TO: Mayor and City Council
FROM: Philippe Eskandar, City Manager
BY: Hillary Guirola-Leon, Finance Director
DATE: April 8, 2026
SUBJECT: DIRECTION ON SEWER SERVICE CHARGE FOR FISCAL
YEAR 2026–27
STRATEGIC PLAN CRITICAL SUCCESS FACTORS
Efficient, Responsive, and Effective City Services
Fiscally Responsible and Transparent City Government
BACKGROUND
The City of San Marino manages approximately 50 miles of sewer collection system infrastructure that requires ongoing maintenance, rehabilitation, and capital investment. A Wastewater Collection System Condition Assessment (WCSCA) completed in 2019 identified significant capital improvement needs over the next ten years. Historically, the City did not charge a dedicated fee for sewer services and has instead relied on General Fund revenues to support system operations and maintenance. To ensure long-term financial sustainability and to address identified infrastructure needs, the City engaged independent subject matter experts to prepare a comprehensive Sewer Rate Study. This study includes a financial plan and recommended rate structure for fiscal years 2025-26 through 2029-30.
On June 27, 2025, the City Council conducted a public hearing and adopted Resolution No. R-25-21, establishing a Sewer Service Charges with annual adjustments through July 1, 2029, and authorizing the collection of such charges on the Los Angeles County property tax roll in FY 2025-26.
While the Sewer Rate Study identified the need for a rate of $984 per sewer unit per year in order to carry out the necessary maintenance and Tony Chou, Mayor
Calvin Lo, Vice Mayor
Hunter Chang, Council Member
John Chou, Council Member
Gretchen Shepherd Romey, Council Member
rehabilitation to the City’s sewer system, the City Council’s adopted resolution included a maximum annual charge of approximately 50% of the identified capital improvement needs, or $522 per sewer unit ($43.50 per month) for FY 2025-26.
Going one step further in order to ensure that property owners are not adversely impacted by this new sewer rate, the City Council exercised its discretion to adopt an even lower rate of $312 annually per sewer unit ($26 per month) for FY 2025-26. This $312 rate would generate revenue to cover approximately 25% of the sewer maintenance and rehabilitation needs identified in the City’s Sewer System Master Plan with the balance remaining unfunded.
DISCUSSION
The adopted rate structure allows for annual adjustments up to the maximum rate as shown on Exhibit A to Resolution No. R-25-21 and shown below. The current FY 2025-26 Sewer Service Charge is $312 annual per sewer unit ($26 per month) and is projected to generate $1.49 million in Sewer revenue.
Although the permitted maximum Sewer Service Charge for FY 2026-27 is $537.66, it is currently set at $312 by the City Council. The Consumer Price Index (CPI) for December 2025 was 3%. A 3% increase would result in a Sewer Service Charge of $321.36 per Sewer Unit for FY 2026-27. This would result in projected Sewer revenue of $1.53 million.
If the City Council proceeds with a 3% increase to a new rate of $321.36 per Sewer Unit, this would equal an increase of $9.36 per year per Sewer Unit, or approximately 0.78 cents per month per Sewer Unit. While a 3% increase may appear to be a minor adjustment in real dollars, implementing a modest increase if and when CPI allows during a given year will help limit the need for requests of larger increases in the future.
At this time, staff is seeking City Council direction regarding the appropriate Sewer Service Charge for FY 2026-27. The direction provided today will be used to develop revenue projections for the FY 2026-27 Proposed budget.
Following Council direction, staff will return with a resolution for formal consideration at a public hearing in May 2026. This resolution will set the FY 2026-27 Sewer Service Rates and authorize the collection of sewer service charges on the Los Angeles County property tax roll for FY 2026-27.
FISCAL IMPACT & PROCUREMENT REVIEW
The City Council has authority to adopt a Sewer Service Charge of up to $537.66 per Sewer Unit for FY 2026-27.
The Consumer Price Index (CPI) for December 2025 was 3%. Applying a 3% increase would result in an annual Sewer Service Charge of $321.36 per Sewer unit and resulting in projected revenue of $1,537,140.
Each 1% increase in the Sewer Service Charge is estimated to generate approximately $14,900 in additional annual sewer revenue.
As presented during the March 27, 2026 City Council meeting, staff are currently forecasting the need for approximately $18.1 million in funding to carry out a portion of the necessary repairs to the City’s sewer system during the next five years.
LEGAL REVIEW
The City Attorney's office has reviewed and approved as to form.
RECOMMENDATION
Staff recommends that the City Council provide direction on the proposed Sewer Service Charge for FY 2026–27, including consideration of a 3% increase to account for inflation. Following Council direction, staff will return with a resolution for formal consideration at a public hearing in May.
ATTACHMENTS
1. Resolution No. R-25-21 A Resolution of the City Council of the City of San Marino, California, Establishing Sewer Service Charges for Sewer Collection, with Annual Updates Through July 1, 2029.