Marin Municipal Water District prepares to raise rates

Marin Municipal Water District rate revenues need to increase 4% to 6% annually over the next four years to maintain a balanced budget, officials said this week.

The report, presented at a board meeting Tuesday, came on the heels of another report that said district water sales were about $8 million lower than projected last year and will continue to decrease because of less consumption. At the same time, the district’s costs are estimated to climb about 4.5% annually.

The solution could involve an overhaul of the district’s tiered rate structure. The district is looking at raising both fixed and variable rates that it charges its customers, said Bret Uppendahl, the finance director.

The 4% to 6% revenue increase is “the bottom line what the overall rates need to bring in,” Uppendahl said.

“We’re looking right now with the consultants as to where that will show itself,” he said.

Uppendahl said rate revenue makes up about 91% of the total revenue. Water sales, the variable rates that would likely be most affected by any proposed rate increase, make up about 65%.

“The key piece here that is driving a lot of the work we’re doing is that rates cannot exceed the cost of providing service,” he said. “And then within that, the cost recovery methodology needs to be proportional to the cost of providing service. You need to kind of have a cost basis for everything you do.”

The district, which supplies water to 191,000 customers, operates on two-year budget cycles. The current budget was approved in June 2025. This year, the spending plan is $188 million.

Inflation is stressing the budget, primarily around salaries, which are on pace to increase 4% annually for cost-of-living adjustments and healthcare premiums jumping 8% to 10%, among other increases, Uppendahl said.

The last rate increase plan began in 2023, when most single-family home ratepayers were told their bills would rise about 20%. Officials said the hike was needed to secure water supply and tackle deferred maintenance. Capital costs have increased from $24 million in the 2022-2023 fiscal year to $67 million in 2025-2026 and $65 million this year.

Since enacting the new rates, the district has established a water supply category within its capital improvements program, allocating about $9 million this year and for each of the past two years.

Uppendahl assumes that the capital improvements budget will start to decrease $5 million to $7 million over the next four years.

When it comes to the rate tiers, the water district has four tiers for residential customers who make up about 90% of the customer base. All neighboring districts have three or fewer tiers, Uppendahl said.

For commercial, industrial and institutional customers, the district has three tiers. Neighboring districts only have one tier for these customers.

Reducing the number of tiers could simplify rates, but the district is looking at how that might affect customers before making any proposals, Uppendahl said.

Board member Ranjiv Khush said that as he read the staff report and saw the projected increases in expenses for various line items, “I could feel my blood pressure going up.”

He said he felt relieved seeing that the overall annual increase was projected at only 4.5%.

“We can’t translate how that’s going to map out in terms of rate increases, but it feels like we’re going to be at a less sort of impactful situation than we were in 2023, and that’s something I appreciate as a ratepayer,” he said.

Khush encouraged staff to continue looking at creative ways to cut costs, considering the projections.

Despite water sales dropping last year, the district was still able to balance its budget, Uppendahl said. The deficit was offset by better-than-expected interest earnings, salary savings and other savings, he said.

Board president Jed Smith said that’s a key fact when discussing the district rates and finances.

“I think it’s really important for the public to understand that we are managing this agency not at a loss, that we’re covering ourselves,” Smith said. “We’re being thoughtful and prudent about our expenses and we need to continue to do that.”

Smith said he’s interested in seeing other ways to tighten expenses, including trimming the capital improvements budget.

Uppendahl said the district rate study is expected to be completed in the spring. A public hearing to consider any proposed changes will be scheduled in conjunction with the district’s budget process.