San Clemente leans on general fund to plug $1m annual storm drain deficit

San Clemente leans on general fund to plug $1m annual storm drain deficitThe expiration of a voter-approved clean ocean fee and 30-year-old storm drain rates have left the Californian city subsidizing its stormwater and surface water quality compliance from general reserves.

The proposed FY 2026-2028 budget includes a $1 million annual transfer from the general fund to support the storm drain enterprise.

Storm drain operations are currently funded by fees established in 1993, which are insufficient to meet tightening state and federal regulations.

The deficit was exacerbated by the 2021 expiration of the Clean Ocean Fee, which previously generated about $2.3 million annually for water quality projects.

The city plans to initiate a new cost of service study for its sewer enterprise later in the upcoming budget cycle.

The City of San Clemente, California, is increasingly relying on its general fund to subsidize stormwater management and surface water quality compliance, driven by decades-old rates and the loss of a key funding mechanism. During a May 26 budget workshop for the proposed FY 2026-2028 biennial budget, city officials highlighted a growing structural deficit in the utility's storm drain fund. According to Assistant City Manager Brian Brouwer, the city plans to transfer approximately $1 million annually from the general fund's unassigned balance to keep the storm drain fund afloat over the next two years. The shortfall stems from the city's reliance on storm drain fees that have not been updated since 1993. "The cost to provide those services that are related have gone up significantly since then," Brouwer noted during the meeting. Compounding the revenue challenge was the 2021 expiration of the city's Clean Ocean Fee. Enacted by residents to fund stormwater diversion, water quality monitoring, and street sweeping, the fee previously generated about $2.3 million per year. Without it, the burden of funding regulatory compliance and capital projects—including planned storm drain trash capture devices and the Poche Beach water reclamation project—has increasingly fallen on general reserves. City Manager Andy Hall warned the council that the general fund subsidy will likely continue to grow as stormwater regulations tighten. "We have some projects on the horizon that could mean a lot to us in that number," Hall said, pointing to the Poche Beach issue as a primary example of future capital needs. While the storm drain utility faces revenue constraints, the city's other water enterprises have seen recent rate adjustments. Brouwer noted that the council recently approved water fee increases following a cost of service study, which has helped maintain healthy revenues in the water operating division. The city also plans to initiate a new cost of service study for its sewer utility later in the upcoming two-year budget cycle, as it approaches the five-year mark since its last sewer rate adjustment.