Cayucos residents to decide fate of water rate hike
By Neil Farrell · Mon Jul 06 2026
Customers have 45 days to submit written protests as county proposes 15% increase this year, followed by annual hikes
July 7 has been set for the start of a comment period that could mean a significant increase for nearly 1,000 households in Cayucos.
That's when County Public Works staff will present a proposed rate increase for County Services Area-10A, the county-served water system that provides drinking water to the entire South Cayucos area. CSA-10A runs roughly from Whale Rock Dam south to the end of Ocean Boulevard and down Studio Drive on the west side of Highway 1.
The July 8 date, provided county supervisors approve the rate hike, starts a 45-day period when water customers will be officially informed of the proposed rate hike and Proposition 218 protest vote period.
Those customers — whoever's name appears on water bills, will then have until Sept. 1 to formally protest the rate hike, in writing.
On Sept. 1, supervisors will hold a second public hearing and official vote, again ballots must be in writing, to decide the fate of the increase.
If over 50 percent (even just one vote over half) is a "No," then the rate hike cannot be put into effect. If the vote falls short, the entire rate-hike package will be adopted, and the increases will begin with a 15% jump the first year.
Then there will be a 5% increase for each of the next four years (years 2 through 5), for a grand total of 35%.
Also, the proposal has a built-in increase annually for inflation, so the rates would increase accordingly every year.
If the Prop. 218 vote denies the proposed rate hike, it might not be the end of the issue as the county still has a budget problem to deal with in CSA-10A's operations and maintenance, including a list of projects it wants to complete to further bolster the system.
Rather, the county would likely go back to the drawing board to rework the numbers and propose it again in the future, presumably with a softer increase.
Cayucos also has two privately owned water purveyors — Cayucos Beach and Morro Rock Mutual Water Cos., — and while the county's rate hike isn't aimed directly at them they could still be affected.
That's because CSA-10A's water treatment plant also treats their water for delivery to their customers, roughly the entire north end of town, including the Downtown business district.
All of the town's water comes from Whale Rock Reservoir and is treated at the water plant below the dam and then distributed to the community.
Though both of the mutual companies have groundwater wells, they haven't been used much, if at all, for years.
SLO County Water Utilities Project Manager Laura Holder released a slide show in May summarizing their intentions and justifications for the rate hike before the Cayucos Citizens Advisory Council (CCAC).
The show listed just three general reasons for seeking the increase:
Revenues are below the Operations and Maintenance (O&M) budget;
Repayment of a loan from the parent agency (CSA-10); and,
Reserves are below target "after major capital projects."
One of those projects, the Chaney Waterline Upgrade Project, was slated to get underway in late June or early July.
Hartzell General Engineering, Inc., won the bid at $189,000, though the County's overall project budget tops $500,000.
The project will slip a new, larger 6-inch water pipe through an existing casing that runs underneath Highway 1 from the east side over to the Studio Drive neighborhood on the west. It will replace a 4-inch line and increase water pressure for Studio Drive, as well as better charge fire hydrants.
County Water Utilities Division Manager Nola Engelskirger told the CCAC, "This project will improve water system’s resiliency and increase fire flow to Studio Drive, west of Highway 1."
CCAC, as well as the general public, submitted comments to the county's rate hike, summarized by the county staff into two suggestions for changes:
Keep 14 units included in the base rate; and,
Accept lower reserves.
The county's rate hike proposal is expected to give at least one concession on the number of units covered in the base rate, but that's it.
Cover costs without cutting usage;
A 15 percent increase for the first year; and,
5% increases for each of the following four years (years 2 through 5).
The county laid out its reasons for seeking such a high rate hike. For the current 2025-26 fiscal year, the county slide show said, CSA-10A revenues are projected at $1.18 million, but costs are $1.32 million to a $134,000 shortfall.
In five years, for FY 2030-31, they project revenues at $1.2 million and expenses at $1.53 million, a shortfall of $331,000.
In another slide, titled in a headline, "Why are rates being increased?" the county lists increasing costs at $50,000 for "Parent Loan Payment"; $55,000 for labor costs; $45,000 for water treatment costs; and $10,000 for increased vendor costs due to inflation, for a $160,000 total shortfall.
What does this translate into? CSA-10A customers are billed every other month, and the proposed rate increase is $32.66, or $16.33 per month for the base rate, which would increase from 8 units to 14. A unit is 745 gallons of water.
The proposed rate hike would bump up the base rate from $217.79 (every two months) to $250.45 in the first year (15% hike).
It would then go up to $262.97 in year 2; $276.12 in year 3; $289.93 in year 4; and $304.43 in year 5, according to the county's slide show.
And if readers have a large household and use more than the base amount of water, the rate for those extra units would increase $1.81 per unit.
CSA-10A residents and customers will be able to fight the increases during the 45-day period that will kick off on July 7.
That's when the Proposition 218 process begins. Water customers will be able to vote "No" on the rate hike. They must do so in writing; an email or phone call will not count.
Notices of the voting period are supposed to be sent out during the 45-day period and the final public hearing and official vote is set for Sept. 1.
Who gets to vote? Whoever has their name on and pays the water bills. If a renter pays for water they should be getting the ballot notice. If they do not pay it, or if the water is part of their rent the property owner or manager should get the notice.
CSA-10A has just 950 customers and if the Prop. 218 protest vote is to be successful, 476 "No" votes are needed. It should be noted that if no one from a particular water customer/household casts a vote, it is considered a "Yes" vote. Protest votes are due Sept. 1 and can be delivered in person on the day of the public hearing before supervisors, or prior to that date at the County Public Works desk.
The notice that comes in the mail will have more detailed information, including mailing addresses.
If readers want more information, visit slocounty.ca.gov/departments/public-works/committees-programs/county-service-areas/csa-10-10a-cayucos-area