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Home My WebLink AboutStaff Report 2403-27565.Staff Recommends That the Utilities Advisory Commission Recommend the City Council Adopt the Proposed Operating and Capital Budgets for the Utilities Department for the Fiscal Year 2025 (ACTION 8:30 PM – 9:30 PM) Staff: Anna Vuong Item No. 5. Page 1 of 2 Utilities Advisory Commission Staff Report From: Dean Batchelor, Director Utilities Lead Department: Utilities Meeting Date: May 1, 2024 Staff Report: 2403-2756 TITLE Staff Recommends That the Utilities Advisory Commission Recommend the City Council Adopt the Proposed Operating and Capital Budgets for the Utilities Department for the Fiscal Year 2025 RECOMMENDATION Staff recommends the Utilities Advisory Commission recommend the City Council adopt the Proposed Operating and Capital Budgets for the Utilities Department for Fiscal Year 2025 BACKGROUND Linked and referenced below are the FY 2025 Proposed Operating and Capital budgets for the Utilities Department. Due to the number of pages of the CIP budget, staff only printed the CIP overview fand five year forecast of each utility for FY 2025 – FY 2029. The entire Utilities CIP budget for FY 2025 – FY 2029 with the individual project pages can be downloaded and viewed in full from the links below: Preliminary Proposed Utilities Capital Budgets for FY 2025 – FY 2029 ➢Electric CIP ➢Fiber Optic CIP ➢Gas CIP ➢Water CIP ➢Wastewater CIP The entire Utilities Operating budget for FY 2025 can be downloaded and viewed in full from the link below: ➢Preliminary Proposed Utilities Operating Budget for FY 2025 Please refrain from discussing the preliminary proposed budget materials with Council or the public until after Monday, April 29, 2024 when the budget is published. Item No. 5. Page 2 of 2 ATTACHMENTS Attachment A: UAC – FY25 Budget Presentation AUTHOR/TITLE: Dean Batchelor, Director of Utilities Staff: Anna Vuong, Senior Business Analysist UTILITIES ADVISORY COMMISSION Preliminary Proposed FY 2025 Utilities Operating and Capital Budgets MAY 1, 2024 www.cityofpaloalto.org 2 BUDGET REQUEST PROCESS Submits Request DEPT HR OMB CMO UAC FC Approves Request Council Preliminary Requests Recommended Requests General review process for staffing, budget, and project changes 3 PROJECTED CHANGE IN RESIDENTIAL MEDIAN BILL - SFPUC 1)FY 2025 projection incorporates results of cost-of-service analysis 2)Based on general fund transfer of 11.9% of gross revenue in FY25; gas rate changes shown with commodity rates held constant; actual gas commodity rates vary monthly 3)Storm Drain fees increase by CPI index annually per approved 2017 ballot measure (2.6% in FY 2025) 4)Based on an FY 2023 monthly residential bill of $369 4 •Public/private partnership with Tesla for Hanover Substation •Approval of the Reliability and Resiliency Strategic Plan for the Electric Utility •AMI Meters: approximately 30,000 or 40% installed •Established pilot area boundaries for Grid Modernization (Grid Mod) and Fiber-to- the-Premise (FTTP) projects. •New OMS for improved outage communications DEPARTMENT FY 2024 ACCOMPLISHMENTS 5 FY 2024 STAFFING REPORTAuthorized 258 FTE Separations •5 Retirements •5 Voluntary Recruitment and retention strategies •Department Human Resource Liaisons •Childcare assistance •PAUSD K-12 enrollment Hires and Promotions •17 External •9 Promotions ELECTRIC FUND MAY 1, 2024 www.cityofpaloalto.org 7 FY 2024 ACCOMPLISHMENTS •Launched the Advanced Heat Pump Water Heater (HPWH) Program •Completed Phase 1 and 2 of Foothills Fire Mitigation •Completed electric cost of service study FY 2025 INITIATIVES •Electrification related business processes, efficiency programs, and TOU rates •Rebalance the electric supply portfolio •Design and identify pilot area for whole residential home electrification and gas decommissioning. •Enhance and accelerate HPWH installations ELECTRIC - ACCOMPLISHMENTS AND INITIATVES 8 ELECTRIC – FUND HIGHLIGHTSpages 9-22 EXPENSES $272M YoY Increase $5.0M or 1.9% •Capital improvements •Salaries & Benefits, increase 6.04 FTE •Contracts and General expenses REVENUES $261M YoY Increase $20.1M or 8.4% •Bond financing •Net sales •Return on investments 9 ELECTRIC – CAPITAL IMPROVEMENT CIP Category FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 Customer Connections $2.7M $2.7M $2.7M $2.7M $2.7M System Improvements $23.7M $10.0M $8.3M $5.7M $5.8M Grid Modernization $40.0M $50.0M $50.0M $50.0M $50.0M Grand Total $66.4M $62.7M $61.0M $58.4M $58.5M 10 Multi year one-time project, FY 2024 – FY2030 Overhead - Years 1 through 4, purchase and construction to upgrade all overhead areas Substation - Years 5 and 6, construction to upgrade substation transformers, purchase equipment in Year 3 Underground - Years 6 and 7, construction to upgrade all underground areas, purchase equipment in Year 5 (1) EL-14000 Coleridge/Cowper/Tennyson 4/12kV, (2) EL-17001 East Meadow Circles 4/12 kV, (3) EL-11003 Rebuild Underground District 15, (4) EL-13003 Rebuild Underground District 16, (5) EL-14002 Rebuild Underground District 20, (6) EL-17000 Rebuild Underground District 23, (7) EL-16000 Rebuild Underground District 26, (8) EL-19003 Rebuild Underground District 30 (9) EL-08001 Underground District 42, and (10) EL-08001 Underground District 43 ELECTRIC – GRID MODERNIZATION FIBER FUND MAY 1, 2024 www.cityofpaloalto.org 12 FY 2024 ACCOMPLISHMENTS •Finalized pilot area for Fiber-to-the-Premise (FTTP) •Allocated internal resources for FTTP business FY 2025 INITIATIVES •Expand the fiber backbone network •Conduct cost and benefit analysis study •Launch Palo Alto Fiber Internet in the pilot area FIBER - ACCOMPLISHMENTS AND INITIATVES 13 FIBER – FUND HIGHLIGHTSpages 23 - 29 EXPENSES $25.3M YoY Decrease $3.8M or 13.1% •Capital Improvement REVENUES $4.5M YoY Decrease $0.02M or 0% •Increase in Return on Investments •Offset by decrease in Net Sales 14 FIBER – CAPITAL IMPROVEMENT CIP Category FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 Fiber Optics – System Improvement $0.2M $0.2M $0.2M $0.2M $0.2M Fiber Optics – System Rebuild $12.5M $13.0M Fiber-to-the-Premises (FTTP)$8.0M $13.0M Fiber Customer Connections $0.2M $0.3M $0.3M $0.3M $0.2M Grand Total $20.9M $13.5M $0.5M $0.5M $0.4M GAS FUND MAY 1, 2024 www.cityofpaloalto.org 16 FY 2024 ACCOMPLISHMENTS •Federal grant award for Natural Gas Distribution Infrastructure Safety and Modernization •Gas commodity mitigation purchase strategy •Gas Main Replacement 24A FY 2025 INITIATIVES •Complete construction of Gas Main Replacement 24B •Cross-bore Phase IV •Conduct study and identify proof of concept area for downsizing gas system GAS - ACCOMPLISHMENTS AND INITIATVES 17 GAS – FUND HIGHLIGHTSPages 30 - 43 EXPENSES $68.5M YoY Decrease $7.5M or 9.9% •Capital Improvement •Utility Purchases •S&B, add 1.24 FTE REVENUES $70.4M YoY Increase $3.4M, 5.2% •Net sales •Return on investments 18 GAS – CAPITAL IMPROVEMENT CIP Category FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 Customer Connections $0.8M $0.7M $0.7M $0.7M $0.7M Main Replacements $6.6M $4.2M $6.7M $4.7M $7.4M System Improvements $2.1M $1.1M $1.1M $1.1M $1.1M Grand Total $9.5M $6.0M $8.5M $6.5M $9.2M WASTEWATER FUND MAY 1, 2024 www.cityofpaloalto.org 20 FY 2024 ACCOMPLISHMENTS •Sanitary Sewer Replacement Project 31 (WC-19001) FY 2025 INITIATIVES •Complete Sewer Master Plan Study WASTEWATER - ACCOMPLISHMENTS AND INITIATVES 21 WASTEWATER – FUND HIGHLIGHTS pages 45 - 54 EXPENSES $25.1M YoY Decrease $0.2M •Capital Improvement REVENUES $26.0M YoY Increase $2.3M, 9.7% •Net sales 22 WASTEWATER – CAPITAL IMPROVEMENT CIP Category FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 Customer Connections $0.5M $0.5M $0.5M $0.5M $0.5M Sewer Replacements $1.0M $2.0M $3.0M 8.0M $3.5M System Improvements $1.1M $1.1M $1.2M $1.8M $1.2M Grand Total $2.6M $3.6M $4.6M $10.3M $5.2M WATER FUND MAY 1, 2024 www.cityofpaloalto.org 24 FY 2024 ACCOMPLISHMENTS •Water Main Replacement Project 28 (WS-14001) •Water Regulation Stations (WS-07000) •Started the One Water Plan FY 2025 INITIATIVES •Water Main Replacement Project 29 (WS-15002) •Water Seismic Project – Park and Dahl Reservoirs •Complete alternative water resources for One Water Plan WATER - ACCOMPLISHMENTS AND INITIATVES 25 WATER – FUND HIGHLIGHTSpages 55 - 65 EXPENSES $58.1M YoY Decrease $18.6M or 24.2% •Capital Improvement •Tank Non WMR year REVENUES $56.5M YoY Increase $2.9M or 5.4% •Net sales •Return on investments 26 WATER – CAPITAL IMPROVEMENT CIP Category FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 Customer Connections $0.9M $1.0M $1.0M $1.1M $1.1M Main Replacements $0.4M $9.4M $0.5M $10.4M $0.6M System Improvements $2.5M $2.0M $2.1M $2.2M $2.3M Water Tank Seismic Upgrade $3.5M $7.0M $7.0M 0.9M $1.0M Grand Total $6.8M $19.4M $10.6M $14.6M $5.0M POSITION CHANGES New and reclassifications MAY 1, 2024 www.cityofpaloalto.org 28 RECOMMENDED POSITION REQUESTS Cross Connection Control Program, +2.0 FTE -1.0 FTE Project Coordinator -1.0 FTE Meter Technician Grid Modernization, +6.0 FTE -2.0 FTE Electric Project Engineers -1.0 FTE Heavy Equipment Operator/IR -1.0 FTE Utilities Installer Repairer -1.0 FTE Cement Finisher -1.0 FTE Electrician – Lead Customer Support, +1.0 FTE - 1.0 FTE Project Coordinator 29 RECOMMENDED POSITION RECLASS Water Transmission - Reclassifications -4.0 FTE Water System Operator II to Utilities Installer Repairer -2.0 FTE Sr. Water System Operator to Utilities Installer Repairer - Lead 30 STAFF RECOMMENDATION TO UAC FOR APPROVAL Staff requests that the Utilities Advisory Commission (UAC) recommend that the Council approve proposed FY 2025 Utilities Operating Budget. Staff requests that the Utilities Advisory Commission (UAC) recommend that the Council approve proposed FY 2025 Utilities Capital Budget.