Relief from huge proposed rate hikes for San Diego water and sewer customers is looking less likely, after a consultant recommended no rate changes and after a City Council committee tentatively endorsed the hikes Thursday.
City officials are proposing 62% hikes to water rates and 31% hikes to sewer rates over four years to cover sharply rising costs for workers, imported water, chemicals, energy, construction projects and other priorities.
The hikes, which would incrementally kick in between January 2026 and January 2029, need final approval from the full council during a public hearing scheduled for Sept. 30.
But the city’s independent budget analyst said Thursday that what is usually a key opportunity for a reprieve — a legally mandated second opinion from an outside consultant — won’t be providing relief this time around.
“Stantec concluded the Public Utilities Department studies are sound,” said IBA analyst Jordan More, referring to the consultant. “Significant rate increases for both systems will most likely be necessary to maintain current service levels.”
After hearing More’s report, the council’s Environment Committee voted 3-0 Thursday to move the proposal forward to a full council vote. If the full council agrees, the Sept. 30 hearing will be the next step in the process.
More said the water and sewer systems are projected to face such significant shortfalls in coming years that hefty hikes seem unavoidable. He said cuts to customer service may be the only option to soften them.
Council members seemed to accept that steep hikes will be necessary, but Councilmember Sean Elo-Rivera said he still hopes there’s wiggle room on some of the hikes in later years attributed to imported water costs.
“I need to be fully convinced that ratepayers are being presented with the lowest possible rate, and I’m not fully convinced of that just yet,” said Elo-Rivera, suggesting the county water authority could still find ways to lower imported water costs. “I think there is still some fat to be cut.”
This spring, county water authority officials whittled down this year’s proposed increase from 18% to 8.3% with a series of cost-cutting moves and changes in their assumptions.
On Thursday, the Environment Committee also rejected a request from the Public Utilities Department for permission to raise rates automatically when the county water authority increases imported water costs.
PUD officials had said the change would save about $200,000 per rate increase because it would let the city avoid calling a special hearing required under state law.
“I think it’s important for the council to maintain its ability to approve all increases,” Elo-Rivera said in explaining why the committee rejected the proposal.
PUD officials said the four main drivers of the rate hikes were rising costs for imported water, aging infrastructure that requires more maintenance, investments in future water supply and higher prices for chemicals, energy and workers.
Those investments include Pure Water, a sewage recycling system under construction now that is projected to provide half of the city’s drinking water once it’s complete in 2035. Phase One is scheduled to be completed next year.
PUD officials said the city’s planned hikes would be much larger if they hadn’t taken many recent steps to shrink them, including the use of $100 million in rate stabilization funds.
They’ve also saved $83 million by using more water stored in reservoirs, thanks to rainy winters in 2023 and 2024.
And they have saved $67 million by delaying capital improvement projects and another $90 million by delaying a scheduled assessment of the pipeline to the San Vicente Reservoir.
PUD officials said they’ve also agreed to soften their financial policies, including with less rigorous requirements on reserves, debt service and cash flow.
The proposal calls for water rates to rise by 14.7% in January 2026, 14.5% in January 2027, 11.5% in January 2028 and 11% in January 2029. Compounded, the hikes add up to just over 62%.
The proposal calls for sewer rates to rise by 6% in January 2026, 6% in January 2027, 8% in January 2028 and 8% in January 2029. Compounded, those hikes add up to about 31%.
PUD officials said the hikes would raise the monthly combined water and sewer bill for a typical single-family home to about $180, which they contend is below the county average of just under $200.
Officials haven’t provided comparison numbers for the subsequent increases in 2027, 2028 and 2029.
The hikes would come on top of additional recent rate increases for city water and sewer customers.
Sewer rates rose 3% in January under a series of rate hikes the council approved in 2021, and water rates rose 8.7% in January and another 5.5% on May 1.
The hikes, which would kick in on Jan. 1, would also come just as many San Diego property owners begin paying for trash pickup for the first time.
The council approved a monthly trash fee of $43.60 last month for single-family homes and multifamily properties with four or fewer units.
Councilmember Joe LaCava said the water and sewer hikes will definitely be painful, but he stressed that they could have been larger and are mostly unavoidable.
“We did inherit a system that was expensive to build and it’s expensive to maintain,” he said. “We don’t have the ability to say ‘let’s get rid of that transmission line or pump station.’”