsuits.
Results from the most recent review of the Sewer Financial Model are shown in Charts 1 through 4 below. They demonstrate that absent rate increases, costs are forecast to continue to outpace, and soon far exceed revenues (Chart 1), and how the proposed increases, supplemented with additional debt for capital projects, reverses that (Chart 2).
Although a five-year rate plan is proposed, projections and forecasts were modelled over a 10-year planning period so that longer-term projects, operational needs, and future state of the Sewer Fund could be considered fully. A 5.0% placeholder for revenue and cost escalation was included for thew period after Fiscal Year 2030/31.
Chart 1 – Sewer Fund Revenue and Expenditure Forecast through Fiscal Year 2035/36 absent increases.
Chart 2 - Sewer Fund Revenue and Expenditure Forecast Through Fiscal Year 2034/35 with Proposed Increases and Bond Proceeds.
Without the proposed increases, Operating Reserve Funds would be depleted sometime within Fiscal Year 2028/29 in favor of necessary capital improvements (Chart 3) and reserves would fall below the reserve goal within four years. Chart 4 shows projected reserves which would result from the proposed rate plan.
Chart 3 – Projected Sewer Enterprise Fund Reserves & Reserve Goal Without Rate Increases.
Chart 4 – Reserve Goal & Projected Sewer Enterprise Fund Reserve.
Proposed Community Engagement
To engage with the community on the proposed rate increases, staff would schedule City-sponsored community outreach events throughout the public notice period. The intended approach would be to deliver a presentation on the proposed rate plan to residents and community groups, providing an opportunity for questions and answers during each event.
In addition to in-person events, the proposed five-year rate plan would be available continuously on the City website along with staff reports, presentations, a calendar of outreach events, and other resources. City social media would also be used to communicate the proposed rate plan.
Low Income Assistance through SHARE Program
The proposed rate plan does not include financial assistance via the SHARE program. Inclusion of an assistance program would be subject to City Council approval and General Fund availability. Upon direction from City Council, the Public Works Department would work with the Finance Department to identify funding and would include the assistance program for consideration at the public hearing.
Proposition 218 Procedural Compliance
The Sewer utility is a self-supporting enterprise fund that provides services for a fee. Charges for service through rates are the primary source of funding for operations and a significant portion of the CIP which includes the debt service (principal and interest) for bonds issued to fund projects.
Proposition 218 (Prop 218), approved in 1996, adds Article XII C (Voter Approval for Local Tax Levies) to the California Constitution. All property-related fees, such as sewer service rates, must meet Prop 218’s requirements. Prior to adoption of increases to Sewer rates, the City must provide written notice to all affected ratepayers informing them about the proposed rate increase for sewer services and set a public hearing for consideration no less than 45 days after mailing. The City must record receipt of all written protests against the proposed sewer rate increases at the public hearing. Prop 218 prohibits increases to sewer fees and charges if a majority of the affected sewer ratepayers submit written opposition to the proposed increases. With approval of a proposed sewer rate plan, staff would prepare all documents necessary for public notice and set a public hearing for the proposed sewer rate increases on a date at least 45 days after mailing said notice in accordance with Prop 218.
The proposed fiveyear sewer rate plan provides a stable and predictable revenue framework that allows the City to fund essential operations and comply with increasingly rigorous State and Regional Water Board requirements. It enables the timely completion of critical capital improvements needed to maintain treatment reliability, prevent costly emergency failures, and support future growth. The plan also restores reserve levels to meet Councilestablished policy targets and strengthens the Sewer Fund’s ability to secure future bond financing. Together, these benefits enhance system reliability, regulatory certainty, and longterm financial sustainability.
FISCAL IMPACT:
With Council approval of the proposed sewer rate structure, the anticipated average annual revenue from the proposed rate increase and projected from the sewer financial model over the five-year rate plan, is $4,875,200. The cost of services study (Attachment 2), Table 13 shows the projected revenues from the proposed rate increases over the term of the rate plan. When combined with revenues from bond proceeds, anticipated new connection fees from new developments, and other fees, there is sufficient cash flow to account for inflationary impacts and other unanticipated costs incurred to date, to fund ongoing O&M needs, and to maintain the Working Capital at or above the previously established reserve threshold.
Prepared by: Kevin Street, Deputy Public Works Director Approved by: Nathan Mustafa, Public Works Director
Certified as to
availability of funds: Julie Nemes, Finance Director
Approved by: Kris Martinez, Assistant City Manager
Approved as to form: James Johnson, City Attorney
Attachments:
Select Capital Improvement Projects Completed Since 2018 and Outstanding CIP Draft Sewer Cost of Service Analysis
Proposed Five-year Sewer Rate Schedule
City of Riverside City Council Wards & Sewer Pumping Zones Capitalized Interest means borrowing extra to pay future debt service. In this transaction, the borrowed extra was used to make the first year’s interest payment Proposed Sewer Services Rate Plan and Set Public Hearing ● Page 3