May 5, 2026
TO: City Council
REQUESTED BY: Kimberly Ganimian, Finance Director
APPROVED BY: Robert A. Johnson, City Manager
SUBJECT: Notice of Public Hearing for Proposed Water and Wastewater Rate Adjustments (Prop 218)
RECOMMENDATION:
Staff recommends that the City Council:
1. Approve and adopt Resolution No. 4118, declaring its intention to consider proposed water and wastewater rate adjustments; and
2. Give notice and set a Public Hearing for July 21, 2026, in accordance with Proposition 218 requirements; and
3. Direct staff to return following the Public Hearing with the proposed updated rate schedule for City Council consideration.
BACKGROUND:
The City of San Jacinto (“City”) operates water and wastewater utility enterprises that provide service to residential, commercial, and institutional customers throughout the City. The City engaged Willdan Financial Services (“Willdan”) to prepare a comprehensive Water and Wastewater Rate Study (“Rate Study”) to evaluate the financial needs of the utility systems and recommend rate adjustments necessary to ensure long-term operational and capital sustainability.
The Rate Study identified required adjustments to adequately fund operating expenses, maintain reserves consistent with City policy, support ongoing capital improvement needs, and comply with debt covenant requirements. The existing rates are insufficient to continue meeting these obligations without adjustment.
Under Article XIII D of the California Constitution (Proposition 218), water and wastewater rates are considered property-related fees and therefore require mailed notice and a public hearing prior to adoption of any increases. Adoption of Resolution No. 4118 does not establish or implement rate changes; rather, it initiates the Proposition 218 noticing process and sets the required public hearing date.
DISCUSSION:
Willdan was retained by the City to conduct a comprehensive Water and Wastewater Utility Rate Study to evaluate the financial condition of the City’s utilities, develop a long-term financial plan, and determine whether rate adjustments are necessary to ensure the ongoing sustainability of the systems. Willdan’s study includes a ten-year financial forecast, a five-year rate plan, and a full cost-of-service analysis consistent with Proposition 218 and industry standards.
The study evaluates historical and projected operating costs, customer billing and usage data, system growth, capital improvement needs, debt service obligations, groundwater recharge requirements, reserve targets, and other financial factors. The analysis incorporates comprehensive financial modeling to ensure that the utilities can adequately fund operations, maintenance, and capital projects, meet debt coverage requirements, and maintain prudent reserves.
Willdan developed a robust, interactive rate model that allowed the City to evaluate scenarios, including alternative capital funding strategies, adjustments in usage assumptions, operating cost changes, and timing of capital projects. The model provides a transparent, data-driven basis for determining revenue requirements and developing Proposition 218-compliant rates.
The Rate Study also includes a cost-of-service allocation to ensure that costs are equitably assigned to customer classes and that any proposed rate structure is legally defensible, technically sound, and consistent with American Water Works Association (AWWA) principles.
Willdan’s analysis evaluates existing rate structures and presents potential modifications to enhance equity, financial stability, and compliance with legal standards.
The Rate Study findings will be used to support the proposed water and wastewater rate adjustments and form the basis of the Proposition 218 Notice. Adoption of Resolution No. 4118 initiates the Proposition 218 noticing process required prior to Council consideration of any rate changes. No rates will be adjusted unless approved by the City Council following the Public Hearing.
Resolution No. 4118 declares the City Council’s intention to consider proposed adjustments to water and wastewater rates and schedules the Proposition 218 Public Hearing for July 21, 2026, at 6:30 p.m. at the San Jacinto Community Center.
The resolution directs the City Clerk to mail Proposition 218 notices to all affected property owners and ratepayers. The notices will include the proposed rate adjustments derived from the Rate Study, the basis for the calculations, an explanation of how the rates support utility operations and capital needs, and instructions for submitting written protests.
If a majority protest is not received at or before the public hearing, the City Council may consider adopting the proposed rate adjustments at a later meeting. No changes to rates may occur unless the Council approves them following completion of the Proposition 218 hearing process.
FISCAL IMPACT:
There is no direct fiscal impact to the City’s General Fund. Water and wastewater utility services are fully funded through user fees.
The cost associated with preparing and mailing the Proposition 218 notices will be paid from existing Water (Fund 50) and Wastewater (Fund 55) enterprise fund budgets. These costs have already been accounted for in the current budget, and no additional appropriation or budget adjustment is required.
Adoption of Resolution No. 4118 merely initiates the Proposition 218 noticing process and does not adjust rates. Fiscal impacts would occur only if the City Council later approves new rates following the Public Hearing.
ATTACHMENTS:
Resolution No. 4118