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HomeMy WebLinkAboutItem 23 - City Responses to Water and Sewer Rates Protests MAYOR . CITY MANAGER Valerie Amezcua Alvaro Nunez MAYOR PRO TEM �R: S,,, CITY ATTORNEY David Penaloza Sonia R.Carvalho COUNCILMEMBERS CITY CLERK Phil Bacerra � Jennifer L. Hall Johnathan Ryan Hernandez Jessie Lopez Thai Viet Phan Benjamin Vazquez CITY OF SANTA ANA PUBLIC WORKS AGENCY 20 Civic Center Plaza+P.O. Box 1988 Santa Ana.California 92702 www,santa-ana.org March 10, 2026 Ms. Barbara Orozco Subject: City of Santa Ana Response to Valid Legal Objection Dear Ms. Orozco: Thank you for your correspondence, which was received February 9, 2026 by the City Clerk's office. Your correspondence meets the requirements of a valid legal objection pursuant to Government Code section 53759.1. This letter constitutes the City of Santa Ana's response. 1. The City retained an independent rate consultant to conduct a robust cost of service analysis and rate study, which constitutes the administrative record and demonstrates that the rates do not exceed the proportional cost of service. California courts have routinely held that customers may be grouped into classes based on similar usage characteristics, and such classifications satisfy Proposition 218's requirement to allocate costs based on the proportional cost of service to the parcel. Here, the City classified customers based on the size of the meter serving the parcel. On the fixed charge side, this allowed for proportional allocation of the City's fixed costs based on capacity demand on the system, using ratios for maximum flow. On the volumetric side, this allowed the City to allocate costs based on relative system investment as well as shared usage characteristics stemming from the size of the meter serving the parcel. For more information, please review the rate study at: https://SantaanautiIityrates.com/wp-content/uploads/2026/01/Cit -of-Santa-Ana- 2025-Water-and-Sewer-Rate-Study-Report.pdf 2. As set forth in Table 52 of the study, the City only allocates the fixed costs associated with the delivery of water services that do not fluctuate based on water use, including SANTA ANA CITY COUNCIL Vaie6e Amezcua David Penaloza Thai Viet Phan Benjamin Vazquez Jessie Lopez Phil Bacera Johnalhan Ryan Hernandez Mayor Mayor Pra Tam-Ward 6 ward 1 Ward 2 Ward 3 Ward 4 Ward 5 yamezcua(telsanta-ana.org dpenalozardsanta-ana,orn lohantrasanla-ana,oep bvazauezCa7sanla-anaorc �essielopez@santa-ana.ora phacerransanta-ana.org irvanhemandez@zanta-anax Ms. Barbara Orozco March 10, 2026 Page 2 fixed meter costs (costs associated with reading and maintaining meters); fixed infrastructure costs associated with capacity and delivery, and fixed infrastructure costs associated with delivering water through public hydrants. These include things like facilities repairs and replacements, meter capacity, and customer service. The variable rates, on the other hand, include water supply costs, and costs of managing water resources and distributing water. No variable costs are recovered through the fixed charges. 3. The pass-through adjustment mechanism is not self-executing. Rather, the City is carving out the authority to pass through rate increases adopted by wholesale water providers. The amount of the pass-through, if any, is limited by the actual rate increase, and will never exceed cost of service. 4. The pass-through authority will not exceed 5 years from adoption, as will be set forth in the resolution adopting the rates. 5. The City strives to establish rates that are affordable. However, while the City does consider all cost-saving mechanisms, it must also ensure that each utility is self- sufficient. Importantly, the City only recovers what it needs to provide the property- related service, and further, the City actually subsidizes water utility by nearly $1.5 Million from unrestricted revenues, which reduces rates by approximately$0.15 in Tier 1. This is not required under Proposition 218, but was implemented in order to provide savings to City water customers. 6. The Proposition 218 notice meets all legal requirements. Should you have any questions, please contact the City at (714) 647-3320. Sincerely, Rodolfo osas, P.E. Acting Executive Director of Public Works SANTA ANA CITY COUNCIL Valerie Amezcua David Penaloza Thai Viet Phan Benjamin Vazquez Jessie Lopez Phil Bacerra Johnathan Ryan Hernandez Mayor Mayor Pro Tem-Ward 6 Ward t Ward 2 Ward 3 Ward 4 Ward 5 vamezcua!ov7santa-ana.oro doenaloza af�san[a-ana.aM tphan(&.santa-ana.ora bvaz a uezei)Santa-ana.om iesslelooez(dsanta-ana.oro pbacerrano santa-ana om jryanhemandez(n)santa-ana.oi MAYOR . CITY MANAGER Valerie Amezcua r ! Alvaro Nunez MAYOR PRO TEM CITY ATTORNEY David Penaloza Sonia R.Carvalho COUNCILMEMBERS CITY CLERK Phil Bacorra AJennifer L.Hall Johnathan Ryan Hernandez Jessie Lopez Thai Viet Phan Benjamin Vazquez CITY OF SANTA ANA PUBLIC WORKS AGENCY 20 Civic Center Plaza .P.O. Box 1988 Santa Ana,California 92702 www.santa-ana.orq March 10, 2026 Swithin Lindbeck Subject: City of Santa Ana Response to Valid Legal Objection Dear Swithin Lindbeck: Thank you for your correspondence, which was received February 5, 2026 by the City Clerk's office. Your correspondence meets the requirements of a valid legal objection pursuant to Government Code Section 53759.1. This letter constitutes the City of Santa Ana's response. Upon consideration of the issues raised in the letter, the City does not believe any issues raised in the letter warrant a change to the proposed water and sewer rates for the reasons described below. The substantial evidence supporting the proposed rate structure is set forth in great deal in the cost of service analysis and rate study, which can be found here: https:f/santaanautiIitvrates.com/wp-content/uploads/2026/01/City-of-Santa-Ana-2025- Water-and-Sewer-Rate-Stud y-Re Dort.Pdf The bulk of the letter revolves around the misunderstanding that the proposed rates eliminate customer classes. This is not true. The proposed rate structure does not eliminate customer classes for water customers. Instead, it classifies customers based on the size of the meter serving the parcel. The size of the meter serving the parcel reflects common use characteristic and capacity investments associated with the varying meter sizes. In other words, similarly sized meters use water in a similar manner, and larger meter sizes reflect greater investment in the water system through capacity fees and fixed monthly charges. Proposition 218 authorizes establishing customer classes based on shared characteristics, and the City's rate study demonstrates that the shared characteristic between customer classes is the SANTA ANA CITY COUNCIL Valerie Amezcua David Penaloza Thai Viet Phan Benjamin Vazquez Jessie Lopez Phil Bacerra Johnathan Ryan Hernandez Mayor Mayor Pro Tom-Ward 6 Ward 1 Ward 2 Ward 3 Ward 4 Ward 5 vamezcua(p�sanla-ana.om dpenalpzala�santa-ana.ora Ephan(rilsanta-ana.orp byazppezra7aanla-ana,0M less€elooezCo1santa-ano.orp pacerra santa-ano.o jryanhernandezp(1.santa-apa.o1 Swithin Lindbeck March 10, 2026 Page 2 size of the meter serving the parcel. Additionally, the primary incremental cost supporting the two tiers is source of supply, with tier one paying for groundwater costs, and tier two paying for imported water. Costs for peaking are factored into the fixed charges applicable to each customer, which vary based on the size of the meter serving the parcel. Finally, the City uses meter equivalents for sewer rates based on average winter water use rations for each meter size. These ratios reflect sewer flow differences attributable to each meter size, and serves as an effective proxy for projecting flows that return to the sewer. Importantly, Coziahr v. Otay Water District and Patz v. City of San Diego took issue with creating customer classes, as opposed to consolidating them. Additionally, Dreher V. City of Los Angeles Department of Water and Power reinforces that agencies have flexibility and discretion in establishing rate structure, so long as the rate within each tier reflects the cost of service within such tier. The City's rate study clearly demonstrates that this is the case. The letter includes additional claims that the City's Proposition 218 notice understates bill impacts. The City provides bill impacts as a courtesy, but this information is not required under article Xlll D, section 6 of the California Constitution. As such, the notice meets all constitutional limitations and requirements. Similarly, nothing in Proposition 218 mandates that an agency implement any particular frequency in billing. As such, there is no violation of Proposition 218 resulting from the transition to monthly billing. As explained clearly in the City's Proposition 218 notice, the deadline for submitting an objection is March 10, 2026, to allow the City to review and provide a timely response. While the City is always happy to listen to any additional concerns you may have, no further objections or legal arguments will be considered for purposes of exhausting administrative remedies after the deadline of March 10, 2026, set forth in the Proposition 218 notice. If you have specific questions about the impacts of the proposed rates on your parcel, please feel free to call 714-647-3320, and City staff would be happy to walk through your particular circumstances. Sincerel odolfo Rosas, P.E. Acting Executive Director of Public Works SANTA ANA CITY COUNCIL Valerie Amezcua David Pena€oza Thai Viet Phan Benjamin Vazquez Jessie Lopez Phil 13acerra Johnathan Ryan Hernandez Maynr Mayor Pro Tem-Ward 6 Ward? Ward Ward Ward Wards vamezcua santa-ana.cr dpenalozaOsapts-sna.ora 1 han. sarta-ana orc pyazGUezr&sanla-ana.orq lessielopez(n�santa-ana.orq phacema@santa-ana_om anhemandez santa-ana.oi MAYOR , CITY MANAGER Valerie Amezcua .r Alvaro Nunez MAYOR PRO TEM CITY ATTORNEY David Penaloza = Sonia R.Carvalho COUNCILMEMBERS CITY CLERK Phil Bacerra Jennifer L. Hall Johnathan Ryan Hernandez Jessie Lopez Thai Viet Phan Benjamin Vazquez CITY OF SANTA ANA PUBLIC WORKS AGENCY 20 Civic Center Plaza•P.O. Box 1988 Santa Ana,California 92702 vuww.santa-ana.orq March 16, 2026 Ms. Nelida Mendoza Subject: City of Santa Ana Response to Correspondence Dear Ms. Mendoza: Thank you for your correspondence, which was received on March 10, 2026 by the City Clerk's office. Your correspondence does not meet the requirements of a valid legal objection pursuant to Government Code section 53759.1 because the letter does not identify a legal concern with the proposed rates. However, the City will consider your comments and your letter will count as a ,protest for determining whether a majority protest exists. Should you have any questions, please contact the City at (714) 647-3320. Sincerely, odolfo osas, P.E. Acting Executive Director Public Works Agency SANTA ANA CITY COUNCIL Valerie Amezcua ©avid Penaloza Thal Viet Phan Benlamin Vazquez Jessie Lopez Phil Bacerra Johnathan Ryan Hernandez Mayor May Pro Tem-Ward 6 Ward 1 Ward 2 Ward 3 Ward A Ward 5 VameZCuafd75anta-ana.glq d[renaPoza@se.nla-ana.ore Iphan(nZsanta-ans.orCl bvazquez@sanla-ana.cro inssielooezaDsanta-al bacerra sanla-ana.0 anhernandeZ santa-ana.ol