San Clemente City Council
February 17, 2026

910 Calle Negocio
2nd Floor
San Clemente, California
www.san-clemente.org
Council Chambers
Mayor Loeffler
Mayor Pro Tem Knoblock
Councilmember Cabral
Councilmember Enmeier
Councilmember Wu
4:30 p.m. - Closed Session
5:30 p.m. - Business Meeting

CITY OF SAN CLEMENTE
Tuesday, February 17, 2026
City Council
Regular Meeting Agenda
Information concerning City Council Meeting protocols and procedures is contained at the end of this agenda.

MISSION STATEMENT
The City of San Clemente, in partnership with the community we serve, will foster a tradition dedicated to:

Maintaining a safe, healthy atmosphere in which to live, work and play; Guiding development to ensure responsible growth while preserving and enhancing our village character, unique environment and natural amenities; Providing for the City’s long-term stability through promotion of economic vitality and diversity…
Resulting in a balanced community committed to protecting what is valued today while meeting tomorrow’s needs.

CALIFORNIA ENVIRONMENTAL QUALITY ACT
The California Environmental Quality Act (“CEQA”) is the state law that requires the City to evaluate and document the potential environmental consequences of discretionary decision. (See, California Public Resources Code Sections 21000-21189.3; and the “CEQA Guidelines” at California Code of Regulations Title 14, Division 6, Chapter 3, Sections 15000-15387). For each item that requires a CEQA determination by the City Council, there is a reference to that determination on this agenda, and more information regarding the CEQA analysis is included in the documents that accompany this agenda. To the extent that City staff determines that particular items are not subject to CEQA, there will be no indication of a CEQA action on this agenda.

DISCLOSURE OF CAMPAIGN CONTRIBUTIONS
Pursuant to Government Code § 84308, City Council Members are disqualified and not able to participate in any agenda item involving contracts (other than competitively bid, labor, or personal employment contracts), franchises, discretionary land use permits and other entitlements if the City Council Member received more than $500 in campaign contributions from the applicant or contractor, an agent of the applicant or contractor, or any financially interested participant who actively supports or opposes the City’s decision on the agenda item since January 1, 2023. Members of the City Council who have received, and applicants, contractors or their agents who have made, campaign contributions totaling more than $500 to a City Council Member since January 1, 2023, are required to disclose that fact for the official record of the subject proceedings. Disclosures must include the amount of the campaign contribution and identify the recipient City Council Member and may be made either in writing to the City Clerk before the agenda item or by verbal disclosure during consideration.

1 City Council Regular Meeting Agenda February 17, 2026 CLOSED SESSION (4:30 P.M.)
A. CONFERENCE WITH LEGAL COUNSEL - EXISTING LITIGATION
Existing litigation pursuant to Government Code Section 54956.9(d)(1) Number of Cases: 1
Case Name: VM Development II, LLC v. City of San Clemente Orange County Superior Court Case No.: 30-2025-01512943-CU-WM-CJC B. CONFERENCE WITH REAL PROPERTY NEGOTIATORS
Discussion concerning real property transactions in compliance with Government Code section 54956.8 regarding:

Real Property Negotiations: APN: 701-041-06, 701-041-52, 701-041-55, 701- 041-58, 701-041-59, 701-041-62, 701-043-07, 701-043-08, 701-043-09, and 701-341-02 Property: Properties located near the eastern terminus of Avenida Pico in the City of San Clemente
City Negotiators: Andy Hall, City Manager; Brian Brower, Assistant City Manager; Adam Atamian, Community Development Director
Negotiating Parties: Foothill/Eastern Transportation Corridor Agency, Talega Associates, LLC, and Talega Maintenance Corporation
Under Negotiations: Terms
C. PUBLIC EMPLOYEE PERFORMANCE EVALUATION
Pursuant to Government Code section 54957(b)
Title: City Manager
BUSINESS MEETING (5:30 P.M.)

CALL TO ORDER
INVOCATION – Lead Pastor Mark Ambrose, Pacific Coast Church

PLEDGE OF ALLEGIANCE

ROLL CALL

1. Special Presentations

2. Council Member Reports

2 City Council Regular Meeting Agenda February 17, 2026

3. Oral Communications (Part 1)
Members of the audience who wish to address Council on matters that are within the jurisdiction of the City of San Clemente, but not separately listed on the agenda, may do so during the Oral Communications portion of the meeting. Speakers may address Council once during either Oral Communications Part 1 or Part 2. A total time limitation of 30 minutes is allocated for Oral Communications Part 1, with each speaker being allotted 3 minutes in which to give his or her presentation. Speaker order is determined by the order in which speaker cards are provided to the City Clerk or Deputy City Clerk at the meeting. Speakers that cannot be accommodated during Oral Communications Part 1 will be invited to address Council during Oral Communications Part 2, which appears on this agenda as Item No. 12. When invited by the Mayor, please step to the podium, and if you wish, state your name and the City in which you reside, and make your presentation. Under the Ralph M. Brown Act, the City Council cannot act on items raised during public comment but may respond briefly to statements made or questions posed, request clarification or refer the item to staff.

4. Motion waiving reading in full of all Resolutions and Ordinances

5. Consideration of agendizing items requiring immediate action Per Government Code section 54954.2(b) and 54956.5. Any items agendized will be considered under New Business, unless otherwise determined by a majority vote of the City Council.

6. Closed Session Report - City Attorney

7. Staff Communications

8. Public Hearings
The Public Hearing process includes a staff presentation, a presentation by the applicant not to exceed ten (10) minutes, and public testimony (not to exceed three minutes per speaker). Following closure of the Public Hearing, the City Council will respond to questions raised during the hearing, discuss the issues, and act upon the matter by motion.
8A. PUBLIC HEARING TO CONSIDER ADOPTION OF A RESOLUTION

UPDATING LEASE RATES, METHODOLOGY AND PROCESS FOR

WIRELESS TELECOMMUNICATIONS FACILITIES ON CITY OWNED

PROPERTY
Public hearing to consider a resolution to establish a revised standardized lease rate and methodology related to wireless communications facilities on city owned property.

Staff Recommendation

1. Conduct the public hearing.

After conducting the public hearing, adopt Resolution 26-28, which will:

3 City Council Regular Meeting Agenda February 17, 2026

2. Adopt the staff recommended lease rate and methodology, which reflects a reduced rate version of the California Department of General Services program as indicated in Exhibit A of Attachment 1, which consists of $3,000 per month for Microcell facilities, $4,000 per month for Minicell facilities, and $5,000 per month for Macrocell facilities, all with an annual 3% escalator.

3. Repeal any prior City Council actions or resolutions in conflict with the approved lease rate and methodology.

4. Implement the new standardized lease structure for all future telecommunications company leases, or amendments of such, on City-owned property.

5. Approve the standardized telecommunications lease template, included as Exhibit B to Attachment 1.

6. Authorize the City Manager to execute future leases, using the standardized telecommunications lease template and the standardized lease structure and methodology adopted herein, that are consistent with any applicable Conditional Use Permit or City Antenna Permit.

7. Direct staff to initiate an amendment City Policy 901-1 (“Property Management Policies and Procedures for Lease and Sale of City-owned Property”) to formalize the City Manager’s authorization to execute leases consistent with an adopted rate schedule.
8B. PROTEST HEARING TO CONSIDER ALL WRITTEN PROTESTS AND HEAR

ALL ORAL COMMENTS TO PROPOSED WATER RATES AND FEES
PURSUANT TO PROPOSITION 218, CONSIDERATION OF A RESOLUTION

ADOPTING PROPOSED WATER FEES AND RATES WITH ANNUAL
ADJUSTMENTS AND PASS-THROUGH RATES THROUGH JANUARY 1,
2030 AND INTRODUCTION (FIRST READING) OF AN ORDINANCE
AMENDING SAN CLEMENTE MUNICIPAL CODE SECTION 13.04.220

REGARDING ADOPTION OF FUTURE WATER RATES
Public hearing (a Proposition 218 Protest Hearing) to count timely written protests and to consider changes to the City's water rate structure, potential rate increases over a five-year period, implementation of wholesale water costs pass-through adjustments, and implementation of a "demand management rate" to offset revenue fluctuations during periods of reduced water demands (such as a prolonged drought) to stabilize City revenues so the City can continue to operate and maintain the City's water system.

Staff Recommendation

1. Conduct the protest hearing to consider all written protests and hear all

4 City Council Regular Meeting Agenda February 17, 2026 oral comments.

After conducting the hearing, and if there is not a majority protest:

2. Adopt Resolution No. 26-29 entitled A RESOLUTION OF THE CITY

COUNCIL OF THE CITY OF SAN CLEMENTE, CALIFORNIA, MAKING

FINDINGS FOLLOWING PROTEST HEARING, AND ADOPTING WATER

RATES AND CHARGES, WITH ANNUAL ADJUSTMENTS AND
PASS-THROUGH RATES THROUGH JANUARY 1, 2030.

3. Introduce and conduct a first reading of Ordinance No. 1799 entitled AN

ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SAN CLEMENTE, CALIFORNIA, AMENDING SECTION 13.04.220 OF THE CITY OF SAN CLEMENTE MUNICIPAL CODE RELATING TO WATER RATES.

9. Unfinished Business
None.

10. New Business
10A. INTRODUCTION (FIRST READING) OF ORDINANCE NO. 1800 TO AMEND SECTION 3.40.030 OF THE SAN CLEMENTE MUNICIPAL CODE TO REVISE

THE DEFINITION OF LOCAL BUSINESS FOR THE LOCAL PREFERENCE

PROGRAM
(Agendized by Councilmember Wu, with the support of Mayor Pro Tem Knoblock and Mayor Loeffler, at the January 20, 2026 City Council meeting.) Staff Recommendation
Introduce and conduct a first reading of Ordinance No. 1800 entitled AN

ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SAN CLEMENTE, CALIFORNIA, AMENDING SAN CLEMENTE MUNICIPAL CODE TITLE 3 REVENUE AND FINANCE, CHAPTER 3.40, SECTION 3.40.030(A) RELATING

TO THE DEFINITION OF LOCAL BUSINESS FOR THE LOCAL VENDOR PREFERENCE.
10B. INFORMATIONAL REPORT ON THE STATUS OF THE EXTENSION OF THE

PILOT GOAT-GRAZING PROJECT
Staff Recommendation
Receive and file the Administrative Report dated February 17, 2026 and on file with the City Clerk.

5 City Council Regular Meeting Agenda February 17, 2026

11. Consent Calendar
All items listed on the Consent Calendar are considered to be routine and will be enacted by one motion without discussion unless Council or Staff requests removal of an item for separate discussion and action.

A. City Council Minutes
Staff Recommendation:
(1) APPROVE THE CITY COUNCIL REGULAR MEETING MINUTES OF FEBRUARY 3, 2026.

B. Commission/Committee Minutes
Staff Recommendation:

Receive and file the following:
(1) GOLF COURSE COMMITTEE REGULAR ADJOURNED MEETING
MINUTES OF NOVEMBER 20, 2025.
(2) PLANNING COMMISSION REGULAR MEETING MINUTES OF
JANUARY 21, 2026.
(3) ZONING ADMINISTRATOR REGULAR MEETING MINUTES OF
JANUARY 22, 2026.
(4) DESIGN REVIEW SUBCOMMITTEE REGULAR MEETING MINUTES
OF JANUARY 28, 2026.

C. Warrant Register
(1) APPROVE WIRE TRANSFER NOS.
3374 THROUGH 3377 AND WARRANT NOS.
609421 THROUGH 609527, PAID ON
1-23-26, IN THE AMOUNT OF $2,356,655.41
(2) APPROVE WIRE TRANSFER NOS.
3378 THROUGH 3379 AND WARRANT NOS.
609528 THROUGH 609671, PAID ON
1-30-26, IN THE AMOUNT OF $1,085,158.22
(3) APPROVE WIRE TRANSFER NOS.
3380 THROUGH 3387 AND WARRANT NOS.
609672 THROUGH 609782, PAID ON
2-6-26, IN THE AMOUNT OF $3,852,900.52
TOTAL WARRANT REGISTER $7,294,714.15

6 City Council Regular Meeting Agenda February 17, 2026 Payroll Register

APPROVE AUTOMATIC DEPOSIT
ADVISES 109263 THROUGH 109575,
FOR THE PERIOD 1-5-26 THROUGH
1-18-26, PAID ON 1-23-26, IN
THE AMOUNT OF $536,757.78
APPROVE WARRANT NO. 993, AND
AUTOMATIC DEPOSIT ADVISES 109576
THROUGH 109907, FOR THE PERIOD
1-19-26 THROUGH 2-1-26, PAID
ON 2-6-26, IN THE AMOUNT OF $570,098.11
TOTAL PAYROLL REGISTER $1,106,855.89
11D. CONTRACT AWARD - ALLEY PAVEMENT REHABILITATION PROGRAM,

AND FINDING THE PROJECT CATEGORICALLY EXEMPT FROM THE

CALIFORNIA ENVIRONMENTAL QUALITY ACT
Staff Recommendation
Adopt Resolution No. 26-30, which will:
..recommendation

1. Find the Alley Pavement Rehabilitation Program, CIP Project Nos. 16316 and 15316 and 12305, categorically exempt from the California Environmental Quality Act (CEQA) under Class 1 (Existing Facilities, 14 CCR section 15301) of the State CEQA Guidelines.

2. Award the Alley Pavement Rehabilitation Program, CIP Project Nos. 16316 and 15316 and 12305, contract to Eagle Paving LLC.

3. Approve, and authorize the City Manager to execute, Contract No. C26- 15, by and between the City of San Clemente and Eagle Paving, LLC., for the Alley Pavement Rehabilitation Program, in an amount not to exceed $338,400, in a form substantially similar to Contract No. C26-15 (Attachment 2).

7 City Council Regular Meeting Agenda February 17, 2026 11E. CONSIDERATION OF A RESOLUTION MODIFYING THE SENIOR MOBILITY

PROGRAM TO LIMIT THE NUMBER OF RIDES ALLOWED PER RIDER,

AWARDING A CONTRACT TO OCY MANAGEMENT, LLC FOR SENIOR

MOBILITY PROGRAM TRANSPORTATION SERVICES, APPROVING
SUPPLEMENTAL APPROPRIATIONS TOTALING $70,000, AND FINDING

THE PROJECT STATUTORILY EXEMPT FROM THE CALIFORNIA

ENVIRONMENTAL QUALITY ACT
Staff Recommendation
Adopt Resolution No. 26-31, which will:
..recommendation

1. Find the project statutorily exempt from the California Environmental Quality Act (CEQA) under Public Resources Code section 21080(b)(10).

2. Approve the modification of the Senior Mobility Program to limit each rider to eight (8) one-way rides per month.

3. Approve supplemental appropriations in the amount $56,000 from the Senior Mobility Fund (015) to Account No. 015-806-44723-000-00000 and $14,000 from the General Fund (001) to Account No. 001-203-47012-000- 00000.

4. Award a Professional Services Agreement to OCY Management LLC for Senior Mobility Program; and

5. Approve , and authorize the City manager to execute, Contract No. C26-16, by and between the City of San Clemente and OCY Management, LLC., providing for the Senior Mobility Program, for a four-month term through June 30, 2026 in an amount not to exceed $70,000.

6. Authorize the City Manager to approve up to three one-year contract extensions in an amount not to exceed $180,000 per year from July 1, 2026 through June 30, 2029, exercisable at the City Manager’s discretion.

8 City Council Regular Meeting Agenda February 17, 2026 11F. CONSIDERATION OF A RESOLUTION AUTHORIZING THE CITY MANAGER

TO NEGOTIATE AND EXECUTE AN EMERGENCY LETTER AGREEMENT

AND A COOPERATIVE AGREEMENT WITH ORANGE COUNTY

TRANSPORTATION AUTHORITY (OCTA) TO INSTALL AND MANAGE A TEMPORARY SEWER BYPASS, IN AN ESTIMATED AMOUNT OF $690,911;

APPROVING AN EXEMPTION TO THE FORMAL BIDDING PROCESS DUE TO A BONA FIDE EMERGENCY; AWARDING AN EMERGENCY
CONSTRUCTION CONTRACT TO SANCON TECHNOLOGIES INC. FOR THE

INSTALLATION OF A CURED-IN-PLACE PIPE (CIPP) LINER IN AN AMOUNT NOT TO EXCEED $247,008; AND FINDING THE PROJECT EXEMPT FROM

THE CALIFORNIA ENVIRONMENTAL QUALITY ACT
Staff Recommendation
Adopt Resolution No. 26-32, which will:

1. Find the project statutorily exempt from the California Environmental Quality Act (CEQA) under Section 15269(b) of the CEQA Guidelines (14 CCR 15269(b)) for emergency repairs.

2. Authorize the City Manager to negotiate and execute a letter agreement to reimburse OCTA to manage and install a temporary sewer bypass, in an amount estimated at $690,911.

3. Authorize the City Manager to negotiate and execute a final Cooperative Agreement with OCTA for the temporary sewer bypass with key terms similar to those in the letter agreement.

4. Make a finding that an emergency exists due to the potential failure of the City’s beach trunk sewer line while OCTA’s contractor Condon Johnson & Associates is completing the work on the catchment wall for Area 3, and to prevent a sewer spill and protect public health and safety.

5. Declare that the public interest and necessity demand the immediate expenditure of public funds to safeguard public health and approve an exemption to the formal bidding process due to a bona fide emergency.

6. Approve, and authorize the City Manager to execute, Contract No. C26- 17, an emergency contract, by and between the City of San Clemente and Sancon Technologies, Inc., providing for the installation of a cured-in-place pipe (CIPP) liner, in an amount not to exceed $247,008.

9 City Council Regular Meeting Agenda February 17, 2026 11G. CONSIDERATION OF A FEE WAIVER REQUEST FOR SAN CLEMENTE

HIGH SCHOOL SWIM TEAM SPRING PRACTICE AT THE SAN CLEMENTE

AQUATIC CENTER
Staff Recommendation
Adopt Resolution No. 26-33 entitled A RESOLUTION OF THE CITY COUNCIL

OF THE CITY OF SAN CLEMENTE, CALIFORNIA, APPROVING A FEE

WAIVER FOR USE OF THE SAN CLEMENTE AQUATIC CENTER BY SAN CLEMENTE HIGH SCHOOL FOR SPRING SWIM TEAM PRACTICES.
11H. CONSIDERATION OF A FEE WAIVER REQUEST FOR CHRIST LUTHERAN CHURCH “BEACH CHURCH” SUNDAY SERVICES AT NORTH BEACH FOR CALENDAR YEAR 2026
Staff Recommendation
Adopt Resolution No. 26-34 entitled A RESOLUTION OF THE CITY COUNCIL

OF THE CITY OF SAN CLEMENTE, CALIFORNIA, APPROVING A PARTIAL FEE WAIVER FOR CHRIST LUTHERAN CHURCH’S “BEACH CHURCH”
SUNDAY SERVICES AT NORTH BEACH FOR CALENDAR YEAR 2026.

12. Oral Communications (Part 2)
Members of the audience who wish to address Council on matters that are within the jurisdiction of the City of San Clemente, but not separately listed on the agenda, may do so during the Oral Communications portion of the meeting. When invited by the Mayor, please step to the podium, and if you wish, state your name and the City in which you reside, and make your presentation, not to exceed three minutes. Under the Ralph M. Brown Act, the City Council cannot act on items raised during public comment but may respond briefly to statements made or questions posed, request clarification or refer the item to staff.

13. Future Agenda Items

14. Reports
A. City Attorney
B. City Manager

15. Adjournment
The next Regular City Council Meeting is scheduled to take place on March 3, 2026.

Closed Session will begin at 4:30 p.m. and the Regular Business Meeting will begin at 5:30 p.m. The meeting will take place in the Council Chambers, located at 910 Calle Negocio, 2nd Floor, San Clemente.

10 City Council Regular Meeting Agenda February 17, 2026

CITY COUNCIL MEETING PROCEDURES

RULES FOR ADDRESSING COUNCIL
• Members of the public may address the City Council on matters within the jurisdiction of the City of San Clemente.
• If you wish to address Council, please complete one of the blue speaker cards located at the entrance to the Council Chambers and turn it in to the City Clerk or Deputy City Clerk. • Persons wishing to address Council concerning an agendized item will be invited to address Council during the time that Council is considering that particular agenda item.

Persons wishing to address Council concerning a non-agendized issue will be invited to address Council during the “Oral Communications” portion of the meeting. • When invited by the Mayor, please step to the podium, and if you wish, state your name and the City in which you reside, and make your presentation. Please limit your presentation to three minutes.

PRESENTATION OF WRITTEN MATERIALS TO COUNCIL
In order to ensure that Councilmembers have adequate time to consider written materials concerning agenda items, it is strongly recommended that such materials be submitted to the City Clerk by noon the date preceding the Council meeting.

MEETINGS RECORDED AND TELEVISED
City Council meetings are broadcast live and are replayed periodically on Cox Communications Local Access Channel 854. Meetings are also available for live-stream or post meeting viewing from the City’s website.

Meetings are also recorded via audio CD and/or DVD and retained as a City record in accordance with the City’s records retention schedule.

USE OF ELECTRONIC VISUAL AIDS BY PUBLIC AT MEETINGS
To allow staff adequate time to confirm software compatibility, individuals wishing to utilize electronic visual aids to supplement their oral presentations at the meeting, must submit the electronic files to the City Clerk by no later than 12:00 p.m. on the day of the meeting. Only compatible electronic formats will be permitted to be used on City audio/visual computer equipment. Staff makes no guarantee that such material will be compatible, but will use its best efforts to accommodate the request. Electronic presentations shall be limited to visual media, without prerecorded audio narration, that augment a live verbal presentation addressed to the City Council. The display of visual media shall be ancillary to, and not presented in place of, live verbal narration. Members of the public shall not be permitted to connect equipment to the City's computer system. Members of the public shall not be permitted to access the internet from the City's computer equipment. Visual presentations must be provided to the City Clerk in a display-ready format. In no case shall Staff be required to develop a presentation for public use.

This prohibition includes, but is not limited to, compiling of City records, downloading data from websites, or gathering or modifying data provided by the public.

LENGTH OF MEETINGS
At 11:00 p.m., the City Council will determine which of the remaining agenda items can be considered and acted upon at this meeting and will continue all other agenda items to a future meeting.

AMERICANS WITH DISABILITIES ACT
Pursuant to the Americans with Disabilities Act, persons with a disability who require a disability-related modification or accommodation in order to participate in a meeting, including auxiliary aids or services, may request such modification or accommodation from the City Clerk at (949) 361-8200. Notification 48 hours prior to the meeting will enable the City to make reasonable arrangements to assure accessibility to the meeting.

COMMUNICATION DEVICES
To minimize meeting distractions and sound system interference, please be sure all personal communication devices are turned off or on silent mode.

11 City Council Regular Meeting Agenda February 17, 2026

MEETING SCHEDULE
Regular Council Meetings are held on the first and third Tuesdays of each month in the Council Chambers, located at 910 Calle Negocio, 2nd floor, San Clemente. Closed Session are considered at 5:00 p.m. and the Business Meeting begins at 6:00 p.m. Additional meetings of the City Council may be called as needed.

AGENDAS, ADMINISTRATIVE REPORTS AND SUPPLEMENTAL WRITTEN MATERIALS Agendas and Administrative Reports are available for review and/or copying at the City Clerk’s Department as soon as agendas are posted, by accessing the City’s website at www.san-clemente.org. An “Inspection Copy” of agenda materials is also located at the entrance to the Council Chambers during meetings for public review. All written material distributed to a majority of the Council after the original agenda packet was distributed is available for public inspection in the City Clerk’s Department, located at 910 Calle Negocio, San Clemente, during normal business hours.

The City Clerk’s Department offers an agenda packet subscription service free of charge. If you wish to receive email copies of City Council agendas, which include hyperlinks to staff reports and other back-up material, register at http://san-clemente.org/enotification.

12 910 Calle Negocio
2nd Floor
San Clemente, California
www.san-clemente.org

AGENDA REPORT

CITY OF SAN CLEMENTE

CITY COUNCIL MEETING
CITY OF SAN CLEMENTE 1
Meeting Date: February 17, 2026 Agenda Item: 8A.

Submitted By: Community Development
Prepared By: Jonathan Lightfoot, City Planner
Subject:
..titl e

PUBLIC HEARING TO CONSIDER ADOPTION OF A RESOLUTION UPDATING LEASE

RATES, METHODOLOGY AND PROCESS FOR WIRELESS TELECOMMUNICATIONS

FACILITIES ON CITY OWNED PROPERTY
..body
Fiscal Impact:

There is no immediate financial impact as this action does not establish any new leases.

However, implementing the staff recommended action to modify the lease rate schedule should result in future increased revenue at new telecommunications sites and at older sites that convert to the new lease rate structure once their current leases expire. The staff recommendation also includes a requirement for a deposit account for cost recovery for any potential lessee that requests custom modifications to the standardized telecommunications lease template.

Summary:

To improve the implementation of telecommunication leases on City-owned property, staff is presenting for the City Council’s consideration an alternate methodology based on the leasing structure used by the California Department of General Services (“DGS”, refer to Attachment 3), with a 3% annual escalator:

Proposed Standardized Lease Rates
January, 2026 January, 2027*
Macrocell1 $5000/month $5150/month
Minicell2 $4000/month $4120/month
Microcell3 $3000/month $3090/month
This would simplify all future leases into a 3-tier structure that is more readily understandable by potential lessees and staff who are managing the program. The revised rate structure is

1 Macrocell: Facility with 9 or more antennas and/or fenced area with equipment building or concrete pad space and space required for the foundation of the monopole or tower, when combined exceeds 500 square feet, not to exceed 16 antennas or 2,500 square feet.
2 Minicell: Facility with 4 to 8 antennas and/or fenced area containing equipment building or concrete pad space and space required for the foundation of the monopole or tower, when combined is in excess of 300 square feet but less than 500 square feet.
3 Microcell: Facility with 1 to 3 antennas and/or fenced area with equipment building or concrete pad space and space required for the foundation of the monopole or tower, when combined is less than 300 square feet. 13 Meeting Date: February 17, 2026 Agenda Item: 8A.

CITY OF SAN CLEMENTE 2
anticipated to result in increases in future lease revenue as well as improved flexibility for lessees.

Background:

The City has utilized an equipment fee schedule to establish telecommunications site leases since 2000 (see Attachment 2). That schedule is updated annually based on the Consumer Price Index (CPI). While its structure is designed to result in higher rent for facilities that have more equipment, it also results in slower approvals for leases and future modifications to the facilities because the leases specifically call out each piece of equipment used by the lessees. This type of fee schedule methodology can also be confusing to implement because some of the equipment and technology may have varying configurations or names. Development plans may identify branded part numbers, and staff are left to decipher whether any of those items qualify as one of the types of equipment listed in the schedule. Further, amendments to the leases are required when there is a change in the quantity of on-site equipment.

City records indicate that there are 22 active wireless facility leases. Many of these occur at consolidated locations – including water reservoir facilities and San Gorgonio Park – which are desirable locations due to their higher elevations, allowing a greater service coverage area.

Currently, San Clemente’s typical macro facility4leases generate between $2200-3500 per month; however, a few smaller facilities are lower at under $2000 per month, and one facility is higher at $4800 per month. These rates are below those used by Newport Beach (range of $3000 - $4360/ month), Carlsbad ($4500-$5000), and the California DGS ($4000-$6200). Refer to Attachments 3 through 6 for more information on these comparable fee schedules.

Discussion:

Adopting a uniform tiered structure would simplify the application and amendment process, reducing ambiguities for staff and telecommunications companies interested in entering into lease agreements with the City. This structure also removes ambiguities related to co-locations on an existing tower and facilities that rely on SCE or SDGE power poles (where approvals are needed from both the City and the utility). Macro facilities would still require a conditional use permit (CUP), requiring discretionary review by the Planning Commission. The City Council would retain its right to call up any facilities from the Minutes of the Planning Commission that it deems are not sited or designed appropriately. The execution of leases would require continued consistency with any CUP conditions of approval.

Staff proposes an alternate methodology based on the leasing structure used by the DGS, with revised rates that would make City telecommunications leases comparable to other local municipalities. This rate reduction equates to about a 20% decrease when compared to those rates published by the DGS, which staff believes is more consistent with the market rate based on survey data of other local jurisdictions (Attachment 6). Using the DGS methodology would simplify all future leases into a 3-tier structure that is more readily understandable by potential lessees and staff who are managing the program. The revised rate structure is anticipated to result in increases in future lease revenue as well as improved flexibility for lessees. The proposed rate schedule is incorporated into the draft Resolution as Exhibit A.

4 Macro Facility generally refers to a telecommunications facility that includes a freestanding pole and a supporting ground mounted equipment enclosure.
14 Meeting Date: February 17, 2026 Agenda Item: 8A.

CITY OF SAN CLEMENTE 3
Additionally, staff recommends that the City Council direct staff to initiate an amendment to City Policy 901-1 (“Property Management Policies and Procedures for Lease and Sale of City-owned Property”) to allow the City Manager to execute leases consistent with an adopted rate schedule.

A copy of this policy is provided as Attachment 7.

Staff has discussed the potential change with telecommunications carriers. They are generally supportive of the 3-tiered structure; however, representatives from T-Mobile and AT&T indicated that they may not seek new leases with the City if it establishes rates that match the DGS pricing.

Staff’s recommended rate schedule does not affect the rates for “Small Cell” facilities, such as wireless facilities attached to City street-light poles. Small Cell facilities are already required to be standardized, pursuant to the Federal Communications Commission’s (FCC) 2018 Declaratory Ruling (18-133) which established low safe-harbor fee standards for such facilities.

Council Options:
 Adopt the staff recommended standardized lease rates and methodology, which reflects a reduced rate version of the CA DGS program as indicated in Exhibit A of Attachment 1.  Modify the staff-recommended leasing program with revisions to the pricing and/or equipment tiers (such as how many antennas are permitted in each tier).  Adopt the DGS methodology and pricing with no City-specific revisions.  Maintain the existing equipment fee schedule and process for telecommunications facilities.  Direct staff to engage an independent telecommunications consulting company and provide direction on the scope of services desired. This is not a budgeted task, so the City Council would need to allocate monies from the General Fund to enter into a related professional services agreement.
 Continue the item with direction to staff to provide further information.

Environmental Review/Analysis:

The proposed action, including modifying a standardized lease rate structure for telecommunications facilities is not a project according to the California Environmental Quality Act (CEQA) Guidelines Section 15378(b)(4).

Recommended Actions:

Staff Recommendation ..recommendation
STAFF RECOMMENDS THAT THE CITY COUNCIL:

1. Conduct the public hearing; and
After conducting the public hearing, adopt Resolution 26-28, which would:
15 Meeting Date: February 17, 2026 Agenda Item: 8A.

CITY OF SAN CLEMENTE 4

2. Adopt the staff recommended lease rate and methodology, which reflects a reduced rate version of the CA DGS program as indicated in Exhibit A of Attachment 1, which consists of $3,000 per month for Microcell facilities, $4,000 per month for Minicell facilities, and $5,000 per month for Macrocell facilities, all with an annual 3% escalator; and

3. Repeal any prior Council actions or resolutions in conflict with the approved lease rate and methodology; and

4. Implement the new standardized lease structure for all future telecommunications company leases, or amendments of such, on City-owned property; and

5. Approve the standardized telecommunications lease template, included as Exhibit B to Attachment 1; and

6. Authorize the City Manager to execute future leases, using the standardized telecommunications lease template and the standardized lease structure and methodology adopted herein, that are consistent with any applicable Conditional Use Permit or City Antenna Permit; and

7. Direct staff to initiate an amendment City Policy 901-1 (“Property Management Policies and Procedures for Lease and Sale of City-owned Property”) to formalize the City Manager’s authorization to execute leases consistent with an adopted rate schedule. ..end
Attachment:

1. Resolution 26-28
Exhibit A: Proposed Lease Rate Structure
Exhibit B: Telecommunications Lease Template

2. Current Telecommunications Equipment Fee Schedule

3. California Department of General Services Lease Rates

4. City of Newport Beach Macro Tower Rates

5. City of Carlsbad Telecom Licenses

6. 2023 Telecom Rate Survey (conducted by City of Newport Beach)

7. City Policy 901-1
Notification:

Notice for this public hearing was published in the OC Register and the San Clemente Times, and posted per City and State requirements.
16 Attachment 1
RESOLUTION NO. 26-28

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF

SAN CLEMENTE, CALIFORNIA, REVISING THE STANDARD

LEASING STRUCTURE AND RATES FOR NEW OR

EXTENDED WIRELESS TELECOMMUNICATIONS FACILITY

LEASES ON CITY-OWNED PROPERTY, REPEALING ANY

PRIOR CITY COUNCIL ACTIONS OR RESOLUTIONS

CONFLICTING WITH THE NEW LEASE RATES AND

METHODOLOGY ESTABLISHED HEREIN, AND

AUTHORIZING THE CITY MANAGER TO EXECUTE LEASES

AND AMENDMENTS THAT ARE CONISTENT WITH THE

STANDARD LEASE STRUCTURE AND RATE AND INITIATE
AN AMENDMENT TO CITY POLICY 901-1 TO FORMALIZE

THE SAME
WHEREAS, the City has identified a need to simplify and streamline the leasing process for telecommunications sites; and
WHEREAS, the City Council desires for lease rates to be competitive in the market and also to be established in a manner that is clear and consistent for all companies desiring to do business with the City; and
WHEREAS, on February 17, 2026, the City Council held a duly noticed public hearing and heard all those wishing to be heard regarding the proposed lease rates and methodology for wireless telecommunications facility leases.

NOW, THEREFORE, the City Council of the City of San Clemente does hereby find, determine and resolve as follows:

SECTION 1. The City’s existing rate schedule entitled “Telecommunications Facilities: Equipment Fee Schedule”, attached as Attachment 2 to the City Council Agenda Report entitled “Public Hearing to Consider a Resolution to Establish an Updated Lease Process and Methodology Related to Wireless Communications Facilities on City Owned Property,” dated February 17, 2026, is hereby repealed. Any and all prior City Council actions or resolutions in conflict with this resolution are hereby repealed to the extent such conflict exists.

SECTION 2. The rate schedule provided as “City of San Clemente Leases for Macro Telecommunications Facilities”, attached hereto as Exhibit A and incorporated fully herein by this reference, is hereby adopted.

SECTION 3. The lease template provided in Exhibit B to this resolution shall be the Standard Wireless Telecommunications Facility Lease Template. If prospective Lessees desire to submit requested modifications to the template, they shall first submit funds for a 17 Resolution No. 26-28 Page 2
deposit account of not less than $5,000 to reimburse City staff and City Attorney time in review of such proposed modifications. The City Manager (or designee) may require a larger deposit as necessary to ensure full City reimbursement for time in review of such proposed modifications.

SECTION 4. The City Manager is hereby authorized to execute future leases, using the Standard Wireless Telecommunications Facility Lease Template and the standardized lease structure and methodology adopted herein, provided that they are consistent with any and all applicable Zoning Permits (e.g., Conditional Use Permit or City Antenna Permit).

Leases not in a form substantially similar to the Standard Wireless Telecommunications Facility Lease Template approved by this resolution shall require City Council approval.

SECTION 5. The City Manager is hereby directed to initate an amendment to City Policy 901-1 (“Property Management Policies and Procedures for Lease and Sale of Cityowned Property”) to allow the City Manager to execute leases consistent with an adopted rate schedule and City Council approved template.

SECTION 6. The City Clerk shall certify to the passage and adoption of this resolution and enter it into the book of original resolutions.

PASSED AND ADOPTED this _____ day of ____________________, _______.

ATTEST:
___________________________ __________________________
City Clerk of the City of Rick Loeffler, Mayor of the City of San Clemente, California San Clemente, California
18 Resolution No. 26-28 Page 3

STATE OF CALIFORNIA )
COUNTY OF ORANGE ) §

CITY OF SAN CLEMENTE )
I, LAURA CAMPAGNOLO, City Clerk of the City of San Clemente, California, do hereby certify that Resolution No. 26-28 was adopted at a regular meeting of the City Council of the City of San Clemente held on the _______ day of _______________________, _________, by the following vote:

AYES:

NOES:

ABSENT:

IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City of San Clemente, California, this _____ day of _________________, ________. __________________________
CITY CLERK of the City of
San Clemente, California
Approved as to form:
____________________________
Elizabeth A. Mitchell, City Attorney
19 Resolution No. 26-28 Page 4
Exhibit A:

City of San Clemente Leases for Macro Telecommunications Facilities January, 2026 January, 2027*
Macrocell $5000/month $5150/month
Minicell $4000/month $4120/month
Microcell $3000/month $3090/month
*3% annual escalator for all future years beginning January 1, 2027 The following definitions are used by the DGS and will also apply to leases in San Clemente:

Macrocell: Facility with 9 or more antennas and/or fenced area with equipment building or concrete pad space and space required for the foundation of the monopole or tower, when combined exceeds 500 square feet, not to exceed 16 antennas or 2,500 square feet.

Minicell: Facility with 4 to 8 antennas and/or fenced area containing equipment building or concrete pad space and space required for the foundation of the monopole or tower, when combined is in excess of 300 square feet but less than 500 square feet.

Microcell: Facility with 1 to 3 antennas and/or fenced area with equipment building or concrete pad space and space required for the foundation of the monopole or tower, when combined is less than 300 square feet.
20 Resolution No. 26-28 Page 5
Exhibit B:

CITY OF SAN CLEMENTE

TELECOMMUNICATIONS SITE

FACILITY LEASE
This Telecommunications Site Facility Lease (the “Lease”) is made and entered into this day of , 2026 by and between the CITY OF SAN
CLEMENTE, a California Municipal Corporation, (herein “LESSOR”), and [ENTITY, a California limited partnership (or LLC, etc), DBA [if applicable] (herein “LESSEE”) (hereinafter collectively referred to as “Parties” or individually as the “Party”).

RECITALS
WHEREAS, LESSOR owns the Property located at [Address] and within Assessor’s Parcel Number (APN) xxx-xxx-xx, commonly known as the [Site Name] (“Property”) in fee simple; and
WHEREAS, LESSEE wishes to operate a telecommunications facility consisting of (i) approximately ## square feet of ground space for an equipment enclosure, together with ( i i ) ## antennas and related equipment installed on a ## -foot tall monopole (“Monopole”), collectively referred to hereafter as the “Facility” on a portion of the aforementioned Property; and
WHEREAS, LESSEE has received pertinent zoning approvals for a facility at this location through the approval of [Insert Conditional Use Permit or City Antenna Permit reference number] by [Resolution Number] of the [Approval Body] on [date]; and WHEREAS, the LESSEE has assigned the following site identification number and or name for purposes of their property management: [Enter Lessee Site ID]; and WHEREAS, LESSEE wishes to lease the Premises, as defined below, from said LESSOR on the terms and conditions herein for the transmission of and for provision of wireless telecommunications services; and
NOW THEREFORE, in consideration of the foregoing recitals and the mutual covenants, conditions, and agreements contained herein, the receipt and sufficiency of which is hereby acknowledged, the Parties to this Lease do hereby agree as follows:
21 Resolution No. 26-28 Page 6

1. DEMISE AND DESCRIPTION:

1.1 PREMISES: LESSOR agrees to lease a portion of that certain Property described above as more specifically described in Exhibit "A", which is attached hereto, incorporated by reference fully herein and hereinafter referred to as the "Premises". Access to the Premises from a public right of way shall be provided by the LESSOR as reflected on Exhibit "B", which is attached hereto and incorporated by reference fully herein. LESSOR shall provide LESSEE, LESSEE'S employees, agents, and subcontractors access over the Property to the Premises twenty-four (24) hours a day, seven (7) days a week without notice to LESSOR, at no charge to LESSEE. The Premises and access over the Property are provided in an "AS IS, WHERE IS" condition.

1.2 DESCRIPTION: The Facility originally contemplated under this Lease and as described in the Recitals above meets the criteria of a [Facility Classification] as defined in Section 1.4 below. The Premises may be used by LESSEE for the purpose of installing, operating and maintaining the Facility for any lawful activity in connection with the provision of mobile/wireless telecommunications services, including without limitation, cellular communications facilities including the upgrade, repair or replacement of such equipment and facilities; and environmental and other testing.

1.3 FACILITY MODIFICATIONS: Alterations to the number of antennas that do not result in a change in Facility Classification (Section 1.4) and comply with any existing conditions of approval from applicable Zoning Permits shall be processed ministerially and not require an amendment to this Lease. Alterations resulting in a different facility classification shall require an amendment, to be approved by the City Manager; and if the alteration is not consistent with the Zoning Permit, the LESSEE shall first apply for and receive applicable Zoning Permit amendment approvals prior to seeking an amendment to this Lease.

1.4 FACILITY CLASSIFICATIONS: Wireless telecommunications facilities are classified as follows:

A. Macrocell: Facility with 9 or more antennas and/or fenced area with equipment building or concrete pad space and space required for the foundation of the monopole or tower, when combined exceeds 500 square feet, not to exceed 16 antennas or 2,500 square feet.

B. Minicell: Facility with 4 to 8 antennas and/or fenced area containing equipment building or concrete pad space and space required for the foundation of the monopole or tower, when combined is in excess of 300 square feet but less than 500 square feet. 22 Resolution No. 26-28 Page 7
C. Microcell: Facility with 1 to 3 antennas and/or fenced area with equipment building or concrete pad space and space required for the foundation of the monopole or tower, when combined is less than 300 square feet.

2. LEASE TERM:

2.1 INITIAL TERM: If the LESSEE has not already installed part of the Facility on the Property under a prior agreement with the LESSOR, the initial term of this Lease shall commence on the date listed below (the "Commencement Date"), which the Parties anticipate is either 60 days following full execution of this Lease or on the date of full execution of this Lease if the LESSEE has already installed part of the Facility on the Property, and shall continue for ten (10) years from that date ("Initial Term") unless terminated earlier pursuant to Section 5 below.

Commencement Date: [Insert after lease is fully executed]

2.2 RENEWAL TERMS: LESSOR grants LESSEE an option to renew this Lease for an additional fifteen (15) years, with a renewal in three (3) five (5) year increments (each five (5) year increment, a "Renewal Term"), commencing upon expiration of the Initial Term, which shall continue for five (5) years from that date unless terminated earlier. Renewals shall occur automatically unless LESSEE provides written notice of nonrenewal to LESSOR no later than thirty (30) days prior to the expiration of the then current Lease Term. For the purpose of this Lease, the "then current Lease Term" shall mean either the Initial Term or the Renewal Term, whichever is in effect at the relevant time. The exercise of renewal terms shall not require an amendment to the Lease.

2.3 LEASE EXTENSIONS: At the conclusion of the Initial Term and any of the Renewal Terms, LESSOR may require LESSEE to apply for amendments to any Zoning Permits to ensure that the Facility is or becomes consistent with City policy documents related to best practices for stealth design for the Facility and/or site. This Zoning Amendment review shall occur prior to any further lease extension, including a Renewal Term, or new lease agreement for the site.

2.4 SUPERSEDES PRIOR LEASE OR AGREEMENT: (delete this section if not applicable) LESSOR and LESSEE acknowledge and agree that as of the Commencement Date, the previous agreement between the Parties entitled [Mobile/Wireless Communications Antenna Site Ground Lease] dated [DATE], referenced by LESSEE as [Ref#] and any amendments, related easements, Memorandum of Lease or other documents (collectively, the "Terminated Agreement") shall terminate and be of no further force and effect. This Lease supersedes and replaces the Terminated Agreement. LESSOR and LESSEE acknowledge that notwithstanding the termination of the Terminated Agreement and 23 Resolution No. 26-28 Page 8
the commencement of this Lease, LESSEE may continue to make, and LESSOR may continue to receive, rental and other payments. In such event, any rental or other payments made pursuant to the Terminated Agreement after its termination shall be applied and credited against any rentals or other payments due under this Lease. Provisions of the Terminated Agreement that survive termination, like indemnity provisions, shall remain in full force and effect.

3. PAYMENT OF RENT: LESSEE agrees to pay to LESSOR, as rental for said Premises, each month in advance, on the first of each month during the term of this Lease payable to the City of San Clemente, 910 Calle Negocio, San Clemente, CA 92673, Attn: Accounts Receivable, Accounting Division, the amount described below. In addition, LESSEE agrees to do and perform all other covenants and agreements contained in this Lease.

3.1 BASE RENTAL PAYMENT: The Base Rental Payment under this Lease shall be consistent with the rate applicable for a [Identify: microcell/minicell/microcell] facility as identified on Exhibit C hereto, which is fully incorporated herein by this reference. If the Commencement Date is a date other than the first day of a month, the Base Rental Payment for the first calendar month shall be prorated on the basis of the number of actual days in such partial month.

3.2 ANNUAL RENTAL INCREASES: Commencing on January 1 after the Commencement Date and on each annual anniversary thereafter, the Base Rental Payment shall be increased automatically by an amount equal to three percent (3%) of the Base Rental Payment in effect during the immediately preceding year. Each new rental amount shall also be referred to as the "Base Rental Payment."

3.3 LATE CHARGE: LESSEE acknowledges that late payment by LESSEE to LESSOR of the Base Rental Payment will cause LESSOR to incur costs not contemplated by this Lease, the exact amount of such costs being extremely difficult and impracticable to fix. Such costs include, without limitation, processing and accounting charges. Therefore, if any installment of the Base Rental Payment due from LESSEE is not received by LESSOR within ten (10) days after the same becomes due, LESSEE shall pay to LESSOR an additional sum of five percent (5%) of the overdue Base Rental Payment as a late charge. The Parties agree that this late charge represents a fair and reasonable estimate of the costs that LESSOR will incur by reason of a late payment by LESSEE. Acceptance of any late charge shall not constitute a waiver of any right of termination as contained in Section 6 below with respect to the overdue amount, or prevent LESSOR from exercising any of the other rights and remedies available to LESSOR.

3.4 LESSEE'S OBLIGATION: LESSEE recognizes and understands that this Lease may create a possessory interest subject to property taxation and that LESSEE may be subject to the payment of property taxes levied on such interest. 24 Resolution No. 26-28 Page 9
LESSEE shall pay all property taxes and assessments directly attributable to LESSEE's possessory interest.

4. CONSTRUCTION OF IMPROVEMENTS:

4.1 LESSEE'S CONSTRUCTION: The purpose of this Lease is to provide LESSEE a site for the placement and use of the Facility, and for no other use whatsoever. LESSEE shall have the right, during the Lease term, to develop, construct, alter, remove, repair, operate, demolish, restore and remodel the following improvements on the Premises and be allowed to operate the Facility as follows:
a) The Facility described in the Recitals together with any modifications that do not result in a different facility classification as described in Sections

1.3 and 1.4 above.
b) Site Equipment: LESSEE shall provide all site equipment required for the installation and operation of the Facility ("Site Equipment"). The Site Equipment is and shall remain the sole property of LESSEE, shall not be deemed fixtures, and may be removed from the Premises by LESSEE at any time.
c) Access to Site: LESSEE's employees, agents and subcontractors shall have access over the Property to the Premises twenty-four (24) hours a day, seven (7) days a week without notice to LESSOR or charge to LESSEE, which such access is reflected on Exhibit B.
d) Construction of Improvements: All improvements made to the Premises by LESSEE shall be developed, constructed, altered, restored, and/or remodeled in a good and workmanlike manner, at LESSEE's expense, in accordance with the requirements of all laws, ordinances, and regulations applicable thereto, including zoning requirements and building code requirements of the City of San Clemente (including compliance with the CUP process prescribed by the City of San Clemente Ordinance No. 1129, if applicable), the County of Orange, and any municipal, state, federal or other governmental agency having jurisdiction over the Premises or the Facility at the time the improvements are constructed. LESSOR agrees to cooperate with LESSEE and execute all documents reasonably required in connection with applying for any municipal permits, zoning variances, or conditional use permits in connection with the construction of the aforementioned improvements. It is understood and agreed that such cooperation and execution of documents shall not be implied to include any expenditures of funds on the part of LESSOR or any implied promise or warranty that such permits, discretionary, or otherwise, will be issued to LESSEE.

Notwithstanding anything in this Lease to the contrary, prior to 25 Resolution No. 26-28 Page 10
commencement of construction, LESSEE, at its expense, shall submit a location and installation plan to LESSOR for review and approval by LESSOR's Utilities Manager. If LESSOR's Utilities Manager (or his/her designee) does not respond in writing to LESSEE within twenty (20) days following LESSEE's request for approval, such request will be deemed to have been approved by LESSOR. Once commenced, any and all improvements to be made by LESSEE with respect to the installation of the Facility and the Premises shall be diligently pursued to completion in compliance with all applicable laws and regulations.

4.2 MECHANIC'S LIENS : LESSEE shall not suffer or permit to be enforced against the Premises, or any part thereof, and shall defend (with counsel acceptable to LESSOR), indemnify, and hold LESSOR harmless from any mechanic's, material suppliers', contractors', tax, or subcontractors' liens arising from any claim for damage, or growing out of the work of any construction, repair, restoration, replacement, or improvement made by or alleged to have been made by or on behalf of LESSEE with respect to the Premises. LESSEE shall pay or cause to be paid all of such liens, claims, or demands before any action is brought to enforce the same against the Premises. If LESSEE shall in good faith contest the validity of any such lien, claim, or demand, then LESSEE shall, at its expense, defend itself and LESSOR against same and shall pay and satisfy any settlement or adverse judgment that may be entered thereupon prior to the execution thereof. In the event of any such contest, LESSEE shall provide LESSOR with a security bond in a form and amount LESSOR deems sufficient in its reasonable discretion to allow the lien of record to be discharged as a matter of law.

4.3 CARE DURING CONSTRUCTION: LESSEE shall exercise great care during construction of the improvements. Any and all damage to improvements, including landscaping and vegetation located on or about the Property, shall be repaired and/or replaced with like size and type of plant materials. All applicable City standards and specifications shall be followed. LESSEE shall request and LESSOR shall reasonably approve all work prior to commencement.

5. TERMINATION:

5.1 LESSOR'S RIGHT TO TERMINATE: LESSOR may pursue any remedies available to it under applicable law, including, but not limited to, the right to terminate this Lease, upon the earliest of any of the following events:
a) LESSEE's failure to pay any Base Rent Payment within fifteen (15) days following notice of nonpayment;
b) LESSEE's failure to comply with any term, covenant, or condition of this Lease after LESSEE has been given notice of the violation and has had thirty (30) days to cure same or, if such default is not curable within such thirty 26 Resolution No. 26-28 Page 11
(30) day period, has not proceeded to commence such cure within such thirty (30) day period and diligently prosecutes the cure to completion; c) Interference by LESSEE's Site Equipment with other electrical or radio frequency equipment installed on or around the Property prior to the Commencement Date, which interference LESSEE does not commence curing within ten (10) days following notice thereof;
d) Interference by LESSEE's Site Equipment with hydrological equipment installed on or around the Property prior to the Commencement Date, which interference LESSEE does not commence curing within ten (10) days following notice thereof. Likewise, LESSOR will not permit or suffer the installation of any future equipment which (i) results in technical interference problems with LESSEE'S then existing equipment or (ii) encroaches onto the Premises.

5.2 LESSEE'S RIGHT TO TERMINATE: LESSEE may terminate this Lease without further liability for any reason whatsoever upon ninety (90) days written notice to LESSOR. Upon termination, all prepaid Base Rent Payments will be retained by LESSOR unless such termination is due to LESSOR's failure of proper ownership or authority, or such termination is a result of LESSOR's default hereunder. In the event that LESSEE terminates the Lease prior to commencement of construction of the improvements, LESSEE's obligation to construct the improvements shall terminate without further liability.

5.3 OWNERSHIP OF IMPROVEMENTS UPON TERMINATION: Upon
termination of this Lease for any reason whatsoever, LESSEE shall offer to transfer to LESSOR title to all real property improvements ("Retained Improvements") constructed by LESSEE (i.e., the Facility, but not the Site Equipment constructed upon the Premises) free, clear and unencumbered of any monetary encumbrance or other restriction or title exception of any kind or nature created by LESSEE other than as permitted by LESSOR in writing. If LESSOR declines the offer of transfer, LESSEE shall return the Premises to its original condition and shall be responsible for obtaining any necessary permits required for the demolition and removal of the Facility. LESSOR acknowledges and agrees that it shall take possession of the Retained Improvements in their then "AS IS" condition, and that LESSEE makes no representation or warranty regarding their condition or fitness for any particular purpose and that LESSEE shall incur no further liability therefore.

6. INTERFERENCE:

6.1 LESSEE'S OBLIGATIONS: Prior to occupancy and operation of any portion of the Facility by LESSEE or its agents, assigns or other lessees within LESSOR's portion of the Premises, LESSEE agrees to:
27 Resolution No. 26-28 Page 12
a) Submit to LESSOR within 45 days prior to operation, proposed plans designating equipment locations on the Premises (including any building or enclosure, pole or tower, antenna type, size and locations and heights above ground on the pole or tower), along with operating frequencies, effective radiated power, and other necessary on-air technical data at LESSOR's reasonable discretion for LESSOR's review and approval, which approval shall not be unreasonably withheld, conditioned or delayed. b) Install or cause to be installed, all equipment according to generally accepted standard engineering practices used in the communication industry, in a good and workmanlike manner and in compliance with all applicable law and regulations.
c) The Site Equipment and the use thereof shall not interfere with the use of any other communication or similar equipment of any kind and nature owned or operated by LESSOR or other occupants of the Property existing as of the Commencement Date, except as may be permitted by applicable laws.

LESSEE shall use reasonable efforts to mitigate any interference from existing radio frequency equipment of LESSEE within ten (10) days of written notification of interference.

6.2 LESSOR'S OBLIGATION: LESSOR shall include in all leases between LESSOR and future lessees on the Property a covenant that the lessee shall not interfere with other electrical or radio frequency equipment previously installed on or around the Property and that if the lessee is not able to mitigate the interference, the lease shall provide for termination thereof. Likewise, LESSOR will not permit or suffer the installation of any future equipment which (i) results in technical interference problems with LESSEE's then existing Site Equipment or (ii) encroaches onto the Premises.

6.3 NON-INTERFERENCE: The Site Equipment and the use thereof shall not interfere with the use of any other communication or similar equipment of any kind and nature owned or operated by LESSOR or other occupants of the Property existing as of the Commencement Date, except as may be permitted by applicable laws; provided, however that subsequent to the installation by LESSEE of the Facility, LESSOR agrees not to install and to exercise commercially reasonable efforts to not allow installation of new equipment on the Property if such equipment causes interference with LESSEE's operations.

7. CO-LOCATION:

7.1 RIGHT TO LEASE TO THIRD PARTY: LESSOR, in LESSOR'S sole and absolute discretion and in compliance with the terms of this Lease, may elect to enter into a similar lease with another carrier ("Potential Carrier") to place an antenna 28 Resolution No. 26-28 Page 13
and/or necessary improvements on the Property. LESSEE hereby agrees that LESSOR may elect to place any such antenna upon a second pole located upon the Property constructed by the Potential Carrier pursuant to the terms of this Section 8.

7.2 CO-LOCATION AGREEMENT: LESSEE may enter into a separate written sublease and co-location agreement ("Co-location Agreement") with any Potential Carrier on LESSEE's Facility, subject to the reasonable approval of the City Manager of the City of San Clemente or his/her designee. The Co-location Agreement shall also set forth the maintenance, utility, indemnification and other obligations of the parties as to the Pole and shall provide that LESSEE shall have the right to charge such Potential Carrier rent, as well as recover from any Potential Carrier the Potential Carrier's pro rata share of the cost of the antenna structure construction. The Colocation must comply with the terms of Facility Modifications in Section 1.3 of this Lease.

7.3 RELEASE OF LESSOR: LESSEE hereby releases LESSOR, its officers, agents, and employees from any responsibility or liability occurring by reason of or arising out of interference with LESSEE's communication configurations, equipment and/or frequency caused by the location of any Potential Carrier upon the Pole, the Facility, the Premises, or the Property in conformity with the provisions of this Lease, or by pre-existing communications operating upon the commencement of this Lease.

8. REPAIRS AND MAINTENANCE:

8.1 NO OBLIGATION OF LESSOR: LESSEE agrees that LESSOR shall be under no obligation to repair, rebuild or replace the Premises or the Right- of-Way area or any improvements located thereon during the term of this Lease, except LESSOR may be liable to LESSEE for any damage to the Facility or Site Equipment arising out of the active negligence or willful misconduct of LESSOR or its agents.

8.2 LESSEE'S OBLIGATION: Notwithstanding the provisions of Section 5.1 above, LESSEE shall, at LESSEE's sole expense and cost, keep and maintain that portion of the Premises and improvements located thereon, and any and all facilities appurtenant under LESSEE's control thereto, including any landscaping, in a good and safe order and repair and in a clean and orderly condition, reasonable wear and tear excepted. Not by way of limitation of the foregoing, LESSEE shall remove any accumulation of trash, weeds, debris, and graffiti on the Premises within seventy-two (72) hours of receipt of notice of the same. LESSEE shall make any and all additions, alterations, repairs or improvements in and about the Premises that may be required by law, and shall otherwise observe and comply with all public laws, ordinances and regulations that are from time to time made applicable to the Premises. LESSEE shall indemnify, defend (with counsel acceptable to LESSOR) and hold LESSOR harmless from and against all actions, claims, liabilities, damages, costs (including without limitation, reasonable attorney's fees) and expenses incurred by LESSOR to 29 Resolution No. 26-28 Page 14
the extent resulting by reason of LESSEE's failure to comply with or perform the provisions of this Lease or its acts on the Property. LESSEE is aware of and waives the provisions of California Civil Code Sections 1941 and 1942 with respect to any obligation LESSOR may have during the term of this Lease regarding the tenantability of the Premises and LESSEE's right to make repairs and deduct the expenses of such repairs from Base Rent Payments.

8.3 LESSEE'S CONTRACTOR: LESSEE shall be responsible for any and all damage to City equipment or property to the extent caused by LESSEE or LESSEE's contractors and shall be responsible for the repair of any such damage to the extent caused by their act hereunder. LESSEE shall be responsible for the replacement of all plant materials damaged by LESSEE or LESSEE's contractors during the construction of the Facility or any other actions taken on the Property or Premises, including trees, shrubs, ground cover, mulch, pebble bark and similar materials. The full cost of such replacement, including the cost of labor shall be borne by LESSEE.

9. UTILITIES AND PROVISION OF SERVICE: LESSEE shall determine the availability of and shall, at its sole cost and expense, cause to be installed in, on, and about the Premises all facilities necessary to supply thereto all water, sewage, gas, electricity, telephone, and other similar services required to service the Premises. LESSOR shall allow LESSEE to have its own electrical metering equipment installed. LESSEE shall obtain all necessary approvals for the installation of the meter. An electrical plan shall be submitted to the LESSOR and approved prior to commencement of such work, such approval not to be unreasonably withheld, conditioned or delayed.

LESSOR agrees to cooperate with LESSEE in its efforts to obtain such utility service.

During the Lease term, LESSEE agrees to pay when due all charges for water, sewage, gas, electricity, and all other utility services of every kind and nature supplied to and used by LESSEE on the Premises. LESSOR shall be responsible for its own electrical and other utility service and for the regular payment of electrical and other utility charges attributable to the Facility other than the Premises.

10. DAMAGE OR DESTRUCTION OF IMPROVEMENTS TO PREMISES:

10.1 LESSOR'S OBLIGATION: LESSOR shall have no duty or obligation to rebuild the Facility or the improvements thereon if such Facility or improvements are substantially damaged during the Lease term, in whole or in part by any casualty.

LESSOR will give LESSEE (a) notice of such casualty within thirty (30) days after the date of the casualty and (b) the right to terminate in sixty (60) days from said casualty date. In the event LESSOR chooses not to rebuild the Facility or improvements thereon, LESSEE shall be entitled to build a new equipment shelter and monopole for its own use on the leased Premises.
30 Resolution No. 26-28 Page 15

10.2 WAIVER OF CIVIL CODE SECTIONS: LESSEE is aware of and, by entering into this Lease, waives the provisions of Civil Code Sections 1932(2) and 1933(4) with respect to any damage or destruction of the Premises.

10.3 CONDEMNATION: In the event of condemnation of the Premises, unless LESSEE is allowed by the condemning authority to continue its operations on the Premises, this Lease shall terminate as of the date title to the Premises vests in the condemning authority or LESSEE is required to cease its operations, whichever is earlier. Notwithstanding the foregoing, if as a result of a condemnation of the Premises, LESSEE, in LESSEE's sole discretion, is unable to use the Premises for the purposes intended hereunder, or if such condemnation is expected to disrupt LESSEE's operations at the Premises for more than forty-five (45) days, LESSEE may, at LESSEE's option, terminate this Lease as of the date the condemning authority takes such possession. LESSEE shall be entitled to share in the proceeds of any condemnation, and LESSEE's share shall include the value of any improvements, which are transferred to the condemning authority, moving expenses, and prepaid rent and business dislocation expenses. LESSEE shall not be allowed to recover for the value of its leasehold interest.

11. ASSIGNMENT AND SUBLEASING:

11.1 ASSIGNMENT: LESSEE shall not voluntarily assign or transfer its interest under this Lease or in the Premises without first obtaining the prior written consent of LESSOR, which consent shall not be unreasonably withheld, delayed or conditioned. The transfer of the rights and obligations of LESSEE to a parent, subsidiary, or other affiliate of LESSEE, or to any successor in interest or entity acquiring fifty-one (51%) or more of LESSEE's membership interests or assets in the market as defined by the FCC in which the Property is located, shall not be deemed an assignment and LESSOR's consent shall not be required for such transfer. Any assignment without LESSOR's consent (when such consent is required) shall be voidable and, at LESSOR's election, shall constitute cause for exercise of LESSOR's remedies under applicable law, including termination of the Lease. No consent to any assignment shall constitute a further waiver of the provisions of this Section.

Notwithstanding the foregoing, it is understood that LESSEE shall not be released from liability hereunder by virtue of any assignment. As a condition precedent to any such assignment that requires LESSOR's consent, LESSEE agrees to provide written notice to LESSOR of its intention to assign at least thirty (30) days before the proposed effective date of any such proposed assignment which notice shall include the identity of the proposed assignee, copies of the proposed assignment documentation and current financial statements of the proposed assignee. As a further condition precedent to any assignment, the assignee must assume, in writing, all of LESSEE's obligations under this Lease.
31 Resolution No. 26-28 Page 16

11.2 SUBLEASING: LESSEE shall not sublease any portion of the Premises except as expressly provided in Sections 8 and 12 of this Lease. LESSEE shall be permitted to sublease portions of the Premises to a wholly-owned subsidiary of LESSEE, provided LESSEE provides LESSOR with express written notice of such sublease.

11.3 RENEWAL/HOLDING OVER: Upon the expiration or within ninety (90) days following termination of this Lease, LESSEE shall surrender the Premises to LESSOR. If LESSEE shall remain in possession of the Premises after the expiration or termination of the Lease, with the consent of LESSOR, either express or implied, such holding over shall be construed to create a tenancy from month to month subject to all the covenants, conditions, and obligations hereof, and LESSEE hereby agrees to pay LESSOR, as monthly rental, an amount equal to one hundred twenty-five percent (125%) of the most recent monthly Base Rent Payment. Nothing above shall be construed to give LESSEE any rights to so hold over and to continue in possession of the Premises after the expiration of the Lease term without the express consent of LESSOR.

12. HAZARDOUS SUBSTANCES:

12.1 LESSEE shall not under any circumstances store or bring onto the Property any Hazardous Substances except as set forth in Section 14.8 below. For purposes of this Lease, the term "Hazardous Substances" means:
a) Any substance, products, waste, or other material of any nature whatsoever which is or becomes listed, regulated, or addressed pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), 42 United States Code Section 9601 et seq.; the Resources Conservation and Recovery Act, 42 United States Code Section 6901 et seq.; the Hazardous Materials Transportation Conservation and Recovery Act, 42 United States Code Section 1801 et seq.; the Clean Water Act, 33 United States Code Section 1251 et seq.; the Toxic Substances Control Act, 15 United States Code Section 2601 et seq.; the California Hazardous Waste Control Act, Health and Safety Code Section 25100 et seq.; the Hazardous Substance Account Act, Health and Safety Code Section 25330 et seq.; the California Safe Drinking Water and Toxic Enforcement Act, Health and Safety Code Section 25249.5 et seq.; California Health and Safety Code Section 25280 et seq. (Underground Storage of Hazardous Substances); the California Hazardous Waste Management Act, Health and Safety Code Section 25170.1 et seq.; California Health and Safety Code Section 25501 et seq. (Hazardous Materials Release Response Plans and Inventory); or the California Porter-Cologne Water Quality Control Act, Water Code Section 13000 et seq., all as amended (the above cited statutes are hereinafter collectively referred to as the "Toxic Substances Laws"); or any other federal, state, or local statute, law, ordinance, resolution, code, rule, regulation, order 32 Resolution No. 26-28 Page 17
or decree regulating, relating to, or imposing liability or standards of conduct concerning any Hazardous Substance, now or at any time hereinafter in effect; b) Any substance, product, waste or other material of any nature whatsoever that may give rise to liability under any of the above statutes or under any statutory or common law theory based on negligence, trespass, intentional tort, nuisance or strict liability or under any reported decisions of a state or federal court;
c) Petroleum fuel or crude oil, other than petroleum and petroleum products which are contained within regularly operated motor vehicles; and d) Asbestos.

12.2 Except as otherwise specifically permitted under the terms of the Lease, LESSEE shall not use, create, generate, store, deposit, dispose of or allow any Hazardous Substances on, under, about or within the Property or the Premises in violation of any federal, state, or local law, rule, regulation, order, decree or other Lease requirement. Storage batteries for emergency power, fuel for the generator, and ordinary paints, solvents and similar substances commonly used in small quantities and necessary for maintenance of the LESSEE's Facilities are excepted from the preceding prohibition of use by LESSEE of Hazardous Substances on the Premises, so long as LESSEE complies with all applicable federal, state and local laws, rules and regulations governing the storage and use of such items ("Excepted Materials"). All Excepted Materials stored on the Property shall be stored in a lockable and weather resistant storage cabinet with leak containment in accordance with industry standards. LESSEE shall develop and maintain all required hazardous material compliance documentation related to the site as mandated by federal, state, or local law, rule, regulation, order, decree or other requirements.

12.3 No permanent underground or above ground storage tanks shall be installed on the Premises. LESSOR or its officers, employees, contractors, or agents shall at all times have the right to go upon and inspect the Premises and the operations conducted thereon to assure compliance with the requirements herein stated. This inspection may include taking samples for chemical analysis of substances and materials present and/or testing soils on Property and taking photographs. In addition, a representative of LESSEE's shall be available for all requested site inspections initiated by the County or LESSOR staff. LESSOR shall provide at least two (2) working days of advance notice for such inspections that are not emergency in nature.

12.4 LESSEE shall, within twenty-four (24) hours of the discovery by LESSEE of the presence of, or believed presence of, a Hazardous Substance as defined herein not in compliance with Toxic Substance Laws caused by LESSEE, give written notice to Lessor in the event that LESSEE knows or has reasonable cause to believe that any release of Hazardous Substance caused by LESSEE has come or will come to be located on, under, about or within the Property or Premises. The failure to 33 Resolution No. 26-28 Page 18
disclose in a timely manner the release of a Hazardous Substance, including but not limited to, an amount which is required to be reported to a state or local agency pursuant to law (e.g., California's Hazardous Materials Storage and Emergency Response Act, Health and Safety Code Section 25550 et seq.) shall be grounds for termination of the Lease by Lessor in addition to actual damages and other remedies provided by law. LESSEE shall immediately clean up and completely remove all Hazardous Substances placed by LESSEE on, under, about or within the Property or Premises, in a manner that is in all respects safe and in accordance with all applicable laws, rules and regulations.

12.5 In the event Hazardous Substances are discovered by LESSEE, LESSEE shall, within twenty-four (24) hours of discovery, disclose to Lessor the specific information regarding LESSEE's discovery of any Hazardous Substances placed on, under, about or within the Property by LESSEE, and provide written documentation of its safe and legal disposal, if LESSEE disposes such.

12.6 Breach of any of these covenants, terms, and conditions, and LESSEE's failure to cure within thirty (30) days of LESSEE's receipt of written notice from Lessor, shall give Lessor the authority to either immediately terminate the Lease or to shut down LESSEE's operations thereon, at the sole discretion of Lessor. In either case, LESSEE will continue to be liable under the Lease to remove, mitigate all Hazardous Substances placed by LESSEE on, under, about or within the Premises and indemnify, defend and hold harm the Lessor with respect thereto. LESSEE shall be responsible for, and bear the entire cost of removal and disposal of, all Hazardous Substances introduced to Premises by LESSEE during LESSEE's period of use and possession of Premises. Upon termination of the Lease, LESSEE shall, in accordance with all laws, remove from the Premises any equipment or improvements placed on Premises by LESSEE that may be contaminated by Hazardous Substances.

12.7 LESSEE shall defend (with counsel acceptable to LESSOR), indemnify and hold Lessor and its officials, officers, employees, contractors and agents free and harmless from any and all claims, liability, injury, damage, costs, fines, or expenses (including, without limitation, the cost of attorney's fees) arising as a result of the presence or use of any Hazardous Substances placed or caused to be placed by LESSEE or its partners, affiliates, agents, officials, officers, contractors, representatives or employees on the Premises or the Property. LESSOR shall defend, indemnify and hold LESSEE and its officers, employees, contractors and agents free and harmless from any and all claims, liability, injury, damage, costs, fines, or expenses (including, without limitation, the cost of attorney's fees) arising as a result of the presence of use of any Hazardous Substances placed or caused to be placed by Lessor or its agents, officials, officers, contractors or employees on the Property. The foregoing indemnity is intended to operate as an agreement pursuant to, among other requirements, Section 107, subdivision (e) of CERCLA, 42 United 34 Resolution No. 26-28 Page 19
States Code Section 9607, subdivision (e), and California Health and Safety Code Section 25364, to insure, protect, hold harmless and indemnify each party from any liability created by the other party pursuant to such sections.

12.8 Notwithstanding the requirements of Section 14.1 and 14.2 above, the LESSEE discloses that LESSEE may operate a diesel generator and storing diesel fuel on the Premises. LESSOR acknowledges and agrees to allow the use and storage of diesel fuel on the Premises, subject to the following terms:
a) LESSEE shall use or store diesel fuel on the Premises in a manner that complies with all applicable statutes, laws, ordinances, rules, and regulations now or hereafter mandated by any federal, state, or local governmental authority;
b) LESSEE shall report and remediate any spill of diesel fuel in accordance with all existing and future federal, state and local laws, and shall promptly notice Licensor of the same;
c) LESSEE shall affirmatively remove all diesel fuel and its residues from the Premises upon expiration or termination of the Lease or LESSEE's removal of the generator, whichever is earlier;
d) If LESSEE fails to promptly take any of the actions required by paragraphs b and c above, LESSOR shall have the option, but not the duty, on at least five (5) days' prior written notice to LESSEE, to undertake such actions on LESSEE's behalf, at LESSEE's sole expense, and LESSEE shall promptly reimburse LESSOR for the costs thereof within ten (10) days of demand; and
e) LESSEE indemnify, defend (with counsel reasonably acceptable to LESSOR), and hold LESSOR and its officials, officers, employees, representatives and agents harmless from and against any and all liability, fines, regulatory proceedings, actions, claims, damages, losses, expenses and costs (including attorney fees) arising out of, related to or in connection with LESSEE's use or storage of diesel fuel on the Premises.

12.9 Upon the execution and effectiveness of this Lease, and until sixty (60) days following the removal of all diesel fuel and its residues from the Premises, in addition to other performance guarantees, LESSEE shall have sixty (60) calendar days to provide a faithful performance bond, in a form acceptable to the LESSOR, in an amount not less than fifty thousand dollars ($50,000) to guarantee LESSEE's performance under section 4.2 above.

13. MUTUAL WAIVER OF DAMAGES AND INDEMNIFICATION:

13.1 Except as provided below, neither Party will be liable to the other, or any of their respective agents, representatives, employees for any lost revenue, lost profits, loss of technology, rights or services, incidental, punitive, indirect, special or consequential damages, loss of data, or interruption or loss of use of service, even if 35 Resolution No. 26-28 Page 20
advised of the possibility of such damages, whether under theory of contract, tort (including negligence), strict liability or otherwise.

13.2 With respect to third-party claims, LESSEE shall and indemnify, defend (with counsel acceptable to LESSOR), and hold harmless LESSOR and its officers, officials, employees, representatives, and agents, and each of them, from and against any and all claims, actions, damages, liabilities, proceedings, costs and expenses (including without limitation reasonable attorneys' fees) (collectively, "Claims") to the extent related to or arising from or out of any claim or action filed against LESSOR as a result of the Facility, LESSEE's use of the Premises or Property or use of the Site Equipment on the Premises, except to the extent such claim or action is due, in whole or in part to the negligence or willful misconduct to LESSOR, in which case, LESSEE's indemnification obligation shall be proportionately reduced in direct proportion to the extent LESSOR's negligence or willful misconduct resulted in the claims, actions, damages, liabilities and expenses.

13.3 With respect to third-party claims, LESSOR shall and indemnify, defend (with counsel acceptable to LESSEE), and hold harmless LESSEE and its officers, officials, directors, shareholders, employees, and agents, and each of them, from and against any and all Claims to the extent arising from or out of any claim or action filed against LESSEE as a result of LESSOR's operation of LESSOR's Property, except to the extent such claim or action is due, in whole or in part to the acts, omissions, negligence or illegal or willful misconduct of LESSEE, in which case, LESSOR's indemnification obligation shall be proportionately reduced in direct proportion to the extent LESSEE's acts or omissions resulted in the Claims.

13.4 Neither Party has any obligation to defend or indemnify the other unless the Party seeking defense and indemnity ("Indemnified Party") provides prompt written notice of any such claims to the Party from which defense and indemnity is sought under this Section 15 ("Indemnifying Party"). The Indemnifying Party also agrees and acknowledges that it shall not admit any liability, settle, compromise, pay or discharge any such claims without the advance written consent of the Indemnified Party and such consent will not be unreasonably withheld, conditioned or delayed.

14. INSURANCE:

14.1 LESSEE agrees, at its sole expense, and at all times during the term of this Lease, to maintain in full force, or cause to be maintained in full force, a policy of commercial general liability insurance, including bodily injury and property damage, with limits of One Million Dollars ($1,000,000) per occurrence for bodily injury (including death) and property damage, and Two Million Dollars ($2,000,000) general aggregate. Any deductible or self-insured retentions shall be the sole responsibility of LESSEE. Such policies shall insure against liability for injury to persons and/or property and death of any person or persons which may occur as a result of or in 36 Resolution No. 26-28 Page 21
connection with the existence and/or operation of LESSEE'S equipment in, on or about the CITY'S property. Each such policy of insurance shall:
a) be issued by companies licensed, authorized or permitted to do business in the State of California that hold a current policy holder's alphabetic and financial size category rating of not less than A-VII, according to the current Best's Key Rating Guide.
b) include as additional insureds CITY, CITY's officers and employees.

A blanket additional insured endorsement shall accompany the insurance certificate.
c) specify it acts as primary insurance and that no insurance held or owned by CITY (or, if applicable, the San Clemente Redevelopment Agency) shall be called upon to cover a loss under said policy; d) cover the operations of LESSEE pursuant to the terms of this Agreement; and
e) be written on an occurrence and not a claims made basis.

14.2 Automobile Liability Insurance: LESSEE shall maintain Automobile Liability insurance covering bodily injury and property damage for all owned, hired, and non-owned vehicles used in connection with LESSEE’S operations under this Lease.
a) Coverage shall be written on ISO form CA 00 01 (or equivalent) with a limit of not less than $1,000,000 combined single limit per accident.

14.3 Workers’ Compensation and Employer’s Liability: LESSEE shall maintain Workers’ Compensation insurance as required by the laws of the State of California and Employer’s Liability insurance with limits of not less than:
a) $1,000,000 bodily injury by accident;
b) $1,000,000 bodily injury by disease – policy limit;
c) $1,000,000 bodily injury by disease – each employee. d) Such policy shall include a waiver of subrogation in favor of CITY, its elected and appointed officials, officers, agents, employees, and volunteers.

14.4 Property Insurance (LESSEE’S Equipment): LESSEE shall maintain property insurance covering LESSEE’S towers, antennas, generators, cabinets, improvements, and all related equipment and personal property installed or maintained on CITY property pursuant to this Lease. Coverage shall be written on a special form (all risk) basis and shall be maintained at full replacement cost value. a) Such policy shall include a waiver of subrogation in favor of CITY, its elected and appointed officials, officers, agents, employees, and volunteers. b) CITY shall have no responsibility for loss of or damage to LESSEE’S property.

14.5 Additional Insured Status: CITY, its elected and appointed officials, officers, agents, employees, and volunteers shall be included as additional insureds under the Commercial General Liability and Automobile Liability policies with respect to liability arising out of LESSEE’S operations, activities, use, or occupancy of CITY property, including products and completed operations. Such status shall be provided 37 Resolution No. 26-28 Page 22
by ISO endorsement CG 20 10 and CG 20 37 (or equivalent) or by blanket additional insured endorsement.
a) Primary and Noncontributory Coverage: LESSEE’S insurance shall be primary and noncontributory with respect to any insurance or selfinsurance maintained by CITY. Any insurance or self-insurance maintained by CITY shall be excess of LESSEE’S insurance and shall not contribute with it.

14.6 Deductibles and Self-Insured Retentions: Any deductibles or self-insured retentions (“SIRs”) shall be declared to and approved by CITY. LESSEE shall be solely responsible for payment of any deductibles or SIRs. CITY may require LESSEE to provide financial documentation demonstrating the ability to satisfy any SIR.

14.7 Insurer Qualifications: All insurance shall be issued by insurers admitted to do business in the State of California and having a current A.M. Best rating of not less than A-VII, unless otherwise approved in writing by CITY.

14.8 Waiver of Subrogation: Where required above, LESSEE shall require its insurers to waive all rights of subrogation against CITY, its elected and appointed officials, officers, agents, employees, and volunteers for losses arising out of LESSEE’S use or occupancy of CITY property.

14.9 Evidence of Insurance: Prior to commencement of any installation, construction, or operation under this Lease, and annually thereafter upon renewal of coverage, LESSEE shall furnish CITY with certificates of insurance and applicable endorsements evidencing required coverage. Endorsements shall be attached to the certificate and shall not be provided by reference only.

14.10 Notice of Cancellation or Material Change: Each policy shall provide that coverage shall not be canceled, materially reduced, or non-renewed except after thirty (30) days’ prior written notice to CITY (ten (10) days for nonpayment of premium).

14.11 Occurrence Form: All required liability insurance shall be written on an occurrence basis and not on a claims-made basis.

14.12 Failure to Maintain Insurance: Failure to maintain required insurance shall constitute a material breach of this Lease and grounds for termination.

15. MISCELLANEOUS:

15.1 INSPECTION: LESSOR reserves the right for itself and its employees, agents, and representatives to enter upon the Premises at any reasonable time and after reasonable notice to LESSEE and in the presence of a LESSEE representative for the purpose of attending to LESSOR's obligations under this Lease, provided that LESSOR and its employees, agents, and representatives shall make best efforts not to disturb, disrupt, damage, move, alter, turn off, adjust or otherwise adversely affect LESSEE's operations or Site Equipment.

15.2 NO WAIVER: No covenant, term, or condition contained herein shall be deemed waived, except by written consent of the Party against whom the waiver is claimed. Any waiver or the breach of any covenant, term or condition shall not be 38 Resolution No. 26-28 Page 23
deemed to be a waiver of any preceding or succeeding breach of the same or any other covenant, term, or condition. Acceptance by LESSOR of performance other than full performance by LESSEE after the time the performance shall have become due shall not constitute a waiver by LESSOR of the breach or default or default of any covenant, term, or condition unless otherwise expressly agreed to by LESSOR in writing.

15.3 INTERPRETATION: The Parties hereto agree that all provisions hereof are to be construed as both covenants and conditions as though the words imparting such covenants and conditions were used in each separate paragraph hereof. The captions of the articles and paragraphs of this Lease are for convenience only and shall not be deemed to be relevant in resolving any questions of interpretation or construction.

15.4 INTEGRATION AND GOVERNING LAW: This Lease represents the entire understanding of LESSOR and LESSEE as to those matters contained herein. No prior oral or written understanding shall be of any force or effect with respect to those matters covered by this Lease. This Lease shall be governed by the laws of the State of California and construed as if drafted by both LESSOR and LESSEE. This Lease may not be modified, altered, or amended except in writing signed by both LESSOR and LESSEE.

15.5 LEASE BINDING ON HEIR AND ASSIGNS: Each of the terms, covenants, and conditions of this Lease shall extend to, be binding upon, and inure to the benefit of not only LESSOR and LESSEE, but each of their respective heirs, representatives, administrators and assigns. Whenever in this Lease reference is made to either LESSOR or LESSEE, the reference shall be deemed to include, whenever applicable, the heirs, legal representatives, and assigns of each of the parties, the same as if in every case expressed.

15.6 CORPORATE AUTHORITY: Each person executing this Lease on behalf of an entity represents and warrants that he or she is duly authorized to execute and deliver this Lease on behalf of said entity, in accordance with a duly adopted resolution or other action of the Party, that this Lease is binding upon said Party in accordance with its terms and that such person will defend and indemnify the other Party should such representation and warranty prove false.

15.7 NOTICES: Any written notices required pursuant to this Lease shall be made by certified or registered mail, return receipt requested, or reliable overnight courier and delivered to the following address:

To LESSOR: City of San Clemente
910 Calle Negocio
San Clemente, CA 92673 Attn: Finance
39 Resolution No. 26-28 Page 24
(949) 361-8200
With a Copy to: City of San Clemente
910 Calle Negocio
San Clemente, CA 92673
Attn: Accounting
(949) 361-8282
To LESSEE: [LESSEE]
[Address]
Attention: [Contact]
Site: [Site Name]
Notice shall be effective upon actual receipt or refusal as shown on the receipt obtained pursuant to the foregoing.

16. PROPERTY: LESSOR warrants that: (i) LESSOR owns the Property in fee simple and has rights of access thereto; (ii) LESSOR has full right to make this Lease; and (iii) LESSOR covenants and agrees with LESSEE that upon LESSEE paying the Base Rental Payment and observing and performing all the terms, covenants, and conditions on LESSEE's part to be observed and performed, LESSEE may peacefully and quietly enjoy the Premises, subject, nevertheless, to the terms and conditions of this Lease. LESSOR warrants that the making of this Lease and the performance thereof will not violate the provision of any mortgage, lease, or other agreements under which LESSOR is bound and which restricts the LESSOR in any way with respect to the use or disposition of the Property.

17. AMENDMENTS: The City Council assigns the City Manager signature authority to execute future Lease Amendments and extensions for periods not more than five (5) years each and provided that the City Manager shall not have the authority to approve a decrease in the rental rate without the prior approval of the City Council.

Any such Amendment shall be consistent with Sections 1.3 and 2.3 of this Lease.

18. COUNTERPARTS/ELECTRONIC SIGNATURES: This Lease may be executed electronically and in any number of counterparts, which together shall constitute one agreement. A true and correct electronic copy of this Lease can be used for any purpose as one with an original ink signature.
[SIGNATURES ON FOLLOWING PAGE]
40 Resolution No. 26-28 Page 25
IN WITNESS WHEREOF, the Parties hereto caused this Lease to be executed by their duly authorized officers.

CITY OF SAN CLEMENTE
Dated: By: _
Andy Hall, City Manager
Dated: , 20
ATTEST:

TAX I.D. #: 95-6000775
CITY CLERK of the City of
San Clemente, California
APPROVED AS TO FORM:

Elizabeth A. Mitchell, CITY ATTORNEY
LESSEE
[ENTITY, a California limited partnership (or
LLC, etc), DBA [if applicable]
By: [Signature Authority]
Its: General Partner
By:_
Name:

Its:

Date:
41 Attachment 1

EXHIBIT A TO LEASE TEMPLATE

DESCRIPTION OF PREMISES
The Property shall consist of all that real property situated in the City of San Clemente, County of Orange, State of California described as follows:
[Insert Address]
Also known as Assessor’s Parcel Number [xxxxxx-xx]
[Insert Legal Description]
The Premises shall consist of that portion of the Property where the Facility is located and as depicted on the map attached as Exhibit “B” hereto and incorporated fully herein by this reference.
42 Resolution No. 26-xx Page 2

EXHIBIT B TO LEASE TEMPLATE
This page left blank intentionally.

Insert telecommunications project plans after this
page, including site access.
43 Resolution No. 26-xx Page 3

EXHIBIT C
City of San Clemente Leases for Macro Telecommunications Facilities January, 2026 January, 2027*
Macrocell $5000/month $5150/month
Minicell $4000/month $4120/month
Microcell $3000/month $3090/month
*3% annual escalator for all future years beginning January 1 The following definitions are used by the CA DGS and will also apply to leases in San Clemente:

Macrocell: Facility with 9 or more antennas and/or fenced area with equipment building or concrete pad space and space required for the foundation of the monopole or tower, when combined exceeds 500 square feet, not to exceed 16 antennas or 2,500 square feet.

Minicell: Facility with 4 to 8 antennas and/or fenced area containing equipment building or concrete pad space and space required for the foundation of the monopole or tower, when combined is in excess of 300 square feet but less than 500 square feet.

Microcell: Facility with 1 to 3 antennas and/or fenced area with equipment building or concrete pad space and space required for the foundation of the monopole or tower, when combined is less than 300 square feet.
44 Private
Antenna Cabinet Power Rack Transmitter/
Receiver Generator GPS Unit
CPI Index
January
2000 $100.00 $200.00 $150.00 $100.00 $200.00 $200.00 2.25% 2001 $103.75 $207.50 $155.63 $103.75 $207.50 $207.50 3.75% 2002 $106.55 $213.10 $159.83 $106.55 $213.10 $213.10 2.70% 2023 $183.11 $366.22 $274.66 $183.11 $366.22 $366.22 $191.13 6.40% 2024 $188.78 $377.57 $283.18 $188.78 $377.57 $377.57 $197.05 3.10% 2025 $194.45 $388.90 $291.67 $194.45 $388.90 $388.90 $202.96 3.00% 2026 pending CPI update, expected Feb 11, 2026
Telecommunications Facilities: Equipment Fee Schedule
Attachment 2
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CITY OF NEWPORT BEACH

COMMUNITY DEVELOPMENT DEPARTMENT
100 CIVIC CENTER DRIVE
NEWPORT BEACH, CA 92660
(949) 644-3200

MICRO/MACRO TELECOM RATES
July 2022
The following is the rate structure for placement of antennas and corresponding equipment on City property, as approved by the City Manager’s office:

Single Site Pricing:

1. Antenna on streetlight or traffic signal with no equipment cabinetry on City public property - $2,045/month.

2. Antenna on streetlight or traffic signal with equipment cabinetry on City public property (not right of way):
a. Foundation/surface area containing equipment or cabinet is less than 150 square feet - $3,015/month.
b. Foundation/surface area containing equipment or cabinet is 150-499 square feet - $3,690/month.
c. Foundation/surface area containing equipment or cabinet is 500+ square feet - $4,360/month.

3. Antenna attached to buildings or other pre-existing structures with equipment cabinetry on City public property (not right of way) – Equipment cabinetry will be charged based on square feet at the same rate as above, plus a flat rate of $500/month.

4. Antenna on monopoles on public property (not right of way) with equipment cabinetry on City public property (not right of way) – Rates will be based on same square foot schedule as above; square footage will include equipment or cabinetry AND the area of the monopole.

Other Requirements:
 If the antennas are on park property, the City may require a one-time upfront payment mitigating any park impacts. The amount shall be at the recommendation of the City Manager and the Director of Recreation and Senior Services.
 This communication is published as a courtesy. The License Rates shall automatically increase each year by the percentage change in the Consumer Price Index, and adjust to market rate upon the first renewal term; or the License Rates shall automatically increase by 5% each year, and adjust to market rate upon the second renewal term.
 Additional fees may be applicable pursuant to City’s fee schedule.

For more information about these rates, contact Lauren Wooding Whitlinger, Real Property Administrator, by e-mail at [email protected] or by telephone at 949-644-3236.

Attachment 4
49 Number Facility Carrier Property Location Property Owner APN Lease Yerm License
Commencement
1 Calavera Hills Community Park AT&T (New Cingular Wireless) 2997 Glasgow Dr
Calavera Hills Park City of Carlsbad 167-101-35-00
10 Years
Options: 2x 5-Years 6/11/2020
2 Twin D Water Tanks AT&T (New Cingular Wireless)
6580 Black Rail Rd, Carlsbad
Twin D CMWD
215-080-05-00
215-080-23-00
License; First
Amendment 4/24/2018 6/14/2016
3 Crossings Golf Course AT&T (New Cingular Wireless) Crossing Golf Course City of Carlsbad 212-270-01
212-270-02
212-270-07
10 Years
Options: 2x 5-Years 4/24/2018
4 Calavera Hills Community Park T-Mobile West LLC/Crown Castle 2997 Glasgow Dr
Calavera Hills Park City of Carlsbad 167-101-35-00
10 Years
Options: 2x 5-Years 4/9/2019
5 Trailblazer Park - Future Robertson
Ranch Community Park Crown Castle Towers 06-02 LLC Trailblazer Way City of Carlsbad 208-010-38-00
208-010-39-00
208-010-42-00
3 years + three 1-year
options (Temporary) 7/28/2020
6 Ellery Reservoir
STC One LLC
(Crown Castle) 2237 Janis Way, Carlsbad City of Carlsbad 167-540-52-00 10 years
Option: 1x 10-Years 12/20/2016
7 Maerkle Reservoir Verizon Wireless (VAW LLC) 3300 Sunny Creek Rd, Carlsbad CMWD 169-230-02-00
169-500-05-00
5 years
Option: 10-year 6/13/2017
8 La Costa High Reservoir Verizon Wireless (VAW LLC) Corintia St (APN 223-792-19-00), Carlsbad CMWD 223-792-19-00 10 Years
Options: 2x 5-Years 2/25/2020
9 Calavera Hills Community Park Verizon Wireless (VAW LLC) 2997 Glasgow Dr (Calavera Hills Park),
Carlsbad City of Carlsbad 167-101-35-00
Renewal executed (see
file) 7/22/2014
10 Twin D Water Tanks Verizon Wireless (VAW LLC)
6580 Black Rail Rd, Carlsbad
Twin D CMWD
215-080-05-00
215-080-23-00
5 years
Option: 10-year 10/25/2016
11 Ellery Reservoir San Diego County 2237 Janis Way, Carlsbad City of Carlsbad 167-540-52-00 20-Years 4/13/2017 October 28, 2025
Attachment 5
50 License
Expiration CUP/MCUP CUP/MCUP Expiration
Payment
Schedule
Approximate
Monthly Rent
Approximate
Annual Rent
Current
Status CPI Increase Holdover Rent Late Fee Comments/Notes 6/10/2030 MCUP-19-07 9/30/2029 Monthly $ 4,521.17 $ 54,254.03 Active 3% Annually 150% 6% $8,000 admin fee 6/13/2026 MCUP: 15-09 8/10/2025 Monthly $ 4,976.49 $ 59,717.88 Active 3% Annually 200%

1. $70,000 Construction Mitigation Fee (Reso 1549
(6/14/2016)

2. Z-Boom lift valued at $129,060; Reso 1593
(4/24/2018)
4/23/2028 MCUP: 15-04 NA Monthly $ 4,845.71 $ 58,148.52 Active CPI (4%-6% cap) 150% 10% $8,000 admin fee 4/8/2029 MCUP 07-04x1 NA Monthly $ 4,537.40 $ 54,448.78 Active 3% Annually 150% 6% $8,000 admin fee 7/29/2026 CUP 2019-0179 NA Monthly $ 5,871.72 $ 70,460.68 Active 3% Annually 150% 6% $50,000 park improvement fees; Reso 2020-158
(7/28/2020)
12/20/2026
MCUP 08-01x1
(9/12/2016) 08/18/2026 Monthly $ 4,598.80 $ 55,185.00 Active 3% Annually 200% 10% $5,000 admin fee 6/12/2032 CUP 09-04 NA Monthly $ 4,736.77 $ 56,841.24 Active CPI (3%–6% cap) 200% 10% $6,000 admin fee; Reso 1576 (6/13/2017) 2/24/2030 CUP 94-11x1 NA Monthly $ 4,463.21 $ 53,558.00 Active CPI (3%–6% cap) 130% 10% $17,500 construction enhancement fee 7/21/2034 MCUP: 13-06 NA Monthly $ 4,878.90 $ 58,546.80 Active CPI (3%–6% cap) 200% 10% $10,000 construction enhancement fee 10/24/2036 MCUP: 15-07 NA Monthly $ 4,878.91 $ 58,546.92 Active CPI (3%–6% cap) 130% 10% $70,000 construction mitigation fee 4/26/2037 NA NA NA NA NA Active NA NA NA Public Safety Radio Tower Avergage Current Lease Rate $ 4,830.91
51 Link to Staff Report
https://records.carlsbadca.gov/WebLink/Do
cView.aspx?id=4869877&dbid=0&repo=City
OfCarlsbad
https://records.carlsbadca.gov/WebLink/Do
cView.aspx?id=4871854&dbid=0&repo=City
OfCarlsbad
https://records.carlsbadca.gov/WebLink/Do
cView.aspx?id=4869124&dbid=0&repo=City
OfCarlsbad
https://records.carlsbadca.gov/WebLink/Do
cView.aspx?id=4869413&dbid=0&repo=City
OfCarlsbad
https://records.carlsbadca.gov/WebLink/Do
cView.aspx?id=5154708&dbid=0&repo=City
OfCarlsbad
https://records.carlsbadca.gov/WebLink/Do
cView.aspx?id=4868663&dbid=0&repo=City
OfCarlsbad
https://records.carlsbadca.gov/WebLink/Do
cView.aspx?id=4871873&dbid=0&repo=City
OfCarlsbad
https://records.carlsbadca.gov/WebLink/Do
cView.aspx?id=4871919&dbid=0&repo=City
OfCarlsbad
https://records.carlsbadca.gov/WebLink/Do
cView.aspx?id=4867853&dbid=0&repo=City
OfCarlsbad
https://records.carlsbadca.gov/WebLink/Do
cView.aspx?id=4871858&dbid=0&repo=City
OfCarlsbad
https://records.carlsbadca.gov/WebLink/Do
cView.aspx?id=4868766&dbid=0&repo=City
OfCarlsbad
52 14-Feb-23
City Rent (Low) Rent (High) Notes Adjustment Rate Other Fees Rent (Low) Rent (High) Adjustment Rate Other Fees Aliso Viejo $658.56 $1,534.80 SCE
Anaheim $105.18 2% $763 Admin. Review $53,681.76 $56,527.68 5% or CPI, w/e is higher $381.36 Per Add. Antenna Brea $295.00 3% $40,113.57 3% $10,000 Admin Fee
Buena Park $658.56 $1,534.80 SCE
Costa Mesa $658.56 $1,534.80 SCE $18,984.00 3%
Cypress $15,738.84 CPI
Dana Point $500.00 SDGE Per 2017 $1191.02 Streetlight Fee Fountain Valley $283.50 $1,890.00 5% $7626 Review Fee $2781 Application Fee
$36,894.00 $42,213.00 5%
Fullerton $270.00
$500 Permit Fee (≤5)
$100 Application Fee (>5)
$1000 for New Pole
Garden Grove $658.56 $1,534.80 SCE
Huntington Beach $2,092.00 $2,682.00 3%-5% or CPI, w/e lower $17,656.32 $52,587.00 3%-4% or CPI Irvine $658.56 $1,534.80 SCE $42,000.00 $44,100.00 4% Short-tem 5yr lease La Habra $300.00 3%
$565 Application Fee (≤5)
$113 Application Fee (>5)
$1129 for New Pole
$29,441.00 $37,991.00 3-5%
La Palma
Laguna Beach $278.00 3% $8000 Master License Fee
$206 Administrative Fee
Laguna Hills $26,918.00 $29,904.00 COLA
$364.88 Permit Request
$741.21 New Cell Cite Check
$392.51 New Cell Cite
Laguna Niguel $19,384.86 $1600 ROW Fee $15,651.00 $54,148.00 3-5% Laguna Woods $1829 Permit Fee
Lake Forest $658.56 $1,534.80 SCE $742 Permit Fee
Los Alamitos $658.56 $1,534.80 SCE n/a n/a
Mission Viejo
Newport Beach $2,728.00 5% or CPI $100 Utilities Fee (if app.) $24,540.00 $52,320.00 5% or CPI $500/month Cabinetry Orange $39,845.50 3%
Placentia $658.56 $1,534.80 $36,000.00 $42,000 4% $1567 Plan review Rancho Santa Margarita $270.00
$500 Permit Fee (≤5)
$100 Application Fee (>5)
$1000 for New Pole
n/a n/a
San Clemente $304.00 3% $97.24 Application Fee $34,000.00 $39,000.00 3% $323.27 Per Antenna San Juan Capistrano
Santa Ana
Seal Beach $658.56 $1,534.80 SCE
Stanton Pending Pending
Tustin $284.00 2%
$525 Review Fee (≤5) $105
Review Fee per (>5)
$1050 Encroachment Permit
$42,000.00 $66,000.00 4% $5250 Application Fee
$9000 Security Deposit (P&R)
Villa Park
Westminster $658.56 $1,534.80 SCE $355-$500 Check Fee $60 Annual Inspection Yorba Linda
AVERAGE RATES: $746.76 $1,940.83 $32,616.55 $42,098.17
SCE Calculations: Nokia Small Cell Study + SCE Nokia Study SCE Micro/Macro Cell Yearly Rates by City
City of Newport Beach
Cell Rate Survey for Orange County Cities
Survey Summary
Small Cell Yearly Rates by City
Attachment 6
53 Attachment 7
54 55
56 57
58 59
60 910 Calle Negocio
2nd Floor
San Clemente, California
www.san-clemente.org

AGENDA REPORT

CITY OF SAN CLEMENTE

CITY COUNCIL MEETING
CITY OF SAN CLEMENTE 1
Meeting Date: February 17, 2026 Agenda Item: 8B.

Submitted By: Public Works
Prepared By: David Rebensdorf, Public Works Director/City Engineer Subject:
..titl e

PROTEST HEARING TO CONSIDER ALL WRITTEN PROTESTS AND HEAR ALL ORAL

COMMENTS TO PROPOSED WATER RATES AND FEES PURSUANT TO PROPOSITION 218, CONSIDERATION OF A RESOLUTION ADOPTING PROPOSED WATER FEES AND

RATES WITH ANNUAL ADJUSTMENTS AND PASS-THROUGH RATES THROUGH JANUARY 1, 2030 AND INTRODUCTION (FIRST READING) OF AN ORDINANCE AMENDING SAN CLEMENTE MUNICIPAL CODE SECTION 13.04.220 REGARDING ADOPTION OF FUTURE WATER RATES ..body
Fiscal Impact:

The revenue generated from water rates and service charges is based on a cost-of-service study and model that is designed to ensure that rates and fees do not exceed the cost of providing water services, including adequate revenues and reserves to sufficiently fund current and future operations and capital costs. The impact on each customer is based on customer water use, water rates and charges adopted. As proposed, a typical residential customer’s monthly water bill (one inch meter using 10 units of water) would increase by about $7.69 (9.8%) on March 1, 2026, and be reflected on the April bill and would increase 3.5% annually starting January 1, 2027 and each year through January 1, 2030.

Summary:

In conjunction with several other steps in the rate adjustment process, the City Council is being asked to consider the adoption of new water rates and fees. The City Council is required to conduct a Proposition 218 protest hearing and the City Clerk will count the number of written protests. If a majority of property owners do not protest, the City Council is able to adopt Resolution No. 26-29, approving the proposed water rates and fees. Staff is also recommending the introduction of Ordinance No. 1799 and conducting a first reading of the Ordinance.

Background:

On May 6, 2025, the City hired Water Resources Economics (WRE) to conduct a Cost-of-Service Study to evaluate water rates. On September 16, 2025, the City Council considered results and findings from the draft Cost-of-Service Study and provided direction to finalize a Water Rate Study to include:
 uniform rates for all customer classes
 increased fixed revenue recovery to stabilize revenue aligned with the City’s fixed costs  utilization of a pass-through for water supply
 Municipal Water District of Orange County (MWDOC) fixed costs and fixed meter charges  revised Demand Management Rates
 development of a five-year rate increase schedule
61 Meeting Date: February 17, 2026 Agenda Item: 8B.

CITY OF SAN CLEMENTE 2
Additionally, staff was directed to finalize a draft Proposition 218 Notice of Public Hearing. On October 7, 2025, the City Council adopted procedures to establish the water rates in a manner consistent with Proposition 218 and Government Code sections 53750 through 53759.2 and 54354.5 including a process to receive property owner objections to proposed water fees.

WRE completed the final draft of the November 2025 Water Rate Study for the City Council to receive and consider. The study addressed the direction provided by the City Council on September 16, 2025 with more detail under the background section of the report and within the study. At its November 18, 2025 meeting, the City Council instructed staff to distribute the Notice of Public Hearing (Attachment 2) in relation to the proposed adjustments to water rates and charges, including information regarding the exhaustion of administrative remedies and how ratepayers/property owners could submit an objection to the proposed water rates and fees. The public hearing notice advised ratepayers and property owners that the City Council would consider and respond to all timely written legal objections to proposed water rates and charges at its February 3, 2026 meeting and consider proposed adjustments to water rates and charges at its February 17, 2026 meeting.

On December 1, 2025 (which was at least 45 days prior to January 15, 2026), the City mailed the “Notice of Public Hearing” to each ratepayer/property owner served by the City and posted the Notice of Public Hearing on the City’s webpage (www.sanclemente.gov/water-rates). The Public Hearing Notice identified supplemental documents that were concurrently posted on the City’s webpage, including the Water Rate Study Report that provides detailed information on the proposed water rates, how they were calculated and the reason for the proposed change in water rates. The Water Rate Study Report was included on the City’s webpage, and it is labeled “2025 Water Rate Study Final Report – November 2025” (Attachment 4) prepared on behalf of the City by Water Resources Economics.

On February 3, 2026, the City Council conducted a public hearing to examine all written objections. The City received two letters that identified opposition to the proposed water rate update prior to the January 15 deadline, both of which were labeled as an “objection”; however, neither letter complied with the definition of a “written objection” as defined by “AB 2257” (California Government Code Section 53759.1) and Resolution No. 25-151. The City Council determined that there were no timely written legal objections to proposed water rates and charges received, directed staff to respond in writing to the communications received, determined that clarifications, further review or reduction or abandonment of the proposed water rates, fees and charges were not warranted in accordance with Government Code sections 53759.1 and 53759.2, and made no changes to the Water Rate Study Report nor the proposed adjustment to water rates and charges.

Analysis:

The most recent previous Water Cost-of-Service Study was completed by Carollo Engineers, Inc. in 2017 and included a five-year rate increase through 2022. In 2017, rates were simplified from a tiered rate structure to a uniform rate based on customer class. Fixed rates were increased from 22% to 32% (which was more aligned with the City’s fixed costs of approximately 42%). The costs for imported water and operating costs for MWDOC were established as a pass-through, and drought rates were developed. The modified rate structure simplified rates for ease of 62 Meeting Date: February 17, 2026 Agenda Item: 8B.

CITY OF SAN CLEMENTE 3
customer understanding, created improved revenue stability due to the pass-through, increased fixed rate recovery and was codified in San Clemente Municipal Code section 13.04.220.

During the annual budget, City staff examined potential expenditures to identify reductions wherever possible and to establish a budget that provides an adequate level of service to provide water service, operate and maintain the system, and rehabilitate/replace existing infrastructure.

Due to rising expenses from purchased water, electricity, chemicals, materials, new regulatory requirements and construction, WRE was hired to evaluate the City’s revenues, expenses and reserve policy to establish a funding level to continue to provide water service to the City’s customers.

As a government agency, the City does not profit from the water utility. All water revenues are used to fund the water system and will not exceed the cost of providing water service to customers. There are three key factors impacting water fund financial performance: debt coverage requirements, capital needs and reserve policy targets.  Debt Coverage Requirements - The City’s annual debt service payment from the Water Fund is approximately $900k for the expansion of the Recycled Water System through the study period and the City is required to meet an annual debt coverage requirement of 110 percent.

This means the City’s net operating revenue must be 110 percent greater than its annual debt service. With existing revenues, the City does not satisfy the debt service coverage.  Capital Investments – The cost of planned capital projects over the next five years (FY 2026 through FY 2030) are approximately $21 million, accounting for inflation of project costs over time.
 Reserve Policy Targets – The City’s current reserve policy includes targets for operating, capital projects and debt service reserves. To be consistent with an industry-standard reserve policy, WRE is recommending the following changes: an operating reserve of 25 percent of annual operating expenses, capital project reserve based on a five-year rolling average, emergency reserve with $2 million in the event of a major asset failure or emergency, and a debt service reserve with one year of debt service. City staff intends to present an update to the Reserve Policy to reflect these recommended changes at a future City Council meeting.

Based on an analysis of the current and future expenditures, a proposed financial plan scenario includes five years of revenue adjustments, that are required to satisfy the debt coverage and maintain financial sufficiency and resiliency as shown below:

Line Fiscal Year Effective Date Revenue Adjustments
(Potable and Recycled)
1 FY 2026 3/1/2026 9.5%
2 FY 2027 1/1/2027 3.5%
3 FY 2028 1/1/2028 3.5%
4 FY 2029 1/1/2029 3.5%
5 FY 2030 1/1/2030 3.5%
63 Meeting Date: February 17, 2026 Agenda Item: 8B.

CITY OF SAN CLEMENTE 4
Proposed Rate Structure Changes and Water Rates
The main objective of the study was to conduct a comprehensive cost-of-service analysis while maintaining as much of the current rate structure as possible to minimize customer impacts. The City’s current water rate structure includes a monthly service charge based on meter size and a uniform consumption rate per ccf (one hundred cubic feet or approximately 748 gallons) that varies by customer class.

Upon examination of the existing rate methodology and the City’s water supply profile, WRE recommended that the City implement a uniform consumption rate for all customer classes.

Additionally, to continue pass-through of water supply costs from MWDOC on the variable rate component, who is the City’s main water supplier, WRE recommended that the City implement a separate MWDOC monthly service charge based on meter size for the MWDOC fixed charge.

The proposed five-year potable and recycled water rate schedules are based on the proposed rate structure and methodology changes, the updated cost-of-service analysis, and the proposed revenue adjustments over the five-year period. The proposed rate schedule shows the proposed potable and recycled water rates to be implemented in March 2026 through January 2030. Note that MWDOC potable water supply costs will be billed to customers as pass-through charges.

The proposed rates shown for these years may differ depending on changes to MWDOC rates because of the pass-through provision of MWDOC water supply costs. As proposed, the City is authorized to pass-through those increases in costs from MWDOC by providing a 30-day mailed notice to the City’s customers.

Current and Proposed Monthly Fixed Water Service Charge – City Portion (Potable and Recycled)
Line
Monthly Fixed Water
Service Charge - City
Portion (Potable and
Recycled)
As of
1/1/2022
Effective
3/1/2026
Effective
1/1/2027
Effective
1/1/2028
Effective
1/1/2029
Effective
1/1/2030
1 Up to 1" $27.41 $27.76 $28.74 $29.75 $30.80 $31.88
2 1.5" $67.72 $76.67 $79.36 $82.14 $85.02 $88.00
3 2" $102.09 $118.60 $122.76 $127.06 $131.51 $136.12
4 3" $211.23 $251.37 $260.17 $269.28 $278.71 $288.47
5 4" $372.08 $447.03 $462.68 $478.88 $495.65 $513.00
6 6" $756.96 $1,124.86 $1,164.24 $1,204.99 $1,247.17 $1,290.83 Current and Proposed Monthly Fixed Water Service Charge – MWDOC (Potable) Line
Monthly Fixed Water
Service Charge -
MWDOC (Potable )
Effective
3/1/2026 Effective 1/1/2027 Effective 1/1/2028
Effective
1/1/2029
Effective
1/1/2030
1 Up to 1" $5.34
Pass-Through Going Forward
2 1.5" $17.80
3 2" $28.48
4 3" $62.30
5 4" $112.14
6 6" $284.80
64 Meeting Date: February 17, 2026 Agenda Item: 8B.

CITY OF SAN CLEMENTE 5
Current and Proposed Consumption Rates (Potable and Recycled)* Line
Consumption Rates
($/ccf) (Potable and
Recycled)
As of
1/1/2022
Effective
3/1/2026
Effective
1/1/2027
Effective
1/1/2028
Effective
1/1/2029
Effective
1/1/2030
1 Single Family
Residential $5.11 $5.31 $5.50 $5.70 $5.90 $6.11
2 Multi Family Residential $4.92 $5.31 $5.50 $5.70 $5.90 $6.11 3 Commercial $4.95 $5.31 $5.50 $5.70 $5.90 $6.11
4 Irrigation $6.01 $5.31 $5.50 $5.70 $5.90 $6.11
5 Recycled Water $3.29 $3.52 $3.65 $3.78 $3.92 $4.06
*One unit of water is 100 cubic feet (ccf) or approximately 748 gallons of water. For potable water rates effective 3/1/2026, the MWDOC supply unit cost is $4.03 and City’s unit cost for delivery, conservation and revenue offset is $1.28. For illustration, $4.03 remains the same unit rate in future years, but will depend upon future MWDOC supply costs, and supply unit costs are subject to change.

Recycled Water Rates
Recycled water is used by irrigation customers where it is available and utilized for irrigating parks, schools, golf courses, slopes and medians throughout the City. The use of recycled water is a local supply of tertiary treated wastewater and offsets the amount of imported water that the City needs from MWDOC. The City’s current monthly fixed charges are the same for both potable and recycled water customers and the proposed rates are recommended to retain the current rate policy. However, recycled water customers will not be charged the MWDOC monthly fixed charges because they do not use MWDOC water.

Proposed Recycled Water Monthly Fixed Water Service Charge Line
Monthly Fixed
Water Service
Charge
Effective
3/1/2026
Effective
1/1/2027
Effective
1/1/2028
Effective
1/1/2029
Effective
1/1/2030
1 Up to 1" $27.76 $28.74 $29.75 $30.80 $31.88
2 1.5" $76.67 $79.36 $82.14 $85.02 $88.00
3 2" $118.60 $122.76 $127.06 $131.51 $136.12
4 3" $251.37 $260.17 $269.28 $278.71 $288.47
5 4" $447.03 $462.68 $478.88 $495.65 $513.00
6 6" $1,124.86 $1,164.24 $1,204.99 $1,247.17 $1,290.83
Demand Management Rates
Demand Management Rates offset reduced revenues when the City is in a declared water shortage emergency. The City’s Urban Water Management Plan includes six stages of water shortages, which all require a different level of usage reduction from the City’s customers. When customers reduce their usage in each stage, the City’s rate revenues from variable charges are directly impacted. When water shortage emergencies occur, especially during more severe stages, the amount of lost revenue can significantly impact the City’s ability to meet its operating, capital, and reserve requirements.
65 Meeting Date: February 17, 2026 Agenda Item: 8B.

CITY OF SAN CLEMENTE 6
Demand management rates are a tool for the City to effectively respond to water shortage emergencies while maintaining financial sufficiency and operational reliability. Demand management rates are designed to recover the costs of water shortages, which include loss of variable revenues and cost differences (savings) from purchased water supply changes. Demand management rates would only come into effect to the extent that the City Council declares a water shortage at Level 1 through Level 6, as shown in the following table.

Proposed Demand Management Rates
Line Shortage
Level
Usage
Reduction
Effective
3/1/2026
Effective
1/1/2027
Effective
1/1/2028
Effective
1/1/2029
Effective
1/1/2030
1 Level 1 up to 10% $0.21 $0.22 $0.23 $0.24 $0.25
2 Level 2 up to 20% $0.46 $0.48 $0.50 $0.52 $0.54
3 Level 3 up to 30% $0.78 $0.81 $0.84 $0.87 $0.91
4 Level 4 up to 40% $1.21 $1.26 $1.31 $1.36 $1.41
5 Level 5 up to 50% $1.81 $1.88 $1.95 $2.02 $2.10
6 Level 6 >50% $2.71 $2.81 $2.91 $3.02 $3.13
The proposed changes to the water rates and charges comply with California Constitution Article 13D, Section 6 (Proposition 218) for “Property Related Fees and Charges,” because of the following:

In compliance with the procedural requirements:
 The City identified each parcel and customer affected by the proposed changes and sent via US Mail on December 1, 2025, a Notice, which included proposed water rates and service charges, the reason for the proposed adjustment to the water rates and service charges, and the date, time and location of the public hearings.
 The City published supplemental Notices in the San Clemente Times once on November 27, 2025, once on January 22, 2026, and once on February 12, 2026. The proof of publication is on file with the City Clerk.
 The noticed public hearing will be conducted on February 17, 2026 at 5:30 p.m., at City Hall in the City Council Chambers at 910 Calle Negocio, San Clemente, CA 92673 or as soon thereafter as the matter may be heard.

In compliance with the substantive requirements:
 Revenue derived from the proposed changes will not exceed the cost to provide water service to customers. The revenue will not be utilized for any purpose other than financing the City’s operating and capital needs to provide the City’s water service, including necessary capital improvements or debt financing to ensure continued service. Without the proposed adjustments, the City will eventually exhaust its reserves and run out of funds or the ability to debt finance capital projects.
 The revenues derived from the City’s water rates and service charges will not be used for any purpose other than water service, as the City’s water utility’s single purpose is to provide delivery of water to its customers. All of the City’s water revenues are dedicated to paying the 66 Meeting Date: February 17, 2026 Agenda Item: 8B.

CITY OF SAN CLEMENTE 7
expenditures incurred in acquiring, storing, treating, and delivering water to the customers withing its jurisdictional boundaries.
 The City’s water rate and service charges are calculated in a manner that is proportionate to the cost of providing service to each customer, since the rates are calculated based on actual and estimated costs of providing water service to each identified customer class and meter size.
 The City’s water rate and service charge structure does not support any general governmental services that non-customers receive at lower or no cost because, the City only uses its water rate revenues to provide water service to its customers. In other words, the only people who receive City water service are the City’s rate-paying customers.

The February 17, 2026 Public Hearing will allow the City Council to hear protests and consider adopting the recommended update to water rates in accordance with the requirements of “Proposition 218” (California Constitution Article XIII D, Section 6) for approving increases to “property related fees.” If approved by the City Council, the updated water rates will become effective on March 1, 2026 and will be reflected on the April bill and would increase 3.5% January 1, 2027 each year through January 1, 2030.

As of the writing of this staff report, from the total number of properties receiving water service from the City’s service includes 26,397 parcels, the City has received written protests representing 0 properties.

Council Options:
 Conduct a protest hearing to consider all written protests and hear all oral comments on the proposed rates; if there is not a majority protest, adopt Resolution No. 26-29, which will incorporate adjustments of the City’s water rates and pass through of MWDOC rates and charges beginning March 1, 2026 reflected on the April water bill and would increase 3.5% January 1, 2027 each year through January 1, 2030; and introduce and conduct a first reading of Ordinance No. 1799, cleaning up San Clemente Municipal Code section 13.04.220 regarding establishing future water rates and eliminating old rate tables to prevent customer confusion.
 Conduct the protest hearing; modify and approve Resolution No. 26-29 with lower rates; and modify, introduce and conduct a first reading of Ordinance No. 1799.  Continue the Item and direct staff to provide additional information.

Environmental Review/Analysis:

The proposed actions are not a “project” under the California Environmental Quality Act Guidelines sections 15273 and 15378 (14 CCR sections 15273 and 15378) and Public Resources Code Section 21080(b)(8). The recommended action to adopt a resolution with proposed adjustments to water rates establishes, modifies, structures, or restructures, and approves rates and charges for the purposes of: (1) meeting operating expenses; (2) purchasing supplies, equipment and materials; (3) meeting financial requirements; and (4) obtaining funds for capital projects necessary to maintain service within existing service areas. 67 Meeting Date: February 17, 2026 Agenda Item: 8B.

CITY OF SAN CLEMENTE 8
Recommended Actions:

Staff Recommendation ..recommendation
STAFF RECOMMENDS the City Council:

1. Conduct the protest hearing to consider all written protests and hear all oral comments; and After conducting the hearing, and if there is not a majority protest:

2. Adopt Resolution No. 26-29, which will incorporate adjustments of the City’s water rates beginning March 1, 2026 reflected on the April water bill, with annual adjustments each January 1 (through 2030) that incorporate a pass through of increased costs of wholesale water from MWDOC and the calculated annual increase in the City rate components of 3.5%; and

3. Introduce and conduct a first reading of Ordinance No. 1799, amending San Clemente Municipal Code section 13.04.220 regarding establishing future water rates and eliminating old rate tables.
..end
Attachment:

1. Resolution No. 26-29

2. Exhibit A to Resolution No. 26-29

3. Notice of Public Hearing on Proposed Water Rates and Charges

4. Water Rate Setting Procedures

5. Final November 2025 Water Rate Study

6. Ordinance No. 1799, amending San Clemente Municipal Code section 13.04.220 Notification:

On December 1, 2025 (which was at least 45 days prior to January 15, 2026), the City mailed the “Notice of Public Hearing” to each ratepayer/property owner served by the City and posted the Notice of Public Hearing on the City’s webpage (www.sanclemente.gov/water-rates). The Public Hearing Notice identified supplemental documents that were concurrently posted on the City’s webpage, including the Water Rate Study Report that provides detailed information on the proposed water rates, how they were calculated and the reason for the proposed change in water rates. The Water Rate Study Report was included on the City’s webpage, and it is labeled “2025 Water Rate Study Final Report – November 2025” (Attachment 4) prepared on behalf of the City by Water Resources Economics.

The City published supplemental Notices in the San Clemente Times once on November 27, 2025, once on January 22, 2026, and once on February 12, 2026. The proof of publication is on file with the City Clerk.
68 Attachment 1
RESOLUTION NO. 26-29

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF

SAN CLEMENTE, CALIFORNIA, MAKING FINDINGS

FOLLOWING PROTEST HEARING, AND ADOPTING

WATER RATES AND CHARGES, WITH ANNUAL

ADJUSTMENTS AND PASS-THROUGH RATES THROUGH
JANUARY 1, 2030
WHEREAS, the City owns and operates approximately 230 miles of water lines, 15 reservoirs, 16 pump station and 56 pressure reducing stations; and WHEREAS, the City receives imported water from Metropolitan Water District from Northern California and the Colorado River Basin through its wholesaler Municipal Water District of Orange County; and
WHEREAS, the City has local water resources from two wells and produces recycled water at the Water Reclamation Plant for irrigation purposes; and WHEREAS, the City provides water service meeting state and federal standards to approximately 17,600 service meters consisting of residential, multifamily, irrigation and commercial accounts; and
WHEREAS, the City exercises its constitutional authority to establish, operate, and regulate a water service system, pursuant to California Constitution Article XI, section 7, and establish rates for providing those services to property owners and customers in accordance with San Clemente Municipal Code Chapter 13.04, subject to the requirements and limitations of California Constitution Article XIII D, Section 6 (a.k.a., “Proposition 218”); and WHEREAS, pursuant to the requirements of Proposition 218, prior to extending, imposing or increasing water rates (for a property-related service), the City must provide property owners notice at least 45 days before a public hearing regarding modifications to the water rates. The notice must contain an explanation of: (1) the amount of the propose rates, (2) the basis on which the rates are calculated, (3) the reason for the rate modifications, (4) the date, time and place of a public hearing to consider the rate modifications, and (5) the rights of property owners to submit written protests to the proposed rate modifications. The proposed rate modifications may not be imposed if, prior to the close of the public hearing, written protests are submitted by property owners or tenants representing a majority of the properties subject to the modified rates (“majority protest”); and
WHEREAS, in order to evaluate the costs of providing service to City customers and maintain operation of the water system, the City Council hired Water Resources Economics, LLC on May 6, 2025 to conduct a cost-of-service study to evaluate the City’s costs of providing water services in comparison to water rate and other revenues; and WHEREAS, Water Resources Economics, LLC reviewed the City’s water finances, 69 Resolution No. 26-29 Page 2
presented preliminary recommendations and received direction from the City Council on September 16, 2025; and
WHEREAS, on October 7, 2025, the City Council adopted water rate setting procedures under Proposition 218 and Government Code sections 53750 through 53759.2 and 54354.5 to establish a process for property owner objections to proposed water fees; and
WHEREAS, Water Resources Economics, LLC completed a cost-of-service study, as documented in the November 2025 Water Rate Study Final Report (“Water Rate Study”) that recommended changes in the rate structure, five-year rate adjustments, fixed and pass through of charges from the Municipal Water District of Orange County, and establishment of recycled water rates and demand manager rates in the event there is a required reduction in water use; and
WHEREAS, on November 18, 2025, based on the Water Rate Study, the City Council directed staff to mail a Proposition 218 public hearing notice to all property owners served by City water, and that notice established a deadline to receive written objections by January 15, 2026 at 5:00 p.m., set a Public Hearing for February 3, 2026, at 5:30 p.m. to consider all timely written objections, and set a Public Hearing for February 17, 2026, at 5:30 p.m. to conduct a protest hearing under Proposition 218 and to consider proposed adjustments to and adoption of water rates and service charges; and WHEREAS, those Proposition 218 public hearing notices were mailed to all property owners receiving City water services (including tenants who are directly liable to pay water rates) on December 1, 2025, a minimum of 45 days prior to the requirement for objections to be received by the City on January 15, 2026 at 5:00 p.m.; and WHEREAS, the City Council conducted a duly noticed public objection hearing on February 3, 2026, to consider all written communications related to the proposed update to water rates that were received by the City prior to the January 15 deadline, as well as the responses to those communications prepared by City staff, and the City Council determined no such written communications met the definition of a written objection, and determined no clarifications, further review or reduction or abandonment of the proposed water rates, fees and charges were warranted in accordance with Government Code sections 53759.1 and 53759.2; and
WHEREAS, the City Council conducted a duly noticed protest hearing on February 17, 2026, to consider all written protests and hear all oral comments, determine whether or not a majority protest was made and to consider setting rates in accordance with the Proposition 218 Notice.

NOW, THEREFORE, the City Council of the City of San Clemente does hereby find, determine and resolve as follows:

SECTION 1. The above recitations are true and correct and fully incorporated herein.

SECTION 2. The City Council determines that, at the time of closing the protest 70 Resolution No. 26-29 Page 3
hearing, out of the total number of 26,397 parcels served by City water, the City had not received written protests from a majority of those parcels; and, therefore, there was no majority protest to the adoption of updated water rates as set forth in this resolution.

SECTION 3. The City Council hereby adopts the water rates set forth on Exhibit “A,” attached hereto and incorporated herein fully by reference (“Water Rates”). The City Council determines that the Water Rates have been established in accordance with the requirements of Proposition 218. At the corresponding effective dates identified in this resolution, the Water Rates hereby supersede and replace the previously adopted water rates that were effective as of January 1, 2022, as identified in San Clemente Municipal Code section 13.04.220. The Water Rates shall be implemented in accordance with the following paragraphs of this Section 3:

A. Effective Date of Water Rate Adjustments. The Water Rates identified on Exhibit “A” under columns labeled “Effective 3/1/2026” shall be effective on March 1, 2026. Thereafter, water rates set forth on Exhibit “A” in each column respectively labeled: 1/1/2027 through 1/1/2030 shall be effective on the date that is the later of: (1) January 1 of the year identified on each respective column, or (2) thirty days after the date that written notice of the adjusted water rates is mailed to customers in accordance with Government Code Section 53756(d). The Finance Director is directed to mail the written notice to each customer not less than 30 days before the effective date of each of the annual adjustments, including an identification of the effective date of the adjustment.

B. Pass-Through Water Rates. In addition to the annual adjustment to water rates identified in Section 3(A) of this Resolution, the City shall provide written notice of any annual adjustment based on a pass-through of increased costs of wholesale water from Metropolitan Water District of Orange County (“MWDOC”). The City shall calculate the amount of the pass-through rate in accordance with Rate Study Section 4.3, including Tables 4-1 and 4-14. The Finance Director is directed to mail the written notice to each customer not less than 30 days before the effective date of each of the annual adjustments, including an identification of the effective date of the adjustment.

C. Fixed Water Rates. Each customer to whom the City has issued a water meter shall pay a fixed rate based on the size of the water meter, at the rates identified on Exhibit “A,” TABLES 1 and 2. The Fixed Water Meter Rate shall include the City Portion (TABLE 1) and the MWDOC portion (TABLE 2), with the MWDOC portion subject to adjustment based on pass-through costs in accordance with Section 3(B) of this Resolution. Each year, the updated annual MWDOC Total Fixed Charge shall replace the amount identified in Rate Study Table 4-1, and the corresponding unit cost per water meter size shall be calculated in accordance with Rate Study Section 4.3.

D. Consumption Water Rates. Each customer to whom the City has issued a water meter shall pay a consumption water rate per “ccf” (100 cubic feet), as identified on Exhibit “A,” TABLE 4. The consumption rates are subject to adjustment based on pass-through costs in accordance with Section 3(B) of 71 Resolution No. 26-29 Page 4
this Resolution. Each year, the updated per ccf cost from MWDOC will replace the projected MWDOC Supply Unit Cost shown in Table 4-14 of the Water Rate Study Report (shown on Exhibit “A,” TABLE 3) for 2027 through 2030, which will be added to the City Delivery Cost to result in a corresponding recalculation of the per ccf charge to All Customer Classes.

E. Recycled Water Rates. Each customer to whom the City has issued an irrigation water meter connected to the City’s non-potable recycled water system shall also pay the recycled water monthly fixed water service charge (identified on Exhibit “A,” TABLE 5) as well as the recycled water consumption rate per ccf (identified on Exhibit “A,” TABLE 6).

F. Demand Management Rates. In addition to the water rates identified in paragraphs A through E, above, each customer to whom the City has issued a water meter shall pay the Demand Management Rates (per ccf) identified on Exhibit “A,” TABLE 7. The Demand Management Rates shall only be in effect when the City Council has adopted a resolution declaring a water shortage emergency in accordance with the City’s Urban Water Management Plan. The amount of the Demand Management Rates shall be based on the relevant shortage level (Level 1 through Level 6) as identified in the water shortage emergency resolution.

SECTION 5. This resolution shall be effective immediately.

SECTION 6. The City Clerk shall certify to the passage and adoption of this resolution and enter it into the book of original resolutions.

PASSED AND ADOPTED this _____ day of February, 2026.

ATTEST:
___________________________ __________________________
City Clerk of the City of Rick Loeffler, Mayor of the
San Clemente, California City of San Clemente, California 72 Resolution No. 26-29 Page 5

STATE OF CALIFORNIA )
COUNTY OF ORANGE ) §

CITY OF SAN CLEMENTE )
I, LAURA CAMPAGNOLO, City Clerk of the City of San Clemente, California, do hereby certify that Resolution No. 26-29 was adopted at a regular meeting of the City Council of the City of San Clemente held on the _______ day of February, 2026, by the following vote:

AYES:

NOES:

ABSENT:

IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City of San Clemente, California, this _____ day of _____________, ______. __________________________
CITY CLERK of the City of
San Clemente, California
Approved as to form:
_____________________________
Elizabeth A. Mitchell, City Attorney
73 Attachment 2
Exhibit A – Water Rates
TABLE 1: Current and Proposed Monthly Fixed Water Service Charge – City Portion
(Potable and Recycled)
Line
Monthly Fixed Water
Service Charge - City
Portion (Potable and
Recycled)
As of
1/1/2022
Effective
3/1/2026
Effective
1/1/2027
Effective
1/1/2028
Effective
1/1/2029
Effective
1/1/2030
1 Up to 1" $27.41 $27.76 $28.74 $29.75 $30.80 $31.88
2 1.5" $67.72 $76.67 $79.36 $82.14 $85.02 $88.00
3 2" $102.09 $118.60 $122.76 $127.06 $131.51 $136.12
4 3" $211.23 $251.37 $260.17 $269.28 $278.71 $288.47
5 4" $372.08 $447.03 $462.68 $478.88 $495.65 $513.00
6 6" $756.96 $1,124.86 $1,164.24 $1,204.99 $1,247.17 $1,290.83 TABLE 2: Proposed Monthly Fixed Water Service Charge – MWDOC (Potable) Line
Monthly Fixed Water
Service Charge -
MWDOC (Potable )
Effective
3/1/2026 Effective 1/1/2027 Effective 1/1/2028
Effective
1/1/2029
Effective
1/1/2030
1 Up to 1" $5.34
Pass-Through Going Forward
2 1.5" $17.80
3 2" $28.48
4 3" $62.30
5 4" $112.14
6 6" $284.80
TABLE 3: Potable Water Consumption Rates Components
Line Consumption Rates
($/ccf) (Potable)
Effective
3/1/2026
Effective
1/1/2027
Effective
1/1/2028
Effective
1/1/2029
Effective
1/1/2030
1 All Customer Classes $5.31 $5.50 $5.70 $5.90 $6.11
2 Water Supply Unit Cost $4.03 $4.03 $4.03 $4.03 $4.03
3 City Delivery Cost $1.28 $1.47 $1.67 $1.87 $2.08
74 Attachment 2
TABLE 4: Current and Proposed Consumption Rates (Potable and Recycled)* ($/ccf)
Line
Consumption Rates
($/ccf) (Potable and
Recycled)
As of
1/1/2022
Effective
3/1/2026
Effective
1/1/2027
Effective
1/1/2028
Effective
1/1/2029
Effective
1/1/2030
1 Single Family
Residential $5.11 $5.31 $5.50 $5.70 $5.90 $6.11
2 Multi Family Residential $4.92 $5.31 $5.50 $5.70 $5.90 $6.11 3 Commercial $4.95 $5.31 $5.50 $5.70 $5.90 $6.11
4 Irrigation $6.01 $5.31 $5.50 $5.70 $5.90 $6.11
5 Recycled Water $3.29 $3.52 $3.65 $3.78 $3.92 $4.06
*One unit of water is 100 cubic feet (ccf) or approximately 748 gallons of water. For potable water rates effective 3/1/2026, the MWDOC supply unit cost is $4.03 and City’s unit cost for delivery, conservation and revenue offset is $1.28. For illustration, $4.03 remains the same unit rate in future years, but will depend upon future MWDOC supply costs, and supply unit costs are subject to change.

TABLE 5: Proposed Recycled Water Monthly Fixed Water Service Charge Line
Monthly Fixed
Water Service
Charge
Effective
3/1/2026
Effective
1/1/2027
Effective
1/1/2028
Effective
1/1/2029
Effective
1/1/2030
1 Up to 1" $27.76 $28.74 $29.75 $30.80 $31.88
2 1.5" $76.67 $79.36 $82.14 $85.02 $88.00
3 2" $118.60 $122.76 $127.06 $131.51 $136.12
4 3" $251.37 $260.17 $269.28 $278.71 $288.47
5 4" $447.03 $462.68 $478.88 $495.65 $513.00
6 6" $1,124.86 $1,164.24 $1,204.99 $1,247.17 $1,290.83
TABLE 6: Recycled Water Consumption Rate ($/ccf)
Line Consumption Rates
($/ccf) (Potable)
Effective
3/1/2026
Effective
1/1/2027
Effective
1/1/2028
Effective
1/1/2029
Effective
1/1/2030
1 All Customers $3.52 $3.65 $3.78 $3.92 $4.06
75 Attachment 2
TABLE 7: Proposed Demand Management Rates ($/ccf)
Line Shortage
Level
Usage
Reduction
Effective
3/1/2026
Effective
1/1/2027
Effective
1/1/2028
Effective
1/1/2029
Effective
1/1/2030
1 Level 1 up to 10% $0.21 $0.22 $0.23 $0.24 $0.25
2 Level 2 up to 20% $0.46 $0.48 $0.50 $0.52 $0.54
3 Level 3 up to 30% $0.78 $0.81 $0.84 $0.87 $0.91
4 Level 4 up to 40% $1.21 $1.26 $1.31 $1.36 $1.41
5 Level 5 up to 50% $1.81 $1.88 $1.95 $2.02 $2.10
6 Level 6 >50% $2.71 $2.81 $2.91 $3.02 $3.13
76 WHY ARE YOU RECEIVING THIS NOTICE?
The City of San Clemente will hold a public hearing (a Proposition 218 Protest Hearing) on February 17, 2026, at 5:30 p.m., or as soon thereafter as the matter may be heard, in the City Council Chambers located at 910 Calle Negocio, San Clemente, to count timely written protests and to consider changes to the City's water rate structure, potential rate increases over a five-year period, implementation of wholesale water costs pass-through adjustments, and implementation of a "demand management rate" to offset revenue fluctuations during periods of reduced water demands (such as a prolonged drought) to stabilize City revenues so the City can continue to operate and maintain the City's water system. These rate changes, if approved, will take effect on March 1, 2026. This notice describes the reason for the new proposed rates, how they were calculated, the amount of the proposed new rates, and how to file a protest and/or objection to this proposed action. While the proposed new rates cannot be adopted until after the Proposition 218 protest hearing on February 17, 2026 the public hearing on exhaustion of administrative remedies (the objection hearing) will be held by the City on February 3, 2026, at 5:30 p.m., or as soon thereafter as the matter may be heard, in the City Council Chambers located at 910 Calle Negocio, San Clemente, to consider written objections timely received before January 15, 2026, at 5 p.m.

WHAT DO WATER RATES FUND?
The water utility must be financially self-sufficient. Monthly rates paid by users are the primary sources of revenue to fund water operations. All revenue generated from rates on your water utility bill is used to maintain and operate the water system, purchase imported water and provide emergency supply and storage. It is not used for other general governmental purposes. These revenues must meet costs such as purchased raw water, electricity, chemicals, maintenance, and salaries and benefits for water utility enterprise staff. The City of San Clemente is committed to providing a safe and reliable supply of water now, and into the future.

THE CITY’S WATER SYSTEM SERVES ROUGHLY 83% OF CITY RESIDENTS While some residents are served by other water districts. The boundaries for customers served by the City’s water system are identified in the City’s Water Service Area Exhibit at www.sanclemente.gov/water-rates. The Water Rate Study Final Report dated November 2025 was prepared on behalf of the City by Water Resources Economics (WRE) to evaluate the City’s costs of providing water services to customers, and to recommend rates to cover the City’s proportionate costs of providing those services to customers, as summarized in this notice.City water customers receive water sourced from local groundwater, imported water, and recycled water. In normal conditions, about five percent of the City’s water supply is groundwater pumped from two City owned wells, 80 percent is imported water from the Northern California State Water Project and from the Colorado River by Metropolitan Water District as purchased by the City through the City’s wholesaler Municipal Water District of Orange County (MWDOC), and 15 percent is recycled water treated at the City’s Water Reclamation Plant and distributed for irrigation purposes only. The water system infrastructure includes: 230 miles of water pipelines, two groundwater wells, 15 local and two regional water storage reservoirs, 16 pumping stations, 56 pressure regulating stations, and one filtration plant.

WHY WATER RATE INCREASES ARE NEEDED?
As documented in the Water Rate Study Report, the City reviewed operational costs, planned capital projects, and water revenues that revealed a shortfall and the need for continued annual rate increases to address the following issues:

Address rising costs of wholesale water supply, utilities, chemicals, and supplies.

Replace, rehabilitate, and modernize aging infrastructure to prevent breaks and service disruptions and improve system resiliency.

Maintain financial sustainability while addressing debt service coverage ratios for the expansion of the recycled water system, reducing the City’s dependency on imported water. .

Meet minimum reserve requirements and fund emergency/unplanned expenses.

The majority of funds required to operate and invest in the City’s water system come directly from the rates customers pay for water service. Revenues from current rates are no longer adequate to support operations and fund the much-needed system improvements and maintenance planned over the next five years. With costs continually outpacing revenues in recent years and the last rate increase occurring January 1, 2022, the City enlisted utility finance experts at WRE to examine the City’s costs to purchase water and operate the water system. The proposed changes to water rates and charges described in this notice are necessary to proactively maintain the water production and distribution systems, so it doesn't cost more later to do so; and the City incorporates ongoing evaluations of operational and capital expenses to minimize costs whenever feasible.

THE MAIN DIFFERENCES BETWEEN AN OBJECTION AND A PROTEST:
a) an objection has an earlier deadline for timely submission; b) an objection must include the substantive basis to claim the rates do not comply with Proposition 218 (summarized below); c) an objection must be submitted for a property owner to preserve a right to challenge the water rates in court; d) an objection may be submitted via email (with a signature sent electronically), but a protest must be submitted in paper form; and (e) the objection hearing and protest hearing occur on different dates (as described below).

ADDITIONAL REQUIREMENTS:

Timely Written OBJECTION
A timely written objection must be received by the City at a SUBMITTAL LOCATION identified below no later than January 15, 2026, at 5 p.m. A written objection must describe the reason that the owner claims a particular portion of the proposed water rates identified in this notice does not comply with a particular requirement of Proposition 218 (California Constitution Article XIII D, Section 6). A statement that the proposed rates violate Proposition 218 without an explanation as to the basis of the claim is not sufficient to constitute a valid written objection. For a summary of relevant requirements of Proposition 218, see the Water Rate Setting Procedures (particularly Section 3(c)).

ADDITIONAL REQUIREMENTS:

Timely Written PROTEST
A timely written protest must be received by the City at a SUBMITTAL LOCATION identified below prior to the close of the public testimony portion of the Public Hearing on February 17, 2026. A written protest must: (a) clearly indicate that the property owner opposes the City’s approval of the water rates, and (b) be submitted in paper form. Any non-paper form will not be accepted as a protest (such as e-mail, facsimile, or spoken protests via telephone or in person). Only one written protest will be counted for each parcel served.

SUBMITTAL LOCATIONS:

Mail…
San Clemente City Clerk
910 Calle Negocio, San Clemente, CA 92673
Email (for objections only; note: a written protest may NOT be submitted via email) [email protected]

IN PERSON
San Clemente City Clerk
910 Calle Negocio, San Clemente, CA 92673
PROCEDURE FOR PUBLIC HEARING AND CONSIDERING WRITTEN OBJECTIONS AND WRITTEN PROTESTS:

WRITTEN OBJECTIONS - At the public hearing on Tuesday, February 3, 2026, at 5:30 p.m., or as soon thereafter as the matter may be heard at their regular meeting, the City Council will consider all timely written objections and the City shall respond in writing to any timely written objections. The City’s responses shall explain the substantive basis for retaining or altering the proposed water rates in response to written objections, including any reason to reject requested changes. The City Council will consider all timely written objections, along with the City’s response, and determine whether clarifications or further review or deduction or abandonment of the proposed water rate increases is warranted.

WRITTEN PROTESTS - At the public hearing on Tuesday, February 17, 2026, at 5:30 p.m., or as soon thereafter as the matter may be heard at their regular meeting, the City Council will consider all written protests and hear all oral comments on the proposed water rates as well as a staff presentation of the proposed rate modifications. The City Council will then close the public hearing in order to count written protests. If there is a “majority protest” (50% + 1) for the proposed modified water rates, the City may not approve those proposed rates. There is a majority protest only if the number of timely written protests exceeds one-half of the parcels served by the City. If there is not a majority protest, the City Council may then consider adoption of the proposed rates.

PRESERVING A PROPERTY OWNER’S RIGHT TO LEGALLY CHALLENGE THE PROPOSED WATER RATES:

You are hereby notified that, in order to file a judicial action or legal proceeding to challenge the proposed rates described in this Notice, you must file a timely written objection, and you must commence the action or proceeding within 120 days of the adoption of the rates by the City Council.

FAILURE TO SUBMIT A TIMELY WRITTEN OBJECTION bars any right to challenge the proposed rates through a judicial action or proceeding. (Government Code Section 53759.1(b).)
There is a 120-day statute of limitations for judicially challenging the rates set forth in this Notice that runs from the date of the City Council action to approve the rates, and any legal action is limited to the issues raised in a timely written objection. (Government Code Section 53759.) If adopted, the proposed rates will take effect beginning March 1, 2026. The reasons for the rate adjustments, the basis upon which they were calculated, and the amount of the proposed rates are described in more detail in the Water Rate Study Report posted at www.sanclemente.gov/water-rates and available through an appointment at the City Clerk's office.

TO SCHEDULE AN APPOINTMENT or to receive a written copy of the Water Rate Study Report, please call (949) 361-8200 or send an email to [email protected]

NOTICE TO PROPERTY OWNERS AND TENANTS OF PUBLIC HEARINGS

ON PROPOSED WATER RATES
Objection Hearing Date/Time: February 3, 2026 5:30 PM
Protest Hearing Date/Time: February 17, 2026 5:30 PM
Location: City Council Chambers
910 Calle Negocio, San Clemente, CA 92673
910 Calle Negocio
San Clemente, CA 92673

PRSRT STD
U.S. POSTAGE
PAID
Irvine, CA
PERMIT NO. 84
.
.
.
.
$WWDFKPHQW
77 Recycled Water $3.29 $3.52 $3.65 $3.78 $3.92 $4.06
** Subject to Pass-through adjustments for MWDOC Supply Unit Costs summarized above.

Proposed Bill Impact
The table below is based on a monthly bill for a typical Single-Family Residential (SFR) customer with a 1" meter. For average usage of 10 ccf, the Single-Family Residential customer will see an increase of $7.71 on their monthly water bill over the first year. If approved, first year rate adjustments will go into effect March 1, 2026. Bill impacts will vary based on customer type, meter size, and water usage.

Sample Bills for Single Family Residential up to 1” meter size Line Single Family Customer
Impacts ccf Current Bill Proposed Bill Difference ($) Difference (%) 1 Low Usage 5 $52.96 $59.65 $6.69 12.6%
2 Average Usage 10 $78.51 $86.20 $7.69 9.8%
3 High Usage 20 $129.61 $139.30 $9.69 7.5%
4 Very High Usage 50 $282.91 $298.60 $15.69 5.5%
Recycled Water Rates
Recycled water is used by irrigation customers where it is available and utilized for irrigating parks, schools, golf courses, slopes and medians throughout the City. The use of recycled water is a local supply of tertiary treated wastewater and offsets the amount of imported water the City needs from MWDOC.

Currently, the City Portion of monthly fixed charges is the same for both potable and recycled water customers and the proposed rates are recommended to retain the current rate policy. However, recycled water customers will not be charged the MWDOC monthly fixed charges because they do not use MWDOC water. The recycled water consumption rate is calculated based on Section 5.4 of the Water Rate Study Report.

Proposed Rate Schedule
Revenue Adjustment
FY 2026 FY 2027 FY 2028 FY 2029 FY 2030

9.5% 3.5% 3.5% 3.5% 3.5%
Proposed Recycled Water Monthly Fixed Water Service Charge Line Monthly Fixed Water
Service Charge
Effective
3/1/2026
Effective
1/1/2027
Effective
1/1/2028
Effective
1/1/2029
Effective
1/1/2030
1 Up to 1" $27.76 $28.74 $29.75 $30.80 $31.88
2 1.5" $76.67 $79.36 $82.14 $85.02 $88.00
3 2" $118.60 $122.76 $127.06 $131.51 $136.12
4 3" $251.37 $260.17 $269.28 $278.71 $288.47
5 4" $447.03 $462.68 $478.88 $495.65 $513.00
6 6" $1,124.86 $1,164.24 $1,204.99 $1,247.17 $1,290.83
Proposed Recycled Water Consumption Rate
Line RW Consumption Rate
($/ccf)
Effective
3/1/2026
Effective
1/1/2027
Effective
1/1/2028
Effective
1/1/2029
Effective
1/1/2030
1 All Customers $3.52 $3.65 $3.78 $3.92 $4.06
from MWDOC will replace the projected MWDOC Supply Unit Cost shown in Table 4-14 of the Water Rate Study Report (shown below) for 2027 through 2030, which will be added to the City Delivery Cost to result in a corresponding recalculation of the per ccf charge to All Customer Classes.

Consumption Rate Components ($/ccf)
3/1/2026 1/1/2027 1/1/2028 1/1/2029 1/1/2030
All Customer Classes Total
Unit Cost
$5.31 $5.50 $5.70 $5.90 $6.11
MWDOC Supply Unit Cost $4.03 $4.03 $4.03 $4.03 $4.03
City Delivery Cost: Delivery,
Conservation and Revenue
Offset
$1.28 $1.47 $1.67 $1.87 $2.08
The proposed rate schedule table below shows the current and proposed monthly water service charge by meter size.

Note: One unit of water is 100 cubic feet (ccf) or approximately 748 gallons of water. Additional detail regarding the rate components are provided in the notice and in the Water Rate Study Report at www.sanclemente.gov/water-rates.

Proposed Rate Schedule
Revenue Adjustment
FY 2026 FY 2027 FY 2028 FY 2029 FY 2030

9.5% 3.5% 3.5% 3.5% 3.5%
Monthly Fixed Water Service Charge – City Portion
Up to 1” $27.41 $27.76 $28.74 $29.75 $30.80 $31.88

1.5” $67.72 $76.67 $79.36 $82.14 $85.02 $88.00
2” $102.09 $118.60 $122.76 $127.06 $131.51 $136.12
3” $211.23 $251.37 $260.17 $269.28 $278.71 $288.47
4” $372.08 $447.03 $462.68 $478.88 $495.65 $513.00
6” $756.96 $1,124.86 $1,164.24 $1,204.99 $1,247.17 $1,290.83 Consumption Rates ($/ccf) **
Single Family
Residential
$5.11 $5.31 $5.50 $5.70 $5.90 $6.11
Multi Family
Residential
$4.92 $5.31 $5.50 $5.70 $5.90 $6.11
Commercial $4.95 $5.31 $5.50 $5.70 $5.90 $6.11
Irrigation $6.01 $5.31 $5.50 $5.70 $5.90 $6.11
Current Rates 3/1/2026 1/1/2027 1/1/2028 1/1/2029 1/1/2030 Monthly Fixed Water Service ChargeMWDOC
Pass-through from MWDOC
Up to 1” $0.00 $5.34

1.5” $0.00 $17.80
2” $0.00 $28.48
3” $0.00 $62.30
4” $0.00 $112.14
6” $0.00 $284.80
The City is proposing five years of rate adjustments for adoption by the City Council based on financial expert analysis from Water Resources Economics. Balancing affordability with financial needs is a key consideration for developing the proposed changes to water rates. The justification and methodology for the proposed rate changes are set forth in the Water Rate Study Report that is posted at www.sanclemente.gov/water-rates.

Demand Management Rates
Demand Management Rates work to offset reduced revenues when the City is in a declared water shortage emergency. The City’s Urban Water Management Plan includes six stages of water shortages, which all require a different level of usage reduction from the City’s customers. When customers reduce their usage in each stage, the City’s rate revenues from variable charges are directly impacted. When water shortage emergencies occur, especially during more severe stages, the amount of lost revenue can significantly impact the City’s ability to meet its operating, capital, and reserve requirements.

Demand management rates are a tool for the City to effectively respond to water shortage emergencies while maintaining financial sufficiency and operational reliability. Demand management rates are designed to recover the costs of water shortages, which include loss of variable revenues and cost differences (savings) from purchased water supply changes. Demand management rates are only in effect to the extent that the City Council declares a water shortage at Level 1 through Level 6, as shown in the following table.

Proposed Demand Management Rates
Line Shortage Level Usage
Reduction
Effective
3/1/2026
Effective
1/1/2027
Effective
1/1/2028
Effective
1/1/2029
Effective
1/1/2030
1 Level 1 up to 10% $0.21 $0.22 $0.23 $0.24 $0.25
2 Level 2 up to 20% $0.46 $0.48 $0.50 $0.52 $0.54
3 Level 3 up to 30% $0.78 $0.81 $0.84 $0.87 $0.91
4 Level 4 up to 40% $1.21 $1.26 $1.31 $1.36 $1.41
5 Level 5 up to 50% $1.81 $1.88 $1.95 $2.02 $2.10
6 Level 6 >50% $2.71 $2.81 $2.91 $3.02 $3.13

HOW TO PARTICIPATE IN THE WATER RATE SETTING PUBLIC HEARINGS Any member of the public may submit written comments and present spoken testimony during the public hearing. However, only a property owner has a right to submit a Written Protest and/or a Written Objection as summarized below. For additional detail regarding these procedures, please see the “Water Rate Setting Procedures” posted at www.sanclemente.gov/water-rates.

HOW TO SUBMIT A WRITTEN OBJECTION OR A WRITTEN PROTEST
Any objection OR protest must: (1) be in writing identifying the name of the property owner, and the street address or other clear identification of the property subject to the rates; (2) be signed by the property owner, unless alternative proof of property owner authorization is provided to and verified by the City; and (3) comply with the relevant ADDITIONAL REQUIREMENTS for a written objection or written protest (as identified below). NOTE: As used in this Notice, the phrase "property owner" includes a tenant who is obligated to pay the water rate.

PROPOSED WATER RATE STRUCTURE CHANGES:

The City’s current water rate structure includes a monthly fixed service charge based on meter size and variable charges based on customer class and units of water used in increments of one hundred cubic feet (one unit = one ccf = 748 gallons). Upon examining the existing rate methodology, given the City’s water supply profile, the proposed updated rates implement a uniform consumption rate for all customer classes consistent with cost-of-service principles. Additionally, to properly pass through to customers the City’s costs of purchasing water from MWDOC, the City’s main water supplier, the proposed updated rates include a separate MWDOC monthly service charge based on meter size and a continued pass through of the purchased water cost on the variable commodity component of the rate. There are no proposed changes to the recycled water rate structure.

PROPOSED FIVE-YEAR POTABLE AND RECYCLED WATER RATE STRUCTURE SCHEDULE:

As described in the Water Rate Study Report, the proposed five-year potable and recycled water rate schedules are based on changes to the rate structure and methodology, the updated cost-of-service analysis, and the revenue adjustments needed to cover the City’s costs of providing water service in the five-year period. The rate schedule in this notice shows the proposed potable and recycled water rates to be implemented in March 2026 through January 2030. Note that, since the City does not currently know its cost of purchasing wholesale potable water supply from MWDOC, those costs will be billed to customers as pass-through charges, as authorized by Government Code Section 53756.

Overall annual increases in potable and recycled water rate revenues resulting from rate increases are referred to as “revenue adjustments” to meet increases in operating costs. The proposed rates identified in the rate schedule include five years of revenue adjustments, which are required to meet the debt coverage ratio as well as maintain financial sufficiency and resiliency.

FIXED WATER SERVICE CHARGE (SECTION 4.3 OF THE WATER RATE STUDY REPORT) The monthly fixed charge is based on the size of the water meter (in inches) serving a property and is calculated to recover a portion of the City’s annual fixed costs of providing water service, such as utilities, equipment, materials, billing, collections, customer service, meter reading, and meter maintenance. The fixed water service charge includes a “(City Portion)” which covers costs directly incurred by the City, as well as a “MWDOC” portion which covers the fixed costs of wholesale water charged by MWDOC to the City. MWDOC fixed costs are billed to the City regardless of imported water purchases. Beginning with the annual adjustment on January 1, 2027, MWDOC fixed costs to the City will be passed through to customers as described in Section 4.3 and illustrated in Table 4-1 of the Water Rate Study. This use of a pass-through charge will enhance revenue stability for the City and reduce the City’s financial risk related to MWDOC water supply in case of decreased future water consumption. This approach will also increase fixed revenue recovery to approximately 36% and ensure for more accurate pass-throughs.

CONSUMPTION BASED RATE (VOLUMETRIC OR COMMODITY RATE, SECTION 4.4 OF THE WATER RATE STUDY REPORT) The proposed updated rates implement a uniform consumption rate for all customer classes consistent with cost-of-service principles. The consumption based rate takes into account base costs (including baseline supplies, treatment, distribution, and storage, up to a level that meets the City’s baseline demands throughout the year), and they are split into two components: “MWDOC Supply Unit Cost” and “City Delivery Cost.” The MWDOC Supply Unit Cost includes potable water supplies from MWDOC, Imported Water from Metropolitan Water District, Baker Treatment Plant, and delivery to the City’s service area. The Proposed Rate Schedule table below includes MWDOC costs for FY 2026, which is shown as the same rate for 2027 through 2030; however, future MWDOC consumption based costs will be calculated as described in Section 4.4 and Table 4-13 of the Water Rate Study Report and passed through to City customers, as authorized by Government Code Section 53756. Each year, the updated per ccf cost from MWDOC will replace the projected MWDOC Supply Unit Cost shown in Table 4-14 of the Water Rate Study Report (shown below) for 2027 through 2030, which will be added to the City Delivery Cost to result in a corresponding recalculation of the per ccf charge to All Customer Classes. $3.29 $3.52 $3.65 $3.78 $3.92 $4.06
** Subject to Pass-through adjustments for MWDOC Supply Unit Costs summarized above.

Recycled Water
$7.69
78 Resolution No. 25-151
1 Water Rate Setting Procedures
These “Water Rate Setting Procedures” (“Procedures”) describe the processes that will be followed by the City of San Clemente (“City”) in establishing any new or increased water rates, as summarized in the Resolution identified in the header of this Exhibit “A.” The Water Rate Setting Procedures include compliance with Proposition 218 (including the consideration of “written protests” from record owners) as well as the procedures for exhausting administrative remedies under Government Code section 53759.1 (including the consideration of “written objections” from record owners).

For the purpose of considering written protests and written objections, the City will consider the term “record owner” to include tenancies of real property where tenants are directly liable to pay the rates to the City (consistent with Proposition 218; California Constitution Article XIII D, Section 2(g)).

1. Overview of Exhaustion Procedure
If the City publishes a notice of public hearing identifying procedures for property owners to submit written objections (described in Section 2(b), below),¹ the City will follow the “exhaustion procedure” set forth herein, to be conducted concurrently with or before the Proposition 218 process, for the City Council’s consideration of any proposed new or increased water rates. This exhaustion procedure shall be conducted in accordance with “Proposition 218” (California Constitution Article XIII D; as it is implemented by the Legislature1 at Government Code sections 53750 – 53759.2; and as it has been interpreted by judicial decisions), and the particular procedures set forth in Government Code section 53759.1. The exhaustion procedure provides an opportunity for record owners to submit a “timely written objection” to identify substantive bases for asserting proposed water rates do not comply with Proposition 218. A ”record owner” may be referred to in these Procedures as the “owner” or “property owner.” The processes described herein may be referred to as “these Procedures.”
a. City staff will post on its internet website a notice of the exhaustion procedure, and this notice will be prominently incorporated in the Proposition 218 public hearing notice mailed to each record owner.
b. The notice will identify the date and time by which timely written objections must be submitted to the City, and the date will be no less than 45 calendar days after the notice is mailed to record owners.

1 If the City publishes a notice of public hearing that does not identify procedures for property owners to submit written objections, the City will conduct the public hearing in compliance with Proposition 218, and consider any written protests in accordance with these Procedures.

Attachment 4
79 Resolution No. 25-151
c. City staff will review timely written objections and draft written responses providing the substantive basis for retaining or altering the proposed water rates in response to the written objections. City staff will present its written responses to the City Council prior to the close of the public hearing for the Proposition 218 protest hearing and the City Council will review them to determine whether action is needed in response to the written objections or written responses. d. Following the City Council’s review and response to timely written objections and written responses, it is within the discretion of the City Council to proceed with the Proposition 218 protest hearing process, as described herein, to consider approval of the proposed water rates.
e. Rate Challenger Must Exhaust Administrative Remedies. No claim, suit for damages, suit for injunctive relief, petition for writ of mandamus, or administrative or judicial proceeding shall be brought against the City (including the City Council, or its employees, officers, or designees) regarding a challenge to a proposed water rate unless the challenging party first exhausts its administrative remedies by complying with these Procedures and submitting to the City a timely written objection.

2. Notice of Proposition 218 Public Hearing and Initiating Exhaustion Procedure Prior to approving or imposing any new or increased water rates, the City will conduct a public hearing and provide prior written notice to each record owner of the hearing and the exhaustion procedure as described in these Procedures. To the extent that the City sends a regular billing statement for water service provided to a “customer” (e.g., a “tenant” or other “ratepayer”) who is not the record owner, the City will also mail the written notice to the customer at the address for the billing statement. The City will mail the public hearing notice to each record owner no later than 45 days prior to the public hearing. The contents of the hearing notice will include:
a. Compliance with Proposition 218:
(1) The date, time, and location of the public hearing. (2) The amount of the water rates proposed to be imposed on each parcel.

This may be satisfied by identifying the rate amounts for each customer type subject to the rates.
(3) The basis upon which the amount of the proposed water rates were calculated.
(4) The reason for the proposed water rates.
(5) The location to which owners must submit written protests via mail, email, fax, or personal delivery.
80 Resolution No. 25-151
(6) To the extent required by Government Code section 54354.5, the notice will identify the opportunity for record owners to be heard as to whether the proposed water rates are not in compliance with any requirements of the Revenue Bond Law of 1941 (Government Code Sections 53000 – 55821), including: (a) the rates are discriminatory or excessive, or (b) the rates will not be sufficient under the provisions of any outstanding revenue bonds (including Government Code section 54515). (7) How members of the public may obtain additional information regarding the proposed new or increased fee, including a link to information that is available on the City’s website or by requesting a mailed copy. This will include a copy of the resolution or ordinance by which the proposed new or increased water rates are proposed to be adopted.
b. Compliance with the Exhaustion Procedure for Written Objections. If the City chooses to follow the exhaustion procedure for written objections, substantially concurrently with mailing the public hearing notice, the City will post on its internet website the written basis for the proposed water rates and a link to the Proposition 218 public hearing notice, which will be supplemented with the following prominently displayed information:
(1) The “deadline” (date and time) by which a “timely written objection” must be submitted to the City. The deadline will be no earlier than 45 days after the City mails to property owners the notice of the public hearing. (2) The location to which written objections must be submitted to the City via mail, email, fax, or personal delivery.
(3) All substantive requirements for submitting a written objection. The record owner must comply with the requirements set forth in Procedures section 3, below, including specifying the grounds on which the owner alleges the proposed new or increased water rates does not comply with Proposition 218.
(4) Notice that: (a) any person’s failure to submit a timely written objection bars any right of that person to challenge the proposed new or increased fee through a legal proceeding; and (b) there is a 120-day statute of limitations for challenging the proposed new or increased water rates (in accordance with Government Code section 53759).
c. The City will mail the public hearing notice to each record owner of a parcel that is subject to payment of the new or increased fee. The notice shall be mailed to owner’s address shown on the last equalized property tax assessment roll. (1) There is a rebuttable presumption that the most recent equalized property tax assessment roll of the Orange County Recorder is sufficient 81 Resolution No. 25-151
evidence of the record owner of each parcel. A person may rebut the presumption by providing to the City written proof of ownership. (2) The City Clerk, or designee, may certify by affidavit the proper mailing of notices described in these Procedures, and any such affidavit shall constitute conclusive proof of mailing in the absence of fraud. (3) Failure of any person to receive notice shall not invalidate the hearing or its results.
(4) The City will also provide supplemental notices to the address where the City customarily mails the billing statement for water rates. d. Concurrently with publishing and mailing the public hearing notice, the City will post on its website relevant information regarding the proposed new or increased fee including a copy of the cost of service analysis (which may be referred to as a water “rate study”) which provides documentation of compliance with all substantive requirements of Prop 218 regarding the calculation of the amount of the proposed new or increased fee.

3. Requirements for Submitting Timely Written Objections In order for a record owner to submit a timely written objection, it must:
a. Be received by the City at the location identified on the public hearing notice, no later than the deadline identified on the public hearing notice. The deadline may be no earlier than 45 days after the City mails to record owners the notice of public hearing.
b. Be in writing (i) identifying the name of the record owner, and the street address or assessor’s parcel number (or other clear identification) of the property subject to the water rates; and (ii) signed by the record owner, or otherwise identifying that the record owner submitted the written objection, subject to verification by the City.
c. Specify the grounds for alleging the proposed rates do not comply with Proposition 218. The grounds must identify (i) the substantive requirement of Proposition 218, and (ii) the reason the proposed water rates do not comply with that requirement. For any proposed new or increased “fee” for a property-related service (such as water rates), relevant substantive requirements of Proposition 218 include:
(1) Revenues derived from the water rates shall not exceed the funds required to provide the property related water service. (2) Revenues derived from the water rates shall not be used for any purpose other than that for which the fee or charge was imposed. 82 Resolution No. 25-151
(3) The amount of the water rates shall not exceed the proportional cost of the service attributable to the parcel.
(4) No water rates may be imposed for a service unless that service is actually used by, or immediately available to, the owner of the property in question. Water rates based on potential or future use of a service are not permitted.
(5) No water rates may be imposed for general governmental services including, but not limited to, police, fire, ambulance or library services, where the service is available to the public at large in substantially the same manner as it is to property owners.

4. Requirements for Submitting Timely Written Protests
In order for a record owner to submit a timely written protest, to be considered as a part of the Proposition 218 protest hearing described in Section 6, below, it must:
a. Be received by the City at the location identified on the public hearing notice, no later than the close of the public testimony portion of the public hearing. b. Be in writing (1) identifying the name of the record owner, and the street address or assessor’s parcel number (or other clear identification) of the property subject to the water rates; and (2) signed by the record owner, or otherwise identifying that the record owner submitted the written objection, subject to verification by the City.

A written protest must be submitted in paper form. Any protest will not satisfy this requirement if it is submitted in any non-paper format such as: email, facsimile, or spoken protest via telephone or in person.
c. Must clearly identify that the record owner opposes the proposed new or increased water rates that are the subject of the hearing. d. Will only be counted as one protest per parcel. That means that if any one or more record owners of a parcel submits a timely written protest (or timely written objection) for the same parcel, it will be counted as one timely written protest. e. Record owners of multiple parcels within the City may file one protest for each parcel owned within the City’s service area.
f. A record owner may withdraw a written protest only if the withdrawal is submitted in writing by the record owner clearly indicating an intent to withdraw for an identified property, and it is received by the City at the location (and no later than the time) for submitting written protests. After a written protest is withdrawn, a record owner may submit a new or replacement written protest in accordance with the requirements of these Procedures. No other modification to a timely written protest may be made.
83 Resolution No. 25-151
g. The City Clerk shall take custody of all submitted written objections and written protests.
(1) In order to protect the integrity of the procedures for considering written objections and written protests as described in these Procedures, all written objections and written protests shall remain confidential until the City Manager (or designee) has determined they may be published in accordance with the criteria in paragraph 4(g)(2).
(2) Any submitted written objection and written protest shall be a public record, subject to public disclosure under the California Public Records Act (Government Code sections 7920.000, et seq.); however, the City may withhold the record if the City determines that the public interest served by not disclosing clearly outweighs the public interest served by disclosure under Government Code section 7922.000. As a general rule, the City finds there is a substantial public interest in not disclosing written objections and written protests to protect the integrity of the process described herein during the time that: (A) written objections are still being submitted and (B) prior to the time that the Brown Act meeting agenda is posted (e.g., at least 72 hours before a regular meeting under Government Code section 54954.2).

5. City’s Response to Timely Written Objections
At the close of the written objection period, City staff shall review timely written objections and shall draft written responses to the written objections. The City’s written response will include: (i) the grounds on which the objection is (or is not) resulting in amendments to the proposed new or increased water rates; and (ii) an explanation of the substantive basis for retaining or altering the proposed new or increased water rates.

City staff shall present the written responses to the City Council at the public meeting that was specified in the public hearing notice described in Section 2, above. a. In accordance with the Brown Act, the public will be provided an opportunity to address the City Council prior to the Council’s action related to the timely written objections and written responses. (See Government Code section 54954.3(a).) b. In accordance with Government Code section 53759.1(d), the City Council, in exercising its legislative discretion in considering timely written objections and written responses, shall determine for the proposed new or increased water rates whether further review, clarification, or reduction is needed, and whether to proceed to the Proposition 218 protest hearing.
84 Resolution No. 25-151

6. Conducting the Proposition 218 Protest Public Hearing If the City Council determines to proceed to the Proposition 218 protest public hearing for proposed new or increased water rates (as previously noticed in accordance with Section 2, above), the public hearing shall be conducted consistent with the following:
a. The City Council will open the public hearing and consider all evidence presented during the hearing including the public hearing notice and all documents referenced therein (particularly including the Rate Study), all written objections, written responses, written protests, and any testimony, documents, or information presented during the public hearing.
b. Prior to closing the public hearing, the City Council will request if there are any additional written protests to be submitted to (or withdrawn from) the City. c. The City Council will then close the public hearing and request a report from the City Clerk to identify the number of timely written protests compared to the total number of parcels subject to the new or increased fees. (1) A majority protest exists only if the number of timely written protests exceeds one-half of the parcels served by the City.
(2) If the City Clerk determines that additional time is needed to tabulate timely written protests, the City Council shall recess or continue the public meeting to provide sufficient time for the City Clerk to complete the tabulation.
(3) If the City Clerk determines that there is a majority protest, the City shall not impose the new or increased water rates.
(4) If the City Clerk determines that there is not a majority protest, the City Council shall continue its deliberations and take action on the proposed new or increased water rates.
(5) The City Clerk’s determinations under these Procedures shall be the final determination of the City subject to appropriate judicial review. This shall include the City Clerk’s determinations that: (a) a written protest meets the requirements for a timely written protest in accordance with these Procedures; or (b) a majority protest has (or has not) been submitted for the proposed rates.
85 Attachment 5
City of
San Clemente
2025 Water Rate Study
Final Report – November 2025
Prepared by: Water Resources Economics, LLC
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87 November 13, 2025
David Rebensdorf
Public Works Director
City of San Clemente
910 Calle Negocio
San Clemente, CA 92673
Subject: City of San Clemente Water Cost of Service and Rate Study Report Dear Mr. Rebensdorf,
Water Resources Economics, LLC (WRE) is pleased to submit this 2025 Water Cost of Service and Rate Study Report to the City of San Clemente (City). This report documents the results and recommendations of the City’s water rate study. The goal of the study was to develop a five-year schedule of water, recycled water rates, and demand management rates that will sufficiently fund the City’s water and recycled water system expenses, allow the City to meet its financial goals within the study period, and comply with cost-of-service principles.

This study utilized industry-standard rate-setting methodology in accordance with guidelines developed by the American Water Works Association and incorporates guidance provided by the City Council. Our project team has a proven track record of developing fair and equitable water rates for numerous public water agencies in California over the past 25 years. We are confident in our ability to develop sound water rates that satisfy the requirements of Proposition 218.

It has been a pleasure assisting the City, and we appreciate the support provided by yourself, the City Council, and other City staff during this study.

Sincerely,
Sanjay Gaur Hannah Phan
Founder / President Principal Consultant
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89 City of San Clemente
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TABLE OF CONTENTS

1. Executive Summary ............................................................................................................................. 1

1.1 System Overview........................................................................................................................................ 1

1.2 Rate Study Overview.................................................................................................................................. 1

1.3 Legal Requirements.................................................................................................................................... 1

1.4 Rate-Setting Methodology......................................................................................................................... 2

1.5 Additional Information and Disclaimers .................................................................................................... 2

1.6 Current Water Rates.................................................................................................................................. 3

1.7 Financial Plan ............................................................................................................................................. 3

1.8 Cost-of-Service Analysis............................................................................................................................. 4

1.9 Proposed Potable and Recycled Water Rates............................................................................................ 5

1.10 Proposed Demand Management Rates..................................................................................................... 7

2. Financial Plan ...................................................................................................................................... 9

2.1 Financial Plan Methodology....................................................................................................................... 9

2.2 Revenues.................................................................................................................................................... 9

2.3 Operating Expenses.................................................................................................................................. 13

2.4 Debt Service ............................................................................................................................................. 15

2.5 Capital Improvement Plan ....................................................................................................................... 15

2.6 Financial Policies...................................................................................................................................... 17

2.7 Status Quo Financial Plan......................................................................................................................... 18

2.8 Proposed Financial Plan ........................................................................................................................... 25

3. Potable Water Cost-of-Service ........................................................................................................... 33

3.1 Cost-of-Service Methodology .................................................................................................................. 33

3.2 Revenue Requirement ............................................................................................................................. 33

3.3 Cost Functionalization.............................................................................................................................. 34

3.4 Cost Causation Components.................................................................................................................... 35

3.5 Equivalent Meter Units............................................................................................................................ 40

3.6 Allocation to Cost Components ............................................................................................................... 41

3.7 Unit Cost Calculation................................................................................................................................ 42

4. Potable Water Rates.......................................................................................................................... 44

4.1 Rate Design Methodology........................................................................................................................ 44

4.2 Proposed Changes to Rate Structure....................................................................................................... 44

4.3 Proposed Monthly Fixed Charges............................................................................................................ 44

4.4 Proposed Variable Charges...................................................................................................................... 46

4.5 Proposed Water Rate Schedule ............................................................................................................... 48

4.6 Customer Impacts.................................................................................................................................... 50

5. Recycled Water Cost-of-Service and Rates.......................................................................................... 51

5.1 Cost-of-Service Methodology .................................................................................................................. 51

5.2 Revenue Requirement ............................................................................................................................. 51

5.3 Proposed Monthly Fixed Service Charge ................................................................................................. 52

5.4 Proposed Consumption Rate ................................................................................................................... 52

5.5 Proposed Recycled Water Rate Schedule ................................................................................................ 53 90 City of San Clemente
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6. Demand Management Rates.............................................................................................................. 55

6.1 Rate Design Methodology........................................................................................................................ 55

6.2 Risks Related to Water Shortages............................................................................................................ 55

6.3 Proposed Demand management Rates ................................................................................................... 55

6.4 Proposed Demand management Rate Schedule ..................................................................................... 58

7. Appendices ....................................................................................................................................... 59

7.1 Financial Plan Appendices........................................................................................................................ 59

7.2 Cost-of-Service Appendices ..................................................................................................................... 69 91 City of San Clemente
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iii

LIST OF TABLES
Table 1-1: Current Monthly Fixed Water Service Charges (Potable and Recycled)................................................ 3 Table 1-2: Current Consumption Rates................................................................................................................... 3 Table 1-3: Proposed Financial Plan Scenario .......................................................................................................... 4 Table 1-4: Current and Proposed Monthly Fixed Water Service Charge – City Portion (Potable and Recycled) .. 6 Table 1-5: Current and Proposed Monthly Fixed Water Service Charge – MWDOC (Potable) .............................. 6 Table 1-6: Current and Proposed Consumption Rates (Potable and Recycled)...................................................... 6 Table 1-7: Proposed Single Family Customer Impacts (Year 1)............................................................................... 7 Table 1-8: Proposed Demand Management Rates................................................................................................. 8 Table 2-1: Current Monthly Fixed Water Service Charge (Potable and Recycled) ............................................... 10 Table 2-2: Current Consumption Rates................................................................................................................. 10 Table 2-3: Projected Customer Accounts.............................................................................................................. 11 Table 2-4: Projected Demand Growth .................................................................................................................. 11 Table 2-5: Projected Customer Water Usage (ccf)................................................................................................ 11 Table 2-6: Calculated Rate Revenues at Current Rates......................................................................................... 12 Table 2-7: Revenue Summary ............................................................................................................................... 12 Table 2-8: Expense Inflationary Assumptions....................................................................................................... 13 Table 2-9: Calculated Potable Water Supply Costs............................................................................................... 14 Table 2-10: Operating Expenses Summary ........................................................................................................... 15 Table 2-11: Existing Debt Service .......................................................................................................................... 15 Table 2-12: Potable Water Capital Project Costs.................................................................................................. 15 Table 2-13: Recycled Water Capital Project Costs................................................................................................ 16 Table 2-14: Potable Water Capital Funding Summary.......................................................................................... 17 Table 2-15: Recycled Water Capital Funding Summary........................................................................................ 17 Table 2-16: Status Quo Financial Plan Scenario.................................................................................................... 18 Table 2-17: Projected Potable Cash Flows (Status Quo Financial Plan)................................................................ 19 Table 2-18: Projected Recycled Cash Flows (Status Quo Financial Plan).............................................................. 20 Table 2-19: Projected Potable and Recycled Fund Balances (Status Quo Financial Plan) .................................... 21 Table 2-20: Forecasted Potable and Recycled Financial Performance (Status Quo Financial Plan)..................... 22 Table 2-21: Proposed Water and Recycled Financial Plan Scenario ..................................................................... 25 Table 2-22: Projected Potable Cash Flows (Proposed Financial Plan) .................................................................. 26 Table 2-23: Projected Recycled Cash Flows (Proposed Financial Plan) ................................................................ 27 Table 2-24: Projected Potable and Recycled Fund Balances (Proposed Financial Plan)....................................... 28 Table 2-25: Forecasted Potable and Recycled Financial Performance (Proposed Financial Plan) ....................... 29 Table 3-1: FY 2025 Potable Revenue Requirement............................................................................................... 33 Table 3-2: Operating Costs by System Functions.................................................................................................. 35 Table 3-3: Capital Expenses by System Functions................................................................................................. 35 Table 3-4: System-Wide Capacity.......................................................................................................................... 36 Table 3-5: System Function Allocation to Cost Components................................................................................ 37 Table 3-6: Operating Allocation by Cost Component ........................................................................................... 38 Table 3-7: Capital Allocation by Cost Component ................................................................................................ 39 Table 3-8: Equivalent Meter Units........................................................................................................................ 40 Table 3-9: Cost-of-Service Allocation by Cost Component (General and Delivery).............................................. 41 Table 3-10: Cost-of-Service Allocation by Cost Component (Final) ...................................................................... 42 Table 3-11: Units of Service Definitions................................................................................................................ 42 Table 3-12: Unit Cost by Cost Component............................................................................................................ 43 92 City of San Clemente
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Table 4-1: MWDOC Fixed Charge Unit Cost.......................................................................................................... 45 Table 4-2: Revenue Neutral Monthly Fixed Water Service Charge – City Portion................................................ 45 Table 4-3: Revenue Neutral Monthly Fixed Water Service Charge – MWDOC..................................................... 45 Table 4-4: Proposed Monthly Fixed Water Service Charge (City Portion) After Adjustment............................... 46 Table 4-5: Proposed Monthly Fixed Water Service Charge (MWDOC) for FY 2026.............................................. 46 Table 4-6: MWDOC Variable Supply Unit Cost...................................................................................................... 47 Table 4-7: Revenue Neutral Consumption Rates.................................................................................................. 47 Table 4-8: Proposed Consumption Rates after Adjustment ................................................................................. 48 Table 4-9: Proposed Revenue Adjustments.......................................................................................................... 48 Table 4-10: Proposed Monthly Fixed Water Service Charge – City Portion ......................................................... 48 Table 4-11: Proposed Monthly Fixed Water Service Charge - MWDOC ............................................................... 49 Table 4-12: Proposed Consumption Rates............................................................................................................ 49 Table 4-13: Water Supply Unit Cost in FY 2026 .................................................................................................... 49 Table 4-14: Proposed Consumption Rates – with Water Supply Unit Cost .......................................................... 49 Table 4-15: Proposed Single Family Customer Impacts........................................................................................ 50 Table 5-1: FY 2025 Recycled Revenue Requirement............................................................................................. 51 Table 5-2: Revenue Neutral Monthly Fixed Water Service Charge....................................................................... 52 Table 5-3: Revenue Neutral Monthly Fixed Water Service Charge After Adjustment.......................................... 52 Table 5-4: Annual Fixed Service Charge Revenue Calculation .............................................................................. 52 Table 5-5: Revenue Neutral Consumption Rate.................................................................................................... 53 Table 5-6: Proposed Consumption Rate after Adjustment................................................................................... 53 Table 5-7: Proposed Recycled Water Revenue Adjustments................................................................................ 54 Table 5-8: Proposed Recycled Water Monthly Fixed Water Service Charge ........................................................ 54 Table 5-9: Proposed Recycled Water Consumption Rate ..................................................................................... 54 Table 6-1: Water Usage Reductions...................................................................................................................... 56 Table 6-2: Variable Revenue Loss by Stage........................................................................................................... 56 Table 6-3: Water Supply Cost Differences by Stage.............................................................................................. 57 Table 6-4: Demand Management Costs by Stage ................................................................................................. 57 Table 6-5: Proposed Revenue Adjustments.......................................................................................................... 58 Table 6-6: Proposed Demand Management Rates............................................................................................... 58 Table 7-1: Revenues (Detail) ................................................................................................................................. 59 Table 7-2: Expenses (Detail).................................................................................................................................. 60 Table 7-3: Operating Expenses Allocation (Detailed)............................................................................................ 69 Table 7-4: Capital Expenses (CIP) Allocation (Detailed)........................................................................................ 69 93 City of San Clemente
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v

LIST OF FIGURES
Figure 2-1: Potable Revenue Requirements vs. Revenues (Status Quo Financial Plan) ....................................... 23 Figure 2-2: Recycled Revenue Requirements vs. Revenues (Status Quo Financial Plan) ..................................... 23 Figure 2-3: Potable and Recycled Projected Debt Coverage (Status Quo Financial Plan) .................................... 24 Figure 2-4: Potable and Recycled Projected Fund Balances (Status Quo Financial Plan)..................................... 24 Figure 2-5: Potable Revenue Requirements vs. Revenues (Proposed Financial Plan).......................................... 30 Figure 2-6: Recycled Revenue Requirements vs. Revenues (Proposed Financial Plan)........................................ 31 Figure 2-7: Potable and Recycled Projected Debt Coverage (Proposed Financial Plan)....................................... 31 Figure 2-8: Potable and Recycled Projected Fund Balances (Proposed Financial Plan) ....................................... 32 94 City of San Clemente
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1 1. EXECUTIVE SUMMARY

1.1 SYSTEM OVERVIEW
The City of San Clemente (City) Utilities Division provides water, recycled water, sewer, storm drain, and solid waste services to a population of approximately 66,250 across 18.45 square miles in Orange County in Southern California. The City’s water system serves roughly 83% of City residents, while some residents are served by other water districts. The boundaries for customers served by the City’s water system are identified on the City’s website1. The current water rate structure consists of a monthly fixed water service charge by meter size, and a consumption rate per unit of water for each customer class. The last rate study, completed in 2017, implemented five years of rate adjustments through January 1, 2022.

1.2 RATE STUDY OVERVIEW
Public retail water agencies in California typically conduct a cost-of-service study every five years to ensure that customers are appropriately charged for water service and to reestablish the cost-of-service nexus that is required by Proposition 218. The City engaged Water Resources Economics, LLC (WRE) in 2025 to conduct a comprehensive water cost of service and rate study (collectively referred to as this Rate Study) with the following objectives:
 Evaluate a five-year financial plan scenario to meet financial targets for Fiscal Year (FY) 2025 2 to FY
2030.
 Conduct a cost-of-service analysis based on the most recent data and customer use characteristics.  Develop a five-year potable and recycled water rate schedule from FY 2026 through FY 2030.  Develop a five-year demand management rate schedule from FY 2026 to FY 2030.

1.3 LEGAL REQUIREMENTS3
Legal considerations relating to retail water rates in California focus heavily on Proposition 218, which was enacted in 1996 and is now reflected in Article XIII C and Article XIII D of the California Constitution.

Proposition 218 states that “property related fees and charges” (including retail water rates) may not exceed the proportional cost of providing the service to the customer and may not be used for any purpose other than providing said service. The practical implication is that public retail water agencies in California must demonstrate a sufficient nexus between the costs incurred by the agency to provide water service, and the rates charged to customers. The primary means by which retail water agencies address this requirement is by conducting a “cost-of-service analysis.” Proposition 218 also affects the rate adoption process by requiring agencies to hold a public hearing to adopt rates. The agency must mail public hearing notices to all customers no fewer than 45 days prior to the public hearing. The public hearing notices must clearly show all proposed rate changes, provide information on the public hearing date/time/location, and provide instructions on how customers may protest the proposed rate changes. If a majority of customers submit a protest, the proposed rate changes cannot be adopted.

1 www.sanclemente.gov/water-rates
2 FY 2026 is the year starting July 1, 2025 and ending June 30, 2026. 3 Although this section is named “Legal Requirements” and discusses Proposition 218 and 26, WRE is not a law firm and does not provide legal advice.
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2 For comparison, although water connection and capacity fees are not the subject of this Study, they are not subject to the same legal requirements under Proposition 218. Rather, they are subject to the limitations of Proposition 26, which was approved by voters in 2010 and amended provisions of Article XIII A and Article XIII C of the California Constitution. Proposition 26 defines what types of charges are considered a “tax” (which is subject to a two-thirds voter approval) and are not considered as such. Based on the definitions provided by Proposition 26, “a charge imposed for a specific benefit conferred or privilege granted directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government conferring the benefit or granting the privilege” and “a charge imposed for a specific government service or product provided directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of providing the service or product” are not considered “taxes.” As such, water connection and capacity fees are not taxes and do not require two-thirds voter approval; provided that, the calculation of connection and capacity fees must follow cost-of-service principles to prove that the fees charged do not exceed the reasonable costs of connecting new customers to the City’s existing water system. Additionally, connection and capacity fees are subject to procedural requirements under the Mitigation Fee Act (see California Government Code Section 66013).

1.4 RATE-SETTING METHODOLOGY
This study was conducted using industry-standard methodology outlined by the American Water Works Association (AWWA) in its Manual of Water Supply Practices M1: Principles of Water Rates, Fees and Charges, Seventh Edition (M1 Manual). The rate study process includes the following steps:

1. Financial Plan: Annual revenues and expenses are projected over the rate-setting period to determine the magnitude of rate increases needed to maintain financial sufficiency. Financial policies, such as reserve targets, are also evaluated and updated if necessary.

2. Cost-of-Service Analysis: Costs are allocated to customers in proportion to use of and burden on the water system. The overall goal is to establish a robust nexus between the costs incurred by an agency and the rates charged to customers, as required by Proposition 218.

3. Rate Design: The existing rate structure is evaluated, and potential changes are identified. A multi-year proposed rate schedule is then calculated directly from the results of the financial plan and cost-ofservice analysis.

4. Rate Study Documentation: A rate study report is developed to document the proposed rate development process. This provides transparency and enhances legal defensibility in light of Proposition 218 requirements. This document serves as the report for this rate study.

1.5 ADDITIONAL INFORMATION AND DISCLAIMERS
This report summarizes the data, analyses, processes, and results of the City’s water cost of service and rate study. Some important information to keep in mind when reading the report includes the following:
 All study projections are based on the best available data as of June 2025.  All table values are rounded to the nearest digit shown unless stated otherwise. However, all calculations are based on precise values. Attempting to manually recreate the calculations described in this report from the values displayed in tables may therefore produce slightly different results.  All current and proposed rates and charges in this report are shown on a monthly basis. 96 City of San Clemente
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3 1.6 CURRENT WATER RATES
The City’s current water rates include monthly fixed meter charges based on meter sizes and variable charges based on customer class and units of water in hundred cubic feet (ccf). The consumption rates have two components: the water supply charge and the City distribution charge. The water supply charge is the same for all potable water customers.

Table 1-1 and Table 1-2 show the current monthly fixed water service charges and consumption rates, respectively.

Table 1-1: Current Monthly Fixed Water Service Charges (Potable and Recycled) Line Monthly Fixed Water Service Charge
(Potable and Recycled)
As of
1/1/2022
1 Up to 1" $27.41
2 1.5" $67.72
3 2" $102.09
4 3" $211.23
5 4" $372.08
6 6" $756.96
Table 1-2: Current Consumption Rates
Line Consumption Rates ($/ccf) As of
1/1/2022
1 Single Family Residential $5.11
2 Water Supply Charge $2.94
3 City Distribution Charge $2.17
4 Multi Family Residential $4.92
5 Water Supply Charge $2.94
6 City Distribution Charge $1.98
7 Commercial $4.95
8 Water Supply Charge $2.94
9 City Distribution Charge $2.01
10 Irrigation $6.01
11 Water Supply Charge $2.94
12 City Distribution Charge $3.07
13 Non-Potable Irrigation $3.29

1.7 FINANCIAL PLAN
WRE worked closely with City staff and City Council to determine the financial plan scenario that best suits the City’s needs. The results and recommendations of the potable and recycled water rate study are driven by the City’s financial performance, input from City staff, and feedback and direction from City Council.
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4 FACTORS AFFECTING FINANCIAL PERFORMANCE
The potable and recycled water funds are both under the water enterprise fund, even though their costs are separated, and their financial performance is evaluated together. The potable and recycled water system’s financial performance is driven by the ability of the current potable and recycled water rates to meet the City’s funding needs. To maintain financial sufficiency, potable and recycled water rates must fully fund operations and maintenance (O&M) costs, capital improvement plan (CIP) expenditures, and any relevant financial policies, which typically include target reserve balances and debt coverage.

The key factors affecting financial performance include:
 Debt Coverage Requirements: The City’s existing annual debt service payment is approximately $900k in each year of the study period, and the City is required to meet an annual debt coverage requirement of 110% each year. This means that the City’s net operating revenue (operating revenue less operating expenses) must be at least 110% greater than its annual debt service. Without any revenue adjustments, the City is not expected to meet its debt coverage requirements starting in FY 2026.  Substantial Capital Investment Needs Over the Next Five Years: The cost of planned capital projects over the next five years (FY 2026 through FY 2030) is approximately $21 million, accounting for inflation of project costs over time.
 Reserve Policy Targets: The City’s current reserve policy includes targets for operating, capital projects, and debt service reserves. The reserve policy in place allows the City to maintain cash on hand to meet short-term cash flow requirements and to execute CIP projects.

PROPOSED REVENUE ADJUSTMENTS AND DEBT ISSUANCES
Overall annual increases in potable and recycled water rate revenues resulting from rate increases are referred to as “revenue adjustments.” WRE worked with City Council and City staff to determine the most appropriate financial plan scenario, which is shown in Table 1-3.

The proposed financial plan scenario includes five years of revenue adjustments, which are required to meet the debt coverage ratio as well as maintain financial sufficiency and resiliency.

Table 1-3: Proposed Financial Plan Scenario
Line Fiscal Year Effective
Date
Revenue Adjustments
(Potable and Recycled)
1 FY 2026 2/1/2026 9.5%
2 FY 2027 1/1/2027 3.5%
3 FY 2028 1/1/2028 3.5%
4 FY 2029 1/1/2029 3.5%
5 FY 2030 1/1/2030 3.5%

1.8 COST-OF-SERVICE ANALYSIS
A cost-of-service analysis is a technical process used to determine the cost of providing potable and recycled water service to the City’s customers based on each customer’s use of and burden on the water system.

Although the financial performance of each service is evaluated together, the cost-of-service analysis is done separately for potable and recycled water service to ensure that customers only pay for costs associated with the specific service they receive. The cost-of-service analysis is the basis of the nexus between the costs 98 City of San Clemente
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5 incurred by the utility to provide potable and recycled water service, and the potable and recycled water rates charged to customers, which is a requirement of Proposition 218.

COST-OF-SERVICE METHODOLOGY
The cost-of-service methodology is based on industry standards set forth by AWWA in its M1 Manual; this rate study utilizes the base-extra capacity method. The overall goal of the cost-of-service analysis is to develop “unit costs,” which provide the basis from which proposed rates are directly calculated from. Note that although the study period spans five years, the cost-of-service analysis is limited to a single representative year referred to as the “test year.” The test year in this study is FY 2025. The key steps in conducting a potable and recycled water cost-of-service analysis are outlined below:
 Revenue Requirement Determination: The total rate revenue requirement for the test year is determined based on the results of the proposed financial plan and divided into primary subcomponents (operating, capital, etc.).  Cost Functionalization: Operating and capital costs are evaluated and assigned to “functional categories” in the potable and recycled water system (e.g., customer service, water supply, distribution, etc.). This provides a proportional breakdown of system costs by functional category.  Revenue Requirement Allocation to Cost Causation Components: Functionalized costs are allocated to “cost causation components” (e.g., water supply, delivery, conservation, etc.), which is used to attribute customers’ use of the system to the costs incurred by the City.  Unit Cost Development: The rate revenue requirement allocation for each individual cost causation component is divided by the appropriate units of service to establish unit costs for the test year. Unit costs provide the basis from which proposed rates are calculated.

1.9 PROPOSED POTABLE AND RECYCLED WATER RATES
WRE worked closely with the City Council and City staff to determine the most appropriate water rate structure that meets the City’s needs.

PROPOSED RATE STRUCTURE CHANGES
The main objective was to conduct a comprehensive cost-of-service analysis while maintaining as much of the current rate structures as possible to minimize customer impacts.

The City’s current water rate structure includes a monthly service charge based on meter size and a uniform consumption rate per ccf that varies by customer class. After examining the existing rate methodology, given the City’s water supply profile, WRE recommends the City implement a uniform consumption rate for all customer classes to be more consistent with cost-of-service principles. Additionally, to properly pass through Municipal Water District of Orange County (MWDOC)’s cost, who is the City’s main water supplier, WRE recommends the City implement a separate MWDOC monthly service charge based on meter size and pass through supply costs to the variable rate.

WRE proposes no changes to the recycled water rate structure. 99 City of San Clemente
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6 PROPOSED FIVE-YEAR POTABLE AND RECYCLED WATER RATE SCHEDULE The proposed five-year potable and recycled water rate schedules in this section are based on the proposed rate structure and methodology changes, the updated cost-of-service analysis, and the proposed revenue adjustments in the five-year period. The rate schedule shows the proposed potable and recycled water rates to be implemented in February 2026 through January 2030. Note that MWDOC potable water supply costs will be billed to customers as pass-through charges. The proposed rates shown for these years may differ depending on changes to MWDOC rates; based on the pass-through provision of MWDOC water supply costs, any additional MWDOC costs will not require an additional Proposition 218 noticing process to be passed through to the City’s customers.

Table 1-4, Table 1-5, and Table 1-6 show the current and proposed City monthly fixed charges for potable water customers, MWDOC monthly fixed charges for potable water customers, variable charges for potable water customers, including MWDOC supply and City costs, monthly fixed charges for recycled water customers, as well as variable charges for recycled water customers, respectively.

Table 1-4: Current and Proposed Monthly Fixed Water Service Charge – City Portion (Potable and Recycled)
Line
Monthly Fixed Water Service
Charge - City Portion (Potable
and Recycled)
As of
1/1/2022
Effective
2/1/2026
Effective
1/1/2027
Effective
1/1/2028
Effective
1/1/2029
Effective
1/1/2030
1 Up to 1" $27.41 $27.76 $28.74 $29.75 $30.80 $31.88
2 1.5" $67.72 $76.67 $79.36 $82.14 $85.02 $88.00
3 2" $102.09 $118.60 $122.76 $127.06 $131.51 $136.12
4 3" $211.23 $251.37 $260.17 $269.28 $278.71 $288.47
5 4" $372.08 $447.03 $462.68 $478.88 $495.65 $513.00
6 6" $756.96 $1,124.86 $1,164.24 $1,204.99 $1,247.17 $1,290.83 Table 1-5: Current and Proposed Monthly Fixed Water Service Charge – MWDOC (Potable) Line Monthly Fixed Water Service
Charge - MWDOC (Potable )
Effective
2/1/2026
Effective
1/1/2027
Effective
1/1/2028
Effective
1/1/2029
Effective
1/1/2030
1 Up to 1" $5.34
Pass-Through Going Forward
2 1.5" $17.80
3 2" $28.48
4 3" $62.30
5 4" $112.14
6 6" $284.80
Table 1-6: Current and Proposed Consumption Rates (Potable and Recycled) Line Consumption Rates ($/ccf)
(Potable and Recycled)
As of
1/1/2022
Effective
2/1/2026
Effective
1/1/2027
Effective
1/1/2028
Effective
1/1/2029
Effective
1/1/2030
1 Single Family Residential $5.11 $5.31 $5.50 $5.70 $5.90 $6.11 2 Multi Family Residential $4.92 $5.31 $5.50 $5.70 $5.90 $6.11 3 Commercial $4.95 $5.31 $5.50 $5.70 $5.90 $6.11
4 Irrigation $6.01 $5.31 $5.50 $5.70 $5.90 $6.11
5 Recycled Water $3.29 $3.52 $3.65 $3.78 $3.92 $4.06
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7 CUSTOMER IMPACTS
WRE evaluated the impacts to the Single Family customer class based on the proposed potable water rates for FY 2026.

Table 1-7 shows the proposed impacts for a Single Family customer with up to 1” meter (the most common meter size within this class) at various levels of monthly usage. For the average Residential customer that uses 10 ccf of water every month, the monthly impact will be $7.69 or 9.8%, which reflects the impact of the costof-service analysis, and the 9.5% revenue adjustment applied to FY 2026 rates.

Table 1-7: Proposed Single Family Customer Impacts (Year 1) Line Single Family
Customer Impacts ccf Current Bill Proposed Bill
Difference
($)
Difference
(%)
1 Low Usage 5 $52.96 $59.65 $6.69 12.6%
2 Average Usage 10 $78.51 $86.20 $7.69 9.8%
3 High Usage 20 $129.61 $139.30 $9.69 7.5%
4 Very High Usage 50 $282.91 $298.60 $15.69 5.5%

1.10 PROPOSED DEMAND MANAGEMENT RATES
The City’s 2020 Urban Water Management Plan (UWMP) consists of six stages of demand management, which all require different levels of usage reduction by the City’s customers. When customers reduce their usage at each stage, the City’s rate revenues from variable charges are directly impacted.

Demand management rates are a tool for the City to effectively respond to water shortage emergencies while maintaining financial sufficiency and operational reliability. These rates are designed to recover the costs of supply reduction, which include the loss of variable revenues and any difference (savings) in water supply costs. These rates are explained in section 6 of this report. 101
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8 Table 1-8 shows the proposed demand management rates in each stage for the five-year period, which are incremental charges in addition to the City variable charges shown in Table 1-6 for all usage. 102
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9 Table 1-8: Proposed Demand Management Rates
Line Shortage Level Usage
Reduction
Effective
2/1/2026
Effective
1/1/2027
Effective
1/1/2028
Effective
1/1/2029
Effective
1/1/2030
1 Level 1 up to 10% $0.21 $0.22 $0.23 $0.24 $0.25
2 Level 2 up to 20% $0.46 $0.48 $0.50 $0.52 $0.54
3 Level 3 up to 30% $0.78 $0.81 $0.84 $0.87 $0.91
4 Level 4 up to 40% $1.21 $1.26 $1.31 $1.36 $1.41
5 Level 5 up to 50% $1.81 $1.88 $1.95 $2.02 $2.10
6 Level 6 >50% $2.71 $2.81 $2.91 $3.02 $3.13
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10 2. FINANCIAL PLAN

2.1 FINANCIAL PLAN METHODOLOGY
The purpose of a financial plan is to project revenues, expenses, cash flows, reserve balances, and debt coverage over a multi-year period to assess financial sufficiency and performance and to determine the amount of required rate revenue. For this study, the planning period is from FY 2026 through FY 2030; data for FY 2025 are shown when needed to represent actual or budgeted data inputs. The key steps in developing a financial plan for a potable and recycled water enterprise are below:
 Revenue Projections: Annual revenues from rates and other miscellaneous sources are projected over the planning period. Rate revenues are projected based on current rates to establish baseline revenues from which the need for additional rate increases can be evaluated.  Expense Projections: Annual expenses are projected over the study period, including O&M expenses, debt service, and CIP costs. CIP funding options (grants, debt, etc.) are also evaluated as part of the financial plan.
 Financial Policy Evaluation: Key financial policies include debt coverage requirements and reserve targets. Debt coverage requirements are typically explicitly stated in official agreements on outstanding debt issuances. Reserve targets are typically set by an agency’s elected officials and may need to be periodically evaluated and updated.
 Status Quo Financial Plan Projections: Cash flow, reserve balances, and debt coverage are projected over the study period in the absence of additional rate increases (this scenario is called the “status quo”). Projected reserve balances and debt coverage are then compared to the agency’s financial policy requirements and targets. The status quo financial plan provides a baseline to evaluate the need for rate increases.
 Proposed Financial Plan Projections: The magnitude and timing of annual proposed revenue increases over the study period are evaluated and determined based on the agency’s financial policies, financial performance, and policy objectives. Proposed rate increases (referred to as “revenue adjustments”) should generate sufficient revenue to recover the agency’s expenses, maintain adequate reserves, and meet all debt coverage requirements. The proposed financial plan determines the total annual rate revenue requirement over the study period.

2.2 REVENUES

CURRENT WATER RATES
The City’s current water rates include monthly fixed meter charges based on meter sizes and variable charges based on customer class and units of water in hundred cubic feet (ccf). The consumption rates have two components: the water supply charge and the City distribution charge. The water supply charge is the same for all potable water customers.
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11 Table 2-1 and Table 2-2 show the current monthly fixed water service charges and consumption rates, respectively.
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12 Table 2-1: Current Monthly Fixed Water Service Charge (Potable and Recycled) Line Monthly Fixed Water Service Charge
(Potable and Recycled)
As of
1/1/2022
1 Up to 1" $27.41
2 1.5" $67.72
3 2" $102.09
4 3" $211.23
5 4" $372.08
6 6" $756.96
Table 2-2: Current Consumption Rates
Line Consumption Rates ($/ccf) As of
1/1/2022
1 Single Family Residential $5.11
2 Water Supply Charge $2.94
3 City Distribution Charge $2.17
4 Multi Family Residential $4.92
5 Water Supply Charge $2.94
6 City Distribution Charge $1.98
7 Commercial $4.95
8 Water Supply Charge $2.94
9 City Distribution Charge $2.01
10 Irrigation $6.01
11 Water Supply Charge $2.94
12 City Distribution Charge $3.07
13 Non-Potable Irrigation $3.29

CUSTOMER ACCOUNTS AND USAGE
This section details the customer accounts and water usage for all years of the study, which are referred to as the units of service. Units of service represent the quantity of billing units that are subject to the City’s potable and recycled water rates and charges.
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13 Table 2-3 shows the projected number of meters for all customers for the study period. City staff provided actual data for FY 2025. Growth in the City is highly variable and the timeline in which growth occurs can vary significantly from planning documents. WRE worked with City staff to determine the most appropriate estimates for customer accounts. Based on the City’s adopted FY 2026 budget, the City is projecting a 3.5% increase in customer accounts in FY 2026 compared to FY 2025. The number of accounts for FY 2027 through FY 2030 is assumed to be the same as FY 2026. The number of metered connections is the unit of service for the City’s monthly fixed charges.
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14 Table 2-3: Projected Customer Accounts
Line Customer Accounts FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 1 Potable Water
2 Up to 1" 15,081 15,615 15,615 15,615 15,615 15,615
3 1.5" 315 326 326 326 326 326
4 2" 762 789 789 789 789 789
5 3" 21 22 22 22 22 22
6 4" 18 19 19 19 19 19
7 6" 10 10 10 10 10 10
8 Total 16,208 16,782 16,782 16,782 16,782 16,782
9 10 Recycled Water
11 Up to 1" 1 1 1 1 1 1
12 1.5" 2 2 2 2 2 2
13 2" 115 119 119 119 119 119
14 3" 7 8 8 8 8 8
15 4" 1 1 1 1 1 1
16 6" 6 6 6 6 6 6
17 Total 132 136 136 136 136 136
Table 2-4 shows the water demand growth assumptions for the study period. WRE worked with City staff to determine the most appropriate estimates for annual water usage. Based on the City’s adopted FY 2026 budget, the City is projecting a 2% potable water usage decrease in FY 2026 compared to FY 2025. Consumption for FY 2027 through FY 2030 is assumed to be the same as FY 2026.

Table 2-4: Projected Demand Growth
Line Demand Growth FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 1 Potable -2% 0% 0% 0% 0%
2 Non-Potable 10% 0% 0% 0% 0%
Table 2-5 shows the projected potable and recycled water usage for each customer class based on the demand growth assumptions (Table 2-4). City staff provided actual water usage for FY 2025.

Table 2-5: Projected Customer Water Usage (ccf)
Line Water Consumption (ccf) FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 1 Single Family Residential 1,485,734 1,460,466 1,460,466 1,460,466 1,460,466 1,460,466 2 Multi Family Residential 458,565 450,767 450,767 450,767 450,767 450,767 3 Commercial 277,248 272,532 272,532 272,532 272,532 272,532 4 Irrigation 435,612 428,203 428,203 428,203 428,203 428,203 5 Non-Potable Irrigation 339,774 373,417 373,417 373,417 373,417 373,417 6 Total 2,996,933 2,985,385 2,985,385 2,985,385 2,985,385 2,985,385 108
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15 REVENUES FROM CURRENT RATES
Table 2-6 shows the calculated potable and recycled water rate revenues for the study period based on the current rates and the projected units of service. The monthly fixed charge revenue for potable water customers (Line 2) is calculated by multiplying the effective monthly fixed charges (Table 2-1) by the projected potable water meter connections (
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16 Table 2-3) for twelve billing periods. The monthly fixed charge revenue for recycled water customers (Line 3) is calculated by multiplying the effective monthly fixed charges (Table 2-1) by the projected recycled water meter connections (
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17 Table 2-3) for twelve billing periods.

The variable charge revenue for each customer class (Lines 5-9) is calculated by multiplying the effective combined variable charges (Table 2-2) by the projected water usage (Table 2-5) in each year.

Table 2-6: Calculated Rate Revenues at Current Rates
Line Calculated Rate Revenues FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 1 Fixed Charge Revenue $6,594,065 $6,827,557 $6,827,557 $6,827,557 $6,827,557 $6,827,557 2 Potable Water $6,378,290 $6,604,141 $6,604,141 $6,604,141 $6,604,141 $6,604,141 3 Recycled Water $215,775 $223,416 $223,416 $223,416 $223,416 $223,416 4 Consumption Revenue $13,838,644 $13,603,287 $13,603,287 $13,603,287 $13,603,287 $13,603,287 5 Single Family Residential $7,592,099 $7,462,979 $7,462,979 $7,462,979 $7,462,979 $7,462,979 6 Multi Family Residential $2,256,142 $2,217,771 $2,217,771 $2,217,771 $2,217,771 $2,217,771 7 Commercial $1,372,376 $1,349,035 $1,349,035 $1,349,035 $1,349,035 $1,349,035 8 Irrigation $2,618,027 $2,573,501 $2,573,501 $2,573,501 $2,573,501 $2,573,501 9 Non-Potable Irrigation $1,117,857 $1,228,543 $1,228,543 $1,228,543 $1,228,543 $1,228,543 10 11 Total Rate Revenue $21,550,566 $21,659,387 $21,659,387 $21,659,387 $21,659,387 $21,659,387

REVENUE SUMMARY
Table 2-7 shows the summary of projected revenues for the study period. City staff provided actual revenues for FY 2025 and budgeted revenues for FY 2026; all other years are projected based on the relevant assumptions or calculations. Total potable and recycled water rate revenues (Lines 1-3) are equal to total calculated rate revenues (Table 2-6, Line 11). The sum of potable water rate revenues (Lines 2 and 3) and recycled water rate revenues (Line 1) is equal to potable and recycled water rate revenues at current rates (Line 11). Other Revenue (Line 4) is not inflated for future years. Interest Earnings (Line 5) is calculated based on ending fund balances and an assumed 2.5% interest rate. A breakdown of revenues by potable and recycled water funds is available in the Appendix (Table 7-1).

Table 2-7: Revenue Summary
Line Revenues FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 1 Effluent Water Sales $1,117,857 $1,228,543 $1,228,543 $1,228,543 $1,228,543 $1,228,543 2 Metered Water Sales $13,838,644 $13,603,287 $13,603,287 $13,603,287 $13,603,287 $13,603,287 3 Fixed Water Service
Charge
$6,594,065 $6,827,557 $6,827,557 $6,827,557 $6,827,557 $6,827,557 4 Other Revenue $1,863,050 $2,055,340 $2,055,340 $2,055,340 $2,055,340 $2,055,340 5 Interest Earnings $811,420 $750,000 $523,452 $486,150 $452,052 $430,554 6 Total $24,225,036 $24,464,727 $24,238,179 $24,200,877 $24,166,779 $24,145,281

2.3 OPERATING EXPENSES

INFLATIONARY ASSUMPTIONS
WRE worked with City staff to determine the annual inflationary assumptions to apply to the City’s O&M expense budget. City staff provided actual O&M expenses for FY 2025, budgeted expenses for FY 2026, and additional expenses expected during the study period; all other years are projected based on the inflationary assumptions shown in Table 2-8.
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18 Table 2-8: Expense Inflationary Assumptions
Line Inflationary Assumptions FY 2027 FY 2028 FY 2029 FY 2030 1 General 3.0% 3.0% 3.0% 3.0%
2 Salaries 7.0% 7.0% 7.0% 7.0%
3 Benefits 10.0% 10.0% 10.0% 10.0%
4 Chemicals 8.0% 8.0% 8.0% 8.0%
5 Utilities 4.0% 4.0% 4.0% 4.0%
6 Capital 4.0% 4.0% 4.0% 4.0%
7 General (High) 5.0% 5.0% 5.0% 5.0%

POTABLE WATER SUPPLY COSTS
The City’s main source of potable supply is imported water from Metropolitan Water District of Orange County (MWDOC). The cost of purchasing water from MWDOC represents a significant portion, approximately 54%, of the City’s O&M expenses in FY 2025, and can vary depending on water demand each year and the projected fixed and variable rates of MWDOC water.

The annual imported water cost includes an annual fixed charge and variable charge per ccf of imported water.

MWDOC rates are set based on the calendar year4(CY) so costs are converted to FY basis for projection purposes.

4 One calendar year runs from January 1st – December 31st .
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19 Table 2-9 shows the calculated MWDOC water supply costs for the study period accounting for these factors.

The City provided the purchased water amount for both untreated and treated water for FY 2025 (Lines 1-8).

Since there is no demand growth projected for the study period, WRE assumes the same water purchases for FY 2026 through FY 2030.

City staff provided MWDOC fixed and variable charges for CY 2024 through CY 2026, adjusted for the fiscal year. Future years are assumed to be passed through to customers. Total MWDOC water costs for each year (Line 32) are calculated by multiplying total water purchases (Lines 1-8) by the corresponding variable charges (Lines 17-21), plus the annual fixed charges (Lines 11-14). These charges are determined by MWDOC on an annual basis.
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20 Table 2-9: Calculated Potable Water Supply Costs
Line Water Purchase Cost FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 1 MWDOC Purchase Water
2 Untreated Purchase (AF) 1,101 1,101 1,101 1,101 1,101 1,101 3 Jul - Dec 536 536 536 536 536 536
4 Jan - Jun 565 565 565 565 565 565
5 Treated Purchase (AF) 5,997 5,997 5,997 5,997 5,997 5,997 6 Jul - Dec 3,407 3,407 3,407 3,407 3,407 3,407
7 Jan - Jun 2,590 2,590 2,590 2,590 2,590 2,590
8 Total MWDOC Purchase
Water (AF) 7,098 7,098 7,098 7,098 7,098 7,098
9 10 MWDOC Rates
11 Readiness-to-Serve Charge $767,479 $877,002 $877,002 $877,002 $877,002 $877,002 12 Capacity Charge $223,453 $233,961 $233,961 $233,961 $233,961 $233,961 13 Retail Meter Charge $14.75 $15.25 $15.25 $15.25 $15.25 $15.25 14 Choice Services Charge $39,301 $35,346 $35,346 $35,346 $35,346 $35,346 15 16 Untreated Full Service
17 Jul - Dec $903 $912 $984 $984 $984 $984
18 Jan - Jun $912 $984 $984 $984 $984 $984
19 Treated Full Service
20 Jul - Dec $1,256 $1,395 $1,528 $1,528 $1,528 $1,528
21 Jan - Jun $1,395 $1,528 $1,528 $1,528 $1,528 $1,528
22 23 MWDOC Calculated Cost
24 Readiness-to-Serve Charge $767,479 $877,002 $877,002 $877,002 $877,002 $877,002 25 Capacity Charge $223,453 $233,961 $233,961 $233,961 $233,961 $233,961 26 Retail Meter Charge $239,068 $255,925 $255,925 $255,925 $255,925 $255,925 27 Choice Services Charge $39,301 $35,346 $35,346 $35,346 $35,346 $35,346 28 29 Untreated Cost $999,563 $1,045,094 $1,083,679 $1,083,679 $1,083,679 $1,083,679 30 Treated Cost $7,892,256 $8,710,298 $9,163,416 $9,163,416 $9,163,416 $9,163,416 31 32 Total MWDOC Cost $10,161,120 $11,157,627 $11,649,329 $11,649,329 $11,649,329 $11,649,329 33 Fixed Cost $1,230,001 $1,366,888 $1,366,888 $1,366,888 $1,366,888 $1,366,888 34 Choice Services Charge $39,301 $35,346 $35,346 $35,346 $35,346 $35,346 35 Variable Cost $8,891,818 $9,755,393 $10,247,095 $10,247,095 $10,247,095 $10,247,095

OPERATING EXPENSE SUMMARY
Table 2-10 shows the summary of O&M expenses for the study period. City staff provided actual expenses for FY 2025 and budgeted expenses for FY 2026; expenses for other years are projections. Purchased water expenses (Line 3) include MWDOC expenses from
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21 Table 2-9 (Line 32) plus additional water purchases from Trabuco Canyon Water District. The City’s Water Reclamation Plant provides treated wastewater to secondary standards as the supply source for Recycled Water. Costs for further treatment of the wastewater from secondary to tertiary level for distribution for irrigation purposes is funded by the Water Fund. All other expenses are inflated based on the assumptions in Table 2-8. Detailed operating expense projections by potable and recycled water funds are included in the Appendix (Table 7-2).

Table 2-10: Operating Expenses Summary
Line Expenses FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 1 Water Administration $1,758,510 $2,281,800 $2,384,188 $2,492,452 $2,607,008 $2,728,306 2 Water Production $2,313,400 $3,157,138 $3,300,973 $3,453,207 $3,614,443 $3,785,335 3 Purchased Water $10,895,590 $11,900,240 $12,299,150 $12,331,641 $12,365,757 $12,401,578 4 Transmission/Distribution $3,506,990 $4,680,630 $4,947,083 $5,231,758 $5,536,067 $5,861,543 5 Water Conservation $269,470 $502,970 $524,894 $548,043 $572,502 $598,364 6 Water Reclamation $1,349,520 $1,766,370 $1,868,588 $1,977,794 $2,094,522 $2,219,351 7 Total $20,093,480 $24,289,148 $25,324,876 $26,034,894 $26,790,299 $27,594,477

2.4 DEBT SERVICE
Table 2-11 shows the City’s existing annual debt service for the study period. The City has existing debt service payments on one outstanding loan totaling approximately $900k each year.

Table 2-11: Existing Debt Service
Line Debt Service FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 1 Recycled SRF Loan $900,602 $900,602 $900,602 $900,602 $900,602 $900,602

2.5 CAPITAL IMPROVEMENT PLAN

CAPITAL IMPROVEMENT PROJECTS
Table 2-12 and Table 2-13 show the City’s potable and recycled water planned CIP, respectively; project costs are inflated based on the Capital factor (Table 2-8, Line 6). The total 6-year CIP cost is $23.4 million for potable water and $449k for recycled water.

Table 2-12: Potable Water Capital Project Costs
Line Potable Capital Projects
(Inflated) FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 1 AC Pipe Replacement
Northwest 308 Zone $82,095 $4,705,277 $0 $0 $0 $0
2 Blanco Pump Station
Rehabilitation $0 $520,000 $0 $0 $0 $0
3 Calle Real Pump Station
Rehabilitation $4,372 $3,120,000 $0 $0 $0 $0
4 Calle Vallarta PRS $0 $364,000 $0 $0 $0 $0
5 Cathodic Protection
System Improvements $31,124 $208,035 $0 $0 $0 $0
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22 6
City-wide Copper Service
Replacements $0 $520,000 $0 $0 $0 $0
7 Costero Risco PRS
Rehabilitation $20,831 $694,887 $0 $0 $0 $0
8 Dead End Water System
Improvements $40,536 $9,843 $0 $0 $0 $0
9 El Levante PRS
Rehabilitation $10,266 $353,324 $0 $0 $0 $0
10 JRWSS Agency Projects5 $720,283 $1,179,641 $1,317,565 $1,765,732 $1,182,642 $849,456 11 Major Street Maintenance
Program $0 $0 $0 $0 $0 $0
12 Meter Replacements $96,303 $66,245 $108,160 $112,486 $134,534 $139,915 13 Pico Booster Pump Station
Pump Replacement $55,997 $0 $0 $0 $0 $0
14 Pico/Presidio DIP
Replacement (Albertsons) $847,086 $580,657 $0 $0 $0 $0
15 Pump Station & Reservoir
Pavement Rehab $87,000 $4,128 $0 $0 $0 $0
16 Reata Pump Station
Rehabilitation $370 $82,663 $0 $0 $0 $0
17 Reservoir 5A Replacement $29,219 $114,537 $0 $0 $0 $0 18 Reservoir No 4 Exterior
Coating $221,617 $0 $0 $0 $0 $0
19 Sodium Hypochlorite Tank
Replacement $51,578 ($37,823) $0 $0 $0 $0
20 Valve Replacement
Program $96,153 $138,483 $0 $0 $0 $0
21 Water Distribution Insert
Valve Program $0 $31,200 $0 $0 $0 $0
22 Water System Air-Vac
Replacement Program $0 $26,000 $0 $0 $0 $0
23 Water System
Rehabilitation $358,199 $251,473 $378,560 $393,702 $409,450 $425,829 24 Well Water Quality System
Improvement $27,022 $474,680 $0 $0 $0 $0
25 Total $2,780,051 $13,407,249 $1,804,285 $2,271,921 $1,726,626 $1,415,199 26 27 CIP Execution Rate 100% 100% 100% 100% 100% 100%
28 Executed Capital Projects $2,780,051 $13,407,249 $1,804,285 $2,271,921 $1,726,626 $1,415,199 Table 2-13: Recycled Water Capital Project Costs
Line Recycled Capital Projects
(Inflated) FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 1 Recycled Water Storage Bay
Rehab $0 $208,000 $0 $0 $0 $0
2 Recycled Water Alum Chem
System Replace $15,480 $225,557 $0 $0 $0 $0
3 Total $15,480 $433,557 $0 $0 $0 $0

5 JWRSS stands for Joint Regional Water Supply System
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23 4
5 CIP Execution Rate 100% 100% 100% 100% 100% 100%
6 Executed Capital Projects $15,480 $433,557 $0 $0 $0 $0

CAPITAL EXPENSE SUMMARY
Table 2-14 and Table 2-15 show the potable water and recycled water capital funding sources, respectively.

Debt funded CIP (Line 2) pertains to all CIP that is funded by any proposed debt issuances. All other project costs will be funded by grants (Line 1) or water rates and reserves (Line 3).

Table 2-14: Potable Water Capital Funding Summary
Line Potable Capital
Financing Plan FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 1 Grant Funded $66,250 $0 $0 $0 $0 $0
2 Debt Funded $0 $0 $0 $0 $0 $0
3 Rate Funded $2,713,801 $13,407,249 $1,804,285 $2,271,921 $1,726,626 $1,415,199 4 Total $2,780,051 $13,407,249 $1,804,285 $2,271,921 $1,726,626 $1,415,199 Table 2-15: Recycled Water Capital Funding Summary
Line Recycled Capital
Financing Plan FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 1 Grant Funded $0 $0 $0 $0 $0 $0
2 Debt Funded $0 $0 $0 $0 $0 $0
3 Rate Funded $15,480 $433,557 $0 $0 $0 $0
4 Total $15,480 $433,557 $0 $0 $0 $0

2.6 FINANCIAL POLICIES

RESERVE POLICY
The City’s reserve policy maintains cash on hand to meet short-term cash imbalances, execute CIP projects, and for emergencies. The City currently has an adopted reserve policy6that consists of an emergency reserve, which is recommended to protect funds during periods of economic downturn, other unanticipated expenses, or emergency expenses that could not be reasonable foreseen, with a target equal to 12% of annual operating expenses, a depreciation reserve target equal to three years of CIP, and a debt service reserve equal to one year of debt service. The reserve target for the study period ranges from approximately $9.4 to $21.8 million in the City’s reserve funds.

WRE proposes that the City modifies its reserve policy to the following to be more in line with industry standards:
 Operating Reserve: 25% of annual operating expenses to cover unexpected expenses or seasonal fluctuations
 Capital Projects Reserve: 5-year rolling average of annual CIP to fund unexpected capital expenses that may arise

6 The City’s current reserve policy is defined within the City’s 2024-25 & 2025-26 Biennial Budget under Fiscal Policy 117
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24  Emergency Reserve: $2 million, which is the cost of replacing a major asset in case of failure during an emergency
 Debt Service Reserve: one year of debt service per debt agreement

DEBT COVERAGE REQUIREMENT
The City’s debt coverage requirement is 110% of annual debt service. To meet coverage requirements, net operating revenues (revenues less operating expenses) must be 110% or more of annual debt service.

2.7 STATUS QUO FINANCIAL PLAN

STATUS QUO FINANCIAL PLAN SCENARIO
Table 2-16 shows the status quo financial plan scenario, which assumes no revenue adjustments and no proposed debt issuances. This scenario is used to evaluate the ability of the current potable and recycled water rates to meet the City’s financial targets and to determine the need for revenue adjustments.

Table 2-16: Status Quo Financial Plan Scenario
Line Fiscal Year Effective
Date
Revenue Adjustments
(Potable and Recycled)
1 FY 2026 2/1/2026 0.0%
2 FY 2027 1/1/2027 0.0%
3 FY 2028 1/1/2028 0.0%
4 FY 2029 1/1/2029 0.0%
5 FY 2030 1/1/2030 0.0%

STATUS QUO CASH FLOW PROJECTIONS
Table 2-17 and Table 2-18 show the cash flow projections for the status quo financial plan for potable water and recycled water funds, respectively. Revenues7(Lines 1-7) are from Table 2-7. Operating expenses (Lines 9- 15) are from Table 2-10. Net operating revenue (Line 17) is equal to the difference between total revenues (Line 7) and total expenses (Line 15). Debt service (Lines 19-22) is from Table 2-11. Rate funded CIP (Line 25) is calculated from total CIP (Table 2-14, Line 3, and Table 2-15, Line 3). The status quo scenario assumes no new debt; all CIP is expected to be rate or grant funded. Net cash flow (Line 28) is equal to the net operating revenue (Line 17) less debt service (Line 22) and rate funded CIP (Line 26). Grant proceeds, debt proceeds, grant funded CIP and debt funded CIP are not included in the cash flow projections.

The net operating revenue in this scenario is negative starting at the end of FY 2027 for potable and FY 2026 for recycled water funds, meaning that the City’s current revenues are not sufficient to fund its operating expenses. The net cash flow in the status quo scenario is negative for all years of the planning period, meaning that the City’s current revenues are not sufficient to fund its debt service and annual CIP.

7 Interest income (Line 6) is different in the status quo financial plan scenario because it is based on projected fund balances. The status quo scenario results in lower fund balances; therefore, the City has less interest income. Table 2-7 shows the interest income for the proposed financial plan scenario. 118
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25 Table 2-17: Projected Potable Cash Flows (Status Quo Financial Plan) Line Potable Cash Flow Projections FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 1 Revenues
2 Rate Revenues at Existing Rates $20,216,934 $20,207,428 $20,207,428 $20,207,428 $20,207,428 $20,207,428 3 Revenue Adjustments $0 $0 $0 $0 $0 $0
4 Miscellaneous Revenues $249,420 $282,000 $282,000 $282,000 $282,000 $282,000 5 All Other Revenues $1,411,740 $1,597,640 $1,597,640 $1,597,640 $1,597,640 $1,597,640 6 Interest Income $811,420 $750,000 $470,842 $359,849 $228,734 $85,555 7 Subtotal - Revenues $22,689,514 $22,837,068 $22,557,910 $22,446,917 $22,315,802 $22,172,624 8 9 Operating Expenses
10 Water Administration $1,758,510 $2,281,800 $2,384,188 $2,492,452 $2,607,008 $2,728,306 11 Water Production $2,313,400 $3,157,138 $3,300,973 $3,453,207 $3,614,443 $3,785,335 12 Purchased Water $10,895,590 $11,900,240 $12,299,150 $12,331,641 $12,365,757 $12,401,578 13 Transmission/Distribution $3,506,990 $4,680,630 $4,947,083 $5,231,758 $5,536,067 $5,861,543 14 Water Conservation $269,470 $502,970 $524,894 $548,043 $572,502 $598,364 15 Subtotal - Operating Expenses $18,743,960 $22,522,778 $23,456,288 $24,057,100 $24,695,777 $25,375,125 16 17 Net Revenue $3,945,554 $314,290 ($898,378) ($1,610,183) ($2,379,975) ($3,202,502) 18 19 Debt Service
20 Existing Debt $0 $0 $0 $0 $0 $0
21 Proposed Debt $0 $0 $0 $0 $0 $0
22 Subtotal - Debt Service $0 $0 $0 $0 $0 $0
23 24 Capital Projects
25 Rate Funded CIP $2,713,801 $13,407,249 $1,804,285 $2,271,921 $1,726,626 $1,415,199 26 Subtotal - Capital Projects $2,713,801 $13,407,249 $1,804,285 $2,271,921 $1,726,626 $1,415,199 27 28 Net Cash Flow $1,231,752 ($13,092,959) ($2,702,663) ($3,882,104) ($4,106,601) ($4,617,701) 119
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26 Table 2-18: Projected Recycled Cash Flows (Status Quo Financial Plan) Line Recycled Cash Flow Projections FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 1 Revenues
2 Rate Revenues at Existing Rates $1,333,632 $1,451,959 $1,451,959 $1,451,959 $1,451,959 $1,451,959 3 Revenue Adjustments $0 $0 $0 $0 $0 $0
4 SMWD RW Sale Revenue $0 $0 $0 $0 $0 $0
5 Other Governmental Revenues $125,080 $169,000 $169,000 $169,000 $169,000 $169,000 6 Subtotal - Revenues $1,458,712 $1,620,959 $1,620,959 $1,620,959 $1,620,959 $1,620,959 7 8 Operating Expenses
9 Water Reclamation $1,349,520 $1,766,370 $1,868,588 $1,977,794 $2,094,522 $2,219,351 10 MF/RO Additional Cost $0 $0 $0 $0 $0 $0
11 Subtotal - Operating Expenses $1,349,520 $1,766,370 $1,868,588 $1,977,794 $2,094,522 $2,219,351 12 13 Net Revenue $109,192 ($145,411) ($247,629) ($356,835) ($473,563) ($598,393) 14 15 Debt Service
16 Existing Debt $900,602 $900,602 $900,602 $900,602 $900,602 $900,602 17 MF/RO Debt $0 $0 $0 $0 $0 $0
18 Proposed Debt $0 $0 $0 $0 $0 $0
19 Subtotal - Debt Service $900,602 $900,602 $900,602 $900,602 $900,602 $900,602 20 21 Capital Projects
22 Rate Funded CIP $15,480 $433,557 $0 $0 $0 $0
23 Subtotal - Capital Projects $15,480 $433,557 $0 $0 $0 $0 24 25 Net Cash Flow ($806,890) ($1,479,571) ($1,148,231) ($1,257,437) ($1,374,166) ($1,498,995) 120
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27 STATUS QUO FUND BALANCE PROJECTIONS
Table 2-19 shows the fund balance projections for the status quo financial plan. Based on the sources (revenues) and uses (operating expenses, debt service, and capital expenditures) of funds, the City’s fund balances will be negative by the end of FY 2030. At the end of the study period, the City’s fund balances will be approximately -$494,000 in FY 2030, from a starting balance of approximately $34.3 million in FY 2025. This represents a net loss of approximately $34.8 million in six years.

Table 2-19: Projected Potable and Recycled Fund Balances (Status Quo Financial Plan) Line Fund Balance Projections FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 1 Combined Beginning Fund Balance $34,292,690 $34,717,552 $20,093,944 $16,243,049 $11,103,508 $5,622,741 2 3 Sources of Funds
4 Rate Revenues $21,550,566 $21,659,387 $21,659,387 $21,659,387 $21,659,387 $21,659,387 5 Revenue Adjustments $0 $0 $0 $0 $0 $0
6 Non-Rate Revenues $1,786,240 $2,048,640 $2,048,640 $2,048,640 $2,048,640 $2,048,640 7 Grant Proceeds $66,250 $0 $0 $0 $0 $0
8 Debt Proceeds $0 $0 $0 $0 $0 $0
9 Interest Income $811,420 $698,922 $470,842 $359,849 $228,734 $85,555 10 Subtotal - Sources of Funds $24,214,476 $24,406,949 $24,178,869 $24,067,876 $23,936,761 $23,793,582 11 12 Uses of Funds
13 Operating Expenses $20,093,480 $24,289,148 $25,324,876 $26,034,894 $26,790,299 $27,594,477 14 Debt Service $900,602 $900,602 $900,602 $900,602 $900,602 $900,602 15 Grant Funded CIP $66,250 $0 $0 $0 $0 $0
16 Debt Funded CIP $0 $0 $0 $0 $0 $0
17 Rate Funded CIP $2,729,281 $13,840,806 $1,804,285 $2,271,921 $1,726,626 $1,415,199 18 Subtotal - Uses of Funds $23,789,614 $39,030,557 $28,029,763 $29,207,417 $29,417,528 $29,910,279 19 20 Ending Balances $34,717,552 $20,093,944 $16,243,049 $11,103,508 $5,622,741 ($493,955) 121
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28 STATUS QUO FINANCIAL PERFORMANCE
The City’s financial performance is evaluated based on the reserve targets and debt coverage requirements, as shown in Table 2-20. Under the status quo financial plan, the City will not meet its debt coverage requirements from FY 2026 to FY 2030 and will not meet its existing reserves target in FY 2026, FY 2029 and FY 2030. The City will not meet the recommended reserves target starting in FY 2028.

Table 2-20: Forecasted Potable and Recycled Financial Performance (Status Quo Financial Plan) Line Financial Performance FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 1 Existing Reserve Targets
2 Emergency Reserve $2,411,218 $2,914,698 $3,038,985 $3,124,187 $3,214,836 $3,311,337 3 Depreciation Reserve $18,440,623 $17,917,012 $5,802,832 $5,413,746 $5,413,746 $5,413,746 4 Debt Service Reserve $900,602 $900,602 $900,602 $900,602 $900,602 $900,602 5 Combined Reserve Target $21,752,443 $21,732,313 $9,742,420 $9,438,536 $9,529,185 $9,625,686 6 Combined Reserves $34,717,552 $20,093,944 $16,243,049 $11,103,508 $5,622,741 ($493,955) 7 Meets Target? Yes No Yes Yes No No
8 9 Recommended Reserve Targets
10 Operating Reserve Target $5,023,370 $6,072,287 $6,331,219 $6,508,724 $6,697,575 $6,898,619 11 Capital Projects Reserve Target $4,487,834 $4,211,768 $4,211,768 $4,211,768 $4,211,768 $4,211,768 12 Emergency Reserve Target $2,000,000 $2,000,000 $2,000,000 $2,000,000 $2,000,000 $2,000,000 13 Debt Service Reserve $900,602 $900,602 $900,602 $900,602 $900,602 $900,602 14 Combined Reserve Target $12,411,806 $13,184,657 $13,443,589 $13,621,094 $13,809,945 $14,010,989 15 Combined Reserves $34,717,552 $20,093,944 $16,243,049 $11,103,508 $5,622,741 ($493,955) 16 Meets Target? Yes Yes Yes No No No
17 18 Debt Coverage Target
19 Required Debt Coverage 110% 110% 110% 110% 110% 110% 20 Calculated Debt Coverage 450% 19% -127% -218% -317% -422% 21 Meets Target? Yes No No No No No
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29 Figure 2-1 and Figure 2-2 show the comparison of revenues and the revenue requirement for the status quo scenario for potable and recycled water funds, respectively. The stacked bars represent the revenue requirements, or costs: light blue for O&M expenses, dark blue for debt service, and green for rate funded CIP.

The City will not be adding to its reserves (grey bars) in this scenario. The current revenue, shown as a solid line, is lower than the revenue requirements, meaning that revenues are insufficient to fund necessary costs.

Figure 2-1: Potable Revenue Requirements vs. Revenues (Status Quo Financial Plan) Figure 2-2: Recycled Revenue Requirements vs. Revenues (Status Quo Financial Plan) This may cause the City to be in technical default.
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30 Figure 2-3 shows the debt coverage projections in the status quo financial plan. The required debt coverage (dashed black line) is equal to 110%. The City is expected to not meet its debt coverage requirements starting in FY 2026, indicated by the alert coverage (red circles). This may cause the City to be in technical default.

Figure 2-3: Potable and Recycled Projected Debt Coverage (Status Quo Financial Plan) Figure 2-4 shows the fund balance projections in the status quo financial plan. The City’s ending balance (green bars) will not meet the existing reserve targets (solid line) beginning in FY 2029 and will not meet the recommended reserve targets (dashed line) beginning in FY 2028.

Figure 2-4: Potable and Recycled Projected Fund Balances (Status Quo Financial Plan) 124
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31 2.8 PROPOSED FINANCIAL PLAN

PROPOSED FINANCIAL PLAN SCENARIO
The proposed financial plan includes five years of revenue adjustments, shown in Table 2-21. These adjustments are needed to meet the City’s debt coverage requirements and were developed based on input from City staff and the City Council. The first year increase of 9.5% is due to the coverage ratio requirement.

Without this increase, the City may be in technical default since the net revenue is not 110% of the annual debt service.

Table 2-21: Proposed Water and Recycled Financial Plan Scenario Line Fiscal Year Effective
Date
Revenue Adjustments
(Potable and Recycled)
1 FY 2026 2/1/2026 9.5%
2 FY 2027 1/1/2027 3.5%
3 FY 2028 1/1/2028 3.5%
4 FY 2029 1/1/2029 3.5%
5 FY 2030 1/1/2030 3.5%

PROPOSED CASH FLOW PROJECTIONS
Table 2-22 and Table 2-23 show the cash flow projections for the proposed financial plan for potable water and recycled water funds, respectively. Revenues (Lines 1-7) are from Table 2-7. Revenue adjustments (Line 3) are from Table 2-21. Operating expenses (Lines 9-15) are from Table 2-10. Net operating revenue (Line 17 and Line 13) is equal to the difference between total revenues (Line 7 and Line 6) and total expenses (Line 15 and Line 11). Debt service (Lines 19-22 and Lines 15-19) is from Table 2-11. Rate funded CIP (Line 25 and Line 23) is calculated from total CIP (Table 2-14, Line 3, and Table 2-15, Line 3). The status quo scenario assumes no new debt; all CIP is expected to be rate or grant funded. Net cash flow (Line 28 and Line 25) is equal to the net operating revenue (Line 17 and Line 13) less debt service (Line 22 Line 19) and rate funded CIP (Line 26 and Line 23). Grant proceeds, debt proceeds, grant funded CIP and debt funded CIP are not included in the cash flow projections.
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32 Table 2-22: Projected Potable Cash Flows (Proposed Financial Plan) Line Potable Cash Flow Projections FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 1 Revenues
2 Rate Revenues at Existing Rates $20,216,934 $20,207,428 $20,207,428 $20,207,428 $20,207,428 $20,207,428 3 Revenue Adjustments $0 $799,877 $2,306,931 $3,094,933 $3,910,516 $4,754,644 4 Miscellaneous Revenues $249,420 $282,000 $282,000 $282,000 $282,000 $282,000 5 All Other Revenues $1,411,740 $1,597,640 $1,597,640 $1,597,640 $1,597,640 $1,597,640 6 Interest Income $811,420 $750,000 $523,452 $486,150 $452,052 $430,554 7 Subtotal - Revenues $22,689,514 $23,636,945 $24,917,451 $25,668,151 $26,449,636 $27,272,266 8 9 Operating Expenses
10 Water Administration $1,758,510 $2,281,800 $2,384,188 $2,492,452 $2,607,008 $2,728,306 11 Water Production $2,313,400 $3,157,138 $3,300,973 $3,453,207 $3,614,443 $3,785,335 12 Purchased Water $10,895,590 $11,900,240 $12,299,150 $12,331,641 $12,365,757 $12,401,578 13 Transmission/Distribution $3,506,990 $4,680,630 $4,947,083 $5,231,758 $5,536,067 $5,861,543 14 Water Conservation $269,470 $502,970 $524,894 $548,043 $572,502 $598,364 15 Subtotal - Operating Expenses $18,743,960 $22,522,778 $23,456,288 $24,057,100 $24,695,777 $25,375,125 16 17 Net Revenue $3,945,554 $1,114,167 $1,461,163 $1,611,050 $1,753,859 $1,897,140 18 19 Debt Service
20 Existing Debt $0 $0 $0 $0 $0 $0
21 Proposed Debt $0 $0 $0 $0 $0 $0
22 Subtotal - Debt Service $0 $0 $0 $0 $0 $0
23 24 Capital Projects
25 Rate Funded CIP $2,713,801 $13,407,249 $1,804,285 $2,271,921 $1,726,626 $1,415,199 26 Subtotal - Capital Projects $2,713,801 $13,407,249 $1,804,285 $2,271,921 $1,726,626 $1,415,199 27 28 Net Cash Flow $1,231,752 ($12,293,082) ($343,122) ($660,870) $27,233 $481,941 126
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33 Table 2-23: Projected Recycled Cash Flows (Proposed Financial Plan) Line Recycled Cash Flow Projections FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 1 Revenues
2 Rate Revenues at Existing Rates $1,333,632 $1,451,959 $1,451,959 $1,451,959 $1,451,959 $1,451,959 3 Revenue Adjustments $0 $57,473 $165,759 $222,379 $280,981 $341,634 4 SMWD RW Sale Revenue $0 $0 $0 $0 $0 $0
5 Other Governmental Revenues $125,080 $169,000 $169,000 $169,000 $169,000 $169,000 6 Subtotal - Revenues $1,458,712 $1,678,432 $1,786,718 $1,843,338 $1,901,940 $1,962,593 7 8 Operating Expenses
9 Water Reclamation $1,349,520 $1,766,370 $1,868,588 $1,977,794 $2,094,522 $2,219,351 10 MF/RO Additional Cost $0 $0 $0 $0 $0 $0
11 Subtotal - Operating Expenses $1,349,520 $1,766,370 $1,868,588 $1,977,794 $2,094,522 $2,219,351 12 13 Net Revenue $109,192 ($87,938) ($81,870) ($134,455) ($192,582) ($256,758) 14 15 Debt Service
16 Existing Debt $900,602 $900,602 $900,602 $900,602 $900,602 $900,602 17 MF/RO Debt $0 $0 $0 $0 $0 $0
18 Proposed Debt $0 $0 $0 $0 $0 $0
19 Subtotal - Debt Service $900,602 $900,602 $900,602 $900,602 $900,602 $900,602 20 21 Capital Projects
22 Rate Funded CIP $15,480 $433,557 $0 $0 $0 $0
23 Subtotal - Capital Projects $15,480 $433,557 $0 $0 $0 $0 24 25 Net Cash Flow ($806,890) ($1,422,097) ($982,472) ($1,035,058) ($1,093,184) ($1,157,361) 127
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34 PROPOSED FUND BALANCE PROJECTIONS
Table 2-24 shows the fund balance projections for the proposed financial plan. Based on the sources (revenues, revenue adjustments) and uses (operating expenses, debt service, and capital expenditures) of funds, the City’s fund balances will be approximately $16.2 million at the end of the study.

Table 2-24: Projected Potable and Recycled Fund Balances (Proposed Financial Plan) Line Fund Balance Projections FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 1 Combined Beginning Fund Balance $34,292,690 $34,717,552 $20,962,012 $19,636,417 $17,940,489 $16,874,537 2 3 Sources of Funds
4 Rate Revenues $21,550,566 $21,659,387 $21,659,387 $21,659,387 $21,659,387 $21,659,387 5 Revenue Adjustments $0 $857,351 $2,472,690 $3,317,312 $4,191,497 $5,096,278 6 Non-Rate Revenues $1,786,240 $2,048,640 $2,048,640 $2,048,640 $2,048,640 $2,048,640 7 Grant Proceeds $66,250 $0 $0 $0 $0 $0
8 Debt Proceeds $0 $0 $0 $0 $0 $0
9 Interest Income $811,420 $709,639 $523,452 $486,150 $452,052 $430,554 10 Subtotal - Sources of Funds $24,214,476 $25,275,017 $26,704,169 $27,511,489 $28,351,576 $29,234,859 11 12 Uses of Funds
13 Operating Expenses $20,093,480 $24,289,148 $25,324,876 $26,034,894 $26,790,299 $27,594,477 14 Debt Service $900,602 $900,602 $900,602 $900,602 $900,602 $900,602 15 Grant Funded CIP $66,250 $0 $0 $0 $0 $0
16 Debt Funded CIP $0 $0 $0 $0 $0 $0
17 Rate Funded CIP $2,729,281 $13,840,806 $1,804,285 $2,271,921 $1,726,626 $1,415,199 18 Subtotal - Uses of Funds $23,789,614 $39,030,557 $28,029,763 $29,207,417 $29,417,528 $29,910,279 19 20 Ending Balances $34,717,552 $20,962,012 $19,636,417 $17,940,489 $16,874,537 $16,199,117

PROPOSED FINANCIAL PERFORMANCE
Table 2-25 shows the forecasted financial performance for the proposed financial plan. Under this plan, the City will meet its reserve targets and debt coverage requirements in all years of the study.
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35 Table 2-25: Forecasted Potable and Recycled Financial Performance (Proposed Financial Plan) Line Financial Performance FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 1 Existing Reserve Targets
2 Emergency Reserve $2,411,218 $2,914,698 $3,038,985 $3,124,187 $3,214,836 $3,311,337 3 Depreciation Reserve $18,440,623 $17,917,012 $5,802,832 $5,413,746 $5,413,746 $5,413,746 4 Debt Service Reserve $900,602 $900,602 $900,602 $900,602 $900,602 $900,602 5 Combined Reserve Target $21,752,443 $21,732,313 $9,742,420 $9,438,536 $9,529,185 $9,625,686 6 Combined Reserves $34,717,552 $20,962,012 $19,636,417 $17,940,489 $16,874,537 $16,199,117 7 Meets Target? Yes No Yes Yes Yes Yes
8 9 Recommended Reserve Targets
10 Operating Reserve Target $5,023,370 $6,072,287 $6,331,219 $6,508,724 $6,697,575 $6,898,619 11 Capital Projects Reserve Target $4,487,834 $4,211,768 $4,211,768 $4,211,768 $4,211,768 $4,211,768 12 Emergency Reserve Target $2,000,000 $2,000,000 $2,000,000 $2,000,000 $2,000,000 $2,000,000 13 Debt Service Reserve $900,602 $900,602 $900,602 $900,602 $900,602 $900,602 14 Combined Reserve Target $12,411,806 $13,184,657 $13,443,589 $13,621,094 $13,809,945 $14,010,989 15 Combined Reserves $34,717,552 $20,962,012 $19,636,417 $17,940,489 $16,874,537 $16,199,117 16 Meets Target? Yes Yes Yes Yes Yes Yes
17 18 Debt Coverage Target
19 Required Debt Coverage 110% 110% 110% 110% 110% 110% 20 Calculated Debt Coverage 450% 114% 153% 164% 173% 182% 21 Meets Target? Yes Yes Yes Yes Yes Yes
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36 Figure 2-5 shows the comparison of revenues and the revenue requirement for the proposed scenario for the potable water fund. The stacked bars represent the revenue requirements, or costs: light blue for O&M expenses, dark blue for debt service, and green for rate funded CIP. The City will be adding to its reserves (grey bars) starting in FY 2030 in this scenario. The current revenue, shown as a solid line, is lower than the revenue requirements. The proposed revenue, shown as a dotted line, will equal the revenue requirements by FY 2029, meaning that the City’s revenues are able to sufficiently fund its expenses by FY 2029.

Figure 2-5: Potable Revenue Requirements vs. Revenues (Proposed Financial Plan) 130
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37 Figure 2-6 shows the comparison of revenues and the revenue requirement for the proposed scenario for the recycled water fund. In this scenario, recycled water revenues are insufficient to fund its expenses in all years of the planning period.
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38 Figure 2-6: Recycled Revenue Requirements vs. Revenues (Proposed Financial Plan) Figure 2-7 shows the debt coverage projections in the proposed financial plan. The required debt coverage (dashed black line) is equal to 110%. The City is expected to meet its debt coverage requirements for all years of this scenario.

Figure 2-7: Potable and Recycled Projected Debt Coverage (Proposed Financial Plan) Figure 2-8 shows the fund balance projections in the proposed financial plan. The City’s ending balance (green bars) will meet the recommended reserve targets (dashed line) in all years of this scenario and will meet the existing reserve targets (solid line) in all years except FY 2026 of this scenario. 132
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39 Figure 2-8: Potable and Recycled Projected Fund Balances (Proposed Financial Plan) 133
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40 3. POTABLE WATER COST-OF-SERVICE

3.1 COST-OF-SERVICE METHODOLOGY
A cost-of-service analysis was conducted to allocate the proposed FY 2025 rate revenue requirement to customers in proportion to use of and burden on the City’s potable water system. The overall goal of the costof-service analysis is to develop “unit costs,” which provide the basis from which proposed rates are directly calculated from. Note that although the study period spans five years, the cost-of-service analysis is limited to a single representative year referred to as the “test year.” The test year in this study is FY 2025.

The cost-of-service analysis is “revenue neutral,” meaning that the resulting cost-of-service based rates collect the same amount of revenue as the City expects to collect in FY 2025. The revenue neutral unit costs determine revenue neutral rates, which are then adjusted based on the proposed financial plan increases to arrive at the proposed potable water rates for five years. All values presented in this section pertain to FY 2025 and are revenue neutral unless stated otherwise.

The key steps in conducting a water cost-of-service analysis are outlined below:
 Revenue Requirement Determination: The total rate revenue requirement for the test year is determined based on the results of the proposed financial plan and divided into primary subcomponents (operating, capital, etc.).  Cost Functionalization: Operating and capital costs are evaluated and assigned to “functional categories” in the water system (e.g., customer service, supply, distribution, etc.). This provides a proportional breakdown of system costs by functional category.  Revenue Requirement Allocation to Cost Causation Components: Functionalized costs are allocated to “cost causation components” (e.g., water supply, base delivery, max day, etc.), which is used to attribute customers’ use of the system to the costs incurred by the City.  Unit Cost Development: The rate revenue requirement allocation for each individual cost causation component is divided by the appropriate units of service to establish unit costs for the test year. Unit costs provide the basis from which proposed rates are calculated.

3.2 REVENUE REQUIREMENT
The total rate revenue requirement for the test year, FY 2025, is based on the financial plan projections (Table 2-22) and is allocated between the Operating, Capital, and Revenue Offset components, as shown in Table 3-1.

The Operating revenue requirement consists of operating expenses (Line 2; from Table 2-22, Line 15) and interest income (Line 10; from Table 2-22, Line 6). The Capital revenue requirement includes debt service (Line 3; from Table 2-22, Line 22), rate funded CIP (Line 4; from Table 2-22, Line 26), and adjustments for cash from reserves (Line 14; from Table 2-22, Line 28). The Revenue Offset revenue requirement reduces the overall revenue requirement by the miscellaneous non-rate revenues (Line 8; from Table 2-22, Line 4), and other nonrate revenues (Line 9; from Table 2-22, Line 5) . The total revenue requirement (Line 18) is equal to the amount of rate revenue collected in FY 2025 (Table 2-22, Line 2).

Table 3-1: FY 2025 Potable Revenue Requirement
Line FY 2025 Revenue Requirement Operating Capital Rev. Offset Total 134
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41 1 Revenue Requirements
2 Operating Expenses $18,743,960 $18,743,960
3 Debt Service $0 $0
4 Rate Funded CIP $2,713,801 $2,713,801
5 Subtotal - Revenue Requirements $18,743,960 $2,713,801 $0 $21,457,761 6 7 Revenue Offsets
8 Miscellaneous Revenues ($249,420) ($249,420)
9 All Other Revenues ($1,411,740) ($1,411,740)
10 Interest Income ($811,420) ($811,420)
11 Subtotal - Revenue Offsets ($811,420) $0 ($1,661,160) ($2,472,580) 12 13 Adjustments
14 Cash to/(from) Reserves $1,231,752 $1,231,752
15 Revenue Adjustment Annualization $0
16 Subtotal - Adjustments $0 $1,231,752 $0 $1,231,752
17 18 Total - Revenue Requirement $17,932,540 $3,945,554 ($1,661,160) $20,216,934

3.3 COST FUNCTIONALIZATION

FUNCTIONAL CATEGORY DEFINITIONS
After determining the revenue requirement, the next step in the cost-of-service analysis is to allocate the City’s costs into various functional categories. These categories represent the main functions of the City’s water system and include:
 Meter Maintenance: costs of meter maintenance and replacement  Customer Service: costs related to customer service and billing  Water Supply: costs related to acquiring water from MWDOC  Pumping: costs relating to pumping water to higher elevations  Storage: costs related to water storage facilities (such as reservoirs and tanks)  Transmission and Distribution (T&D): costs related to the transmission and distribution of water through the City’s water system
 Conservation: costs related to the City’s water conservation program  General: costs that are not directly attributable to any other functional category  Revenue Offset: miscellaneous revenues that are not generated by specific customer classes or for payment of services provided by the City; these revenues can be used to offset rates at the City’s discretion under Proposition 218 requirements

OPERATING COST FUNCTIONALIZATION
WRE worked closely with City staff to evaluate and allocate the operating expenses for FY 2025 (Table 2-10) to the most closely associated functional categories within the water system, as shown in Table 3-2. The detailed allocation of the operating costs to the functional categories is included in the Appendix (Table 7-3).
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42 Table 3-2: Operating Costs by System Functions
Line Cost Function Operating
Expenses Percent of Total
1 Meter Maintenance $0 0.0%
2 Customer Service $1,230,957 6.6%
3 Water Supply $10,895,590 58.1%
4 Pumping $1,156,700 6.2%
5 Storage $1,156,700 6.2%
6 Transmission & Distribution $3,506,990 18.7%
7 Conservation $269,470 1.4%
8 General $527,553 2.8%
9 Revenue Offset $0 0.0%
10 Total $18,743,960 100.0%

CAPITAL ASSET FUNCTIONALIZATION
WRE worked with City staff to evaluate and allocate the City’s current capital expenses to the most closely associated functional categories within the water system, as shown in Table 3-3. The detailed allocation of the current capital expenses to the functional categories is included in the Appendix (Table 7-4).

Table 3-3: Capital Expenses by System Functions
Line Cost Function Capital Expenses (CIP) Percent of
Total
1 Meter Maintenance $657,643 2.8%
2 Customer Service $0 0.0%
3 Water Supply $501,702 2.1%
4 Pumping $6,654,452 28.4%
5 Storage $470,257 2.0%
6 Transmission & Distribution $15,070,900 64.4%
7 Treatment $0 0.0%
8 Conservation $0 0.0%
9 General $50,379 0.2%
10 Revenue Offset $0 0.0%
11 Total $23,405,332 100.0%

3.4 COST CAUSATION COMPONENTS

COST COMPONENT DEFINITIONS
While the functional categories represent the costs of system functions, cost causation components represent the reasons for why and how those costs are incurred within the system (thus, cost causation). Cost causation components will be referred to as cost components in this report. The next step of the cost-of-service analysis is to allocate the Operating, Capital, and Revenue Offsets in the functional categories between the cost components, most of which directly correspond to a single functional category.

The cost components in this study include the following:
 Meter: directly corresponds to the Meter Maintenance functional category 136
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43  Customer: directly corresponds to the Customer Service functional category  Water Supply: directly corresponds to the Water Supply functional category  Delivery: costs associated with delivering and distributing water to customers  Conservation: directly corresponds to the Conservation functional category  Revenue Offset: directly corresponds to the Revenue Offset functional category  General: directly corresponds to the General functional category

SYSTEM-WIDE MAXIMUM CAPACITY FACTORS
System-wide maximum capacity factors for the City’s water system, shown in Table 3-4, are used to allocate costs associated with the Pumping, Storage, and Transmission & Distribution (T&D) functional categories to the Base, Max Day, and Max Hour cost components. Maximum capacity factors represent the ratio of maximum to average water demand over the course of one year for the entire system. This provides a basis to identify costs incurred to provide water service during average demand conditions and to provide additional capacity during maximum demand conditions.

City staff provided the average day, maximum day, and maximum hour demand capacity factors, which are normalized based on average day demand (meaning that the average day demand is always equal to

1.00).

The percentage allocations to the Base, Max Day, and Max Hour cost components based on the average day, maximum day, and maximum demand capacity factors are calculated as follows:
• Average day demand is allocated entirely to Base
• Max day demand is allocated proportionately to Base8 and Max Day9 • Max hour demand is allocated proportionately to Base10, Max Day11, and Max Hour12 • Average of max day/ hour is the average of max day demand and max hour demand Table 3-4: System-Wide Capacity
Line System-Wide Capacity Factor Capacity
Factor Base Max Day Max Hour Total
1 Average Day Demand 1.00 100% 0% 0% 100%
2 Max Day Demand 1.80 56% 44% 0% 100%
3 Max Hour Demand 2.70 37% 30% 33% 100%
4 Average of Max Day/Hour 46% 37% 17% 100%

8 1.00/1.80 = 56.0%
9 (1.80-1.00)/1.80 = 44.0%
10 1.00/2.70 = 37.0%
11 (1.80-1.00)/2.70 = 30.0%
12 (2.70-1.80)/2.70 = 33.0%
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44 COST COMPONENT ALLOCATION FACTORS
Table 3-5 shows the factors used to allocate the functionalized costs to the cost components. For the cost components that directly correlate to a functional category (Meter, Customer, Water Supply, Conservation, Revenue Offset, and General), the functionalized costs are allocated entirely to the matching cost component. Pumping and Storage are sized based on maximum day demand and are allocated to Base and Extra Capacity cost components (Table 3-4, Line 2). T&D is sized based on the average of max day/ hour demand and is allocated to the Base and Extra Capacity cost components where Extra Capacity is equal to the sum of max day and max hour cost components (Table 3-4, Line 4).

Table 3-5: System Function Allocation to Cost Components Line Cost Function Meter Customer Water
Supply Base Extra Capacity Conservation Rev. Offset General Total 1 Meter Maintenance 100% 0% 0% 0% 0% 0% 0% 0% 100%
2 Customer Service 0% 100% 0% 0% 0% 0% 0% 0% 100%
3 Water Supply 0% 0% 100% 0% 0% 0% 0% 0% 100%
4 Pumping 0% 0% 0% 56% 44% 0% 0% 0% 100%
5 Storage 0% 0% 0% 56% 44% 0% 0% 0% 100%
6 Transmission &
Distribution 0% 0% 0% 46% 54% 0% 0% 0% 100%
7 Conservation 0% 0% 0% 0% 0% 100% 0% 0% 100%
8 General 0% 0% 0% 0% 0% 0% 0% 100% 100%
9 Revenue Offset 0% 0% 0% 0% 0% 0% 100% 0% 100%

OPERATING COST COMPONENT ALLOCATION
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45 Table 3-6 shows the operating cost allocation by cost component. The functionalized operating expenses from Table 3-2 are allocated based on the cost component allocation factors in Table 3-5. The operating allocation (Line 11) is derived from the total operating expenses by cost component (Line 10) and represents the proportion of the Operating revenue requirement that will be allocated to each cost component. 139
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46 Table 3-6: Operating Allocation by Cost Component
Line Operating Expenses Meter Customer Water
Supply Base Extra Capacity
ConservationRev.

Offset General Total
1 Meter Maintenance $0 $0 $0 $0 $0 $0 $0 $0 $0
2 Customer Service $0 $1,230,957 $0 $0 $0 $0 $0 $0 $1,230,957 3 Water Supply $0 $0 $10,895,590 $0 $0 $0 $0 $0 $10,895,590 4 Pumping $0 $0 $0 $642,611 $514,089 $0 $0 $0 $1,156,700 5 Storage $0 $0 $0 $642,611 $514,089 $0 $0 $0 $1,156,700 6 Transmission &
Distribution $0 $0 $0 $1,623,606 $1,883,384 $0 $0 $0 $3,506,990 7 Conservation $0 $0 $0 $0 $0 $269,470 $0 $0 $269,470
8 General $0 $0 $0 $0 $0 $0 $0 $527,553 $527,553
9 Revenue Offset $0 $0 $0 $0 $0 $0 $0 $0 $0
10 Total - Operating $0 $1,230,957 $10,895,590 $2,908,829 $2,911,561 $269,470 $0 $527,553 $18,743,960 11 Operating Cost
Allocation 0.0% 6.6% 58.1% 15.5% 15.5% 1.4% 0.0% 2.8% 100.0%

CAPITAL COST COMPONENT ALLOCATION
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47 Table 3-7 shows the capital cost allocation by cost component. The functionalized capital expenses from Table 3-3 are allocated based on the cost component allocation factors in Table 3-5. The capital allocation (Line 11) is derived from the total capital expenses by cost component (Line 10) and represents the proportion of the Capital revenue requirement that will be allocated to each cost component. 141
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48 Table 3-7: Capital Allocation by Cost Component
Line Capital Expenses (CIP) Meter Customer Water
Supply Base Extra Capacity
ConservationRev.

Offset General Total
1 Meter Maintenance $657,643 $0 $0 $0 $0 $0 $0 $0 $657,643 2 Customer Service $0 $0 $0 $0 $0 $0 $0 $0 $0
3 Water Supply $0 $0 $501,702 $0 $0 $0 $0 $0 $501,702
4 Pumping $0 $0 $0 $3,696,918 $2,957,534 $0 $0 $0 $6,654,452 5 Storage $0 $0 $0 $261,254 $209,003 $0 $0 $0 $470,257
6 Transmission &
Distribution $0 $0 $0 $6,977,269 $8,093,632 $0 $0 $0 $15,070,900 7 Conservation $0 $0 $0 $0 $0 $0 $0 $0 $0
8 General $0 $0 $0 $0 $0 $0 $0 $50,379 $50,379
9 Revenue Offset $0 $0 $0 $0 $0 $0 $0 $0 $0
10 Total - Capital $657,643 $0 $501,702 $10,935,440 $11,260,169 $0 $0 $50,379 $23,405,332 11 Capital Cost Allocation 2.8% 0.0% 2.1% 46.7% 48.1% 0.0% 0.0% 0.2% 100.0% 142
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49 3.5 EQUIVALENT METER UNITS
The costs for certain system functions are based on the capacity requirements related to that function. For example, meter-related costs are allocated based on meter capacity, which is defined by the safe maximum operating capacity of each meter size. This section describes and defines capacity requirements and allocations relating to water meters, private fire lines, customer water usage, and fire protection.

Costs related to meter capacity increase based on meter size. Therefore, equivalent meter units are calculated to provide a basis from which to allocate costs in proportion to meter size. Equivalent meter calculations are shown in Table 3-8.

Equivalent meters are calculated based on meter capacity ratios, which represent the safe operating capacity of a water meter relative to the base meter size. For this study, the base meter size is a 1” meter, which is the most common meter size in the City’s system. Capacity in gallons per minute (gpm) is derived from the AWWA M1 Manual. The meter ratio for a 1 1/2” meter is 3.33, which means that the capacity of a 1 1/2” meter is 3.33 times that of a 1” meter.

The number of meters in each meter size is from
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50 Table 2-3. Equivalent meters are calculated by multiplying the meter counts by the meter ratio in each size.

The number of bills are equal to the number of meters multiplied by 12.

Table 3-8: Equivalent Meter Units
Line Meter Size Safe Operating
Capacity (gpm) Meter Ratio Number of Meters
Equivalent
Meters
Number of
Bills
1 Up to 1"13 30 1.00 15,081 15,081 180,971
2 1.5" 100 3.33 315 1,050 3,779
3 2" 160 5.33 762 4,066 9,149
4 3" 350 11.67 21 247 254
5 4" 630 21.00 18 387 221
6 6" 1,600 53.33 10 540 122
7 Total 16,208 21,371 194,496

13 The default meter size is 1” and has been upsized from 3/4” to reflect fire flow requirements. Meter ratio is based on a 3/4” flow rate.
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51 3.6 ALLOCATION TO COST COMPONENTS

PRELIMINARY COST-OF-SERVICE ALLOCATION AND GENERAL REALLOCATION Table 3-9 shows the preliminary cost-of-service allocation prior to any adjustments and the adjusted cost-of-service allocations after the General cost reallocation. The Operating costs (Line 1) are equal to the total Operating revenue requirements (Table 3-1, Line 18) allocated to each cost component based on the Operating allocation (Table 3-6 , Line 11). The Capital costs (Line 2) are equal to the total Capital revenue requirements (Table 3-1, Line 18) allocated to each cost component based on the Capital allocation ( 145
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52 Table 3-7, Line 11). The Revenue Offsets (Line 3) are equal to the total Revenue Offset requirements (Table 3-1, Line 18). Note that the total cost-ofservice (Line 4) is equal to the total rate revenue requirement for FY 2025 (Table 3-1, Line 18).

The next step is to reallocate General costs (Line 5) based on the proportion of costs in each cost component (except General and Revenue Offset, which is restricted to specific revenues only) in the preliminary allocation. The total revenue requirement (Line 6) stays the same after the General cost reallocation.

The final step is to reallocate the Extra Capacity cost component to the Meter cost component to maintain the current fixed revenue recovery. The Extra Capacity cost represents the fixed cost of the system that relates to providing extra capacity for customers. For example, the size of the distribution system is dependent on the total capacity of the customer demands.

Table 3-9: Cost-of-Service Allocation by Cost Component (General and Delivery) Line Revenue
Requirement Meter Customer Water Supply Base Extra Capacity Conservation Rev. Offset General Total 1 Operating Costs $0 $1,177,669 $10,423,923 $2,782,906 $2,785,521 $257,805 $0 $504,715 $17,932,540 2 Capital Costs $110,862 $0 $84,574 $1,843,442 $1,898,183 $0 $0 $8,493 $3,945,554 3 Revenue Offsets ($1,661,160) ($1,661,160)
4 Total - COS (Initial) $110,862 $1,177,669 $10,508,498 $4,626,348 $4,683,704 $257,805 ($1,661,160) $513,208 $20,216,934 5 General Cost
Allocation $2,663 $28,289 $252,426 $111,130 $112,508 $6,193 ($513,208) $0 6 Total - COS (General) $113,525 $1,205,958 $10,760,923 $4,737,478 $4,796,211 $263,997 ($1,661,160) $0 $20,216,934 7 Reallocation to Meter
Charge $4,796,211 ($4,796,211) $0
8 Total - COS (Final) $4,909,736 $1,205,958 $10,760,923 $4,737,478 $0 $263,997 ($1,661,160) $0 $20,216,934 146
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53 FINAL COST-OF-SERVICE ALLOCATION
Table 3-10 shows the final cost-of-service allocation based on the adjustments for General and Extra Capacity from the prior report tables. The Meter and Customer components add up to approximately 30% of the total costs. The Delivery cost component is the sum of the Base and Extra Capacity components in Table 3-9.

Table 3-10: Cost-of-Service Allocation by Cost Component (Final) Line Cost Component Final Allocation
1 Meter $4,909,736
2 Customer $1,205,958
3 Water Supply $10,760,923
4 Delivery $4,737,478
5 Conservation $263,997
6 Rev. Offset ($1,661,160)
7 Total $20,216,934

3.7 UNIT COST CALCULATION

UNITS OF SERVICE DEFINITIONS
The appropriate units of service are then established for each cost component based on cost causation, which is shown in Table 3-11. Cost components to be recovered by the fixed charges are assigned units of service based on the number of equivalent meters (Table 3-8) and customers (sum of meter counts from Table 3-8).

Cost components to be recovered by the consumption charges are assigned units based on annual usage in ccf.

Table 3-11: Units of Service Definitions
Line Cost Component Units of Service Definition Units of Service Units
1 Meter Equivalent meters x 12 mo. 256,452 equiv. meter 2 Customer Meter count x 12 mo. 194,496 bills
3 Water Supply Annual usage in ccf 2,657,159 ccf
4 Delivery Annual usage in ccf 2,657,159 ccf
5 Conservation Annual usage in ccf 2,657,159 ccf
6 Rev. Offset Annual usage in ccf 2,657,159 ccf

UNIT COST BY COST COMPONENT
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54 Table 3-12 shows the calculation of unit costs by each cost component. The final cost-of-service allocation (Table 3-10) is divided by the units of service (Table 3-11) for each cost component to derive the unit cost.

These unit costs will determine the cost-of-service by customer class. 148
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55 Table 3-12: Unit Cost by Cost Component
Line Cost Component Final
Allocation
Units of
Service Unit Cost Units
1 Meter $4,909,736 256,452 $19.14 equiv. meter
2 Customer $1,205,958 194,496 $6.20 bills
3 Water Supply $10,760,923 2,657,159 $4.05 ccf
4 Delivery $4,737,478 2,657,159 $1.78 ccf
5 Conservation $263,997 2,657,159 $0.10 ccf
6 Rev. Offset ($1,661,160) 2,657,159 ($0.63) ccf
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56 4. POTABLE WATER RATES

4.1 RATE DESIGN METHODOLOGY
A five-year proposed water rate schedule was developed based on the results of the proposed financial plan and cost-of-service analysis. The key steps in developing the proposed rate schedule are outlined below:
 Rate Structure Evaluation: The existing rate structure is evaluated, and any proposed changes are identified. Proposed rate structure changes are typically intended to address specific policy objectives or to improve legal defensibility.
 Test Year Rate Development: Rates are calculated for the proposed rate structure for the cost-ofservice test year (FY 2025). Rate calculations directly incorporate the unit costs developed in the costof-service analysis. The test year rates are revenue neutral, then are increased based on the proposed financial plan revenue adjustments. Although total rate revenues in the first year of adjustments (FY 2026) are designed to increase by the proposed revenue adjustment percentage (9.5% in FY 2026), the proposed percentage increase to each rate/charge varies due to the updated cost-of-service allocations.
 Five-Year Rate Schedule Development: Proposed rates for the full five-year period are calculated by increasing the cost-of-service rates by the proposed annual revenue adjustment percentages from the proposed financial plan.

4.2 PROPOSED CHANGES TO RATE STRUCTURE
The main objective of the rate study was to conduct a comprehensive cost-of-service analysis while maintaining as much of the current water rate structure as possible to minimize customer impacts. The City’s current rate structure includes monthly fixed meter charges based on meter sizes and variable charges based on customer class and units of water in ccf. The consumption rates have two components: the water supply charge and the City distribution charge. The water supply charge is the same for all potable water customers.

After examining the existing rate methodology, given the City’s water supply profile, WRE recommends the City implement a uniform consumption rate for all customer classes to be more consistent with cost-of-service principles. Additionally, WRE recommends recovering MWDOC fixed costs in the City’s monthly fixed charges, thus increasing financial and rate stability for the City and allowing for more accurate passthrough of MWD costs.

4.3 PROPOSED MONTHLY FIXED CHARGES

MWDOC FIXED SUPPLY COST
Table 4-1 shows the calculation of MWDOC fixed charge unit cost. MWDOC fixed costs are billed to the City regardless of imported water purchases. The total MWDOC fixed charge is equal to the MWDOC fixed charge in FY 2025 (Line 1; from
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57 Table 2-9, Line 33). Based on input from City staff and City Council, the City will collect 100% of MWDOC fixed costs (Line 2) on the monthly fixed charges. This will enhance revenue stability for the City and reduce the City’s financial risk related to MWDOC water supply in case of decreased future water consumption. This change will also increase fixed revenue recovery to approximately 36% and ensure for more accurate passthrough of MWDOC costs.

The total MWDOC fixed charge cost (Line 3) is calculated by multiplying the MWDOC fixed cost in FY 2025 (Line 1) by the percentage of MWDOC fixed costs to be recovered by fixed charges (Line 2). The unit cost (Line 5) is calculated by dividing the total cost (Line 3) by the units of service for meters (Line 4; from Table 3-11, Line 1).

Table 4-1: MWDOC Fixed Charge Unit Cost
Line MWDOC Fixed Charge Value
1 MWDOC Total Fixed Charge $1,230,001
2 Reallocated to Meter Charges 100%
3 Reallocated MWDOC Fixed Charge $1,230,001
4 Equivalent meters 256,452
5 Unit cost ($/equiv. meter) $4.80

REVENUE NEUTRAL RATES
Table 4-2 shows the revenue neutral monthly fixed charge calculations. The Meter and Customer unit costs are from
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58 Table 3-12 (Lines 1-2). Table 4-3 shows the MWDOC Fixed Charge calculation. The MWDOC unit cost is from Table 4-1 (Line 5). Meter and MWDOC Fixed Charge unit costs are multiplied by the meter capacity ratio; Customer costs do not vary based on meter size and thus are the same for all meter sizes. The revenue neutral rate represents the cost-of-service analysis for FY 2025 but does not include the proposed revenue adjustments for the first year of rates in FY 2026.

Table 4-2: Revenue Neutral Monthly Fixed Water Service Charge – City Portion Line Meter Size Meter Ratio Meter
Charge
Customer
Charge
Revenue Neutral
Rate
1 Up to 1" 1.00 $19.14 $6.20 $25.35
2 1.5" 3.33 $63.82 $6.20 $70.02
3 2" 5.33 $102.11 $6.20 $108.31
4 3" 11.67 $223.36 $6.20 $229.56
5 4" 21.00 $402.04 $6.20 $408.24
6 6" 53.33 $1,021.06 $6.20 $1,027.26
Table 4-3: Revenue Neutral Monthly Fixed Water Service Charge – MWDOC Line Meter Size Meter Ratio MWDOC Fixed
Charge
Revenue
Neutral Rate
1 Up to 1” 1.00 $4.80 $4.80
2 1.5” 3.33 $15.99 $15.99
3 2” 5.33 $25.58 $25.58
4 3” 11.67 $55.96 $55.96
5 4” 21.00 $100.72 $100.72
6 6” 53.33 $255.80 $255.80

PROPOSED RATES WITH ADJUSTMENT
Table 4-4 shows the proposed City monthly fixed charges for FY 2026 based on the revenue neutral rate (Table 4-2) adjusted by the proposed revenue adjustment of 9.5% in the first year (Table 2-21) and rounded up to the nearest cent.

Table 4-4: Proposed Monthly Fixed Water Service Charge (City Portion) After Adjustment Line Meter Size Revenue
Neutral Rate
Proposed FY 2026
Rate (w/ 9.5% Adj.)
Current
Rate
Difference
($)
Difference
(%)
1 Up to 1" $25.35 $27.76 $27.41 $0.35 1.3%
2 1.5" $70.02 $76.67 $67.72 $8.95 13.2%
3 2" $108.31 $118.60 $102.09 $16.51 16.2%
4 3" $229.56 $251.37 $211.23 $40.14 19.0%
5 4" $408.24 $447.03 $372.08 $74.95 20.1%
6 6" $1,027.26 $1,124.86 $756.96 $367.90 48.6%
Table 4-5 shows the proposed MWDOC monthly fixed charges based on the fixed charges from Table 2-9, Line 33 divided by the equivalent meters from Table 4-1, Line 4.

Table 4-5: Proposed Monthly Fixed Water Service Charge (MWDOC) for FY 2026 152
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59 Line Meter Size Revenue
Neutral Rate
Proposed FY 2026
Rate
Current
Rate
1 Up to 1" $4.80 $5.34 $0.00
2 1.5" $15.99 $17.80 $0.00
3 2" $25.58 $28.48 $0.00
4 3" $55.96 $62.30 $0.00
5 4" $100.72 $112.14 $0.00
6 6" $255.80 $284.80 $0.00

4.4 PROPOSED VARIABLE CHARGES
The variable charge calculations include the MWDOC Variable Supply, Delivery, Conservation, and Revenue Offset components, which are detailed in this section.

MWDOC VARIABLE SUPPLY COST
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60 Table 4-6 shows the calculation of MWDOC variable supply unit cost. The total MWDOC water supply cost (Line 1) is equal to the cost-of-service allocation to the Water Supply cost components ( 154
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61 Table 3-12, Line 3). The portion of cost recovered by fixed charges (Line 2) is from Table 4-1 (Line 3). The net MWDOC variable cost (Line 3) is calculated by subtracting the MWDOC cost recovered by fixed charges (Line 2) from the total MWDOC water supply cost (Line 1). The unit cost (Line 5) is calculated by dividing the net MWDOC variable cost (Line 3) by units of service for water supply (Line 4; from 155
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62 Table 3-12, Line 3). The MWDOC variable supply unit cost is charged to all customer classes equally. 156
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63 Table 4-6: MWDOC Variable Supply Unit Cost
Line FY 2025
1 Total Water Supply Cost $10,760,923
2 Less Reallocated to Fixed Meter Charges ($1,230,001)
3 Net Water Supply Cost $9,530,923
4 Total Consumption (ccf) 2,657,159
5 Water Supply Unit Cost ($/ccf) $3.59

DELIVERY COST
The Delivery unit cost of $1.78 per ccf is from
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64 Table 3-12 (Line 4) and is charged to all customer classes equally.

CONSERVATION COST
The Conservation unit cost of $0.10 per ccf is from
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65 Table 3-12 (Line 5) and is charged to all customer classes equally.

REVENUE OFFSET
The Revenue Offset unit cost is a credit of of $0.63 per ccf is from 159
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66 Table 3-12 (Line 6) and is offsetting rates for all customer classes equally.

REVENUE NEUTRAL RATES
Table 4-7 shows the revenue neutral variable charges for all classes, based on the MWDOC Variable Supply unit cost from
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67 Table 4-6, Delivery, Conservation, and Revenue Offset unit costs. The revenue neutral rate represents the costof-service analysis for FY 2025 but does not include the proposed revenue adjustments for the first year of rates in FY 2026.

Table 4-7: Revenue Neutral Consumption Rates
Line Customer Class Annual Use
(ccf)
Water
Supply Delivery Conservation Revenue Offset
Revenue
Neutral Rate
1 Single Family Residential 1,485,734 $3.59 $1.78 $0.10 ($0.63) $4.84 2 Multi Family Residential 458,565 $3.59 $1.78 $0.10 ($0.63) $4.84 3 Commercial 277,248 $3.59 $1.78 $0.10 ($0.63) $4.84
4 Irrigation 435,612 $3.59 $1.78 $0.10 ($0.63) $4.84

PROPOSED RATES WITH ADJUSTMENT
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68 Table 4-8 shows the proposed variable charges for FY 2026 based on the revenue neutral rate (Table 4-7) adjusted by the proposed revenue adjustment of 9.5% in the first year (Table 2-21) and rounded up to the nearest cent.
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69 Table 4-8: Proposed Consumption Rates after Adjustment Line Customer Class Revenue
Neutral Rate
Proposed FY 2026
Rate (w/ 9.5% Adj.)
Current
Rate
Difference
($)
Difference
(%)
1 Single Family Residential $4.84 $5.31 $5.11 $0.20 3.9% 2 Multi Family Residential $4.84 $5.31 $4.92 $0.39 7.9% 3 Commercial $4.84 $5.31 $4.95 $0.36 7.3%
4 Irrigation $4.84 $5.31 $6.01 ($0.70) -11.6%

4.5 PROPOSED WATER RATE SCHEDULE

PROPOSED FIVE-YEAR REVENUE ADJUSTMENTS
Table 4-9 shows the revenue adjustments for the five-year period and their effective date based on the proposed financial plan (Table 2-21).

Table 4-9: Proposed Revenue Adjustments
Line Fiscal Year Effective
Date
Revenue Adjustments
(Potable and Recycled)
1 FY 2026 2/1/2026 9.5%
2 FY 2027 1/1/2027 3.5%
3 FY 2028 1/1/2028 3.5%
4 FY 2029 1/1/2029 3.5%
5 FY 2030 1/1/2030 3.5%

PROPOSED FIVE-YEAR POTABLE WATER RATE SCHEDULE
The proposed five-year potable water rate schedules are based on the proposed rate methodology changes, the updated cost-of-service analysis, and the proposed revenue adjustments (Table 4-9) in the five-year period. The proposed rates for FY 2027, FY 2028, FY 2029 and FY 2030 were calculated by increasing the FY 2026 rates by the revenue adjustments, rounded up to the nearest cent. Table 4-10, 163
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70 Table 4-11, and Table 4-12 show the proposed monthly fixed charges, including both City and MWDOC components, respectively, and consumption charges. The City will pass-through any MWDOC rate increases starting in 1/1/2027.

Table 4-10: Proposed Monthly Fixed Water Service Charge – City Portion Line Monthly Fixed Water Service Charge -
City Portion (Potable and Recycled)
Effective
2/1/2026
Effective
1/1/2027
Effective
1/1/2028
Effective
1/1/2029
Effective
1/1/2030
1 Up to 1" $27.76 $28.74 $29.75 $30.80 $31.88
2 1.5" $76.67 $79.36 $82.14 $85.02 $88.00
3 2" $118.60 $122.76 $127.06 $131.51 $136.12
4 3" $251.37 $260.17 $269.28 $278.71 $288.47
5 4" $447.03 $462.68 $478.88 $495.65 $513.00
6 6" $1,124.86 $1,164.24 $1,204.99 $1,247.17 $1,290.83
164
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71 Table 4-11: Proposed Monthly Fixed Water Service Charge - MWDOC Line Monthly Fixed Water Service
Charge - MWDOC (Potable )
Effective
2/1/2026
Effective
1/1/2027
Effective
1/1/2028
Effective
1/1/2029
Effective
1/1/2030
1 Up to 1" $5.34
Pass-Through Going Forward
2 1.5" $17.80
3 2" $28.48
4 3" $62.30
5 4" $112.14
6 6" $284.80
Table 4-12: Proposed Consumption Rates
Line Consumption Rates ($/ ccf) Effective
2/1/2026
Effective
1/1/2027
Effective
1/1/2028
Effective
1/1/2029
Effective
1/1/2030
1 Single Family Residential $5.31 $5.50 $5.70 $5.90 $6.11 2 Multi Family Residential $5.31 $5.50 $5.70 $5.90 $6.11 3 Commercial $5.31 $5.50 $5.70 $5.90 $6.11
4 Irrigation $5.31 $5.50 $5.70 $5.90 $6.11
Table 4-13 shows the formula to calculate future MWDOC cost pass-through, starting in 1/1/2027. This calculation mirrors that of Table 4-6. Line 1 shows the projected total water supply cost in FY 2026 (from Table 2-10, Line 3). Line 2 shows the projected fixed meter charges to be collected in FY 2026 (from Table 2-9, Line 33). Line 3 is the net water supply cost. Line 4 is the projected potable water consumption in FY 2026 (from Table 2-5, Lines 1-4). The unit cost (Line 5) is calculated by dividing the net MWDOC variable cost (Line 3) by units of service for water supply (Line 4).

Table 4-13: Water Supply Unit Cost in FY 2026
Line FY 2026
1 Total Water Supply Cost $11,900,240
2 Less Reallocated to Fixed Meter Charges ($1,366,888)
3 Net Water Supply Cost $10,533,352
4 Total Consumption (ccf) 2,611,968
5 Water Supply Unit Cost ($/ccf) $4.03
Table 4-14 shows the assumed water supply unit cost for the planning period. Any future increases in MWDOC cost will be pass-through to the customers using the same calculation to derive the $4.03 per ccf unit cost.

Table 4-14: Proposed Consumption Rates – with Water Supply Unit Cost Line Consumption Rates ($/ ccf) Effective
2/1/2026
Effective
1/1/2027
Effective
1/1/2028
Effective
1/1/2029
Effective
1/1/2030
1 All Customer Classes $5.31 $5.50 $5.70 $5.90 $6.11
2 Water Supply Unit Cost $4.03 $4.03 $4.03 $4.03 $4.03
3 City Delivery Cost $1.28 $1.47 $1.67 $1.87 $2.08
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72 4.6 CUSTOMER IMPACTS

SINGLE FAMILY CUSTOMER IMPACTS
Table 4-15 shows the proposed impacts for a Single Family customer with up to 1” meter (the most common meter size within this class) at various levels of monthly usage. For the average Residential customer that uses 10 ccf of water every month, the monthly impact will be $7.69 or 9.8%, which reflects the impact of the costof-service analysis, and the 9.5% revenue adjustment applied to FY 2026 rates.

Table 4-15: Proposed Single Family Customer Impacts
Line Single Family Customer
Impacts ccf Current Bill Proposed Bill Difference ($) Difference (%) 1 Low Usage 5 $52.96 $59.65 $6.69 12.6%
2 Average Usage 10 $78.51 $86.20 $7.69 9.8%
3 High Usage 20 $129.61 $139.30 $9.69 7.5%
4 Very High Usage 50 $282.91 $298.60 $15.69 5.5%
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73 5. RECYCLED WATER COST-OF-SERVICE AND RATES

5.1 COST-OF-SERVICE METHODOLOGY
The cost-of-service methodology used for the recycled water system is the same as for the potable water system. The cost-of-service analysis is “revenue neutral,” meaning that the resulting cost-of-service based rates collect the same amount of revenue as the City expects to collect in FY 2025. The revenue neutral unit costs determine revenue neutral rates, which are then adjusted based on the proposed financial plan increases to arrive at the proposed recycled water rates for five years. All values presented in this section pertain to FY 2025 and are revenue neutral unless stated otherwise.

5.2 REVENUE REQUIREMENT
The total rate revenue requirement for the test year, FY 2025, is based on the financial plan projections (Table 2-23) and is allocated between the Operating, Capital, and Revenue Offset components, as shown in Table 5-1.

The Operating revenue requirement consists of operating expenses (Line 2; from Table 2-23, Line 11). The Capital revenue requirement includes debt service (Line 3; from Table 2-23, Line 19), rate funded CIP(Line 4; from Table 2-23, Line 23), and adjustments for cash from reserves (Line 14; from Table 2-23, Line 25). The Revenue Offset revenue requirement reduces the overall revenue requirement by the miscellaneous non-rate revenues (Lines 8-10; from Table 2-23, Lines 4-5). The total revenue requirement (Line 18) is equal to the amount of rate revenue collected in FY 2025 (Table 2-23, Line 2).

Table 5-1: FY 2025 Recycled Revenue Requirement
Line FY 2025 Revenue Requirement Operating Capital Rev. Offset Total 1 Revenue Requirements
2 Operating Expenses $1,349,520 $1,349,520
3 Debt Service $900,602 $900,602
4 Rate Funded CIP $15,480 $15,480
5 Subtotal - Revenue Requirements $1,349,520 $916,082 $0 $2,265,602 6 7 Revenue Offsets
8 Miscellaneous Revenues ($125,080) ($125,080)
9 All Other Revenues $0 $0
10 Interest Income $0 $0
11 Subtotal - Revenue Offsets $0 $0 ($125,080) $0
12 13 Adjustments
14 Cash to/(from) Reserves ($806,890) ($806,890)
15 Revenue Adjustment Annualization $0
16 Subtotal - Adjustments $0 ($806,890) $0 ($806,890)
17 18 Total - Revenue Requirement $1,349,520 $109,192 ($125,080) $1,333,632 167
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74 5.3 PROPOSED MONTHLY FIXED SERVICE CHARGE
Currently, the City charges the same monthly fixed charges to both potable and recycled water customers. To avoid disruptions to customers’ rates WRE proposed that the City retains the current rate policy. Thus, recycled water customers will be charged the same monthly fixed charges as potable water customers.

However, recycled water customers will not be charged the MWDOC monthly fixed charges because they do not use MWDOC water.

Table 5-2 shows the revenue neutral monthly fixed water service charge. The revenue neutral rate represents the cost-of-service analysis for FY 2025 but does not include the proposed revenue adjustments for the first year of rates in FY 2026.

Table 5-2: Revenue Neutral Monthly Fixed Water Service Charge Line Meter Size Meter Ratio Meter
Charge
Customer
Charge
Revenue
Neutral Rate
1 Up to 1" 1.00 $19.14 $6.20 $25.35
2 1.5" 3.33 $63.82 $6.20 $70.02
3 2" 5.33 $102.11 $6.20 $108.31
4 3" 11.67 $223.36 $6.20 $229.56
5 4" 21.00 $402.04 $6.20 $408.24
6 6" 53.33 $1,021.06 $6.20 $1,027.26
Table 5-3 shows the proposed monthly fixed charges for FY 2026 based on the revenue neutral rate (Table 5-2) adjusted by the proposed revenue adjustment of 9.5% in the first year (Table 2-21) and rounded up to the nearest cent.

Table 5-3: Revenue Neutral Monthly Fixed Water Service Charge After Adjustment Line Meter Size Revenue
Neutral Rate
Proposed FY 2026
Rate (w/ 9.5% Adj.)
Current
Rate
Difference
($)
Difference
(%)
1 Up to 1" $25.35 $27.76 $27.41 $0.35 1.3%
2 1.5" $70.02 $76.67 $67.72 $8.95 13.2%
3 2" $108.31 $118.60 $102.09 $16.51 16.2%
4 3" $229.56 $251.37 $211.23 $40.14 19.0%
5 4" $408.24 $447.03 $372.08 $74.95 20.1%
6 6" $1,027.26 $1,124.86 $756.96 $367.90 48.6%

5.4 PROPOSED CONSUMPTION RATE
The recycled water consumption rate is calculated by dividing the net revenue requirement, after subtracting the fixed monthly charge revenue from the total revenue requirement by the total recycled water usage.

Table 5-4 shows the total recycled water fixed revenue calculation. The annual fixed charge revenue is calculated by multiplying the revenue neutral rate (from Table 5-2) by the number of meters (from 168
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75 Table 2-3) times 12 months.

Table 5-4: Annual Fixed Service Charge Revenue Calculation Line Meter Size Revenue
Neutral Rate
Number of
Meters
Annual Fixed Charge
Revenue
1 Up to 1" $25.35 1 $280
2 1.5" $70.02 2 $1,547
3 2" $108.31 115 $149,594
4 3" $229.56 7 $20,292
5 4" $408.24 1 $4,511
6 6" $1,027.26 6 $68,105
7 Total $244,330
Table 5-5 shows the revenue neutral recycled water consumption rate calculation. First, the fixed charge revenue (Line 3; from Table 5-4, Line 7) is subtracted from the total revenue requirement (Line 1; from Table 5-1, Line 18) to arrive at the net revenue requirement (Line 4). The net revenue requirement (Line 4) is divided by the total recycled water usage (Line 5, from Table 2-5) to arrive at the recycled water consumption rate per ccf. The revenue neutral rate represents the cost-of-service analysis for FY 2025 but does not include the proposed revenue adjustments for the first year of rates in FY 2026.

Table 5-5: Revenue Neutral Consumption Rate
Line Revenue Neutral Consumption Rate FY 2025
1 Total Revenue Requirement $1,333,632
2 3 Less: Fixed Charge Revenue ($244,330)
4 Net Revenue Requirement $1,089,303
5 6 Total RW Usage (ccf) 339,774
7 8 RW Consumption Rate ($/ccf) $3.21
Table 5-6 shows the proposed variable charges for FY 2026 based on the revenue neutral rate (Table 5-5) adjusted by the proposed revenue adjustment of 9.5% in the first year (Table 2-21) and rounded up to the nearest cent.

Table 5-6: Proposed Consumption Rate after Adjustment
Line Class Revenue
Neutral Rate
Proposed FY 2026
Rate (w/ 9.5% Adj.)
Current
Rate
Difference
($)
Difference
(%)
1 Recycled Water $3.21 $3.52 $3.29 $0.23 7.0%

5.5 PROPOSED RECYCLED WATER RATE SCHEDULE

PROPOSED FIVE-YEAR REVENUE ADJUSTMENTS
169
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76 Table 5-7 shows the revenue adjustments for the five-year period and their effective date based on the proposed financial plan (Table 2-21).
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77 Table 5-7: Proposed Recycled Water Revenue Adjustments Line Fiscal Year Effective
Date
Revenue Adjustments
(Potable and Recycled)
1 FY 2026 2/1/2026 9.5%
2 FY 2027 1/1/2027 3.5%
3 FY 2028 1/1/2028 3.5%
4 FY 2029 1/1/2029 3.5%
5 FY 2030 1/1/2030 3.5%

PROPOSED FIVE-YEAR RECYCLED WATER RATE SCHEDULE
The proposed five-year recycled water rate schedules are based on the proposed rate methodology changes, the updated cost-of-service analysis, and the proposed revenue adjustments ( 171
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78 Table 5-7) in the five-year period. The proposed rates for FY 2027, FY 2028, FY 2029 and FY 2030 were calculated by increasing the FY 2026 rates by the revenue adjustments, rounded up to the nearest cent. Table 5-8 and Table 5-9 show the proposed recycled water monthly fixed charges and consumption rate, respectively.

Table 5-8: Proposed Recycled Water Monthly Fixed Water Service Charge Line Monthly Fixed Water
Service Charge
Effective
2/1/2026
Effective
1/1/2027
Effective
1/1/2028
Effective
1/1/2029
Effective
1/1/2030
1 Up to 1" $27.76 $28.74 $29.75 $30.80 $31.88
2 1.5" $76.67 $79.36 $82.14 $85.02 $88.00
3 2" $118.60 $122.76 $127.06 $131.51 $136.12
4 3" $251.37 $260.17 $269.28 $278.71 $288.47
5 4" $447.03 $462.68 $478.88 $495.65 $513.00
6 6" $1,124.86 $1,164.24 $1,204.99 $1,247.17 $1,290.83
Table 5-9: Proposed Recycled Water Consumption Rate
Line RW Consumption Rate
($/ccf)
Effective
2/1/2026
Effective
1/1/2027
Effective
1/1/2028
Effective
1/1/2029
Effective
1/1/2030
1 All Customers $3.52 $3.65 $3.78 $3.92 $4.06
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79 6. DEMAND MANAGEMENT RATES

6.1 RATE DESIGN METHODOLOGY
In addition to the base water rates developed in the prior sections of the report, demand management rates were developed to be implemented during water shortage emergencies. The key steps in determining the demand management rates are as follows:
 Evaluate Financial Risks: The City faces revenue risks when government-mandated usage cutbacks reduce the City’s variable charge revenues.
 Determine Cost Impact: The cost impact is dependent upon the water shortage condition. Constrained water supply results in higher costs to purchase water for the City to meet its customer demand.

Demand management emergencies result in lost revenues from variable charges when customers use less water.
 Calculate Demand Management Rates: The resulting cost impact is then used to calculate demand management rates, to be implemented during shortage emergencies and which vary based on stages (from the City’s 2020 Urban Water Management Plan (UWMP)).

6.2 RISKS RELATED TO WATER SHORTAGES

WATER SHORTAGE EMERGENCIES
The City’s UMWP includes six stages of water shortages, which all require a different level of usage reduction from the City’s customers. When customers reduce their usage in each stage, the City’s rate revenues from variable charges are directly impacted. When water shortage emergencies occur, especially during more severe stages, the amount of lost revenue can significantly impact the City’s ability to meet its operating, capital, and reserve requirements.

Demand management rates are a tool for the City to effectively respond to water shortage emergencies while maintaining financial sufficiency and operational reliability. Demand management rates are designed to recover the costs of water shortages, which include loss of variable revenues and cost differences (savings) from purchased water supply changes.

6.3 PROPOSED DEMAND MANAGEMENT RATES

USAGE REDUCTIONS BY WATER SHORTAGE STAGE
Table 6-1 shows the projected water usage reductions in each water shortage stage by customer class (Line 5).

The total usage reduction (Line 1) for each stage is based on the City’s UWMP. The total usage reduction in each stage is applied to the total usage for each customer class equally. For example, in Stage 1, Single Family, Multi-Family, Commercial/ Industrial, and Potable Irrigation are expected to reduce their class usage by 10%. 173
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80 Table 6-1: Water Usage Reductions
Line Demand Management Rates Normal Level 1 Level 2 Level 3 Level 4 Level 5 Level 6 1 Usage Reduction 0% up to 10% up to 20% up to 30% up to 40% up to 50% >50% 2 3 Total Water Consumption (ccf) 2,611,968 2,611,968 2,611,968 2,611,968 2,611,968 2,611,968 2,611,968 4 Required Reduction 0% 10% 20% 30% 40% 50% 60%
5 Reduction in Water Consumption (ccf) 0 261,197 522,394 783,590 1,044,787 1,305,984 1,567,181

VARIABLE REVENUE LOSS
Table 6-2 shows the estimated variable revenue loss by stage based on the proposed variable charges for FY 2026 (from Table 4-12). The proposed FY 2026 variable charge (Line 2) is multiplied by the estimated reduction in usage in each stage (Table 6-1, Line 5) to determine the reduction in rate revenue by stage (Line 3).

Table 6-2: Variable Revenue Loss by Stage
Line Variable Revenue Loss Normal Level 1 Level 2 Level 3 Level 4 Level 5 Level 6 1 Reduction in Water Consumption (ccf) 0 261,197 522,394 783,590 1,044,787 1,305,984 1,567,181 2 Proposed Water Rate FY 2026 $5.31 $5.31 $5.31 $5.31 $5.31 $5.31 $5.31 3 Reduction in Rate Revenue $0 $1,386,955 $2,773,910 $4,160,865 $5,547,819 $6,934,774 $8,321,729

WATER SUPPLY COST SAVINGS
Table 6-3 shows the calculation of water supply costs for each stage. The water supply cost differences in this section do not assume an increase to the MWDOC variable cost of water.

The total reduction in consumption in each stage (Line 1) is from Table 6-1 (Line 5). The MWDOC variable charge (Line 2; from 174
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81 Table 2-9, Lines 20-21) is the FY 2026 rate. The MWDOC variable cost savings (Line 4) is calculated by multiplying the reduction in consumption (Line 1) by the MWDOC variable charge (Line 3). The City will see cost savings in each stage since MWDOC represents 100% of the City’s water supply.

Note that the water supply cost differences do not assume any change to MWDOC variable costs; demand management rates are designed to recover the costs of each stage, with all other costs being equal.

Table 6-3: Water Supply Cost Differences by Stage
Line Water Purchase Cost Savings Normal Level 1 Level 2 Level 3 Level 4 Level 5 Level 6 1 Reduction in Water Consumption (ccf) 0 261,197 522,394 783,590 1,044,787 1,305,984 1,567,181 2 MWDOC Variable Rate ($/AF) $1,528 $1,528 $1,528 $1,528 $1,528 $1,528 $1,528 3 MWDOC Variable Rate ($/ccf) $3.51 $3.51 $3.51 $3.51 $3.51 $3.51 $3.51 4 Total Savings $0 ($916,227) ($1,832,455) ($2,748,682) ($3,664,910) ($4,581,137) ($5,497,365)

DEMAND MANAGEMENT COSTS
Table 6-4 shows the water shortage costs by stage, which includes the variable revenue loss (Table 6-2) and supply cost savings (Table 6-3). The total cost of each water shortage stage (Line 3) represents the costs that the proposed demand management rates are designed to recover. Revised water consumption (Line 5) is from Table 6-1 (difference between Line 3 and Line 5). The unit cost for each stage (Line 7) is calculated by dividing the total demand management costs (Line 3) by the potable water usage (Line 5) in each stage.

Table 6-4: Demand Management Costs by Stage
Line Demand Management Costs Normal Level 1 Level 2 Level 3 Level 4 Level 5 Level 6 1 Reduction in Rate Revenue $0 $1,386,955 $2,773,910 $4,160,865 $5,547,819 $6,934,774 $8,321,729 2 Savings in Water Purchase Cost $0 ($916,227) ($1,832,455) ($2,748,682) ($3,664,910) ($4,581,137) ($5,497,365) 3 Total Costs $0 $470,727 $941,455 $1,412,182 $1,882,910 $2,353,637 $2,824,365 4 5 Revised Water Consumption (ccf) 2,611,968 2,350,771 2,089,574 1,828,377 1,567,181 1,305,984 1,044,787 6 7 Demand Management Rate ($/ccf) $0.00 $0.21 $0.46 $0.78 $1.21 $1.81 $2.71 175
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82 6.4 PROPOSED DEMAND MANAGEMENT RATE SCHEDULE

PROPOSED FIVE-YEAR REVENUE ADJUSTMENTS
Table 6-5 shows the revenue adjustments for the five-year period and their effective date based on the proposed financial plan (Table 2-21).

Table 6-5: Proposed Revenue Adjustments
Line Fiscal Year Effective
Date
Revenue Adjustments
(Potable and Recycled)
1 FY 2026 2/1/2026 9.5%
2 FY 2027 1/1/2027 3.5%
3 FY 2028 1/1/2028 3.5%
4 FY 2029 1/1/2029 3.5%
5 FY 2030 1/1/2030 3.5%

PROPOSED FIVE-YEAR WATER SHORTAGE RATE SCHEDULE
Table 6-6 shows the proposed demand management rates in each stage for the five-year period, which are incremental charges in addition to the variable charges shown in Table 4-12. The proposed rates for FY 2027, FY 2028, FY 2029 and FY 2030 were calculated by increasing the FY 2026 rates by the revenue adjustments, rounded up to the nearest cent.

Table 6-6: Proposed Demand Management Rates
Line Shortage Level Usage
Reduction
Effective
2/1/2026
Effective
1/1/2027
Effective
1/1/2028
Effective
1/1/2029
Effective
1/1/2030
1 Level 1 up to 10% $0.21 $0.22 $0.23 $0.24 $0.25
2 Level 2 up to 20% $0.46 $0.48 $0.50 $0.52 $0.54
3 Level 3 up to 30% $0.78 $0.81 $0.84 $0.87 $0.91
4 Level 4 up to 40% $1.21 $1.26 $1.31 $1.36 $1.41
5 Level 5 up to 50% $1.81 $1.88 $1.95 $2.02 $2.10
6 Level 6 >50% $2.71 $2.81 $2.91 $3.02 $3.13
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83 7. APPENDICES

7.1 FINANCIAL PLAN APPENDICES
Table 7-1: Revenues (Detail)
Line Revenues (Detailed) Number FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 1 Nonbusiness Licenses & Permits 32300
2 Water Acreage Fees 32375 $10,560 $6,700 $6,700 $6,700 $6,700 $6,700 3 4 State Grants 33400
5 Other State Grant 33490 $66,250 $0 $0 $0 $0 $0
6 7 Other Governmental Revenues 33900
8 M.W.D. Reclaimed Water Credit 33910 $125,080 $169,000 $169,000 $169,000 $169,000 $169,000 9 SMWD - Recycled Water System 33921 $0 $0 $0 $0 $0 $0
10 11 General Govt Service Charges 34100
12 Late Payment Charges 34180 $0 $200,000 $200,000 $200,000 $200,000 $200,000 13 14 Health Service Charges 34400
15 Effluent Water Sales 34430 $1,117,857 $1,228,543 $1,228,543 $1,228,543 $1,228,543 $1,228,543 16 17 Water Service Charges 34800
18 Metered Water Sales 34810 $13,838,644 $13,603,287 $13,603,287 $13,603,287 $13,603,287 $13,603,287 19 Fixed Water Service Charge 34811 $6,594,065 $6,827,557 $6,827,557 $6,827,557 $6,827,557 $6,827,557 20 Hydrant Meter Water Sales 34815 $59,240 $25,000 $25,000 $25,000 $25,000 $25,000 21 Water Application Fee 34818 $40,120 $65,000 $65,000 $65,000 $65,000 $65,000 22 Backflow Testing Admin Fees 34826 $46,910 $46,000 $46,000 $46,000 $46,000 $46,000 23 Hydrant Meter Rentals 34830 $23,890 $26,000 $26,000 $26,000 $26,000 $26,000 24 Turn On/Reconnection Fee 34835 $3,270 $20,000 $20,000 $20,000 $20,000 $20,000 25 Water Posting Fee 34836 $5,400 $69,000 $69,000 $69,000 $69,000 $69,000 26 Meter Installation Fees 34840 $70,590 $30,000 $30,000 $30,000 $30,000 $30,000 27 Exemption Application Fees 34850 $0 $1,000 $1,000 $1,000 $1,000 $1,000 177
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84 28
29 Interest Earnings 36100
30 Investment Earnings 36110 $811,420 $750,000 $523,452 $486,150 $452,052 $430,554 31 32 Other Revenues 36800
33 Work Orders 36810 $0 $2,000 $2,000 $2,000 $2,000 $2,000 34 Miscellaneous Income 36850 $11,740 $13,000 $13,000 $13,000 $13,000 $13,000 35 Other Agency (JRWSS) Revenue 36858 $1,400,000 $1,382,640 $1,382,640 $1,382,640 $1,382,640 $1,382,640 36 37 Total Revenues $24,225,036 $24,464,727 $24,238,179 $24,200,877 $24,166,779 $24,145,281 Table 7-2: Expenses (Detail)
Line Expenses (Detailed) Number FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 1 WATER ADMINISTRATION
2 Personnel 41000 $488,860 $685,210 $739,424 $798,059 $861,485 $930,107 3 Salaries, Regular Full Time 41010 $304,830 $458,780 $490,895 $525,257 $562,025 $601,367 4 Premium Overtime - Regular 41320 $120 $1,000 $1,070 $1,145 $1,225 $1,311 5 Accrued Leave Payoff 41350 $12,560 $12,620 $13,503 $14,449 $15,460 $16,542 6 Assignment Pay 41460 $110 $0 $0 $0 $0 $0
7 Auto Allowance 41530 $1,930 $4,200 $4,494 $4,809 $5,145 $5,505 8 Phone Allowance 41535 $0 $290 $310 $332 $355 $380
9 Bilingual Pay 41715 $210 $0 $0 $0 $0 $0
10 FICA 41951 $17,790 $25,160 $27,676 $30,444 $33,488 $36,837 11 Medicare 41954 $4,630 $6,660 $7,326 $8,059 $8,864 $9,751 12 State Disability Insurance 41957 $3,650 $5,710 $6,281 $6,909 $7,600 $8,360 13 A.D.& D. Insurance 41958 $60 $90 $99 $109 $120 $132
14 Long Term Disability Insurance 41959 $1,150 $1,220 $1,342 $1,476 $1,624 $1,786 15 State Unemployment Insurance 41961 $680 $1,010 $1,111 $1,222 $1,344 $1,479 16 Workers Compensation Ins. 41963 $8,630 $9,190 $10,109 $11,120 $12,232 $13,455 17 Life Insurance 41965 $950 $1,000 $1,100 $1,210 $1,331 $1,464 18 Medical Insurance 41967 $53,310 $62,580 $68,838 $75,722 $83,294 $91,623 178
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85 19 San Clemente Retirement Prem. 41975 $29,920 $45,330 $49,863 $54,849 $60,334 $66,368 20 Retirement Premium (Legacy) 41976 $22,530 $19,730 $21,703 $23,873 $26,261 $28,887 21 Retirement Prem-Calpers (UAL) 41977 $22,860 $24,140 $26,554 $29,209 $32,130 $35,343 22 Deferred Compensation 41981 $2,940 $6,500 $7,150 $7,865 $8,652 $9,517 23 24 Supplies 42000 $19,280 $21,070 $21,702 $22,353 $23,024 $23,714 25 Office Supplies 42010 $3,230 $4,260 $4,388 $4,519 $4,655 $4,795 26 Postage 42030 $680 $750 $773 $796 $820 $844
27 Data Processing Supplies 42050 $1,230 $2,130 $2,194 $2,260 $2,328 $2,397 28 Medical Supplies 42130 $580 $700 $721 $743 $765 $788 29 Office Furniture/Equipment (Non-Cap) 42380 $890 $1,600 $1,648 $1,697 $1,748 $1,801 30 Clothing And Uniforms 42410 $9,930 $9,500 $9,785 $10,079 $10,381 $10,692 31 Other Operating Supplies 42490 $2,740 $2,130 $2,194 $2,260 $2,328 $2,397 32 33 Contractual Services 43000 $513,330 $672,090 $692,478 $713,487 $735,136 $757,444 34 Printing And Binding 43050 $660 $13,500 $13,905 $14,322 $14,752 $15,194 35 Travel And Training 43060 $4,840 $5,070 $5,222 $5,379 $5,540 $5,706 36 Property Insurance 43120 $106,440 $133,000 $136,990 $141,100 $145,333 $149,693 37 Electricity 43330 $27,110 $22,570 $23,473 $24,412 $25,388 $26,404 38 Water 43340 $3,270 $4,840 $4,985 $5,135 $5,289 $5,447 39 Maintenance Of Buildings 43410 $0 $2,250 $2,318 $2,387 $2,459 $2,532 40 Maintenance Of Improvements 43420 $0 $1,120 $1,154 $1,188 $1,224 $1,261 41 Maint. Of Computer Software 43456 $44,590 $68,020 $70,061 $72,162 $74,327 $76,557 42 Contracted Custodial Services 43480 $18,720 $29,030 $29,901 $30,798 $31,722 $32,674 43 Answering Service 43565 $3,110 $5,370 $5,531 $5,697 $5,868 $6,044 44 Other Legal Services 43640 $0 $17,250 $17,768 $18,301 $18,850 $19,415 45 Other Professional Services 43690 $39,700 $26,100 $26,883 $27,689 $28,520 $29,376 46 Rental Of Uniforms 43750 $4,880 $8,580 $8,837 $9,103 $9,376 $9,657 47 Other Contractual Services 43890 $260,010 $335,390 $345,452 $355,815 $366,490 $377,484 48 49 Other Charges 44000 $88,910 $95,670 $98,590 $101,600 $104,702 $107,899 50 Dues And Subscriptions 44110 $1,340 $7,840 $8,075 $8,317 $8,567 $8,824 51 Licenses And Permits 44260 $83,400 $82,830 $85,315 $87,874 $90,511 $93,226 179
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86 52 Depreciation 44800 $4,170 $5,000 $5,200 $5,408 $5,624 $5,849 53 54 Interdepartmental Charges 46000 $648,130 $807,760 $831,993 $856,953 $882,661 $909,141 55 Insurance Charges 46030 $434,150 $520,980 $536,609 $552,708 $569,289 $586,368 56 Postage Charges 46050 $3,650 $4,380 $4,511 $4,647 $4,786 $4,930 57 Duplicating Charges 46060 $2,390 $2,870 $2,956 $3,045 $3,136 $3,230 58 Information Technology Charges 46080 $52,080 $62,500 $64,375 $66,306 $68,295 $70,344 59 Communications Charges 46110 $15,290 $18,350 $18,901 $19,468 $20,052 $20,653 60 Fleet Rental Charges 46130 $14,920 $17,900 $18,437 $18,990 $19,560 $20,147 61 Charges From Weed Abatement 46320 $0 $25,000 $25,750 $26,523 $27,318 $28,138 62 General Fund Overhead Charges 46510 $125,650 $155,780 $160,453 $165,267 $170,225 $175,332 63 64 WATER PRODUCTION
65 Personnel 41000 $809,870 $932,820 $1,007,458 $1,088,255 $1,175,734 $1,270,468 66 Salaries, Regular Full Time 41010 $394,680 $518,760 $555,073 $593,928 $635,503 $679,989 67 Regular Overtime 41310 $0 $250 $268 $286 $306 $328
68 Premium Overtime - Regular 41320 $100,900 $70,000 $74,900 $80,143 $85,753 $91,756 69 Accrued Leave Payoff 41350 $8,200 $10,700 $11,449 $12,250 $13,108 $14,026 70 Assignment Pay 41460 $23,430 $21,760 $23,283 $24,913 $26,657 $28,523 71 FICA 41951 $32,120 $31,710 $34,881 $38,369 $42,206 $46,427 72 Medicare 41954 $7,520 $7,380 $8,118 $8,930 $9,823 $10,805 73 State Disability Insurance 41957 $5,950 $5,710 $6,281 $6,909 $7,600 $8,360 74 A.D.& D. Insurance 41958 $70 $90 $99 $109 $120 $132
75 Long Term Disability Insurance 41959 $1,410 $1,760 $1,936 $2,130 $2,343 $2,577 76 State Unemployment Insurance 41961 $1,140 $1,140 $1,254 $1,379 $1,517 $1,669 77 Workers Compensation Ins. 41963 $23,160 $23,310 $25,641 $28,205 $31,026 $34,128 78 Life Insurance 41965 $880 $1,070 $1,177 $1,295 $1,424 $1,567 79 Medical Insurance 41967 $85,680 $106,750 $117,425 $129,168 $142,084 $156,293 80 San Clemente Retirement Prem. 41975 $38,730 $51,250 $56,375 $62,013 $68,214 $75,035 81 Retirement Premium (Legacy) 41976 $53,450 $46,810 $51,491 $56,640 $62,304 $68,535 82 Retirement Prem-Calpers (UAL) 41977 $32,550 $34,370 $37,807 $41,588 $45,746 $50,321 83 84 Supplies 42000 $11,021,340 $12,082,930 $12,488,960 $12,528,916 $12,570,862 $12,614,902 180
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87 85 Chemical Supplies 42150 $14,680 $32,790 $35,413 $38,246 $41,306 $44,610 86 Laboratory Supplies 42170 $23,400 $27,720 $28,552 $29,408 $30,290 $31,199 87 Protective Supplies 42280 $8,010 $8,960 $9,229 $9,506 $9,791 $10,085 88 Educational Material 42360 $850 $1,340 $1,380 $1,422 $1,464 $1,508 89 Small Tools And Equipment 42390 $12,640 $10,660 $10,980 $11,309 $11,648 $11,998 90 Other Operating Supplies 42490 $55,670 $51,220 $52,757 $54,339 $55,969 $57,649 91 Other Maintenance Supplies 42590 $10,500 $50,000 $51,500 $53,045 $54,636 $56,275 92 Purchased Water 42610 $10,895,590 $11,900,240 $12,299,150 $12,331,641 $12,365,757 $12,401,578 93 94 Contractual Services 43000 $1,112,250 $1,712,618 $1,764,825 $1,818,630 $1,874,085 $1,931,239 95 Travel And Training 43060 $2,790 $5,020 $5,171 $5,326 $5,485 $5,650 96 Electricity 43330 $17,260 $82,800 $86,112 $89,556 $93,139 $96,864 97 Refuse Collection Service 43350 $0 $5,150 $5,305 $5,464 $5,628 $5,796 98 Maintenance Of Auto Equipment 43440 $110 $5,150 $5,305 $5,464 $5,628 $5,796 99 Maintenance Of Operating Equip 43450 $34,250 $36,980 $38,089 $39,232 $40,409 $41,621 100 Maint. Of Other Facilities 43470 $1,018,670 $1,468,498 $1,512,553 $1,557,930 $1,604,667 $1,652,807 101 Other Professional Services 43690 $2,360 $8,760 $9,023 $9,293 $9,572 $9,859 102 Rental Of Equipment 43730 $0 $7,000 $7,210 $7,426 $7,649 $7,879 103 Other Contractual Services 43890 $36,810 $93,260 $96,058 $98,940 $101,908 $104,965 104
105 Other Charges 44000 $5,810 $17,350 $17,871 $18,407 $18,959 $19,528 106 Dues And Subscriptions 44110 $360 $2,350 $2,421 $2,493 $2,568 $2,645 107 Licenses And Permits 44260 $5,450 $15,000 $15,450 $15,914 $16,391 $16,883 108
109 Interdepartmental Charges 46000 $259,720 $311,660 $321,010 $330,640 $340,559 $350,776 110 Information Technology Charges 46080 $60,100 $72,120 $74,284 $76,512 $78,807 $81,172 111 Fleet Rental Charges 46130 $48,260 $57,910 $59,647 $61,437 $63,280 $65,178 112 General Fund Overhead Charges 46510 $151,360 $181,630 $187,079 $192,691 $198,472 $204,426 113
114 TRANSMISSION/DISTRIBUTION
115 Personnel 41000 $1,858,750 $2,267,480 $2,448,076 $2,643,502 $2,855,013 $3,083,976 116 Salaries, Regular Full Time 41010 $961,980 $1,286,220 $1,376,255 $1,472,593 $1,575,675 $1,685,972 117 Premium Overtime - Regular 41320 $196,530 $180,000 $192,600 $206,082 $220,508 $235,943 181
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88 118 Accrued Leave Payoff 41350 $8,230 $14,250 $15,248 $16,315 $17,457 $18,679 119 Assignment Pay 41460 $0 $0 $0 $0 $0 $0
120 FICA 41951 $51,870 $57,920 $61,974 $66,313 $70,954 $75,921 121 Medicare 41954 $74,670 $79,260 $87,186 $95,905 $105,495 $116,045 122 State Disability Insurance 41957 $17,470 $18,450 $20,295 $22,325 $24,557 $27,013 123 A.D.& D. Insurance 41958 $13,910 $14,150 $15,565 $17,122 $18,834 $20,717 124 Long Term Disability Insurance 41959 $180 $230 $253 $278 $306 $337 125 State Unemployment Insurance 41961 $3,060 $3,980 $4,378 $4,816 $5,297 $5,827 126 Workers Compensation Ins. 41963 $2,660 $2,830 $3,113 $3,424 $3,767 $4,143 127 Life Insurance 41965 $56,060 $61,720 $67,892 $74,681 $82,149 $90,364 128 Medical Insurance 41967 $2,390 $2,930 $3,223 $3,545 $3,900 $4,290 129 San Clemente Retirement Prem. 41975 $161,780 $215,540 $237,094 $260,803 $286,884 $315,572 130 Retirement Premium (Legacy) 41976 $94,350 $127,080 $139,788 $153,767 $169,143 $186,058 131 Retirement Prem-Calpers (UAL) 41977 $125,700 $110,080 $121,088 $133,197 $146,516 $161,168 132
133 Supplies 42000 $392,510 $503,610 $525,671 $548,950 $573,528 $599,491 134 Chemical Supplies 42150 $40,190 $139,050 $150,174 $162,188 $175,163 $189,176 135 Protective Supplies 42280 $8,360 $11,730 $12,082 $12,444 $12,818 $13,202 136 Educational Material 42360 $850 $1,130 $1,164 $1,199 $1,235 $1,272 137 Small Tools And Equipment 42390 $19,570 $17,060 $17,572 $18,099 $18,642 $19,201 138 Other Operating Supplies 42490 $158,050 $169,950 $175,049 $180,300 $185,709 $191,280 139 Water Meter Purchase 42495 $0 $2,140 $2,204 $2,270 $2,338 $2,409 140 Painting Supplies 42530 $900 $5,550 $5,717 $5,888 $6,065 $6,247 141 Other Maintenance Supplies 42590 $164,590 $157,000 $161,710 $166,561 $171,558 $176,705 142
143 Contractual Services 43000 $725,060 $1,262,450 $1,306,834 $1,352,809 $1,400,434 $1,449,770 144 Travel And Training 43060 $6,730 $10,300 $10,609 $10,927 $11,255 $11,593 145 Electricity 43330 $523,260 $651,000 $677,040 $704,122 $732,286 $761,578 146 Refuse Collection Service 43350 $0 $72,100 $74,263 $76,491 $78,786 $81,149 147 Landfill Fees 43370 $0 $1,500 $1,545 $1,591 $1,639 $1,688 148 Maintenance Of Landscaping 43425 $28,700 $27,980 $28,819 $29,684 $30,575 $31,492 149 Maintenance Of Auto Equipment 43440 $4,480 $5,870 $6,046 $6,227 $6,414 $6,607 150 Maintenance Of Operating Equip 43450 $4,530 $85,800 $88,374 $91,025 $93,756 $96,569 182
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89 151 Maint. Of Other Facilities 43470 $590 $8,530 $8,786 $9,049 $9,321 $9,601 152 Other Professional Services 43690 $25,450 $80,270 $82,678 $85,158 $87,713 $90,345 153 Rental Of Equipment 43730 $11,960 $15,000 $15,450 $15,914 $16,391 $16,883 154 Other Contractual Services 43890 $119,360 $304,100 $313,223 $322,620 $332,298 $342,267 155
156 Other Charges 44000 $1,880 $12,550 $12,927 $13,314 $13,714 $14,125 157 Dues And Subscriptions 44110 $710 $3,740 $3,852 $3,968 $4,087 $4,209 158 Property Taxes 44210 $40 $60 $62 $64 $66 $68
159 Licenses And Permits 44260 $1,130 $8,750 $9,013 $9,283 $9,561 $9,848 160
161 Interdepartmental Charges 46000 $528,790 $634,540 $653,576 $673,183 $693,379 $714,180 162 Information Technology Charges 46080 $92,150 $110,580 $113,897 $117,314 $120,834 $124,459 163 Communications Charges 46110 $1,940 $2,330 $2,400 $2,472 $2,546 $2,622 164 Fleet Rental Charges 46130 $184,730 $221,670 $228,320 $235,170 $242,225 $249,492 165 General Fund Overhead Charges 46510 $249,970 $299,960 $308,959 $318,228 $327,774 $337,608 166
167 WATER CONSERVATION
168 Personnel 41000 $118,310 $139,220 $150,232 $162,141 $175,023 $188,960 169 Salaries, Regular Full Time 41010 $76,280 $93,910 $100,484 $107,518 $115,044 $123,097 170 Premium Overtime - Regular 41320 $3,270 $3,050 $3,264 $3,492 $3,736 $3,998 171 Accrued Leave Payoff 41350 $0 $50 $54 $57 $61 $66
172 FICA 41951 $4,890 $5,810 $6,391 $7,030 $7,733 $8,506 173 Medicare 41954 $1,140 $1,350 $1,485 $1,634 $1,797 $1,977 174 State Disability Insurance 41957 $910 $1,030 $1,133 $1,246 $1,371 $1,508 175 A.D.& D. Insurance 41958 $10 $20 $22 $24 $27 $29
176 Long Term Disability Insurance 41959 $210 $0 $0 $0 $0 $0 177 State Unemployment Insurance 41961 $180 $210 $231 $254 $280 $307 178 Workers Compensation Ins. 41963 $1,180 $1,410 $1,551 $1,706 $1,877 $2,064 179 Life Insurance 41965 $160 $170 $187 $206 $226 $249
180 Medical Insurance 41967 $7,990 $9,040 $9,944 $10,938 $12,032 $13,235 181 San Clemente Retirement Prem. 41975 $7,490 $9,280 $10,208 $11,229 $12,352 $13,587 182 Retirement Premium (Legacy) 41976 $8,420 $7,370 $8,107 $8,918 $9,809 $10,790 183 Retirement Prem-Calpers (UAL) 41977 $6,180 $6,520 $7,172 $7,889 $8,678 $9,546 183
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90 184
185 Supplies 42000 $6,560 $5,450 $5,614 $5,782 $5,955 $6,134 186 Office Supplies 42010 $290 $540 $556 $573 $590 $608 187 Clothing And Uniforms 42410 $0 $0 $0 $0 $0 $0
188 Other Operating Supplies 42490 $6,270 $4,910 $5,057 $5,209 $5,365 $5,526 189
190 Contractual Services 43000 $71,260 $228,740 $235,602 $242,670 $249,950 $257,449 191 Printing And Binding 43050 $1,660 $4,270 $4,398 $4,530 $4,666 $4,806 192 Travel And Training 43060 $3,120 $3,580 $3,687 $3,798 $3,912 $4,029 193 Other Professional Services 43690 $10,120 $50,250 $51,758 $53,310 $54,910 $56,557 194 Other Contractual Services 43890 $56,360 $170,640 $175,759 $181,032 $186,463 $192,057 195
196 Other Charges 44000 $18,350 $63,570 $65,477 $67,441 $69,465 $71,549 197 Dues And Subscriptions 44110 $2,980 $2,960 $3,049 $3,140 $3,234 $3,332 198 Water Use Efficiency Rebate Program 44785 $10,370 $55,610 $57,278 $58,997 $60,767 $62,590 199 Environmental Sustainability Grant 44786 $5,000 $5,000 $5,150 $5,305 $5,464 $5,628 200
201 Interdepartmental Charges 46000 $54,990 $65,990 $67,970 $70,009 $72,109 $74,272 202 Information Technology Charges 46080 $12,020 $14,420 $14,853 $15,298 $15,757 $16,230 203 Communications Charges 46110 $0 $0 $0 $0 $0 $0
204 Fleet Rental Charges 46130 $16,130 $19,360 $19,941 $20,539 $21,155 $21,790 205 General Fund Overhead Charges 46510 $26,840 $32,210 $33,176 $34,172 $35,197 $36,253 206
207 WATER RECLAMATION
208 Personnel 41000 $533,940 $664,160 $716,829 $773,803 $835,445 $902,150 209 Salaries, Regular Full Time 41010 $303,660 $403,540 $431,788 $462,013 $494,354 $528,959 210 Regular Overtime 41310 $0 $1,200 $1,284 $1,374 $1,470 $1,573 211 Premium Overtime - Regular 41320 $42,860 $35,000 $37,450 $40,072 $42,877 $45,878 212 Accrued Leave Payoff 41350 $4,190 $3,430 $3,670 $3,927 $4,202 $4,496 213 Education Incentive Pay 41410 $40 $50 $54 $57 $61 $66 214 Assignment Pay 41460 $12,740 $15,000 $16,050 $17,174 $18,376 $19,662 215 Phone Allowance 41535 $50 $50 $55 $61 $67 $73
216 Educational Reimbursement 41710 $0 $8,660 $9,526 $10,479 $11,526 $12,679 184
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91 217 FICA 41951 $22,060 $24,810 $27,291 $30,020 $33,022 $36,324 218 Medicare 41954 $5,170 $5,770 $6,347 $6,982 $7,680 $8,448 219 State Disability Insurance 41957 $4,130 $4,440 $4,884 $5,372 $5,910 $6,501 220 A.D.& D. Insurance 41958 $50 $70 $77 $85 $93 $102
221 Long Term Disability Insurance 41959 $1,040 $1,310 $1,441 $1,585 $1,744 $1,918 222 State Unemployment Insurance 41961 $790 $890 $979 $1,077 $1,185 $1,303 223 Workers Compensation Ins. 41963 $16,190 $17,900 $19,690 $21,659 $23,825 $26,207 224 Life Insurance 41965 $750 $830 $913 $1,004 $1,105 $1,215 225 Medical Insurance 41967 $52,680 $65,180 $71,698 $78,868 $86,755 $95,430 226 San Clemente Retirement Prem. 41975 $29,850 $39,870 $43,857 $48,243 $53,067 $58,374 227 Retirement Premium (Legacy) 41976 $20,180 $17,670 $19,437 $21,381 $23,519 $25,871 228 Retirement Prem-Calpers (UAL) 41977 $17,510 $18,490 $20,339 $22,373 $24,610 $27,071 229
230 Supplies 42000 $290,130 $363,030 $387,362 $413,500 $441,583 $471,763 231 Office Supplies 42010 $140 $320 $330 $339 $350 $360 232 Chemical Supplies 42150 $221,750 $268,830 $290,336 $313,563 $338,648 $365,740 233 Laboratory Supplies 42170 $7,320 $12,740 $13,122 $13,516 $13,921 $14,339 234 Protective Supplies 42280 $0 $2,400 $2,472 $2,546 $2,623 $2,701 235 Small Tools And Equipment 42390 $1,100 $8,840 $9,105 $9,378 $9,660 $9,949 236 Other Operating Supplies 42490 $22,480 $37,900 $39,037 $40,208 $41,414 $42,657 237 Other Maintenance Supplies 42590 $37,340 $32,000 $32,960 $33,949 $34,967 $36,016 238
239 Contractual Services 43000 $413,840 $601,320 $622,400 $644,234 $666,850 $690,276 240 Travel And Training 43060 $1,490 $4,480 $4,614 $4,753 $4,895 $5,042 241 Electricity 43330 $327,350 $304,060 $316,222 $328,871 $342,026 $355,707 242 Refuse Collection Service 43350 $0 $10,300 $10,609 $10,927 $11,255 $11,593 243 Maintenance Of Auto Equipment 43440 $0 $400 $412 $424 $437 $450 244 Maintenance Of Operating Equip 43450 $35,200 $42,820 $44,105 $45,428 $46,791 $48,194 245 Other Professional Services 43690 $25,130 $70,320 $72,430 $74,602 $76,841 $79,146 246 Developers Reimbursements 43691 $0 $50,000 $51,500 $53,045 $54,636 $56,275 247 Rental Of Equipment 43730 $8,450 $6,000 $6,180 $6,365 $6,556 $6,753 248 Other Contractual Services 43890 $16,220 $112,940 $116,328 $119,818 $123,413 $127,115 249
185
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92 250 Other Charges 44000 $34,050 $44,790 $46,134 $47,518 $48,943 $50,412 251 Dues And Subscriptions 44110 $160 $0 $0 $0 $0 $0
252 Licenses And Permits 44260 $33,890 $44,790 $46,134 $47,518 $48,943 $50,412 253
254 Interdepartmental Charges 46000 $77,560 $93,070 $95,862 $98,738 $101,700 $104,751 255 Information Technology Charges 46080 $8,020 $9,620 $9,909 $10,206 $10,512 $10,827 256 Communications Charges 46110 $30 $40 $41 $42 $44 $45 257 Fleet Rental Charges 46130 $13,620 $16,340 $16,830 $17,335 $17,855 $18,391 258 General Fund Overhead Charges 46510 $55,890 $67,070 $69,082 $71,155 $73,289 $75,488 259
260 TOTAL EXPENSES $20,093,480 $24,289,148 $25,324,876 $26,034,894 $26,790,299 $27,594,477 186
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93 7.2 COST-OF-SERVICE APPENDICES
Table 7-3: Operating Expenses Allocation (Detailed)
Line Expense Category FY 2025 Meter
Maint.

Customer
Service
Water
Supply Pumping Storage T&D Fire Protection
Conservation General Rev.

Offset Total
1 Water Administration $1,758,510 0% 70% 0% 0% 0% 0% 0% 0% 30% 0% 100% 2 Water Production $2,313,400 0% 0% 0% 50% 50% 0% 0% 0% 0% 0% 100% 3 Purchased Water $10,895,590 0% 0% 100% 0% 0% 0% 0% 0% 0% 0% 100% 4 Transmission/Distribution $3,506,990 0% 0% 0% 0% 0% 100% 0% 0% 0% 0% 100% 5 Water Conservation $269,470 0% 0% 0% 0% 0% 0% 0% 100% 0% 0% 100% Table 7-4: Capital Expenses (CIP) Allocation (Detailed) Line CIP Allocation Total CIP Allocation
1 AC Pipe Replacement Northwest 308 Zone $4,787,372 Transmission & Distribution 2 Blanco Pump Station Rehabilitation $520,000 Pumping
3 Calle Real Pump Station Rehabilitation $3,124,372 Pumping 4 Calle Vallarta PRS $364,000 Pumping
5 Cathodic Protection System Improvements $239,159 Transmission & Distribution 6 City-wide Copper Service Replacements $520,000 Transmission & Distribution 7 Costero Risco PRS Rehabilitation $715,717 Pumping
8 Dead End Water System Improvements $50,379 General
9 El Levante PRS Rehabilitation $363,589 Pumping
10 JRWSS Agency Projects $7,015,319 Transmission & Distribution 11 Major Street Maintenance Program $0 General
12 Meter Replacements $657,643 Meter Maintenance
13 Pico Booster Pump Station Pump Replacement $55,997 Pumping 14 Pico/Presidio DIP Replacement (Albertsons) $1,427,743 Pumping 15 Pump Station & Reservoir Pavement Rehab $91,128 Storage 16 Reata Pump Station Rehabilitation $83,033 Pumping
17 Recycled Water Storage Bay Rehab $208,000 Excluded
18 Recycled Water Alum Chem System Replacement $241,037 Excluded 19 Reservoir 5A Replacement $143,756 Storage
187
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Water Resources Economics
94 20 Reservoir No 4 Exterior Coating $221,617 Storage
21 Sodium Hypochlorite Tank Replacement $13,755 Storage 22 Valve Replacement Program $234,636 Transmission & Distribution 23 Water Distribution Insert Valve Program $31,200 Transmission & Distribution 24 Water System Air-Vac Replacement Program $26,000 Transmission & Distribution 25 Water System Rehabilitation $2,217,213 Transmission & Distribution 26 Well Water Quality System Improvement $501,702 Water Supply 188
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189
Attachment 6
ORDINANCE NO. 1799

AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF

SAN CLEMENTE, CALIFORNIA, AMENDING SECTION

13.04.220 OF THE CITY OF SAN CLEMENTE MUNICIPAL

CODE RELATING TO WATER RATES
WHEREAS, the City owns and operates approximately 230 miles of water lines, 15 reservoirs, 16 pump station and 56 pressure reducing stations; and WHEREAS, the City receives imported water from Metropolitan Water District from Northern California and the Colorado River Basin through its wholesaler Municipal Water District of Orange County (MWDOC); and
WHEREAS, the City has local water resources from two wells and produces recycled water at the Water Reclamation Plant for irrigation purposes; and WHEREAS, the City provides water service meeting state and federal standards to approximately 17,600 service meters consisting of residential, multifamily, irrigation and commercial accounts; and
WHEREAS, the City exercises its constitutional authority to establish, operate, and regulate a water service system, pursuant to California Constitution Article XI, section 7, and establish rates for providing those services to property owners and customers in accordance with San Clemente Municipal Code Chapter 13.04, subject to the requirements and limitations of California Constitution Article XIII D, Section 6 (a.k.a., “Proposition 218”); and WHEREAS, pursuant to the requirements of Proposition 218, prior to extending, imposing or increasing water rates (for a property-related service), the City must provide property owners notice at least 45 days before a public hearing regarding modifications to the water rates; and
WHEREAS, in order to evaluate the costs of providing service to City customers and maintain operation of the water system, the City Council hired Water Resources Economics, LLC on May 6, 2025 to conduct a cost-of-service study to evaluate the City’s costs of providing water services in comparison to water rate and other revenues; and WHEREAS, Water Resources Economics, LLC reviewed the City’s water finances, presented preliminary recommendations and received direction from the City Council on September 16, 2025; and
WHEREAS, on October 7, 2025, the City Council adopted water rate setting procedures under Proposition 218 and Government Code sections 53750 through 53759.2 and 54354.5 to establish a process for property owner objections to proposed water fees; and
WHEREAS, Water Resources Economics, LLC completed a cost-of-service study, as documented in the November 2025 Water Rate Study Final Report (“Water Rate Study”) 190
Ordinance No. 1799 Page 2
that recommended changes in the rate structure, five-year rate adjustments, fixed and pass through of charges from the Municipal Water District of Orange County, and establishment of recycled water rates and demand manager rates in the event there is a required reduction in water use; and
WHEREAS, on November 18, 2025, based on the Water Rate Study, the City Council directed staff to mail a Proposition 218 public hearing notice to all property owners served by City water, and that notice established a deadline to receive written objections by January 15, 2026 at 5:00 p.m., set a Public Hearing for February 3, 2026, at 5:30 p.m. to consider all timely written objections, and set a Public Hearing for February 17, 2026, at 5:30 p.m. to conduct a protest hearing under Proposition 218 and to consider proposed adjustments to and adoption of water rates and service charges; and WHEREAS, those Proposition 218 public hearing notices were mailed to all property owners receiving City water services (including tenants who are directly liable to pay water rates) on December 1, 2025, a minimum of 45 days prior to the requirement for objections to be received by the City on January 15, 2026 at 5:00 p.m.; and WHEREAS, the City Council conducted a duly noticed objection hearing on February 3, 2026, to consider all written communications related to the proposed update to water rates that were received by the City prior to the January 15 deadline, as well as the responses to those communications prepared by City staff, and the Council determined no such written communications met the definition of a written objection, and determined no clarifications, further review or reduction or abandonment of the proposed water rates, fees and charges was warranted in accordance with Government Code sections 53759.1 and 53759.2; and
WHEREAS, the City Council conducted a duly noticed public protest hearing on February 17, 2026, to consider all written protests and hear all oral comments, determine whether or not a majority protest was made and set rates in accordance with the Proposition 218 Notice; and
WHEREAS, San Clemente Municipal Code section 13.04.220 sets forth an old water schedule and requires amendment to prevent customer confusion and accurately reflect the City’s process for rate setting.

NOW, THEREFORE, the City Council of the City of San Clemente does hereby ordain as follows:

SECTION 1. The aforementioned recitals are true and correct and incorporated fully herein.

SECTION 2. Section 13.04.220, including subsections A through E, of the San Clemente Municipal Code is hereby deleted in its entirety and replaced with the following:

13.04.220 – Establishment of water rate schedule
A. Water Rates Adopted by Resolution. The City Council shall adopt water rates by resolution. Water rates may include both fixed and variable consumption 191
Ordinance No. 1799 Page 3
components in order to allow the City to recover its costs for the provision of service. Each property owner (or the property owner’s tenant) to whom the City has issued a water meter shall pay the water rates in accordance with such resolution adopting rates and this Chapter 13.04.

B. Demand Management Rate. The water rates adopted by the City Council by resolution may include a demand management rate. At any time that the City Council adopts a resolution declaring a water shortage emergency in accordance with the City’s Urban Water Management Plan, customers shall pay the supplemental demand management rate corresponding to the level of emergency declared by City Council for as long as the water shortage emergency remains in effect.

SECTION 3. If any section, subsection, subdivision, paragraph, sentence, clause, or phrase of this Ordinance, or any part thereof, is for any reason held to be invalid, such decision shall not offset the validity of the remaining portions of this Ordinance or any part thereof. The City Council hereby declares that it would have passed each section, subsection, subdivision, paragraph, sentence, clause, or phrase thereof, irrespective of the fact that any one or more sections, subsections, subdivisions, paragraphs, sentences, clauses, or phrases are declared invalid.

SECTION 4. This Ordinance shall take effect thirty (30) days from the date of its passage. Before the expiration of fifteen (15) days after its passage, this Ordinance shall be published in a newspaper of general circulation, printed and published in the City of San Clemente.

APPROVED AND ADOPTED this _____ day of February, 2026.

ATTEST:
___________________________ __________________________
City Clerk of the City of Rick Loeffler, Mayor of the
San Clemente, California City of San Clemente, California 192
Ordinance No. 1799 Page 4

STATE OF CALIFORNIA )
COUNTY OF ORANGE ) §

CITY OF SAN CLEMENTE )
I, LAURA CAMPAGNOLO, City Clerk of the City of San Clemente, California, do hereby certify that Ordinance No. 1799, was again introduced, the reading in full thereof unanimously waived, and duly passed and adopted at a regular meeting of the City Council held on the _____day of _____________, 2026, and said ordinance was adopted by the following vote:

AYES:

NOES:

ABSENT:

IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City of San Clemente, California, this _____ day of _____________, ______. __________________________
CITY CLERK of the City of
San Clemente, California
Approved as to form:
_____________________________
Elizabeth A. Mitchell, City Attorney
193
910 Calle Negocio
2nd Floor
San Clemente, California
www.san-clemente.org

AGENDA REPORT

CITY OF SAN CLEMENTE

CITY COUNCIL MEETING
CITY OF SAN CLEMENTE 1
Meeting Date: February 17, 2026 Agenda Item: 10A.

Submitted By: Finance and Administrative Services
Prepared By: Brian Brower, Assistant City Manager
Matthew Schmelzel, Senior Management Analyst
Subject:
..titl e
INTRODUCTION (FIRST READING) OF ORDINANCE NO. 1800 TO AMEND SECTION

3.40.030 OF THE SAN CLEMENTE MUNICIPAL CODE TO REVISE THE DEFINITION OF LOCAL BUSINESS FOR THE LOCAL PREFERENCE PROGRAM ..body
Fiscal Impact:

Unknown at this time.

Summary:

On Tuesday, January 20, 2026, the City Council directed staff to review and provide a recommendation for modification of the local preference ordinance, specifically the definition of a local business. Staff reviewed current processes and language for a variety of sources and other jurisdictions, and identified multiple options to ensure consistent application.

If adopted, Ordinance No. 1800 would revise the definition of a local business in the San Clemente Municipal Code to reduce ambiguity and address deficiencies in the current eligibility criteria.

Background:

San Clemente Municipal Code section 3.40.030 addresses eligibility for local preference, detailing the business requirements in compliance with state law. To qualify for local preference, businesses are required to satisfy criteria that verify business certification and business location.

The following section briefly explains these two requirements for local preference eligibility:

1. Business Location
Businesses must have a physical location in San Clemente as indicated on an approved business license.

2. Small Business Certification
Businesses must meet the small business criteria established by state law and adopted by City Ordinance. The State Department of General Services (DGS) maintains the responsibility for certifying and determining the eligibility of small businesses.

Discussion:

In consideration of the local business preference eligibility requirements, staff researched definitions sourced from other jurisdictions to address deficiencies in eligibility criteria and developed the following recommended parameters to better define local business requirements:
194
Meeting Date: February 17, 2026 Agenda Item: 10A.

CITY OF SAN CLEMENTE 2

1. Businesses must have a physical location in San Clemente as indicated on an approved business license from which they regularly conduct business.

2. Physical locations can include a main office, headquarters, branch office, or similar functional location within the geographic boundaries of the City where business work is regularly performed.

3. An approved business license issued with a valid City business site address must be established prior to the City inviting bids or requesting proposals for the procurement.

4. Post Office Box address, shared office space without a sublease or regular performance of business work from the space or similar arrangement within the City shall not qualify as a valid business location.

5. The City reserves the right to verify claimed business locations and may require documentation demonstrating qualification and business being conducted therefrom.

Alternatively, the County of Orange utilizes language that aligns location requirements with the Department of General Services small business certification program. This would establish a consistent certification process for both location and small business criteria. Given this option, local businesses are strictly defined as a principal office determined by the DGS, which does not include branch office locations, thus limiting eligibility. In this case, verification requirements would be far more strict than locally defined parameters.

While both options provide clarification to the requirements for business location eligibility, expanding the local preference definition by incorporating the aforementioned criteria would continue to support local business operations while providing consistent and reasonable requirements in determining eligibility.

Proposed Ordinance No. 1800 would update the San Clemente Municipal Code - Title 3 Revenue and Finance, Section 3.40.030 by adding the five criteria outlined in the above discussion to the definition of a local business, reducing ambiguity in the existing eligibility requirements.

Council Options:
 Introduce and conduct a first reading of Ordinance No. 1800 amending the San Clemente Municipal Code - Title 3 Revenue and Finance, Section 3.40.030 with additional eligibility criteria to qualify vendors as a local business.
 Direct staff to modify the local business definition to align with the Department of General Services small business certification requirements and return with a Local Vendor Preference Ordinance amendment.
 Continue the item with direction to staff to provide additional information.  Determine the adopted local business definition is acceptable and reject consideration of a Local Vendor Preference Ordinance amendment.
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CITY OF SAN CLEMENTE 3
Environmental Review/Analysis:

Not a project under the California Quality Act (CEQA).

Recommended Actions:

Staff Recommendation ..recommendation
Introduce and conduct a first reading of Ordinance No. 1800, amending Section 3.40.030 of the San Clemente Municipal Code to change the definition of local business to include additional eligibility criteria to qualify vendors as a local business. ..end
Attachment:

1. Ordinance No: 1800

2. Adopted Local Preference Ordinance - San Clemente Municipal Code, Title 3 Revenue and Finance, Chapter 3.40, Section 3.40.030
Notification:

None.
196
Attachment 1
4861-3475-9263 v2
ORDINANCE NO. 1800

AN ORDINANCE OF THE CITY COUNCIL OF THE

CITY OF SAN CLEMENTE, CALIFORNIA, AMENDING
SAN CLEMENTE MUNICIPAL CODE TITLE 3
REVENUE AND FINANCE, CHAPTER 3.40, SECTION

3.40.030(A) RELATING TO THE DEFINITION OF

LOCAL BUSINESS FOR THE LOCAL VENDOR

PREFERENCE
WHEREAS, California Public Contract Code section 2002 allows a local agency to provide for a local vendor preference in awarding contracts within the requirements of such section; and
WHEREAS, the City Council of the City of San Clemente has determined that the provision of a Local Vendor Preference Ordinance is in the best interests of the community, the local economy, and the economic stability of the City, and WHEREAS, the City Council has an interest in improving the community by leveraging, to the greatest extent possible, the funds spent contracting with private firms for goods, equipment and services to and for the benefit of the City and its residents, and WHEREAS, the City Council has determined that funds spent locally, with local businesses, provide an enhanced economic benefit to the entire City as reinvestment and recirculation of the funds in the local economy generates taxable transactions, retains and creates local jobs, increases local profits, provides for greater involvement and contributions to local charities, and increases procurement of local goods and services for resale and operations; and
WHEREAS, a Local Vendor Preference Ordinance can encourage businesses to compete for City contracting opportunities, locate operations in the City, and encourage existing local businesses to refrain from relocating to different, less expensive areas; and WHEREAS, on May 16, 2023, City Council adopted Ordinance No. 1750, which added Section 3.40.030 to the San Clemente Municipal Code and established a local preference with provisions that met the requirements of Public Contract Code section 2002, had a rational relationship to the legitimate governmental purpose by stimulating a local market for services, equipment, materials, supplies and any City funds will stimulate the local economy and reduce unemployment; and
WHEREAS, an amendment is needed to the definition of local business under Section 3.40.030(A) to the San Clemente Municipal Code to provide additional eligibility 197
Ordinance No. 1800 Page 2
4861-3475-9263 v2
criteria and ensure that business are truly local, thereby accomplishing the purpose of stimulating the local economy and reducing unemployment.

NOW, THEREFORE, the City Council of the City of San Clemente, California, hereby ordains as follows:

SECTION 1: Recitals and Scope
The recitals above are considered true and correct and incorporated fully into this Ordinance. The scope of this Ordinance is strictly financial. This Ordinance does not allow local applicants to be relieved of any specification, license requirement or any other provision of the Bid or Request for Proposal.

This Ordinance applies only to contracts that involve the expenditure of funds entirely within the City's control where responsibility and quality are equal and shall not apply to contracts that involve the expenditure of funds that are not entirely within the City's control, such as state and federal grant funds, that due to legal restrictions prohibit its application.

SECTION 2: Environmental Review
This Ordinance is exempt from the provisions of the California Environmental Quality Act (“CEQA”) pursuant to Section 15061(b)(3) of the CEQA Guidelines (14 CCR 15061) because there is no possibility that the activity in question may have a significant effect on the environment and this Ordinance is not a project as defined by CEQA.

SECTION 3: Amendment to San Clemente Municipal Code section 3.40.030(A) Section 3.40.030(A) of the Municipal Code of the City of San Clemente is hereby amended to read in its entirety as follows (underlines are additions):

A. Definitions
The following definitions shall apply to this Ordinance:
"Bid" means any response to a City solicitation for bids or proposals. "City" means the City of San Clemente.
"Contract" means a written agreement for the purchase of goods, equipment or services, including construction, for the benefit of the City or its residents.
"Contractor" means a person, business or entity awarded a Contract by the City.
198
Ordinance No. 1800 Page 3
4861-3475-9263 v2
“Local Vendor”, "Local Business", “Local Contractor”, or “Local Bidder” means a Small Business with a physical location in San Clemente as indicated on an approved Business License as more particularly defined below:.

1. Businesses must have a physical location in San Clemente as indicated on an approved business license from which they regularly do business.

2. Physical locations can include a main office, headquarters, branch office, or similar functional location within the geographic boundaries of the City where business work is regularly performed.

3. An approved business license issued with a valid City business site address must be established prior to the City inviting bids or requesting proposals for the procurement.

4. Post Office Box address, shared office space without a sublease or regular performance of business work from the space or similar arrangement within the City shall not qualify as a valid business location.

5. The City reserves the right to verify claimed business location and may require documentation demonstrating
qualification and business being conducted therefrom.
"Proposal" means any response to a City solicitation for bids or proposals. “Small Business” means a business or entity that meets the requirements of a small business enterprise certified pursuant to Article 1 (commencing with Section 14835) of Chapter 6.5 of Part 5.5 of Division 3 of Title 2 of the Government Code as that section may be amended from time to time and that performs a commercially useful function within the meaning of Public Contract Code section 2002(d) as that section may be amended from time to time.

SECTION 4: Severability
All ordinances or parts of ordinances or resolutions or parts of resolutions in conflict with any applicable law are hereby repealed to the extent of such conflict and no further.

SECTION 5: Effective Date
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Ordinance No. 1800 Page 4
4861-3475-9263 v2
This ordinance shall take effect 30 days after passage and proper publication at least once in a newspaper of general circulation in the City of San Clemente.

SECTION 6: The City Clerk shall certify to the passage of this ordinance and cause the same to be published as required by law, and the same shall take effect as provided by law.

INTRODUCED AND FIRST READ at a regular meeting of the City Council of the City of San Clemente, California, on the 17th day of February, 2026.

APPROVED AND ADOPTED at a regular meeting of the City Council of the City of San Clemente, California, on _____day of _________________, 2026.

ATTEST:
_______________________________ ___________________________ City Clerk of the City of Rick Loeffler, Mayor of the City San Clemente, California of San Clemente, California
200
Ordinance No. 1800 Page 5
4861-3475-9263 v2

STATE OF CALIFORNIA )
COUNTY OF ORANGE ) ss.

CITY OF SAN CLEMENTE )
I, LAURA CAMPAGNOLO, City Clerk of the City of San Clemente, California, hereby certify that Ordinance No. _______ having been regularly introduced at the meeting of _______________________, was again introduced, the reading in full thereof unanimously waived, and duly passed and adopted at a regular meeting of the City Council held on the _____day of _____________, _______, and said ordinance was adopted by the following vote:

AYES:

NOES:

ABSENT:

IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City of San Clemente, California, this _____ day of ______________________, ________.
__________________________
CITY CLERK of the City of
San Clemente, California
APPROVED AS TO FORM:
_________________________________
Elizabeth A. Mitchell, CITY ATTORNEY
201

3.40.030 - Local preference.

A.

Definitions. .....The following definitions shall apply to this chapter:
"Bid" means any response to a City solicitation for bids or proposals. "City" means the City of San Clemente.
"Contract" means a written agreement for the purchase of goods, equipment or services, including construction, for the benefit of the City or its residents.
"Contractor" means a person, business or entity awarded a contract by the City. "Local vendor", "local business", "local contractor", or "local bidder" means a small business with a physical location in San Clemente as indicated on an approved business license. "Proposal" means any response to a City solicitation for bids or proposals. "Small business" means a business or entity that meets the requirements of a small business enterprise certified pursuant to Article 1 (commencing with Section 14835) of Chapter 6.5 of Part 5.5 of Division 3 of Title 2 of the Government Code as that section may be amended from time to time and that performs a commercially useful function within the meaning of public contract code section 2002(d) as that section may be amended from time to time.

B.

Local Business License Required. .....Any business or entity seeking to apply the provisions of this chapter must have a valid business license issued by the City of San Clemente which must be in good standing and must qualify as a small business. The business must be physically located in the municipal boundaries of the City of San Clemente. If for any reason the contractor fails to qualify as a local business for more than 60 days during the entire term of the contract, the City shall be entitled to withhold or recover funds from the contractor in an amount that represents the value of the bid or proposal preference.

C.

Application of Ordinance. .....When applying the provisions of this chapter to a bid, the City shall apply the preference to the bid price solely for bid evaluation purposes such that the total price bid by a local business shall be reduced by seven percent of the bid amount, and the reduced bid amount shall be deemed the amount of the bid by the bidder.

This chapter does not create a right to receive a bid or proposal preference. The City Council may, at any time before the award of a contract, determine that it is not in the City's best interest to grant a bid or proposal preference and direct staff to award the contract to the bidder or proposer eligible for the award without consideration of the provisions of this chapter.

Local subcontractors are not eligible for the local preference.

D.

Local Preference for an Open Bid. .....If the total combined bid amount submitted by a responsible local vendor is not greater than 107 percent of the apparent low bid and all other rating criteria is considered to be equal, preference shall be given to the responsible local vendor, unless waived prior to the contract award by the San Clemente City Council finding the waiver would serve the best interests of the City and the public. However, in 1/27/26, 12:12 PM San Clemente, CA Code of Ordinances
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Attachment 2
202
no case shall the amount of the preference exceed $150,000.00. This provision shall not apply to contracts required by state or federal statutes and/or regulations to be awarded to the 'lowest responsible bidder', or otherwise exempted from local preference.

E.

Local Preference for a Sealed Bid. .....A seven percent preference shall be granted to local vendors on all sealed bids, unless waived prior to the contract award by the San Clemente City Council finding the waiver would serve the best interests of the City and the public. However, in no case shall the amount of the preference exceed $150,000.00. This provision shall not apply to contracts required by state or federal statutes and/or regulations to be awarded to the 'lowest responsible bidder', or otherwise exempted from local preference.

F.

Local Preference Procurement Policy. .....This chapter is intended to act as a procurement policy within the meaning of and in compliance with the requirements of Public Contract Code section 2002(c).

G.

Oversight. .....City staff shall investigate any allegation of potential fraudulent behavior on the part of a entity or individual for the purpose of qualifying for and being awarded a local vendor preference. If the City Council determines after a hearing that a contractor was not actually qualified as a local business at the time that the application for the local vendor preference was made or at the time that the contract was awarded, the City shall be entitled to withhold or recover funds from the contractor an amount that represents the value of the bid or proposal preference and/or the City may, in its discretion, declare the contract void and the contractor's bid nonresponsive and award the contract without regarded to such bid. (Ord. 1207 § 1 (part), 1998)
(Ord. No. 1750, § 3, 5-16-2023)
1/27/26, 12:12 PM San Clemente, CA Code of Ordinances
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203
910 Calle Negocio
2nd Floor
San Clemente, California
www.san-clemente.org

AGENDA REPORT

CITY OF SAN CLEMENTE

CITY COUNCIL MEETING
CITY OF SAN CLEMENTE 1
Meeting Date: February 17, 2026 Agenda Item: 10B.

Submitted By: Community Development
Prepared By: Adam Atamian, Community Development Director Subject:
..titl e
INFORMATIONAL REPORT ON THE STATUS OF THE EXTENSION OF THE PILOT GOATGRAZING PROJECT ..body Fiscal Impact:

None.

Summary:

Following City Council authorization to extend the pilot goat-grazing project and initiate an RFP process, staff conducted additional outreach with service providers and resource agencies to refine the scope of a contracted goat-grazing program and complete the pilot. Through this process, staff identified the need for additional program development in certain areas and recognized that further definition of program parameters is necessary before proceeding with a larger-scale contract.

To address these considerations, staff is implementing a phased approach that utilizes smaller, site-specific contracts to continue fuel-reduction efforts while gathering critical information related to best management practices, environmental constraints, and scheduling. This approach allows the City to continue making progress on wildfire risk reduction while ensuring that future program expansion is informed, environmentally sound, and operationally effective.

Background:

On August 19, 2025, the City Council authorized the extension of the pilot goat-grazing project and appropriated up to $100,000 to allow staff to initiate a Request for Proposals (RFP) process to establish a contract for expanded goat-grazing services. The agenda report related to this action is provided as Attachment 1. This direction was intended to support the City’s broader wildfire prevention efforts while staff continued pursuing longer-term grant funding and program development.

Following City Council direction, staff began developing an RFP and conducting outreach with experienced goat-grazing service providers to better understand the operational, environmental, and logistical considerations associated with transitioning from a donated pilot program to a paid, contract-based service. Through this process, staff identified several key issues that warranted further evaluation prior to proceeding with a single, larger grazing contract.

First, during preliminary site evaluations and discussions with prospective vendors, staff identified certain areas initially contemplated for program expansion that present environmental sensitivities or site constraints that may limit or complicate the use of goat grazing. In coordination with 204
Meeting Date: February 17, 2026 Agenda Item: 10B.

CITY OF SAN CLEMENTE 2
appropriate resource agencies, staff determined that additional environmental review would be necessary to ensure that goat grazing could be conducted safely, effectively, and in an environmentally sensitive manner in those locations, and without negatively affecting neighboring residential areas and trail users. This includes confirming appropriate best management practices, seasonal timing, and site-specific constraints.

Second, the RFP development process revealed that additional upfront work by staff is needed to more clearly define program parameters, performance standards, monitoring expectations, and scheduling considerations for a contracted goat-grazing program operating across multiple sites.

Establishing these parameters is critical to ensuring that future contracts are cost-effective, environmentally responsible, and aligned with the City’s wildfire risk reduction objectives.

Based on these findings, staff is developing a phased approach to the continued implementation of the pilot goat-grazing project. Rather than immediately pursuing a single, large-scale contract, staff will engage in a series of smaller, targeted contracts focused on specific locations. This approach will allow the City to gather additional site-specific data, refine best management practices, and better understand optimal grazing schedules, logistics, and limitations. Information gained through these targeted efforts is expected to complete the pilot efforts and will directly inform the structure of a future, more comprehensive goat-grazing program and support the City’s ongoing wildfire prevention planning efforts.

Council Options:
 Receive and file this report.
 Continue the item with direction to provide additional information.

Environmental Review/Analysis:

In connection with smaller contract awards to continue the expanded pilot goat grazing project, staff has and anticipates continuing to determine that the project is exempt from the California Environmental Quality Act under Class 8 (14 CCR 15308). The Class 8 exemption specifically exempts from further CEQA review actions taken by regulatory agencies, as authorized by state or local ordinance, to assure the maintenance, restoration, enhancement, or protection of the environment where the regulatory process involves procedures for protection of the environment.

The purpose of the pilot goat-grazing project is to protect the City’s environmental resources by reducing risk of wildfires, and invasive and non-native vegetation that degrades the natural environment. Thus, the project has been determined to qualify for the Class 8 exemption to date.

Additionally, the pilot goat-grazing project has been determined previously to be statutorily exempt under Public Resources Code §§ 21080(b)(4) (Emergency Projects) and § 21080.42 (SB 131—Fire Prevention Exemption) in that it consists of specific actions necessary to prevent or mitigate an emergency—namely, the imminent threat of wildfire in areas designated as Very High and High Fire Hazard Severity Zones. The project’s vegetation management activities are directly intended to reduce flammable fuel loads and create defensible space to protect life, property, and critical infrastructure from catastrophic fire events. Under Section 21080.42, the work qualifies for the fire prevention exemption because it involves wildfire risk reduction in compliance with applicable environmental protection measures, is located in a wildland-urban interface area, and does not exceed the acreage limitations set forth in the statute. Thus, the project has previously 205
Meeting Date: February 17, 2026 Agenda Item: 10B.

CITY OF SAN CLEMENTE 3
been found to qualify for both the emergency project and fire prevention statutory exemptions.

Thus, no further environmental review is anticipated to be required.

Recommended Actions:

Staff Recommendation
..recommendation
STAFF RECOMMENDS the City Council receive and file this report. ..end
Attachment:

1. City Council Agenda Report, dated August 19, 2025
Notification:

None.
206
910 Calle Negocio
2nd Floor
San Clemente, California
www.san-clemente.org

AGENDA REPORT

CITY OF SAN CLEMENTE

CITY COUNCIL MEETING

CITY OF SAN CLEMENTE
Meeting Date: August 19, 2025 Agenda Item: 10E.

Submitted By: Community Development
Prepared By: Adam Atamian, Community Development Director Subject:
..titl e

WILDFIRE PREVENTION PROGRAM - UPDATE ON CURRENT ACTIVITIES, AND PROPOSED EXTENSION OF THE CITY’S PILOT GOAT-GRAZING PROJECT, AND EXPANSION OF THE

WEED ABATEMENT PROGRAM, INCLUDING A REQUEST TO AWARD A NEW PROFESSIONAL SERVICES CONTRACT TO E. STEWART AND ASSOCIATES, INC. FOR

WEED ABATEMENT SERVICES, RELATED SUPPLEMENTAL APPROPRIATIONS AND MAKING ..body FINDINGS UNDER THE CALIFORNIA ENVIRONMENTAL QUALITY ACT Fiscal Impact:

Staff is requesting City Council consideration of three distinct items, each with fiscal impacts. The first consideration is a request to consider a supplemental appropriation not to exceed $100,000, in account number 001-452-43890, to extend the Pilot Goat-Grazing Project until March 31, 2026.

The second consideration is a request to confirm the City’s commitment of a 25% match for a Hazard Mitigation Grant Program application, which staff is currently developing. The entire grant amount being sought is $8,550,000, of which the local match of 25% would be up to $2,137,500.

Much of the 25% match is anticipated to be covered through in-kind contributions of labor and services, contributions from private property owners such as HOAs for the aspects of the project occurring on privately-owned open space, volunteer labor, potentially other state and county grant sources, and with additional funds being required from the City's General Fund.

The third consideration is a request to appropriate additional funds for the City’s existing Weed Abatement Program. Currently, $160,000 is provided in the General Fund for the FY 2026 Weed Abatement Program (Program 452). $135,900 of that amount is dedicated for weed abatement services, including abatement of private and public properties, and the remaining $24,100 is for additional areas of Orange County Fire Authority (OCFA)-recommended defensible-space clearance services. Due to the rising costs of vegetation management, the community’s heightened focus on fire safety, and the recent expansion of the City’s designated Fire Hazard Severity Zones, staff is requesting to increase the total cost of the program by $96,060, for a total program cost of $256,060. This results in a total cost of $181,060 for weed abatement services for private and public properties, and $75,000 for additional areas of OCFA-recommended defensible-space clearance services. The breakdown of the total supplemental appropriation of $96,060 that is requested is $45,160 in 001-452-43470 and $50,900 in 001-452-43890.

Summary:

The City is working to strengthen its wildfire preparedness through strategic planning and community engagement. Staff has submitted a $250,000 grant application to develop a Community Wildfire Protection Plan (CWPP). A CWPP will help develop and organize the City’s 1 Attachment 1
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Wildfire Prevention Program by guiding fuel reduction project priorities, support Firewise USA community designations, and enhance access to state and federal funding. Additionally, the City is preparing its application for City-inclusion on CalFIRE’s Fire Risk Reduction Community List (FRRCL) before the October 1, 2025 deadline. FRRCL designation will provide priority consideration for wildfire prevention grants and formally recognize the City’s adoption of key fire safety measures, such as updated Fire Hazard Severity Zone maps, a compliant General Plan Safety Element, and active defensible-space enforcement.

The City is also advancing multiple wildfire prevention and vegetation management initiatives to protect life, property, and infrastructure in its wildland-urban interface areas while the CWPP is developed. Building on its successful 2025 Pilot Goat-Grazing Project, the City has applied for $518,535 from CalFIRE’s Wildfire Prevention Grant Program to expand fuel reduction treatments on 348.36 acres of publicly-owned open space, benefiting more than 2,600 nearby homes and 113 commercial properties. If successful, this grant would fund such work to occur between March 2026 and March 2028. In the shorter-term, City staff seeks City Council’s direction on an option to extend the Pilot Goat-Grazing Project until March 31, 2026 by appropriating $100,000 to extend the Pilot Goat-Grazing Project, and directing staff to initiate a Request for Proposals to identify a contractor to conduct the work. The areas proposed for this project under CalFIRE’s Wildfire Prevention Grant Program is shown in Figure 1, below:

Figure 1
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Concurrently, the City is pursuing an $8,550,000 Hazard Mitigation Grant Program (HMGP) award from the California Office of Emergency Services (CalOES) to implement a long-term Wildfire and Vegetation Management Program across 5,300 acres of open space, incorporating goat grazing, mechanical and hand-work vegetation removal, native-vegetation restoration, and public education and outreach. In order to facilitate the submission of this application, staff requests City Council approval to confirm the 25% required local match in an amount up to $2,137,500. The areas proposed for this project under HMGP is shown in Figure 2, below.

Figure 2
Both projects (funded through CalFIRE’s Wildfire Prevention Grant Program and HMGP) align with the City’s 2024 Local Hazard Mitigation Plan (LHMP) and regional wildfire protection strategies, and, if awarded, will be implemented in collaboration with OCFA and community partners.

Given rising vegetation management costs, expansion of the City’s Fire Hazard Severity Zones, and heightened community expectations for proactive fire prevention, the City’s Weed Abatement Program (WAP) has grown increasingly vital. Following a vendor review, staff determined that E.

Stewart and Associates, Inc. (Stewart) is uniquely qualified to provide the services necessary to 3 Legend
Sub ct Open Space
Development Buffer (150 ft)
- R.Mcl5 lluffM (SO rt)
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meet the City’s operational needs due to their local presence, technical expertise, established agency relationships, and proven track record over 29 years. Staff recommends awarding a contract, for $256,060 to Stewart to continue WAP operations, which includes clearing approximately 86 City-owned parcels and enforcing weed abatement on private properties. This contract will ensure timely and effective fire-risk reduction ahead of peak wildfire conditions while maintaining the City’s high standards for environmental stewardship and public safety.

Background:

Wildfire Prevention Program Activities:

1. Extension of Pilot Goat-Grazing Project
In early 2025, the City of San Clemente launched an innovative pilot goat-grazing project aimed at reducing wildfire risk through sustainable vegetation management. The initiative, which began in February, employs a herd of approximately 20 goats to graze on overgrown brush and invasive plants across 10 acres near Vista Hermosa Sports Park.

The program was spearheaded by a local resident, Mike Kay, a former volunteer firefighter who relocated to San Clemente after losing his home in the 2017 Tubbs Fire in Sonoma County. He provided the animals free of charge and constructed a 100-by-150-foot enclosure on City property to manage their grazing and protect them from predators.

The pilot program was scheduled to run for three months, during which time the animals grazed on a designated City-owned parcel, consuming dry brush and non-native vegetation such as mustard and thistle. Community response has been overwhelmingly positive, with residents expressing enthusiasm for the eco-friendly approach.

To facilitate continuation of this program in the short term (until March 31, 2026), staff is presenting an option for City Council’s consideration that is discussed in more detail later in this report in the “Discussion” Section.

To facilitate continuation of this program in the near term (to occur during fiscal years 2026 through 2028), City staff have submitted a grant application to CalFIRE’s Wildfire Prevention Grant Program to expand the successful Pilot Goat-Grazing Project into a larger-scale hazardous fuels reduction initiative. The project seeks $518,535 in funding to treat 348.36 acres of wildland-urban interface (WUI) open space within the City’s Local Responsibility Areas (LRAs), all located in Very High and High Fire Hazard Severity Zones.

The project builds on the City’s three-month pilot project, which demonstrated the effectiveness of prescribed goat grazing in reducing wildfire risk and controlling invasive plant species. Using lessons learned from the pilot, the proposed program would do the following:
 Deploy goat herds strategically to remove dense, fire-prone vegetation (e.g., black mustard, artichoke thistle) and create defensible space adjacent to neighborhoods, commercial areas, and evacuation routes.
 Protect 2,665 nearby residences and 113 commercial properties located within ½ mile of treatment areas.
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 Restore ecological health by improving soil quality, controlling invasive species, and supporting native vegetation.
 Implement a public education campaign to increase wildfire preparedness, promote defensible space, and raise awareness about the benefits of goat grazing.  Collaborate with OCFA and regional partners to ensure alignment with broader wildfire mitigation efforts.

The project aligns with the City’s 2024 LHMP, which prioritizes vegetation management and explicitly recommends exploring alternative fuel modification methods such as goat grazing.

The grant would also help the City sustain project benefits by integrating goat grazing into its long-term wildfire mitigation strategy and leveraging future grant opportunities for maintenance and program expansion.

If awarded, the project will be implemented in two annual grazing cycles with monitoring, community outreach, and interagency coordination, including compliance with CEQA and local conservation easements. By reducing hazardous fuels and increasing community engagement, the project will protect lives, property, and critical infrastructure while serving as a scalable model for wildfire resilience in Southern California.

2. Long-Term Wildfire and Vegetation Management Program In June 2025, the City of San Clemente successfully submitted a Notice of Interest for funding through the California Office of Emergency Services (Cal OES) Hazard Mitigation Grant Program (HMGP) to implement a comprehensive Wildfire and Vegetation Management Program. The City is currently working on the full application for this program, which is due September 15, 2025. The application seeks approximately $8,550,000 in total project funding, with a 25% local match, to reduce hazardous vegetation across its 5,300 acres of public and private open space.

The program builds upon the City’s successful Pilot Goat-Grazing Project and expands it into a multi-year effort incorporating:
 Strategic goat grazing to manage vegetation in steep or inaccessible terrain.  Mechanical and hand-crew vegetation removal to reduce hazardous fuel loads.  Native vegetation restoration to create fire-resilient landscapes.  Collaboration with HOAs and private property owners to address high-risk privately owned parcels.
 Public education and community volunteer programs to strengthen wildfire prevention awareness.

The grant application is supported by the City’s recently adopted Local Hazard Mitigation Plan (LHMP), the Orange County Community Wildfire Protection Plan (CWPP), updated Fire Hazard Severity Zone (FHSZ) maps, and historical fire data documenting significant wildfires such as the Grundy Fire (1976) and Cristianitos Fire (2017).

If awarded, the project will directly mitigate wildfire hazards by lowering fuel loads, creating additional defensible space buffers between development and the wildland-urban interface 2115
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(WUI), and reducing ember-driven fire risks in the City’s WUI. This program will protect approximately 17,943 properties identified as at-risk for wildfire damage, while improving ecological conditions and providing a scalable model for regional wildfire mitigation.

The City anticipates using this funding to launch planning, environmental studies, and phased vegetation management work in 2026, with sustained annual treatments to ensure long-term risk reduction.

3. Community Wildfire Protection Plan
A Community Wildfire Protection Plan (CWPP) is a planning and funding prioritization tool created by the Healthy Forests and Restoration Act of 2003 as an incentive for communities to engage in comprehensive forest and fire hazard planning and to help define and prioritize local needs. The plan focuses on protections for existing development, and may address wildfire response, hazard mitigation, community preparedness, and/or structure protection. A local CWPP is one of the most effective ways to influence where and how federal agencies implement fuel reduction projects on federal lands, and how additional federal funds may be distributed for projects on nonfederal lands. CWPP’s are not required by the State or Federal government, but a CWPP development or update process can be leveraged to meet multiple local, tribal, regional, state, and federal priorities and requirements.

The City’s adopted LHMP includes Mitigation Action No. 50, which states that the City will, “Consider developing a Community Wildfire Protection Plan to further reduce wildfire risk and enhance resilience.” In response to the heightened need to address wildfire preparedness and the current availability of grant funding offered through the U.S. Forest Services’ Community Wildfire Defense Fund Grant, City staff developed a grant application to cover the costs of creating a CWPP. The grant application was submitted on March 14, 2025 and provides nomatch funding of up to $250,000 specifically for the creation of a CWPP. If the City is successful in the application process, City staff anticipates initiating this process immediately thereafter with the assistance of consultants contracted though the appropriate Request For Proposals (RFP) process. Should the need arise to acquire other grant funds if the application is not successful, City staff are aware of other opportunities available and would begin the process to apply for those funds.

4. Firewise Communities Program
The Firewise USA program, led by the National Fire Protection Association, offers a structured approach for communities to enhance their wildfire resilience in California. This initiative promotes collaborative efforts among residents, local fire departments, and other key stakeholders to bolster the fire resistance of homes and their surroundings. Integral to California’s wildfire preparedness strategy, the program is supported by CalFIRE’s Community Wildfire Preparedness & Mitigation Division, aiding communities in achieving Firewise designation. Achieving Firewise USA recognition is a collaborative and ongoing process. Each step is designed to empower residents and stakeholders to work together to enhance their local area’s wildfire resilience. The program allows neighborhoods and HOAs, between 8 and 2,500 homes, to apply for this designation.
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The LHMP includes Mitigation Action No. 37, which states: “To assist neighborhoods and HOAs with becoming a Firewise USA community, prepare a City-wide Community Wildfire Risk Assessment utilizing approved Firewise approaches and methodologies. Include action plan templates for neighborhoods to reduce ignition risks, such as community-level actions, educational activities, and suggested homeowner improvements. Promote the Community Wildfire Risk Assessment as a tool for use in applying to become a Firewise USA community.” As part of the CWPP, the City will prepare a City-wide Community Wildfire Risk Assessment, which is an integral step in the City’s effort to assist neighborhoods and HOAs with becoming Firewise USA communities. City staff anticipates implementing Mitigation Action No. 37 subsequent to the completion of the City-wide Community Wildfire Risk Assessment portion of the CWPP. However, individual neighborhoods and HOAs are able to embark on the process to become a recognized Firewise Community beforehand.

5. Fire Risk Reduction Community List (FRRCL)
The City is actively preparing an application to be included on the California FRRCL, a designation administered by CalFIRE that identifies communities demonstrating a strong commitment to wildfire prevention and risk reduction. Communities on the FRRCL receive priority consideration for CalFIRE’s wildfire prevention grants and may benefit from additional support in implementing vegetation management and hazard mitigation projects.

The FRRCL application period for the current application cycle closes on October 1, 2025, with successful applicants formally listed on July 1, 2026 for a two-year designation. To qualify, the City will demonstrate compliance with CalFIRE’s required criteria, which include:
 Adoption of Very High Fire Hazard Severity Zone (VHFHSZ) maps;  An up-to-date Safety Element in its General Plan;
 An LHMP;
 A documented process for reviewing development projects in fire-prone areas;  Implementation of additional wildfire risk reduction measures such as defensible space enforcement, community education programs, and vegetation management initiatives.

The City is currently compiling evidence of compliance with these criteria, including its recently updated LHMP, ongoing weed abatement and vegetation management programs, and cooperative efforts with OCFA. In addition, the City is preparing supporting documentation such as ordinances, inspection protocols, and public outreach materials that demonstrate its commitment to reducing wildfire hazards.

If approved, the FRRCL designation will strengthen the City’s eligibility for state wildfire mitigation funding and reinforce San Clemente’s proactive leadership in reducing fire risk for its residents and businesses in the wildland-urban interface.

Weed Abatement Program:

Each year, the City Council adopts a resolution pursuant to California Government Code Section 39561, which finds and declares weeds and trash on vacant and unoccupied parcels to be a 2137
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seasonal and recurrent fire hazard nuisance. The City’s WAP was established with the intent of reducing the possibility of weed- and debris-fueled fires. Since its adoption, the City has contracted with professional service providers for the administration and implementation of the WAP. The WAP includes the clearing of approximately 86 City-owned, non-developed parcels, reservoirs, well and pumping station sites, as well as any vacant, privately-owned parcels not cleared by their owners prior to a deadline established annually by resolution of the City Council.

The work performed under the WAP’s professional services contract consists of the administration, notification, inspection, and removal of noxious and dangerous weeds and trash located upon the streets, sidewalks, private properties, and parkways within the corporate limits of the City. Additionally, every year, OCFA staff, the Program contractor, and the Community Development Director inspect City property for compliance with the City’s fire safety standards.

During those inspections, OCFA recommends areas in need of additional fire-clearance work.

The average annual cost to the City for the last five years of the entire WAP is $160,169 with the single most expensive year (FY2024) costing $176,842. Costs related to the clearing of noncompliant private properties are passed on to the property owners and are not reflected in these amounts. Due to the rising costs of vegetation management, the community’s heightened focus on fire safety, and the recent expansion of the City’s designated Fire Hazard Severity Zones, staff is recommending awarding and executing a new WAP contract and increasing the annually budgeted amount of the WAP. More information on this request is provided in the “Discussion” Section below.

Discussion:

Wildfire Prevention Program Activities:

1. Near-term Extension of Pilot Goat-Grazing Project
On June 3, 2025, staff presented the City Council with a request to continue and expand the pilot goat-grazing project until December 31, 2025. Attachment 2 provides a copy of the agenda report related to that item. Staff indicated that the cost to extend the program would be $100,000. At that meeting, the City Council directed that this item be continued to a future meeting for further City Council consideration.

While the City is actively applying for grants to provide the funding necessary to provide goatgrazing services in an expanded capacity beyond the initial pilot project, including both the CalFIRE Wildfire Prevention Grant Program and the HMGP discussed above, the City will not know whether its grant applications are successful until early next year and the middle of next year, respectively. Staff seeks the City Council’s direction on whether to appropriate funding at this time to provide goat-grazing services in the near-term while staff await responses on the success of the grant programs currently being developed or already submitted.

For the City Council’s consideration, staff has included a draft Resolution 25-116 (Attachment 1) to allocate up to $100,000 for near-term goat-grazing services. The resolution also extends the timeframe for this project to cover the spring of 2026, should these funds allow for goat grazing to continue past December 31, 2025. Due to the cost of this program, City staff will 2148
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need to initiate a Request For Proposals process to establish a contract for goat-grazing services. The contract would be presented for the City Council’s approval at a future meeting if the contract amount exceeds the City Manager’s authorization limit of $75,000.

2. Long-Term Wildfire and Vegetation Management Program As discussed in the “Background” Section above, the HMGP application seeks approximately $8,550,000 in total project funding, with a 25% local match, to reduce hazardous vegetation across its 5,300 acres of public and private open space. The 25% match results in a nonfederal cost share (City commitment) of $2,137,500.00. The City anticipates its matching funds to come mostly from in-kind contributions of labor and services, contributions from private property owners such as HOAs for the aspects of the project occurring on privatelyowned open space, volunteer labor, and potentially other state and county grant sources, if and when applicable. There will likely be some additional funds required from the City's General Fund, but staff is working to tailor this program in a way that over the proposed 4-year HMGP-funded program, the costs do not create a significant burden on the General Fund.

As part of the City’s application for the HMGP, the City will need to confirm its commitment to the 25% match. Staff is requesting the City Council consider proposed Resolution 25-117 (Attachment 3) which provides direction to City staff to submit the HMGP application that includes a 25% match of up to $2,137,500.

3. Weed Abatement Program:

The City’s WAP has become an increasingly critical component of the City’s wildfire prevention strategy due to the rising costs of vegetation management, the community’s heightened focus on fire safety, and the recent expansion of the City’s designated Fire Hazard Severity Zones. These factors, coupled with higher contractor pricing for specialized fuel-reduction work and the growing need for proactive clearance in both City-owned and private parcels, have made it necessary to secure a new contract for WAP services. To ensure the program’s continued effectiveness and cost-efficiency, staff has evaluated available vendors and determined that Stewart, a local vendor, is uniquely qualified to meet the City’s operational requirements.

Pursuant to City Policy 201-2-1, Procurement Policy and Procedure, staff recommends awarding this contract based on two exemptions contained in Section XI, Exemptions To the Formal and Informal Solicitation Process. The first exemption is A.1.2, which reads in pertinent detail “that compliance with the bidding requirements and procedures is inefficient, impractical, or not in the best interest of the City, based on specifically identified conditions and supported by substantial evidence in the record.” The second exemption is A.1.8, which states: “The proposed professional service provider has unique familiarity with the project, subject area, or possesses other attributes that make the provider uniquely qualified to provide the services….” Following a review of potential vendors, staff determined that Stewart is the only qualified provider that meets the City’s operational requirements and is uniquely qualified and, therefore, recommends awarding the contract, under these exemptions, supported by the following findings:
 Geographic and Logistical Advantages: Stewart is the only provider headquartered within a 30-minute drive of the City. Their local presence enables rapid deployment, flexible 2159
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scheduling, and timely response to urgent fire-risk situations, such as red flag weather events or emergency clearance requests.
 Technical Expertise: Stewart has extensive experience with fire fuel reduction techniques, including hand thinning, chipping, and mastication, and is uniquely qualified to perform this work on steep slopes and in environmentally sensitive areas within the City. Their team includes wildland fire specialists, licensed arborists, and professionals with environmental compliance knowledge, ensuring proper habitat protection.  Agency Collaboration and Trust: Stewart has an established working relationship with the OCFA and other fire prevention agencies in the region, and regularly coordinates with these agencies to implement fire-clearance recommendations within City limits.  Proven Track Record: Stewart has successfully administered the City’s weed abatement program for the past 29 years, consistently demonstrating high performance, cost control, and exemplary customer service. Their familiarity with the City’s processes and requirements significantly reduces the risk of service interruptions or performance deficiencies.
 Specialized Equipment: Stewart possesses specialized equipment suited for work in the City’s wildland-urban interface areas, including low-ground impact machinery that minimizes environmental disturbance.
 Market Limitations: A review of prior solicitations, RFP responses, and publicly advertised services indicates that Stewart is the only vendor capable of delivering the full scope of services required, including administration of weed abatement for privately-owned parcels in compliance with Government Code Section 39561.

Based on these factors, staff has determined that Stewart has unique familiarity with the project and is the only feasible provider for the WAP. Furthermore, utilizing the City formal bidding procedures for this contract would be inefficient, impractical, and not in the best interest of the City, as it would not result in identifying a consultant better suited for the work required by this contract.

The proposed contract amount of $256,060 (for weed abatement on public and private properties, and OCFA-recommended defensible-space clearance services) represents an increase of $96,060 over the current contract’s maximum fixed cost, due in large part to the rising costs of vegetation management, the community’s heightened focus on fire safety, the recent expansion of the City’s designated Fire Hazard Severity Zones, higher contractor pricing for specialized fuelreduction work, and the growing need for proactive clearance in both City-owned and private parcels. This amount exceeds the currently budgeted total of $156,000. Attachment 4 provides a draft Resolution 25-118 that appropriates an additional $96,060 for the WAP (Program 452), and awards a new contract to Stewart, provided as Exhibit A to that resolution.

Council Options:
 Adopt Resolution No. 25-116 to allocate $100,000 to extend the Pilot Goat-Grazing Project until March 31, 2026, adopt Resolution 25-117 to confirm the City’s commitment of the 25% match for the HMGP grant application, and adopt Resolution 25-118 to award a new Weed Abatement Contract to E. Stewart and Associates, Inc., and allocate an additional $96,060 to the WAP budget.
 Modify and then adopt Resolutions Nos. 25-116, 25-117, and 25-118. 21610
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 Continue the item with the direction to staff to provide additional information.  Do not approve Resolutions Nos. 25-116, 25-117, and 25-118. This would result in the City not extending the Pilot Goat-Grazing Project, not confirming the City’s commitment of the 25% match for the HMGP grant application, and not approving a new Weed Abatement Contract.

Environmental Review/Analysis:

The extension of the goat-grazing program is categorically exempt from the California Environmental Quality Act (CEQA) under Class 1 § 15301(h) (Existing Facilities), Class 4, § 15304 (Minor Alterations to Land), Class 7, § 15307 (Actions by Regulatory Agencies for Protection of Natural Resources), and Class 8, § 15308 (Actions by Regulatory Agencies for Protection of the Environment) and is statutorily exempt under Public Resources Code §§ 21080(b)(4) (Emergency Projects) and § 21080.42 (SB 131—Fire Prevention Exemption), as the activity consists of fuel-modification work to reduce the risk of wildfires, and invasive and nonnative vegetation, that degrades the natural environment.

The commitment to a 25% local match for the HMGP application is not a “project” pursuant to the California Environmental Quality Act (CEQA), as it has no potential for resulting in either a direct or physical change in the environment or a reasonably foreseeable indirect physical change in the environment. Appropriate CEQA determinations will be made for specific projects to carry out the program contemplated by the HMGP-funded wildfire prevention program, if such application is successful, when considered at a later date.

The execution of a contract for weed abatement and fuel-modification work to reduce wildfire risk is not a “project” pursuant to the California Environmental Quality Act (CEQA), as it has no potential for resulting in either a direct or physical change in the environment or a reasonably foreseeable indirect physical change in the environment. Appropriate CEQA determinations will be made for specific projects to provide wildfire prevention services and abate the nuisance of weeds when considered at a later date.

Recommended Actions:

Staff Recommendation ..recommendation
STAFF RECOMMENDS that the City Council approve Resolutions Nos. 25-116, 25-117, and 25- 118, which will accomplish the following, respectively:

1. Appropriate $100,000, in account number 001-452-43890, to extend the Pilot Goat-Grazing Project until March 31, 2026, direct City staff to initiate a Request for Proposals process to establish a contract for goat grazing services, and determine that the project is statutorily and categorically exempt from the California Environmental Quality Act under various provisions; and

2. Confirm the City’s commitment to the 25% match for the HMGP application of up to $2,137,500 anticipated to be covered by in-kind contributions of labor and services, contributions from private property owners such as HOAs for the aspects of the project occurring on privately-owned open space, volunteer labor, potentially other state and county grant sources, and the City's General Fund; and
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3. Award and authorize the City Manager to execute a Professional Services Agreement by and between the City of San Clemente and E. Stewart and Associates, Inc., in an amount not to exceed Two Hundred Fifty-Six Thousand, Sixty Dollars ($256,060) for the Weed Abatement Program, consisting of weed abatement and related defensible-space clearance services, and appropriate an additional $96,060 to Program 452 – Weed Abatement: $45,160 in 001-452- 43470 and $50,900 in 001-452-43890.
..end
Attachments:

1. Proposed Resolution 25-116 – Appropriating funds to extend the Goat Grazing Pilot Project and finding the project categorically and statutorily exempt from the California Environmental Quality Act

2. City Council Agenda Report on Extension of Goat Grazing Pilot Project, dated June 3, 2025

3. Proposed Resolution 25-117 – Confirming the City’s 25% match for the HMGP Application

4. Proposed Resolution 25-118 – Awarding and Authorizing the City Manager to execute a Weed Abatement Contract to E. Stewart and Associates, Inc., Appropriating an Additional $96,060 to Program 452 – Weed Abatement.

5. Professional Services Agreement with E. Stewart and Associates, Inc.

Notification:

E. Stewart and Associates, Inc.

Orange County Fire Authority
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Attachment 1
RESOLUTION NO. 25-116

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF

SAN CLEMENTE, CALIFORNIA, APPROPRIATING FUNDS

TO EXTEND THE PILOT GOAT-GRAZING PROGRAM FOR

WILDFIRE PREVENTION PURPOSES, DIRECTING STAFF

TO INITIATE A REQUEST FOR PROPOSALS, AND

FINDING THE PROJECT EXEMPT FROM THE

CALIFORNIA ENVIRONMENTAL QUALITY ACT (CEQA)
UNDER SECTION 15301, 15304, 15307, 15308 (14 CCR §
CLASS 1: EXISTING FACILITIES, CLASS 4: MINOR
ALTERATIONS TO LAND, CLASS 7: ACTIONS BY

REGULATORY AGENCIES FOR PROTECTION OF
NATURAL RESOURCES, CLASS 8: ACTIONS BY

REGULATORY AGENCIES FOR PROTECTION OF THE

ENVIRONMENT), AND STATUTORILY EXEMPT UNDER
PUBLIC RESOURCES CODE §§ 21080(b)(4) (EMERGENCY
PROJECTS) AND § 21080.42 (SB 131 - FIRE PREVENTION

EXEMPTION)
WHEREAS, the City Council recognizes the heightened risk of wildfire in the City’s Very High and High Fire Hazard Severity Zones and has adopted a Local Hazard Mitigation Plan prioritizing vegetation management to reduce that risk; and WHEREAS, the City’s 2025 Pilot Goat Grazing Program successfully reduced hazardous fuel loads in targeted wildland-urban interface (WUI) areas, and extending the program to maintain and expand these fire-prevention benefits is in the City’s and the public’s best interest; and
WHEREAS, the extension will provide for goat-grazing services through March 31, 2026, pending the outcome of state and federal wildfire-prevention grant applications; and
WHEREAS, the City Council desires to appropriate up to $100,000 from the General Fund to extend the Pilot Goat-Grazing Program and direct staff to initiate a Request For Proposals for continued grazing services; and WHEREAS, the City Council finds the extension of the goat-grazing program is categorically exempt from the California Environmental Quality Act (CEQA) under Class 1 § 15301(h) (Existing Facilities), Class 4, § 15304 (Minor Alterations to Land), Class 7, § 15307 (Actions by Regulatory Agencies for Protection of Natural Resources), and Class 8, § 15308 (Actions by Regulatory Agencies for Protection of the Environment)and is statutorily exempt under Public Resources Code §§ 21080(b)(4) (Emergency Projects) and § 21080.42 (SB 131—Fire Prevention Exemption), as the activity consists of fuel21913 Resolution No. 25-116 Page 2
modification work to reduce the risk of wildfires, and invasive and non-native vegetation that degrades the natural environment.

NOW THEREFORE, the City Council of the City of San Clemente does hereby find, determine, and resolve as follows:

SECTION 1. The above recitals are true and correct and incorporated herein fully by reference as findings.

SECTION 2. Based upon its review of the entire record, including the Staff Report, any public comments or testimony presented to the City Council, and the facts outlined below, the City Council hereby finds and determines that the proposed project is categorically exempt from CEQA pursuant to State CEQA Guidelines Sections 15301(h) (Class 1: Existing ), 15304 (Class 4: Minor Alterations to Land), 15307 (Class 7: Actions by Regulatory Agencies for Protection of Natural Resources), and 15308 (Class 8:

Actions by Regulatory Agencies for Protection of the Environment), and is statutorily exempt under Public Resources Code §§ 21080(b)(4) (Emergency Projects) and § 21080.42 (SB 131—Fire Prevention Exemption).

The Class 1 exemption specifically exempts from further CEQA review the operation, repair, maintenance, and minor repair of existing public or private facilities and topographical features involving negligible or no expansion of use beyond that existing at the time of the lead agency's determination. This exemption covers, but is not limited to, maintenance of existing landscaping, native growth, and water supply reservoirs. The project does not change the existing general use of properties. Thus, the project qualifies for the Class 1 exemption.

The Class 4 exemption specifically exempts from further CEQA review the minor public or private alterations in the condition of land, water, and/or vegetation which do not involve removal of healthy, mature, scenic trees except for forestry and agricultural purposes. This exemption covers, but is not limited to, fuel management activities within 30 feet of structures to reduce the volume of flammable vegetation, provided that the activities will not result in the taking of endangered, rare, or threatened plant or animal species or significant erosion and sedimentation of surface waters. This exemption shall apply to fuel management activities within 100 feet of a structure if the public agency having fire protection responsibility for the area has determined that 100 feet of fuel clearance is required due to extra hazardous fire conditions. Thus, the project qualifies for the Class 4 exemption.

The Class 7 exemption specifically exempts from further CEQA review the actions taken by regulatory agencies as authorized by state law or local ordinance to assure the maintenance, restoration, or enhancement of a natural resource, where the regulatory process involves procedures for protection of the environment. This exemption covers, but is not limited to, agency actions aimed at safeguarding natural resources through regulatory procedures, provided there’s no physical construction involved. Thus, the project qualifies for the Class 7 exemption.
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Resolution No. 25-116 Page 2
The Class 8 exemption specifically exempts from further CEQA review actions taken by regulatory agencies, as authorized by state or local ordinance, to assure the maintenance, restoration, enhancement, or protection of the environment where the regulatory process involves procedures for protection of the environment. The purpose of the pilot goat-grazing project is to protect the City’s environmental resources by reducing risk of wildfires, and invasive and non-native vegetation that degrades the natural environment. Thus, the project qualifies for the Class 8 exemption.

Furthermore, none of the exceptions to the use of the Class 1, 4, 7, and 8 categorical exemptions identified in State CEQA Guidelines section 15300.2 apply. The project will not result in a cumulative impact from successive projects of the same type in the same place over time. The pilot goat-grazing project consists of regular maintenance activities to reduce the risk of fires in the City. There are no unusual circumstances surrounding the project that result in a reasonable possibility of a significant effect on the environment because the project is limited to the removal of weeds, and invasive and non-native vegetation that degrades the natural environment within the City’s open space areas. The project will not damage scenic resources, including trees, historic buildings, rock outcroppings, or similar resources. The project does not include any hazardous waste sites, and the project will not cause a substantial adverse change in the significance of a historical resource. The project will be carried out on open space-zoned properties with no historical resources affected. And the project has no possibility of a direct or foreseeable indirect significant impact on the environment. Thus, the Class 1, 4, 7, and 8, and 21 exemptions apply.

Additionally, the pilot goat-grazing project is statutorily exempt under Public Resources Code §§ 21080(b)(4) (Emergency Projects) and § 21080.42 (SB 131—Fire Prevention Exemption) in that it consists of specific actions necessary to prevent or mitigate an emergency—namely, the imminent threat of wildfire in areas designated as Very High and High Fire Hazard Severity Zones. The project’s vegetation management activities are directly intended to reduce flammable fuel loads and create defensible space to protect life, property, and critical infrastructure from catastrophic fire events. Under § 21080.42, the work qualifies for the fire prevention exemption because it involves wildfire risk reduction in compliance with applicable environmental protection measures, is located in a wildland-urban interface area, and does not exceed the acreage limitations set forth in the statute. Thus, the project qualifies for both the emergency project and fire prevention statutory exemptions. Thus, no further environmental review is required.

SECTION 3. The City Council hereby approves a supplemental appropriation of up to $100,000 from the General Fund to extend the Pilot Goat-Grazing Program through March 31, 2026.

SECTION 4. The City Council directs the City Manager, or their designee, to initiate a Request For Proposals for goat-grazing services to extend the Pilot GoatGrazing Program through March 31, 2026, and return to Council for contract award if the amount exceeds the City Manager’s authorization limit.
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Resolution No. 25-116 Page 2
SECTION 5. The City Clerk shall certify to the passage and adoption of this resolution and enter it into the book of original resolutions.

PASSED AND ADOPTED this ___ day of _____________________, ____.

ATTEST:

City Clerk of the City of Steve Knoblock, Mayor of the
San Clemente, California City of Clemente, California
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Resolution No. 25-X1 Page 3

STATE OF CALIFORNIA )
COUNTY OF ORANGE ) §

CITY OF SAN CLEMENTE )
I, LAURA CAMPAGNOLO, City Clerk of the City of San Clemente, California, do hereby certify that Resolution No. 25-116 was adopted at a regular meeting of the City Council of the City of San Clemente held on the _______ day of _______________________, _________, by the following vote:

AYES:

NOES:

ABSENT:

IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City of San Clemente, California, this _____ day of _________________, ________. __________________________
CITY CLERK of the City of
San Clemente, California
Approved as to form:
____________________________
Elizabeth A. Mitchell, City Attorney
22317
910 Calle Negocio
2nd Floor
San Clemente, California
www.san-clemente.org

AGENDA REPORT

CITY OF SAN CLEMENTE

CITY COUNCIL MEETING

CITY OF SAN CLEMENTE
Meeting Date: June 3, 2025 Agenda Item: 10C.

Submitted By: City Manager
Prepared By: Andy Hall, City Manager
Subject:
..titl e

CONSIDERATION OF EXTENDING THE GOAT GRAZING NOXIOUS WEED AND FIRE FUEL REDUCTION PILOT PROGRAM UNTIL DECEMBER 31, 2025 ..body
Fiscal Impact:

All costs associated with the initial phase of the pilot program were donated by the owner of the goats, Mr. Mike Kay. The extension and expansion of the program will cost $100,000 for the period of July 1 through December 31, 2025. Funding has not been identified and would need to be appropriated from the General Fund balance.

Summary:

In response to both a significant increase in noxious weeds and potential fire fuel in the open space areas of San Clemente, the City Council authorized a goat grazing pilot program for a specified parcel of City owned property. The initial phase of the program was completed donated by Mike Kay, the owner of the goats. The program included the goats, the construction of a goat enclosure, and grazing of noxious weeds and grasses that can also become fire fuel (and a donkey named Steve). In addition to the grazing, Mr. Kay provided educational and volunteer opportunities. The City provided the property and water for the animals.

Background:

In October of 2024, a goat grazing program was
established to reduce noxious weeds and fire fuels
on open space owned by the City of San Clemente.

The original pilot program concluded in April of 2025
and an assessment of the program was conducted
between the owner of the Goats, Mr. Mike Kay, and
members of staff. The program was successful in
the assigned location for weed and fire fuel removal,
as expected, and the public response was
overwhelmingly positive.

Following discussion with staff, the owner of the
goats, who is also an experienced fire fighter, has
suggested that there remains a lot of work to do on the City owned property and would like to extend and expand the program. Staff is supportive of the proposed expansion, but suggest that the timeframe be limited to December 31, 2025. The proposed timeframe would allow the pilot project to continue while the community fire preparation program is prepared by staff for future consideration by the City Council. It is anticipated that the fire preparation program will include 1 Attachment 2
22418
Meeting Date: June 3, 2025 Agenda Item: 10C.

CITY OF SAN CLEMENTE
goat grazing as one of the strategies in reducing the likelihood of fire in the community. The expansion of the pilot project would increase the number of goats from about 20 to about 100 goats and address more than 30 additional acres of City owned open space located south of Vista Hermosa Park and perhaps other areas of City owned open space. In order to extend and expand the project, Mr. Kay is seeking $100,000 in funding that will be used to:
 Continue the grazing program until December 31, 2025
 Expand the enclosure and add necessary animal care items  Conduct environmental review for additional City owned lands for grazing  Conduct outreach and education for local homeowner’s associations  Provide some funding for general expenses associated with the program (feeding, transportation, etc.)
As the program matures from a pilot program into a more consistent effort, a permanent program could include a comprehensive citywide grazing plan to reduce noxious weeds and reduce fire fuels.

Council Options:
 Terminate the pilot project and restore the current site to its previous condition.  Expand the pilot project and authorize a supplemental appropriation from General Fund balance to provide funding for the additional efforts.
 Provide alternative direction to the City Manager.

Environmental Review/Analysis:

Action to expand the project in and of itself is not defined as a project by the California Environmental Quality Act. However, goat grazing with an expanded foot print will require additional environmental review and may need additional City Council action.

Recommended Actions:

Staff Recommendation ..recommendation
Staff recommends an extension and expansion of the pilot project. To date, the current pilot project has been successful and supported by residents. An additional six months to study the issue and become more familiar with the limitations of the grazing program can ensure the activity is adequately addressed in the preparation of the community fire preparation program. ..end
Attachment:

None.

Notification:

None.
225192
910 Calle Negocio
2nd Floor
San Clemente, California
www.san-clemente.org

AGENDA REPORT

CITY OF SAN CLEMENTE

CITY COUNCIL MEETING
CITY OF SAN CLEMENTE 1
Meeting Date: February 17, 2026 Agenda Item: (1)
226
910 Calle Negocio
2nd Floor
San Clemente, California
www.san-clemente.org
Council Chambers

CITY OF SAN CLEMENTE
Tuesday, February 3, 2026
City Council
Regular Meeting Minutes
4:30 p.m. - Closed Session
5:30 p.m. - Business Meeting
Mayor Loeffler
Mayor Pro Tem Knoblock
Councilmember Cabral
Councilmember Enmeier
Councilmember Wu
These minutes reflect the order in which items appeared on the meeting agenda and do not necessarily reflect the order in which items were actually considered.

A Regular Meeting of the San Clemente City Council was called to order by Mayor Loeffler on February 3, 2026 at 4:30 p.m. in the San Clemente City Council Chambers, located at 910 Calle Negocio, 2nd Floor, San Clemente.

PRESENT: *Cabral, Enmeier, Knoblock, Wu and Mayor Loeffler *Councilmember Cabral arrived at 4:46 p.m.

STAFF PRESENT: Andy Hall, City Manager; Elizabeth Mitchell, City Attorney; Laura Campagnolo, City Clerk; Megan Jimenez, Deputy City Clerk

CLOSED SESSION
Amanda Quintanilla spoke in support of Closed Session item A3; commented on an email received from Ryan Chamberland, Chief Executive Officer, Transportation Corridor Agency.

Councilmember Wu announced that he will recuse himself from deliberations related to Closed Session Item A3 - properties located near the eastern terminus of Avenida Pico in the City of San Clemente.

Motion by Mayor Pro Tem Knoblock, second by Councilmember Enmeier, CARRIED 4-0 (Councilmember Cabral absent) to recess to Closed Session at 4:35 p.m. to discuss the following:

A. CONFERENCE WITH REAL PROPERTY NEGOTIATORS
Discussion concerning real property transactions in compliance with Government Code section 54956.8 regarding:

1. Real Property Negotiations: APNs: 678-16-01 and 690-552-06 Property: Northwest lot at Vista Hermosa Sports Park (known as the Meadows/Fields 7,8,9) and a portion of Richard T. Steed Memorial Park City Negotiators: Andy Hall, City Manager; Samantha Wylie, Beaches,