Council reviews water and sewer rate‑structure study and customer assistance program; staff recommends four‑year adoption period

San Luis Obispo — City staff on April 19 presented the 2026 water and sewer rate structure study, describing legal constraints under Proposition 218, the tradeoffs between fixed and volumetric charges, and proposed rate‑design priorities. Staff recommended council confirm those priorities and adopt a four‑year rate adoption period to increase revenue stability and reduce administrative workload.

Public Works and Utilities Director Aaron Floyd and Utilities Business Manager Shane Whittington framed the session as a study to set structure rather than finalize rate amounts. They explained Proposition 218 requirements that rates be proportional to cost of service and revenues restricted to the fund purpose. Staff emphasized three design goals: (1) revenue effectiveness and predictability, (2) fairness across customer classes, and (3) simplicity and transparency for customers.

Key recommendations and context: Staff proposed moving from a typical two‑year adoption schedule to a four‑year adoption period (allowed under Prop 218 for up to five years), which they said would reduce repetitive consultant and administrative work and provide more predictable multi‑year planning. Staff described the tradeoff between fixed base charges and volumetric (tiered) charges: currently about 30% of typical bills are fixed revenue and ~70% variable; however fixed expenses (debt, salaries, capital) constitute roughly 80% of water expenses, which argues for some increase in fixed revenue to stabilize finances.

Customer assistance and rebates: Staff reviewed the utility customer assistance program (CAP) and noted the program cap is $200,000 annually (funded through non‑rate sources such as late fees) but actual uptake has been low (hundreds of participants versus potential need). Staff described outreach and a recent increase to the assistance percentage (from 15% to 20% on comparable programs), which helped increase enrollment. Staff noted the CAP budget is separate from rate revenue (it uses late‑fee and other non‑rate funds) and cautioned that expanding CAP funding would have implications for rate or budget planning.

Outreach and next steps: Staff described modest participation in February’s public information session and broad targeted outreach to HOAs and property managers; a wider survey and winter 2027 public outreach were planned. If council confirms rate design priorities, staff will proceed with outreach, include the work in financial plans and seek authorization to mail Proposition 218 notices in spring 2027 with public hearings anticipated in early summer 2027.

Council reaction: Members asked technical questions about tier design, the city’s winter period for sewer caps (December historically), the effect of Cal Poly wastewater reclamation timing on revenues, and the customer assistance program’s utilization and funding sources. Several councilmembers said they supported staff’s recommendation to move to a four‑year adoption cycle and asked staff to report back on potential expansion of rebate/assistance funding as part of future rate and budget work.

What this means: No rates were adopted at the study session. Staff will return with the formal rate schedule and Proposition 218 notice process next cycle if council confirms the design priorities. Council direction tonight was procedural and strategic rather than a rate increase decision.