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PROPOSITION 218 PUBLIC HEARING TO CONSIDER STORMWATER RATE ADJUSTMENTS
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RECOMMENDATION
It is recommended that the City Council adopt a resolution approving the Stormwater Utility rate adjustments as identified in the Final Stormwater Rate Study (Study) (Attachment A) if a majority of returned ballots support the proposed adjustments.
It is also recommended that the City Manager be authorized to take appropriate and necessary actions to carry out the purpose and intent of this resolution.
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Summary
The Municipal Utilities Department (MUD) Stormwater Utility operates 77 pump stations, over 600 miles of pipeline, and 22,500 drain inlets that convey precipitation from streets and other hard surfaces to flood basins and local waterways.
The Stormwater Utility rate set in 1992 no longer keeps pace with inflation, capital improvement demands, or rising service costs. As a result, reserves will be depleted below required levels, threatening the utility’s ability to sustain ongoing operations and maintenance. If stormwater rates are not adjusted, the City will eventually have to seek other funding methods to support the stormwater program and provide the necessary services to protect the community, property, and the environment.
Approval of the proposed rates would establish the maximum stormwater rates that may be charged during the five-year period. Before implementing any rate adjustments each fiscal year, staff will review the revenue requirements and the rates needed to meet those requirements as part of the Annual Budget process.
DISCUSSION
Background
The MUD Stormwater Utility was established in 1992 as a separate enterprise fund, previously operating under the Wastewater Utility. As state and federal stormwater discharge requirements expanded, program management needs and capital costs increased, prompting the creation of a dedicated fund and rate. Council Resolution No. 91-0866 approved a stormwater service fee of $2.10 per month for all residential units beginning January 1992, designed to support the utility’s FY 1991-92 operations, maintenance, and administration.
In 1996, California voters approved Proposition 218, requiring local agencies to follow strict public procedures when adjusting property‑related fees such as water, sewer, and stormwater rates.
In 2011, the City attempted to adjust stormwater fees; however, property owners did not approve it.
In March 2023, the City Council adopted the 2023 Stormwater Master Plan (SWMP) by Resolution 2023‑03‑07‑1501. The SWMP included an updated assessment of stormwater infrastructure, development of a citywide system model, identification of system deficiencies under existing and 2040 General Plan buildout conditions, and preparation of a Stormwater Capital Improvement Plan (CIP) with preliminary cost estimates. The model identified areas of concern and outlined 12 CIP projects, ranging from $4.5 million to $75 million, which form the basis of the current Study.
On August 22, 2023, the City Council adopted Resolution 2023‑08‑22‑1214 authorizing a professional services contract with HDR Engineering, Inc. (HDR) to evaluate the Stormwater Utility’s revenue requirements, conduct a cost‑of‑service analysis, and develop proportionate rates for all customer classes, including residential, multi‑family, apartments, commercial, institutional, and industrial.
On January 27, 2026, the City Council adopted Resolution 2026‑01‑27‑1601 authorizing a public hearing on March 31, 2026, to consider adjustments to the City’s stormwater rates and charges and directing the City Manager to mail notice of the hearing to all Stormwater Utility customers and affected property owners.
On February 10, 2026, staff mailed the required Proposition 218 notice to property owners and stormwater utility customers explaining the proposed rate adjustments, the date and time of the public hearing, and the procedures for submitting written protests.
At the close of the public hearing on March 31, 2026, fewer than 50 percent of property owners submitted valid protests. Therefore, the City Council adopted Resolution 2026‑03‑31‑1503 directing staff to mail ballots to all property owners within the stormwater service area.
The City pays its proportional share to the Stormwater Utility because it is a major owner of impervious surfaces, including roads, parking lots, infrastructure, and rooftops. On April 28, 2026, through Resolution 2026‑04‑28‑1210, the City Council cast ballots in favor of the proposed stormwater rate adjustment for City‑owned parcels, consistent with the City’s rights as the record owner under Proposition 218.
Present Situation
The proposed stormwater rates were developed in compliance with Proposition 218, which requires that fees do not exceed the cost of providing service and that charges be proportional to each parcel’s share of that cost. Revenue requirements are allocated to customer classes based on each parcel’s ERUs, including residential, multi-family, apartments, commercial, institutional, and industrial customers, both within City limits and in applicable unincorporated County areas. The rate design is cost-based, aligned with the revenue requirement analysis, and equitably distributed among all customer classes.
The Study focused solely on potential adjustments to the stormwater service charge. To determine the utility’s revenue needs from FY 2025‑26 through FY 2029‑30, HDR conducted three analyses: a revenue requirement analysis to compare projected expenses and revenues; a cost‑of‑service analysis to allocate costs fairly among customer classes; and a rate design analysis to determine the structure needed to collect the required revenue. Together, these analyses show that current stormwater rates are insufficient to meet operational and capital needs, requiring rate adjustments.
The proposed stormwater rates and charges for each customer class and the effective dates are shown in the following table:
*Includes all residential accounts other than single-family (i.e., duplex, fourplex, apartment homes, etc.)
**Non-residential accounts are billed based on the number of ERUs existing on each individual parcel. The actual service charge shall equal the one ERU multiplied by the ERU rate.
Public Outreach and Notification
MUD staff provided information about the Study and an overview of the legal process requirements of Article XIII D to the Water Advisory Group on April 1, 2026, and to the Council Water Committee on April 10, 2025, November 13, 2025, and January 8, 2026.
On January 27, 2026, the City Council authorized MUD staff to mail a Notice to all City of Stockton Stormwater Utility customers and the record owners of property upon which the rates and charges are proposed for imposition.
On February 10, 2026, staff mailed Public Hearing Notices to record property owners and stormwater utility customers. The Notice included information on the amount of the proposed adjustments; the reasons for the adjustments; the date, time and location of the Public Hearing; and instructions to protest the proposed adjustments. The Notice listed March 31, 2026, at 5:30 p.m. as the date and time of the Public Hearing.
In April, staff also mailed property owners and Stormwater Utility customers additional information explaining the proposed rate adjustments, the community meeting details, and the procedures for returning ballots.
In addition, a dedicated phone line and an Ask Stockton topic provided additional ways to contact the City for questions and information on the proposed stormwater rate adjustments. The phone line is a message line. All calls were returned by a knowledgeable individual within two business days.
Staff also held a community meeting on May 14, 2026, at the Stockton Memorial Civic Auditorium South Hall. (The May 14th Community meeting was originally set for the South Hall, but due to a graduation event at the arena, it was moved to the North Hall. Appropriate signage was posted directing all attendees to the new location. In addition, parking spaces on the north side of the building were reserved to ensure parking despite the large number of graduation attendees.). The meeting included a presentation about the proposed rates, and an opportunity for community members to ask questions. The presentation was recorded and is available at www.stocktonca.gov/StormRates <http://www.stocktonca.gov/StormRates>.
Outreach to commercial and industrial customers included meetings held by staff with interested groups upon request.
FINANCIAL SUMMARY
The current stormwater rate, established in 1992, has not been updated to reflect inflation or rising costs for operations, infrastructure, and maintenance. The Stormwater Rate Study (Attachment A) projects that without additional revenue, the utility will face an annual deficit of about $5 million starting in FY 2027-28, putting critical flood‑protection infrastructure at risk. Ongoing shortfalls are also expected to draw reserves below policy levels, creating a growing structural deficit in the Stormwater Utility fund.
If approved, the proposed Stormwater rate adjustments will generate sufficient revenue over the next five years to pay for Stormwater Utility operation and maintenance costs, infrastructure needs, and capital improvement projects, while also maintaining bond coverage covenants.
This action has no impact on the General Fund or any other unrestricted funds.
Attachment A - Final Stormwater Rate Study