At today’s Susanville City Council meeting, council members will consider approving a resolution to increase water rates beginning October 1, 2024, with additional annual increases over the following four years. Proposed Resolution No. 24-6349 is intended to improve the financial sustainability of the city’s water utility, which faces significant challenges if no action is taken.

The push for a rate increase follows the results of a recent water rate study conducted by Dan Bergmann, a consultant with IGService. Bergmann, who presented his findings at the June 19 City Council meeting, warned that if current inflation trends continue and no corrective action is taken, the city’s water operating fund could reach a deficit of over $2 million within five years. To prevent this from happening, Bergmann recommended a 7% revenue increase over five years.

However, the proposed rate increase will have different impacts on different customer groups. Single-family homes, which provide just over half of the water demand but generate 70% of the revenue, could benefit from a positive impact, while multifamily and commercial customers are expected to bear a larger share of the financial burden. Bergmann emphasized the need to distribute the rate increase in a way that balances service costs, particularly by shifting some of the financial responsibility away from single-family homes.

This is not the first time Susanville has reviewed its water rates. The last comprehensive pricing study was conducted in September 2016 and resulted in the current rates that have been in place since January 2017. Because those rates remained unchanged for the past seven years, city officials decided it was necessary to reevaluate the water company’s financial health and ensure compliance with California’s Proposition 218, which requires rates to equal the cost of service.

If the resolution is passed, the first full year of rate increases is expected to generate $311,000 in additional revenue, a 15 percent increase based on fiscal year 2024 projections. An additional $358,000 could be added the following year. Although the city’s operating funds are expected to be negative in fiscal years 2025 and 2026, they are expected to recover to a positive balance of $411,000 by fiscal year 2029, the final year of the rate-setting period.

Despite these temporary setbacks, the City will remain in compliance with the Series 2019 bond agreement, which requires the City to generate 25 percent more net revenue than the bond payment amounts. This is largely due to revenue from infrastructure surcharges, which are classified as operating revenue and will help offset the operating cash losses.

The council is expected to vote on the resolution during today’s meeting. If approved, the new rates will take effect in October 2024, followed by a 45-day public comment period and a formal hearing on the changes, expected by January.