Stormwater Utility Funding Options
Council Water Committee
August 19, 2026
Agenda Item No. 26-0917
Background
Stormwater utility must be self-supporting
The current stormwater rate of $2.10 per month for a typical single-family home was set in 1992 and has never been increased The 2010 Stormwater Rate Study and Election weren’t successful Years of underfunding have resulted in:
Backlog of deferred maintenance
No funding for critical capital projects
Depletion of reserve funds
Stormwater Utility will face an approximately $5 million annual shortfall starting in July 2027 The 2026 Stormwater Rate Study and Election were not successful 2 Proposition 218
California constitutional amendment passed by voters in 1996 that restricts local governments from enacting or increasing taxes, assessments, and property-related fees without taxpayer consent. It requires voter approval for local tax levies and mandates that property-related fees not exceed the actual cost of providing the service Only sewer, water, and refuse collection were explicitly noted as exempt from voter approval 3 Typical Stormwater Proposition 218 Process
Conducted by mail
Ballots mailed to property owners or customers of record Ballots must be returned by the close of the Public Hearing If more than 50% of returned ballots are in favor of the proposed rate adjustments, rates may be adopted 4 Sewer and water services are essential to a parcel’s habitability and are not services a property owner can realistically opt out of They are exempt from the requirement to hold an actual majority election, relying instead on a formal public hearing and the majority (50% + 1) written protest process Unfortunately, stormwater was not explicitly named in Proposition 218 Proposition 218 Process for Sewer and Water
5 Potential Funding Sources
SB231
Signed in 2017, SB 231 attempted to fix this by legally redefining "sewer" in state law to include stormwater Currently moving through the courts
6 Proposition 26
Allows for an increase in fees to cover regulatory compliance efforts (about 35% of the current stormwater budget) Requires the Proposition 218 process, like that required of water and sewer utilities
Stormwater Funding Options
California Senate Bill 231
Clarified that the statutory definition of "sewer" includes storm drainage and surface/storm waters Cities have not pursued due to the risk of litigation
Currently moving through the courts
General Election
Would require a two-thirds vote
Attempt another Proposition 218 effort
Expensive and unlikely to get different results
Proposition 26
Requires a similar Proposition 218 process to water and sewer utilities Would fund regulatory efforts only
7 Initiate a Proposition 26 effort to fund the regulatory compliance component of the Stormwater Utility Continue monitoring litigation concerning Proposition 218 and SB 231, and reevaluate the potential pursuit of a new Proposition 218 measure in the future Recommendation
8