TO: Mayor and City Council
FROM: Philippe Eskandar, City Manager
BY: Hillary Guirola-Leon, Finance Director
DATE: June 27, 2025
SUBJECT: CONSIDERATION OF SEWER SERVICE CHARGE RATES
FOR FISCAL YEARS 2026 TO 2030: CONSIDER STAFF
PRESENTATION, WRITTEN OBJECTIONS FROM
PROPERTY OWNERS, AND RESPONSES FROM STAFF;
HOLD PUBLIC HEARING ON SEWER SERVICE CHARGES
FOR FISCAL YEARS 2026 TO 2030, CONSIDER PROTESTS,
AND ADOPT RESOLUTION NO. R-25-21 ESTABLISHING
SEWER SERVICE CHARGES WITH ANNUAL UPDATES
THROUGH JULY 1, 2029; CONSIDER ADOPTING
ORDINANCE NO. O-25-1420, AMENDING THE SAN
MARINO CITY CODE TO ADD SECTION 16.06.03 (SEWER
SERVICE CHARGES) TO SAN MARINO CITY CODE
CHAPTER XVI, ARTICLE 6; AND APPROVAL OF
RESOLUTION NO. R-25-20 AUTHORIZING THE
COLLECTION OF SEWER SERVICE CHARGES ON THE LOS
ANGELES COUNTY PROPERTY TAX ROLL FOR FISCAL
YEAR 2025-2026
STRATEGIC PLAN CRITICAL SUCCESS FACTORS
Engaged and Connected Residents
Efficient, Responsive, and Effective City Services
Fiscally Responsible and Transparent City Government
Well-Maintained Infrastructure
Gretchen Shepherd Romey, Mayor
Tony Chou, Vice Mayor
Hunter Chang, Council Member
John Chou, Council Member
Calvin Lo, Council Member
BACKGROUND
As a part of the Fiscal Year (FY) 2025-26 Priority Initiatives, the City of San Marino engaged independent subject matter experts, Raftelis Financial Consultants Inc, to prepare a Comprehensive Sewer Rate Study to identify a viable funding mechanism to maintain the City‘s aging sewer system. Having an independent third party perform the Sewer Rate Study ensures an unbiased, objective analysis of costs and needs, helping to establish fair and equitable rates. The Sewer Rate Study was completed in April 2025 and establishes a financial plan with recommended sewer rates effective July 1, 2025, (for FY 2025-26) with annual adjustments for inflation each July 1 through July 1, 2029, (for FY 2029-30). The sewer rates established in the Study are based on the cost of providing the service as required by Proposition 218. The sewer system financial plan includes a capital investment target, operation and maintenance costs, and future inflationary assumptions for the Study period. The Study was published on the City’s website and is included as an attachment to this report (Attachment 1). The proposed sewer rates will be placed on the annual tax roll for properties connected to the City’s sewer system starting on July 1, 2025. The Preliminary tax roll report was published on the City’s website on June 13, 2025, and is included as Exhibit A to Resolution R-25-20.
Achieving a financially self-sustaining Sewer system is a priority initiative selected by the City Council for FY 2025-26. The initiative is focused on the long-term financial viability and functionality of the City’s sewer system. The Sewer Rate Study and associated initiative have been discussed at multiple public meetings, offering residents opportunities to provide input and feedback.
• At the February 12, 2025, City Council meeting, staff presented the proposed priority initiatives which included the goal of achieving a selfsustaining sewer system. • Community feedback on priority initiatives was gathered through a community survey and the results were presented to the City Council on March 12, 2025.
• At the March 12, 2025, City Council meeting, the City Council finalized its selection of FY 2025-26 priority initiatives.
• On March 28, 2025, the Sewer Rate Study and financial model was presented to City Council.
• Proposition 218 notices were sent to property owners on April 28, 2025.
This notice provided property owners with a date of the public hearing and the proposed maximum rate increases for FY 2025-26 through FY 2029-30.
• A Town Hall meeting was held on June 10, 2025, to present the proposed sewer rates to the public. This event served as an opportunity to inform and engage the community through education and outreach.
DISCUSSION
The City of San Marino operates a fifty (50)-mile long municipal sewer collection system and is responsible for collecting wastewater (sewage) and conveying it to the Los Angeles County Sanitation District for treatment.
Proper maintenance and capital investment are essential for the system’s continued operation, health, and safety. In 2019, the City completed a Sewer System Master Plan (SSMP) and a Wastewater Collection System Condition Assessment (WCSCA), which identified significant sewer capital investments needs over the next ten (10) years. The City’s five-year Capital Improvement Plan (CIP) as proposed in the City’s recent Wastewater Master Plan from FY 2026 to FY 2030 is approximately $20 Million. These projects remain unfunded and are necessary to maintain the structural and functional integrity of the City’s sewer system.
Unlike other cities in the region, San Marino does not currently charge residents for sewer services and instead relies entirely on the General Fund to cover any sewer-related expenditures or improvements. Based on research conducted by staff, San Marino remains the only City in the region who funds, operates, and maintains their sewer system in this manner. Most sewer systems are self-funded enterprises funded through customer rate revenue.
This approach ensures sewer revenue is only used for sewer expenses and helps keep sewer operations financially independent and legally transparent.
On November 13, 2024, the City engaged Raftelis to conduct a Sewer Rate Study consisting of a financial plan and rate recommendations for fiscal years 2025-26 through 2029-30. Achieving a financial self-sustaining Sewer system will help ensure there is enough funding available to continue making necessary improvements.
On March 28, 2025, the three capital funding scenarios listed below were presented for Council’s consideration:
• 100% rate funded;
• 75% rate funded; and
• 50% rate funded
The City Council provided staff with direction to use the fifty percent (50%) Capital Improvement Program (CIP) funding scenario for the Sewer Rate Study and Proposition 218 notices. The noticed rates represent the maximum rate implemented each year.
Proposition 218 notices were mailed to property owners on April 28, 2025, and included the maximum annual charge per Sewer Unit (SU) for the “Study period” of FY 2025-26 through FY 2029-30. Again, the “maximum annual charge” is based on the fifty percent (50%) CIP funding as directed by City Council. Although the Sewer Rate Study proposes a maximum annual charge per Sewer Unit of $522 (equivalent to $43.50/month) for FY 2025-26, with annual increases of three percent (3%) per year through FY 2029-30, the Council has discretion to set the charges at a lower rate.
On March 28, 2025, the City Council also provided direction to staff to prepare documents to support a sewer service charge for the first year (FY 2025-26, effective July 1, 2025) using the twenty-five percent (25%) CIP funding scenario, which is $312 annually per Sewer Unit.
After the City Council establishes the maximum charges for the Study period, the Council will also have discretion each year, when establishing the amount of the charges to be placed on the tax rolls for collection, to impose the charges in an amount equal to or less than the maximum charge.
The table below shows the proposed maximum annual Sewer Service Charge per Sewer Unit (SU) through FY 2029-30 based on fifty percent (50%) CIP:
Rate Structure and Billing
Since the wastewater collected by the City’s sewer system flows to the Los Angeles County Sanitation District (LACSD) for treatment, the City calculated the recommended Sewer Service Charges based on the SUs established by LACSD. Under this system of SUs, one SU represents the typical wastewater flow from one (1) single-family home. This means that a single-family home is assigned one (1) SU, while larger properties, such as restaurants and FY 2026 FY 2027 FY 2028 FY 2029 FY 2030
Annual Charge per Sewer
Unit (SU)- Applicable to
Residential AND NonResidential Sewer Service
$522.00 $537.66 $553.79 $570.40 $587.52
schools, that generate more wastewater are assigned additional SUs to reflect their higher usage of the sewer system.
The proposed sewer rates will be placed on the annual tax roll for properties connected to the City’s sewer system starting on July 1, 2025. To the extent a sewer rate is not included on the tax rolls for collection, the recommended ordinance authorizes the City to directly bill customers with payment due in thirty (30) days.
Procedures for Proposed Public Hearing
1. AB 2257 Determinations
California enacted AB 2257, effective January 1, 2025, to establish a procedure for ratepayers to submit written objections about proposed rates. As a condition of a ratepayer filing litigation to challenge the proposed rates, that ratepayer must submit a written objection regarding the proposed rates (in this case, the sewer service charges) prior to the public hearing when the Council considers approving the rates. The City must provide a written response prior to the close of the public hearing.
This process provides an opportunity for the local public agency to address or resolve the objection or objections before its governing body makes a final decision on whether to establish a new, or amend a current, propertyrelated fee (such as the sewer service charge) pursuant to Proposition 218.
On March 28, 2025, the City Council adopted Resolution R-25-09 establishing the Sewer Service rate setting procedures. The Sewer Service Charge Rate Setting Procedures include compliance with Proposition 218 as well as the procedures for exhausting administrative remedied under AB 2257 (Government Code section 53759.1). The procedures were included in the Proposition 218 notices and also published to the City’s website. The deadline for written objections was June 12, 2025, at 4 p.m. There were eight (8) written objections submitted to the City Clerk.
Based on the requirements of AB 2257, at the public hearing, as a part of the staff presentation, there will be an overview of the written objections and written responses that will be a part of the public record for the hearing. After the staff presentation and public testimony, the City Council must review the timely written objections and written responses, and make the following determinations required by Government Code Section 53759.1 (d):
• Whether the written objections and responses warrant any clarifications to the proposed rates.
• Whether to reduce the proposed rates.
• Whether any additional review is needed before determining whether clarification or reduction is needed.
• Whether to proceed with the rate hearing and protest tabulation required under Proposition 218.
To meet this requirement, staff recommends that the City Council consider the written responses and decide whether to alter or reduce the proposed rates and proceed with the rate hearing and protest tabulation.
2. Public Hearing- Protest Tabulation and Establishing Sewer Charges After considering written “objections” and responses, if the City Council decides to proceed with considering the written “protests” in accordance with Proposition 218 (Article XIII(D), Section 6 of the California Constitution), the City Council will provide a final opportunity for any submittal of a written protest prior to closing public testimony.
The City Council should then request from the City Clerk, or designee, the number of written protests received prior to the close of the public hearing.
Each timely written objection will also be counted as a timely written protest. The City Clerk will identify if a recess will be needed to complete the tally of timely written protests. In addition, the City Council may take a brief recess to review any protests received prior to the close of the public hearing. Under Proposition 218, the City Council may not approve any sewer service rates if there is a majority protest to the proposed rates.
A majority protest exists if written protests are timely submitted prior to the close of the public hearing by the owners of a majority (50% plus 1) of the parcels subject to the proposed charge. There are a total of 4,323 parcels subject to the proposed charge.
Upon the conclusion of the protest tabulation the City Clerk, or designee, shall report the results of the tabulation to the City Council. If a majority protest exists then the City Council is precluded from proceeding with the proposed Sewer Service Charges. However, if a majority protest does not exist, then the City Council may move forward with consideration of Resolution No. R-25-21 Establishing Sewer Service Charges for Sewer Collection services with annual updates from July 1, 2025, through July 1, 2029.
The recommended Resolution No. R-25-21 sets the maximum Sewer Service charges for FY 2025-26 through FY 2029-30 and the City Council may re-evaluate these rates and may set the rates by resolution each year in an amount that is equal to or less than the amounts authorized by this resolution. The sewer rates shall not be set in an amount that exceeds those set forth in Resolution No. R-25-21 unless the City Council first conducts a noticed public hearing in accordance with the requirements of law including Proposition 218.
3. Consideration of Ordinance
If there is no majority protest, staff recommends the City Council consider adopting Ordinance 25-1420, amending the San Marino City Code to add Section 16.06.03 (Sewer Service Charges) to the San Marino City Code Chapter XVI, Article 6.
The proposed ordinance establishes procedures for the City to charge customers of the City’s sewer services a fee for those services. The procedures established by ordinance facilitate the separate resolutions being considered under this item to: (a) approve the amount of the rates to be charged, and (b) place the charges on the County’s property tax rolls for collection. The ordinance also establishes procedures for customers to challenge fees.
4. Consideration of Resolution No. R-25-20 Authorizing the Collection of Sewer Service Charges on the Property Tax Roll for FY 2025-2026 Staff is recommending the approval of Resolution No. R-25-20 which sets the Sewer Service Charges for FY 2025-26 and authorizes the placement of the Sewer Service charges on the tax roll. Although the Sewer Rate Study proposes a maximum annual charge per Sewer Unit of $522 for FY 2025-26 (based on 50% CIP), the Council may set the charges at a lower rate. The City Council previously directed setting rates for the first year (FY 2025-26) at $312 annually per Sewer Unit (based on 25% CIP). As the Council directed staff to set the rate at $312 per sewer unit for the first year, this report and accompanying resolution reflects that amount for FY 2025-26. Should the Council wish to set the rates at $522 annually per sewer unit, the Council may do so at this time.
FISCAL IMPACT & PROCUREMENT REVIEW
Sewer charges, if implemented at the maximum levy, would generate revenue to fund fifty percent (50%) of sewer capital investments needed or $2.3 million in capital improvements each year for the next five years.
However, if the rate is set at the City Council directed twenty-five percent (25%) of the sewer capital investments needed, it would fund $1.2 million in capital improvements for the first year.
The sewer rate revenue will be restricted, accounted for in a separate Sewer Fund, and can only be spent on sewer operations, maintenance, and improvements.
Achieving a self-sustaining sewer utility would ensure General Fund revenues are spent on general operations. Sewer charges, if implemented, would help relieve the General Fund of approximately $260,000 in annual operating costs.
This report requires no procurement review.
LEGAL REVIEW
The City Attorney's office has reviewed and approved as to form.
RECOMMENDATION
Staff recommends that the City Council:
Hold Public Hearing and consider public testimony regarding sewer service charges for Fiscal Years 2025-26 to 2029-30; and placing sewer service charges on the County tax rolls for Fiscal Year 2025-26; Consider timely written objections and written responses for sewer service charges for fiscal years 2025-26 to 2029-30 and move forward with the public hearing;
Consider timely written protests, and if no majority protest is received, adopt Resolution No. R-25-21 Establishing Sewer Service Charges with Annual Updates through July 1, 2029;
Consider approving the first reading of Ordinance O-25-1420, amending the San Marino City Code to Add Section 16.06.03 (Sewer Service Charges to San Marino City Code Chapter XVI Article 6); and
Approve Resolution No. R-25-20 Authorizing the Collection of Sewer Service Charges on the Los Angeles County Property Tax Roll for Fiscal Year 2025- 2026.
If the Council concurs with staff’s recommendation, an appropriate motion would be:
“I move to adopt Resolution R-25-21 Establishing Sewer Service Charges with Annual Updates through July 1, 2029; waive full reading and introduce by title only Ordinance O-25-1420, amending the San Marino City Code to Add Section
16.06.03 (Sewer Service Charges to San Marino City Code Chapter XVI Article 6); and adopt Resolution R-25-20 Authorizing the Collection of Sewer Service Charges on the Los Angeles County Property Tax Roll for Fiscal Year 2025-
26.”
ATTACHMENTS
1. City of San Marino Sewer Rate Study
2. Resolution No. R-25-21, Establishing Sewer Service Charges for Sewer Collection Services, with Annual Updates Through July 1, 2029
3. Resolution No. R-25-20, Authorizing the Collection of Sewer Service Charges on the Los Angeles County Property Tax Roll for Fiscal Year 2025-26
4. Ordinance No. O-25-1420, amending the San Marino City Code to Add Section 16.06.03 (Sewer Service Charges to San Marino City Code Chapter XVI Article 6
5. City Written Response to Written Objections and Protests for Proposed Sewer Rates