TO:Andrew P. Powers, City Manager
FROM:Jaime Boscarino, Finance Director
DATE:September 9, 2025
SUBJECT: Water and Wastewater Financial Plans and Proposed Rate Adjustments
RECOMMENDATION:
1. Approve the 2025 Water Financial Plan and Wastewater Rate Study, and set November 4, 2025, as the Public Hearing date to establish water service charges to be effective January 1, 2026, and January 1, 2027, and wastewater service charges to be effective July 1, 2026, and July 1, 2027.
2. Find that this action is not a project as defined under the California Environmental Quality Act.
LEVINE ACT ITEM: No
FINANCIAL IMPACT:
No Additional Funding Requested. Cost for consultant and staff preparation of financial plan updates and reports is included in the Adopted FY 2025-26 Water and Wastewater Fund Budgets.
BACKGROUND:
The City is one of four water purveyors and one of two wastewater purveyors serving residents and businesses in the Conejo Valley. The City-operated utilities are public enterprises managed by the Public Works Department, with utility billing and customer service managed by the Finance Department. The City serves approximately 38,000 wastewater customers and 17,000 potable water customers.
Financial plans for the water and wastewater utilities have been prepared for many years to ensure the City’s utilities are operating in a fiscally and managerially responsible manner, and to ensure that the City remains one of California's most desirable places to live, work, visit, recreate, and raise a family. Utility financial plans provide the framework for the City’s operating and capital budgets, impact fees, and utility rates. These plans are prepared biennially.
Water and Wastewater Financial Plans and Proposed Rate Adjustments September 9, 2025
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State law requires water and wastewater agencies to perform a cost-of-service analysis, at a minimum, every ten years. To ensure rates are equitable amongst various customer classifications, best management practice is for the City to perform a cost-of-service study, alternating between each utility, every six years.
This analysis ensures that rates are fair and properly reflect the actual cost of providing service to the customer. The most recent wastewater cost-of-service study was completed in 2019 and for water in 2021.
DISCUSSION/ANALYSIS:
The 2025 Water Financial Plan and Wastewater Rate Study (Attachment Nos. 1 and 2), prepared by Water Resources Economics (WRE), are presented for City Council review and approval. These plans provide recommendations for adjusted water rates for the next two calendar years and wastewater rates for the next two fiscal years.
Water Financial Plan Update
Based on the 2025 Water Financial Plan, key recommendations are as follows:
1. Reduce the capital reserve target from two years to one year of average annual Capital Improvement Projects (CIP) spending, keeping operating and emergency reserve targets unchanged.
2. Adjustment of City overall water rate revenue needs by five percent, per year, to ensure sufficient funding for City operations, maintenance, and capital replacement and refurbishment projects.
3. Maintain pass-through mechanism to recover wholesale water cost increases and adjust water commodity rates at approximately six percent for 2026 and seven percent for 2027.
4. Adopt drought rates that add temporary surcharges during declared water shortages to maintain stable funding when water use declines if specifically enacted by City Council.
Water Meter Base and Commodity Rate Adjustments:
The following tables present the proposed water rate adjustments for 2026 and 2027. Overall, the combined effect of the base revenue adjustment and wholesale pass-through results in an approximate eleven percent revenue increase in 2026 and an approximate twelve percent in 2027. Table 1 shows the proposed changes to the fixed Meter Base Rate for all customer classes, while Tables 2 and 3 show the recommended commodity rate adjustments. Commodity rates for commercial, irrigation, and multi-family residential customers (non-SFR) are subject to the Water and Wastewater Financial Plans and Proposed Rate Adjustments September 9, 2025
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same pass-through increases applied to single-family residential (SFR) tiered rates.
Table 1: Proposed Meter Base Rates – All
Proposed Water Rates Current
Proposed
January
2026
Proposed
January
2027
Fixed Meter Charges (per Month)
3/4-inch meter and smaller $28.41 $29.84 $31.34
1-inch meter $44.52 $46.75 $49.09
1.5-inch meter $84.80 $89.04 $93.50
2-inch meter $133.14 $139.80 $146.79
3-inch meter $286.20 $300.51 $315.54
4-inch meter $511.76 $537.35 $564.22
6-inch meter $1,051.49 $1,104.07 $1,159.28
Table 2: Proposed Single-Family Residential Commodity Rates Proposed Water Rates Current
Proposed
January
2026
Proposed
January
2027
Tier 1: 0-12 HCF per Month $6.41 $7.16 $8.10
Tier 2: 13-30 HCF per Month $7.01 $7.79 $8.76
Tier 3: >30 HCF per Month $7.36 $8.15 $9.14
Table 3: Proposed Uniform Commodity Rates
Proposed Water Rates Current
Proposed
January
2026
Proposed
January
2027
Multi-Family Residential, Non-Residential,
& Groundwater $6.78 $7.54 $8.50
Construction $7.36 $8.15 $9.14
Water Pass-Through Rate:
The City’s water supply is entirely dependent on imported state water, treated by Metropolitan Water District of Southern California, and delivered by Calleguas Municipal Water District. With no local water sources to offset these costs, wholesale water purchases are the single largest cost driver for the City’s Water Enterprise expenses, totaling approximately $18.4 million in FY 2025/26 and accounting for more than half of annual operating costs. To manage this financial risk, the City utilizes a water pass-through mechanism authorized by Government Code Section 53756. This provision allows customer rates to be adjusted in direct proportion to documented wholesale water cost increases without requiring a full cost-of-service study each time. Based on the 2025 Water Financial Plan, projected pass-through adjustments are $0.42 per HCF in 2026 and an additional $0.50 per HCF in 2027. The pass-through is applied as a uniform, per-unit surcharge across all customer classes and usage tiers, ensuring that wholesale Water and Wastewater Financial Plans and Proposed Rate Adjustments September 9, 2025
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cost increases are recovered equitably from every unit of imported water purchased.
Pumping Lift Rate:
A pumping lift charge is assessed on a per-HCF use basis for customers in higher elevation service zones to recover the electrical cost of conveying water. The charges are proposed to be adjusted in 2026 and 2027, as shown in Table 4 by service zone.
Table 4: Proposed Pumping Charges
Pumping Charges (per HCF) Current
Proposed
January 2026
(5% Increase)
Proposed
January 2027
(5% Increase)
Zone P1 (0 Lifts) N/A N/A N/A
Zone P2 (1 Lifts) $0.45 $0.48 $0.51
Zone P3 (1 Lifts) $0.45 $0.48 $0.51
Zone P4 (2 Lifts) $0.90 $0.96 $1.02
Zone P5 (3 Lifts) $1.35 $1.44 $1.53
Table 5 shows how the proposed 2026 rates affect typical single-family homes at various consumption levels. The estimates assume a ¾-inch meter, no pumping lift, and include the wholesale pass-through.
Table 5: Total Estimated Monthly Water Charges for 2026 SFR
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A comparison of typical monthly residential water costs for public and private water purveyors is shown in Table 6, on the following page, which compares current rates and proposed 2026 rates. Note that water purveyors with lower average (16 HCF/month) costs have local, less expensive water sources like groundwater and/or reclaimed water.
Table 6: Monthly Water Service Charge Comparison
*Single-Family Residential using 15 HCF, inside City limits, no pumping/lift charge, 3/4” or 5/8” meter.
Drought Rates:
As part of the 2025 Water Rate Study, staff and the consultant evaluated the introduction of water shortage stage rates, a tool the City has not previously adopted. These rates are designed to stabilize Water Enterprise revenues during declared droughts, when customer water use declines and revenues fall but fixed system costs remain constant.
The proposed drought rates would apply only to commodity charges and would take the form of temporary surcharges based on the declared water shortage stage. Importantly, City Council would retain full discretion to implement or not implement these rates when declaring a drought stage. Adoption of a drought stage does not automatically trigger the use of drought rates, and drought rates cannot be implemented unless the City is under a formally declared water shortage stage in accordance with the City’s Water Shortage Contingency Plan.
Under California law, drought rates are considered contingent rate adjustments.
Once adopted through the Proposition 218 process, they may be implemented during a declared drought provided the City gives customers at least 30 days’ advance notice before the rates take effect (Government Code Section 53756).
This notice requirement is separate from the Proposition 218 process that adopts the underlying schedule of rates, including the option for drought rates and other water rate adjustments.
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The surcharges were determined through the financial plan by modeling revenue shortfalls that would occur at each water shortage stage and then calculating the per-unit adjustment needed to recover those fixed costs across expected demand.
This method ensures that the proposed surcharges are directly tied to documented revenue requirements, are applied on a uniform per-unit basis, and are no greater than necessary to maintain financial stability. The adoption of drought rates will provide the City with an important financial safeguard, ensuring the ability to fund essential water operations, maintenance, and capital improvements even during extended periods of reduced water sales due to conservation mandates.
Table 7 shows the additional flat surcharge per HCF that would be applied under each declared water shortage stage. Surcharges begin with small, incremental adjustments and increase only under more severe shortage stages.
Table 7 – Proposed Water Shortage Rate Surcharges (Dollars per HCF) Water Shortage Stage
Proposed
Surcharge per HCF
(January 2026)
Proposed Surcharge
per HCF
(January 2027)
Stage 1 (0-10% Shortage) N/A N/A
Stage 2 (11-20% Shortage) $0.47 $0.54
Stage 3 (21-30% Shortage) $0.94 $1.07
Stage 4 (31-40% Shortage) $1.55 $1.76
Stage 5 (41-50% Shortage) $2.35 $2.68
Stage 6 (>50% Shortage) $5.28 $6.01
Table 8, on the following page, shows the total commodity rate per HCF customers would pay if drought surcharges were implemented. Rates build on the adopted base schedule, with surcharges added only when City Council elects to implement drought rates during a declared shortage.
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Table 8 – Total Commodity Rates with Drought Surcharges (Dollars per HCF) 2026
Water Shortage Stage Rates
Baseline
Commodity
Rate
Stage
2 Stage
3 Stage
4 Stage
5 Stage
6 Surcharge Stage per HCF $0.47 $0.94 $1.55 $2.35 $5.28 Single-Family Residential Tiered Commodity Rates
Tier 1: 0-12 HCF per Month $7.16 $7.63 $8.10 $8.71 $9.51 $12.44 Tier 2: 13-30 HCF per Month $7.79 $8.26 $8.73 $9.34 $10.14 $13.07 Tier 3: >30 HCF per Month $8.15 $8.62 $9.09 $9.70 $10.50 $13.43
Uniform Commodity Rates
Multi-Family Residential, Non-
Residential, & Groundwater $7.54 $8.01 $8.48 $9.09 $9.89 $12.82 Construction $8.15 $8.62 $9.09 $9.70 $10.50 $13.43
2027
Water Shortage Stage Rates
Baseline
Commodity
Rate
Stage
2 Stage
3 Stage
4 Stage
5 Stage
6 Surcharge Stage per HCF $0.54 $1.07 $1.76 $2.68 $6.01 Single-Family Residential Tiered Commodity Rates
Tier 1: 0-12 HCF per Month $8.10 $8.64 $9.17 $9.86 $10.78 $14.11 Tier 2: 13-30 HCF per Month $8.76 $9.30 $9.83 $10.52 $11.44 $14.77 Tier 3: >30 HCF per Month $9.14 $9.68 $10.21 $10.90 $11.82 $15.15
Uniform Commodity Rates
Multi-Family Residential, Non-
Residential, & Groundwater $8.50 $9.04 $9.57 $10.26 $11.18 $14.51 Construction $9.14 $9.68 $10.21 $10.90 $11.82 $15.15
Wastewater Rate Study
The City’s Wastewater Fund operates as a self-supporting enterprise, with customer rates providing the primary source of funding for operations, maintenance, and capital projects. Periodic rate studies are required to ensure rates remain fair, legally compliant, and sufficient to maintain reliable service. The 2025 Wastewater Rate Study (Attachment #2) was conducted following industry best practices established by the Water Environment Federation and the American Water Works Association.
Wastewater Rate Study:
Based on the 2025 Wastewater Rate Study, key recommendations are as follows:
1. Revise the City’s wastewater reserve policy by reducing the capital reserve target from two years to one year of average annual CIP costs, while maintaining current operating and emergency reserve targets.
Water and Wastewater Financial Plans and Proposed Rate Adjustments September 9, 2025
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2. Adjust overall wastewater rate revenues by seven percent per year for FY 2026-27 and FY 2027-28 to ensure sufficient funding for City operations, maintenance, and ongoing capital renewal.
3. Update service unit definitions and make minor rate adjustments across certain customer classes to reflect actual wastewater flow and strength characteristics, consistent with the cost-of-service analysis.
These recommendations are intended to maintain the City’s wastewater system in a safe, reliable condition while minimizing customer impacts. The study evaluated projected revenues, expenses, and reserve requirements over a five-year planning horizon. Operating costs are expected to increase an average of 3.9 percent per year, and the City’s adopted CIP includes over $85 million in wastewater projects over the next five years. To limit customer impacts, the financial plan assumes an average of $12.2 million in CIP spending per year, rather than front-loading all identified projects.
To balance the need for capital funding with customer affordability, the study recommends adjusting the City’s reserve policy. The capital reserve target would be reduced from two years to one year of average CIP funding, consistent with industry norms. Operating reserves (25 percent of annual Operations and Maintenance) and emergency reserves (replacement cost of the most critical facility asset) would remain unchanged. This adjustment provides the City with flexibility to fund near-term projects while reducing pressure on rates and minimizing impacts to customers.
Cost-of-Service Analysis:
The 2025 Wastewater Rate Study evaluated how treatment costs should be distributed among customer classes based on the amount and strength of wastewater discharged to Hill Canyon Treatment Plant. Flow meters and established wastewater strength factors were used to measure two key water quality factors: Total Suspended Solids (TSS) and Biochemical Oxygen Demand (BOD). This approach ensures that costs are allocated in proportion to actual system use, consistent with Proposition 218 requirements.
As a result of this analysis, most customer classes will see bills increase at or near the overall average of 7 percent. However, some classes experience larger or smaller changes due to updated cost-of-service results and revised service unit definitions. These adjustments ensure that each class pays only its fair share of system costs.
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Rate Adjustments:
The Study recommends annual revenue adjustments of 7 percent in FY 2026-27 and FY 2027-28. This level of increase is lower than the previously adopted 11 percent annual adjustments and is sufficient to fund operations, maintain reserves, and support essential infrastructure renewal. Rates remain on a fixed charge per Service Unit basis, where one Service Unit equals the wastewater load from a typical single-family residence. Non-residential customer types are billed in proportion to their wastewater flow and strength relative to a single-family home.
Table 9 shows the proposed monthly wastewater charges per Service Unit. *1 Service Unit is equal to the wastewater load of a typical single-family home; whereas other customer types are billed based on proportional flow and strength.
Thousand Oaks wastewater rates remain among the lowest in the region. Table 10 compares the City’s current single-family residential wastewater bill, the proposed 2026 bill, and charges from neighboring agencies. For agencies with a usage-based (volumetric) component, the comparison assumes 15 HCF of billed wastewater flow per month, a typical level for single-family residences. Even with the proposed 2026 adjustment to $42.88 per month, Thousand Oaks remains well below the regional average of $67.77, or $24.89 lower per month than the average household bill in surrounding communities.
Table 10: Wastewater Rate Comparison for Single-Family Residences Table 9 – Proposed Two-Year Wastewater Rate Schedule (monthly) Monthly Wastewater Charges Current
Proposed
FY 2026-27
(July 2026)
Proposed
FY 2027-28
(July 2027)
Single-Family Residential Fixed Charge $39.17 $42.88 $45.89 Non-Residential Fixed Charge (per Service Unit) $39.17 $42.88 $45.89 Outside City Surcharge (per Service Unit) $0.55 $0.72 $0.78
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Customer Class Impacts:
Table 11 shows the average monthly wastewater bills by customer class under current FY 2025-26 rates and proposed FY 2026-27 rates. On average, bills increase approximately 7 percent in line with the overall revenue adjustment, but impacts vary by customer class due to updated cost-of-service results and revised Service Unit definitions.
•Multi-family residential will realize reduced bills because updated factors show that these dwellings generate less wastewater flow per unit than single-family homes. The service unit factor was therefore reduced from 100 percent to 80 percent of a single-family residence, which lowers the cost allocation for this customer class.
•Schools will realize increased bills because industry standards indicate that school wastewater is stronger than previously estimated. While schools typically use less water overall due to weekends and summer closures, the revised factors recognize that the wastewater produced is more concentrated. This adjustment ensures that costs are distributed fairly and more accurately reflect the impact of school facilities on the treatment system.
•Restaurants will realize modest changes in bills, with most increasing slightly and those with grease traps decreasing by about 8 percent. These adjustments reflect differences in wastewater strength, as establishments with grease traps generate lower concentrations of pollutants compared to those without.
•General Commercial customers will realize modest increases of about 9 percent because their wastewater characteristics are generally similar to single-family residential customers. Since one service unit for general commercial is defined the same as a single-family home, their bills increase at approximately the same rate under the proposed adjustments. •Industrial and Car Washes will realize higher wastewater bills due to billing being based on the volume of wastewater discharged, measured in gallons per day. The 2025 Wastewater Rate Study updated the calculation of a Service Unit from 180 gallons per day to 150 gallons per day to align with current industry standards and regional agency practices for defining residential wastewater flows:
Service Units = Average Daily Flow (gpd)
150
Previously, the same flow was divided by 180. This change increases the number of Service Units assigned to each customer and results in higher charges. On average, bills for industrial and car wash customers will Water and Wastewater Financial Plans and Proposed Rate Adjustments September 9, 2025
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increase by approximately 23 percent, reflecting a more accurate measure of system use.
These adjustments ensure that each customer class is charged proportionally to the wastewater it generates and that rates remain fair and legally compliant.
Table 11: Wastewater Rate Bill Comparison
Customer Class # of
Accounts
Average
Monthly
Bill
(Current)
Average
Monthly Bill
(Proposed
July 2026)
Difference
($)
Difference
(%)
Single-Family Residential 36,525 $39.17 $42.88 $3.71 9.5% Multi-Family Residential 573 $541.02 $473.82 ($67.20) -12.4% General Commercial
(Offices/Retail/All Other) 1,347 $171.02 $187.22 $16.20 9.5% Markets/Mortuaries 19 $535.60 $548.27 $12.67 2.4%
Restaurants/Bakeries 49 $110.31 $114.00 $3.69 3.3%
Restaurants (w/Grease
Trap) 215 $171.61 $157.87 ($13.74) -8.0%
Schools 45 $420.07 $549.73 $129.66 30.9%
Industrial/High Flow 6 $21,472.35 $26,343.37 $4,871.02 22.7% Car Washes 4 $1,830.35 $2,261.69 $431.34 23.6%
Total 38,783 $56.20 $60.16 $3.96 7.0%
Connection Fees:
The 2025 Wastewater Rate Study also updated the City’s connection fee, which is charged to new development to buy into existing system capacity. Using the industry-standard Buy-In Method, the fee will increase from $11,135 to $11,608 per Service Unit. Beginning in 2028, the fee will be adjusted every two years based on the Engineering News-Record Construction Cost Index to keep pace with construction costs. This approach ensures that new development contributes its fair share of infrastructure costs and that existing ratepayers are not burdened with costs attributable to growth.
Proposition 218
Proposition 218, approved by voters in 1996, added provisions to the California Constitution to ensure that property-related fees such as water and wastewater rates are reasonable, proportional to the cost of service, and used only for that service. It also requires that a public hearing notice be mailed to property owners at least 45 days before any rate hearing. If a majority of property owners submit written protests, the proposed rate adjustments cannot be adopted.
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To comply with these requirements, the City will mail a detailed notice of the proposed water and wastewater rate adjustments to all property owners within the service area 45 days prior to the public hearing. Private water purveyors, such as California American Water and California Water, are regulated by the California Public Utilities Commission and are not subject to Proposition 218.
Important Dates
In summary, significant capital investments are anticipated over the next five to ten years, increasing operational demands for both water and wastewater utilities.
Financial plans are updated every two years with a five-year outlook, and rate adjustments are also implemented on a biennial basis. The 2025 studies recommend water rate revenue adjustments of approximately five percent per year in 2026 and 2027 and wastewater rate revenue adjustments of seven percent per year in FY 2026-27 and FY 2027-28. The next water cost-of-service study is scheduled for 2027. This approach enables the City to respond to near-term needs while maintaining flexibility to adjust for future projections.
COUNCIL GOAL COMPLIANCE:
Meets the following City Council goal:
C. Operate City government in a fiscally and managerially responsible and prudent manner to ensure that the City of Thousand Oaks remains one of California's most desirable places to live, work, visit, recreate, and raise a family.
PREPARED BY: Tara Tosatto, Revenue Operations Manager/Budget Officer Attachment:
Attachment #1 – 2025 Water Financial Plan
Attachment #2 – 2025 Wastewater Rate Study
FIN: 330-10\tt\ H:\COMMON\Council\2025\Public Services\090925 WT WW Financial Plans and WW CoS Staff Report.docx
September 9, 2025 Approval of financial plans and setting of Public Hearing
September 13, 2025 Prop 218 Notices mailed
November 4, 2025 Public Hearing
January 1, 2026 Water Rates implemented
July 1, 2026 Wastewater Rates implemented