Water and Wastewater Rate Adjustment

Purpose

As a full-service City, Gilroy owns and operates its own water and wastewater utilities, providing services to over 15,000 customers and growing. To ensure both utilities collect revenue sufficient to meet the growing demand, keep pace with the rising operational costs, and fund the multi-year capital improvement plans, the City has conducted a utilities' rate study. The last utilities' rate study was completed in 2015, and the City has not increased its water or wastewater rates since 2019. 

The City's operational costs for the water utility continue to increase due to inflationary cost increases for materials/services, electricity, and continued increases in water extraction charges from Valley Water. Statewide conservation efforts enacted in recent years due to the droughts also impacted the revenues collected as the City was mandated to reduce water consumption. In 2021, the City issued wastewater revenue bonds to finance the City's share (approximately $50 million) of the $86 million expansion of the South County Regional Wastewater Authority (SCRWA) plant due to be complete in 2025. In addition to the annual debt payment requirements, the City's cost for the wastewater utility is also expected to increase for its share of the treatment plant expense as the expansion becomes operational and additional compliance is required by state mandates. 

In April 2023, the City approved the updated Water and Wastewater Master Plans. The Plans assess utility systems against the desired level of service and identify infrastructure improvements needed to fix existing systems' deficiencies and service growth. The plans collectively identified over $50.3 million in new improvements, of which $21.7 million is for existing users (ratepayers) and $28.6 million for future developments. 

For the City to continue investing in critical utilities' infrastructure and keep pace with rising operational costs, the City needs to establish multi-year rate adjustments. The City of Gilroy engaged a consultant, NBS Government Finance Group, to conduct a Comprehensive Water and Wastewater Rate Study (Rate Study) with several objectives and goals including meeting revenue requirements, reviewing the rising costs of providing services, funding capital improvements and changes in costs, and complying with certain legal requirements (e.g., California Constitution Article XIII D, Section 6, which is commonly referred to as Proposition 218 [Prop 218]). The City’s broader objectives include ensuring adequate funding for operating and capital costs, maintaining reasonable reserves, and ensuring revenue stability in utility rates.

Process

August 21, 2023: Introduction and presentation of the Rate Study to the City Council at the regularly scheduled meeting and adoption of a resolution of the City Council declaring intent to adjust water and wastewater rates, commencing the proposition 218 noticing process, and setting October 16, 2023 as the date of the Public Hearing to adopt the said rates.

September 6, 2023: A community meeting will be hosted to present the report, proposed rate adjustments, and answer any questions. The meeting will be held at 6 pm in the City Council Chambers located at the City Hall, 7351 Rosanna Street, Gilroy, CA 95020.

October 16, 2023: City Council will conduct a formal Public Hearing to review any written protests and consider the adoption of the new water and wastewater services rates.

January 1, 2024: If approved, the new rates will go into effect during the service period containing January 1, 2024, and will be adjusted annually thereafter for a five-year period.

Documents

• 2023 Comprehensive Water and Wastewater Rate Study
• August 21, 2023 - Staff Report
  • August 21, 2023 - City Council Meeting Video
• Proposition 218 Notice (English)
• Proposition 218 Notice (Spanish)