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18 THE CITY OF M F.M731 TON CITY COUNCIL AGENDA REPORT PLEASAN July 18, 2023 Operations Services TITLE: RECEIVE OVERVIEW OF WATER AND SEWER RATES AND AUTHORIZE MAILING OF PROPOSITION 218 NOTICE OF PUBLIC HEARING TO BE HELD SEPTEMBER 19, 2023 REGARDING PROPOSED RATE INCREASES SUMMARY Completing a comprehensive analysis of water and sewer rates is a priority that has been set by the City Council and is consistent with the City's water and sewer policies. The City's water and sewer utilities are operated as enterprise funds. An enterprise fund is a self-supporting government fund that provides goods and services to the public for a fee. Enterprise funds are operated separate from the City's operations that are funded by the General Fund. In March 2023, the City contracted with Raftelis to complete a water and sewer rate study with a scope of work focused on providing sufficient funding to address immediate infrastructure improvements to the water distribution system to ensure continued safe and reliable water supply and quality. Water rate revenues are proposed to increase 30 percent effective November 1, 2023, then 20 percent effective January 1, 2025, and then 12 percent for the third year effective January 1 , 2026. This results in an increase of $33.17 per bi-monthly (60-day) period based on the average single family residential customer's usage of 20 100 cubic feet (CcF) of water in the first year. As proposed are sewer rate increases based on inflation as defined by the Consumer Price Index, effective November 1, 2023. The proposed increase incorporates the inflation of operations and maintenance costs, and additional costs based on the resources necessary to implement critical near-term system infrastructure improvements and to advance the selected water supply alternative and other prioritized water projects. To inform the ratepayers of the proposed rate changes, a public hearing notice will be mailed to every City water customer in compliance with the State's Proposition 218 requirements. RECOMMENDATION Authorize staff to mail a notice to the ratepayers regarding the proposed changes to the water and sewer rates and set the public hearing date for consideration of this matter by the City Council on September 19, 2023. FINANCIAL STATEMENT The City's water and sewer utility funds are enterprise funds; as such, the cost of operation of these utilities are fully paid by the users (100 percent fee based). The proposed rate increases address the operating and capital needs of the water, recycled Page ' of