Title
Adopt a Resolution to Amend Title 6, Chapter 4 of the San Leandro Administrative Code Amending Fees and Charges for Wastewater Discharge for FYs 2026-2030
Staffreport
COUNCIL PRIORITY
• Infrastructure
SUMMARY
The Water Pollution Control Division (WPC) initiated a sewer rate study to determine the fiscal requirements to maintain high quality service, repair aging infrastructure, and meet regulatory requirements. Staff, upon the direction of the City Council and in compliance with Proposition 218, mailed a notice to all property owners within the City’s sewer service area of the proposed rate increases, and opened the required 45 day protest period. If fewer than half of the property owners submit protests to the increase, Council may raise the sewer rates to the specified amounts.
RECOMMENDATIONS
Staff recommends that the City Council adopt the resolution to amend the sewer service rates to the amounts shown in Attachment A Exhibit A for Fiscal Years 2026-2030 if there is no majority protest.
BACKGROUND
The City’s wastewater infrastructure serves about 60,000 residents and businesses in the northern two-thirds of the City. The system includes 125 miles of collection system pipelines, 12 lift stations, and a Water Pollution Control Plant (WPCP) that processes an average of about 5 million gallons per day of wastewater. Because of the preponderance of business and industrial users, the WPCP receives some of the strongest wastewater in the Bay Area and processes this water to exceed stringent requirements set by state and federal regulating agencies.
Proposition 218 requires that sewer rates be justified by expenses incurred in the collection and processing of wastewater, including capital expenses and reserve requirements. The City worked with Bartle Wells Associates, a public finance consulting firm with expertise in the areas of utility rates and finance, to analyze all financial data from the wastewater enterprise fund including operating expenses and Capital Improvement Program (CIP) costs to develop cost-of-service based rates and produce a Wastewater Rate Study.
At the March 3, 2025 City Council meeting, the City Council accepted the Wastewater Utility Rate Study (“Study”), and authorized City staff to move forward with sending notices to property owners, to open the legally required 45 day protest period, and to hold a public hearing to receive and count protest votes to ascertain whether a majority protest against the proposed sewer rates was achieved, all as required by and in compliance with Proposition 218. Notices were mailed to all property owners in the City of San Leandro sewer service area on March 17, 2025, which allowed for more than the required 45-day protest period before the Public Hearing on May 5, 2025. The City Clerk kept a record of all protest notices received and will report on the total number of protest votes, including those made in person at the Public Hearing. City staff mailed 14,589 notices, so if fewer than 7,294 protests are received, the City Council is authorized under Proposition 218 to approve the proposed rates described in the notice.
Attachment A Exhibit A shows rates for Fiscal Year 2025 currently in effect, and the proposed rates for the next five years. The proposed rates would be effective July 1, 2025, and July 1 in subsequent years.
Analysis
The Study included three key elements:
1. Financial projections using historical and estimated future operational and CIP expenditures;
2. Flow and wastewater strength projections using historical usage data and anticipated changes;
3. An evaluation of customer class and fee structure
Financial Projections
There is a projected increase in costs due to increased staffing and projects as part of the 10-year CIP to address aging infrastructure and stricter requirements from the State Water Board for nutrient reduction. In addition, the proposed sewer rates support maintaining at least one year of operating funds in reserve. This level allows the Water Pollution Control Plant Enterprise Fund to absorb unexpected changes or disasters without reliance on the General Fund.
The City analyzed the upcoming capital improvement needs for the wastewater enterprise over the next 10 years. The CIP plan was presented to City Council on October 21, 2024. The plan aims to address the aging infrastructure with upgrades to the Water Pollution Control Plant, sewer pipelines, and lift stations. While some of these costs are offset by grants, the remainder comes from sewer fees.
In July 2024, the San Francisco Bay Regional Water Quality Control Board (“Water Board”) imposed limits for the first time on the quantity of nitrogen that can be discharged to San Francisco Bay. Complying with this requirement will require changes to the WPCP. The CIP Plan sets forth a strategy for identifying cost-effective changes while maintaining flexibility to meet lower limits if necessary. However, because the costs for compliance with this requirement are not yet determined, additional debt financing is not recommended over the next five years to reserve future debt capacity if necessary.
Flow and Strength Projections
Residential estimates are based on average home size in San Leandro and median water usage. Commercial usage is based on historical flow data and standard loading by type of business. Industrial usage is based on measured historical flow and load strength. There is currently no anticipated significant increase in new customers.
Customer Classes
Sewer service fees are assessed within three customer classes:
1. Residential: Flat fee for single family homes and multifamily units
2. Commercial: Fees based on water flow by category of business
3. Industrial: Fees based on flow and loading charges
A new fee structure is proposed for commercial users. The current structure specifies rates for certain types of industries, with most businesses falling into an “all other” category. Customers will now be categorized as low, medium, or high based on industry standards for flow strength.
The proposed fees increase the sewer rates by 8% for fiscal year 2025-2026 and by 9% for fiscal years 2026-2027 through 2029-2030. Because the rate study also includes a recalculation of rates relative to one another, this may vary slightly by customer class in the first year.
Previous Actions
Reso No. 2024-124: Resolution to Appropriate $2,660,000 from the Water Pollution Control Plant Enterprise Fund Balance to account 593-52 for Fiscal Year 2024-2025 Capital Improvement expense.
Reso No. 2025-017: Resolution to Accept the Wastewater Utility Rates Study and Provide Direction to Proceed With the Processes and Procedures to Increase the Sewer Service Rate as Required by Proposition 218.
Committee Review and Actions
The Wastewater Rate Study was presented to the City Council Finance Committee on January 22, 2025. It was recommended to bring item to the full City Council for a vote to proceed with the Prop. 218 process.
Applicable General Plan Policies
Policy CSF-6.4 Wastewater Collection and Treatment. Maintain efficient, environmentally sound, and cost-effective wastewater collection and treatment services in San Leandro.
Financial Impacts
The requested rate increases are designed to allow the Water Pollution Control Plant Enterprise Fund to continue to be self-sufficient. Staff requests approval to initiate Proposition 218 notification process.
ATTACHMENTS
A: Resolution
Ex A: Proposed Rates
B: Wastewater Rate Study Report
C: Public Notice Mailer
D: Presentation Wastewater Rates Public Hearing
PREPARED BY:
Ramya Sankar, Management Analyst II, Water Pollution Control Division
Hayes Morehouse, Water Pollution Control Manager