Title
Proposition 218 Procedures for Water and Wastewater Rate Adjustments
End
FileID
File ID: 2026-01245
End
Location
Location: Citywide
End
Recommendation
Recommendation: Adopt: 1) a Resolution: a) initiating proceedings under Proposition 218 by scheduling a public hearing to consider proposed updated water and wastewater service charges; b) authorizing the mailing of notice of the public hearing; and c) establishing procedures for considering objections to the proposed water and wastewater service charges; and 2) a Resolution: a) rescinding Resolution No. 2021-0365; and b) readopting Guidelines for the Submission and Tabulation of Protests in Connection with Rate Hearings Conducted Pursuant to Article XIID, Section 6, Subdivision (A) of the California Constitution.
End
Contact
Contact: Dalia Fadl, Director, (916) 808-3765, dfadl@cityofsacramento.org; Chuong (Ryan) Pham, Business Services Manager, (916) 808-8995, rpham@cityofsacramento.org; David Levine, Program Manager, (916) 808-6213, dlevine@cityofsacramento.org; Department of Utilities
End
Presenter
Presenter: None
End
Attachments
Attachments:
1-Description/Analysis
2-Resolution - Initiate Proposition 218 Water and Wastewater Rate Update Proceedings
3-Exhibit A - Proposition 218 Public Hearing Notice Form
4-Resolution - Rescinding Resolution No. 2021-0365 and Readopting Guidelines
End
Description/Analysis
IssueDetail
Issue Detail: The City of Sacramento (City), Department of Utilities provides water, wastewater, and storm drainage utility services that are fully funded by ratepayer service charges. Utility funds cannot legally be used to pay for other City services, like parks, police, or fire. The City Department of Utilities has taken several measures to keep rates low for customers, including keeping them stable through the COVID-19 pandemic, refinancing debt (saving $40 million), securing grants (about $50 million), completing projects that reduce energy needs, and increasing efforts to recover administrative and overhead costs.
The City uses a "Cost of Service” model to ensure rates are proportionate to the costs of service and comply with state law (Proposition 218). This means each customer pays their proportionate share based on the demands they place on the system. To make sure the analysis was done right, the City hired Raftelis, an independent consulting firm with more than 30 years of experience in utility rate studies. Raftelis performed a comprehensive Water and Wastewater Rate Study in compliance with Article XIII D, Section 6 of the California Constitution (“Proposition 218”). The results of the rate study will be available at cityofsacramento.gov/2027UtilitiesRates once finalized.
Proposition 218 requires the City of Sacramento to consider written protests prior to adopting or adjusting these property-related fees. The City Council possesses the authority to adopt guidelines when notice of a public hearing regarding adoption or adjustment of property-related fees has been given by the City pursuant to Proposition 218. This item outlines the process and requirements, including those pertaining to new legislation, AB 2257, and updates previously adopted guidelines. Ratepayers will be advised of the public hearing to consider the proposed rates by mailed notice, in compliance with Proposition 218.
End
PolicyConsiderations
Policy Considerations: Not applicable.
End
EconomicImpacts
Economic Impacts: Not applicable.
End
EnvironmentalConsiderations
Environmental Considerations:
California Environmental Quality Act (CEQA): This action is not a project that is subject to CEQA because it is an organizational or administrative activity that will not result in direct or indirect physical changes in the environment. (CEQA Guidelines §15378(b)(5)).
End
Sustainability
Sustainability: Not applicable.
End
Commission/Committee Action
Commission/Committee Action: Not applicable.
End
RationaleforRecommendation
Rationale for Recommendation: Sufficient revenues must be collected to cover the costs of regulatory compliance and operation, maintenance, construction, and improvement of the facilities used for the water and wastewater utility systems.
State voters approved Proposition 218 which requires that the total revenues from the water and wastewater funds not exceed the cost of providing each service, and that charges for any customer class cannot exceed the proportional cost of providing service to that customer class. Therefore, no subsidies between customer classes are allowed under Proposition 218.
In addition to restrictions on the amount of service charges that can be imposed, the City must comply with Proposition 218's procedural requirements when adopting the rates. The City is also choosing to comply with California Government Code sections 53759.1 and 53759.2 (Assembly Bill 2257 (2024)) (“AB 2257”) which require the following:
1. Advance notice of the proposed service charges by mail at least 45 days prior to holding a public hearing to consider extending, imposing or increasing water and wastewater service charges.
2. Consideration of oral and written protests and timely written objections to the proposed revised water and wastewater service charges.
3. Inclusion of the following information in the notice:
a. The amount of the proposed service charges, and the basis on which the charges are calculated; and
b. A web link to the Water and Wastewater Rate Studies on the City's website; and
c. The reason for the rate change; and
d. The date, time, and place of the public hearing to consider adoption of the revised charges; and
e. Instructions on the procedure and deadline to submit a written protest and written objections.
Proposition 218 Majority Protest Process:
• Property owners may submit written protests regarding the proposed rates any time up to the close of the public hearing to consider the rates.
• The Utilities Rate Advisory Commission (“URAC”) holds a public hearing and the Clerk’s Office determines if a majority protest exists (50 percent plus one of all parcels receiving water or wastewater services).
• If no majority protest exists, the URAC forwards the rate recommendations to the City Council for adoption.
AB 2257 New Written Objection Process:
• Allows for ratepayers to submit written objections to the proposed rates by a deadline set forth in the mailed notice.
• Requires staff to respond to all timely valid, written objections.
• Limits future legal challenges to issues raised through valid, written objections during the rate adoption process.
• Requires a separate submission for objections and protests.
End
FinancialConsiderations
Financial Considerations: There are sufficient funds in the Water Fund (Fund 6005) and Wastewater Fund (Fund 6006) operating budgets to cover the costs associated with printing and mailing public notices.
There are no impacts to the General Fund.
End
LocalBusinessEnterprise
Local Business Enterprise (LBE): Not applicable.
End