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PROPOSITION 218 PUBLIC HEARING TO CONSIDER STORMWATER RATE ADJUSTMENTS AND ANY PROTESTS
recommended action
RECOMMENDATION
It is recommended that the City Council adopt a resolution to:
1. Determine, at the close of the public hearing, that no majority protest has been filed by the property owners and customers of record subject to the proposed Stormwater Fees.
2. Adopt the Final Stormwater Rate Study Report (Attachment A) prepared by HDR Engineering, Inc.
3. Direct the City Manager to mail ballots to all property owners or customers of record subject to the proposed rates and charges, and to schedule a public hearing as required by Proposition 218 on June 9, 2026, as the deadline for submission of ballots and the end of the voting period.
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 proposed actions would determine that no majority protest exists, adopt the
Comprehensive Stormwater Rate Study (Attachment A) and overrule any protests, provided that protests are received from fewer than 50 percent of affected property owners or customers of record upon whom stormwater rates and charges are proposed, as required by Article XIII D of the California Constitution (Proposition 218); direct the City Manager to mail ballots to all property owners or customers of record and set a balloting proceeding for June 9, 2026, to consider proposed stormwater rate adjustments.
DISCUSSION
Background
The Stormwater Utility was first established in 1991 in response to the Porter Cologne Clean Water Act (CWA). The CWA governs water quality regulation in California and was established to protect the beneficial uses of water and water quality including surface water bodies, groundwater, and wetlands.
Before establishing a separate Stormwater Utility within the Municipal Utilities Department (MUD), the stormwater program functioned under the Wastewater Utility. With the establishment of discharge requirements for stormwater, program management responsibilities and cost grew significantly, which created a need for a separate fund and rate.
The stormwater rate structure is based on the estimated impervious area of a property such as roofs, pavement, and other hard surfaces. It is measured using Equivalent Residential Units (ERUs). Under this system, all residential dwelling units, including single-family homes, multi-family units, and apartments, are each assessed as one ERU and charged a flat fee. Non-residential customer classes including commercial, industrial, and institutional, are charged based on the total number of ERUs assigned to their parcel.
In January 1992, the City Council approved Resolution No. 91-0866 establishing a $2.10 stormwater service fee per month for all residential dwelling units. The original stormwater fee of $2.10 was designed to fund the utility operation, maintenance, and administration with the Fiscal Year (FY) 1991-92 appropriations of $2.43 million.
In 1996, California voters approved Proposition 218, which required local agencies to follow strict public process to adjust property-related fees like water, sewer, and stormwater utility rates.
In 2011, the most recent attempt to adjust stormwater fees was not approved by Stockton property owners.
The Stormwater Utility has expanded extensively since the approval of the stormwater fee in 1992. The stormwater rate set 34 years ago is insufficient to fund the maintenance and project improvements necessary to sustain an aging system and meet State and Federal regulatory compliance requirements. Stormwater expenditures have grown by 424 percent to $7.89 million in FY 2024-25.
In March 2023, the 2023 Stormwater Master Plan (SWMP) was adopted by the City Council. The SWMP updated the 2008 Conceptual Storm Drain Master Plan in accordance with the Envision Stockton 2040 General Plan Update. The SWMP included an updated stormwater infrastructure assessment, a computer model of the City's stormwater system, assessment of system deficiencies for existing and buildout conditions based on the 2040 General Plan Update and a Stormwater Capital Improvement Plan (CIP) with cost estimates. The model identified key areas of concern and outlined 12 CIP projects, with estimated costs ranging from $4.5 million to $75 million. These projects formed the foundation for advancing a new rate 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 Stormwater Utility’s revenue requirements, prepare a cost-of-service analysis, and design rates that are proportionately distributed among the customer classes and customers within each class. Customer classes include residential (including single family), multi-family, apartments, commercial, institutional, and industrial properties.
To determine the appropriate level of revenue for the utility, HDR completed the Draft 2025 Stormwater Rate Study (Study) to evaluate potential adjustments to stormwater rates between FY 2024-25 and FY 2028-29. Three analyses were used to address the adequacy and equity of the proposed utility rates including:
• The revenue requirement analysis, which compares the revenues to the expenses of the utility to determine the overall rate adjustment required and establish the cost basis of the rates.
• The cost-of-service analysis, which allocates the revenue requirement of the utility to the various customer classes of service in a proportional manner.
• The rate design analysis, which considers both the level and structure of the rate design to collect the necessary amount of revenue as outlined in the prior two analyses.
The proposed stormwater rates were developed based on a detailed analysis to comply with Proposition 218. Under this law, stormwater rates cannot exceed the cost of providing the service. The proposed rates are based on the Study, are consistent with the City’s goals, cost-based, and equitably distributed among all customer types.
Present Situation
On January 27, 2026, the City Council adopted Resolution 2026-01-27-1601 authorizing a public hearing to consider the proposed stormwater rates and charges. A public hearing notice was mailed to approximately 85,000 record owners of property or customers of record upon which the rates and charges are proposed.
At the close of the public hearing, the City Council will review all written protests. If protests are submitted on behalf of more than 50 percent of separate parcels subject to the proposed rate increases, the rate adjustment cannot proceed. If fewer than 50 percent plus one customer or property owner submit valid written protests, the City Council may direct the City Manager to mail ballots to all property owners or customers of record upon whom the rates and charges are proposed and set a balloting proceeding on June 9, 2026. Proposed stormwater rates may be adopted if more than half of the returned ballots are marked “yes.” Stormwater rates cannot be adopted if more than half of the returned ballots are marked “no.”
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
In addition to mailing the official public hearing notice, the MUD public outreach team is implementing several strategies to actively inform and engage the community. These efforts include a 24/7 online open house at www.stocktonca.gov/StormRates <http://www.stocktonca.gov/StormRates>, where community members can learn more about Stockton’s stormwater system.
The MUD has also established a dedicated phone line and an Ask Stockton topic to provide additional opportunities for community members to ask questions and obtain information about the proposed stormwater rate adjustments. The phone line operates as a voicemail service, with all calls returned by a knowledgeable staff member within two business days.
If there is no majority protest, the City Council can set a balloting proceeding for June 9, 2026, and direct the City Manager to mail ballots to affected property owners or customers of record. Staff may then schedule community meetings to provide information, gather public input and respond to questions.
FINANCIAL SUMMARY
There are sufficient funds available in the Stormwater Utility Outreach Division accounts for postage, special services, and reprographics for the related printing and postage fees to mail customer notices and ballots.
The stormwater rate, unchanged since 1992, no longer covers rising service costs. The expenditures started to outpace revenues in FY 2022-23 and have continued to drain the fund’s reserves. It is anticipated that the reserve balance will be depleted by the end of FY 2026-27, threatening operation and maintenance of the Stormwater Utility in FY 2027-28. The resulting shortfall will reduce Stormwater Utility reserves below policy limits. Without a rate adjustment, the City will need to pursue alternative funding to protect public safety, property, and the environment.
This action has no impact on the General Fund or any other unrestricted funds.
Attachment A - Comprehensive Stormwater Rate Study