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The Pleasanton City Council is poised to consider a final decision on raising the city’s water service rates over the next three years on Tuesday after the members delayed their vote in September so staff could conduct further analysis and provide a slightly different alternative to their original recommendation.
City officials have been looking at raising water rates since 2019, but a water rate study that was supposed to be used as a crux for raising the rates was paused due to the COVID-19 pandemic. Since then, staff have said that three years of no rate increases have put the city in a difficult position of having to raise the rates so that the city’s water enterprise fund doesn’t go bankrupt in the next three years.
“While the sewer enterprise is adequately funded, funding for the water distribution system is inadequate, which has necessitated the use of reserves to both operate the water system and make necessary infrastructure improvements to have the pressure and capacity to deliver sufficient water supply during peak demand periods,” according to the Sept. 19 staff report.
“Depletion of the water reserves is unsustainable for the operation of the enterprise fund, to the point of insolvency,” the staff report added. “This situation is problematic because it creates operational risk when reserve funds are not available to do necessary repairs or larger projects and from a policy perspective because it does not meet the city’s approved reserve target of 35%.”
The council voted 4-1 in July, with Vice Mayor Jack Balch in dissent, to initiate the public notification process ahead of final rate increase consideration in September. That proposed rate structure was to increase the rate payers bills by 30% (which was supposed to start this month but has now been pushed to start on Jan. 1), followed by a 20% increase beginning Jan. 1, 2025 and a 12% increase the following year.
According to the Sept. 19 staff presentation, the first proposed rate increase would raise the average homeowner’s bimonthly bill by $33, which equates to an approximately 30% increase in the total water portion of the utility bill, or about a 13% increase to the overall utility bill. After that, residents would see a $25 increase upon the second year and a $17 increase upon the third year.
Staff also presented an alternative two-year rate increase of 30% in 2024 and 20% in 2025 at the Sept. 19 meeting.
However, Balch had initially asked the city to push pause and to actually wait until November so that more analysis could be done and so that more residents could weigh in on the discussion.
While the council was poised to make that final decision on Sept. 19, the dais unanimously agreed to push pause after dozens of residents packed the meeting room to ask the council to slow down so that staff can conduct more analysis on the topic.
A total of 202 residents also submitted validated written protests against the increases on Sept. 19 but in order to table the recommended rate increases the city would have had to receive 11,243 protests, or a majority of property owners in the city.
That’s why the council said staff needed to evaluate comments from the public, respond to resident questions and figure out any possible alternatives to the three-year water rate hikes, which is what staff will be bringing back to the table on Tuesday.
“Staff worked with Raftelis to perform a sensitivity analysis that focused on replenishing the reserve in the near term while addressing ratepayers’ concerns about the annual and compounded rate increases,” according to the Nov. 7 staff report.
Raftelis is a water and utility consulting company that had conducted a previous report to determine the water rates.
“The sensitivity analysis looked at the debt financing assumptions and extending the reserve replenishment to one additional year (four years, instead of three years),” according to the staff report. “Extending the reserve replenishment out to year four and extending the payback period of the $6 million debt to 20 years would allow for the second-year rate revenue adjustment to be lowered to 12%, or 8% lower than the recommended 20% in the second year.”
Now, according to the Nov. 7 staff report, the dais — along with the original three-year recommendation — will also look at that modified alternative recommendation of reducing the second year of increases to 12%.
“This approach prolongs the water enterprise fund ‘reset’ and will result in the enterprise fund balance dipping to $6.3 million, or 17% of operating and maintenance expenses (which is less than half of the reserve target),” according to the Nov. 7 staff report.
If approved on Tuesday, these water rate increases would also mark the first rate structure overhaul since 2011 — according to the Sept. 19 staff report, water rates have only been adjusted for inflation since 2011, except for 2017, 2020, 2021 and 2022 when there weren’t any increases at all.
The City Council meeting is scheduled to begin at 7 p.m. Tuesday (Nov. 7). The full agenda can be accessed here.
In other business
* City staff will be introducing and asking the council to waive the first reading of an ordinance that would ban gasoline-powered leaf blowers effectively on June 1, 2024.
The ban, which was a priority action item included in the city’s 2021-23 Work Plan, would cost the city about $180,000 in order to transition the city’s “fleet of gas-powered leaf blowers to all-electric models,” according to the staff report. That money would go toward purchasing new equipment and other components such as battery packs and charging equipment.
The staff report states that under state law, “gas-powered leaf blowers cannot be sold in California beginning Jan. 1, 2024, but state law would not prohibit the use of existing gas-powered leaf blowers.”
* The council will also be holding a public hearing and consider adopting a resolution levying the Downtown Pleasanton Business Improvement District assessment for 2024, which levy funds to be used by the Pleasanton Downtown Association, to conduct promotions, programs and activities that benefit downtown Pleasanton.
According to the staff report, the Downtown Pleasanton Business Improvement District (BID) annual assessment revenue in 2024 is “provisionally projected by City staff to be approximately $80,000.”
“Under the current agreement between the (Pleasanton Downtown Association) and the city, the city will match the annual BID assessment, estimated at an additional $80,000,” the staff report states. “This combined $160,000 is projected to account for approximately 34% of the PDA’s total 2024 funding sources.”
* As part of the council’s consent calendar, which are items considered routine in nature and are approved with a single vote, staff will ask the council to approve a resolution authorizing the city to submit a State Transportation Improvement Program application in the amount of $6 million for the I-680/Sunol Boulevard Interchange Modernization Project.
The State Transportation Improvement Program is a multi-year capital improvement program administered by the California Transportation Commission.
* The council will also be looking to waive a first reading of an ordinance to consolidate five of the freestanding newsracks located along Main Street to just three racks that will be bought, operated and maintained by the city.
The purchase of three new newsracks is estimated to be about $16,000, which would be allocated from the Downtown Beautification Fund, according to the staff report.
Water Rates – Seems to me that 30% increase is still far too much. Balance it out 20% in 2024, then see how the fund is doing mid year and look at what is truly needed in 2025 and beyond.
Also how about the council put the 10.5 million targeted for skatepark and century house into the water enterprise fund. Yes they can actually do this. Do away with pet projects of Testa, Arkin and Brown. Nibert just voted to go along with those three as a follower on the fiscally irresponsible projects.
This massive increase in water prices is unacceptable and shows mismanagement of our water resources. It’s time to consider replacing the management of our water system and find a team that finds ways to keep increases in water rates to a minimum by driving unnecessary expenses out of the water department and providing the city with reasonable increases in rates that maintain the reserve account purchasing power. Clearly a failure in management.