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Page 1 of 5 Item #13 CITY COUNCIL AGENDA REPORT June 3, 2025 Public Works - Utilities Division TITLE: RECEIVE AN OVERVIEW OF SEWER RATES AND APPROVE STAFF RECOMMENDATION FOR CPI RATE INCREASE EFFECTIVE JANUARY 1, 2026 SUMMARY The City’s water and sewer utilities operate as enterprise funds, which are self-supporting government funds providing goods and services to the public for a fee. Enterprise funds are financially independent and separate from the City's General Fund operations. On September 3, 2024, the City awarded a contract to Water Resources Economics, LLC (WRE) that includes conducting comprehensive sewer rate and connection fee studies. In compliance with State Water Resources Control Board (SWRCB) requirements, the City completed an independent sewer system audit in January 2025 and is currently updating its Sewer System Management Plan (SSMP). Staff anticipates presenting the updated SSMP for Council review and adoption in June 2025, prior to submitting it to the SWRCB by the August 2, 2025 deadline. The City is also preparing a Long-Term Sewer CIP report that provides a detailed assessment of the City’s sewer system assets and recommends capital improvement projects to address identified needs. Staff anticipates presenting the report to Council for review and approval in or around October 2025. Upon completion, the approved report will be added to the SSMP by the SWRCB’s change log process. The SSMP, including the Long-Term Sewer CIP report and Operation and Maintenance needs, will define the cost of services to maintain, repair, replace and sustain the city’s sanitary sewer system that meets State and Federal regulations. The document will serve as the foundation for the sewer rate study. The sewer rate study is expected to be completed in spring 2026 with new sewer rates to be adopted and become effective July 1, 2026. This timeline aligns with the Dublin San Ramon Services District (DSRSD) and City of Livermore wastewater treatment rate cycles, which are passed through and included in Pleasanton's overall sewer bills. In 2023, the City Council approved sewer rate adjustments tied to the Consumer Price Index (CPI) effective January 1, 2024, for Fiscal Year 2023/24 and July 1, 2024, for Fiscal Year 2024/25. This sewer rate will expire June 30, 2025. Given the gap between the end of the current rate cycle and the adoption of new rates (July 1, 2025 to June 30, 2026), staff recommends continuing with the CPI increase effective January 1, 2026, for Fiscal Year 2025/26. Staff is also recommending authorization of the CPI increase for 2026/2027 so the CPI increase can continue into the following fiscal year, as needed, until the new rates are in place. The process for Council approval and Proposition 218 notification for these CPI increases would be included with the current water rate increase process, which is occurring July through October of 2025. RECOMMENDATION Receive an overview of sewer rates and approve staff recommendation for CPI rate increase Page 171 of 226