Item 23 - Public Hearing to Consider Proposed Water and Sewer Rate Adjustments

Home Browse Search

Water and Sewer Rates March 17, 2026 Page 2 County cities, including Orange, Garden Grove, La Habra, Fullerton, Tustin, San Clemente, and Newport Beach. The City's current water and sewer rates were last updated in 2023. Since that time, changes in California law and evolving legal interpretations have introduced new requirements to ensure equity among ratepayers. Recent case law interpreting Proposition 218 has established additional criteria that public agencies must meet when setting water and sewer rates. As a result, the City must review and adjust its existing rate structure to ensure compliance with these legal requirements. Under Proposition 218, rates must be fair, equitable, and proportional to the cost of providing service. The law prohibits rate structures that subsidize or otherwise benefit one customer class at the expense of another. For example, charging different rates to residential and commercial customers that are not directly supported by cost -of -service analyses may no longer be permissible. In addition to these legal considerations, the City's water and sewer infrastructure continues to age and requires ongoing investment. Critical improvements, including pipeline replacement and construction of water treatment facilities, are necessary to maintain system reliability and meet regulatory standards. At the same time, the cost of providing safe, reliable drinking water and maintaining the sewer system has increased at a pace that exceeds current revenue levels. As a result, the water and sewer enterprise fund balances have declined to levels that are not financially sustainable. If not addressed, this trend could negatively impact the financial stability of the utility and potentially lead to a downgrade of the City's credit rating. Updating the rate structure is necessary for compliance with state law, maintaining fairness among ratepayers, and providing the financial resources needed to sustain and modernize Santa Ana's water and sewer systems. To ensure continued service delivery, compliance with applicable law, and the protection of the City's credit rating, staff recommends adoption of a rate plan implementing adjustments based on the findings of a comprehensive water and sewer rate study completed in January of 2026 (See Exhibit 2). The recommended rates would increase the typical total combined monthly water and sewer bill for a single-family residential customer by approximately $38 over a 5-year period, increasing from $68.04 to $106.35 by July 1, 2030 (based on the average of 8,975 gallons of water used per month by typical residential customer). Based on the 5-year total, the typical household will experience an average monthly increase of approximately $7.65 per year. Even with the proposed changes when compared to neighboring cities, the typical Santa Ana customer will continue to pay a lower amount, on average, for water services as compared to other Orange County cities, such as Garden Grove, La Habra, Fullerton, Tustin, Newport Beach, and San Clemente (See Exhibit 4). Similarly,