2019 Water Rate Study

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2019 Water Rate Study -

Latest Update (As of February 10, 2020)

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The City of Newport Beach Utilities Department operates the City's water operations through the water enterprise fund and the combination of multiple factors were the catalysts for conducting a water rate study:

  • The Water Enterprise Fund is now operating at a structural deficit, drawing down on net working capital reserves in order to fund the current Water System Capital Improvement Program.
  • Water Rates have not been increased since 2014.
  • Increased Capital Improvement Program annual expenditures with the new 2019 Water Master Plan recommending an average of $7.2 million annually over the 30-year plan, a 40 percent increase over current levels.
  • Operational costs, especially water supply costs, have increased steadily over the past five years. Specifically, the cost of pumping groundwater has increased 72 percent and the cost of purchasing imported water has increased by 18 percent since 2014.
  • A comprehensive water rate study has been conducted and reviewed by the Finance Committee.
  • Water rate increases are recommended to properly sustain the water system; with 7.4 percent increase each year over the next five years, starting January 2020 and through and including January 2024.
  • The average water customer (i.e. 5/8 inch meter and 10 units of water usage per month) will experience an increase of approximately $3.38 per month starting January 2020 or $40.56 over the course of the year.

The essential finding and recommendation of the 2019 Water Rate Study is to ensure that the Water Enterprise Fund has sufficient revenue to cover the additional capital and operating costs,. Revenues are generated through the City's water rates, both fixed (meter charge) and variable (water usage.)

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Water Rate Study Timeline

On November 24, 2009 - following a Proposition 218 public hearing, the City Council approved the water rate increase as proposed by the 2009 Water Rate Study.

January 1, 2014 - The last water rate increase for the City of Newport Beach water customers. Both the fixed meter and the water usage rates remained unchanged for the past five years.

On March 12, 2019 – City Council approved an agreement to retain the consulting services of Raftelis Financial Consultants Inc. to prepare the 2019 Water Rate Study, which consists of a Financial Plan and Cost of Service and Rate Design analysis.


On May 16, 2019 and June 27, 2019 – Utilities Department staff presented the findings and recommendations for water rate adjustments to the Finance Committee. The Committee recommended bringing these findings and recommendations to City Council for discussion and review


On August 13, 2019 – Utilities Department staff and Raftelis presented the findings and recommendations for water rate adjustments at the City Council study session and received direction to continue with the 2019 Water Rate Study report and return to Council for final approval.


On September 24, 2019 – City Council approved the 2019 Final Draft Water Rate Study, Cost of Service analysis and the Administrative Record, brought forward by the Utilities Department. The City Council Staff Report can be found here.

On or about October 1, 2019 - the Proposition 218 Notice (click to view) sent out over 31,000 notices to City property owners on record and to all water customers to ensure all impacted water users alike are informed of the proposed water rate adjustments.

On November 19, 2019 -  The City Council conducted a Public Hearing (click to view) to tabulate written protests and to hear public comments related to the proposed water rate adjustments. The public hearing concluded the minimum 45-day comment period as statutorily required under California Proposition 218, which governs and provides the procedural guidelines on how local agencies may impose new charges on property-related fees, such as water rates. You may view the entire Staff Report and corresponding Attachments here, Click here to access Staff Report and All Attachments.

Following the Proposition 218 process, the City Council approved the new water rates effective January 1, 2020.


General Information about the City's Water Operations and Nexus to Water Rates

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Adjusting Water Rates under Proposition 218 Law

In November 1996, California voters approved Proposition 218. As a result, California agencies such as the City of Newport Beach, must comply with its requirements when setting or adjusting utility rates. Proposition 218 requires the City to provide written notice by mail to the owner of each parcel upon which the water rate will be imposed.

The Proposition 218 notice contains the following:

  1. The proposed amount of the water rate charges;
  2. The basis upon which the water rate charges were calculated;
  3. An explanation of the need for the new water rate charges; and
  4. The date, time, and location of the public hearing at which the City Council will consider the adjusted water rate charges.

On September 24, 2019, City Council approved the 2019 Final Draft Water Rate Study consisting of the Cost of Service, Rate Design analysis and Administrative Record brought forward by the Utilities Department. City Council authorized Utilities Department staff to send out the Proposition 218 notice (click to view) to all Newport Beach property owners and water customers to inform them of the proposed water rate adjustments and set the public hearing for November 19, 2019.  Proposition 218 requires a 45-day comment period before the City Council may act on the proposed water rates and finalize the tabulation of any protests received. This notice provides detailed information about the water rate adjustment recommendations and a table of water rates for the next five calendar years, with rate adjustments effective January 2020.

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Water Enterprise Fund - What does the City's Water bill pay for?


The Water Enterprise Fund is a separate fund from the City’s General Fund, and is used only for the specific purpose of water. Over the years, increased costs of the Water System Capital Improvement program, wholesale water purchases, and water operations, combined with no inflationary rate adjustments over the last five years. The recommendations presented in the 2019 Water Rate Study to adjust the rate in order to maintain the City’s water system needs and for the Enterprise Fund to remain financially sound and debt-free. Below is a list of Water Enterprise Fund items that the City water bill helps pay for:

  • Current and future capital improvement projects, i.e. infrastructure improvements and replacements
  • The purchase of water and supplies
  • Water service: storage, treatment, and delivery of water
  • Water distribution system maintenance and repair
  • Customer service
    • On-call and 24-hour emergency service
    • Water quality testing
    • Public health and environment protections
    • Water conservation and use efficiency
    • Leak detection notifications
    • Consolidating municipal billing
    • Fire fighting support
  • Administrative costs (technology, public outreach, safety and overhead)

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Water Rate Study and Rationale for water rate adjustments

The Water Rate Study Report includes the following elements:

  • Legal framework with regards to Proposition 218, particularly with respect to water rates.
  • Development of a 10-year financial plan for Water Enterprise Fund to ensure financial sufficiency for operating and capital obligations.
  • Revision of current financial policy and recommendations for policy revisions, including reserves policy.
  • Cost of Service analysis and development of water rates that meet the requirements under Propositions 218

Other elements of the Water Rate Study include the development of a reserve policy that takes into account the different types of risks the water utility faces, including future drought conditions and to ensure revenue stability while maintaining affordability and communicating intention of conservation.


Water Rate Structure



what are the current and proposed water rates?   


customer’s water bill is a component of the Municipal Services statement sent to City water customers. The recommended structure of the rates remains fairly unchanged and includes a fixed and a variable rate. Currently, the water rates include a fixed charge, usage charge, and per dwelling unit charge. The proposed rate structure eliminates the per dwelling unit charge and adds the costs to the monthly fixed charge.

The proposed water rates for customers that receive water service from the City include:

Fixed charge – a monthly water service charge based on water meter size.

Water use charge – a monthly consumption charge based on each customer’s actual metered water use.

  • (Consumption Unit – one HCF or 100 Cubic Feet equals 748 gallons)

Adopted 5-year Water Rates - Potable, Fire Protection Services, and Recycled Water

For a printable version of the City of Newport Beach Water Rates and Charges Table, please click here.