West Basin weighs rate hikes amid $47.9m recycling operations budget and MWD cost pressures

West Basin weighs rate hikes amid $47.9m recycling operations budget and MWD cost pressuresThe California district is evaluating its FY26-27 budget, balancing a new O&M contract with Jacobs, volatile chemical pricing, and projected 9.5% imported water rate increases from the Metropolitan Water District.

Water recycling operations dominate the district's operating expenditures, proposed at $47.9 million for FY26-27.

Chemical costs are budgeted at $15.2 million, factoring in a 5% unit price escalation despite anticipated optimization under the new Jacobs O&M contract.

The district is bracing for projected 9.5% rate hikes from the Metropolitan Water District, prompting board discussions on raising local Reliability Service Charges between 0% and 5%.

Capital Improvement Projects for FY26-27 are currently estimated at $20.6 million, primarily targeting rehabilitation and replacement at the Edward C. Little Water Recycling Facility.

West Basin Municipal Water District is bracing for operational cost increases and imported water rate hikes as it shapes its fiscal year 2026-27 budget. During an April 2 budget workshop, staff outlined a $70.7 million total expenditure plan, heavily anchored by a $47.9 million water recycling operations budget. A primary driver of the recycling budget is the district's transition to a new operations and maintenance (O&M) contract with Jacobs, which recently replaced former operator Veolia. Staff noted that while the new contract structure yields significant savings compared to the previous operational framework, year-over-year contract labor is still projected to increase by over $1 million. This includes contractual escalators and a "salary realization" adjustment to bridge the gap between initial fixed pricing and actual employee compensation following the transition. Chemical procurement, which historically constitutes a third of the district's O&M budget, remains a volatile factor. Staff proposed an estimated $15.2 million chemical budget for FY26-27. While Jacobs' corporate buying power and guaranteed reductions in chemical usage have stabilized some expenses, the district is still budgeting for a 5% unit price escalation due to broader market impacts, including tariffs and petroleum cost increases. Compounding internal cost pressures are looming rate hikes from the Metropolitan Water District (MWD) of Southern California. MWD is projected to implement a 9.5% rate increase while shifting volumetric charges to fixed charges starting in January 2027. To absorb these external shocks without severely depleting its $79 million reserve portfolio, West Basin staff presented scenarios to increase the district's Reliability Service Charge by up to 5%. On the capital side, the district is proposing a $20.6 million Capital Improvement Project (CIP) budget. The bulk of this funding—$12.5 million—is earmarked for rehabilitation and replacement projects at the Edward C. Little Water Recycling Facility, particularly focusing on solids handling and filter upgrades. The board will review the CIP budget in greater detail during a subsequent workshop in May as directors weigh the balance between funding infrastructure and minimizing ratepayer impacts.