TO: COMMUNITY AND HUMAN SERVICES COMMISSION
FROM: JEREMY SWAN, COMMUNITY SERVICES DIRECTOR
DATE: JULY 15, 2026
SUBJECT:
Title
PROPOSED SEWER AND SANITATION RATE ADJUSTMENTS AND PROPOSITION 218 PROCESS TO ADJUST FEES
Body
SUMMARY
In 2021, the City Council adopted updated sewer and sanitation rates following completion of a comprehensive financial analysis. As part of that action, annual rate adjustments of up to three percent were established for Fiscal Years 2022-23 through 2025-26 to provide predictable, gradual increases while maintaining the financial stability of the Sewer and Sanitation Enterprise Funds.
Although the adopted annual adjustments provided stability and predictability for customers, actual operating costs increased at a significantly faster pace during the five-year period due to inflationary pressures. As a result, the revenues generated by the adopted rate schedule have not kept pace with the cost of providing sewer and sanitation services.
The City recently retained Willdan Financial Services, Inc. (Willdan) to prepare updated financial forecasts and rate studies for both funds. The studies evaluated current operating costs, capital needs, reserve requirements, and projected revenues. Based on their analysis, Willdan recommends updating rates to ensure that each enterprise fund remains financially sustainable while allowing the City to continue to provide reliable services and maintain compliance with applicable State regulations.
RECOMMENDATION
Recommended Action
Staff recommends the Community and Human Services Commission recommend that the City Council accept the proposed Sewer and Sanitation Fund rate changes, authorize initiation of a Proposition 218 notification process, and schedule a public hearing to consider adoption of updated sewer and sanitation rates.
Body
ALTERNATIVE TO RECOMMENDATION
In addition to the recommendation, there is the following alternative:
• Request additional information from staff.
FINANCIAL REVIEW
The cost for Willdan to prepare the Sewer and Sanitation Rate Studies and corresponding financial analysis was $32,750 and $29,250 respectively. Formal rate studies are commissioned to ensure compliance with Proposition 218 rate-setting requirements.
The Sewer and Sanitation Funds are enterprise funds, or self-supporting governmental funds used to account for services provided to the public on a fee basis. Revenues collected from customers are intended to cover in full the costs of operating and maintaining the service. Enterprise funds revenue cannot be used for any other purposes.
Based upon the financial analysis, projected operating revenues under the existing rates are no longer sufficient to fund anticipated operating expenses, capital improvements, equipment replacement, and reserve targets throughout the five-year planning period. Therefore, the rate studies recommend increasing sewer and sanitation rates over a five-year period.
The proposed rate adjustments are designed to recover the cost of providing sewer and sanitation services and maintain the financial sustainability of the Enterprise Funds. These revenues will be used exclusively for the operation, maintenance, repair, rehabilitation, replacement, and administration of the respective utility systems, consistent with the requirements of Proposition 218.
Sewer Fund Proposed Rate Adjustments
Willdan Financial Services is recommending the following series of sewer rate increases:
|
Implementation Date |
Proposed Revenue Adjustments |
|
January 1, 2027 |
20.0% |
|
July 1, 2027 |
20.0% |
|
July 1, 2028 |
20.0% |
|
July 1, 2029 |
12.5% |
|
July 1, 2030 |
12.5% |
Effective January 1, 2027, monthly rates for an average residential household would increase from $6.63 per month to $7.96 per month, or a $1.33 per month increase. A full schedule of proposed fees is included as an attachment to this report.
Sanitation Fund Proposed Rate Adjustments
Willdan Financial is recommending the following series of sanitation rate increases:
|
Implementation Date |
Proposed Revenue Adjustments |
|
January 1, 2027 |
10.0% |
|
July 1, 2027 |
10.0% |
|
July 1, 2028 |
10.0% |
|
July 1, 2029 |
8.0% |
|
July 1, 2030 |
8.0% |
Effective January 1, 2027, monthly rates for an average residential household with a 96-gallon (large) trash container would increase from $45.06 per month to $49.57 per month, or a $4.51 per month increase. A full schedule of proposed fees is included as an attachment to this report.
The recommended adjustments maintain the City's long-standing philosophy of gradual, predictable rate adjustments while ensuring sufficient revenue to maintain reliable service levels, preserve infrastructure, and maintain prudent operating and capital reserves.
ANALYSIS
Background
In 2021, the City completed comprehensive Sewer and Sanitation Rate Studies to evaluate the long-term financial needs of both enterprise funds. Based on the studies’ findings, the City Council adopted updated utility rates. Fiscal Year 2022-23 through 2025-26 rate adjustments were tied to the March-to-March Consumer Price Index (CPI) for the Los Angeles Area, not to exceed three percent annually. At the time, CPI was consistently below three percent.
Since that time, economic conditions have changed significantly. General inflation increased at rates substantially greater than the adopted three percent annual adjustment, while utility-specific operating and capital costs also experienced significant increases, often at rates greater than general inflation. Throughout this period, the City honored the previously adopted rate schedule rather than seeking larger annual adjustments.
|
Year |
March-March CPI |
Adopted Rate Increase, Effective July 1 |
|
2022 |
8.5% |
3.0% |
|
2023 |
3.7% |
3.0% |
|
2024 |
4.0% |
3.0% |
|
2025 |
3.0% |
3.0% |
|
2026 |
3.4% |
- |
The cumulative effect of these factors has reduced the purchasing power of these enterprise funds and increased the gap between revenues and the actual cost of providing sewer and sanitation services.
Sewer Fund
Sewer Fund Financial Considerations
Although sewer operating expenses have increased due to inflation, the primary financial consideration for the Sewer Enterprise Fund is maintaining sufficient resources to preserve and rehabilitate the City's aging sanitary sewer system. General inflation has increased the cost of labor, construction, materials, equipment, and contracted services necessary to inspect, maintain, repair, and rehabilitate the City's sewer infrastructure. For example, competitively bid sewer-lining rates increased 32 percent between 2020 and 2023. Cost increases have, therefore, significantly outpaced annual rate adjustments, reducing the ability of the sewer fund to maintain the same level of purchasing power anticipated during the 2021 rate study.
Maintaining adequate capital reserves remains a fundamental component of responsible utility management. The City's sewer collection system consists of hundreds of underground assets with finite service lives that require ongoing inspection, maintenance, rehabilitation, and eventual replacement. While many improvements can be planned through the Capital Improvement Program, unforeseen failures or emergency repairs can occur and would require immediate response. Maintaining adequate capital reserve allows the City to address these needs without significant fluctuations in future rates or deferral of critical infrastructure improvements.
The City is currently preparing a comprehensive citywide sewer condition assessment that will evaluate the condition of the sanitary sewer system and identify future rehabilitation and repair priorities. The assessment will establish a data-driven framework for future capital investment and assist the City in prioritizing improvements based on asset condition and system risk. Maintaining adequate capital reserves today will better position the City to implement the recommendations in the assessment as future capital needs are identified.
A properly maintained sanitary sewer system protects public health and the environment by reducing the potential for sanitary sewer overflows, protecting local waterways, and ensuring reliable wastewater collection service. Continued investment in system maintenance and rehabilitation reflects industry best management practices and helps preserve the long-term reliability of this critical public infrastructure.
The proposed sewer rates are intended to maintain sufficient funding for ongoing operations, planned rehabilitation, future capital replacement, and prudent reserve levels while ensuring the long-term financial sustainability of the Sewer Fund.
Comparison with Neighboring Agencies
As part of the 2026 Rate Study, Willdan Financial Services conducted a comparison of residential sewer rates among ten neighboring and comparable agencies. The analysis found that Claremont is currently within $0.09 of the lowest surveyed rate. Even with the proposed rate adjustments, Claremont's sewer rates are projected to remain below the average charged by comparable local agencies. This comparison demonstrates the City's long-standing commitment to maintaining affordable utility rates while ensuring sufficient revenue to operate, maintain, and reinvest in its sanitary sewer system responsibly.
Sanitation Fund
Sanitation Fund Financial Considerations
Like the Sewer Enterprise Fund, the Sanitation Enterprise Fund has experienced operating cost increases that have exceeded the annual three percent adjustments adopted in 2021. However, the most significant cost pressures affecting sanitation operations have resulted from rapidly increasing disposal and processing costs, as well as higher capital replacement costs for specialized collection equipment.
Disposal and Transfer Hauling Costs
Since 2025, the City’s contracts for organic material processing, transfer hauling, and landfill disposal have gone through competitive procurement processes. Although competitive procurement continues to ensure the City receives the best available value, these services operate within regional markets experiencing increasing demand, limited disposal and processing capacity, and evolving regulatory requirements. As a result, contract costs have increased at rates that exceeded general inflation and significantly outpaced the annual adjustments approved in the previous rate study. Since 2021-22, the budget for transfer hauling and disposal costs has increased 51 percent.
Organic Material Processing
In January 2021, the City entered into a contract with Athens Services, Inc. for organic material processing services. By strategically securing this agreement one year before the statewide implementation of Senate Bill 1383 organic recycling requirements, the City was able to obtain competitive pricing for the five-year contract term. Under the agreement, the cost to haul and process organic materials at the American Organics facility in Victorville was $85.00 per ton.
As the contract approached expiration, the City solicited updated pricing for a new agreement. Current costs are approximately $130.00 per ton, representing an increase of approximately 53 percent over the previous contract rate. In addition, the number of permitted organic material processing facilities in the region is limited, resulting in fewer competitive options for these specialized services and contributing to higher processing costs.
Transfer Hauling
The City utilizes a transfer station at the City Yard, where collected solid waste is consolidated and transported to the landfill using tractor trailers. Hauling services are currently provided under contract by Grand Central Solid Waste and Recycling, also known as Valley Vista Services. This transfer operation is a sustainable and cost-effective practice that minimizes wear and tear on City-owned collection vehicles by reducing the number of long-distance trips to the landfill, helping to extend vehicle service life and maintain lower staffing levels.
The City's previous hauling contract provided for a rate of $232.00 per trailer. When the contract was competitively rebid in 2025, the lowest responsive bid increased to $415.38 per trailer, representing an increase of approximately 79 percent. This substantial increase reflects the rising cost of providing waste hauling services and has significantly impacted the City's sanitation operating expenses.
Landfill Disposal
The City contracts with San Bernardino County for landfill disposal services at the Mid-Valley Landfill. Under the previous agreement, the city paid a disposal rate of $39.59 per ton. Effective January 1, 2026, the disposal rate increased to $44.07 per ton, representing an increase of approximately 11.3 percent. Due to the proximity of the Mid-Valley Landfill, the City determined that this agreement continues to provide the most cost-effective option for landfill disposal by minimizing transportation time and associated hauling costs. However, the increase in landfill disposal rates has contributed to rising sanitation operating expenses and the need for a corresponding adjustment to sanitation service rates.
Capital Reserve and Vehicle Replacements
Maintaining adequate capital reserves also remains an important component of the City's long-term financial planning. The Sanitation Enterprise Fund is responsible for replacing the City's specialized collection vehicles as they reach the end of their useful lives. The cost to replace heavy-duty collection vehicles has increased approximately 40 percent since the previous rate study was conducted in 2021. Future replacement costs are expected to continue increasing due to inflation, evolving vehicle technology, and California's transition toward zero-emission heavy-duty vehicle fleets. While the timing of vehicle replacements will occur over many years, maintaining an adequate capital reserve today will better position the City to replace equipment in a timely manner, preserve service reliability, and comply with future regulatory requirements, while minimizing the need for significant future rate increases.
The proposed sanitation rates will provide sufficient funding for ongoing collection services, contracted disposal and processing, fleet replacement, capital improvements, and prudent operating and capital reserves necessary to ensure the long-term financial sustainability of the Sanitation Enterprise Fund.
Sanitation Fund Comparison with Neighboring Cities
Willdan Financial Services surveyed ten local jurisdictions and compared monthly sanitation rates for a single-family residential customer using a 96-gallon trash container. Claremont's proposed monthly rate falls within the range charged by neighboring utilities, which are organized in order by rate below.
It should also be noted that many franchised solid waste systems recover a greater share of system costs through commercial rates or allocate a larger share of overhead and other costs to commercial customers, which can result in lower residential rates. Claremont's sanitation rates are based on a cost-of-service methodology that allocates costs to each customer class based on the cost of providing service, rather than relying on one customer class to offset the costs of another.
Proposition 218 Process Requirements and Next Steps
Proposition 218, an amendment to Article XIII D of the California Constitution, establishes the legal requirements for adopting or increasing property-related utility fees, including sewer and sanitation rates. Under Proposition 218, utility rates may not exceed the reasonable cost of providing the service, revenues may only be used for the purpose for which the fees are collected, and the amount charged to each customer may not exceed the proportional cost of providing service to that customer class.
Willdan Financial Services, Inc. has evaluated the financial needs of the City's Sewer and Sanitation Enterprise Funds to ensure that the proposed rates comply with the cost-of-service requirements established by Proposition 218.
Following review of the proposed rate adjustments by the Community and Human Services Commission, the Commission's recommendation will be forwarded to the City Council for consideration at its June 28, 2026 meeting. If the City Council concurs with the proposed rate adjustments, it will authorize staff to initiate the Proposition 218 process to adjust fees for sewer and sanitation services, authorize mailing Proposition 218 notices to affected property owners, and schedule a public hearing.
The Proposition 218 notice will describe the proposed rate adjustments; the basis for the proposed increases; and the date, time, and location of the public hearing. Property owners will have the opportunity to submit written protests prior to or at the public hearing. At the conclusion of the hearing, the City Council will consider all timely submitted protests before determining whether to adopt the proposed rates in accordance with the requirements of Proposition 218.
RELATIONSHIP TO CITY PLANNING DOCUMENTS
Staff has evaluated the agenda item in relationship to the City’s strategic and visioning documents and finds that it applies to the following City Planning Documents: Council Priorities, Sustainable City Plan, Economic Sustainability Plan, General Plan, 2026-28 Budget, and the Youth and Family Master Plan.
CEQA REVIEW
This item is not subject to environmental review under the California Environmental Quality Act (CEQA).
PUBLIC NOTICE PROCESS
The agenda and staff report for this item have been posted on the City website and distributed to interested parties. If you desire a copy, please contact the City Clerk’s Office.
Submitted by: Prepared by:
Jeremy Swan Kristin Mikula
Community Services Director Community Services Manager
Attachment:
Proposed Sewer and Sanitation Fee Schedule