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The Pleasanton City Council has unanimously approved staff’s recommendation to continue working with financial consultants in updating water rate models and continuing their work in preparing a water rate study.
Tamara Baptista, interim director of operations and water utilities, told the council on April 18 that the approved amendment and increase in the contract amount not to exceed $259,550 with the consultant firm Raftelis, Inc., will help staff to complete a water rate study that they say is crucial in restoring the water enterprise fund, which is running low.
“The rate study will help the city maintain adequate funding for the operations and maintenance of the water system, help replenish the reserves for council and to get them up to approved reserve levels … and to better position the city to pursue future debt financing,” Baptista said.
Water rates in the city of Pleasanton have been stagnant for the last three years since the city had to pause its water rates study back in 2019 due to the pandemic and issues with finding longlasting chemicals in its groundwater wells.
When the city contracted Raftelis to conduct water and sewer rate studies in 2019, the goal was to complete the work by 2020.
Because the water rates have not been increased over the past three years, city staff said water sales have continued to decline due to the mandatory 15% conservation that was enacted to alleviate extreme drought conditions — the 15% mandate has been lifted after the recent storms.
Baptista said that led to projected fund balance for the water enterprise fund being below council-approved reserve levels.
“That wasn’t supposed to happen, it’s supposed to be every five years,” she said regarding the delay in increasing the water rates. “Every five years, we go to council and get the rate increases and that was a plan originally back in September 2019.”
The item was originally supposed to be voted on as part of the consent calendar, which are council items that are deemed routine and typically voted on without discussion, but was pulled by Councilmember Jeff Nibert who wanted to emphasize the need to speed up the water rate increase process.
He expressed a need of urgency from staff to accelerate their tentative timeline that was presented to the council, which shows staff working with the Water Liaison Committee from April to September in developing a water rate model.
The tentative timeline presented shows staff working with the water liaison committee from April to September before holding public hearings and workshops. The water rate increases through utility billing — if the council adopts it that way — would be implemented by January 1.
“I’m looking at April 19 to Sept. 1, to work on the rate model and to report to various other agencies — including the water liaison committee meetings — update rate models and so on,” Nibert said. “I would like to see that happen earlier so that we could have results earlier and be able to hold the public hearings earlier, the workshops earlier and potentially implementation of water rate increases earlier.”
“I’m looking out at the future and thinking it could be a very significant need for city revenue in order to address the concerns and the crisis that we could be facing,” he added.
Nibert’s request to speed up the process was met with unanimous support from the rest of the dias as fellow council members agreed with the need to help the city’s financial hole in its water enterprise fund.
“We’re bleeding to a point where we’re at a 23% reserve as of June 30,” Vice Mayor Jack Balch said. “What is the reserve level going to be on Dec. 31, at the end of this calendar year, and what is it at the end of the next fiscal year? How much capital do we have to take out of the water capital fund and how much reserve comes out?”
Balch said he has seen the water rate study with the PFAS funding element in it so he said he’s hopeful that the PFAS element can simply be removed and be brought forward quickly.
“We’re not necessarily recreating those underlying elements, possibly just simply updating those as I recall,” Balch said.
But Baptista and City Manager Gerry Beaudin said that while they can work with staff in speeding up the process from the April to September timeframe, there are some limitations as to the overall process.
“So because we’re now getting 100% for water from Zone 7 instead of the groundwater (wells), we have to shift the rate structure,” Baptista said. “We’re gonna have to update the financial model, we have to update our usage data and then we have to restructure the rates because of the use of groundwater from Zone 7 versus the city of Pleasanton’s groundwater allocation in the rates.”
Beaudin also said that because of state laws surrounding water rates, the city has to follow certain timeframes to allow for public hearings and to inform the community.
“The takeaway for us is we need to get it done as quickly as possible. I think with the Water Subcommittee, we can certainly lay out a timeline that gets it done as fast as possible,” Beaudin said.
He added that while they do need to adhere to state laws in informing the public about the water rate discussions, staff will work on putting together a schedule to “pigeonhole” the Water Subcommittee to condense their discussion into fewer meetings rather than letting them take several weeks.
“I think, for the sake of time, we might want to get something on the books rather than let it live for longer and miss this opportunity to get it done as efficiently as possible knowing that we will have to come back once we know what our (PFAS) treatment option will be and redo the rates again, or update this rate study again,” Beaudin said.
Mayor Karla Brown rounded up the discussion by asking staff to look into an interim rate adjustment that would reflect the 100% purchase of water from the Zone 7 Water Agency due to the shutting down of the three city-operated water wells.
“Even if it’s like a 10% rate increase across the board,” Brown said. “I’m just trying to protect our funds because as it’s been stated so many times tonight, they’re dangerously low, and they will continue to fall, if we don’t recoup our expenses.”
“Zone seven increases their rate, and we’re buying more water,” Brown added. “By the time we actually can adjust our rates, we have lost a significant amount of money in the fund or percentage of our reserves.”
In other business
The council approved the allocation of more than $1,200,000 for the Housing and Human Services Grant (HHSG) and Community Grant programs during the April 18 council meeting.
According to staff, these grant programs will provide funding to support human services, community development, housing, youth, and civic arts projects and programs throughout the Tri-Valley.
The allocation of these funds for the fiscal year 2023-24 will begin on July 1 — $660,010 will be allocated to human services-related projects and $487,003 will be allocated to housing-related projects.
According to the staff presentations, some of this year’s Housing and Human Services Grant Program recipients include Axis Community Health, CityServe of the Tri-Valley, ECHO Housing Hively, Goodness Village, Open Heart Kitchen and Tri-Valley Haven.
The council also approved, as recommended by the Civic Arts and Youth Commissions, the allocation of $87,800 in Community Grant funds to various recipients including the Go Green Initiative, Livermore Valley Arts, Pacific Chamber Orchestra, Pleasanton Cultural Arts Council and Pleasanton Partnerships in Education (PPIE).
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