"I am very unhappy about this," said Commissioner Armen Adjemian. "I just think operating any business on a very slim cash flow situation is not smart."
For the average residential customer who uses about 14,200 gallons per month, the increase would translate into $2.33 more per month, officials said.
City activists have spoken out against the increase, citing the annual transfer of millions in water revenues to the city's General Fund, which pays for general services such as police and libraries.
Some council members have also been skeptical of the proposed rate hike, which they say seems to penalize consumers for adhering to strict water-conservation measures.
After the city council voted unanimously last year to restrict outdoor irrigation to three days per week, water usage dropped 18%, resulting in a $6-million loss in revenue for the utility.
The loss has been intensified by the increasing cost of imported water from the Metropolitan Water District of Southern California, which will institute a 15% rate increase of its own over the next two years on top of a 20% increase approved last year.
Even if the 3.8% increase is approved, officials said, critical capital projects, including maintenance of the city's aging pipe network, have been postponed. Other upkeep and operation costs have also been cut significantly.
"We think we've done everything we can to control costs, but we absolutely need a rate increase just simply to fund the budget that has been approved," Hayes said.
A key bond-rating agency has also warned that it could downgrade Glendale Water & Power's market status if the utility doesn't impose future rate increases.
"It would cost us more money to borrow," said Commissioner Terry Chan.
Utility officials are also currently in the process of crafting a new water-rate structure that officials say will better incentivize water conservation.
Commissioners said the rate redesign will be essential to help the utility regain financial stability.
"I am very unhappy about a rate increase, and from what I've heard today, it's a Band-Aid at best," said Commissioner Zanku Armenian. "As much as I would like to oppose this sort of rate increase, I don't think this is a hill to die on. The real issue is going to come up later when we do the rate redesign."
