The Morgan Hill City Council will consider a revised report on proposed water and sewer rate hikes, and discuss the process by which ratepayers can block the increases at the Dec. 2 meeting.

The council is also being asked by staff to set a public hearing on the matter Jan. 20, 2016, and to send out “Proposition 218” notices to the city’s 13,500 water and wastewater rate payers. These notices give the residential and commercial customers a chance to protest the proposed rate increases; if more than 50 percent of ratepayers submit written protests, the city cannot enact the rates.

City staff and consultants presented a five-year water/wastewater finance plan Nov. 18 that includes rate hikes for each of the next five years. The largest water rate increase during this time would be a total of 15.25 percent in 2016, with each subsequent annual increase projected at 7.25 percent through 2020.

If the council approves the rate increases Dec. 2, the city will mail Prop 218 notices to customers by Dec. 5. The notices will include a description of the proposed rates and information detailing the protest process. The deadline to protest would be the close of the public hearing, which is tentatively scheduled for Jan. 20.

For the Dec. 2 meeting, staff and the consultant “reexamined” the calculation of costs for customers in the various zones at higher elevations served by the city’s water and wastewater system. These costs are proposed to be added to these customers’ monthly bills as “zonal surcharges,” in order to pay for the electricity and infrastructure costs associated with moving water uphill.

This reexamination resulted in a decrease in the proposed charges by 55 to 80 percent, though some customers in the hills could still see their monthly bills go up more than $100, according to the staff report to be presented to the council Dec. 2. The suggested zonal surcharges, as calculated for the Dec. 2 report, do not include personnel costs associated with the service delivery.

The water/wastewater fund is in need of more revenue because while the city’s 13,500 water customers have cut their water use by as much as 30 percent since 2013, the city’s costs to deliver water have not gone down, according to city staff. The new rate model would rely more on recovering the city’s “fixed costs” associated with delivering water and removing wastewater.

Also on the Dec. 2 city council meeting agenda:

—A zoning amendment to allow a residential and commercial development at the southwest corner of East Third and Depot streets in downtown Morgan Hill. The property owner and developer, Rocke Garcia, has proposed building a 43-unit multi-family development and up to 6,600 square feet of commercial space on the site. The property, known as the “Sunsweet” site, is located next to the city’s Fourth Street Garage project.

—An ordinance to tighten up the reporting requirements for hotels when they submit transient occupancy tax (TOT) revenues and data to the city. A Nov. 18 staff report indicated that many of the city’s hotels are incorrectly reporting these taxes, thereby resulting in less revenue for the city’s general fund.

The city’s local TOT levies a 10 percent per room, per night tax on guests who stay in hotels within the city limits.

The council meeting will take place 7 p.m. at City Council meeting chambers, 17555 Peak Ave.

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