Utilities Rate Advisory Commission (URAC) Special Meeting — December 10, 2025

The Utilities Rate Advisory Commission (URAC) held a special meeting on Wednesday, December 10, 2025, from 5:31 p.m. to 6:52 p.m. at Sacramento City Hall (915 I Street). The Commission received a detailed Department of Utilities (DOU) wastewater fund rate planning update focused on closing a projected operating gap and meeting reserve/debt policies after eight years without a wastewater rate adjustment, and it previewed/suggested topics for URAC’s 2026 work plan tied to the FY28–FY32 rate-setting timeline.

Attendance

• Present: Chair Jill Zito; Commissioners Anthony Burdock, Paul Gaspard, Lara Johnson, Soren Nelson, Tim Olson, Ivan Rogers, Lauren Steinbaum, Srirama Divakar Tanikella
• Absent: Vice Chair Spencer Eberle; Commissioners Babalawo Heru Oba Shambe, Tiffany Tran

Public Comments & Testimony

• No public comment was given on the wastewater update item (Clerk’s office noted none).
• No public comment was given on the 2026 work plan discussion.

Discussion Items

1) Department of Utilities Rate Planning Update — Wastewater Fund (File ID: 2025-01992)

Staff presentation (David Levine, Long-Range Financial Planning Manager, DOU)

• Purpose: Provide additional wastewater-fund detail on the funding gap, core operating/capital needs, and policy constraints for the next five-year rate planning cycle (FY28–FY32).
• Key drivers since FY20: Cost increases attributed to factors such as COVID impacts, labor contract increases, and inflation, while wastewater revenues remained flat; rate adjustments were delayed due to affordability concerns.

Stated funding challenges and policy constraints

• Continuity of operations: DOU stated it costs nearly $51 million in FY26 to meet wastewater obligations and maintain current service levels.
• Projected operating gap: DOU projected a $5.4 million gap in FY28 (absent a rate adjustment) to maintain continuity of operations.
  • Staff stated that without a rate adjustment, DOU may face “difficult decisions” including service level reductions, defunding the capital program, and/or workforce reductions.
  • Staff indicated “eliminating all remaining CIP funding allocations” could be considered, describing those remaining allocations as averaging about $4.2 million/year.
• Reserve and debt policy objectives (described as the Commission’s “second priority” after keeping operations running):
  • Operating reserve: Minimum 120 days of working capital (staff cited $8.7 million in FY26 as the 120-day requirement).
  • Capital reserve: Minimum one-year of capital improvement program (CIP) expenditures; staff stated the capital reserve is underfunded by almost $5 million and is at 42% of the one-year CIP requirement (with $3.3 million cited for FY26 capital reserve level).
  • Debt service coverage: Maintain an “absolute floor” debt service coverage ratio of at least 1.20 (staff stated this is required by bond covenants and that the trend is declining even if above the floor through FY30).

System overview and statistics

• Wastewater system described as including:
  • Two combined-system primary treatment plants permitted for primary treatment and discharge.
  • 840 miles of pipe and 48 wastewater pumping stations.
  • SCADA/industrial control network described as over 150,000 data points across nearly 200 locations.
  • Age profile described as a “bullseye pattern,” with 100+ year-old pipes in the downtown combined system; surrounding areas averaging 80–90 years; then ~65 years, then 35–50 years, with the youngest at the city edges.
• Service area distinctions:
  • Combined system (wastewater and rainwater in same pipe) in the city core.
  • Separated system (separate wastewater and storm pipes) in surrounding areas.
  • Areas served by Sacramento Area Sewer District (SacSewer) are charged separate rates (City rates not used there), though City staff described operational/building service agreements with SacSewer.

Deferred maintenance and capital needs

• Staff cited a deferred maintenance need of $1.1 billion (2021 estimate) escalated to $1.3 billion in 2025 dollars across five asset categories.
• For FY28–FY32, staff cited $89.3 million identified in the current 30-year CIP for deferred maintenance categories, while noting that under the existing rate the CIP budget averages ~$4.2 million/year (about $21 million over five years), described as insufficient.
• Examples highlighted:
  • CSS Priority 1 Pipe Rehabilitation/Replacement: Staff stated a plan to spend $3.9 million in FY28–FY32, addressing ~2.8 miles of combined sewer system pipe, described as less than 10% of program needs; pipes referenced as 94 years old or greater.
  • CSS Treatment Facility Rehabilitation/Improvements: Staff described $6.9 million for combined treatment facility needs (e.g., switchgear upgrades, fire code-related on-site water system improvements).
  • Pioneer Reservoir roof and wash-water system projects: Staff indicated additional more costly roof needs may require bond issuance, and cited an illustrative large need of $150 million for “Pioneer roof replacement and associated improvements.”

Non-deferred maintenance “highest priority” needs (post-operations and policy objectives)

• Staff described total non-deferred maintenance priorities (levels 1–3) of $88 million over FY28–FY32, with DOU executive team recommending up to $38 million across four major categories:
  • Fleet replacements: Up to $22.3 million over five years; wastewater fleet described as 88 vehicles, with 71 heavy-duty vehicles subject to California’s Advanced Clean Fleet requirements. Staff stated they used an assumption to at least double gas vehicle costs for zero-emission equivalents in planning; they estimated $19.4 million for heavy-duty replacements but included $13.7 million in rate planning (described as $6 million short of current estimates). A “vac-on” truck example was cited: $780,000 for a gas unit; a ZEV replacement estimated at at least $1.6 million.
  • Operational needs: $12.2 million for staffing/equipment for unscheduled cleanings/inspections/repairs tied to new discharge requirements, root abatement improvements, drone/technology inspection tools, and safety/security (radios, fencing/cameras/lighting).
    • Additional crew funding cited at $2.4 million (one lead worker, two service workers, plus vehicles/equipment) for unscheduled pipe locating/cleaning/inspection/repairs.
    • Root impacts were emphasized; staff stated over half of sewer spills the City is responsible for are caused by roots.
  • Policy and planning: $1.0 million for regulatory compliance work, system planning/modeling, and asset management.
  • Information technology: SCADA cybersecurity/perimeter and endpoint protection, HMI software/controller upgrades, plus Citywide finance/HR/payroll cloud migration cost sharing and work order system upgrades.

Commissioner questions and comments (positions attributed to speakers)

• Commissioner Soren Nelson expressed concern about the scale of the $1.3B deferred maintenance relative to what rate increases could fund, and asked how DOU balances affordability versus addressing deferred maintenance.
  • DOU response (Levine; plus Roxanne Dilley, Wastewater Supervising Engineer): Staff stated the problem predates this cycle and has been worsened by past rate decisions that did not include full recommended rates. Staff stated a hope to invest roughly $100–$120 million toward deferred maintenance if the first two objectives are met, but characterized that as “scratching the surface” and stated it will take more than one rate cycle. Dilley emphasized data-driven asset management and improved modeling to refine priorities and potentially reduce overestimation-driven costs in the combined system.
• Commissioner Tim Olson asked multiple clarifying questions and raised concerns:
  • Asked why debt service appears in operating expense charts; staff stated it is classified as part of operating costs but represents annual principal and interest.
  • Asked about how often DOU takes on new debt; staff stated it depends on needs and the ability of the fund to support debt, and debt strategy is coordinated with the Treasurer’s Office.
  • Asked whether SacSewer RNG (renewable natural gas) revenues flow to the City; staff described two agreements (operating cost reimbursement; building disbursement) and said they would follow up on magnitude.
  • Suggested the City consider greater transparency by highlighting/publishing major project priorities given the “nature of the rate hike proposal” (speaker position: recommended more public-facing project detail).
  • Expressed that including fleet electrification costs in rate planning is “troubling,” characterizing it as an unfunded mandate; he suggested exploring state funding sources and noted his view that this cost “should not be” in long-term rate planning because other funding pools exist (speaker position: opposed/concerned about ratepayer-funded fleet conversion and advocated external funding).
  • Noted in his experience electric fleet costs may be higher than 2x and cited long lead times (speaker position: warned cost/time assumptions may be understated).
• Commissioner Lauren Steinbaum asked about NPDES compliance scope and the relevance of CSO/SSO information to the public.
  • Staff clarified NPDES/CSS permit compliance funding discussed relates to combined-system outflows/overflows and does not include separated-system SSOs in that specific line item.
  • Operational data provided by staff (Charlie Cunningham, SCADA Manager): Staff stated that prior to ~2015, the separated-system SSOs averaged 102 per year, and that since 2020 the average has been 20 per year; staff stated 11 SSOs had been recorded “so far this year.” Staff linked reductions to cleaning programs and equipment (e.g., vac-on and root-removal trucks), and stated maintaining these programs is important to avoid returning toward earlier SSO levels.
• Commissioner Ivan Rogers asked whether prevailing wage/PLA-type labor requirements are included in the $6.9M CSS treatment facility estimate.
  • Staff stated projects must comply with prevailing wage, and that projects over $1 million fall under a Community Workforce Training Agreement; staff indicated these labor requirements are anticipated in costs.

Process/timeline reminders from staff

• Staff stated a goal to have financial plans for each utility fund finalized by the end of December 2025 and approved by the City Manager’s Office.
• Staff stated the consultant Raftelis will develop cost-of-service and customer-class rates, to be presented to URAC in June 2026.
• Staff stated the community engagement/outreach plan will be developed in early 2026 and shared with URAC in March 2026, to coincide with rates being presented.

2) Review and Discuss Annual Work Plan Topics for Calendar Year 2026 (File ID: 2025-01996)

Staff overview (David Levine, DOU)

• Purpose: Review and discuss topics to include in URAC’s 2025 annual report and 2026 work plan; five meetings were scheduled for 2026, largely aligned with the FY28 water/wastewater rate adjustment process.

Proposed 2026 meeting schedule/topics

• Jan. 28, 2026: Election of URAC Chair/Vice Chair; FY25 year-end financial results (including deferred maintenance update); review/approval of URAC 2025 annual report and 2026 work plan.
• Mar. 25, 2026: Strategic stakeholder communications/outreach approach for the rate process.
• Jun. 24, 2026: Presentation of selected financial plans and proposed rates; Prop 218 process; overview of AB 2257.
• Sep. 23, 2026: Public Works Recycling & Solid Waste update; DOU financial update on FY27 budget and FY26 year-end projections; storm drainage fund review was noted as tentatively moved to 2027 to preserve 2026 capacity for the water/wastewater rate process.
• Dec. 2, 2026: Prop 218 rate hearing; URAC deliberation and recommendation to City Council.

Commission discussion

• Commissioner Olson asked whether outreach will include presentations beyond URAC meetings (e.g., neighborhood groups). Staff stated a multi-faceted outreach plan is expected and will be presented for URAC input; staff also stated Raftelis will likely participate more as communications and rates are presented.
• Commissioner Tanikella asked which figures will be proposed in the financial plan (e.g., the $1.3B deferred maintenance estimate versus the $89.3M identified in the current CIP). Staff responded that what is included will depend on what the City Manager’s Office determines is affordable, given competing citywide obligations; staff reiterated that continuity of operations and policy objectives must be met before additional deferred maintenance/non-deferred maintenance priorities.

Key Outcomes

• Item 1 (Wastewater Fund update): Received and commented (no vote recorded; informational item).
• Item 2 (2026 work plan topics): Received and commented (no vote recorded; informational item).
• No public testimony was provided on either agenda item.
• Next scheduled URAC meeting: January 28, 2026 (includes election of URAC leadership and review/approval of the URAC annual report/work plan, per staff schedule).