Pleasanton Council Considers Raising Water Rates

PLEASANTON — The cost of water will likely rise this fall as the city attempts to steer its water enterprise fund away from insolvency.

City staff proposed at the July 18 city council meeting to increase water rates by 30% starting Nov. 1, followed by a 20% increase on Jan. 1, 2025, and another 12% increase on Jan. 1, 2026. The first adjustment translates to an additional $16.59 per-month cost for the average single-family home using 20 centum cubic feet of water per month.

“The reality is we got behind with rates relative to the financial needs to operate the system,” said City Manager Gerry Beaudin, who cited forever-chemical treatment, pipe replacements and a temporary booster pump as upcoming large expenses on top of the system’s operational costs.

The changes would end a three-year, rate-increase holiday, during which the COVID-19 pandemic and forever-chemical issues delayed a rate study originally planned for 2019, according to the staff report. The stagnant rates have driven the city to use reserve funds to both operate and make infrastructure improvements to Pleasanton’s water system.

“This city — and I was a part of it — made a mistake by not instituting (rate increases) back a few years ago,” said Mayor Karla Brown. “Three years with no rate increases is exactly how we’ve created this problem.”

The city council voted 4-1, with Vice Mayor Jack Balch against, to mail a notice to ratepayers detailing the proposal and to schedule a public hearing for the decision on Sept. 19.

While Balch supported a rate increase in general, he questioned the city’s ability to forecast funding needs past the current year, given the city’s Water Supply Alternatives study currently underway and expected to be completed in September.

“If we don’t know what years two and three are because we haven’t chosen the water alternative, can we look at what we need to do for year one now, and really look at trying to sharpen the pencil?” asked Balch.

Last November, the city decided not to use its 3,500-acre-foot groundwater allotment due to forever-chemical contamination in the area’s aquifer and the city’s inability to treat the water. The city instead currently buys all of its water from the regional water supplier, the Zone 7 Water Agency, which enjoys a wider selection of water sources, such as snowmelt through the State Water Project.

But the city intends for the Zone 7 purchases to only serve as a temporary stopgap, and its Water Alternatives Study will present options for a more permanent solution to make up for the missing 3,500-acre feet of water — about 20% of the city’s supply.

Balch also argued that the specifics around a $6 million capital-improvement loan, which the city plans to take out next year, could significantly alter the bottom-line burden on ratepayers.

While the water-rate study, prepared by local government and utility management consultants Raftelis, assumes a 5% interest rate over a five-year repayment period on the open market for the loan, Director of Finance Susan Hsieh said that internal borrowing — at a 1.4% interest rate — was also an option.

A loan repaid over 10 or 15 years at the lower rate, reasoned Balch, could lessen the increase seen by ratepayers.

Staff responded that the loan details could be decided later.

Other councilmembers reluctantly agreed that the state of the water enterprise fund, which will turn negative in 2025 given no action, necessitated the large increases.

“I get the impact (of) the increase,” said Councilmember Valerie Arkin. “I do think the recommendation is justified, but internally, I am still struggling a little bit with it, and I understand the impact.”

Beaudin stressed the need to bring the fund back to “the starting line” and avoid insolvency.

“This is not a great position for all of us to be in tonight, but there’s a rip-the-Band-Aid-off approach here that really does truly reset our water program and puts us on a totally different path than we’re on currently,” he continued.

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