FROM:
Engineering
SUBJECT:
Title
Establishing Procedures for the Conduct of the Public Hearing and Majority Protest Process and Exhaustion of Administrative Remedies Procedures
End
RECOMMENDATION:
Recommendation
Authorize the City Clerk, or their designee, to provide notice of the public hearing in accordance with Proposition 218’s requirements.
End
COUNCIL GOALS:
• Practice sound fiscal management by producing timely and accurate financial information.
• Practice sound fiscal management by living within our means while investing in the future.
• Practice sound fiscal management by fully funding liabilities and reserves.
• Practice sound fiscal management by developing long-term funding and debt management plans.
• Practice sound fiscal management by producing transparent information in a timely matter.
• Invest in the City’s infrastructure (streets, sewers, parks, etc.) by maintaining and improving the city's existing infrastructure.
DISCUSSION:
The City of Fontana owns, operates, and maintains an extensive wastewater collection system consisting of approximately 474 miles of sewer lines, nine lift stations, two inverted siphons, approximately 45,000 service connections, and five regional discharge outlets. The system is comprised primarily of vitrified clay pipe (VCP), with the remaining facilities constructed of ductile iron pipe (DIP) and polyvinyl chloride (PVC), located both within and outside the City limits. The City’s responsibility is limited to operation and maintenance of the wastewater conveyance system. Wastewater treatment services are provided separately by the Inland Empire Utilities Agency (IEUA) and the City of Rialto.
The City completed Proposition 218 sewer rate adjustment in 2021. Since that time, increased operating costs, inflationary pressures, aging infrastructure, and ongoing capital needs have made it necessary to re-evaluate whether the existing sewer collection rates remain sufficient to support the wastewater funds. In order to assess the long-term financial condition of the Sewer Fund, the City Council approved an agreement with Raftelis Financial Consultants, Inc. (Raftelis) on January 13, 2026, to prepare a comprehensive sewer rate study using the City’s existing rate structure.
The purpose of the study was to evaluate whether current sewer collection revenues are adequate to fund ongoing operations and maintenance, maintain appropriate reserve levels, support continued reinvestment in aging infrastructure, and provide funding for planned capital improvement projects. The study also considered the establishment of a formal reserve policy for the Sewer Fund, including a target operating reserve equivalent to 60 days of operation and maintenance expenditures.
Raftelis prepared a status quo financial plan to evaluate whether the City’s current wastewater rates would be sufficient to fund projected collection system costs over the study period of Fiscal Year 2027 through Fiscal Year 2036. Based on City-provided data, including projected revenues, operating and maintenance expenses, debt service obligations, and capital improvement costs, Raftelis determined that maintaining the current rates throughout the study period would not be financially sustainable. Specifically, the analysis found that the City would fail to meet its reserve target in each year of the study period and would fully deplete available reserves by Fiscal Year 2028. The study further concluded that, under the current rate structure, the Sewer Fund would not generate sufficient revenue to fully fund ongoing operating expenses.
These findings demonstrate that rate adjustment is necessary at this time to correct the structural imbalance within the Sewer Fund, preserve the City’s ability to maintain reliable wastewater collection service, and avoid the need for more significant rate increases in future years. The proposed rate adjustments are intended to provide a phased approach to restoring the financial health of the wastewater funds while maintaining service levels and funding the City’s infrastructure obligations.
The table below summarizes the proposed maximum revenue adjustments for the wastewater enterprise and the corresponding estimated monthly increase to the City’s sewer collection charge, which is currently $12.63 per equivalent dwelling unit (EDU):
|
Effective Date |
Proposed Revenue Adjustment |
|
Estimated Monthly Bill Increase |
|
July 1, 2026 |
15% |
|
$1.92 |
|
July 1, 2027 |
10% |
|
$1.46 |
|
July 1, 2028 |
10% |
|
$1.60 |
|
July 1, 2029 |
10% |
|
$1.76 |
|
July 1, 2030 |
10% |
|
$1.94 |
The proposed sewer collection rates are based on a financial plan designed to eliminate the current structural deficit and provide sufficient funding for operations, capital expenditures, and reserve levels. As part of this effort, a reserve policy was developed based on the financial risks faced by the utility. The recommended reserve structure includes an operating reserve to provide working capital for day-to-day cash flow needs, temporary revenue fluctuations, and unforeseen operating expenses, with a target of 60 days of operation and maintenance expenditure. The reserve structure also includes a capital replacement and improvement reserve to help fund annual capital needs, reduce the impact of unexpected infrastructure failures, and support planned capital improvement projects.
It should also be noted that the proposed rate adjustments apply only to the City’s sewer collection charges, which fund the operation and conveyance of wastewater flows to IEUA and the City of Rialto. Treatment charges are assessed separately by IEUA and Rialto and are adjusted independently, generally effective July 1 and January 1, respectively. In addition, industrial and commercial customers will continue to pay pretreatment fees, separate from the City’s sewer collection fees, to support wastewater regulatory compliance programs. Those pretreatment fees are adjusted annually based on the Consumer Price Index, effective July 1 of each year.
In addition to complying with Proposition 218, City staff recommends the City Council implement the exhaustion of administrative remedies procedures provided by California Government Code sections 53759.1 and 53759.2. This procedure establishes any person or entity will be prohibited from bringing a judicial action or proceeding alleging that the proposed sewer service rates do not comply with Proposition 218 unless that person or entity has first submitted a written legal objection to the proposed rates pursuant to sections 53759.1 and 53759.2.
FISCAL IMPACT:
The anticipated increase in Sewer revenue required to fund ongoing operations and maintenance, maintain appropriate reserve levels, support continued reinvestment in aging infrastructure, and provide funding for planned capital improvement projects is summarized below:
MOTION:
Approve staff recommendation.