Turlock’s water rates aren’t increasing just yet.

But a surge in water and sewer rates could be all-but-unavoidable in the coming months, according to a report delivered to the Turlock City Council on Tuesday.

“We are working on a plan to come back to council on water and sewer rates,” Turlock Municipal Services Director Dan Madden said. “That’s something that should be on your radar.”

This fiscal year alone, Turlock’s water fund is expected to lose $780,000. The fund has been operating at a deficit since a meter-based billing system was implemented in 2010.

Turlock projected a decline in revenues of about $965,000 per year due to metered billing, but the true decline has been nearer to $1.5 million annually. A rate increased proposed in 2009 to offset the loss in funding was denied by council; rates have gone unchanged since July 1, 2008.

The city also faces substantial future costs in constructing a surface water treatment plant to meet Turlock’s drinking water demand. By 2018, Turlock is projected to use groundwater more quickly than it replenishes, potentially creating supply issues without a surface water plant. Such a plant would likely be built in partnership with Modesto and Ceres, treating Turlock Irrigation District-controlled water from the Tuolumne River near Hughson.

But that plant will tally $85 million, plus substantial yearly operating costs. Though some funding would likely come from state and federal grants, water rates will rise to pay for the new facility.

Even should the plant be constructed, Turlock will likely be forced to drill additional wells in the near-term to produce sufficient groundwater prior to the plant’s completion.

“We have one well that's 65 years old,” Madden said. “Most people are retired at that age.”

Making matters worse, sewer revenues are also failing to meet projections. At the same time, the State of California continues to raise water quality standards for effluent, necessitating the purchase of more costly equipment as soon as 2014.

Though the costs facing Turlock are undeniable, council members expressed hesitancy at raising rates given the down economy.

“Our costs have increased, but my wallet hasn’t,” Councilman Bill DeHart said.

The council has many options for how to approach a rate increase.

Council members could opt to begin raising rates now, putting money away for that costly surface water treatment plant. Or council could instead choose to raise rates only once construction starts on the plant, delaying the pain but potentially resulting in a sudden jump in rates.

“We’re going to have to make some tough decisions in terms of rates,” said Councilman Forrest White. “… It’s going to be something that we’ll have to wrangle with in the future.”

Raising rates, however necessary, is a politically sensitive issue. As such, it’s unlikely the council will take up the issue prior to the Nov. 8 City Council Election.

But Madden noted that, regardless of timing, politicians always face pressure to keep rates low.

“It’s always an election year, one way or another,” Madden said.