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The Pleasanton City Council unanimously voted earlier this month to support city staff’s implementation of a funding scenario for the city’s water enterprise fund that city leaders called a crucial step in the overall water rate-setting process.
The “enhance” scenario was one of three that were introduced to the council during a March 4 special council meeting as part of a water enterprise financial analysis. According to staff, the analysis outlined multiple funding scenarios to establish a “financial framework for prioritizing and funding critical water infrastructure projects that will meet the City’s immediate and future water system needs.”
“With an aging water system, rising costs, and new regulatory requirements, we are taking a thoughtful, strategic approach to setting water rates,” Mayor Jack Balch said in a March 12 press release.
The last time the city raised those rates was toward the end of 2023 after a series of contentious council meetings. The first water rate increase was 30% in 2024 and the second increase of 12% just took effect this past January.
Since 2023, the city has been working on a systematic approach to planning the future of its water system, according to the press release. The financial plan analysis, the city states, is the first of three steps in the city’s rate-setting process.
Back in September, the city selected Water Resources Economics, LLC to conduct water and sewer rate and connection fee studies as part of that first step.
“This financial planning tool evaluates the city’s financial health and funding needs to achieve a sustainable, reliable water system while meeting operational, maintenance, and capital improvement costs over the next four years,” according to the city’s press release.
The financial plan analysis, which was developed based on the city’s Water System Management Plan (WSMP), included three implementation scenarios that each evaluated “revenue needs, expenses, reserve recommendations, and funding scenarios to determine the funding needed for financial sufficiency”. The WSMP, which the council approved in January, assessed existing water assets, improvements anticipated for the future, and operational and maintenance requirements needed over the next 20 years.
Staff also told the council during the March 4 special meeting that the analysis also outlined a scenario with no revenue increase, which showed the financial and operational risk of not adjusting water and sewer rates.
“We’ve spent the past two years working to fully understand what’s needed to keep our water system fully operational and ready to meet our future needs,” Balch said. “Now, as we listen to the community, we will work through decisions to cover critical costs, invest in the future, and ensure we provide safe, reliable water to the community.”
During the March 4 special meeting, the council specifically looked at three funding scenarios — including one to stabilize by spreading capital investments evenly over the next 20 years and deferring most projects to rehabilitate infrastructure and one to accelerate by front-loading all water system priority projects within five years.
According to staff, the “stabilize” scenario had an estimated cost of $63 million over five years while the “accelerate” scenario, which would have lowered longterm costs but increased short term financial and staff capacity demands, would have cost $108 million over the same time period.
After reviewing the options, the council supported staff’s recommendation to go with the “enhance” scenario that prioritizes the most critical projects within the first five years while deferring some infrastructure rehabilitation projects, “resulting in slightly higher near term costs but reduced long-term risks”.
According to staff, that scenario is estimated to cost $73.2 million over five years but it is the most balanced approach that prioritizes “the most critical water-related projects within the first five years of the WSMP’s proposed 20-year Capital Improvement Plan (CIP).”
“Taking this balanced approach is the right choice for Pleasanton and reflects our commitment to planned progress,” City Manager Gerry Beaudin said in the March 12 press release. “We appreciate the City Council’s leadership in making difficult, yet thoughtful, decisions to meet the needs of our water system while maintaining high-quality service for our residents.”
Staff also stated that while the enhance scenario requires a “slightly higher upfront investment than the stabilize option,” it also reduces long-term infrastructure costs and helps maintain reliable water service by “minimizing costly emergency repairs and service disruptions”.
The scenario also considers the impacts to ratepayers, which even though the proposed scenarios did not set the rates, they did identify projected revenue needs and suggested debt issuance, staff said.
According to the city, the next step in the rate setting process will be a “comprehensive cost-of-service analysis to calculate proposed water rates and connection fees and assess customer impacts.”
The council will review preliminary rates and rate structures during its May 6 meeting — any future rate adjustments will follow the required notification process before the council holds a public hearing ahead of adopting any potential rate increases.
