Divided council OKs steep San Diego water and sewer rate hikes

A sharply divided and visibly frustrated San Diego City Council voted 5-4 Tuesday to raise water rates 31% over the next two years and increase sewer rates 31% over the next four years.

The council did not soften any of the proposed rate increases, which have been declared necessary by two outside consultants, city staff and the city’s independent budget analyst.

But council members chose to shave off the final two years of a proposed 62% water hike that would have extended through 2029, contending the financial situation of the city’s water system might improve by 2027.

Critics of the rate hikes said they would fall hard on low-income families facing a variety of other fee increases and rising expenses.

Councilmember Vivian Moreno said the hikes will be a “make-or-break moment” for many families, especially in the South Bay.

Some council members voting in opposition blamed the San Diego County Water Authority, whose approval of steep rate hikes in June fueled much of the city’s.

Others blamed city staff for not searching hard enough for cost savings, or for not being transparent enough.

Moreno was joined in opposition by Marni von Wilpert, Kent Lee and Henry Foster. The hikes were approved with the votes of Council President Joe LaCava, Sean Elo-Rivera, Raul Campillo, Stephen Whitburn and Jennifer Campbell.

Water rates will rise 14.7% in January 2026 and another 14.5% in January 2027, for a cumulative rate hike of 31.3% over two years.

In addition to customers in the city of San Diego, these hikes will affect water customers in Coronado, Imperial Beach and Del Mar who are part of San Diego’s water system.

Sewer rates will rise 6% in January 2026, 6% in 2027, 8% in 2028 and 8% in 2029 — a cumulative increase of just over 31%.

In addition to customers in the city of San Diego, those increases will affect sewer customers in several other areas that are part of the city’s system — Chula Vista, El Cajon, La Mesa, Lemon Grove, National City, Coronado, Imperial Beach, Del Mar, Santee, Poway and some parts of the South Bay and unincorporated areas.

Councilmember Stephen Whitburn proposed softer water rate hikes of either 5% or 10% in 2026 but retreated when city staff and the IBA said those proposals would require mass layoffs and threaten the city’s credit rating.

“We would have an immediate downward financial spiral,” said Lisa Celaya, a city administrator overseeing public utilities.

With smaller increases, the city would either have so little cash flow that it would default on its bond covenants or it would be forced to lay off roughly 500 of the 2,000 workers in the Public Utilities Department.

In addition, the city would have to halt all infrastructure projects currently under construction, which could prompt litigation from the contractors hired to complete those projects, Celaya said.

“So 5% has extreme consequences to us,” she said.

Underfunding the city’s water system could also raise the city’s borrowing costs by damaging its credit rating, Celaya added.

“Even with small changes in the proposed rate structures, there are financial consequences,” she said.

Jordan More, who works for the city’s independent budget analyst, supported many of Celaya’s contentions about the need for the increases as proposed and echoed warnings he issued in a report last month.

He said the financial metrics of the city’s Public Utilities Department are already at their lowest advisable levels regarding cash flow, debt service and other factors.

“PUD has already done everything it can to propose the lowest possible rates,” he said. “Approving rates lower than what is proposed would almost entirely eliminate any margin for error in the system, severely hampering the city’s ability to respond to unforeseen impacts to either revenues or expenses.”

PUD officials stress that they avoided rate hikes that would have been nearly three times as large by delaying capital improvement projects and reducing other expenses for a total savings of $360 million.

They also note that the typical monthly combined bill for San Diego sewer and water customers would rise to about $180 in 2026, which would still be slightly lower than the county average.

Council members urged city officials to soften future rate hikes by increasing PUD revenues beyond ratepayer fees. Ideas include charging for parking at city reservoirs and renegotiating leases of PUD land that are outdated and well below market rates.

Von Wilpert suggested the city should decline to pay the County Water Authority as a protest move because the authority hasn’t tried hard enough to avoid rate hikes.

“Don’t pay the water bill,” she said. “They’re not going to turn off our tap.”

Some critics suggested the rate hikes could be smaller if the city abandons or shrinks its ongoing project to develop the Pure Water sewage recycling system.

But city officials stressed that the system is needed to avoid about $5 billion in upgrades to the Point Loma Wastewater Treatment Plant, which would force sewer rates to skyrocket.