By Jorge Casuso
June 9, 2025 -- The City Council on Tuesday is expected to raise water rates over the next five years to keep Santa Monica's water and sewer services afloat.
Under proposed rate hikes, single family homes could see monthly rates rise by an estimated $15 each year over five years, according to a staff report to the Council from the City's Water Resources Division staff.
Multifamily buildings would see monthly increase of about $4 per unit for an average 8-unit building, while commercial buildings would see monthly rates rise by about $60 each year over five years.
"Rate adjustments are needed to invest in system reliability and resiliency as well as keeping pace with escalating costs in serving over 93,000 residents and 2,700 businesses and institutions," staff wrote.
The proposed water and wastewater rates balance the Council's concern "for keeping costs affordable to the community while adequately investing in long-term water quality, reliability, resiliency, and sustainability," the report said.
The hikes recommended by rate study consultant NBS call for a 20 percent increase in the fiscal year starting July 1, followed over the next four fiscal years with increases of 16 percent, 9 percent, 9 percent and 6 percent.
"The recommendation also includes implementing a 20 percent fixed charge and 80 percent commodity charge structure as well as adjusting the rate tiers and tier thresholds to reflect current cost of service," staff wrote, adding that the low-income assistance program would be maintained.
The proposed rate structures are needed after the City's Water Enterprise Fund experienced a total revenue shortfall of some $18.5 million over the past five years, according to staff.
Another shortfall of nearly $5 million was projected for the current fiscal year ending June 30, requiring the City "to dip into the Water Fund reserves" to bridge the gap.
Staff attributes the budget shortfalls each year to the COVID shutdown that led to a "decline in water use in commercial and multifamily residential customers."
It also attributes the shortfalls to "climate change impacts" on water usage due to "severe drought conditions followed by extreme wet winter periods."
Expenditures for both operation and construction during and after the coronavirus emergency, which lasted three years, have also exceeded original projections due to higher than anticipated market inflation rates.
In addition, the cost "for both operation and construction during and post pandemic have also exceeded original projections due to higher than anticipated market inflation rates caused by supply chain shortages and increases in material costs."
The funding gap for "water self-sufficiency projects" has been bridged with a $10 million grant from the California Department of Water Resources and a $78 million water revenue bond.
The Water Resources Division also has deferred "selected routine" Capital Improvement Projects including the annual replacement of water mains.
The proposed rate increases "would allow the Water Fund to collect sufficient revenues to meet the projected operating expenditures, maintain adequate fund reserve levels, and replace aging infrastructure," staff wrote.
