Item 23 - Protests - Sewer & Water Rates

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Legal Objection—Proposed Water and Sewer Rate Changes cogent reason." This holding is directly relevant to the proposed consolidation of customer classes in Santa Ana's Rate Study. These principles were subsequently reinforced in Patz v. City of San Diego (4th Dist, 2025), where the Fourth District Court of Appeal again struck down tiered water rates that failed to meet the strict proportionality standard, and specifically held that reliance on industry-standard methodologies is insufficient absent agency-specific, verified cost data. II. CONSOLIDATION OF CUSTOMER CLASSES VIOLATES SECTION 6(b)(3) A. The Proposed Single-Class Structure Eliminates Proportionality Analysis The Rate Study proposes "combining all customers into a single customer class" for both water and sewer services. (Rate Study, Executive Summary.) The City's prior rate structure maintained distinctions between Single Family Residential, Non-Residential, and Multi-Family customer classes, each with differentiated tier widths reflecting distinct usage patterns and cost-of-service characteristics. The Proposition 218 Notice itself documents these prior distinctions. The current bi-monthly water rate structure sets different Tier 1 widths by customer class: for a 5/8" x 3/4"meter, Single Family customers receive 21 CCF, Non-Residential customers receive 62 CCF, and Multi- Family customers receive 17 CCF per dwelling unit. These differentiated widths reflect the recognized reality that these customer types have materially different water use patterns, infrastructure demands, and cost-of-service profiles. The proposed structure eliminates all of these distinctions, replacing them with a uniform 21 CCF Tier 1 allocation for a 5/8" x 3/4"meter applied to "all customers, regardless of customer class." (Prop 218 Notice, p. 4.) This consolidation is not merely an administrative simplification. It is a fundamental change in cost allocation methodology that the Rate Study fails to justify under Section 6(b)(3)'s strict proportionality standard. D. Different Customer Types Impose Materially Different Costs on the System It is well-established in water utility economics that different customer classes impose different costs on a water and sewer system. 'These differences include,but are not limited to: a. Peaking factors. Single-family residential customers with irrigated lots generate significant seasonal demand peaks, particularly during summer months. These peaks drive capacity requirements for transmission, distribution, pumping, and storage infrastructure. Commercial and multi-family customers typically exhibit flatter demand profiles. The cost of infrastructure sized to meet peak demand is a real, allocable cost that differs by customer type. b. Return-flow ratios for sewer. The proportion of water consumed that returns to the sewer system varies significantly by customer type. Residential outdoor irrigation generates no sewer return flow. Restaurants, laundries, and food-processing facilities generate high-volume, bigh-strength wastewater with grease and organic loading that Page 2