The Turlock City Council could begin the process to change water rates on Tuesday.
Council members will be asked to approve hiring a consultant to assist with a formal Water Rate Study. The results of that study would likely lead to a rate increase.
The 2012-2013 Turlock Budget foresees $7.8 million dollars of costs related to water operations, but only $7.6 million in revenues. That leaves Turlock $780,035 short, which the city plans to backfill with reserves.
The Turlock City Council was warned of the structural deficit as far back is 2009-2010, when new state laws required Turlock to implement meter-based billing, rather than the former flat-rate charges.
Water usage has declined between 5 and 6 percent following the switch to metered billing, but the decline in revenue has been even sharper - between 12 and 15 percent. In 2011-2012, water usage increased, but revenues declined even further.
The revenue shortfall is compounded by an oddity in the rate structure, which grants customers a minimum allotment of 21,000 gallons of water.
Turlock's water rates are currently among the lowest in the region. A single family residence using 22,000 gallons per month pays $25.54; in Modesto, the same water would cost $50.99, in Ceres, $53.17, and in Tracy, $71.28.
The proposed water rate study would be intended to place the Water Fund on "long-term stable footing," per the staff report. The rate study would also examine the potential rate impacts of participation in the Regional Surface Water Supply Project, a proposed plant to be built in partnership with Modesto and Ceres, treating Turlock Irrigation District-controlled water from the Tuolumne River near Hughson.
That plant will tally $85 million, plus substantial yearly operating costs. Though some funding would likely come from state and federal grants, water rates would rise to pay for the new facility. Without the plant, Turlock is projected to overdraw its groundwater resources as soon as 2018.
Turlock produces 6.5 trillion gallons of drinking water each year, from 21 active groundwater wells.

On Tuesday, the Turlock City Council is also expected to:
• Meet with the Turlock Irrigation District in closed session, to discuss the sale of city property at 900 N. Palm St., the current home of the Turlock Police Department and Fire Department Administration.
The Departments are set to move to the new, $33.6 million Public Safety Facility, under construction at the corner of Olive Avenue and Broadway, in June 2013. But $2.5 million of the project's funding hinge on the sale of the existing police department site on Palm Street.
The Turlock Irrigation District's Turlock headquarters on East Canal Drive are on the same city block as the current police department. Purchasing the building would give TID room to gradually expand in the years to come, control over the neighboring land, and a site to move some operations out of cramped quarters at the District's North Broadway corporate yard.
• Begin the process to amend Turlock Municipal Code regarding prohibited wastewater discharges, and payment for those discharges.
• Approve an amendment to the General Plan Land Use Diagram, allowing Yosemite Farm Credit to expand its development at the corner of W. Monte Vista Avenue and Dels Lane.
• Receive a briefing from the Turlock Downtown Property Owners Association on upcoming holiday events, and decreasing vacancy levels.
• Hear staff updates on capital projects and building activities, as well as board, commission, and committee vacancies. Currently, Turlock has two vacancies for alternates on the Turlock City Arts Commission, and one expected vacancy on the Parks, Recreation, and Community Commission to replace Steven Nascimento, who was elected to the Turlock City Council on Tuesday.
• Receive an update on the Turlock Fire Department's Brest Cancer Awareness Month campaign, which sold pink t-shirts to raise money for the cause.
• Authorize the filling of two vacant positions: a Plans Examiner, and a Staff Services Assistant, both in the Building Division. Both positions will be filled through in-house recruitment if possible, with outside recruitment if needed.
The Turlock City Council will meet at 7 p.m. in the Yosemite Room of Turlock City Hall, 156 S. Broadway.