Chico advances low-income sewer rate program ahead of anticipated 180% rate hike
Chico City, California · Meeting date: May 19, 2026 · Published: May 26, 2026
The California municipality is exploring a need-based assistance program funded by delinquent fee collections to soften the blow of massive impending sewer rate increases, while simultaneously tightening its process for recovering unpaid bills.
Key points
- The city faces an estimated $135 million in capital costs over the next five years to upgrade its sewer system, prompting discussions of a 180% rate increase.
- Council voted 5-2 to direct staff to develop a need-based sewer rate program, targeting a June 16 presentation alongside the broader sewer rate update.
- To comply with Proposition 218 constraints against cross-subsidization, the low-income program will be funded by revenue recovered from delinquent sewer fees.
- In a related 7-0 vote, the council amended its municipal code to require a public hearing before placing severely delinquent sewer bills on the county property tax roll.
Full report
The City of Chico, California, is preparing for a massive overhaul of its sewer rates to fund critical infrastructure upgrades, while simultaneously developing a low-income assistance program to shield its most vulnerable residents from the financial impact.
During a May 19 meeting, the city council voted 5-2 to direct staff to return with eligibility criteria and implementation guidance for a need-based sewer rate program. The move comes as the city grapples with an estimated $135 million in capital costs required over the next five years to upgrade its sewer system. To cover these costs, the council is bracing for a potential 180% increase in sewer rates.
Councilmember Hawley, who introduced the assistance program request, suggested benchmarking eligibility against existing utility assistance frameworks, such as the PG&E CARE program. However, funding the subsidy presents a regulatory hurdle. Because Chico is a municipality subject to California's Proposition 218, it cannot legally raise rates on non-qualifying customers to subsidize low-income users.
Instead, the city plans to fund the lost revenue through the aggressive collection of customer nonpayments and delinquency fees. "When we're looking at a loss of revenue due to a need-based fee program, that has to be made up somehow so we're not continuing to underfinance this really important fund," Hawley noted, adding that the City Attorney had confirmed the Prop 218 constraints.
While some councilmembers expressed concern that the assistance program was being developed piecemeal, the majority agreed to have staff present the program's framework on June 16, the same day the council is scheduled to debate the broader sewer fee update.
In a directly related move to bolster its collection capabilities, the council voted 7-0 to amend Section 15.36.072 of the Chico Municipal Code regarding delinquent sewer fees. Administrative Services Director Barbara Martin explained that the amendment ensures consistency with the California Health and Safety Code by introducing a formal public hearing process before severely delinquent sewer assessments are placed on the county property tax roll.
"These aren't going to be properties that are 30 days late, these are severely delinquent, and we can only assess them once a year by August 10th," Martin said. The new ordinance allows property owners an opportunity to formally protest at a city council meeting before the bad debt is sent to the county for assessment.
This summary was generated by AI based on the source document and may contain errors.
Source: 5/19/26 Council Meeting - Budget Session Begins at 1:00 p.m. - May 19, 2026, Chico City