STORMWATER RATE STUDY RECOMMENDATIONS
COUNCIL WATER COMMITTEE
Item 25-1279
November 13, 2025
Stormwater Rate Study
2 Today’s Actions
Outline stormwater utility challenges and funding needs Summarize proposed solution
Rate Study findings and Recommendations
Summarize Proposition 218 requirements and approach
Request approval to forward the proposed rate schedules and Rate Study to the City Council
Problem to be Addressed
3 Stormwater must be physically removed from properties to avoid flood damage and nuisance flooding, and reduce pollution in local waterways Aging stormwater infrastructure at risk for failures
Current stormwater utility rate revenues do not adequately fund the cost to provide reliable service Operations and maintenance
Emergency repairs
Capital improvement projects
Regulatory compliance
Stormwater System Overview
23,200 Catch Basins
(also know as storm drains)
Large network of storm drains, pipes, pump stations and detention basins that collect and move stormwater from properties into local waterways like rivers, creeks, sloughs and the Delta. 243,000 Customers 19 Detention Basins
~100 Discharge Outlets
620 Miles of Pipeline
77 Pump Stations
4 Stormwater Master Plan
5 Identify and evaluate flooding concerns
Develop CIP projects to alleviate flooding
Support future development
Purpose: Findings:
Existing flooding concerns are distributed throughout the City New development often creates or exacerbates flooding concerns 12 improvement concepts developed with costs ranging from $5-75M Improvements focused on larger flooding issues but could be augmented by smaller-scale projects
Aging Infrastructure
6 Aging Infrastructure
7 Infrastructure Impacts
8 Infrastructure Impacts
9 Infrastructure Impacts
10 Stormwater Master Plan Capital Improvements
* Denoted projects are alternatives and would not both be constructed 11 Existing Stormwater System Revenues
12 Enterprise utility must be self supporting
About 87% of funding comes from rate revenues
Current rate of $2.10/month (~$25/year for a single-family home) established 33 years ago, has never increased Fee was established to meet the NPDES permit requirements, not O&M Stormwater monitoring, site inspections, reporting, outreach Since 1992, infrastructure has aged while NPDES requirements and the City have grown Utility faces $2.7M deficit over the next two fiscal years combined Estimated to begin fiscal year 2027-28 with a ~$5M deficit for operations and maintenance alone
Impacts of Insufficient Revenues
13 Backlog of deferred maintenance
Past and future deferral of critical infrastructure improvements Increased risk of flood damage to properties and nuisance flooding Risk of increased pollution in local waterways
Risk of regulatory fines for violations due to infrastructure failures
Purpose of a Rate Study
Determine adequate level of rate revenue to operate and maintain the stormwater utility Develop cost-based and proportional stormwater rates to meet intent and requirements of Proposition 218 Based on stormwater billing units – equivalent residential unit (ERU) Reflect prudent financial planning criteria
Prudent rate funding of capital
Meet target reserve balances
Developed using generally accepted methodologies tailored to the City’s system and customer characteristics 14 Rate Design
Design rates for each class of service to reflect the prior two analyses, along with rate design goals and objectives
Cost of Service
Proportionally distribute the revenue requirement between the customer classes of service Revenue Requirement
Compares the revenue of the utility to the expenses to evaluate the level of overall rate revenues 15 Developing Cost-Based Rates
Prop. 218 – California constitutional amendment to protect taxpayers Limits how taxes, fees and charges can be created or increased Prop. 218 is not prescriptive in defining a “cost-based” rate Fees shall not exceed the reasonable cost of providing the service Fees shall not exceed the proportional cost of providing service Cost of service analysis results are the foundation of the proposed rates Nexus between cost to provide service and rates charged 16 Proposition 218 – Establishing Cost Based Rates
Revenues independently calculated by customer group
O&M expenses based on recent adopted budgets
Projected based on annual inflationary factors
Capital Funding Plan based on City’s current stormwater CIP As outlined in the 2023 Stormwater Master Plan
Target annual rate funding of capital
Target increasing rate funded capital annually to fund necessary capital improvements No current annual debt service
Reserve minimum target: six months of O&M expenses
17 Revenue Requirement - Key Assumptions
Capital Improvement Funding Plan
18 Priority 1 Projects
Pump Station Improvements
HWY 4 and San Joaquin
Bonnie Brook
Boggs Tract
Walker Turnpike Alt 1
Revenue Requirement Summary ($000’s)
19 Revenue Requirement Summary
20 Proposed rate revenue adjustments are necessary to prudently fund the stormwater enterprise fund (utility) Adequately fund annual O&M expenses to reflect recent and future projected inflationary increases Fund essential capital improvements
Maintain strong financial metrics
Overall revenue adjustment may not reflect individual bill impacts developed in the cost of service and rate design analyses Rate revenue adjustments propose annual adjustments to the ERU rate
Provides the basis to meet Proposition 218 requirements Proportional distribution of costs between customer classes Cost of service analysis is simplified using an ERU for billing purposes Revenue requirement distributed on a cost per ERU:
Cost divided by total number of ERUs
Cost of service average unit costs provide basis for proposed rate designs per ERU 21 Cost of Service Summary
Current Stormwater Rate Structure
Residential
Based on an ERU
Single family residential is equal to one ERU
1 ERU = 2,347 square feet of impervious area
Multi-family and apartments are charged for each dwelling unit FY
2025-26
FY
2026-27
FY
2027-28
FY
2028-29
FY
2029-30
FY
2030-31
Average Residential Customer Bill
$2.10
$3.85
$5.60
$6.85
$7.85
$8.10
22 Current Stormwater Rate Structure (continued)
Non-Residential
Commercial, Industrial and Institutional are based on a density of development factor, or the estimated amount of impervious surface area on a given parcel Commercial – 90%
Institutional – 62%
Industrial – 79%
The amount of impervious area is divided by the average amount of impervious area per ERU to determine the number of ERUs for non-residential customers The number of ERUs are multiplied by the rate per ERU
23 Monthly Stormwater Bill Comparison
24 Upon City Council acceptance of the Study, staff sends customer notification outlining proposed rates for protest hearing Review and count protests
Council may move forward with proposed rates if no majority protest (50% + 1) If no majority protest (<50%) , send ballot to customers and set public hearing If majority (>50%) of ballots received are in favor, the City Council may approve the Study and implement proposed rates 25 Proposition 218 Process
Next Steps
26 Finalize technical analysis
Present findings and proposed rates
City Council
Set Public Hearing
Adoption and Implementation Process
Hold Protest Hearing
If >50% protest, process cannot move forward
If <50% protest, next step
Hold Ballot Hearing
Review and count ballots
Council may adopt rates if a majority of returned votes are affirmative
Recommendation
Staff recommend approving a motion to forward the proposed rate schedules and Rate Study to the City Council 27 Questions and Discussion