Sewer Enterprise Study
The City of Chico is evaluating sewer rates to ensure the long-term reliability and financial sustainability of the sewer system, addressing the costs of operating and maintaining critical infrastructure, meeting regulatory requirements, and planning for future system needs.
STATUS
The City of Chico Finance Committee received a presentation on February 18, 2026.
The City of Chico Finance Committee received a second presentation on March 5, 2026.
PUBLIC COMMENT
If you would like to provide a public comment, please use the contact form in the sidebar or send all comments to:
This email account is designated for receiving written comments as part of the formal public review process. All submissions are retained and included in the public record for City Council consideration. Because this address serves as a centralized comment repository, individual replies will not be issued.
FREQUENTLY ASKED QUESTIONS (FAQs)
This FAQ is intended to provide general information and does not replace the formal public process required under Proposition 218.
1. Why is the City proposing a large sewer rate increase?
The City’s sewer system faces significant financial, infrastructure, and regulatory challenges. Current sewer revenues are not sufficient to cover required operating costs, state-mandated treatment requirements, replacement of aging infrastructure, and the rebuilding of emergency reserves. Without a rate adjustment, the long-term reliability of the system and compliance with state and federal regulations cannot be maintained.
2. Why is this happening now and not earlier?
Prior to 2022, sewer rates were not increased for more than 10 years, which resulted in declining reserves and deferred infrastructure investment. In 2022, the City adopted a rate update that funded only about half of the identified system needs in order to limit immediate customer impacts. That update also introduced Equivalent Dwelling Units (EDUs) to more equitably allocate costs among customer classes based on wastewater flow and discharge strength (such as biochemical oxygen demand and suspended solids). While this improved fairness and legal defensibility, it did not generate sufficient revenue to meet long-term system needs. Continued cost escalation, reserve drawdowns, and regulatory requirements now make further action necessary.
3. What specific costs are driving the increase?
Major cost drivers include:
- State-mandated upgrades totaling approximately $57 million by 2031
- Replacement of sewer pipes and treatment facilities that are 50 to 70 years old
- Annual operating costs of approximately $11 million
- Construction cost inflation averaging about 5.3% annually
- The need to rebuild reserves to protect against emergencies and system failures
4. What happens if the City does not increase sewer rates?
If rates are not increased, the City faces growing risks, including:
Regulatory non-compliance and potential fines
- Emergency equipment failures and unplanned service disruptions
- Reduced treatment capacity and limited ability to support planned development under the Chico General Plan 2030
- Higher long-term costs due to emergency repairs rather than planned improvements
5. How strong is the sewer system’s financial position today?
The sewer fund reserve is projected at approximately $4.4 million, which is less than half of one year of operating costs. Industry best practices generally recommend maintaining reserves equal to about one year of operating expenses to ensure system stability and emergency response capability. The current reserve level leaves the system financially vulnerable. In addition, long-term underfunding has limited infrastructure investment and resulted in deferred maintenance.
6. How will this impact my monthly sewer bill?
Customer bill impacts depend on individual usage and the final rate option adopted by the City Council. Two cash-funded approaches are currently under consideration:
- A larger initial increase followed by smaller annual adjustments; or
- Gradual increases over several years, which result in higher overall costs by the end of the period
Actual bills vary based on household size, water use, and customer classification.
7. Why can’t the City reduce costs instead of increasing rates?
Most sewer system costs are fixed and unavoidable, including staffing, energy, chemicals, regulatory compliance, and infrastructure maintenance. The system operates 24 hours a day, year-round, and many costs are driven by state and federal requirements. Significant cost reductions would jeopardize service reliability and regulatory compliance and are not a sustainable alternative to addressing long-term funding needs.
8. How do Chico’s sewer rates compare to other cities?
Even with the proposed increases, Chico’s residential sewer rates remain generally comparable to nearby jurisdictions. However, comparisons are limited because sewer systems differ in age, condition, regulatory requirements, existing debt obligations and past investment decisions.
9. How can I participate in the rate setting process?
Any sewer rate increase must comply with California Proposition 218, which requires the following:
- Advance notice to all affected customers
- A public hearing
- The opportunity for property owners to submit formal written protests
Rates must be proportional to the cost of service provided and may not exceed the actual cost of operating and maintaining the system.
10. Will the City continue to review and adjust sewer rates in the future?
Yes. Sewer rates are reviewed periodically as part of the City’s financial planning and budget process. Future adjustments will be based on updated cost-of-service analyses, regulatory requirements, and system conditions. Any future rate changes would follow the same public and legal process, including notice and public hearings.
