San Diego's low-water users would pay more under flat rate forced by lawsuit; council votes Tuesday

Single-family homeowners who use little water would pay more starting Jan. 1 under a rate overhaul the San Diego City Council is scheduled to vote on Tuesday, Oct. 27, while the heaviest residential users, large apartment complexes and irrigation accounts would pay less.

The plan, Item 330 on the council's 2 p.m. agenda, scraps the three-tier price ladder for single-family homes and charges every customer the same $11.09 per hundred cubic feet of water, or HCF. One HCF is 748 gallons. The city says the change is required by a court ruling that found its tiered rates unconstitutional.

Under rates the council already approved for 2027, single-family homes would have paid $9.75 per HCF for the first tier, $10.88 for the second and $13.62 for the highest. Apartment buildings would have paid $11.41, commercial customers $10.72 and irrigation accounts $12.08. All would move to $11.09. The monthly service charge for a standard 5/8- or 3/4-inch residential meter would rise from a planned $40.69 to $40.97.

A Public Utilities Department presentation for Tuesday's hearing estimates a low-use single-family customer would pay $5.62 more a month, up 7.1%. An average single-family user would pay $7.82 more, up 5.9%. A high-use single-family customer would save $19.52 a month. An apartment property of about 10 units would save $15.17 a month, one with 250 or more units would save $353.52, and an irrigation customer would save $48.

The presentation does not say how much water each example customer uses. By Newsline's calculation from the published rates, a single-family home would come out ahead only if it uses more than about 14 HCF a month, roughly 10,700 gallons.

The changes are measured against rates that already include the 14.5% increase the council approved in October 2025. That increase still takes effect Jan. 1. City staff says the new structure collects the same total revenue as the old one.

The overhaul traces to Patz v. City of San Diego, a class action filed in 2015 on behalf of single-family water customers. A San Diego Superior Court judge ruled in 2021 that the city failed to prove its tiered rates matched the cost of serving each home, as Proposition 218 requires. The court awarded the class $79,541,880 in March 2022 and added $643,750 for each month the rates stayed in place.

On July 30, 2025, the 4th District Court of Appeal, Division Two, affirmed the ruling 2-1 in a published opinion, 113 Cal.App.5th 225. The majority found the city had not supported the "peaking factors" it used to charge heavier users more. Justice Menetrez dissented, calling the $79 million judgment "based on nothing." The court sent the case back so the refund could be handled under a 2024 state law letting agencies satisfy such awards through future rate-setting. The state Supreme Court declined review Oct. 29, 2025, according to the City Attorney's Office.

The city settled the case for $40 million. The council approved the deal Aug. 25, 2026, in Resolution R-316919, which directs that the money be paid from the city's Water Fund, the account supported by ratepayers. The settlement covers payments to the class plus attorney fees, litigation costs and administration, according to a City Attorney's report. Class members have until Nov. 12 to opt out or object, and a judge must still give final approval.

City documents describe how the water fund will be made whole. The staff report says restoring reserves after the payout raises the utility's revenue needs by about $40 million, or 6% to 7%, a cost "not included in this action but will be considered in future cost of service studies." A June memo from consultant Stantec says about $9 million would be covered by lower-than-expected wholesale water costs from the San Diego County Water Authority and the remaining $31 million by cutting cash-funded capital spending in fiscal 2027. The department's slide presentation says there are "no planned changes" to the capital improvement program.

In a written response to a ratepayer who objected that the refund should not be paid by customers, the department cited a 2024 state law and said, "Paying legal judgments and settlements is an operational cost of running a water system."

The city's stated justification is that it has no choice. "The City must adopt a new rate structure that complies with the court's ruling," the staff report says. City Attorney Heather Ferbert's office wrote that the court ruling requires compliant rates by Jan. 1, 2027. Responding to objections that flat pricing undercuts conservation, the department wrote that conservation-based rates "are not allowed under California law if the rates exceed the proportional cost of service."

The vote was supposed to happen Oct. 6. Councilmembers Stephen Whitburn and Sean Elo-Rivera were absent that day, and Councilmember Marni von Wilpert, who attended the meeting remotely, was recorded as not present for the item, according to the city clerk's results summary. The six members present voted 5-1 to reject 27 written legal objections and to continue the vote to Oct. 27. Councilmember Henry Foster III voted no. The agenda says Council President Joe LaCava asked for the delay so the full council could take part.

The city did not receive written protests from a majority of affected parcels, which would have blocked the rates, according to the proposed resolution.

The Independent Budget Analyst has not published a report on the proposal.