At tonight’s Susanville City Council meeting, council members will consider approving a resolution to increase water rates beginning October 1, 2024, with additional increases each year for the following four years. The proposed resolution, No. 24-6349, is designed to address the financial sustainability of the city’s water enterprise, which faces significant challenges if action is not taken.
The push for a rate increase follows findings from a recent water rate study conducted by consultant Dan Bergmann of IGService. Bergmann, who presented his findings at the June 19th City Council meeting, warned that the city’s water operating fund could go negative by over $2 million within five years if current inflation trends continue and no corrective measures are implemented. To prevent this, Bergmann recommended a 7% revenue increase over five years.
The proposed rate increase, however, has different implications for various customer groups. While single-family homes, which account for just over half of the water demand but contribute 70% of the revenue, may see a positive impact, multi-family and commercial customers are expected to bear a more significant portion of the financial burden. Bergmann emphasized the need to allocate the rate increase in a way that equalizes the cost of service, particularly by shifting some of the financial responsibility away from single-family homes.
This is not the first time Susanville has revisited its water rates. The last comprehensive rate study was conducted in September 2016, leading to the current rates that have been in place since January 2017. With these rates unchanged for the past seven years, city officials determined it was necessary to reassess the financial health of the water enterprise and ensure compliance with California’s Proposition 218, which requires rates to be consistent with the cost of service.
If the resolution is approved, the first full year of increased rates is projected to generate an additional $311,000 in revenue, representing a 15 percent increase based on FY24 projections. The following year could see an additional $358,000. Although the city’s operating cash is expected to dip into negative territory during FY25 and FY26, it is projected to recover and reach a positive balance of $411,000 by FY29, the final year of the rate-setting period.
Despite these temporary setbacks, the city will remain in compliance with the Series 2019 bond covenant, which requires the city to collect 25 percent more net revenue than the bond payment amounts. This is largely due to infrastructure surcharge revenue, which is classified as operating revenue and will help offset the operating cash losses.
The council is expected to vote on the resolution during tonight’s meeting. If approved, the new rates will take effect in October 2024, with a 45-day public commenting period and an official hearing on the changes expected by January.
