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
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.
.
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$WWDFKPHQW
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