The County has started the clock on a water rate hike for the south end of Cayucos and a public hearing is scheduled for Sept. 1 when it all will come to a head.
County Supervisors were asked to approve introduction of an ordinance that would increase water rates for County Services Area 10A, which provides drinking water and fire hydrant water to some 050 customers in southern Cayucos. CSA 10A covers the town from roughly 24th Street and Ocean Boulevard encompassing both sides of Hwy 1.
It also includes the water treatment plant below Whale Rock Dam that treats the lake water for all three water purveyors in town — two private companies and the County’s CSA 10A.
The vote begins a Proposition 218 process wherein water customers will have a chance to protest the rate increase in advance of the Sept. 1 public hearing for adoption. Protests must be in writing and delivered on Sept. 1 at the Supervisor’s meeting or in advance.
Water customers should be getting notifications of the matter in the mail soon. And a summary of the rate increase is required to be published in a newspaper of record, most likely the Tribune.
The County Public Works Department report said this is routine and necessary.
“As a standard practice for water utilities,” reads the report from Program Manager Laura Holder “rates are periodically reviewed to ensure revenues remain sufficient to support the safe and reliable operation of the system.
The proposed rate increase is necessary to address rising operations and maintenance costs, meet debt service obligations, plan capital projects, and rebuild reserves following recent infrastructure investments.”
The report indicates CSA 10A has paid for “major infrastructure improvements to enhance the reliability and safety of the water system.
Holder mentions two water line projects — the Hacienda Pipeline Replacement and Chaney Waterline Upgrade — that were done to reduce water loss and repair leaks. The CSA 10A went into debt to get the jobs done.
“These improvements were financed through a combination of reserve funds and a parent fund loan, which reduced reserve balances and created ongoing annual debt service obligations.”
The water rate was last changed in 2018 and was based on the needs that were known at the time, the report explained. Times have changed now.
“Operational costs have increased, significant infrastructure investments have been completed, and the Consumer Price Index [inflationary] rate adjustment authority expired in 2023, causing rates to remain flat despite rising expenses.
“As a result, current revenues are no longer sufficient to support operations and maintenance needs, meet parent loan obligations, plan future capital improvements, and rebuild reserves.”
CSA 1-A’s current rates generate some $1.18 million a year, according to the report. By next fiscal year (2026/27) the report said costs will top $1.35M and go up from there and in FY 2030/31 the costs will top $1.53M, leaving a projected shortfall of some $160,000. And it gets worse from there. “Without an increase in revenue this shortfall will continue to grow,” the report said.
The costs are increasing in both fixed costs and operational costs.
“Fixed costs include staffing, contracted services, water treatment and testing, administrative support and debt payments,” the report said. “These increases reflect economic conditions and operating pressures that have developed since rates were last established in 2018.”
So the County is proposing a graduated increase in rates — 15 percent the first year and 5% annually of the next 4 years. The usual inflation increases that get baked into such rate structures is not being applied to this 35% overall rate hike.
How much are we talking about? If the increases survives the Prop. 218 protest vote, the bi-monthly base rate would increase from $217.79 to $250.45 for up to 14 units of water. Any additional usage above the 14 units would be charged at $13.88 per unit.
By the fifth year the base rate would be $304.42 and the extra charges would be $16.87 per unit.
That big jump the first year is meant to cover the immediate projected shortfall and by the end of the 5 years, CSA 10A water bills would generate an additional $420,000 a year.
The increase has been a long time in the making. The report lists six Cayucos Citizens Advisory Council meetings when it was discussed dating back to August 2025. The last time it was brought up was in May.
With 850 potential votes (water customers) in CSA 10A, it will take 476 “No” votes (50% plus one) to successfully fight the rate increase. Not voting at all is counted as a “Yes” vote.
Prop. 218 or “The Right to Vote on Taxes Act” was approved by voters in 1996 but successfully stopping a rate hike or tax increase through the protest vote process is rare, but not unheard of.
