Seal Beach City Council
July 14, 2025

Rates are regularly evaluated as part of the City’s annual budgeting process to ensure projected revenues are sufficient to cover all Water and Sewer utilityrelated expenditures. The City’s last rate adjustment and cost of service study was approved in February 2021; however, the rates are no longer sufficient to balance ongoing operating costs.

The City retained Raftelis Financial Consultants, Inc. (Raftelis) to conduct a Water and Wastewater Financial Plan and Rate Study (2025 Financial Plan), utilizing the existing rate structures, to develop a financial plan and proposed rates for the water and sewer utilities. The objective of the 2025 Financial Plan is to ensure revenues are sufficient to pay or provide for operation and maintenance, capital improvement projects, adequate debt service coverage ratios, and sufficient reserves. The 2025 Financial Plan considered reserve policies, capital investment requirements for the aging infrastructure to ensure system reliability, inflationary cost increases, current and future State mandates, and health and safety requirements. On May 12, 2025, an overview of the draft 2025 Financial Plan, including analysis results and recommendations for proposed water and sewer rate adjustments, was presented to the City Council.

Water Utility System:

The City owns and maintains a water system and is responsible for ensuring safe and reliable water for potable and fire protection use. These essential services are accomplished through a strategic combination of highly qualified operators and administrative support staff, which includes City departments such as the Public Works Department, City Manager’s Office, City Clerk’s Office, and the Finance Department. Together, the water system’s two (2) reservoirs, two (2) booster stations, four (4) production wells, 73.5 miles of pipeline, and over 5,300 services are properly maintained.

Based on Raftelis’ detailed financial plan analysis, the February 2021 rate adjustments are no longer sufficient to balance the operating costs due to:

1. Increased wholesale import and groundwater costs;

2. Aging infrastructure and deferred maintenance;

3. Overall inflationary impacts; and,

4. On-going introduction of new legislation.

Water Enterprise Fund Reserve Policy:

The water rates have been constructed with a financial plan that corrects the structural deficit and sufficiently funds operations, capital and reserves. A reserve policy was set based on the types of risk the utility faces. • Operating Reserves – to cover day-to-day expenses and maintain sufficient funds to cover operating cash flows, periods of reduced water sales, or unforeseen costs.
o Minimum: 20% of Operating & Maintenance expenditures

o Target: 25% of Operating & Maintenance expenditures
• Capital Replacement Reserves – to cover a portion of upcoming annual capital expenditures and mitigate unexpected capital needs. o Minimum: 25% of average 5 - year CIP
o Target: 25% of average 5 - year CIP
Proposed Water Debt:

To maintain effective operations, it is necessary to secure Water utility revenue through low-interest State Revolving Loans and market-debt loans. This approach ensures ongoing expenditures can be sustained until the anticipated rate-generated revenues come into effect.

Staff will continue to pursue external funding sources to reduce debt issuances, if possible.

FYE 2026 FYE 2027 FYE 2028 FYE 2029 FYE 2030
Market Debt
Issuance $25M
State Loan (SRF) $2.5M $1M $3M $3M
Wholesale Water Purchase Cost Pass-Through:

The City purchases water from wholesale agencies and has no control over those charges. The City has estimated future wholesale rates; however, if wholesale rates are higher than predicted, the City may pass-through the increase in wholesale water purchase costs as allowable by Government Code Section 53756.

The pass-through amount will not exceed the increase in cost. The pass-through will be calculated as the increase in wholesale water purchase costs divided by annual water use.

Water Bill Components:

Water rates have two (2) components – 1) fixed charges; and 2) variable volumetric charges. Fixed charges are a function of meter size and are charges without respect to use. Volumetric charges are calculated based on the amount of water used multiplied by the rate per unit. The unit is measured in hundred cubic feet (HCF), which is approximately 748 gallons.

Proposed Water Rates:

Current water rate structures will remain the same. That is, a fixed charge by meter size, plus a volumetric rate that is generally broken down into the following:
• A two-tiered Single-Family Residential, Multi-Family Residential, and Leisure World customer class based on consumption; and,

• A single-tiered rate structure for Commercial, Irrigation, Sunset Aquatic Park, and City customer class based on consumption.

Although the overall rate structure will not change, the amount of the fixed charge, which is based on meter size, is proposed to increase for the Leisure World community based upon a recent evaluation of its meter infrastructure. The City’s engineering consultant, AKM Consulting Engineers (AKM), conducted an independent evaluation of the meter size for the Leisure World community. In an opinion dated April 1, 2025, AKM concluded that the two (2), existing 12-inch service meters serving Leisure World are appropriately sized to account for the community’s “peak hour and maximum day demand plus fire flow.” Beginning with the City’s last rate update in 2021, Leisure World’s fixed rate charge was based on one (1), six-inch meter in accordance with an earlier analysis of Leisure World’s effective flow demand. However, AKM has provided a current and different analysis of the cost of providing service to the Leisure World community.

The tables below illustrate the proposed rate and charge increases for the next five (5) years, subject to pass throughs for increases in the cost to purchase wholesale water. These adjustments were calculated by forecasting revenue, expenses and reserves to establish adequate cost-to-debt ratio.

Proposed Water Fixed Charges ($/bi-monthly)

Proposed Water Volumetric Charges ($/hcf)
* Multi-Family tier allocations are determined by multiplying the hcf definition shown above (17 hcf) by the number of dwelling units for a given account. For example, the tier allocation for a Multi-Family Residential (MFR) account with two dwelling units would be equal to 17 hcf X 2 dwelling units = 34 hcf bi-monthly. ** Leisure World tier allocations are determined in the same manner as MFR, by multiplying dwelling units by the individual allocation of 17 hcf.

Sewer Utility System:

The City also owns and maintains a Wastewater (also known as Sewer) collections system. This system consists of 181,000 linear feet of pipeline, approximately 800 manholes, and six (6) pump stations. Similar to the Water Utility System, the Sewer Utility System is supported by technical and administrative staff through a rate-supported Sewer Enterprise fund.

Sewer Enterprise Fund Reserve Policy:

The sewer rates have been constructed with a financial plan that corrects the structural deficit and sufficiently funds operations, capital and reserves. A reserve policy was set based on the types of risk the utility faces. • Operating Reserves – to cover day-to-day expenses and maintain sufficient funds to cover operating cash flows, periods of reduced revenue, or unforeseen costs.
o Minimum: 25% of Operating & Maintenance expenditures
o Target: 25% of Operating & Maintenance expenditures
• Capital Replacement Reserves – to cover a portion of upcoming annual capital expenditures and mitigate unexpected capital needs. o Minimum: 25% of average 5 - year CIP

o Target: 25% of average 5 - year CIP
Proposed Sewer Debt:

The required Sewer Utility revenue to properly sustain operations will require market-debt issuance. This will allow expenditures to continue while the proposed rate-generated revenues catch up.

Staff will continue to pursue more favorable external funding sources to reduce debt issuance, if possible.

FYE 2026 FYE 2027 FYE 2028 FYE 2029 FYE 2030
Market Debt
Issuance $6M $4M $4M
Sewer Bill Components:

Sewer Rates have two (2) components – 1) fixed charges; and 2) variable volumetric charges. Fixed charges are a function of customer classification and are charges without respect to use. The City does not measure wastewater flow, but instead estimates flows based on water use by applying a return-to-sewer factor (RTS) to non-residential water use. Volumetric charges, therefore, are calculated based on the amount of water used multiplied by the rate per unit.

Proposed Sewer Rates:

The current sewer rate structures will remain the same. • Single Family Residential: fixed charge;
• Other Customer Classes: fixed charge plus volumetric rate based on water consumption.

The table below illustrates the proposed rate and charge increases for the next five (5) years. These adjustments were calculated by forecasting revenue, expenses and reserves to establish adequate cost-to-debt ratio.

Proposed Sewer Fixed Charges ($/bi-monthly &
Volumetric Charges ($/hcf of water)
Proposition 218 Requirements:

Water and sewer rate adjustments are subject to Proposition 218’s (California Constitution Article XIIII D) public hearing and majority protest procedures. On May 12, 2025, City Council set a public hearing on the proposed water and sewer rate adjustments for July 14, 2025, and directed staff to initiate the Proposition 218 majority protest process for the proposed water and sewer rate adjustments in compliance with Proposition 218.

At the conclusion of the public hearing, the City Clerk will complete the tabulation of all written protests received from record property owners receiving water or

sewer service, water customers and sewer customers, including those received during the public hearing. Only one (1) protest will be counted per parcel in determining the existence of a majority protest. The City Clerk will then report on the results to the City Council.

If, according to the final tabulation, the written protests submitted against the water rate adjustments represent more than 50% of all the parcels in the City receiving water service, a majority protest exists, and the City Council shall not impose the water rate increase. If the final tabulation of written protests represents less than 50% of all the parcels in the City receiving water service, the City Council could consider implementing the water rate increases effective August 1, 2025, and on July 1 for each year from 2026 through 2029.

If, according to the final tabulation, the written protests submitted against the sewer rate adjustments represent more than 50% of all the parcels in the City receiving sewer service, a majority protest exists, and the City Council shall not impose the sewer rate increase. If the final tabulation of written protests represents less than 50% of all the parcels in the City receiving sewer service, the City Council could consider implementing the sewer rate increases effective August 1, 2025, and on July 1 for each year from 2026 through 2029.

Exhaustion of Administrative Remedies Procedure:

The State of California Legislature enacted Assembly Bill 2257 (Exhaustion of Administrative Remedies Procedure) (AB 2577), effective January 1, 2025, which assists local agencies in avoiding litigation by having an opportunity to address or resolve any written objections before making a final decision to impose or adjust water and sewer rates. AB 2257 added Sections 53759.1 and 53759.2 to the Government Code and establishes a formal written objection procedure requiring persons and entities to timely raise, in writing, specific Proposition 218 concerns about proposed water and sewer rate adjustments or be barred from filing litigation alleging noncompliance with Proposition 218.

On May 12, 2025, City Council adopted Resolution 7645 establishing an Exhaustion of Administration Remedies Procedure pursuant to AB 2577. The Notice of Public Hearing includes the substantive and procedural requirements for submitting a written objection to the proposed water and sewer rates in accordance with the requirements of AB 2257. As set forth in the Notice of Public Hearing, the City set July 7, 2025 at 5:00 p.m., as the deadline for the submittal of written objections, which date is at least 45 days after the notice was mailed as required by AB 2257.

The City Clerk received three (3) timely submitted written objections pursuant to AB 2577. Copies of the three (3) written objections are set forth in Exhibit A of proposed Resolution 7668. Pursuant to AB 2257, the City Council must respond in writing to timely submitted written objections. The City’s written responses to each timely objection are set forth in Exhibit B of the same Resolution. In accordance with AB 2257, the responses include the grounds for which a

challenge is not resulting in amendments to the proposed water and sewer rate adjustments and explain the substantive basis for retaining or altering the proposed water and sewer rate adjustments in response to each objection. In considering the responses, the City Council must determine the following: (1) whether the objections and the responses warrant clarifications to the proposed water and/or sewer rates; (2) whether to reduce the proposed water and/or sewer rates; (3) whether to further review before making a determination on whether clarification or reduction is needed; and (4) whether to proceed with the Public Hearing.

ENVIRONMENTAL IMPACT:

This item is not subject to the California Environmental Quality Act (CEQA) because CEQA does not apply to the establishment, modification, structuring, restructuring, or approval of water and sewer rates under Public Resources Code Section 21080(b)(8). The proposed rates are proposed to meet operating expenses, purchase necessary supplies and equipment, meet financial reserve needs, and fund capital projects necessary to maintain service within the existing service area. Furthermore, it is not a “project” as defined under Section 15378(b) of the state CEQA Guidelines. This item is also exempt from CEQA pursuant to Section 15061(b)(3) of the Guidelines because it can be seen with certainty that the approval of Water and Sewer Utility Rates will not have a significant effect on the environment.

LEGAL ANALYSIS:

The City Attorney has approved the resolutions as to form.

FINANCIAL IMPACT:

The anticipated increase in water and sewer revenue required to sustain proper utility operations, is summarized below:

Projected Water Utility Revenue Adjustment
FYE 2026 FYE 2027 FYE 2028 FYE 2029 FYE 2030
Projected
Revenue
Adjustment
$2.67M $2.23M $595k $625k $660k
Projected Sewer Utility Revenue Adjustment
FYE 2026 FYE 2027 FYE 2028 FYE 2029 FYE 2030
Projected
Revenue
Adjustment
$800k $665k $535k $565k $195k
STRATEGIC PLAN:

This item is not applicable to the Strategic Plan.

RECOMMENDATION:

1. That the City Council conduct a public hearing to accept comments on the proposed water and sewer rate adjustments; and,

2. Upon the conclusion of the public hearing, that the City Council adopt Resolution 7668 responding to timely filed written objections to the proposed water and sewer rates pursuant to the requirements of Assembly Bill 2257; and,

3. Upon the conclusion of the public hearing, provided a majority protest against the proposed water rates does not exist, that City Council adopt Resolution 7669 establishing the water rates, effective August 1, 2025; and,

4. Upon the conclusion of the public hearing, provided a majority protest against the proposed sewer rates does not exist, that City Council adopt Resolution 7670 establishing the sewer rates, effective August 1, 2025; and,

5. Receive and file the Water and Wastewater Financial Plan and Rate Study, prepared by Raftelis Financial Consultants, Inc., dated June 17, 2025, as presented to the City Council at this meeting and on file in the office of the City Clerk.

SUBMITTED BY: NOTED AND APPROVED:

Iris Lee Patrick Gallegos
Iris Lee, Director of Public Works Patrick Gallegos, City Manager ATTACHMENTS:

A. Resolution 7668 – Responding to Written Objections
B. Resolution 7669 – Approving Water Rates
C. Resolution 7670 – Approving Sewer Rates
RESOLUTION 7668

A RESOLUTION OF THE SEAL BEACH CITY COUNCIL

RESPONDING TO TIMELY FILED WRITTEN OBJECTIONS TO
PROPOSED ADJUSTMENTS TO THE RATES FOR THE CITY’S

WATER AND SEWER SERVICE CHARGES PURSUANT TO THE
REQUIREMENTS OF STATE ASSEMBLY BILL 2257
WHEREAS, the City of Seal Beach maintains a municipal Water Utility that provides water services and a municipal Sewer Utility that provides wastewater (sewer) collection services to residents and businesses; and, WHEREAS, the City’s Water Utility and Sewer Utility operational and capital improvement costs have increased substantially since the last rate adjustment, and are estimated to continue increasing significantly; and, WHEREAS, the City’s currently established water and sewer rates are not adequate to meet increasing operations and maintenance and capital improvements costs without compromise to system operations; and, WHEREAS, on June 12, 2023, the City retained Raftelis Financial Consultants, Inc. to conduct a Water and Wastewater Financial Plan and Rate Study (2025 Financial Plan) to analyze the cost of providing water and sewer services and recommend appropriate water and sewer rate adjustments; and, WHEREAS, on May 12, 2025, an overview of the draft 2025 Financial Plan, including recommendations for proposed water and sewer rate adjustments were presented to the City Council; and,
WHEREAS, in order to adjust the water and sewer rates, the City must comply with Article XIIID of the Constitution, more commonly known as Proposition 218; and,
WHEREAS, on September 25, 2024, Governor Newsom approved State Assembly Bill 2257 (AB 2577), effective January 1, 2005, which added Sections 53759.1 and 53759.2 to the California Government Code; and, WHEREAS, AB 2257 creates an exhaustion of administrative remedies requirement that, if implemented by a local public agency, requires persons and entities to submit a written objection that specifies the grounds for alleging noncompliance of proposed water and sewer rates with Proposition 218 prior to the deadline established by the local public agency, or be barred from any right to challenge the water and sewer rates through a legal proceeding; and, WHEREAS, on May 12, 2025, City Council adopted Resolution 7645 to provide for an exhaustion of administrative remedies requirement pursuant to AB 2257 in connection with the proposed water and sewer rate adjustments and set July 7, 2025 at 5:00 p.m., as the deadline for the submittal of written objections; and, WHEREAS, on May 12, 2025, City Council adopted Resolution 7644 setting a public hearing on the proposed water and sewer rate adjustments on July 14, 2025 (the “Public Hearing”), and directing staff to initiate the Proposition 218 majority protest process for the proposed water and sewer rate adjustments; and, WHEREAS, in accordance with the requirements of AB 2257 and Proposition 218, the City provided mailed notice of the Public Hearing, which notice includes, among other information, the substantive and procedural requirements for submitting a written objection to the proposed water and sewer rate adjustments and a statement that the failure to timely object in writing to the proposed water and sewer rate adjustments bars any right to challenge the proposed rate adjustments through a legal proceeding; and,
WHEREAS, the City complied with the provisions set forth in AB 2257 for establishing an exhaustion of remedies requirement in connection with the proposed water and sewer rate adjustments, including, among other things, providing not less than 45 days from the date of the mailing the notice of the Public Hearing for persons and entities to submit a written objection to the proposed water and sewer rate adjustments; and,
WHEREAS, as of the July 7, 2025, 5:00 p.m. deadline for submitting written objections, the City received three (3) written objections to the proposed water rate adjustments and/or the proposed sewer rate adjustments, which objections are set forth in Exhibit A, attached hereto and incorporated herein (Objections); and, WHEREAS, this Resolution, as required by AB 2577, responds in writing to the Objections, and the responses to the Objections are set forth in Exhibit B, attached hereto and incorporated herein (Responses); and,
WHEREAS, each Response includes the grounds for which a challenge is not resulting in amendments to the proposed water rate adjustments and/or proposed sewer rate adjustments, as applicable, and an explanation of the substantive basis for retaining or altering the proposed water rate adjustments and/or proposed sewer rate adjustments, as applicable in response to the Objection.

NOW, THEREFORE, the Seal Beach City Council does resolve, declare, determine and order as follows:

Section 1. The City Council finds the Recitals set forth in this Resolution are true and correct and are incorporated by reference.

Section 2. The City Council hereby adopts the Responses set forth in Exhibit B, attached hereto.

Section 3. In considering the Responses, the City Council determined (1) whether the Objections and the Responses warrant clarifications to the proposed water rate adjustments and/or proposed sewer rate adjustments; (2) whether to reduce the proposed water rates and/or proposed sewer rates; (3) whether to undertake further review before making a determination on whether clarification or reduction is needed; and (4) whether to proceed with the Public. If any part of this Ordinance or its application is deemed invalid by a court of competent jurisdiction, the City Council intends that such invalidity will not affect the effectiveness of the remaining provisions or their application and, to this end, the provisions of this Ordinance are severable.

Section 4. If any provision of this Resolution or its application is deemed invalid by a court of competent jurisdiction, the City Council intends that such invalidity will not affect the effectiveness of the remaining provisions or their application and, to this end, the provisions of this Resolution are severable.

PASSED, APPROVED AND ADOPTED by the Seal Beach City Council at a regular meeting held on the 14th day of July 2025 by the following vote:

AYES: Council Members
NOES: Council Members
ABSENT: Council Members
ABSTAIN: Council Members

Lisa Landau, Mayor
ATTEST:

Gloria D. Harper, City Clerk
STATE OF CALIFORNIA }
COUNTY OF ORANGE } SS
CITY OF SEAL BEACH }
I, Gloria D. Harper, City Clerk of the City of Seal Beach, do hereby certify that the foregoing resolution is the original copy of Resolution 7668 on file in the office of the City Clerk, passed, approved, and adopted by the City Council at a regular meeting held on the 14th day of July 2025.

Gloria D. Harper, City Clerk
Exhibit A – Written Objections (redacted)
Exhibit B – Responses to Written Objections

EXHIBIT A
Written Objections (redacted)
City of Seal Beach June 19, 2025
Office of the City Clerk
211 Eighth Street
Seal Beach, CA 90740
Please register my NO vote to this outrageously high water and wastewater rate hike.

Water rate structures that exclude a flat "door fee" service charge often appear to promote conservation or fairness by charging only by meter size and usage. However, in practice, they can be deeply inequitable for several reasons.

Moreover, in areas that are not metered, like the 6,608 homes in Leisure World, the inequity is ever worse. This study is such an example of inequity and does not meet Prop 218 standards requiring equitable billing.

1. Essential Infrastructure Costs Are Shared by All: Every customer, regardless of how much water they use, benefits from access to a maintained, functioning water system—pipes, treatment plants, emergency readiness, meter reading, billing systems, and more. These fixed costs do not vary with usage and must be covered to ensure a reliable water supply. Without a flat door fee, these infrastructure costs are unfairly shifted onto single family homes and higher usage customers, even though low-usage customers benefit equally from the availability of service.

2. Low Users Don’t Pay Their Fair Share: While it may seem equitable to charge multi-family based only on meter size and consumption, very low users—including vacant properties, second homes, or seasonal short-term rentals—still rely on the water system being ready to serve them at any time. Without a door fee, these properties contribute little or nothing toward the fixed costs of maintaining that readiness.

3. Cost Burden Shifts to Families and Low-Income Households: Meter size flat rates with volume usage systems often shift the cost burden onto single ¾” – 1” meters and larger households, which may include low-income or multigenerational families. These households may have higher water use due to basic needs (cooking, hygiene, laundry) but not necessarily the ability to pay more. A flat door fee ensures all users contribute a fair minimum amount, rather than penalizing single family dwellings and those who may use slightly more water due to family size or circumstance.

4. Discourages System Equity and Resilience Investments: Utilities trying to fund projects for equity—like replacing lead pipes, expanding access, or supporting affordability programs—need stable revenue.

Without base door fees, funding such initiatives becomes harder, exacerbating disparities for families and vulnerable populations.

Having reviewed the new wastewater rate hikes, it is obvious that once again, the single-family dwelling is subsidizing others. If single family homes can be charged a flat fee on sewer, so should every dwelling unit using our sewer system. Multi-family homes once again are being subsidized by single family residences.

Also, Sunset Aquatic Park is the sole user of their sewer system and yet to upgrade their system, all of Seal Beach is being charged. Again, this is not equitable. I oppose the deeply flawed and inequitable rate increase on the grounds that it has single family dwellings supporting multi-family units and Sunset Aquatic Park. Prop 218 requires that no segment of our population subsidize another. This study falls short of that goal on both Water and Wastewater.

While I agree our infrastructure needs work, until the billing is equitable, I oppose.

Sincerely,
Ellery Deaton
Water/Wastewater Bill Payer

1 Iris Lee
From: Brandon DeCriscio
Sent: Monday, July 7, 2025 11:53 AM
To: Iris Lee; Patrick Gallegos
Subject: FW: Written Protest - Exhaustion of Administrative Remedies FYI…
Apologies if this is a duplicate and Gloria has already sent it.

Thank you,
Brandon DeCriscio
Deputy City Clerk
(562) 431-2527 x 1306
From: Theresa Miller
Sent: Monday, July 7, 2025 11:32 AM
To: Brandon DeCriscio <[email protected]>
Subject: Fwd: Written Protest - Exhaustion of Administrative Remedies Please confirm receipt of this email.

Thnak you.
---------- Forwarded message ---------
From: Theresa Miller
Date: Mon, Jul 7, 2025 at 11:27 AM
Subject: Written Protest - Exhaustion of Administrative Remedies To: Gloria Harper <[email protected]>
Cc: Joe Kalmick <[email protected]>, Lisa Landau <[email protected]>, <[email protected]>, <[email protected]>, Nathan Steele <[email protected]>
Theresa Miller

July 7, 2025

2 City Clerk
City of Seal Beach
211 Eighth Street
Seal Beach, CA 90740

Re: Written Protest and Objection to Proposed Water and Sewer Rate Increases Under Proposition 218 – Exhaustion of Administrative Remedies

Dear City Clerk and Members of the City Council:

I am the record property owner of , located within the City of Seal Beach. I hereby submit this written protest and formal objection to the proposed water and sewer rate increases scheduled for a public hearing on July 14, 2025, pursuant to the Proposition 218 notice issued by the City.

This written protest constitutes an objection to the proposed rates under Article XIII D, Section 6 of the California Constitution. Furthermore, this submission serves as a formal notice of exhaustion of administrative remedies. I intend this protest to fully preserve my right to challenge the proposed rate increases in any future legal or administrative forum.

My specific objections include, but are not limited to, the following:

1. The proposed water and sewer rates appear to exceed the proportional cost of service attributable to my property, in violation of Proposition 218.

2. The City has failed to clearly demonstrate that the revenues derived from the increased water and sewer rates will not be used for purposes other than those for which the fees are charged.

3. The notice provided to ratepayers lacks sufficient detail to determine whether the methodology used in the rate study is consistent with constitutional requirements.

4. The public process surrounding these changes lacks transparency and may not meet the standards required by the California Constitution and Government Code.

I respectfully request that the City Council reject the proposed water and sewer rate increases and direct staff to revise the rate structure in compliance with applicable law.

Please confirm receipt of this objection and ensure it is included in the record of the public hearing.

Sincerely,
Theresa Miller

EXHIBIT B
Responses to Written Objections
Response to Ellery Deaton Written Objection, dated June 19, 2025 Comment #1

1. Essential Infrastructure Costs Are Shared by All: Every customer, regardless of how much water they use, benefits from access to a maintained, funcƟoning water system—pipes, treatment plants, emergency readiness, meter reading, billing systems, and more. These fixed costs do not vary with usage and must be covered to ensure a reliable water supply. Without a flat door fee, these infrastructure costs are unfairly shiŌed onto single family homes and higher usage customers, even though low-usage customers benefit equally from the availability of service.

Response #1
The City agrees that every customer benefits from the City’s water system regardless of how much water they use and that fixed costs must be covered to ensure a reliable water supply. The City does not agree that, without a “flat door fee”, infrastructure costs are unfairly shifted from low-usage customers to higher usage customers. For purposes of this response, the City has assumed that a “flat door fee” refers to a fixed water charge that is the same for each dwelling unit (e.g., home, apartment, condo) regardless of how much water used.

The City’s water and sewer charges are property-related fees, meaning that they are governed by Proposition 218, which was approved by California voters in 1996 and added Article XIII D to the California Constitution. Article XIII D imposes substantive requirements for property-related fees, including a requirement that the amount of the fee imposed on any parcel shall not exceed the proportional cost of the service attributable to that parcel.

This means that the City’s cost of providing water and sewer service must be allocated among the parcels in the City in a reasonable manner that does not result in one or more customers unfairly subsidizing another customer or customers. Proposition 218 requires rate structuring on the basis of parcels, rather than units.

To assist the City in ensuring that the water and sewer charges, as proposed to be modified and increased, meet the substantive requirements of Proposition 218, the City hired Raftelis, a rate consultant. Raftelis prepared a Water and Wastewater Financial Plan and Rate Study, dated June 17, 2025 (the “2025 Financial Plan”). Except as noted therein and below, the 2025 Financial Plan uses the cost-of-service analysis and rate structure design that Raftelis completed in 2020 (the “2020 Study”). In 2021, the City’s water and sewer rates were set on the basis of the 2020 Study in compliance with the Proposition 218 proportionality requirement. The rate design set forth in the 2020 Study is consistent with the rate setting principles established by the American Water Works Association in the Manual M1: Principles of Water Rates, Fees and Charges, Seventh Edition (“Manual”).

The 2025 Financial Plan relies on the rate design in the 2020 Study, with the exception that the amount of the fixed charge for the Leisure World community is proposed to increase based upon a recent evaluation of its meter infrastructure. The City’s engineering consultant, AKM Consulting Engineers (“AKM”), conducted an independent evaluation of the meter size for the Leisure World community. In an opinion dated April 1, 2025, AKM concluded that the two existing 12-inch service meters serving Leisure World are appropriately sized to account for the community’s “peak hour and maximum day demand plus fire flow.” Beginning with the City’s last rate adjustment in 2021, Leisure World’s fixed rate charge was based on one 6-inch meter in accordance with an earlier analysis of Leisure World’s eƯective flow demand. However, AKM has provided a current and diƯerent analysis of the cost of providing service to the Leisure World community.

Raftelis’ water cost-of-service analysis allocates costs to each parcel based on:
1) Water use;
2) Number of meters (if a customer has more than one); and, 3) Meter size.

The fixed charge recovers a portion of infrastructure costs and recovers those costs in proportion to meter size, which is an industry standard. The fixed charges do not shift costs from low use customers onto single family homes and higher use customers because the rate structure ensures that the charges take into account the diƯerent demands that each residential customer places on the City’s water system in proportion to meter size. The fixed charge is based on the premise that the meter size is proportional to potential infrastructure use. A meter of a certain size has the potential to demand a certain volume of water, and the water system infrastructure is sized accordingly. Larger meters can demand more water and therefore customers pay in proportion to the potential flow through the meter.

A flat door fee would mean that an unmetered dwelling unit (i.e., a door) would be subject to the costs that are recovered in the fixed charge as though it had a meter. The fixed charge (often called a Ready to Serve Charge) recovers three types of costs shown below. Set forth below is an explanation of why the rate structure does not recover these costs on a “per door” basis.

1. Customer billing costs - Customer billing costs involve answering customer calls, sending paper bills and reading customer meters and since only metered customers get a bill (the apartment owner/manager gets a bill for the meters serving the complex) these costs are not charged on a per door basis.

2. Meter maintenance costs - Since dwelling units in an apartment do not have a meter, meter maintenance costs are not charged on a per door basis.

3. Fixed capacity (infrastructure) costs – Since an entire apartment complex’s potential demand is reflected in the meter size serving it and the meter’s associated hydraulic capacity, these costs are allocated in proportion to the meter (or meters) serving a complex and not charged on a per door basis.

The single-family class and all customer classes are paying their proportional share of the costs of each of these three items. It is an industry standard and in alignment with the substantive requirements of Proposition 218 for property-related fees to recover infrastructure costs through both the fixed charge (in proportion to meter size) and the volumetric rate. Recovering a portion of infrastructure costs in proportion to actual volumetric use ensures that high volume users pay in proportion to actual use as opposed to potential use.

Rate setting is a complex process, and it is possible that a variety of rate structures could meet Proposition 218’s requirement that the amount of the water or sewer charge imposed on any parcel shall not exceed the proportional cost of the service attributable to the parcel. To transition to a flat per door rate would require a new rate study and cost-ofservice analysis to support such rate structure. However, for the reasons discussed above, it is unlikely that a new study and analysis could support a flat per door rate structure as meeting Proposition 218’s proportionality requirement.

Comment #2

2. Low Users Don’t Pay Their Fair Share: While it may seem equitable to charge multi-family based only on meter size and consumption, very low users—including vacant properƟes, second homes, or seasonal short-term rentals—sƟll rely on the water system being ready to serve them at any Ɵme.

Without a door fee, these properƟes contribute liƩle or nothing toward the fixed costs of maintaining that readiness.

Response #2
The “very low users” mentioned above – vacant properties, second homes or seasonal short-term rentals – pay the fixed charge (Ready to Serve Charge) even if they did not use water. This is how they contribute towards the fixed costs of the system and pay their fair share. Very low users are paying their proportional cost of service covered by the fixed charge, as described in Responses #1.

Comment #3

3. Cost Burden Shifts to Families and Low-Income Households: Meter size flat rates with volume usage systems oŌen shiŌ the cost burden onto single ¾” – 1” meters and larger households, which may include low-income or mulƟgeneraƟonal families. These households may have higher water use due to basic needs (cooking, hygiene, laundry) but not necessarily the ability to pay more. A flat door fee ensures all users contribute a fair minimum amount, rather than penalizing single family dwellings and those who may use slightly more water due to family size or circumstance.

Response #3
See Response #1.

Comment #4

4. Discourages System Equity and Resilience Investments: Utilities trying to fund projects for equity—like replacing lead pipes, expanding access, or supporƟng affordability programs—need stable revenue. Without base door fees, funding such initiatives becomes harder, exacerbaƟng dispariƟes for families and vulnerable populations.

Response #4
Stable revenue is a function of the proportion of revenue collected from the fixed charge (Ready to Serve Charge) out of total revenue (fixed plus volumetric). This would only change if the City purposefully increased the proportion of revenue derived from the fixed charge.

In other words, adding a “per door” charge, without increasing the proportion of fixed revenue would not impact revenue stability. It would only redistribute the proportion of fixed revenue that each class or customer pays. Stable revenue can be achieved regardless of “door” charges.

Comment #5
Having reviewed the new wastewater rate hikes, it is obvious that once again, the single-family dwelling is subsidizing others. If single family homes can be charged a flat fee on sewer, so should every dwelling unit using our sewer system. MulƟ-family homes once again are being subsidized by single family residences.

Response #5
Single-family homes are paying their fair share, in accordance with the rate structure which allocates costs in proportion to parameters described in Response #1 and in alignment with Proposition 218.

The 2020 Study allocated costs between single-family and multi-family customers based on a Return to Sewer (RTS) factor, ensuring that each customer class pays in proportion to its usage. Therefore, single-family homes are not subsidizing multi-family properties.

Because sewer discharge from single-family homes tends to be more consistent and predictable compared to other customer classes, it was determined that a flat rate was appropriate and equitable approach for single-family homes.

Comment #6
Also, Sunset Aquatic Park is the sole user of their sewer system and yet to upgrade their system, all of Seal Beach is being charged. Again, this is not equitable
Response #6
Water - The fixed charge for the Sunset Aquatic Park meter size is higher than the fixed charge for other customers with the same meter size. This is to recover the added capital cost associated with the water line feeding Sunset Aquatic Park.

Sewer – Sunset Aquatic Park has a separate sewer service equity charge and sewer capital equity charge to recover added cost associated with the sewer service.

Based on the foregoing responses, the City Council determines that the objections described herein do not warrant (1) clarifications to the proposed water rates or sewer rates; (2) a reduction to the proposed water rates or sewer rates, (3) further review, or (4) delaying the public hearing on the proposed water and sewer rate adjustments.

Response to Eugenya Yasnogorodsky Written Objection, received June 10, 2025 Comment #1
Response #1
Comment noted.

Comment #2
Response #2
Your concern regarding the personnel cost inflator is noted. The 8% annual personnel cost projection is a comprehensive estimate that includes merit increases, cost of living adjustments (COLAs), retirement costs, insurance, and other legally obligated personnelrelated expenses. This projection is based on recent cost trends and anticipated future obligations and is necessary to maintain service levels and staƯing required for utility operations.

Additionally, the claim that this personnel inflator is applied to capital improvement projects is incorrect. Capital costs are modeled separately with their own inflators—5% for FY 2025-26, 4% for FY 2026-27, and 3% annually thereafter.

Based on the foregoing responses, the City Council determines that the objections described herein do not warrant (1) clarifications to the proposed water rates or sewer rates; (2) a reduction to the proposed water rates or sewer rates, (3) further review, or (4) delaying the public hearing on the proposed water and sewer rate adjustments.

Response to Theresa Miller Written Objection, received July 7, 2025 Comment #1
The proposed water and sewer rates appear to exceed the proportional cost of service attributable to my property, in violation of Proposition 218.

Response #1
The comment asserts that the proposed water and sewer rates appear to exceed the proportional cost of service attributable to the commenter’s property, but does not include any specific information regarding alleged noncompliance with Proposition 218. However, the City notes that the City’s water and sewer charges are propertyrelated fees, meaning that they are governed by Proposition 218, which was approved by California voters in 1996 and added Article XIII D to the California Constitution.

Article XIII D imposes substantive requirements for property-related fees, including a requirement that the amount of the fee imposed on any parcel shall not exceed the proportional cost of the service attributable to that parcel. This means that the City’s cost of providing water and sewer service must be allocated among the parcels in the City in a reasonable manner that does not result in one or more customers unfairly subsidizing another customer or customers. Proposition 218 requires rate structuring on the basis of parcels, rather than units.

To assist the City in ensuring that the water and sewer charges, as proposed to be modified and increased, meet the substantive requirements of Proposition 218, including that the amount of the fee imposed on any property does not exceed the proportional cost of the water and sewer services attributable to the parcel, the City hired Raftelis, a rate consultant. Raftelis prepared a Water and Wastewater Financial Plan and Rate Study, dated June 17, 2025 (the “2025 Financial Plan”). The 2025 Financial Plan uses the cost-of-service analysis and rate structure design that Raftelis completed in 2020 (the “2020 Study”). In 2021, the City’s water and sewer rates were set on the basis of the 2020 Study in compliance with the Proposition 218 proportionality requirement. The rate design set forth in the 2020 Study is consistent with the rate setting principles established by the American Water Works Association in the Manual M1: Principles of Water Rates, Fees and Charges, Seventh Edition (“Manual”).

Raftelis’ cost-of-service analysis allocates costs to each customer class based on:
1) Water use/water discharged to the sewer;
2) Number of meters (if a customer has more than one); and, 3) Meter size.

Comment #2
The City has failed to clearly demonstrate that the revenues derived from the increased water and sewer rates will not be used for purposes other than those for which the fees are charged.

Response #2
The comment does not include any specific information alleging that the revenues derived from the proposed water and sewer rates will be used for purposes other than those for which the fees are charged.

The City strictly complies with all applicable laws that govern the use of water and sewer utility revenues. Revenues collected from water and sewer rates are legally restricted and are accounted for in separate enterprise funds, entirely distinct from the City’s General Fund. These funds have their own accounting code structure to ensure transparency and proper tracking of all revenues and expenditures. By law, and as a matter of City policy, these revenues can only be used for the costs of providing water and sewer services, including operations, maintenance, capital improvements, and system reinvestment.

The City of Seal Beach undergoes an independent annual financial audit to ensure compliance with generally accepted auditing standards and government regulations.

This process evaluates the City's financial practices, internal controls, and overall fiscal health while promoting accountability and transparency in financial reporting.

Comment #3
The notice provided to ratepayers lacks suƯicient detail to determine whether the methodology used in the rate study is consistent with constitutional requirements.

Response #3
The Notice of Public Hearing to Consider Proposed Water and Sewer Rate Adjustments (“Notice”) was prepared in accordance with the requirements of Proposition 218, and contains all the necessary information required by law. Optional supplemental information was also included to better explain the rate adjustment process and described the City’s water and sewer infrastructure.

As noted in the Notice, the reasons for the proposed rate adjustments, the basis upon which they were calculated, and the amount of the proposed rates are described in more detail in the 2025 Financial Plan and the 2020 Study posted on the City’s webpage at utilityratestudy.sealbeachca.gov and available for review at the City Clerk’s OƯice.

Comment #4
The public process surrounding these changes lacks transparency and may not meet the standards required by the California Constitution and Government Code.

Response #4
The comment does not include any specific information regarding an alleged lack of transparency or how the public process does not meet the requirements of Proposition 218 and only states that the “public process may not meet the standards required by the California Constitution and Government Code”. However, the City notes that the public process for considering the proposed water and sewer rates fully complies with Proposition 218. As described in the Notice of Public Hearing, which was mailed to record owners and customers of record at least 45 days prior to the deadline for submitting written objections, the City will respond to all timely submitted written objections, consider all timely submitted written protests and all testimony at the public hearing, and determine whether there is a majority protest prior to considering approval of the proposed rates.

Based on the foregoing responses, the City Council determines that the objections described herein do not warrant (1) clarifications to the proposed water rates or sewer rates; (2) a reduction to the proposed water rates or sewer rates, (3) further review, or (4) delaying the public hearing on the proposed water and sewer rate adjustments.

RESOLUTION 7669

A RESOLUTION OF THE SEAL BEACH CITY COUNCIL
ESTABLISHING RATES FOR THE CITY’S WATER SERVICE
CHARGES EFFECTIVE ON AUGUST 1, 2025, JULY 1, 2026,
JULY 1, 2027, JULY 1, 2028, AND JULY 1, 2029
WHEREAS, the City of Seal Beach maintains a municipal Water Utility that provides water services to residents and businesses; and, WHEREAS, on February 22, 2021, City Council adopted Resolution 7114 to adjust water rates; and,
WHEREAS, the City’s Water Utility operational and capital improvement costs have increased substantially since the last rate adjustment, and are estimated to continue increasing significantly; and,
WHEREAS, the City’s currently established water rates are not adequate to meet increasing operations and maintenance and capital improvements costs without compromise to system operations; and,
WHEREAS, on June 12, 2023, the City retained Raftelis Financial Consultants, Inc. to conduct a Water and Wastewater Financial Plan and Rate Study to analyze the cost of providing water and sewer services, and recommend appropriate water and sewer rate adjustments (2025 Financial Plan); and,
WHEREAS, on May 12, 2025, an overview of the draft 2025 Financial Plan, including recommendations for proposed water rate adjustments was presented to the City Council; and,
WHEREAS, in order to adjust the water rates, the City must comply with Article XIIID of the California Constitution, more commonly known as Proposition 218; and,
WHEREAS, on May 12, 2025, City Council adopted Resolution 7644 setting a public hearing on the proposed water and sewer rate adjustments on July 14, 2025 (Public Hearing), and directing staff to initiate the Proposition 218 majority protest process for the proposed water and sewer rate adjustments; and, WHEREAS, the City provided mailed notice of the Public Hearing in accordance with the requirements of Proposition 218 and held the Public Hearing on July 14, 2025; and,
WHEREAS, at the Public Hearing, the City Council considered the 2025 Financial Plan and heard and considered all oral testimony and written protests and materials submitted regarding the proposed water rate adjustments; and, WHEREAS, following the conclusion of the Public Hearing, in conformity with Proposition 218, the City Council determined that no majority protest against the proposed water rates exist (i.e., written protests against the proposed water rates submitted and not withdrawn do not represent a majority of the parcels (50% +1) that receive water service).

NOW, THEREFORE, the Seal Beach City Council does resolve, declare, determine and order as follows:

Section 1. The City Council finds the Recitals set forth in this Resolution are true and correct and are incorporated herein by reference.

Section 2. The City Council hereby repeals Resolution 7114 and adopts the following water rates, subject to potential pass-through of increases in wholesale water purchase costs:

Proposed Water Fixed Charges ($/bi-monthly)
Proposed Water Volumetric Charges ($/hcf)
* Multi-Family and Leisure World tier allocations are determined by multiplying the hcf by the number of dwelling units for a given account.

Section 3. The City purchases water from the Orange County Water District and Municipal Water District of Orange County and has no control over the charges from these wholesale agencies. As part of the 2025 Financial Plan, the City estimated future wholesale costs. However, if wholesale costs are higher than predicted, the City may pass through to customers the increase in wholesale water purchase costs. The pass-through will be calculated based on the increase in wholesale water purchase costs compared to projected wholesale costs included in the 2025 Financial Plan, divided by customer annual volumetric water use. Notice of any adjustment to passthrough costs will be provided 30 days or more before the effective date of the adjustment.

Section 4. If any provision of this Resolution or its application is deemed invalid by a court of competent jurisdiction, the City Council intends that such invalidity will not affect the effectiveness of the remaining provisions or their application and, to this end, the provisions of this Resolution are severable.

PASSED, APPROVED AND ADOPTED by the Seal Beach City Council at a regular meeting held on the 14th day of July 2025 by the following vote:

AYES: Council Members
NOES: Council Members
ABSENT: Council Members
ABSTAIN: Council Members

Lisa Landau, Mayor
ATTEST:

Gloria D. Harper, City Clerk
STATE OF CALIFORNIA }
COUNTY OF ORANGE } SS
CITY OF SEAL BEACH }
I, Gloria D. Harper, City Clerk of the City of Seal Beach, do hereby certify that the foregoing resolution is the original copy of Resolution 7669 on file in the office of the City Clerk, passed, approved, and adopted by the City Council at a regular meeting held on the 14th day of July 2025.

Gloria D. Harper, City Clerk
RESOLUTION 7670

A RESOLUTION OF THE SEAL BEACH CITY COUNCIL
ESTABLISHING RATES FOR THE CITY’S WASTEWATER
(SEWER) SERVICE CHARGES EFFECTIVE ON AUGUST 1, 2025,
JULY 1, 2026, JULY 1, 2027, JULY 1, 2028, AND JULY 1, 2029 WHEREAS, the City of Seal Beach maintains a municipal Sewer Utility that provides sewer services to residents and businesses; and, WHEREAS, on February 22, 2021, the City Council adopted Resolution 7115 to adjust the rates for the City’s wastewater (sewer) service charges; and, WHEREAS, the City’s Sewer Utility operational and capital improvement costs have increased substantially since the last rate adjustment, and are estimated to continue increasing significantly; and,
WHEREAS, the City’s currently established sewer rates are not adequate to meet increasing operations and maintenance and capital improvements costs without compromise to system operations; and,
WHEREAS, on June 12, 2023, the City retained Raftelis Financial Consultants, Inc. to conduct a Water and Wastewater Financial Plan and Rate Study to analyze the cost of providing water and sewer services, and recommend appropriate water and sewer rate adjustments (2025 Financial Plan); and,
WHEREAS, on May 12, 2025, an overview of the draft 2025 Financial Plan, including recommendations for proposed sewer rate adjustments was presented to the City Council; and,
WHEREAS, in order to adjust the sewer rates, the City must comply with Article XIIID of the California Constitution, more commonly known as Proposition 218; and,
WHEREAS, on May 12, 2025, City Council adopted Resolution 7644 setting a public hearing on the proposed water and sewer rate adjustments on July 14, 2025 (the “Public Hearing”), and directing staff to initiate the Proposition 218 majority protest process for the proposed water and sewer rate adjustments; and, WHEREAS, the City provided mailed notice of the Public Hearing in accordance with the requirements of Proposition 218 and held the Public Hearing on July 14, 2025; and,
WHEREAS, at the Public Hearing, the City Council considered the 2025 Financial Plan and heard and considered all oral testimony and written protests and materials submitted regarding the proposed sewer rate adjustments; and, WHEREAS, following the conclusion of the Public Hearing, in conformity with Proposition 218, the City Council determined that no majority protest against the proposed water rates exist (i.e., written protests against the proposed sewer rates submitted and not withdrawn do not represent a majority of the parcels (50% +1) that receive sewer service).

NOW, THEREFORE, the Seal Beach City Council does resolve, declare, determine and order as follows:

Section 1. The City Council finds the Recitals set forth in this Resolution are true and correct and are incorporated herein by reference.

Section 2. The City Council hereby repeals Resolution 7115 and adopts the following sewer rates:

Proposed Sewer Fixed Charges ($/bi-monthly & Volumetric Charges ($/hcf of water) Section 3. If any provision of this Resolution or its application is deemed invalid by a court of competent jurisdiction, the City Council intends that such invalidity will not affect the effectiveness of the remaining provisions or their application and, to this end, the provisions of this Resolution are severable.

PASSED, APPROVED AND ADOPTED by the Seal Beach City Council at a regular meeting held on the 14th day of July 2025 by the following vote:

AYES: Council Members
NOES: Council Members
ABSENT: Council Members
ABSTAIN: Council Members

Lisa Landau, Mayor
ATTEST:

Gloria D. Harper, City Clerk
STATE OF CALIFORNIA }
COUNTY OF ORANGE } SS
CITY OF SEAL BEACH }
I, Gloria D. Harper, City Clerk of the City of Seal Beach, do hereby certify that the foregoing resolution is the original copy of Resolution 7670 on file in the office of the City Clerk, passed, approved, and adopted by the City Council at a regular meeting held on the 14th day of July 2025.

Gloria D. Harper, City Clerk
City of Seal Beach
Proposed Water and Wastewater Rate
Adjustment
Public Hearing - July 14, 2025
Revised Financial
Plan- City Council
Workshop #1
2/26/25
Informational
Open House #2
6/14/2025
Financial
Analysis
Commenced
June 2023
Public Hearing
Rates Proposed
No Action Taken
2/12/2024
Timeline – Where We’ve Been
2023
Financial Plan
Presented
December 2023
City
Implemented
Final Rate
Increase from
Prior Rate
Adoption
1/1/2025
City Council
Workshop #2
3/26/25
TODAY
Public
Hearing
7/14/25
2024 2025
Informational
Open House #1
6/4/2025
City Council
Meeting
5/12/25
2 Community
Information
Sessions
3 Fire Station No. 48
3131 N. Gate Road, Seal Beach

1. Wednesday, June 4, 2025

2. Saturday, June 14, 2025
What do my rates pay for?
Utility rates fund operations, maintenance, repairs, debt payments, emergency reserves, and forward-looking capital improvement projects.

Water
• Imported water and
groundwater replenishment
• 73 miles of pipelines,
downtown has 120-year-old
pipe
• 4 groundwater wells
• 2 reservoirs
Sewer
• 34 miles of sewer mains
• 25% severe condition
• Over 100-year-old pipes
• 6 pump stations
• 800 manholes
4 Water and Sewer Utilities Are Not Covering Expenses
Inflation: Post Covid-19 reached highest rate since 1981 and has impacted operational and capital project costs
Rain: FY 2023 and 2024 were wet years; net result is decreased revenue; $600k lower revenue than anticipated each year
Wholesale Water Costs: Increased OCWD water wholesale costs (partly due to PFAS), MWDOC – Import water wholesaler
Both OCWD and MWDOC have had or are proposing 2 years of double-digit rate increases and historically increases have been in the mid single digits Aging Infrastructure / Deferred Maintenance
Sewer: Not meeting required debt coverage ratio, charges were reduced by 25% in the last study
5 Why Rate
Increases are
Needed:
6 Water
Phase
Lampson Well Treatment System
About Purpose & Benefits
Project Timeline
Financials
Constraints
Treatment system to remove nuisance odor,
allowing increased pumping capacity. May need to
import water at double the cost of groundwater if not
producing at capacity.
• Construction: FY 2025-2027
• Design is complete. Soliciting for construction bids. • $4.5 M
• OCWD Producers Loan
• Lampson Well must be fully operational before the
rehabilitation of the Bolsa Chica Well, which currently supplies the majority of the City's groundwater
Lampson Well, the City’s newest built in 2011,
produces a nuisance odor caused by naturally
occurring H2S.
7 LCWA Water Main Lining
About Purpose & Benefits
Project Timeline
Project will reline the transmission line to provide
water to southerly part of City to provide the
necessary fire flow.

Transmission line crossing Los Cerritos
Wetlands/Hellman Ranch that has experienced
several recent breaks.

Phase
Financials
Constraints
• Construction: FY 2025-2026
• Design is complete
• Coastal Development Permit complete
• Coordinating construction with LCWA
• $2.5M Construction Value
• Anticipated SRF funding, pending rate approval
• Environmentally sensitive habitat
• Must be constructed with wetlands restoration –
Fall 2025
8 Water Financial Outlook Without Revenue
Increases (or bond issuances)
In the red before paying for capital expenses
9 FY 2024 FY 2025 FY 2026 FY 2027
Projected Total Revenue $6,488,889 $6,909,669 $7,049,657 $7,049,899 Personnel $2,017,372 $1,551,794 $1,675,937 $1,810,012
Maintenance and Operations $1,632,896 $2,250,908 $2,376,601 $2,465,225 Water Purchase Costs $2,562,447 $3,074,071 $3,230,820 $3,410,563 Subtotal Expenses $6,212,715 $6,876,772 $7,283,358 $7,685,799 Debt Service $103,850 $117,000 $0 $0
Cashflow $172,323 ($84,103) ($233,701) ($635,900)
Water Financial Plan Scenarios
Scenario 1 Scenario 2
Revenue Adjustments
5-Year Increase
FY 2026 38%
FY 2027 23%
FY 2028 5%
FY 2029 5%
FY 2030 5%
Total CAGR 96.5%
FY 2026 29%
FY 2027 15%
FY 2028 8%
FY 2029 7%
FY 2030 6%
Total CAGR 81.7%
CIP $44M
Does more projects sooner
$34M
Pushes out projects
Grants/Loans/Market Debt $25M Market Debt
$9.5M SRF Loan
$4.4M OCWD Loan
$19M Market Debt
$9.5M SRF Loan
$4.4M OCWD Loan
10 Revenue adjustments show increased revenue above prior year revenue Water - Recommended CIP
11 WATER - SCENARIO 1 - RECOMMENDED CIP FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 Total Encumbered Rollover Projects $431,300 $0 $0 $0 $0 $0 $431,300 O-WT-1 Water Infrast. Replacement & Compliance Program $0 $500,000 $500,000 $500,000 $500,000 $500,000 $2,500,000 WT2701 Navy Reservoir Rehabilitation $0 $300,000 $1,500,000 $0 $0 $0 $1,800,000 WT1801 SCADA Improvement Upgrade Project $0 $50,000 $50,000 $50,000 $50,000 $50,000 $250,000 WT1603 Bolsa Chica Water Well Rehabilitation $0 $0 $4,000,000 $0 $0 $0 $4,000,000 WT2401 Seal Way Sewer/Water Upgrade $0 $0 $150,000 $2,000,000 $0 $0 $2,150,000 WTXXXX Leisure World Well Reestablishment $0 $0 $0 $3,000,000 $3,000,000 $0 $6,000,000 SS1902 6th Street Alley Water/Sewer Replacement $0 $0 $0 $2,000,000 $0 $0 $2,000,000 WT1704 Lampson Ave Trans Main Repl. (to Seal Bch Blvd) $0 $0 $0 $0 $300,000 $3,000,000 $3,300,000 WT2102 College Park East Waterline Improvements $0 $0 $0 $0 $200,000 $2,000,000 $2,200,000 WT2301 College Park West Water System Improvements $0 $0 $0 $0 $0 $200,000 $200,000 Subtotal $431,300 $850,000 $6,200,000 $7,550,000 $4,050,000 $5,750,000 $24,831,300 WT1902 Lampson Well Treatment System $0 $5,072,863 $0 $0 $0 $0 $5,072,863 WT0904 Beverly Manor Water Pump Station Rehabilitation $0 $0 $2,000,000 $3,000,000 $3,000,000 $0 $8,000,000 WT2103 LCWA Watermain Lining $0 $2,500,000 $0 $0 $0 $0 $2,500,000 Subtotal - SRF and OCWD Loan Projects $0 $7,572,863 $2,000,000 $3,000,000 $3,000,000 $0 $15,572,863 WT2001 Advanced Metering Infrastructure $0 $40,000 $2,000,000 $2,000,000 $0 $0 $4,040,000 Total $431,300 $8,462,863 $10,200,000 $12,550,000 $7,050,000 $5,750,000 $44,444,163 FY 2025 to FY 2030 Year CIP $44,444,163
Allocation to Cost Causation Components

SUPPLY EXTRA CAPACITY
(Peaking Costs)

CONSERVATION METER

MAINTENANCE

CUSTOMER

SERVICE
Cost of Service
12 Volumetric Rate ($/HCF) Fixed Charge by Meter Size
BASE

DELIVERY /
COSTS
Bi-monthly Fixed Charge & Leisure World
Assumptions (Shown for Illustrative Purposes)
• Certain costs centers: Meter
Maintenance and Capacity are
allocated to customers classes based
on the number and size of meters
• Prior assumption: Leisure World (LW)
needed the equivalent of one 6” meter
• Revised to 2 – 12” meters
• LW would no longer be charged for
their 4 private fire accounts
• LW bi-monthly fixed charge = $14,916
equates to a $2.26 increase per
dwelling unit
13 1/1/2025
Fixed Charges
with LW
Fixed Charges
with LW
Scenario 1
Difference
Scenario 2
Difference
Meter Size Current 1 - 6" Meter 2 - 12" Meters $ $
5/8'' $52.38 $72.28 $70.68 ($1.60) ($1.50)
3/4'' $52.38 $72.28 $70.68 ($1.60) ($1.50)
1" $77.92 $107.53 $104.87 ($2.66) ($2.49)

1.5" $150.93 $208.28 $202.85 ($5.43) ($5.08)
2" $228.33 $315.10 $306.50 ($8.59) ($8.03)
3" $406.25 $560.63 $544.72 ($15.91) ($14.87)
4" $675.94 $932.80 $906.18 ($26.62) ($24.88)
6" $1,331.01 $1,836.79 $1,783.70 ($53.10) ($49.64)
8" $2,128.92 $2,937.91 $2,852.83 ($85.08) ($79.53)
10" $3,047.29 $4,205.26 $4,083.10 ($122.16) ($114.19)
12" NA NA $7,458.19 NA NA
2" Aquatic Park $344.58 $475.52 $476.01 $0.49 $0.45
Aquatic Park includes a capital surcharge due to under sea pipelines Scenario 1
Proposed Water Bi-Monthly 5-Year fixed
Charges (assumes 2 -12” meter for LW)
14 FYE 2026 FYE 2027 FYE 2028 FYE 2029 FYE 2030
Water 1/1/2025 8/1/2025 7/1/2026 7/1/2027 7/1/2028 7/1/2029 Bi-monthly Fixed Charges
All Customers
5/8'' $52.38 $70.68 $86.94 $91.29 $95.85 $100.64
3/4'' $52.38 $70.68 $86.94 $91.29 $95.85 $100.64
1" $77.92 $104.87 $128.99 $135.44 $142.21 $149.32

1.5" $150.93 $202.85 $249.51 $261.99 $275.09 $288.84
2" $228.33 $306.50 $377.00 $395.85 $415.64 $436.42
3" $406.25 $544.72 $670.00 $703.50 $738.68 $775.61
4" $675.94 $906.18 $1,114.60 $1,170.33 $1,228.84 $1,290.28 6" $1,331.01 $1,783.70 $2,193.95 $2,303.64 $2,418.82 $2,539.77 8" $2,128.92 $2,852.83 $3,508.98 $3,684.43 $3,868.65 $4,062.08 10" $3,047.29 $4,083.10 $5,022.21 $5,273.32 $5,536.99 $5,813.84 12" Leisure World $1,331.01 $7,458.19 $9,173.58 $9,632.26 $10,113.87 $10,619.56 2" Aquatic Park $344.58 $476.01 $585.49 $614.76 $645.50 $677.78 Private Fire Charges
4" $54.42 $75.10 $92.37 $96.99 $101.84 $106.93
6" $158.07 $218.14 $268.31 $281.72 $295.81 $310.60
8" $336.86 $464.87 $571.79 $600.38 $630.39 $661.91
10" $605.79 $835.99 $1,028.27 $1,079.68 $1,133.67 $1,190.35 12" NA $1,350.35 $1,660.94 $1,743.98 $1,831.18 $1,922.74 Proposed Water Volumetric Rates ($ / hcf)
15 FYE 2026 FYE 2027 FYE 2028 FYE 2029 FYE 2030
1/1/2025 8/1/2025 7/1/2026 7/1/2027 7/1/2028 7/1/2029
Volumetric Rates ($ /hcf)
Residential
Tier 1 $3.77 $5.20 $6.40 $6.72 $7.06 $7.41
Tier 2 $3.99 $5.51 $6.77 $7.11 $7.47 $7.84
Multi-Family Residential & Leisure World
Tier 1 $3.77 $5.20 $6.40 $6.72 $7.06 $7.41
Tier 2 $3.94 $5.44 $6.69 $7.02 $7.37 $7.74
Commercial $3.77 $5.20 $6.40 $6.72 $7.06 $7.41
Irrigation $3.86 $5.33 $6.55 $6.88 $7.22 $7.58
City $3.82 $5.27 $6.48 $6.81 $7.15 $7.51
Aquatic Park $4.27 $5.89 $7.25 $7.61 $7.99 $8.39
16 Sewer
Sewer Financial Outlook Without
Revenue Increases
• A debt service coverage ratio of 1.2 means the City has promised bondholders to set rates so that net cashflow (before CIP expenses) is about $650k (positive) • Revenue is decreasing due to lower interest earned in cash balances • Does not include capital projects
17 FY 2024 FY 2025 FY 2026 FY 2027
Projected Total Revenue $2,625,899 $2,589,328 $2,477,265 $2,410,373 Personnel $1,451,291 $1,319,707 $1,425,284 $1,539,306
Maintenance and Operations $758,140 $1,146,858 $1,204,201 $1,240,327 Subtotal Expenses $2,209,430 $2,466,565 $2,629,484 $2,779,633 Revenue Less Expenses $416,469 $122,763 ($152,219) ($369,260) Debt Service $545,583 $545,623 $545,183 $544,263
Cashflow ($129,114) ($422,860) ($697,402) ($913,523)
Sunset Aquatic Park Pump Station
About Purpose & Benefits
Project Timeline
Project will provide additional capacity and pump
station upgrades. Overflows from this system would go
directly into the Anaheim Bay and City would be fined.

Due to previous force main failures, current flow
is diverted to 2 - 2” mains across the Bolsa
Chica Channel.

Phase
Financials
• Construction: FY 2027-29
• Planned
• $2.7 M construction value
• Sunset Aquatic Park Equity Fund
Constraints
• Force mains are undersized and frequently have blockages • Coordination with Huntington Beach to receive wastewater 18 Sewer Financial Plan Scenarios
Scenario 1 Scenario 2
Revenue Adjustments
5-Year Increase
FY 2026 34%
FY 2027 21%
FY 2028 14%
FY 2029 13%
FY 2030 4%
Total CAGR 117.2%
FY 2026 34%
FY 2027 20%
FY 2028 9%
FY 2029 8%
FY 2030 7%
Total CAGR 102.5%
CIP (today’s $) $19.2M
• Does more projects
sooner, compared to
scenario 2
$15.7M
• Pushes out projects
Debt $14 M Market Debt $15 M Market Debt
19 34% is needed in the 1st year to meet debt covenants! Revenue adjustments show increased revenue above prior year revenue Proposed Sewer CIP
20 SEWER - SCENARIO 1 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 Total FYE 2023 Encumbered Rollover Projects $3,645,000 $0 $0 $0 $0 $0 $3,645,000 O-SS-2 Sewer Mainline Improvement Program $0 $500,000 $500,000 $500,000 $500,000 $500,000 $2,500,000 SS2303 Sunset Aquatic Park & Forcemain Upgrade $0 $200,000 $2,500,000 $0 $0 $0 $2,700,000 WT2401 Seal Way Sewer/Water Upgrade $0 $0 $150,000 $2,000,000 $0 $0 $2,150,000 WT1801 SCADA Improvement Upgrade Project $0 $50,000 $50,000 $50,000 $50,000 $50,000 $250,000 SS1902 6th Street Alley Water/Sewer Replacement $0 $0 $0 $2,600,000 $0 $0 $2,600,000 SSXXXX Adolfo Lopez Pump Station & Forcemain Upgrade $0 $0 $0 $0 $0 $200,000 $200,000 SS2204 Boeing Pump Station & Forcemain Upgrade $0 $0 $0 $200,000 $1,500,000 $0 $1,700,000 SSXXXX Pump Station 35 Upgrades - Phase 2 $0 $0 $0 $0 $300,000 $3,000,000 $3,300,000 SSXXXX 1st Street Pump Station & Forcemain Upgrade $0 $0 $0 $0 $0 $150,000 $150,000 Total $3,645,000 $750,000 $3,200,000 $5,350,000 $2,350,000 $3,900,000 $19,195,000 FY 2025 to FY 2030 CIP $19,195,000
Proposed Sewer Bi-Monthly
5-Year Rates & Charges
FYE 2026 FYE 2027 FYE 2028 FYE 2029 FYE 2030
Fixed Charge Current 8/1/2025 7/1/2026 7/1/2027 7/1/2028 7/1/2029 Single-Family Residential
Fixed Charge $48.04 $64.37 $77.89 $88.80 $100.34 $104.35 Customers with a Fixed Charge and
Volumetric Rate Current 8/1/2025 7/1/2026 7/1/2027 7/1/2028 7/1/2029 Multi-Family Residential
Fixed Charge $1.22 $1.63 $1.98 $2.26 $2.55 $2.65
Volumetric Rate ($/hcf) $4.00 $5.36 $6.49 $7.39 $8.35 $8.69 Commercial and City
Fixed Charge $1.22 $1.63 $1.98 $2.26 $2.55 $2.65
Volumetric Rate ($/hcf) $4.00 $5.36 $6.49 $7.39 $8.35 $8.69 Leisure World
Fixed Charge $1.22 $1.63 $1.98 $2.26 $2.55 $2.65
Flat Rate $2,198.06 $2,945.40 $3,563.93 $4,062.89 $4,591.06 $4,774.70 Navy
Sewer Meter Fixed Charge $1.22 $1.63 $1.98 $2.26 $2.55 $2.65 Sewer Meter Volumetric ($/hcf) $0.24 $0.32 $0.39 $0.44 $0.50 $0.52 Aquatic Park
Fixed Charge $1.22 $1.63 $1.98 $2.26 $2.55 $2.65
Volumetric Charge ($/hcf) $4.00 $5.36 $6.49 $7.39 $8.35 $8.69 Sewer Service Equity Charge $997.50 $1,336.65 $1,617.35 $1,843.78 $2,083.47 $2,166.80 Sewer Capital Equity Charge $1,322.00 $1,771.48 $2,143.49 $2,443.58 $2,761.24 $2,871.69 21 22
Bi-Monthly
Customer Bill Impacts
Proposed First Year Combined Water & Sewer
Bill Impacts (Bi-Monthly)
23 Proposed Multi-Year Combined Residential Water
& Sewer Bill Impacts (Annual & Bi-Monthly)
24 Proposed Leisure World - Combined Water &
Sewer Bill Impacts (Annual)
25 ≈$19 bi-monthly
increase per dwelling
unit or $9.51 monthly
for first year
Summary
• Proposed revenue increases will restore the utilities’ financial health so the City can:
› Continue to deliver safe, reliable water and sewer services › Maintain and upgrade aging infrastructure
› Maintain good credit standing and be able to issue debt • Consequences of delaying:
› $222k/month for water and $67k/month for sewer
› Projects may be affected if delayed
– LCWA Watermain Lining and Beverly Manor Well assume an SRF loan – Lampson Well Treatment System assumes an OCWD Producers Loan – Need to demonstrate that the City can pay current and future loans back › WW enterprise remains in technical default
• The rate study follows standard rate setting practice and uses available data to determine the cost to serve each class
26 27
Myths
Myth Busters
• Myth 1: The Water & Sewer Enterprise Funds will subsidize the General Fund.
o FACT: By law, revenues generated by water and sewer rates may only be used for costs of providing water and sewer services. • Myth 2: Nothing was done with the revenue from the last rate study. o FACT: On the contrary, many of the projects identified in the 2020 Rate Study have already been designed. However, due to various external factors, construction has been delayed. As a result, funding through debt issuance has not yet been pursued since the projects have not moved into the construction phase.
28 Myth Busters
• Myth 3: The CIP schedules are not attainable.
o FACT: While the Option 1 CIP schedule is ambitious, it is not unattainable—many of the projects are already designed and considered "shovel ready." Option 2 includes fewer projects, making its completion timeline even more manageable.
• Myth 4: Delays won't have an impact.
o FACT: Each month of delay is approximately $300k of revenue loss that could have been used towards enhancing your utility. Also, delays jeopardize external funding opportunities to help augment burden to rate payers and construction windows.
• Myth 5: The rates are subsidizing future developments. o FACT: The rates fund current system needs to keep your water and sewer systems reliable today. They are not designed to subsidize or fund future developments.
29 30
Summary of Objections
and Responses
31 AB 2257
• Established a formal written objection procedure for ratepayers to raise specific legal concerns
• Must include specific grounds for alleging noncompliance of the proposed rates with Proposition 218
• Designed to address disputes during public participation period • Permits agency to resolve issues during participation period • Creates an exhaustion of administrative remedies procedure • Requires ratepayers to bring a specific legal objection prior to the deadline established as part of the rate setting process to preserve their ability to file a legal challenge
31 AB 2257 Objection Tally
32 Written Objections Received 3
As of the 5 p.m. deadline on July 7, 2025, the City received:
33 Objection Letter #1
a. Object to proposed water and wastewater rates, citing inequity in the rate structure based on:
o Fixed charges are not “per door,”
o Lower use parcels unfairly pay less,
o Burden on those without ability to pay (i.e. fixed- and low-income, large families) o Lack of per door fees leads to unstable revenues
a. Object to wastewater rates, citing rate Single-Family customers are subsidizing others b. Object to Sunset Aquatic Park sewer rates, citing all other customers are subsidizing Aquatic Park
Written Objections Summary
Objection Letter #3
a. Proposed rates are excessive and not proportional to her property b. Object to proposed rates, stating they appear to exceed proportional cost of service to the objector’s property.
c. Object that the City has not demonstrated that the revenues will be used exclusively for each utility d. The notice lacks sufficient detail to determine if the methodology is consistent with Constitutional requirements, citing detailed financial analysis and rate modeling was not available to the public e. The public process lacked transparency
34 Objection Letter #2
a. Object to proposed rates, citing they are excessive
b. Object that the proposed rates circumvent Proposition 13 c. Object to personnel compensation increases, citing they are unjustified d. Object to public process, citing lack of transparency Written Objections Summary
Response Summary
The City acknowledges residents' concerns about proposed water and sewer rate increases but asserts that they are necessary, legally compliant, based on detailed studies, and designed to ensure the longterm reliability and equitable funding of essential water and wastewater services. • Written Objections did not demonstrate noncompliance with Proposition 218; therefore, the publicly noticed and available proposed rates, 2025 Financial Plan and 2020 Cost of Service Study Report stand.
• Water and Sewer revenues are restricted and accounted for in Water Enterprise and Sewer Enterprise Funds, separate from the City’s General Fund. Rate revenues pay for water and sewer expenses only.
• The City undergoes an independent annual financial audit to ensure compliance with generally accepted accounting principles in which expenditures from utility Enterprise Funds are noted. • Written Responses to the Written Objections are included in the City’s Administrative Record and included in the Public Hearing agenda packet.
35 Response Summary – 5 Themes

1. Necessity of Rate Increases - Objections did not provide specific information on alleged non-compliance with Proposition 218. Proposed rate increases are deemed essential and not arbitrary, driven by critical factors such as:
o Aging Infrastructure: The need for substantial investment in repairing, replacing, and modernizing old water and wastewater systems to ensure reliability, prevent failures, and meet public health standards.
o Regulatory Compliance: Adhering to increasingly stringent federal and state environmental and public health regulations, which require significant capital and operational adjustments. o Rising Operational Costs: Covering the increasing expenses for supplies, energy, chemicals, and maintenance necessary for daily system operation.
o Long-Term Financial Stability: Ensuring a stable financial foundation for the utility to meet current needs, fund future projects, and maintain reserves to avoid larger, unpredictable increases.
36 Response Summary – 5 Themes

2. Equity in Billing Structure:
• Fair Cost Allocation: While promoting conservation through use-based billing, the overall rate structure aims to recover fixed infrastructure costs equitably from all users. All customers with an account, even if they use no water, pay the fixed charge. A customer pays in proportion to their 1) water use (on average is about 70% of the bill), 2) number of meters, and 3) meter size.
• Fixed Cost Recovery: The proposed water fixed charge recovers the following costs:
o Customer Billing: only customers who get a bill cause this cost and therefore can be charged for it The following are proportional to meter size:
o Meter Maintenance: only customers with meters can be charged for it because the costs are associated with meter maintenance and meter reading
o Fixed Capacity (infrastructure): capacity costs are assessed in proportion to a customer’s meter size as meter size is proportional to potential water use that affects infrastructure needs. Potential demand to serve multi-family dwellings is reflected in their meter size. For example, a SFR ¾” meter fixed charge is currently $26/month compared to a MFR 4” meter fixed charge is $338/month.

Continued next slide
37 Response Summary – 5 Themes

2. Equity in Billing Structure Continued:
• Single Family subsidizing other classes: Single family class pays in proportion to their estimated sewer discharge • Subsidies and Sunset Aquatic Park: The City is committed to ensuring all customer classes, including multi-family units and specific users like Sunset Aquatic Park, contribute their fair share based on their use and impact on the system, in line with Proposition 218 which requires that no class subsidizes another. • The City implemented Sunset Aquatic Park charges specifically to address equity concerns:
o Water - The fixed charge for Sunset Aquatic Park is higher than the fixed charge for other customers with the same meter size. This is to recover the added capital cost associated with the water line feeding Sunset Aquatic Park.
o Sewer – Sunset Aquatic Park has a separate sewer service equity charge and sewer capital equity charge to recover the added costs associated with Sunset Aquatic Park sewer service. 38 Response Summary – 5 Themes

3. Justification for Personnel Compensation:

Staff compensation is a significant part of the operational budget for any utility, as it relies on skilled personnel to manage complex systems, maintain infrastructure, and ensure compliance.

The 8% annual personnel cost inflator is a comprehensive estimate that includes:
• merit increases,
• cost of living adjustments,
• retirement costs,
• insurance and
• other legally obligated personnel-related expenses.

It is based on recent cost trends and future obligations and is necessary to maintain service levels and staffing. The personnel inflator is not used to inflate capital improvement projects. There is a separate CIP inflator which is 5%, 4% , 3%, 3% and 3% for the 5-year proposed rates period. 39 Response Summary – 5 Themes

4. Compliance with Proposition 218 and Legal Standards:
o Prop 218 (User Fees) vs Prop 13 (Taxes): Water and wastewater charges are considered property related fees, not property taxes, meaning Proposition 13 (pertaining to property taxes) does not apply.
o Cost of Service Basis: All proposed rates are based on comprehensive, independent financial analysis and cost-of-service studies designed to ensure that revenues do not exceed the cost of service and that charges are proportional to the cost of serving each parcel, fulfilling Proposition 218 requirements.
o Restricted Funds: Revenues derived from these rates are legally restricted and exclusively dedicated to the operation, maintenance, and capital improvement of the water and sewer systems through each utility Enterprise Fund, separate from the General Fund. 40 Response Summary – 5 Themes

5. Transparency and Public Process:
• Adherence to Legal Process: The proposed rate adjustments followed the legally mandated Prop 218 process, including public notification and a Public Hearing. The Notice of Public Hearing provided an explanation of cost and inflation drivers, capital needs, how proposed rates were determined, and directed interested persons to the consultant's reports available on the website and from the City Clerk’s Office.
• Transparent Public Process Included:
o Multiple publicly-noticed City Council workshops (February 26, March 26, 2025) o Regular City Council Meetings (2023, 2024, 2025)
o Community information sessions (2023, 2024, 2025: June 4 and June 14). o Meetings and information sessions were promoted across various City communication channels (website, media releases, social media, e-newsletters, and within the Public Hearing Notice). 41 Summary of Requests:

1. That the City Council conduct a public hearing to accept comments on the proposed water and sewer rate adjustments; and,

2. Upon the conclusion of the public hearing, that the City Council adopt Resolution 7668 responding to timely filed written objections to the proposed water and sewer rates pursuant to the requirements of Assembly Bill 2257; and,

3. Upon the conclusion of the public hearing, provided a majority protest against the proposed water rates does not exist, that City Council adopt Resolution 7669 establishing the water rates, effective August 1, 2025; and,

4. Upon the conclusion of the public hearing, provided a majority protest against the proposed sewer rates does not exist, that City Council adopt Resolution 7670 establishing the sewer rates, effective August 1, 2025; and,

5. Receive and file the Water and Wastewater Financial Plan and Rate Study, prepared by Raftelis Financial Consultants, Inc., dated June 17, 2025, as presented to the City Council at this meeting and on file in the office of the City Clerk. 42 43
End of
Presentation
Revenue must be
used to cover the
costs for which
the charge was
imposed
The charge must
be for a service
that is actually
used or
immediately
available
The fee may not
exceed the
proportional cost
to serve the
parcel
Proposition 218 Requires:

Cannot collect
more than what
you need
Must send a
written notice to
customers no less
than 45 days
before a public
hearing
44 NOTE: Revenues collected from rates cannot be used for any other purpose.

Utility Enterprise Funds are separate from the General Fund.

Water Infrastructure
45 Beverly Manor Pump Station
About Purpose & Benefits
Project Timeline
Pump station upgrade including new pumps,
discharge piping, emergency generator, Variable
Frequency Drives, and electric controls. Without
Beverly Manor in full operation, system may not
maintain adequate pressure and fire flow.

Constructed in 1969, the booster station is
responsible for connecting Beverly Manor
Reservoir to the distribution system.

Phase
Financials
• Construction: FY 2026-28
• Design is substantially completed
• Production well in service. Fully manual operation.
• $8M Construction Value
• Anticipated SRF Funding
Constraints
• Antiquated system with no supporting parts for maintenance • Inability to fully pump reservoir water to distribution system Navy Reservoir Rehabilitation
About Purpose & Benefits
Project Timeline
Tank provides necessary water storage to address
water demand fluctuations, including emergency
needs
Navy Reservoir, constructed in 1963, has a
usable storage capacity of 2.5 million gallons.

Project will rehabilitate reservoir that has
deteriorated due to corroded steel tank coating,
will also rebuild the booster pumps.

Phase
Financials
• Construction: FY 2026-28
• Assessment is completed.
• Next phase is design.
• $1.8 M
Constraints
• Timely completion to prevent further corrosion,
which can lead to tank failure
Water – Modified CIP
(Absolute Minimum Required Projects)
48 WATER - SCENARIO 2 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 Total FYE 2024 Rollover Projects into FY 2025 $431,300 $0 $0 $0 $0 $0 $431,300 O-WT-1 Water Infrast. Replacement & Compliance Program $0 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $5,000,000 WT2701 Navy Reservoir Rehabilitation $0 $300,000 $1,500,000 $0 $0 $0 $1,800,000 WT1801 SCADA Improvement Upgrade Project $0 $50,000 $50,000 $50,000 $50,000 $50,000 $250,000 WT1603 Bolsa Chica Water Well Rehabilitation $0 $0 $0 $0 $2,000,000 $2,000,000 $4,000,000 WTXXXX Leisure World Well Reestablishment $0 $0 $0 $0 $0 $3,000,000 $3,000,000 Subtotal $431,300 $1,350,000 $2,550,000 $1,050,000 $3,050,000 $6,050,000 $14,481,300 WT1902 Lampson Well Treatment System $0 $5,072,863 $0 $0 $0 $0 $5,072,863 WT0904 Beverly Manor Water Pump Station Rehabilitation $0 $0 $2,000,000 $3,000,000 $3,000,000 $0 $8,000,000 WT2103 LCWA Watermain Lining $0 $2,500,000 $0 $0 $0 $0 $2,500,000 Subtotal - SRF and OCWD Loan Projects $0 $7,572,863 $2,000,000 $3,000,000 $3,000,000 $0 $15,572,863 WT2001 Advanced Metering Infrastructure $0 $40,000 $2,000,000 $2,000,000 $0 $0 $4,040,000 Total $431,300 $8,962,863 $6,550,000 $6,050,000 $6,050,000 $6,050,000 $34,094,163 FY 2025 to FY 2030 Year CIP $34,094,163
Modified Option Water Bi-Monthly 5-Year fixed
Charges (assumes 2 -12” meter for LW)
49 FYE 2026 FYE 2027 FYE 2028 FYE 2029 FYE 2030
Water 1/1/2025 8/1/2025 7/1/2026 7/1/2027 7/1/2028 7/1/2029 Bi-monthly Fixed Charges
All Customers
5/8'' $52.38 $66.07 $75.98 $82.06 $87.81 $93.08
3/4'' $52.38 $66.07 $75.98 $82.06 $87.81 $93.08
1" $77.92 $98.03 $112.73 $121.75 $130.28 $138.09

1.5" $150.93 $189.62 $218.07 $235.51 $252.00 $267.12
2" $228.33 $286.51 $329.49 $355.85 $380.76 $403.60
3" $406.25 $509.19 $585.57 $632.42 $676.69 $717.29
4" $675.94 $847.08 $974.14 $1,052.07 $1,125.72 $1,193.26 6" $1,331.01 $1,667.37 $1,917.47 $2,070.87 $2,215.83 $2,348.78 8" $2,128.92 $2,666.78 $3,066.79 $3,312.14 $3,543.98 $3,756.62 10" $3,047.29 $3,816.81 $4,389.33 $4,740.48 $5,072.31 $5,376.65 12" Leisure World $1,331.01 $6,971.79 $8,017.56 $8,658.96 $9,265.09 $9,821.00 2" Aquatic Park $344.58 $444.96 $511.71 $552.64 $591.33 $626.81 Private Fire Charges
4" $54.42 $70.20 $80.73 $87.19 $93.29 $98.89
6" $158.07 $203.91 $234.50 $253.26 $270.98 $287.24
8" $336.86 $434.55 $499.73 $539.71 $577.49 $612.14
10" $605.79 $781.47 $898.69 $970.58 $1,038.53 $1,100.84 12" NA $1,262.29 $1,451.63 $1,567.76 $1,677.51 $1,778.16 Modified Option Water Volumetric Rates ($ / hcf)
50 FYE 2026 FYE 2027 FYE 2028 FYE 2029 FYE 2030
1/1/2025 8/1/2025 7/1/2026 7/1/2027 7/1/2028 7/1/2029
Volumetric Rates ($ /hcf)
Residential
Tier 1 $3.77 $4.86 $5.59 $6.04 $6.46 $6.85
Tier 2 $3.99 $5.15 $5.92 $6.39 $6.84 $7.25
Multi-Family Residential & Leisure World
Tier 1 $3.77 $4.86 $5.59 $6.04 $6.46 $6.85
Tier 2 $3.94 $5.08 $5.84 $6.31 $6.75 $7.16
Commercial $3.77 $4.86 $5.59 $6.04 $6.46 $6.85
Irrigation $3.86 $4.98 $5.73 $6.18 $6.62 $7.01
City $3.82 $4.93 $5.67 $6.12 $6.55 $6.94
Aquatic Park $4.27 $5.51 $6.33 $6.84 $7.32 $7.76
Modified Option Sewer CIP
51 SEWER - SCENARIO 2 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 Total FYE 2024 Projects rolled over into FYE 2025 $3,645,000 $0 $0 $0 $0 $0 $3,645,000 O-SS-2 Sewer Mainline Improvement Program $0 $750,000 $750,000 $750,000 $750,000 $750,000 $3,750,000 SS2303 Sunset Aquatic Park & Forcemain Upgrade $0 $200,000 $2,500,000 $0 $0 $0 $2,700,000 WT1801 SCADA Improvement Upgrade Project $0 $50,000 $50,000 $50,000 $50,000 $50,000 $250,000 SS2204 Boeing PS & Forcemain Upgrade $0 $0 $0 $200,000 $1,500,000 $0 $1,700,000 SSXXXX PS#35 Upgrades - Phase 2 $0 $0 $0 $0 $300,000 $3,000,000 $3,300,000 SSXXXX Adolfo Lopez PS & Forcemain Upgrade $0 $0 $0 $0 $0 $200,000 $200,000 SSXXXX 1st Street PS & Forcemain Upgrade $0 $0 $0 $0 $0 $150,000 $150,000 Total $3,645,000 $1,000,000 $3,300,000 $1,000,000 $2,600,000 $4,150,000 $15,695,000 FY 2025 to FY 2030 CIP $15,695,000
52 Modified Option Sewer Bi-Monthly 5-Year Rates
& Charges
FYE 2026 FYE 2027 FYE 2028 FYE 2029 FYE 2030
Fixed Charge Current 8/1/2025 7/1/2026 7/1/2027 7/1/2028 7/1/2029 Single-Family Residential
Fixed Charge $48.04 $64.37 $77.25 $84.20 $90.94 $97.30
Customers with a Fixed Charge and
Volumetric Rate Current 8/1/2025 7/1/2026 7/1/2027 7/1/2028 7/1/2029 Multi-Family Residential
Fixed Charge $1.22 $1.63 $1.96 $2.14 $2.31 $2.47
Volumetric Rate ($/hcf) $4.00 $5.36 $6.43 $7.01 $7.57 $8.10 Commercial and City
Fixed Charge $1.22 $1.63 $1.96 $2.14 $2.31 $2.47
Volumetric Rate ($/hcf) $4.00 $5.36 $6.43 $7.01 $7.57 $8.10 Leisure World
Fixed Charge $1.22 $1.63 $1.96 $2.14 $2.31 $2.47
Flat Rate $2,198.06 $2,945.40 $3,534.48 $3,852.58 $4,160.79 $4,452.05 Navy
Sewer Meter Fixed Charge $1.22 $1.63 $1.96 $2.14 $2.31 $2.47 Sewer Meter Volumetric ($/hcf) $0.24 $0.32 $0.39 $0.42 $0.45 $0.49 Aquatic Park
Fixed Charge $1.22 $1.63 $1.96 $2.14 $2.31 $2.47
Volumetric Charge ($/hcf) $4.00 $5.36 $6.43 $7.01 $7.57 $8.10 Sewer Service Equity Charge $997.50 $1,336.65 $1,603.98 $1,748.34 $1,888.21 $2,020.38 Sewer Capital Equity Charge $1,322.00 $1,771.48 $2,125.78 $2,317.10 $2,502.46 $2,677.64 Modified Option First Year Combined Water &
Sewer Bill Impacts (Bi-Monthly)
53 Modified Option Multi-Year Combined Residential
Water & Sewer Bill Impacts (Bi-Monthly)
54 Modified Option Leisure World - First Year Combined
Water & Sewer Bill Impacts (Bi-Monthly)
55 ≈$15.20 bimonthly increase
per dwelling unit or
$7.60 monthly
Water Infrastructure Replacement
& Compliance Program
About Purpose & Benefits
Project Timeline
Replace aging infrastructure to improve reliability,
meet regulatory compliance, and increase capacity
to meet fire flow and pressure needs. Mainline
emergency repairs are costly and will cause service
disruptions.

Program helps fund on-going state and federal
regulatory compliance efforts, and methodically
and systematically improves the aging water
infrastructure, in particular areas that have
shown deterioration and need for capacity.

Phase
Financials
• Ongoing
• Ongoing, especially 100-year-old pipes
• $500,000 to $1M annually
Constraints
• 30,000 linear feet of pipeline that is past its useful life identified in 2012. Thirteen years later, this
number is higher.

Bolsa Chica Well Rehabilitation
About Purpose & Benefits
Project Timeline
Well improvements include replacing pumps,
generators, motors, and a water treatment system.

Pump failure may lead to water imports, which is
double the cost of groundwater.

The project will rehabilitate the groundwater well
site that was built in 1979.

Phase
Financials
• Construction: FY 2027-29
• Design is completed.
• $4 M
Constraints
• Lampson Well needs to be fully operational before
this well can be shutdown
Advanced Metering Infrastructure
About Purpose & Benefits
Project Timeline
AMI provides numerous benefits, including:

1. Reduces in-person manual reading

2. Complies with ongoing water efficiency and conservation mandates

3. Provides on-demand customer user interface (i.e., leak detection) Existing manual meters are at the end or have
surpassed serviceable life, warranting
replacement. AMI (Advanced Metering
Infrastructure) is a two-way communication
system to collect detailed metering information.

Phase
Financials
• Construction: FY 2026-28
• Preliminary Study - Completed
• Next phase is design
• Water Enterprise - $4 M
• BOR Grant – $2M
Constraints
• Not billing for water provided
• Eliminate manual/in-person meter reading
• Multi-year process
SCADA Improvement Upgrade
About Purpose & Benefits
Project Timeline
Supports operations and management monitoring
and automation, to better address and respond to
emergencies and reduce in-person response under
time-sensitive constraints. Used to optimize energy
use.

SCADA – Supervisory Control and Data
Acquisition for Water and Sewer Systems.

Phase
Financials
• In Progress
• Implementation at select locations
• On-going & in progress
• $50k/year Water
• $50k/year Sewer
Constraints
• Replacement of antiquated equipment for
compatibility
Photos is for demonstration purposes only.

Seal Way Water/Sewer Upgrade
About Purpose & Benefits
Project Timeline
Upsize pipe from 6-inch to 8-inch to meet demands.

Has had frequent water main breaks that can lead
to service interruption, and sewer blockages that
can lead to overflows.

Area has frequent blockage and sewer cleaning
needs. CCTV shows sewer mainline
delamination. One of the older water/sewer
mainlines in the city.

Phase
Financials
• Construction: FY 2033-34
• Planned
• $2.2 M Water
• $2.2 M Sewer
Constraints
• Concrete alley, tight working quarters, high
water table
6th Street Alley Water/Sewer Replacement
About Purpose & Benefits
Project Timeline
Address sewer line offset and delamination,
manhole upgrade, and waterline upsizing to meet
demands. Delamination and/or offset in the lines will
lead blockages & service interruptions.

CCTV identified issues. Pipe joint sections can
shift, sink, or be invaded by roots causing them
to become unaligned with the rest of the pipe.

Phase
Financials
Constraints
• Construction: FY 2033
• Design is completed
• Project on hold
• $2.0M Water
• $2.6M Sewer
• Concrete alley, tight working quarters, high water
Photos are for demonstration purposes only. table
Lampson Transmission/CPE
Waterline Improvements
About Purpose & Benefits
Project Timeline
Increase the volume of water that can be delivered
from Lampson Well and improve water pressure
throughout the city.

Upsizing Lampson Avenue transmission main to
maintain pressure during peak demands. Project
will run the span of Lampson Avenue from Seal
Beach Boulevard to easterly City limits, in
phases.

Phase
Financials
Constraints
• Phase I Construction: FY 2029-31
• Planned
• $3.3 M for Lampson Transmission Phase I
• $2.2M for Lampson Transmission Phase II
• $2.2M for CPE Waterline Improvements
• TBD
College Park West Water System Improvements
About Purpose & Benefits
Project Timeline
Establish an additional connection point to the
College Park West neighborhood to provide an
alternate water supply in the event of an
emergency.

Installation of a new emergency interconnection
transmission line to enhance system reliability
and provide greater failover capability,
minimizing the risk of service disruption in an
emergency.

Phase
Financials
Constraints
• Phase I Construction: FY 2028-29
• Planned
• $3.3 M Water for Phase I
• Negotiations with neighboring water agencies for
emergency intertie
Water Financial Plan Scenarios
December 2023 Scenario 1 Scenario 2
Revenue Adjustments
5-Year Increase
FY 2024 33%
FY 2025 25%
FY 2026 17%
FY 2027 12%
FY 2028 10%
Total CAGR 139.6%
FY 2026 38%
FY 2027 23%
FY 2028 5%
FY 2029 5%
FY 2030 5%
Total CAGR 96.5%
FY 2026 29%
FY 2027 15%
FY 2028 8%
FY 2029 7%
FY 2030 6%
Total CAGR 81.7%
CIP $38M $44M
Higher Due to Two
Years of Inflation
Does more projects
sooner
$34M
Pushes out projects
Grants/Loans/Market
Debt
$22M Market Debt
$11M SRF Loan
$25M Market Debt
$9.5M SRF Loan
$4.4M OCWD Loan
$19M Market Debt
$9.5M SRF Loan
$4.4M OCWD Loan
64 Revenue adjustments show increased revenue above prior year revenue 65 Sewer Infrastructure
Pump Station #35
About Purpose & Benefits
Project Timeline
Project will provide emergency sewage by-pass,
mechanical/electrical upgrades, and emergency
back-up power generation. This a very important
pump station – an outage would cause sewer
backups in the southern part of the City.

Originally constructed in 1973, and subsequently
upgraded. PS #35 is the main sewer station that
serves the Hill, Bridgeport, Naval Weapons
Station, Old Town.

Financials
• Phase I - Under construction
• Phase II – FY 29/30
• $1.6 M construction value
• $3.3 M Phase II
Constraints
• Critical system to transport wastewater to OCSan
regional system
• Noticeable increase of Fats, Oils, Grease (FOG)
discharge
Adolfo Lopez and Boeing Pump Stations
About Purpose & Benefits
Project Timeline
Project will rehabilitate components and evaluate
the feasibility of constructing a parallel force main.

Pump station and electrical failures may result in
wastewater leaching and system overflow, which
can potentially be a substantial water quality fine.

Adolfo Lopez Station was constructed in 2005; the Boeing Pump Station was constructed in 2003. Both stations are reaching a point where more frequent failures and repairs are needed, in particular electrical components.

Furthermore, settling and corrosion is apparent in the
piping and wet wells.

Phase
Financials
• FY 2027-29
• Planned
• $1.7M Adolfo Lopez
• $1.7M Boeing
Constraints
• Force mains are original and near end of
serviceable life.
• Electrical repair requires frequent contractor callouts.

Sewer Mainline Improvement Program
About Purpose & Benefits
Project Timeline
Program will address structural and capacity
deficiencies, manhole upgrades, and point repairs.

The sewer system is on average 80 years old. Inability
to properly convey wastewater may result in blockages,
overages, and ultimately a health hazard.

Continuous repair of sewer infrastructure per
CCTV assessment to address deficiencies (e.g.,
cracks, offsets, delamination, capacity, flow).

Phase
Financials
• Ongoing
• CCTV Analysis (2023)
• Next target area – The Hill/Old Town
• $500,000 to $750,000 annually
Constraints
• On-going CCTV/cleaning per state requirements
• Aging infrastructure that was not built for existing
demands