HomeMy WebLinkAboutStaff Report 2410-3581CITY OF PALO ALTO
Finance Committee
Regular Meeting
Tuesday, October 15, 2024
Agenda Item
1.Finance Committee (FC) Discussion for Director of Utilities Department Recruitment and
Input of Candidate’s Key Characteristics and Salary; CEQA Status – Not a Project
Finance Committee
Staff Report
From: City Manager
Report Type: ACTION ITEMS
Lead Department: Human Resources
Meeting Date: October 15, 2024
Report #:2410-3581
TITLE
Finance Committee (FC) Discussion for Director of Utilities Department Recruitment and Input
of Candidate’s Key Characteristics and Salary; CEQA Status – Not a Project
RECOMMENDATION
This item is for Finance Committee discussion and feedback; no action is required.
BACKGROUND
The Director of Utilities position will become vacant when the incumbent Dean Batchelor
retires at the end of the calendar year after serving as the Director for 6 years. Staff is preparing
to launch this executive recruitment and receiving the UAC feedback on key challenges facing
the department and leadership characteristics required to help guide in the identification of
potential candidates.
Human Resources is executing a contract with Executive Recruiter Teri Black & Company. Teri
Black will lead the recruitment and use this feedback to conduct outreach and recruit a new
Director.
ANALYSIS
A recruitment process lead by the City Manager as the hiring manager will be facilitated by the
Human Resources Department and the executive recruiter. Input and feedback gathered from
the Utilities Advisory Commission, Finance Committee, members of the public, the City Council
(via the Finance Committee), and City staff will assist Teri Black & Company to develop the
recruitment brochure as well as to screen potential candidates. The goal is to open the
recruitment in November. Upon selection of a recommended candidate, this position is
submitted to the City Council for confirmation of the City Manager’s hire.
This position is responsible for a number of policies and procedures internally including rate
setting for the five utilities, and Outage Communication to the community. It coordinates
department activities with those of other departments and outside agencies (Northern
California Power Agency, California Municipal Utilities Association, and Bay Area Water Supply
& Conservation Agency), provides staff assistance to the City Manager and the City Council;
prepares and presets staff reports and other necessary correspondence. A key factor in this
position is to establish work plans, key performance indicators, assign work activities, monitor
workflows and evaluate work products. The Department is on the forefront of key investments
such as partnering on the City’s ambitious Sustainability & Climate Action Plan, increase electric
grid reliability and modernization for electrification, and a pilot project establishing fiber-to-the-
premises. The number one goal for the department is making sure every staff member goes
home safe at the end of the day.
For reference, staff have included relevant documents to this role including the job description
(Attachment A) and relevant sections in the City’s annual operating and capital budget
(Attachment B and C respectively). The Utilities Director role is specified in the City’s Municipal
Code. Palo Alto Municipal Code (section 2.08.200) includes the following responsibilities for the
department of utilities under the direction of the director of utilities who shall be accountable
to the City Manager:
(1) To plan, direct and coordinate the operations of the city's utilities department;
(2) To coordinate the forecasting of the city's long-range utility needs and develop financial
plans to ensure that the city's utilities rate, reserve and revenue levels will be able to meet
customer service, operating and financial requirements;
(3) To provide administrative support to the utilities advisory commission on matters relating
to the department;
(4) To generate appropriate reports as may be required by county, state and federal agencies
or by law;
(5) To operate a responsive customer service center, to manage customer service utilities
billing, inquiries and complaints and to provide a fast and courteous response to each
customer's request for utility service;
(6) To establish rates to offset operating costs of all city utility operations designated as
utilities enterprise funds and to provide a fair and reasonable rate of return on the city's capital
improvement investment in those utilities designated as utilities enterprise funds;
(7) To provide technical or other efficiency services to enable residential, commercial and
industrial utilities customers to reduce their operating costs, improve the quality of the
environment and maintain a high level of customer satisfaction;
(8) To forecast and plan the acquisition and disposition of sufficient least-cost resource supplies
to meet existing and future supply requirements in an environmentally acceptable manner;
(9) To negotiate for the purchase and sale of water, gas and electricity and contract with
water, gas and electric power producers, suppliers and marketers for resource supply at the best
available price or cost;
(10) To recommend capital construction and improvements of all utility systems, and to
administer such programs when approved;
(11) To inspect all construction work done by or for the utilities and require compliance with all
contracts made in connection therewith;
(12) To prepare or cause to be prepared all utility maps of the utilities, and to keep and to
maintain such records as are necessary for the fulfillment of this function;
(13) To provide operations, maintenance, and construction necessary to ensure the safe,
efficient and reliable delivery of electric, water, gas and wastewater collection services to all
customers;
(14) To provide operations, maintenance, and construction necessary to ensure the proper
operation of the city's traffic signal, street lighting and communication systems;
(15) To perform or cause to be performed all duties required by this code or other law of the
director of utilities and the department of utilities; and
(16) To perform such other duties as may be required.
(b) For organizational purposes, the department of utilities shall consist of the following
divisions: administration; customer support services; resource management; engineering; and
operations.
FISCAL/RESOURCE IMPACT
An executive recruitment for this role is within existing contract authority and salary savings
from the position while vacant will be sufficient to provide the funding necessary.
Utilities is a highly competitive industry and more so when recruiting for oversight of five
utilities; consideration of amendment to the compensation range may be necessary to attract
qualified candidates to this role. Consideration of both market and internal compaction likely
would benefit from an adjustment to ensure attraction of a competitive candidate pool.
STAKEHOLDER ENGAGEMENT
Both the Utilities Advisory Commission and this Finance Committee will host discussions in
which stakeholders may engage and provide feedback for consideration as part of this
recruitment process.
ENVIRONMENTAL REVIEW
Committee discussion on this item is not a project as defined by CEQA because direction on the
Utilities Director recruitment is a continuing administrative or maintenance activity. CEQA
Guidelines section 15378(b)(2).
ATTACHMENTS
Attachment A: Utilities Director Job Description
Attachment B: FY 2025 Adopted Operating Budget Utilities Excerpts
Attachment C: FY 2025 Adopted Capital Budget Utilities Excerpts
APPROVED BY:
Sandra Blanch, Human Resources Director
ATTACHMENT A:
Utilities Director Job Description
Class Title: DIRECTOR UTILITIES
Class Code: 121
Salary: $251,409.60 - $377,104.00 Annually
Reports To: City Manager
Supervises: Assistant Directors - Engineering/Operations; Administrative Services, Resource
Management; Administrator, Utilities; Executive Secretary
Purpose of Classification
The Director of Utilities directs the activities of the Utilities Department, including water, gas
and electric supply planning and acquisition, the operation of water, gas and electric distribution
systems, a dark fiber telecommunications system, wastewater collection system, as well as the
Customer Service Center.
Essential Duties
Essential and other important responsibilities and duties may include, but are not limited to, the
following:
•Work with Utilities Department management personnel, interpreting policies of the City
Council and City Manager, establishing department priorities, monitoring department
performance, identifying action which will increase the department's level of
performance in coordinating Utilities Department activity with other City departments.
•Participate as a member of the City Manager's Senior Management Group to review and
help develop overall approaches to City issues and priorities.
•Establish and maintain a good working relationship with the City Council and Council
committees on matters relating to Utilities Department activities in order to gain
maximum cooperation and assistance.
•Staff liaison with the Utility Advisory Committee.
•Establish and maintain good working relationships with public groups interested in Utility
services including commercial and industrial customers, environmental organizations,
etc.
•Provide general directions for negotiations with water, gas and electric power producers
and marketers to meet existing and forecasted supply requirements at the lowest
possible cost consistent with policies of the City Council.
•Advises the City Manager in all matters pertaining to delivering and selling utility
services.
•Supervise plans to ensure that the City will be able to meet customer service, operating
and financial requirements.
•Assure that the City's utilities operations are run in a safe, reliable efficient and economic
manner.
•Assure that the Utilities annual operating and capital budget is consistent with goals,
service needs, budget policies and procedures, and that rates are adequate to meet
operating requirements to maintain appropriate levels of reserves, as well as provide a
reasonable transfer to the General Fund consistent with the City Council's policies.
•Assure that the Utilities distribution and supply businesses are competitive in the electric
and gas industry deregulated environment.
•Assure that the City of Palo Alto is competently represented in state regional and joint
powers functions, such as the Northern California Power Agency, Bay Area Water Users,
California Power Exchange (PX), and Independent System Operator (ISO).
•Assure that employee development, safety and training programs are designed and
successfully implemented within the Utilities Department.
•Assure that cost effective technology is deployed within the department to meet Utility
strategic objectives, industry information requirements, to enhance staff productivity
and improve customer service.
•Assure that Utilities plans and programs are consistent with the City's Comprehensive
Plan.
•Perform related duties and responsibilities as required.
Minimum Qualifications
Sufficient education, training and/or work experience to demonstrate possession of the
following knowledge, skills, and abilities which would typically be acquired through:
•Possession of a bachelor's degree or equivalent in engineering, business, public
administration or a field directly relevant to the management of a utility; master's degree
in public or business administration or a related field is preferred. and
•Ten years experience in engineering, operations and/or business in a multi utilities
organization, five years of which should be in a senior management capacity.
Special Requirements:
Possession of a valid California driver's license.
Knowledge, Skills, and Abilities
•Demonstrated ability in operations, financial management, organization and planning, as
well as operational understanding of major utility functions.
•Flexibility, imagination, and the ability to develop and implement state-of-the-art
programs, both from an operational understanding of major utility functions.
•Knowledge of and sensitivity to the interrelationship and coordination which must exist
between utilities functions and other municipal programs.
•Ability to interact effectively with staff, public, elected and appointed officials,
representatives of business, industry, the press, and other governmental agencies.
•Ability to analyze an effective resolution of complex operational problems in a multiple-
utilities environment; maintain flexible and creative approach to issues.
•Ability to make sound financial and personnel decisions and exercise sound judgement
on matters affecting the long-term viability of the Utilities.
•Ability to communicate effectively, orally and in writing, with a wide variety of individuals
and groups; work independently on diverse and demanding projects; plan and
implement new programs; keep informed of advances in utility and business technology.
•Skill in identifying, analyzing and resolving problems; dealing effectively with others;
participating as a supporting member of a team to identify and resolve problems.
•Management skills, including the ability to organize, prioritize and evaluate work as well
as the ability to supervise and direct staff are essential to success in this position.
•Knowledge of deregulation of the electric and natural gas industries in California.
• CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED OPERATING BUDGET 1ZECONOMICDEVELOPMENT & TRANSITION
Z COMMUNITY HEALTH, SAFETY, WELLNESS & BELONGING
Z CLIMATE CHANGE AND THE NATURAL ENVIRONMENT: PROTECTION & ADAPTATION
Z HOUSING FOR SOCIAL AND ECONOMIC BALANCE
FISCAL YEAR 2025
ENTERPRISE FUNDS OVERVIEW
ENTERPRISE FUNDS OVERVIEW •CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED OPERATING BUDGET 121
Enterprise Funds OverviewOverview
The City of Palo Alto’s Utility and Public Works operations are comprised of the Airport, Electric,
Fiber Optics, Gas, Refuse, Stormwater Management, Wastewater Collection, Wastewater Treatment,
and Water Funds. A financial summary of the funds follows this overview along with discussion and
pertinent information in each fund section.
REVENUES
The total budgeted revenue of the Enterprise Funds for FY 2025 is $630.6 million, which represents
a $105.0 million, or 20.0% increase from the FY 2024 Adopted Budget of $525.6 million. The major
sources of the change are from a $53.9 million increase in estimated debt financing recorded in
Other Revenue, and a $16.7 million increase in Net Sales. Enterprise Fund services with rate
increases for FY 2025 include Electric, Fiber Optics, Gas, Stormwater Management, Wastewater
Collection, and Water. Refuse rates will remain the same for FY 2025. Details on these changes and
the specific rate increase for each service is discussed below.
EXPENDITURES
The total budgeted expenditure of the Enterprise Funds for FY 2025 is $724.4 million, which rep-
resents a $97.7 million, or 15.6% increase from the FY 2024 Adopted Budget of $626.7 million. The
primary driver for this year-over-year change is the increase to Capital Improvement Program fund-
ing of $93.4 million, partially offset by a $4.3 million reduction in debt service and a $4.2 million
decrease in Utility Purchase or commodity costs compared to FY 2024. In addition, increases to
Allocated Charges, Contract Services, General Expenses, Equity Transfers, and Salary & Benefits,
resulted in a combined increase of $12.3 million from FY 2024 to FY 2025.
UTILITY RATE CHANGES
The FY 2025 Budget includes rate adjustments for Electric, Fiber Optics, Gas, Stormwater Manage-
ment, Wastewater Collection, and Water. In general, there has been a gradual upward pressure on
rates as commodity and transmission costs continue to rise across all utilities. In addition current
models suggest pandemic economic recovery extend through calendar year 2024, with consump-
tion stabilizing on the long run average by 2025. The size and timing of rate adjustments address
both current and future revenue requirements, including the purchase of commodities, providing
customer service, capital infrastructure investments, and maintenance of adequate reserve levels.
Rate adjustments may also help smooth the impacts on customer bills by spreading larger rate
adjustments over consecutive or alternate years.
ENTERPRISE FUNDS OVERVIEW
122 ENTERPRISE FUNDS OVERVIEW • CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED OPERATING BUDGET
Electric Fund - Scheduled rate increase for median residential customer is 9.0% for FY 2025 due to cost of
service analysis which requires rate changes varying by customer class and consumption pattern to reflect
the cost to serve. Rate changes vary between a 6% decrease to 9% increase depending on customer class.
Fiber Optics Fund - Scheduled rate increase for customers on the EDF-1 rate is 2.6% for FY 2025, based on
Consumer Price Index (CPI) for All Urban Consumers in the San Francisco Bay Area.
Gas Fund - Scheduled rate increase is 12.5% for FY 2025 due to the need to replenish reserves, cover rising
capital and operating costs, and support the increased equity transfer to the General Fund.
Refuse Fund - No rate adjustment is scheduled for FY 2025 due to adequate reserves.
Stormwater Management Fund - Scheduled rate increase of 2.6% for FY 2025, based on CPI for All Urban
Consumers in the San Francisco Bay Area.
Water Fund - Scheduled rate increase is 9.5% for FY 2025 due to wholesale water supply and capital and
operating cost increases.
Wastewater Collection Fund - Scheduled rate increase is 15.0% for FY 2025 due to rising costs driven by
the rehabilitation of the Regional Water Quality Control Plant, acceleration of capital main replacements,
and replenishment of reserves.
RENT
Enterprise Funds pay market-based rental fees to the General Fund for the sites needed to conduct their
business operations. Rent is adjusted on an annual basis consistent with CPI for All Urban Consumers in the
San Francisco Bay Area, 2.6% for FY 2025. Despite this rent increase, the overall costs remain unchanged,
because the Water Fund’s rental costs decreased by $0.2 million due to no longer needing to pay for two
of its well sites. Consequently, the rent paid by the Enterprise Funds to the General Fund remains at $12.4
million.
EQUITY TRANSFERS
In FY 2009, the City Council adopted a change to the methodology used to calculate the equity transfer
from Electric Fund to the General Fund. Beginning in FY 2010, the equity transfer is based on the asset
base in the Electric Fund, along with the rate of return for each utility, which is based on Pacific Gas and
Electric’s (PG&E) rate of return on equity as approved by the California Public Utilities Commission (CPUC).
For FY 2025, no change is projected for the equity transfer of $15.1 million from the Electric Fund.
The Gas Fund equity transfer to the General Fund was originally authorized by City voters in 1950 (similar
to the Electric Fund equity transfer). In November 2022, voters approved Measure L, affirming the continu-
ation of this practice by adding section 2.28.185 to the Municipal Code. Each year the City Council may
transfer from the gas utility to the General Fund an amount up to 18% of the gross revenues of the gas util-
ity, though Council may choose to transfer a lesser amount. A 14.5%, or $10.9 million transfer is pro-
grammed for FY 2025, representing an increase of approximately $3.2 million from the previous year’s $7.7
million. This is within the voter-approved changes codified in PAMC 2.28.185. An annual transfer increase to
18% of gross revenues by FY 2026 is also recommended.
ENTERPRISE FUNDS OVERVIEW
ENTERPRISE FUNDS OVERVIEW • CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED OPERATING BUDGET 123
RESERVES
The financial revenue and expense forecasts are estimates at a single point in time. Some Utilities reserves
serve as balancing accounts, which mitigate the risk of commodity price swings and insure against default
by the City’s wholesale suppliers. Other reserves are used to provide funding for capital infrastructure
improvement projects, replacement parts during an emergency infrastructure failure or serve as temporary
parking for planned expenditures. Reserve levels that are above guidelines may be returned to customers
in the form of lower future rates or used to pay for expenses, which also result in lower future rates. Based
on the actions included in this budget, the total Enterprise Fund Reserve Balances are projected to end in
FY 2025 at $50.8 million, decreasing by $93.8 million from a projected FY 2024 ending fund balance of
$144.6 million.
UTILITIES ENTERPRISE FUNDS
Across the Electric, Gas, Water and Wastewater utilities, costs continue to increase, including construction
cost inflation, commodity price increases, and the rising cost to transport energy and water. Additionally,
infrastructure is aging and investment is needed to maintain the health of utilities and protect reliability.
The City absorbed utility cost increases during the pandemic, and increased costs for construction, opera-
tions, energy, and water were not fully passed through to customers in FY 2020 – FY 2022 but were
instead absorbed from reserves. As a result, revenues are too low to maintain normal operations in all utili-
ties. Reserves are lower than expected, because although the City intended to phase in rate increases more
slowly using reserves, rising energy prices, inflation and other factors led to the need to use the reserves
more quickly, causing low reserve levels in all utilities.
The City relied on reserves heavily over the past few years to minimize rate increases following Council
direction to keep rates flat or minimize rate increases to provide economic relief for residential and com-
mercial customers without compromising the safety and integrity of the utility systems and impacting ser-
vice delivery. Rate increases ensure the City maintains the ability to replenish depleted reserves and
provide sufficient funding for continually increasing expenses in commodity costs to repair and replace the
City’s aging utility infrastructure through various capital projects; and to achieve Sustainability and Climate
Action Plan (S/CAP) goals including grid modernization to support electrification.
For more information on Utilities Rates, please visit:
https://www.cityofpaloalto.org/Departments/Utilities/Customer-Service/Utilities-Rates.
Electric
FY 2025 electric rates are scheduled to increase by 9.0% for the median residential customer. Rate changes
vary significantly by customer class from a decrease of 6.0% to an increase of 9.0% depending on con-
sumption patterns. To ensure that electric rates continue to represent the Utility’s cost to serve customers,
the City completed a cost of service analysis in February 2024. The cost of service analysis showed the
need for different changes by customer class ranging from a 6.0% decrease for small nonresidential cus-
tomers (E-2) to a 2.0% increase for the residential class as a whole. However, recommended changes to the
tier structure and the addition of a fixed charge result in a range of changes for residential customers
ENTERPRISE FUNDS OVERVIEW
124 ENTERPRISE FUNDS OVERVIEW • CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED OPERATING BUDGET
depending on usage, with the median residential customer seeing a 9.0% increase. Palo Alto residential
electric bills are approximately 50% lower than neighboring communities served by PG&E.
Fiber Optics
FY 2025 Fiber optics rates are scheduled to increase by 2.6% for customers on the EDF-1 rate schedule as
part of their contractual lease agreement. CPAU provides commercial dark fiber optic services within the
boundaries of the City. In September 2006, the City Council approved the Dark Fiber Licensing Agreement
with a one-time promotion allowing commercial fiber optic accounts to be enrolled under the EDF-1 rate
schedule, which is adjusted annually in accordance with CPI. Subsequent fiber customer enrollments are
under the Dark Fiber Licensing Services Rate Schedule EDF-3, which has not changed since 2006. Upon
the expiration of contracts on EDF-1 rates, these contracts are renewed and enrolled under the EDF-3 rate.
Most contracts on the EDF-1 rates have expired or voluntarily moved from the EDF-1 rate to the EDF-3 rate
for cost saving purposes.
Gas
FY 2025 gas rates are scheduled to increase by 12.5% to ensure the utility is recovering its costs of capital
projects, operations, and rebuilding reserves. This adjustment also supports the increased equity transfer
to the General Fund, which increases to $10.9 million from $7.7 million in FY 2024. In FY 2021 and FY 2022,
the Gas Utility maintained minimal rate increases, leading to revenues struggling to match the rising
expenses, resulting in a significant depletion of reserves. Additionally, costs reflect a longer-term mitigation
strategy against potential future gas price spikes such as those experienced in FY 2023, which increased
gas bills exponentially.
Water
FY 2025 water rates are scheduled to increase by 9.5%. As part of the water rate increase, the San Fran-
cisco Public Utilities Commission (SFPUC) is projecting a wholesale rate increase of 6.5% for FY 2025,
which is a pass-through commodity charge to CPAU customers and will impact CPAU water rate increases.
Due to the drought and water conservation efforts together with near record-setting precipitation and
snowpack in the winter of 2022-2023, the water utility’s sales revenue declined in FY 2023 by $4.9 million
or 10% compared with sales revenue in FY 2021. The Water Utility used available reserves to hold rates flat
for two years (FY 2021 and FY 2022) while also managing through two years of drought-related sales rev-
enue reductions (FY 2022 and FY 2023).
Wastewater Collection
FY 2025 Wastewater Collection rates are scheduled to increase by 15.0%. Wastewater Collection costs are
projected to rise over the forecast due to increasing treatment costs related to capital improvements and
operational costs at the Regional Water Quality Control Plant (RWQCP), as well as increasing collection
system operational and Capital Improvement Program (CIP) costs. In FY 2023, Operations Reserve ended
the year with a negative balance due to higher CIP expenses and lower sales revenues than anticipated.
The proposed increase will gradually replenish the reserve and enable a reduced-size 1.25 miles main
replacement in FY 2026 to address highest priority mains for replacement. The accelerated 5-mile sewer
ENTERPRISE FUNDS OVERVIEW
ENTERPRISE FUNDS OVERVIEW • CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED OPERATING BUDGET 125
main replacement every other year would resume with construction scheduled in FY 2028. This accelera-
tion will allow the Wastewater Collection Utility to replace the last main no more than approximately 10
years beyond its anticipated 100 year life expectancy.
[Content regarding a department other than
Utilities Department operations removed for brevity]
UTILITIES
UTILITIES •CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED OPERATING BUDGET 449
UtilitiesMission Statement
The City of Palo Alto Utilities mission is
to provide safe, reliable, environmentally
sustainable, and cost-effective services.
Purpose
The purpose of the City of Palo Alto Utilities
is to provide high quality, cost-effective elec-
tric, gas, fiber optics, water and wastewater
collection services; promote effective energy
and water efficiency programs; support the
City’s sustainability and climate action goals
through greenhouse gas emissions reduction
efforts; proactively manage infrastructure
needs and replace deteriorated or aging
facilities with new technologies to ensure
safe and reliable delivery of services; and
ensure the City’s utilities are in sound finan-
cial condition.
UTILITIES
450 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED OPERATING BUDGET
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UTILITIES
UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED OPERATING BUDGET 451
Description
The City of Palo Alto offers a full array of utility services to its citizens and
businesses. Because of this, the City has a unique opportunity to partner with the
Palo Alto community to enjoy the benefits and achievements of reliable, home-
grown, and environmentally focused utilities. Palo Alto has a tradition of over 125
years of successful public utility operations. It is a tradition that continues to
provide the Palo Alto community with safe and reliable utilities service, local
decision-making over policies, utility rate-making, environmental programs, and
customized services.
The City of Palo Alto Utilities (CPAU) continues to focus on customer service,
infrastructure reliability, regulatory compliance, and cost containment. CPAU also
supports the City’s sustainability goals by building a low-carbon energy supply
through renewable energy, carbon emission offsets and by promoting programs
to help customers use energy and water more efficiently, reduce their carbon
footprint, and help them integrate new technologies.
At CPAU, our people empower tomorrow’s ambitions while caring for today’s
needs. We make this possible with our outstanding professional workforce,
leading through collaboration, and optimizing resources to ensure a sustainable
and resilient Palo Alto.
ADMINISTRATION
Utilities Administration is responsible for the overall management of CPAU including communication, regu-
latory compliance, strategic planning, budget coordination, legislation and regulatory policy analysis, and
personnel and administrative support to the entire Department.
CUSTOMER SUPPORT SERVICES
Customer Support Services annually bills approximately $350 million for the City’s electric, natural gas,
water, commercial fiber optic, wastewater collection (operated by CPAU), storm water management, and
refuse (operated by Public Works) services; operates the Customer Service Call Center with 75,000 annual
customer interactions; reads 90,000 utility meters per month; and implements Credit and Collection poli-
cies and financial assistance programs.
UTILITIES
452 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED OPERATING BUDGET
ENGINEERING
Engineering is responsible for managing all phases of CPAU’s capital improvement projects which include
providing new or upgrading existing service to customers and replacing and rehabilitating the City’s elec-
tric, fiber, gas, water, and wastewater distribution systems.
OPERATIONS
Utilities Operations is responsible for the operations, maintenance, and emergency response for the elec-
tric, fiber, gas, water, and wastewater distribution systems.
RESOURCE MANAGEMENT
Resource Management is responsible for the long-term resource acquisition plans for electricity, natural
gas, and water; contract negotiations to acquire renewable resources; financial planning; rate development;
energy efficiency and water conservation programs; and management of key accounts.
Accomplishments
•Established pilot area boundaries for Grid Modernization (Grid Mod) and Fiber-to-the-Premise (FTTP)
projects. The pilot will determine the most efficient, least disruptive and most cost-effective way to
implement residential electrification and provide fiber-speed internet services in residential
neighborhoods. The pilot will serve approximately 1,200 residences. Once the pilot is completed the
Grid Mod and FTTP projects will be expanded to approximately 5,000 additional residences.
•Execution of a public/private partnership with Tesla to expedite construction upgrade of Hanover
Substation to increase electrical capacity to support new electrical load.
•Awarded $16.5 million federal grant for Natural Gas Distribution Infrastructure Safety and
Modernization to replace existing polyvinyl chloride (PVC) material distribution mains and services (gas
main replacement projects).
•Succession planning and concerted efforts are underway to recruit, train, and retain line-workers,
system operators, engineers, inspectors to maintain system and respond to outages effectively. Staff
have also contracted with third-party contractors to supplement staff to undertake emergency
response, maintenance, and capital improvement projects.
•Installed approximately 38,000 or 40% of advanced or smart electric, gas, and water meters as part of
the Advanced Metering Infrastructure (AMI) project. The AMI meters will empower customers to more
efficiently utilize energy and water, better enable customer adoption of distributed energy resources
(DER) such as solar photovoltaics, energy storage, and electric vehicles, and enable the timely
detection of water leaks. AMI will also enable Utilities to optimize operations and improve reliability by
reducing restoration time for outages.
•New outage management system has substantially improved Utilities’ ability to notify customers and
mobilize resources in response to electric outages and emergencies.
•Approval of the Reliability and Resiliency Strategic Plan for the Electric Distribution Utility. The plan
addresses the need for a modernized electric system with enhanced reliability to support an electrified
community and a desire among community members for ways to maintain some level of electric
supply during outages, particularly with an electrified home.
•430 residents have installed or signed contracts to install a heat pump water heater. Nine multi-family
(MF) properties representing 415 housing units (about 4% of all multi-family units in Palo Alto) have
installed EV chargers facilitated through the City’s EV programs.
UTILITIES
UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED OPERATING BUDGET 453
Initiatives
•Complete construction of the Grid Mod and FTTP pilot to enable residential electrification and offer
Palo Alto Fiber internet service to the 1,200 residences.
•Complete the development of the One Water Plan for Palo Alto to evaluate alternative water supplies,
define existing and future uncertainties and supply risks, and identify community needs and priorities
and serve as a long-term guide to better prepare for future uncertainties like multi-year drought.
•Add resources in the Development Service Center and continue collaboration with other City
departments on efforts to streamline the permitting process related to rooftop solar, energy storage,
building electrification, and electric vehicle charging infrastructure.
•Complete the 2023/2024 Sanitary Sewer Management Plan to comply with new state regulations
applicable to the management of the City’s sewer system.
•Complete deployment of the remaining 43,000 AMI electric, gas and water meters. Enable customers
to view their daily interval utility consumption on the Utilities customer account services portal
MyCPAU and subscribe to water leak alerts.
•Complete testing to comply with updated state and federal Lead and Copper Rule regulations
requiring all water service lines be verified prior to October 2024.
•Commence a natural gas study to evaluate the preferred approach for downsizing the gas system and
identifying potential locations to conduct as a proof of concept.
•Issue debt financing and continue to explore grant opportunities to fund phase 1 of the Grid Mod
project.
•Continue working with the Utilities Advisory Commission (UAC), City Council, City departments, and
community to implement and adopt initiatives and programs on the Sustainability and Climate Action
Plan (S/CAP) and Utilities Reliability and Resiliency Strategic Plan.
UTILITIES
454 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED OPERATING BUDGET
Key Performance Measures
COMPARABLE AND COST-EFFECTIVE SERVICES
Goal Ensure fiscally sound and cost-effective services.
Objective Reduce the cost of delivering services through best management practices.
FY 2022
Actuals
FY 2023
Actuals
FY 2024
Adopted
Budget
FY 2024
Estimated
FY 2025
Adopted
Budget
Palo Alto’s average residential monthly utility
bill above/below the median of neighboring
cities
(20)%(12)%(10)%(12)%(12)%
Description This compares the average residential monthly utility bill which includes electricity, gas,
water, and wastewater services to the nearby communities (Menlo Park, Mountain View,
Santa Clara, Hayward, Redwood City).
Purpose This measure compares the City’s average utility rates charged to residents to other
comparable cities (e.g., similar size, similar commodity purchase options, similar geography).
Status The monthly median utility bill for Palo Alto at the end of calendar year 2023 was lower
compared to nearby communities (Menlo Park $421, Redwood City $388, Mountain View
$346, Hayward $327, Santa Clara $248). Palo Alto’s monthly average residential utility bill
was $304, and for all the communities combined the average was $346. Electric rates were
significantly lower than PG&E though higher than Santa Clara. Natural gas rates were slightly
higher than PG&E due to the price spike in the winter of 2022/23. Water rates were higher
primarily due to differing system characteristics, levels of infrastructure investment, and
sources of supply. Palo Alto’s water supply comes from the San Francisco Public Utilities
Commission (SFPUC), which is undergoing a $4.8 billion improvement project, and Palo Alto
is also investing more than other communities in improving our local distribution pipelines
and enhancing our emergency water supply system.
UTILITIES
UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED OPERATING BUDGET 455
CUSTOMER SATISFACTION
Goal Provide excellent customer service.
Objective Maintain a high level of customer satisfaction, equal to or greater than 83 percent of Palo
Alto citizens rating satisfaction of utility services as "Excellent" or "Good" in the Palo Alto
Community Survey.
FY 2022
Actuals
FY 2023
Actuals
FY 2024
Adopted
Budget
FY 2024
Estimated
FY 2025
Adopted
Budget
Percent rating services (electric, gas,
wastewater, and water) "Good" or Excellent"
85%79%85%79%79%
Description This data is collected as part of the Palo Alto Community Survey that is conducted annually.
Purpose To get feedback on whether customers are satisfied with the nature, extent and delivery of
services provided, using random-selection survey processes that include a good cross-
section of the customer base.
Status The most recent Palo Alto Community Survey was completed in September 2023. The full
report can be found on the City website: https://www.cityofpaloalto.org/Departments/City-
Manager/Community-Engagement/Palo-Alto-Community-Survey.
Workload Measures
FY 2022
Actuals
FY 2023
Actuals
FY 2024
Adopted
Budget
FY 2024
Estimated
FY 2025
Adopted
Budget
Total cost of Capital Improvement Program
annually (Millions)
$27.20 $35.00 $123.60 $99.00 $68.00
Key Performance Measures
UTILITIES
456 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED OPERATING BUDGET
Budget Summary
FY 2022
Actuals
FY 2023
Actuals
FY 2024
Adopted
Budget
FY 2025
Adopted
Budget
FY 2025
Change $
FY 2025
Change %
Dollars by Fund
Electric Fund 191,981,933 206,174,744 267,028,976 281,206,576 14,177,600 5.3%
Fiber Optics Fund 3,695,645 3,147,057 29,148,398 31,689,607 2,541,209 8.7%
Gas Fund 54,491,097 72,639,470 76,100,312 74,585,345 (1,514,967)(2.0)%
Wastewater Collection Fund 19,163,957 24,819,213 25,375,497 25,108,669 (266,828)(1.1)%
Water Fund 47,864,059 50,760,603 76,757,131 63,818,946 (12,938,184)(16.9)%
Total Dollars by Fund $317,196,690 $357,541,086 $474,410,315 $476,409,144 $1,998,829 0.4%
Revenues
Charges for Services 363,196 478,018 260,000 260,000 ——%
Charges to Other Funds 388,740 357,665 337,970 337,970 ——%
From Other Agencies 1,588,358 561,362 576,632 576,632 ——%
Net Sales 269,707,701 333,653,237 345,541,823 359,968,805 14,426,982 4.2%
Operating Transfers-In 2,613,966 4,836,286 2,635,966 2,466,125 (169,841)(6.4)%
Other Revenue 11,722,006 33,734,695 35,740,500 50,819,000 15,078,500 42.9%
Return on Investments 3,496,674 3,858,370 4,694,000 5,785,500 1,091,500 23.3%
Total Revenues $289,880,641 $377,479,633 $389,786,891 $420,214,032 $30,427,141 7.8%
Positions by Fund
Electric Fund 113.58 121.42 121.61 128.65 7.04 5.8%
Fiber Optics Fund 6.90 6.55 10.55 10.55 ——%
Gas Fund 53.57 55.35 54.86 56.10 1.24 2.3%
Utilities Administration Fund 19.46 20.46 22.29 22.15 (0.14)(0.6)%
Wastewater Collection Fund 27.50 28.67 28.76 28.71 (0.05)(0.2)%
Water Fund 46.83 47.65 47.59 49.10 1.51 3.2%
Total Positions by Fund 267.84 280.10 285.66 295.26 9.60 3.4%
UTILITIES
UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED OPERATING BUDGET 457
ELECTRIC FUND
Description
On January 16, 1900, the City of Palo Alto began operation of its own electric
system. A steam engine was the initial source of the City’s electricity and was
replaced by a diesel engine in 1914. As demand for electricity and the population
continued to grow, the City of Palo Alto Utilities (CPAU) connected to the Pacific
Gas and Electric distribution system and purchased power from additional
sources.
The integrity of the infrastructure required for achieving a high level of reliability
and value for customers is of paramount importance to CPAU. The Electric Fund
strives to enhance the customer service connection experience, increase energy
efficiency participation, and increase the percentage of electric supply obtained
from renewable energy supplies. The City has entered into a number of contracts
with producers of wind, landfill gas, and solar energy for more than 15-year terms.
Accomplishments
•430 residents have installed or signed contracts to install a heat pump water heater (228 through the
full-service Heat Pump Water Heater Pilot Program, 44 residents on their own, receiving a rebate from
the City).
•As of June 2024, twelve multifamily properties representing 453 residential units (representing 4% of
all multifamily units in Palo Alto) have installed a total of 82 charging ports facilitated through the City’s
EV programs, with another 15 multifamily projects in the pipeline representing an additional 1,021
multifamily units and 372 charging ports.
•Installed over 13,000 electric Advanced Metering Infrastructure (AMI) total meters as part of the AMI
project.
•Overhead to Underground conversion project for wildfire mitigation efforts in the Foothills. This project
is to reduce fire risks related to utility infrastructure and support reliability and resiliency. Phase 1 and 2
are completed, Phase 3 of this project is at approximately 70% completion.
•Electric operations launched a fault indicator program to improve reliability and reduce service
interruptions. Utilizing fault detection devices and equipment will be a key component for grid
modernization. The addition of fault indicators will enhance our grid in reducing outage times and
provides engineering with circuit analysis.
•Due to the increased emphasis on the proactive infrastructure replacement program(s) and grid
modernization, replacing infrastructure before failure is key to supporting reliability and resiliency. 65
electric utility poles were replaced in FY 2023 and 46 were completed in the FY 2024 cycle.
UTILITIES
458 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED OPERATING BUDGET
•Completed the 2023 Integrated Resource Plan to ensure Palo Alto will have sufficient resources to
reliably meet forecasted customer electrical energy and capacity needs in the most cost-effective way
while satisfying environmental and other public policy objectives.
•Council approved extending the current 2009 Long-Term Layoff Agreement for the City’s California-
Oregon Transmission Project rights for ten years until February 1, 2034. The agreement represents
approximately $13 million in savings for Palo Alto.
•Completed the electric cost of service analysis.
•Added a new long-term contract for a geothermal electricity resource to help diversify the supply
portfolio and acquire additional local capacity and round-the-clock renewable electricity.
•Sold 160,000 MWh of PCC1 (in-state) renewable energy credits, swapping them for less expensive
PCC3 (out-of-state) renewable energy credits, yielding over $3 million in net revenue to be applied to
local decarbonization programs.
Initiatives
•Continue pursuing federal and state grant opportunities for electric grid modernization, electric vehicle
chargers, sustainability and climate initiatives, and electrification programs.
•Develop and implement an electric grid modernization plan to increase system capacity and resiliency
and allow community-wide electrification, including a phased roll out plan over the next several years.
•Collaborate with the Planning Department to develop new codes and ordinances to facilitate
electrification in existing buildings and new construction projects where feasible.
•Develop electric rates compatible with electrified homes, Electric Vehicle (EV) charging, and solar +
storage microgrid customers.
•Expand EV charging access for multi-family and income-qualified residents.
•Convert all Palo Alto municipal vehicles to EVs when feasible and when the replacement is
operationally acceptable.
•Partner with employers and business districts to promote commuter EV adoption and EV charging
access as well as alternative commute promotion.
•Design and identify pilot area for whole residential home electrification and gas decommissioning.
•Enhance and promote the Advanced Heat Pump Water Heater Pilot Program with the goal of reaching
at minimum 10 installations per week on average by the end of 2024 (500 per year), and ideally 20 per
week (1,000 per year).
•Continue progress on a new potential 115kV electric interconnection, which would enhance City electric
power reliability and resilience. Efforts will involve risk analysis, power flow studies, and formal requests
to the California Independent System Operator (CAISO).
•Continue undergrounding the new 12kV Electric and Fiber Optic distribution system in the foothills.
This multi-year project will be conducted in one to two miles sections and is scheduled to be
completed in FY 2025.
•Rebalance the electric portfolio including reaching a decision regarding the City’s Western Resource.
•Conduct a preliminary analysis of the cost of 24x7 carbon-free electricity.
•Add additional carbon-free electric resources to the supply portfolio.
UTILITIES
UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED OPERATING BUDGET 459
Goals and Objectives
Goal 1
Provide safe and reliable delivery of electric services to customers.
Objectives:
•Develop a plan to complete a second electric transmission line source to improve service reliability.
•Accelerate network component upgrade (wire, cable, transformers, and substation equipment) to
support new electrification load through the Grid Modernization (GMOD) effort.
•Implement activities outlined in the Utilities Wildfire Mitigation Plan to reduce the possibility of fires in
the western foothills of Palo Alto caused by overhead electric lines.
•Increase emphasis on the proactive infrastructure replacement program, replacing infrastructure before
failure, to support reliability and resiliency.
•Enhance planned maintenance programs for all utilities through clearly defined maintenance plans,
improved management reporting, and developing innovative ways to ensure efficient completion of all
maintenance.
•Implement activities from the Reliability and Resiliency Strategic Plan to maintain and enhance
community reliability, resiliency, grid capacity, and grid modernization
Goal 2
Increase environmental sustainability and promote efficient use of resources.
Objectives:
•Achieve cumulative 10-year energy efficiency savings of 4.4 percent of the electric load by 2031.
•Facilitate the acceleration of Electric Vehicle (EV) adoption by both Palo Alto-based and inbound
vehicles by providing EV education and outreach, incentives for electric infrastructure upgrades and
more charging infrastructure.
•Expand effort to lower greenhouse gas emissions by promoting electrification of buildings in Palo Alto.
UTILITIES
460 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED OPERATING BUDGET
Key Performance Measures
ENVIRONMENTAL SUSTAINABILITY
Goal Support environmental sustainability and promote efficient use of resources.
Objective Achieve Renewable Portfolio Standard (RPS) of at least 50 percent by 2030.
FY 2022
Actuals
FY 2023
Actuals
FY 2024
Adopted
Budget
FY 2024
Estimated
FY 2025
Adopted
Budget
Percent of retail electric sales volume
provided by renewable supply resources
under long-term PPAs
39%39%39%41%44%
Description This measures the fraction of the City’s retail electric sales volume that is provided by
renewable supply resources that are under long-term power purchase agreements (PPAs).
Purpose The Clean Energy and Pollution Reduction Act (SB 350) of 2015 raised the state’s renewable
portfolio standard (RPS) to 50 percent by 2030 and required a doubling of energy efficiency
savings by 2030.
Status The City sold Bucket 1 renewable energy credits (RECs) in Q1-Q4 FY 2023 accordingly,
which caused the City’s RPS levels to drop to a new norm (compared to the levels in FY
2019 and other previous years), but the City still remains in compliance with its RPS
requirements. Under the updated Carbon Neutral Plan that was approved by Palo Alto City
Council in August 2020, the City was authorized to sell all Bucket 1 RECs exceeding the
amount required to comply with the City’s RPS requirements, and to replace them with
Bucket 3 REC purchases. RPS compliance is based on aggregate RPS procurement over
the entire compliance period (2021-2024), which ensures that the City is still in compliance
with the state RPS requirements.
ENVIRONMENTAL SUSTAINABILITY - SOLAR
Goal Support environmental sustainability and promote efficient use of resources.
Objective Increase the penetration of local solar installations.
FY 2022
Actuals
FY 2023
Actuals
FY 2024
Adopted
Budget
FY 2024
Estimated
FY 2025
Adopted
Budget
Cumulative installed capacity of photovoltaic
(PV) systems measured in megawatts (MW)
16 19 16 20 21
Description This represents the cumulative installed capacity of PV systems in Palo Alto, measured in
MW. It includes PV systems installed prior to the passage of California Senate Bill 1 (SB1),
which enacted the Million Solar Roofs Initiative and expands upon the current California
Solar Initiative (CSI) and the Energy Commission’s New Solar Homes Partnership (NSHP).
Purpose This measure supports the City’s goal of achieving a 100 percent carbon neutral electric
supply portfolio, meeting 4 percent of the City’s electricity needs through local solar by 2023,
and complying with California Senate Bill 1 (SB1) to increase PV installations. Increasing the
cumulative installed capacity of PV systems will also benefit the environment and expand the
flexibility of the City’s electric generation portfolio.
UTILITIES
UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED OPERATING BUDGET 461
Status In FY 2023, a total of 171 residential PV systems and 5 nonresidential PV systems were
installed, bringing the cumulative total to 1,342 residential PV installations and 106
nonresidential PV installations since 1999 when CPAU launched the PV Partners Program to
incentivize local PV system installations.
SYSTEM RELIABILITY
Goal Provide safe and efficient delivery of electric services to customers.
Objective Provide exceptional system reliability.
FY 2022
Actuals
FY 2023
Actuals
FY 2024
Adopted
Budget
FY 2024
Estimated
FY 2025
Adopted
Budget
Average duration of customer outages in
minutes as reported using industry guidelines
80 115 100 120 120
Description System Average Interruptible Duration Index (SAIDI) is a measure of outage duration. It
measures the number of minutes over the year that the average customer is without power.
Purpose Reliability indices were introduced in order to keep track of utility performance. This
information will help Utilities prioritize capital and operating spending so that reliability can be
improved without increasing costs.
Status There were a total of 64 outages experienced in FY 2023, of which 51 outages were
weather-related and 13 were equipment failures. As of June 2024, there were 62 outages; of
that 32 were weather-related. It is anticipated that the equipment-related outages will decline
over time as aged infrastructure are replaced.
Workload Measures
FY 2022
Actuals
FY 2023
Actuals
FY 2024
Adopted
Budget
FY 2024
Estimated
FY 2025
Adopted
Budget
Number of Customer Accounts (Electric)29,863 30,002 30,112 30,138 30,138
Number of momentary outages*1 0 0 1 0
Percent of residents surveyed who rate the
quality of the Electric Utility as "Good" or
"Excellent"
80%74%90%74%74%
Total Number of Outages 22 64 25 65 40
Key Performance Measures
*The most recent Palo Alto Community Survey was completed in September 2023. The full report can be found on the City website:
https://www.cityofpaloalto.org/Departments/City-Manager/Community-Engagement/Palo-Alto-Community-Survey.
UTILITIES
UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED OPERATING BUDGET 473
FIBER OPTICS FUND
Description
In 1996, the City built a dark fiber ring around Palo Alto capable of supporting
multiple network developers and service providers with significant growth
potential. The fiber backbone network was routed to pass by and provide access
to key City facilities and the Palo Alto business community, including research
centers and commercial properties.
Dark fiber optics service consists of providing the fiber optics cabling, splice
points, service connections, and other infrastructure providing high-capacity
bandwidth needed to transport large quantities of data. This service excludes the
transmitters, receivers, and data itself, which are owned and operated by each
customer.
Accomplishments
•Completed first iteration of a fiber management system (FMS) to plan, design, construct, and manage
the City’s fiber network.
•Dedicated internal resources to implement and coordinate Fiber-to-the-Premise (FTTP) project and
Electric Grid Modernization project to implement the pilot.
•Finalized the pilot area for FTTP and Grid Mod at Embarcadero Rd, Louis Rd, Colorado Ave, Greer Rd,
and West Bayshore Rd servicing about 1,200 customers.
•Finalized fiber construction drawings, reviewed bids, and awarded contract for the Fiber Hut.
•Secured space at the Equinix data center for FTTP network equipment and connections to Internet
providers.
Initiatives
•Expanding the fiber backbone and undergrounding fiber in the Foothills to provide internet service to
residents, wireless communication to City staff, and fiber connectivity for advanced metering
infrastructure (AMI) and water reservoir.
•Issue invitations for bids for construction and request for proposals for operations for Phase 1 of FTTP,
which may reach an additional 5,000 customers, from 1,200 customers to 6,200.
•Determine best mix of existing resources, new hires and strategic vendors for FTTP.
•Launch FTTP to residents and businesses offering fast speed, reliable, and affordable internet service in
the pilot and phase 1 areas.
UTILITIES
474 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED OPERATING BUDGET
•Begin building a new fiber backbone to support utilities, City departments, dark fiber customers and
FTTP.
•Conduct a cost and benefit analysis and market comparison of dark fiber pricing.
Goals and Objectives
Goal 1
Increase the value of fiber utility services to customers through the City’s Fiber-to-the-Premise (FTTP)
business.
Objectives:
•Provide high-quality, competitively priced fiber optic utility services to City departments and
commercial customers in the City of Palo Alto.
•Manage costs and add new dark fiber license agreements with commercial customers.
•Offer affordable, fast, reliable and secure internet service to residents and businesses.
Goal 2
Expand capacity and enhance reliability of the City’s fiber network.
Objectives:
•Ensure sufficient fiber optic cables are available to meet future City and customer needs.
•Reinvest and make system enhancements to prevent damage from outside sources and improve
reliability.
UTILITIES
UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED OPERATING BUDGET 475
Key Performance Measures
CUSTOMER SATISFACTION
Goal Provide excellent customer service.
Objective Provide high-quality and competitively-priced fiber optic utility services to City departments
and commercial customers in the City of Palo Alto.
FY 2022
Actuals
FY 2023
Actuals
FY 2024
Adopted
Budget
FY 2024
Estimated
FY 2025
Adopted
Budget
Number of commercial fiber connections 168 169 157 164 170
Description This measure shows the growth of the Fiber Enterprise based on customers and
connections. Estimates are based on analyzing the number of upcoming developments,
anticipating how many customers would sign on for Fiber, and taking into account how
many existing connections may result in disconnections such as companies leaving. Some
customers may also have multiple fiber connections at various locations.
Purpose The purpose of this measure is to add value to companies doing business in Palo Alto by
providing a cost-effective, world class telecommunications system. The goal is to build out
and fully leverage the fiber network to add value to the business and other communities as
needed.
Status The Fiber enterprise Utility has 137 commercial customer connections and 32 City customer
connections. As part of the City’s fiber expansion project, there will be opportunities to add
new dark fiber leasing to commercial customers in areas where the existing dark fiber ring
does not serve.
Workload Measures
FY 2022
Actuals
FY 2023
Actuals
FY 2024
Adopted
Budget
FY 2024
Estimated
FY 2025
Adopted
Budget
Number of Customer Accounts (Fiber)45 42 45 41 39
Number of Wholesale re-sellers 14 12 14 13 14
UTILITIES
UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED OPERATING BUDGET 481
GAS FUND
Description
The municipal natural gas system began operations in 1917 when Palo Alto
acquired a privately-owned gas business. During the early years, gas was
manufactured from coal tar. Gas supplied by coal tar was replaced in the 1920s by
natural gas supplied from Pacific Gas and Electric (PG&E). Today, all gas for the
City of Palo Alto is purchased from PG&E. The Gas Utility is responsible for
planning, designing, and budgeting the operations, maintenance, and
constructing major capital improvements for the City’s gas distribution system.
Accomplishments
•Awarded $16.5 million from Department of Transportation funding from the Natural Gas Distribution
Infrastructure Safety and Modernization program to enhance safety of the City’s natural gas
distribution infrastructure.
•Implemented winter 2023-24 strategy for mitigating potential gas commodity price spikes.
•Completed the Gas Main Replacement 24A (GS-14003) project around the Stanford Shopping Center,
with replacement of approximately 2,500 linear feet of 4” Polyvinyl Chloride (PVC) gas main with 4”
Polyethylene (PE) gas main and associated services.
•Retrofitted over 12,000 gas Advanced Metering Infrastructure (AMI) total meters as part of the AMI
project.
•Replaced a 400 foot section of steel gas main on Seneca St between Forest Ave and Homer Ave.
•Started construction on Gas Main Replacement 24B (GS-14003) project to replace 18,000 linear feet of
PVC gas main with PE gas main in various neighborhoods throughout the City of Palo Alto.
Initiatives
•Commence a study in FY 2025 to evaluate the preferred approach for downsizing the gas system and
identifying potential locations to conduct as a proof of concept.
•Complete the construction of Gas Main Replacement Project 24B (GS-14003) portion of the project, in
March of 2025 to replace 18,000 linear feet of gas mains and natural gas service pipelines made of
Polyvinyl Chloride (PVC).
•Retrofit the remaining 16,000 gas meters to make them AMI-compatible.
•Apply for subsequent years of the Natural Gas Distribution Infrastructure Safety Modernization multi-
year grant to accelerate gas main replacement capital projects and enhance safety of the City’s natural
gas distribution infrastructure.
•Recommend a long-term gas hedging strategy to Council to mitigate future gas commodity price
spikes.
UTILITIES
482 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED OPERATING BUDGET
•Begin phase IV of the cross-bore verification program to inspect 400-500 sewer laterals in areas with
high density and where gas service and sewer lateral are within 15 feet or less.
Goals and Objectives
Goal 1
Provide safe and efficient delivery of natural gas to customers.
Objectives:
•Continue repairing 100 percent of laterals damaged by crossbore within 24 hours.
•Remove and replace the remaining Polyvinyl Chloride (PVC) pipe with Polyethylene (PE) pipe.
•Complete a mobile gas leak survey of all distribution mains annually and complete a walking gas leak
survey of all gas services, for 50 percent of the City, each year. Complete a walking leak survey of all
gas services within business districts each year.
Goal 2
Increase environmental sustainability and promote efficient use of natural gas resources.
Objectives:
•Reduce the carbon intensity of the gas portfolio in accordance with the Sustainability and Climate
Action Plan (S/CAP) using offsets.
Key Performance Measures
GAS LEAKS REPAIRED
Goal Provide safe and efficient delivery of natural gas to customers.
Objective Respond to and repair all Grade 1 gas leaks immediately.
FY 2022
Actuals
FY 2023
Actuals
FY 2024
Adopted
Budget
FY 2024
Estimated
FY 2025
Adopted
Budget
Percentage of Grade 1 leaks responded to
within 24 hours
100%100%100%100%100%
Description This measures the total response time to Grade 1 leaks found during the walking and mobile
(vehicle) surveys and any reported leaks classified as Grade 1. The City’s policy is to respond
and repair Grade 1 leaks within 24 hours. Grade 1 leaks are hazardous leaks that pose an
immediate hazard to persons or property and require continuous action until conditions are
no longer hazardous.
Purpose Leaks are assigned priority gradings according to location, extent of migration, gas
concentration, potential for concentration, ignition sources, and potential hazard to the
public and property. These priority grades are intended only as guidelines.
Status Utilities Operations responds immediately to Grade 1 leaks. The average repair time can vary
depending on the size and location of the gas leak.
UTILITIES
UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED OPERATING BUDGET 483
GAS SAFETY
Goal Provide safe and efficient delivery of natural gas to our customers.
Objective Complete a walking gas leak survey for 50 percent of the City and a mobile gas leak survey
of services in business districts and 100 percent of the City’s gas mains on an annual basis.
FY 2022
Actuals
FY 2023
Actuals
FY 2024
Adopted
Budget
FY 2024
Estimated
FY 2025
Adopted
Budget
Percentage of gas system surveyed by
mobile (vehicle)
100%100%100%100%100%
Percentage of gas system surveyed by
walking
100%100%100%100%100%
Description A walking survey is conducted to check for gas leaks on service/gas meters and covers
one-half of the City (approximately 105 miles of gas mains and 36 miles of service lines)
every year, so that the entire City’s gas service system can be reviewed in a two-year period.
The Federal Department of Transportation (DOT) regulations require a survey of the entire
City once every five years. In addition to a walking survey, a mobile (vehicle) survey of all gas
mains and some gas service lines (services in the business district) are conducted annually.
Purpose To ensure the safety of all who live and work in Palo Alto and to comply with Federal DOT
requirements.
Status The department is meeting the requirements and repairing all discovered gas leaks in a
timely manner.
Workload Measures
FY 2022
Actuals
FY 2023
Actuals
FY 2024
Adopted
Budget
FY 2024
Estimated
FY 2025
Adopted
Budget
Number of Customer Accounts (Gas)23,781 23,837 23,818 23,818 23,818
Number of gas leaks repaired 102 102 110 90 100
Key Performance Measures
UTILITIES
UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED OPERATING BUDGET 493
WASTEWATER
COLLECTION FUND
Description
In 1898, Palo Alto approved $28,000 in bond money to fund construction of the
City’s first sewer network, which was completed in 1899. Private cesspools and
privies were banned, and the City Health Officer had residents connected to the
sewer system within a few years.
Wastewater Collection’s staff is responsible for design, construction, operation,
and maintenance of approximately 216 miles of sewer mains and approximate
18,000 City-owned laterals. Staff continues overlapping the design and
construction elements of rehabilitation and augmentation projects. Wastewater
Collection’s priorities are: maintaining infrastructure reliability; identifying
problems in mains and service laterals through expanded use of video
technology; complying with all regulatory requirements; and maintaining its
excellent safety record.
Accomplishments
•Completed Sanitary Sewer Replacement Project 31 (WC-19001) on time and under budget which
consists of replacement of approximately 10,924 linear feet of sanitary sewer mains and associated
laterals on El Camino Real between Page Mill Road and Cesano Court.
•Awarded professional services contract to update the 2004 Sewer Master Plan Study of the
wastewater collection system. The sewer master plan study will evaluate the City’s existing wastewater
collection system, flows, and flow patterns to determine the adequacy of the system’s hydraulic
capacity to meet current and anticipated future wastewater flow demands.
Initiatives
•Complete replacement of sanitary sewer overflow monitoring units in 39 sewer manholes throughout
the City.
•Complete the 2024-2025 Sewer Master Plan Study of the wastewater collection system. The study will
consist of flow analysis, recalibration of the sewer system hydraulic model, and prioritize capital
improvement projects. The anticipated completion is in the spring of 2025.
UTILITIES
494 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED OPERATING BUDGET
•Monitor the financial health of the Wastewater Collection Fund and make structural adjustments to
replenish reserves and accelerate sewer main replacements from 1 mile to 2.5 miles per year.
Goals and Objectives
Goal 1
Maintain and provide reliable and cost-effective wastewater services to customers.
Objectives:
•Clean and maintain sewer mains in commercial areas on a quarterly basis.
•Clean and video a minimum of 17% of the City-owned laterals annually to comply with the City’s Sewer
Overflow Reduction Plan.
•Maintain the integrity of the City’s wastewater collection system by replacing mains and laterals as
identified in the Wastewater Collection System Rehabilitation/Augmentation Capital Improvement
Project plan.
•Minimize sanitary sewer overflows and stoppages.
•Maintain a fleet of dependable vehicles to provide high quality cleaning and servicing of the sewer
system.
Key Performance Measures
MAINTAIN AND PROVIDE RELIABLE SERVICES
Goal Maintain and provide a reliable wastewater system to customers.
Objective Clean and video a minimum of 17 percent of the City-owned laterals annually to comply with
the City’s Sewer Overflow Reduction Plan.
FY 2022
Actuals
FY 2023
Actuals
FY 2024
Adopted
Budget
FY 2024
Estimated
FY 2025
Adopted
Budget
Percentage of sewer laterals inspected
annually
23%16%17%13%13%
Description The purpose of the Sewer System Management Plan (SSMP) is to maintain and improve the
condition of the collection system infrastructure; control infiltration and provide appropriate
sewer capacity; and minimize the number and impact of sanitary sewer overflows. The goal
is to perform sewer main cleaning of the entire collection system every 30 months (81.6
miles per year). This measures inspections and maintenance of 17 percent of City-owned
laterals annually using closed-circuit television (CCTV) inspection data, including results of
the on-going crossbore lateral inspection program, to target sewer mains and lower laterals
for rehabilitation and replacement.
Purpose To prevent blockage, sewer overflows, and to comply with the City’s SSMP, all the City’s
sewer mains must be cleaned within 30 months.
Status The City has not met the objectives of its SSMP in FY 2024 due to staffing resources. Staff
anticipate that staffing levels will return to normal in FY 2025.
UTILITIES
UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED OPERATING BUDGET 495
Workload Measures
FY 2022
Actuals
FY 2023
Actuals
FY 2024
Adopted
Budget
FY 2024
Estimated
FY 2025
Adopted
Budget
Number of Customer Accounts (Wastewater)22,393 22,499 22,482 22,482 22,482
Number of miles of sewer lines cleaned/
treated in a fiscal year
82 99 90 90 95
Percent of sewage spill responses within two
hours
96%98%100%95%95%
Percent of surveyed residents rating the
quality of the Sewer Service as good/
excellent*
95%85%86%87%90%
Number of sewage overflows 52 37 50 50 50
Percent of miles of sewer lines replaced 0.40%0.00%0.95%1.00%0.00%
* The most recent Palo Alto Community Survey was completed in September 2023. The full report can be found on the
City website: https://www.cityofpaloalto.org/Departments/City-Manager/Community-Engagement/Palo-Alto-Commu-
nity-Survey.
UTILITIES
UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED OPERATING BUDGET 503
WATER FUND
Description
From 1895 until 1928, the City’s water supply came from deep wells. When the
groundwater supply started to decline, water was purchased from the San
Francisco Regional Water System to supplement the local water system. Since
1962, when Palo Alto’s wells were discontinued as the primary water system, 100
percent of the water has come from the Regional Water System: 85 percent
derived from snow melt flowing into the Hetch Hetchy Reservoir and the balance
from runoff stored in San Francisco Bay Area reservoirs. The Water Fund focuses
on increasing infrastructure reliability and responsiveness to meet the City’s
water supply needs during an emergency; maintaining high-quality and reliable
sources of water; updating water efficiency goals; and implementing water
efficiency programs and services. Additionally, the Engineering Division is
implementing a seismic upgrade to the existing reservoirs, wells and receiving
stations to increase supply reliability during catastrophic emergencies.
Accomplishments
•Completed construction of Water Main Replacement Project 28 (WS-14001) and replaced
approximately 13,700 linear feet of water main pipelines in various locations throughout the City.
•Completed design of Water Main Replacement Project 29 (WS-15002) to replace approximately 8,000
linear feet of water main pipelines in Evergreen Park and Ventura neighborhoods, as well as California
Business District. The construction of this project started in November 2023 and the anticipated
completion is in August 2024.
•Exchanged or retrofitted over 13,000 water Advanced Metering Infrastructure (AMI) total meters as
part of the AMI project.
•Completed the two turnouts (a.k.a. water receiving stations) Project (WS-07000). The work at
California Avenue turnout included a seismic retrofit of the facility, replacement of all piping, electrical
and SCADA upgrades, added roof access from street, drainage improvements, and lead paint removal.
Page Mill Turnout included work to restrain a valve to remove an unsafe condition to operators working
in the vault.
•Began the One Water Plan, a long-term 20 year water supply plan to address supply reliability,
droughts, and climate change. Held two community workshops on community water needs and
priorities as well as exploring water supply options. Developing initial results to share with the
community in spring/summer 2024. More information and links are available on Palo Alto’s One Water
Plan website: https://www.cityofpaloalto.org/Departments/Utilities/Sustainability/Water-Efficiency/
One-Water-Plan
UTILITIES
504 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED OPERATING BUDGET
Initiatives
•Complete the development of the One Water Plan for Palo Alto to evaluate alternative water supplies,
define existing and future uncertainties and supply risks, and identify community needs and priorities
and serve as a long-term guide to better prepare for future uncertainties like multi-year drought.
•Complete the tests for lead and copper in water service laterals in elementary schools and childcare
facilities by Oct 2024 and to comply with the revised Environmental Protection Agency’s lead and
copper rule.
•Complete construction of Water Main Replacement Project 29 (WS-15002). The project will complete
replacement of approximately 8,600 linear feet of water main pipelines and associated services on
streets around California Avenue, downtown, and along Park Avenue.
•Complete design of Water Main Replacement Project 30 (WS-15002) to replace approximately 8,000
linear feet of water main pipelines and associated services on streets around Towle Place, Christine
Drive, and Lambert Avenue.
•Exchange or retrofit the remaining 13,000 water meters to make them AMI-compatible.
•Allocate more resources to the Backflow Prevention Program to ensure wastewater does not flow back
into the potable water distribution system and to comply with the State Water Resource Control
Board’s backflow program requirements.
•Execute contract for engineering design for the seismic retrofit of Park and Dahl Reservoirs.
Goals and Objectives
Goal 1
Provide safe and clean drinking water for customers.
Objectives:
•Ensure drinking water meets all regulatory standards.
•Maintain and update water infrastructure to ensure reliable service.
•Educate customers about backflow prevention as part of the City’s Cross Connection Control Program.
•Ensure adequate water supplies are available to meet existing and future water demands.
•Complete storage and supply upgrades to water system (e.g. reservoirs, receiving stations, and wells).
Goal 2
Increase environmental sustainability of the water supply system.
Objective:
•Increase water conservation and efficiency participation.
•Complete the One Water Plan which will identify the best water supply alternatives.
UTILITIES
UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED OPERATING BUDGET 505
Key Performance Measures
PROVIDE SAFE AND CLEAN DRINKING WATER FOR OUR CUSTOMERS
Goal Provide safe and clean drinking water for customers.
Objective Ensure drinking water meets all regulatory standards.
FY 2022
Actuals
FY 2023
Actuals
FY 2024
Adopted
Budget
FY 2024
Estimated
FY 2025
Adopted
Budget
Percent of customer-owned water backflow
prevention devices in compliance
89%90%90%90%90%
Description Customer-owned and maintained backflow devices are an integral part of the City’s Cross
Connection Control Program, which began in early 2010. The devices help to ensure that no
contaminants of any kind (e.g. chemicals, debris, reclaimed water) enter the potable water
system.
Purpose The California Department of Public Health provides regulations for the City and its
customers through California Code of Regulations, Title 17. These regulations specify the
types of hazards that require backflow devices.
Status The City is achieving a compliance rate of up to 90 percent on an annual basis. There are
4,632 active backflow devices in compliance. This number is growing every year as current
codes require backflow installation for residences as well as commercial properties.
WATER EFFICIENCY
Goal Increase environmental sustainability of the water supply system.
Objective Increase water conservation and efficiency participation.
FY 2022
Actuals
FY 2023
Actuals
FY 2024
Adopted
Budget
FY 2024
Estimated
FY 2025
Adopted
Budget
Annual savings achieved through water
efficiency programs as a percentage of total
sales
1.31%1.38%0.70%1.35%1.40%
Description The department measures specific savings achieved by the installation of water efficiency
improvements through the programs that the City offers through the Santa Clara Valley
Water District. The California drought greatly affected the City’s water savings numbers with
the largest amount of savings attributed to the non-residential installation of drought tolerant
landscapes and water efficient irrigation hardware.
Purpose Improving water efficiency for homes and businesses can result in water supply, water
operations, and wastewater processing savings. This measure supports the Water Fund’s
long-term goal to exceed the Making Conservation a California Way of Life requirements by
5%. Previously, this measure supported the ten-year goal to reduce expected water use by
20 percent by 2020.
Status Water savings were high in FY 2023, led by savings from the Landscape Conversion Rebate
Program.
UTILITIES
506 UTILITIES • CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED OPERATING BUDGET
WATER QUALITY
Goal Ensure the provision of safe and clean drinking water for customers.
Objective Safe testing of drinking water to meet all regulatory standards.
FY 2022
Actuals
FY 2023
Actuals
FY 2024
Adopted
Budget
FY 2024
Estimated
FY 2025
Adopted
Budget
Percentage of samples passed from all
sampling stations
100%100%100%100%100%
Description The City of Palo Alto (CPA) regularly collects and tests water samples from connection points
between the San Francisco Public Utilities Commission/City of Palo Alto (SFPUC/CPA),
storage reservoirs, emergency wells, residential areas, and sample station locations within
the distribution system to ensure that the water quality meets all California Department of
Public Health (CDPH) and U.S. Environmental Protection Agency (EPA) prescribed
regulations that limit the amount of contaminants in the drinking water. The City has 18
sampling stations and collects 84-105 samples monthly to test levels of chlorine residual,
coliform and pH levels are within regulatory guidelines. All sample results are reported to
CDPH on a monthly basis.
Purpose Complying with regulations guarantees the City maintains its high standards of water quality
and avoids fines.
Status Palo Alto drinking water continues to be in complete compliance with all existing county,
state, and federal standards for water quality.
Workload Measures
FY 2022
Actuals
FY 2023
Actuals
FY 2024
Adopted
Budget
FY 2024
Estimated
FY 2025
Adopted
Budget
Percent of miles of water mains replaced 0.20%0.00%0.7%0.66%0.00%
Number of Customer Accounts (Water)20,650 20,533 20,616 20,616 20,616
Percent of surveyed rating the quality of the
Drinking Water (Water) as "Good" or
"Excellent"*
91%87%89%87%90%
Key Performance Measures
* The most recent Palo Alto Community Survey was completed in September 2023. The full report can be found on the
City website: https://www.cityofpaloalto.org/Departments/City-Manager/Community-Engagement/Palo-Alto-Com-
munity-Survey.
• CITY OF PALO ALTO FISCAL YEAR 2025 PROPOSED CAPITAL BUDGET 1ZECONOMICDEVELOPMENT & TRANSITION
Z COMMUNITY HEALTH, SAFETY, WELLNESS & BELONGING
Z CLIMATE CHANGE AND THE NATURAL ENVIRONMENT: PROTECTION & ADAPTATION
Z HOUSING FOR SOCIAL AND ECONOMIC BALANCE
FISCAL YEAR 2025
CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED CAPITAL BUDGET 403
ELECTRIC FUND
ELECTRIC FUND
404 • CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED CAPITAL BUDGET
Overview
The City of Palo Alto offers a full array of utility services to its citizens and businesses. The municipal electric
power system began operation in 1900 and continues to provide safe, reliable, and cost effective electric ser-
vice to residents and customers of Palo Alto. For the 2025-2029 Capital Improvement Program (CIP), approxi-
mately $320.1 million (315.8 million in projects) is projected, with $75.8 million ($75.1 million in projects)
budgeted in Fiscal Year 2025. Overall, a total of 19 projects are planned over the 5-year CIP.
Electric Fund Expenditures
Major projects funded in the 2025-2029 CIP include the Grid Modernization Project ($243.2 million), Substa-
tion Improvement projects ($16.1 million), Electric Customer Connections ($13.6 million), Electric System
Improvements ($15.9 million), Foothills Rebuild Fire Mitigation ($8.2 million), Underground System Rebuild
projects ($1.8 million), Wood Pole Replacement ($3.8 million), and Smart Grid Technology Installation (2.7 mil-
lion). The budget for the Electric Fund CIP is categorized into three types of projects: Customer Connections,
System Improvements, and Undergrounding Projects.
Infrastructure Inventory
CLASSIFICATION QUANTITY
Miles of 60kV sub transmission lines 19 miles
Substations (w/300 MVA total capacity) 9
Traffic Signals (intersections) maintained 101
$0
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
$60,000,000
$70,000,000
$80,000,000
FY
2021
Actuals
FY
2022
Actuals
FY
2023
Actuals
FY
2024
Estimate
FY
2025
Adopted
FY
2026
Projected
FY
2027
Projected
FY
2028
Projected
FY
2029
Projected
ELECTRIC FUND
• CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED CAPITAL BUDGET 405
Customer Connections
As customers’ electric power needs continually change due to equipment additions, new construction, build-
ing expansions, building remodels, teardowns and rebuilds, and new building occupancy types, the electric
system must evolve to meet these needs.
The Electric Customer Connections Project is the only project within this category (Fiscal Year 2025: $2.7 mil-
lion; 5-Year CIP: $13.6 million). Projects range from new buildings associated with larger commercial buildings
to residential electric panel upgrades. These projects allow for the completion of work required to meet the
needs of customers who have applied for new or upgraded electric service, need temporary power for con-
struction, or require other services. The Electric Fund pays for a portion of these projects, while remaining
costs are supported by reimbursements from customers for project work performed by the City.
Electric Engineering received 5 applications for small cell attachments to Electric utility streetlight and wood
poles in FY 2023. These applications are still under review. The Electric Utility has about 5,903 wood poles and
6,922 streetlight poles citywide, which are of interest to mobile phone companies. This trend of small cell appli-
cations is anticipated to rapidly increase in the next few years, which would increase both the workload and
associated revenue in the Electric Customer Connections project.
Recent Accomplishments
•Completed approximately 441 customer service projects at a cost of approximately $1.2 million in Fiscal
Year 2023.
2025-2029 Capital Improvement Program
Recurring Projects
There is one recurring project in the Electric Customer Connections category in the 2025-2029 CIP (Fiscal
Year 2025 $2.7 million; 5-Year CIP: $13.6 million), which is comprised of individual customer projects and bud-
geted based on historical customer applications for service.
System Improvements
Key elements for ensuring reliable electric service to City of Palo Alto residents and customers include replac-
ing electric system components before they reach their end of life; ensuring there is adequate capacity for the
projected electric load; and installing protective equipment to minimize the impact of system problems. Proj-
ects in the System Improvements category allow for a variety of improvements, including the replacement/
upgrade of old cables and equipment and bringing designs up to current standards, installation of protective
equipment and switches, conversion of the electric system from 4,160 Volts (4kV) to 12,470 Volts (12kV), and
installation of capacitors to improve efficiency.
Streetlights maintained 6,922
Overhead Primary Distribution 116 miles
Underground Primary Distribution 199 miles
Overhead Secondary Distribution 93 miles
Underground Secondary Distribution 84 miles
Infrastructure Inventory
CLASSIFICATION QUANTITY
ELECTRIC FUND
406 • CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED CAPITAL BUDGET
The 2025-2029 CIP includes total funding of $302.2 million in this category, with $72.4 million allocated in Fis-
cal Year 2025. Significant projects in this category include Grid Modernization ($43.2 million), Foothills Rebuild
($8.2 million), Substation Physical Security ($3.4 million), Smart Grid Technology Installation ($2.7 million),
Electric System Improvements ($3.0 million), Wood Pole Replacements ($0.8 million), Substation Breaker
Replacements ($3.7 million), and various projects to substation components.
The 2025-2029 CIP includes the Grid Modernization project that will perform the necessary electric system
upgrades needed to support the City’s transition to a citywide residential electrification scenario, which has
major impacts on the City’s electric transmission and distribution grid. This project will include studies to eval-
uate the impacts of projected electrification loads on the City’s distribution and substation transformers, pri-
mary/secondary distribution circuits, and lead to proposals for upgrades necessary to mitigate overloads. The
estimated cost to construct the necessary electric system upgrades for a 100% electrification scenario is $300
- $350 million, for which the City is exploring alternative funding options such as debt financing.
Recent Accomplishments
•Installed potential transformers and station power transformers for bus 1 and bus 2 at Colorado Power
Station for power reliability.
•Replaced and upgraded approximately 21 deteriorated utility wood poles.
•Completed Part 1 and 2 of the Electrification study, which evaluated the impacts of electrification loads on
Palo Alto’s distribution and substation transformers, primary/secondary distribution circuits, and also
includes proposes upgrades needed to mitigate overloads.
•Replaced remote terminal units (RTU) for the SCADA system at Hanover Substation.
•Installed fiber optic cable between Maybell and Park Boulevard Substations to improve relay and SCADA
communications.
•Installed Nexus Power Quality meters at Hansen Way and Colorado Substations to provide essential power
quality information such as voltage dips and faults at the feeder level.
•Installed seven capacitor banks at several substations for power factor monitoring to keep the electrical
system in compliance.
2025-2029 Capital Improvement Program
Recurring Projects
A total of $27.8 million is programmed for System Improvements recurring projects in the 2025-2029 CIP, with
$5.3 million allocated in Fiscal Year 2025. Recurring projects in this category include the following:
•Communication System Improvements (Fiscal Year 2025: $0.1 million; 5-Year CIP: $0.5 million)
•Electric System Improvements (Fiscal Year 2025: $2.9 million; 5-Year CIP: $15.9 million)
•Electric Utility Geographic Information System (Fiscal Year 2025 $0.2 million; 5-Year CIP: $1.0 million)
•SCADA System Upgrades (Fiscal Year 2025 $0.2 million; 5-Year CIP: $1.3 million)
•Substation Facility Improvements (Fiscal Year 2025: $0.4 million; 5-Year CIP: $2.1 million)
•Substation Protection Improvements (Fiscal Year 2025: $0.3 million; 5-Year CIP: $1.6 million)
•Underground System Rebuild (Fiscal Year 2025: $0.3 million; 5-Year CIP: $1.8 million)
•Wood Pole Replacements (Fiscal Year 2025: $0.8 million; 5-Year CIP: $3.8 million)
Non-Recurring Projects
A total of $274.4 million is programmed in the 2025-2029 CIP for non-recurring System Improvement projects,
with $67.1 million allocated in Fiscal Year 2025. Significant projects include :
ELECTRIC FUND
• CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED CAPITAL BUDGET 407
•Grid Modernization for Electrification: (Fiscal Year 2025: $43.2 million; 5-year CIP: $243.2 million)
•Substation Physical Security: (Fiscal Year 2025: $3.4 million; 5-year CIP: $4.2 million)
•Substation Breaker Replacement: (Fiscal Year 2025: $3.7 million; 5-year CIP: $5.7 million)
•Colorado Power Station Equipment Upgrades: (Fiscal Year 2025: $3.7 million; 5-year CIP: $6.8 million)
•Smart Grid Technology: (Fiscal Year 2025: $2.7 million)
•Foothills Rebuild Fire Mitigation (Fiscal Year 2025: $8.2 million)
Undergrounding Projects
The City of Palo Alto began a program to underground overhead electric, telephone, and cable TV facilities in
1965 with a project along Oregon Expressway. Since that time, 47 Underground Districts have been formed.
The undergrounding of electrical lines is a joint process between the City and AT&T, due to joint ownership of
the poles, and Comcast, which leases pole space from AT&T. All three entities share in the cost of the installa-
tion of underground conduit and boxes necessary to enclose and protect wires and equipment. The City typi-
cally takes the lead in the design, bidding, and construction processes with AT&T and Comcast reimbursing the
City for construction and administrative costs. To align with current staffing levels and project priorities, under-
ground districts 42 and 43 are incorporated into the Grid Modernization Project (EL-24000) with design to
begin in FY 2026. Construction timeline will be updated as more information is available.
Electric Fund
Project
Number Project Title
FY 2024
Budget
FY 2024
Estimate
FY 2025
Adopted FY 2026 FY 2027 FY 2028 FY 2029
5-Year
Total
SOURCE OF FUNDS
Other
EL-89028 Electric Customer Connections 1,700,000 1,700,000 1,700,000 1,700,000 1,700,000 1,700,000 1,700,000 8,500,000
EL-24000 Grid Modernization for Electrification 25,000,000 0 40,000,000 25,000,000 25,000,000 25,000,000 25,000,000 140,000,000
EL-19004 Wood Pole Replacement 150,000 150,000 150,000 150,000 150,000 150,000 150,000 750,000
Other Total $26,850,000 $1,850,000 $41,850,000 $26,850,000 $26,850,000 $26,850,000 $26,850,000 $149,250,000
Total Sources $26,850,000 $1,850,000 $41,850,000 $26,850,000 $26,850,000 $26,850,000 $26,850,000 $149,250,000
USE OF FUNDS
Customer Connections
EL-89028 Electric Customer Connections 5,865,825 5,244,857 2,700,000 2,700,000 2,700,000 2,700,000 2,781,000 13,581,000
Customer Connections Total $5,865,825 $5,244,857 $2,700,000 $2,700,000 $2,700,000 $2,700,000 $2,781,000 $13,581,000
System Improvements
EL-06001 115 kV Electric Intertie 341,335 191,335 250,000 283,300 250,000 0 0 783,300
EL-16002 Capacitor Bank Installation 62,855 12,855 0 0 0 0 0 0
EL-22002 Colorado Distribution Feeder Outlet
Replacement 389,424 389,424 0 0 0 0 0 0
EL-19001 Colorado Power Station Equipment
Upgrades 1,850,000 116,989 3,733,011 2,000,000 1,100,000 0 0 6,833,011
ELECTRIC FUND
408 • CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED CAPITAL BUDGET
EL-19002 Colorado Substation Site
Improvements 1,165,000 26,706 1,138,294 0 0 0 0 1,138,294
EL-89031 Communications System
Improvements 150,000 38,837 100,000 100,000 103,000 107,000 110,210 520,210
EL-98003 Electric System Improvements 4,248,732 4,248,732 2,980,070 4,171,450 3,161,670 2,739,650 2,816,950 15,869,790
EL-02011 Electric Utility Geographic
Information System 440,889 440,888 165,000 165,000 170,000 238,000 245,140 983,140
EL-21001 Foothills Rebuild (Fire Mitigation)4,505,495 2,301,643 8,203,852 0 0 0 0 8,203,852
EL-14000 Grid Mod - Coleridge/Cowper/
Tennyson 4/12kV Conversion 1,000,000 0 0 0 0 0 0 0
EL-17001 Grid Mod - East Meadow Circles 4/
12kV Conversion 1,474,439 150,000 0 0 0 0 0 0
EL-16000 Grid Mod - Rebuild Underground
District 26 623,000 120,000 0 0 0 0 0 0
EL-24000 Grid Modernization for Electrification 25,000,000 6,817,360 43,182,640 50,000,000 50,000,000 50,000,000 50,000,000 243,182,640
EL-24001 Hanover Substation Upgrade Project 15,000,000 15,000,000 0 0 0 0 0 0
EL-17005 Inter-substation Line Protection
Relay 463,280 775 637,505 175,000 200,000 208,000 214,240 1,434,745
EL-10006 Rebuild Underground District 24 522,000 100,934 139,066 0 0 0 0 139,066
EL-02010 SCADA System Upgrades 282,229 95,098 225,000 185,000 220,000 308,000 317,240 1,255,240
EL-11014 Smart Grid Technology Installation 12,396,094 11,388,345 2,748,734 0 0 0 0 2,748,734
EL-17002 Substation Breaker Replacement 2,477,480 130,146 3,697,334 1,000,000 1,000,000 0 0 5,697,334
EL-89044 Substation Facility Improvements 1,303,605 45,480 400,000 400,000 412,000 430,000 442,900 2,084,900
EL-16003 Substation Physical Security 4,021,348 1,104,759 3,386,379 165,000 300,000 189,150 169,950 4,210,479
EL-89038 Substation Protection Improvements 633,747 341,999 300,000 300,000 309,000 320,000 329,600 1,558,600
EL-16001 Underground System Rebuild 350,000 0 350,000 350,000 350,000 364,000 374,920 1,788,920
EL-19004 Wood Pole Replacement 1,983,301 1,783,568 750,000 750,000 750,000 750,000 750,000 3,750,000
System Improvements Total $80,684,253 $44,845,873 $72,386,885 $60,044,750 $58,325,670 $55,653,800 $55,771,150 $302,182,255
Undergrounding Projects
EL-12001 Underground District 46 -
Charleston/El Camino Real 1,367 1,367 0 0 0 0 0 0
Undergrounding Projects Total $1,367 $1,367 $0 $0 $0 $0 $0 $0
Total Uses $86,551,445 $50,092,097 $75,086,885 $62,744,750 $61,025,670 $58,353,800 $58,552,150 $315,763,255
Electric Fund (Continued)
Project
Number Project Title
FY 2024
Budget
FY 2024
Estimate
FY 2025
Adopted FY 2026 FY 2027 FY 2028 FY 2029
5-Year
Total
CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED CAPITAL BUDGET 461
FIBER OPTICS FUND
FIBER OPTICS FUND
462 • CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED CAPITAL BUDGET
Overview
The City of Palo Alto offers a full array of utility services to its citizens and businesses. The most recent addi-
tion to this list of services provided to City of Palo Alto residents and commercial customers is the licensing of
dark fiber service connections on a dark optical fiber backbone network (fiber network), originally designed
and built by the City in the mid to late 1990s. Major efforts to rebuild the dark fiber backbone and coordinate
this work with the roll out of Fiber to the Premise (FTTP) and electric grid modernization in the Electric fund
began in FY 2024.
Fiber Optics Fund Expenditures
For the 2025-2029 Capital Improvement Program (CIP), expenditures of $42.5 million ($42.1 million in projects)
are programmed, with $27.4 million ($27.3 million in projects) allocated in Fiscal Year 2025. Major projects
funded in the 2025-2029 CIP include Fiber-to-the-Premise ($13.9 million) and Fiber Network System Rebuild
($25.5 million). The budget for the Fiber Optics CIP can be categorized into two types of projects: Capacity
Improvements and Customer Connections.
Infrastructure Inventory
CLASSIFICATION QUANTITY
Route Miles of Backbone Fiber Cable 56.3
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
FY
2021
Actuals
FY
2022
Actuals
FY
2023
Actuals
FY
2024
Estimate
FY
2025
Adopted
FY
2026
Projected
FY
2027
Projected
FY
2028
Projected
FY
2029
Projected
FIBER OPTICS FUND
• CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED CAPITAL BUDGET 463
blank row (will print white)
Capacity Improvements
Advances in technology have increased the need for high-bandwidth broadband connectivity. The capacity of
the City’s fiber optic network must be expanded to accommodate increases in online services and applica-
tions, and the significant growth of data transmission. To ensure secure, reliable, and resilient fiber optic service
for internal City operations, Palo Alto residents and commercial customers, network components such as fiber
optic cables and splice cabinets need to be upgraded, added, or rebuilt to increase capacity; mitigate damage
by animals; and safeguard against hazardous conditions.
In Q4 of FY 2024, a pilot was initiated to help inform the City how closely electrification grid modernization
projects may be coordinated with fiber projects. The goal is to start construction for the pilot in Q2 of FY 2025.
Aligning these projects may help reduce construction costs, minimize community disruption, and streamline
project implementation.
Recent Accomplishments
•Began deployment of pilot to coordinate the Grid Modernization Project and Fiber-to-the-Premises (FTTP)
Project, which will upgrade the electric grid and provide homes and businesses with broadband internet in
a pilot area.
•Completed a 60% design of electric make-ready engineering in alignment with Fiber-to-the-Premises
make-ready deployment in the pilot area.
2025-2029 Capital Improvement Program
Recurring Projects
There is one recurring project in the Capacity Improvements category in the 2025-2029 CIP:
•Fiber Optics Network System Improvements (Fiscal Year 2025: $0.6 million; 5-Year CIP: $1.4 million)
Non-Recurring Projects
There are two non-recurring projects in the Capacity Improvements category in the 2025-2029 CIP:
•Fiber Optics Network System Rebuild (Fiscal Year 2025: $12.5 million; 5-Year CIP: $25.5 million)
•Fiber-to-the-Premises (Fiscal Year 2025: $13.9 million)
Customer Connections
The fiber network is dynamic, reflecting changes in customer fiber optic needs from equipment additions, new
construction, building expansions, building remodels, teardowns, rebuilds, and new building occupancy types.
Projects in this category include work required to meet the needs of customers who have applied for new,
replaced, or upgraded dark fiber optic service connections. Labor and material costs incurred are offset by
Route Miles of Overhead Backbone Fiber Optic
Cable
21.6
Route Miles of Underground Backbone Fiber
Optic Cable
34.6
Infrastructure Inventory
CLASSIFICATION QUANTITY
FIBER OPTICS FUND
464 • CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED CAPITAL BUDGET
non-recurring charges (NRC) collected from customers to establish the connection, and ongoing dark fiber
license fees or monthly recurring charges (MRC).
2025-2029 Capital Improvement Program
Recurring Projects
There is one recurring project in the Fiber Optics Customer Connections category with amounts in the 2025 -
2029 CIP:
•Customer Connections (Fiscal Year 2025: $0.3 million; 5-Year CIP: $1.2 million)
Non-Recurring Projects
There are no non-recurring projects in this category.
Fiber Optics Fund
Project
Number Project Title
FY 2024
Budget
FY 2024
Estimate
FY 2025
Adopted FY 2026 FY 2027 FY 2028 FY 2029
5-Year
Total
SOURCE OF FUNDS
Other
FO-10000 Fiber Optics Customer Connections 200,000 200,000 200,000 200,000 200,000 200,000 200,000 1,000,000
Other Total $200,000 $200,000 $200,000 $200,000 $200,000 $200,000 $200,000 $1,000,000
Transfer from Electric Fund
FO-16000 Fiber Optics Network - System
Rebuild 0 0 0 13,000,000 0 0 0 13,000,000
Transfer from Electric Fund Total $0 $0 $0 $13,000,000 $0 $0 $0 $13,000,000
Total Sources $200,000 $200,000 $200,000 $13,200,000 $200,000 $200,000 $200,000 $14,000,000
USE OF FUNDS
Capacity Improvements
FO-10001 Fiber Optics Network - System
Improvements 617,605 92,989 602,500 203,300 203,900 210,000 210,000 1,429,700
FO-16000 Fiber Optics Network - System
Rebuild 16,104,526 2,259,229 12,530,000 13,000,000 0 0 0 25,530,000
FO-24000 Fiber-to-the-Premises (FTTP)12,000,000 6,074,836 13,925,164 0 0 0 0 13,925,164
Capacity Improvements Total $28,722,131 $8,427,054 $27,057,664 $13,203,300 $203,900 $210,000 $210,000 $40,884,864
Customer Connections
FO-10000 Fiber Optics Customer Connections 351,600 3,071 253,100 254,100 254,900 263,000 200,000 1,225,100
Customer Connections Total $351,600 $3,071 $253,100 $254,100 $254,900 $263,000 $200,000 $1,225,100
Total Uses $29,073,731 $8,430,125 $27,310,764 $13,457,400 $458,800 $473,000 $410,000 $42,109,964
CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED CAPITAL BUDGET 481
GAS FUND
GAS FUND
482 • CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED CAPITAL BUDGET
Overview
The City of Palo Alto offers a full array of utility services to its citizens and businesses. The municipal natural
gas distribution system began operation in 1917 and provides safe, reliable, and cost-effective gas service to
residents and customers of Palo Alto. For the 2025-2029 Capital Improvement Program (CIP), approximately
$45.4 million ($43.6 million in projects) is projected, with $13.6 million ($13.4 million in projects) allocated in
Fiscal Year 2025. Overall, a total of nine projects are planned for the 5-year CIP.
Gas Fund Expenditures
Major projects funded in the 2025-2029 CIP include Gas Main Replacements (cumulative total of $32.7 million),
Gas System, Customer Connections ($3.5 million), Gas Distribution System Improvements ($3.2 million), and
Gas Meters and Regulators ($2.7 million). The budget for the Gas Fund CIP can be categorized into three sep-
arate types of projects: Gas Main Replacements, Customer Connections, and System Improvements.
Infrastructure Inventory
CLASSIFICATION QUANTITY
Total miles of gas main distribution system 210.58
Total miles of gas service extension to residents
and businesses
200.83
Number of gas receiving stations 4
$0
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
$16,000,000
FY
2021
Actuals
FY
2022
Actuals
FY
2023
Actuals
FY
2024
Estimate
FY
2025
Adopted
FY
2026
Projected
FY
2027
Projected
FY
2028
Projected
FY
2029
Projected
GAS FUND
• CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED CAPITAL BUDGET 483
Customer Connections
As customers continually change their gas needs due to equipment additions, building expansions, building
remodels, and new building occupancy types, the gas system must evolve to meet these needs. The Gas Sys-
tem Customer Connections project, which is one of the largest recurring projects within the Gas Fund, is
accounted for within this category. This project allows for the completion of work required to meet the needs
of customers who have applied for new or upgraded gas service. The Gas Fund pays for a portion of this proj-
ect, while remaining costs are supported by reimbursements from customers for connection work performed
by the City.
Recent Accomplishments
•In Fiscal Year 2023, the Utilities Gas Division completed approximately 40 customer service projects at a
cost of approximately $0.2 million.
2025-2029 Capital Improvement Program
Recurring Projects
Recurring projects in this category include the following:
•Gas System, Customer Connections (Fiscal Year 2025: $0.7 million; 5-Year CIP: $3.5 million)
Gas Main Replacements
The Gas Main Replacements (GMR) category accounts for the replacement of inadequately-sized and struc-
turally deficient gas mains and services that are subject to corrosion or reaching the end of their expected life.
The Utilities Department coordinates with the Public Works Department’s street maintenance projects to min-
imize impact to the streets that have recently been paved. In the next five years, it is anticipated that approxi-
mately 40,000 linear feet of gas mains, or four percent of the entire system, will be replaced. The 2025-2029
CIP includes $32.7 million in funding for projects within this category.
Recent Accomplishments
•Started construction on the Gas Main Replacement 24B project (GS-14003) to replace 18,500 linear feet of
natural gas mains and approximately 190 natural gas service pipeline made of Polyvinyl Chloride (PVC) and
Steel Black Wrap Pipe (BWP).
•Completed design work on the Gas Main Replacement 25 (GS-15000) project to replace 25,000 linear feet
of natural gas mains, including replacement of approximately 320 natural gas service pipelines made of
Natural Gas System Miles of Pipeline by Material
MATERIAL TYPE MILES OF MAINS IN SYSTEM NUMBER OF SERVICES IN SYSTEM
MILES OF SERVICES IN SYSTEM (AVG
61’ SERVICE)
Steel 61.46 2,112 24.4
Plastic, PVC 30.60 669 7.72
Plastic, PE 118.48 14,470 167.17
Plastic, ABS 0.03 12 0.14
Plastic, Other 0.01 4 0.05
Other 0.00 64 0.74
TOTAL 210.58 17,331 200.21
GAS FUND
484 • CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED CAPITAL BUDGET
PVC, BWP, or undersized Polyetheylene (PE) and the reconnection of 225 natural gas service pipelines. In
late FY 2024, this project was awarded a $16.5 million Department of Transportation grant for Natural Gas
Distribution Infrastructure Safety and Modernization. The grant funding, expense allocation, and project
scope will be adjusted as part of the FY 2026 budget process.
2025-2029 Capital Improvement Program
Non-Recurring Projects
A total of four Gas Main Replacement projects are included in the 2025-2029 CIP (Fiscal Year 2025: $9.7 mil-
lion; 5-Year CIP: $32.7 million).
System Improvements
To ensure reliable gas services for City of Palo Alto residents and customers, gas infrastructure must be
replaced upon reaching the end of its expected life. The System Improvements category includes four projects
during the 2025-2029 CIP at a total cost of $7.3 million, with $3.0 million allocated in Fiscal Year 2025. During
Fiscal Year 2025, staff intends to commence a planning study to evaluate the preferred approach for downsiz-
ing the gas system and potentially begin planning of the first project. For FY 2025, staff is recommending
funding ($1.0 million) for the Gas Line Repair at Arastradero Creek (GS-25001).
Recent Accomplishments
•In calendar year 2023, repaired 101 Grade 1, 2, and 3 leaks throughout the City.
•Purchased new electrofusion machine for water, gas, and wastewater polyethylene pipe, new DataLogger 7
for hydraulic butt fusions on polyethylene pipe, and new set of small diameter squeezers to squeeze gas
pipe.
•Replaced leaking valves and gas service lines, throughout the City, to comply with new utility standards.
2025-2029 Capital Improvement Program
Recurring Projects
There are three recurring projects in the System Improvements category in the 2025-2029 CIP:
•Gas Distribution System Improvements (Fiscal Year 2025: $1.2 million; 5-Year CIP: $3.2 million)
•Gas Equipment and Tools (Fiscal Year 2025: $0.1 million; 5-Year CIP: $0.5 million)
•Gas Meters and Regulators (Fiscal Year 2025: $0.7 million; 5-Year CIP: $2.7 million)
Non-Recurring Projects
There is one non-recurring project in the System Improvements category in the 2025-2029 CIP:
•Gas Line Repair at Arastradero Creek (Fiscal Year 2025: $1.0 million)
Please refer to the City of Palo Alto Utilities webpage to confirm project details: https://www.cityof-
paloalto.org/Departments/Utilities/Utilities-Services-Safety/Utilities-Projects
GAS FUND
• CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED CAPITAL BUDGET 485
Gas Fund
Project
Number Project Title
FY 2024
Budget
FY 2024
Estimate
FY 2025
Adopted FY 2026 FY 2027 FY 2028 FY 2029
5-Year
Total
SOURCE OF FUNDS
Other
GS-80017 Gas System, Customer Connections 500,000 500,000 500,000 500,000 500,000 500,000 500,000 2,500,000
Other Total $500,000 $500,000 $500,000 $500,000 $500,000 $500,000 $500,000 $2,500,000
Transfer from Water Fund
GS-14003 Gas Main Replacement - Project 24 171,590 171,590 0 0 0 0 0 0
Transfer from Water Fund Total $171,590 $171,590 $0 $0 $0 $0 $0 $0
Total Sources $671,590 $671,590 $500,000 $500,000 $500,000 $500,000 $500,000 $2,500,000
USE OF FUNDS
Customer Connections
GS-80017 Gas System, Customer Connections 887,698 520,801 700,000 700,000 700,000 700,000 700,000 3,500,000
Customer Connections Total $887,698 $520,801 $700,000 $700,000 $700,000 $700,000 $700,000 $3,500,000
Main Replacements
GS-13001 Gas Main Replacement - Project 23 63,265 63,265 0 0 0 0 0 0
GS-14003 Gas Main Replacement - Project 24 9,776,974 8,795,364 981,610 0 0 0 0 981,610
GS-15000 Gas Main Replacement - Project 25 3,703,849 0 8,743,849 0 0 0 0 8,743,849
GS-16000 Gas Main Replacement - Project 26 0 0 0 4,216,000 6,665,496 0 0 10,881,496
GS-20000 Gas Main Replacement - Project 27 0 0 0 0 0 4,683,622 7,404,806 12,088,428
Main Replacements Total $13,544,088 $8,858,629 $9,725,459 $4,216,000 $6,665,496 $4,683,622 $7,404,806 $32,695,383
System Improvements
GS-11002 Gas Distribution System
Improvements 1,282,546 615,823 1,166,723 500,000 500,000 500,000 500,000 3,166,723
GS-13002 Gas Equipment and Tools 118,967 118,967 100,000 100,000 100,000 100,000 100,000 500,000
GS-25001 Gas Line Repair at Arastradero
Creek 0 0 1,000,000 0 0 0 0 1,000,000
GS-80019 Gas Meters and Regulators 532,482 343,937 688,545 500,000 500,000 500,000 500,000 2,688,545
System Improvements Total $1,933,995 $1,078,727 $2,955,268 $1,100,000 $1,100,000 $1,100,000 $1,100,000 $7,355,268
Total Uses $16,365,781 $10,458,157 $13,380,727 $6,016,000 $8,465,496 $6,483,622 $9,204,806 $43,550,651
CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED CAPITAL BUDGET 555
WASTEWATER
COLLECTION FUND
WASTEWATER COLLECTION FUND
556 • CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED CAPITAL BUDGET
Overview
The City of Palo Alto offers a full array of utility services to its citizens and businesses. The municipal Wastewa-
ter Collection System began operation in 1898 and continues to provide safe, reliable, and cost-effective ser-
vices to residents and customers of Palo Alto. For the 2025-2029 Capital Improvement Program (CIP),
approximately $26.6 million ($26.3 million in projects) is projected, with $2.6 million allocated in Fiscal Year
2025. Overall, a total of seven projects are programmed for the 5-year CIP.
Wastewater Collection Fund Expenditures
Major projects funded in the 2025-2029 CIP include Wastewater Collection System Rehabilitation/Augmenta-
tion projects (cumulative total of $18.1 million), Sewer Lateral/Manhole Rehabilitation and Replacement ($4.6
million), and Sewer System, Customer Connections ($2.3 million). The budget for the Wastewater Collection
Fund CIP is categorized into three types of projects: Customer Connections, System Improvements, and Sys-
tem Rehabilitation/Augmentation. In order to balance the Wastewater Collection Fund reserves and keep rate
increases low, the wastewater main replacement (Collection System Rehabilitation/Augmentation) projects
have been reduced from annually to biennially to keep expenditures in line with expected revenue.
Infrastructure Inventory
CLASSIFICATION QUANTITY
Total miles of sanitary sewer lines 206.64
Total number of sanitary laterals 17,830
$0
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
FY
2021
Actuals
FY
2022
Actuals
FY
2023
Actuals
FY
2024
Estimate
FY
2025
Adopted
FY
2026
Projected
FY
2027
Projected
FY
2028
Projected
FY
2029
Projected
WASTEWATER COLLECTION FUND
• CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED CAPITAL BUDGET 557
Customer Connections
As customers continually change their wastewater needs due to equipment additions, new construction, build-
ing expansions, building remodels, teardowns and rebuilds, and new building occupancy types, the Wastewa-
ter Collection System must evolve to meet these needs. The Sewer System Customer Connections project is
the only project within this category and includes work required to meet the needs of customers who have
applied for new sewer laterals or are required to upgrade the laterals. The Wastewater Collection Fund pays for
a portion of this project while remaining costs are supported by reimbursements from customers for project
work performed by the City.
Recent Accomplishments
•In Fiscal Year 2023, the Utilities Wastewater Division completed approximately 43 customer service
projects at a cost of $0.3 million.
2025-2029 Capital Improvement Program
Recurring Projects
There is one recurring project in Customer Connections in the 2025-2029 CIP: Sewer System, Customer Con-
nections (Fiscal Year 2024: $0.5 million; 5-Year CIP: $2.3 million). This project funds changes to customer con-
nections and costs are partially offset by reimbursements from customers requesting the service.
System Improvements
To ensure reliable wastewater collection services for City of Palo Alto residents and customers, sanitary sewer
infrastructure must be replaced upon reaching the end of its expected life. The System Improvements cate-
gory includes three projects during the 2025-2029 CIP at a total cost of $5.9 million, with $1.2 million allocated
in Fiscal Year 2025.
2025-2029 Capital Improvement Program
Recurring Projects
A total of $5.9 million is programmed for System Improvement recurring projects in the 2025-2029 CIP, with
$1.2 million allocated in Fiscal Year 2025. Recurring projects in this category include the following:
•Wastewater System Improvements (Fiscal Year 2025: $0.2 million; 5-Year CIP: $1.0 million)
•Wastewater General Equipment and Tools (Fiscal Year: 2025: $0.1 million; 5-Year CIP: $0.3 million)
•Sewer Lateral/Manhole Rehabilitation and Replacement (Fiscal Year 2025: $0.9 million; 5-Year CIP: $4.6
million)
System Rehabilitation /Augmentation
To ensure reliable wastewater services for the City of Palo Alto residents and customers, infrastructure must be
replaced upon reaching the end of its useful life. The infrastructure replacement program includes projects
that will rehabilitate or replace deteriorated pipelines. In the next five years, it is estimated that approximately
30,200 linear feet of wastewater mains will be replaced. The System Rehabilitation category includes three
projects during the 2025-2029 CIP at a total cost of $18.1 million, with $1.0 million allocated in Fiscal Year 2025.
WASTEWATER COLLECTION FUND
558 • CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED CAPITAL BUDGET
Recent Accomplishments
•Completed design of Sanitary Sewer Replacement Project 31 (SSR 31) in Fiscal Year 2023 and construction
to be completed by the end of August 2024. This project included the replacement and rehabilitation of
10,924 linear feet of sanitary sewer main, sewer laterals, and manholes on El Camino Real between Page
Mill Road and Cesano Court, as well as Page Mill Road between Ash Street and Ramos Way. The existing
clay pipe mains will be replaced with High Density Polyethylene pipe.
2025-2029 Capital Improvement Program
Non-Recurring Projects
The majority of funding within this category is allocated towards Wastewater Collection System Rehabilita-
tion/Augmentation Projects (cumulative total of $18.1 million). The program is prioritized to replace pipes with
structural damage to minimize sewer overflows and to replace pipes with condition defects to reduce inflow of
rainfall and groundwater into the collection system. The Utilities Department coordinates with the Public
Works Department’s street maintenance projects to minimize impact to the streets that have been recently
paved when replacing sewer mains.
Linear footage and locations are subject to change, please refer to the City of Palo Alto Utilities webpage to
confirm project details: https://www.cityofpaloalto.org/Departments/Utilities/Utilities-Services-Safety/Utili-
ties-Projects.
Wastewater Collection Fund
Project
Number Project Title
FY 2024
Budget
FY 2024
Estimate
FY 2025
Adopted FY 2026 FY 2027 FY 2028 FY 2029
5-Year
Total
SOURCE OF FUNDS
Other
WC-80020 Sewer System, Customer
Connections 450,000 450,000 250,000 250,000 250,000 250,000 250,000 1,250,000
Other Total $450,000 $450,000 $250,000 $250,000 $250,000 $250,000 $250,000 $1,250,000
Total Sources $450,000 $450,000 $250,000 $250,000 $250,000 $250,000 $250,000 $1,250,000
USE OF FUNDS
Customer Connections
WC-80020 Sewer System, Customer
Connections 466,142 302,066 450,000 450,000 450,000 450,000 450,000 2,250,000
Customer Connections Total $466,142 $302,066 $450,000 $450,000 $450,000 $450,000 $450,000 $2,250,000
System Improvements
WC-99013 Sewer Lateral/Manhole Rehabilitation
and Replacement 1,018,829 959,729 875,500 900,000 927,000 955,000 975,000 4,632,500
WC-13002 Wastewater General Equipment and
Tools 118,480 54,218 90,000 50,000 50,000 50,000 50,000 290,000
WC-15002 Wastewater System Improvements 804,002 503,366 200,000 200,000 200,000 200,000 200,000 1,000,000
System Improvements Total $1,941,311 $1,517,313 $1,165,500 $1,150,000 $1,177,000 $1,205,000 $1,225,000 $5,922,500
System Rehabilitation
WASTEWATER COLLECTION FUND
• CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED CAPITAL BUDGET 559
WC-17001
Wastewater Collection System
Rehabilitation/Augmentation Project
30
622,363 408,898 0 0 0 0 0 0
WC-19001
Wastewater Collection System
Rehabilitation/Augmentation Project
31
8,436,225 8,436,225 0 0 0 0 0 0
WC-20000
Wastewater Collection System
Rehabilitation/Augmentation Project
32
0 0 1,000,000 2,000,000 0 0 0 3,000,000
WC-21000
Wastewater Collection System
Rehabilitation/Augmentation Project
33
0 0 0 0 3,000,000 8,600,000 0 11,600,000
WC-26000
Wastewater Collection System
Rehabilitation/Augmentation Project
34
0 0 0 0 0 0 3,512,716 3,512,716
System Rehabilitation Total $9,058,588 $8,845,123 $1,000,000 $2,000,000 $3,000,000 $8,600,000 $3,512,716 $18,112,716
Total Uses $11,466,041 $10,664,502 $2,615,500 $3,600,000 $4,627,000 $10,255,000 $5,187,716 $26,285,216
Wastewater Collection Fund (Continued)
Project
Number Project Title
FY 2024
Budget
FY 2024
Estimate
FY 2025
Adopted FY 2026 FY 2027 FY 2028 FY 2029
5-Year
Total
CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED CAPITAL BUDGET 627
WATER FUND
WATER FUND
628 • CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED CAPITAL BUDGET
Overview
The City of Palo Alto offers a full array of utility services to its citizens and businesses. The municipal Water
Distribution System began operation in 1896 and continues to provide safe, reliable, and cost-effective water
service to residents and customers of Palo Alto. For the 2025-2029 Capital Improvement Program (CIP),
approximately $62.5 million ($62.3 million in projects) is projected, with $12.5 million allocated in Fiscal Year
2025. Overall, a total of 13 projects are planned for the 5-year CIP.
Water Fund Expenditures
Major projects funded in the 2025-2029 CIP include Water Main Replacements (cumulative total of $24.9 mil-
lion), Water Tank Seismic Upgrade and Rehabilitation ($16.9 million), Water System Customer Connections
($5.2 million), Water Meters ($1.9 million) and Water, Gas, and Wastewater Utility GIS Data ($2.8 million). The
budget for the Water Fund CIP is categorized into three types of projects: Customer Connections, System
Improvements, and Water Main Replacements.
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Infrastructure Inventory
CLASSIFICATION QUANTITY
Miles of water main 231.17
Number of wells 1 active standby and 7 emergency standby
Number of reservoirs 3 steel and 4 reinforced concrete
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
FY
2021
Actuals
FY
2022
Actuals
FY
2023
Actuals
FY
2024
Estimate
FY
2025
Adopted
FY
2026
Projected
FY
2027
Projected
FY
2028
Projected
FY
2029
Projected
WATER FUND
• CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED CAPITAL BUDGET 629
Customer Connections
As customers continually change their water needs due to equipment additions, new construction, building
expansions, building remodels, teardowns and rebuilds, and new building occupancy types, the water system
must evolve to meet these needs. The Water System Customer Connections is the only project in this category
and includes work required to meet the needs of customers who have applied for new or upgraded water ser-
vice. The Water Fund pays for a portion of this project, while remaining costs are supported by reimburse-
ments from customers for project work performed by the City.
Recent Accomplishments
•In Fiscal Year 2023 the Water Utility completed approximately 21 water service projects at a cost of $0.4
million.
2025-2029 Capital Improvement Program
Recurring Projects
The Water System Customer Connections is the only project within this category. Over the course of the 2025-
2029 CIP, $5.2 million is programmed, with $1.0 million allocated in Fiscal Year 2025.
System Improvements
To ensure reliable water services for the City of Palo Alto’s residents and customers, infrastructure must be
replaced at the end of its expected life. The System Improvements category includes seven projects as part of
the 2025-2029 CIP at a total cost of $32.2 million, with $7.6 million allocated in Fiscal Year 2025.
Recent Accomplishments
•Completed two Turnouts (a.k.a. water receiving stations) within Project (WS-07000) in April 2024. The
work at California Avenue turnout included a seismic retrofit of the facility, replacement of all piping,
electrical and SCADA upgrades, added roof access from street, drainage improvements, and lead paint
removal. Page Mill turnout included work to restrain a valve to remove an unsafe condition to operators
working in the vault.
Water Distribution System Main Materials
MATERIAL TIME TOTAL LENGTH PERCENT
Asbestos Cement Pipe 127.33 mi 55.1%
Concrete Cylinder Pipe 16.79 mi 7.3%
Cast Iron Pipe 17.87 mi 7.7%
Copper Pipe 0.28 mi 0.12%
Ductile Iron Pipe 4.63 mi 2.00%
Polyethylene 22.25 mi 9.6%
Polyvinyl Chloride 40.87 mi 17.7%
Steel 0.73 mi 0.3%
Unknown Material 0.40 mi 0.2%
Total: 231.17 mi 100%
WATER FUND
630 • CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED CAPITAL BUDGET
2025-2029 Capital Improvement Program
Recurring Projects
A total of $15.2 million is programmed for System Improvement recurring projects during the 2025-2029 CIP,
with $6.6 million allocated in Fiscal Year 2025. Recurring projects in this category include the following:
•Water Distribution System Improvements (Fiscal Year 2025: $1.0 million; 5-Year CIP: $2.3 million)
•Water General Equipment/Tools (Fiscal Year 2025: $0.05 million; 5-Year CIP: $0.3 million)
•Water, Gas, Wastewater Utility GIS Data (Fiscal Year 2025: $0.6 million; 5-Year CIP: $2.9 million)
•Water Meters (Fiscal Year 2025: $0.4 million; 5-Year CIP: $1.9 million)
•Water Service Hydrant Replacement (Fiscal Year 2025: $0.4 million; 5-Year CIP: $2.2 million)
•Water System Supply Improvements (Fiscal Year 2025: $4.1 million; 5-Year CIP: $5.7 million)
Non-Recurring Projects
There is one non-recurring project in this category:
•Water Tank Seismic Water System Upgrades (Fiscal Year 2025: $1.0 million; 5-Year CIP: $16.9 million)
Water Main Replacements
The Water Main Replacements category accounts for the replacement of inadequately sized and structurally
deficient water mains. In the next five years, it is estimated that approximately 3 miles of water mains will be
replaced. Work is scheduled based on the replacement schedule of water and wastewater construction every
even year and gas construction every odd year to reduce the amount of construction when prices are high and
allow staff to draft and prepare plans for construction in subsequent years.
A recent study indicated that the City has already replaced many of the most leak-prone and deteriorated
pipes through the past water main replacement projects 1 through 26. This study identified 11.6 miles of mains
that are deteriorating or are in liquefaction zones, which will be addressed through future replacement proj-
ects. Upcoming water main replacement projects will continue to target replacement of deteriorating and seis-
mically vulnerable pipes.
Recent Accomplishments
•Completed construction of Water Main Replacement Project 28 (WS-14001) and replaced approximately
13,700 linear feet of water main pipelines in various locations throughout the City.
•Completed design of Water Main Replacement Project 29 (WS-15002) to replace approximately 8,000
linear feet of water main pipelines in Evergreen Park and Ventura neighborhoods, as well as in the
California Business District. The construction of this project started in November 2023 and the anticipated
completion is in August 2024.
•Completed construction of the Water Regulation Station Improvement Project (WS-07000) and
completed the seismic rehabilitation of two underground vaults. This concludes the Water Regulations
Station Improvement project, which improved a total of 14 underground vaults and two above-ground
water regulation facility locations.
2025-2029 Capital Improvement Program
Non-Recurring Projects
The 2025-2029 CIP includes $24.9 million in funding for the four projects within this category, all water main
replacements, with $3.9 million appropriated for Fiscal Year 2025 and a total of $24.9 million programmed for
WATER FUND
• CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED CAPITAL BUDGET 631
the 2025-2029 CIP. The Utilities Department coordinates with the Public Works Department’s street mainte-
nance projects to minimize impact to the streets that have been recently paved when replacing water mains.
Water Fund
Project
Number Project Title
FY 2024
Budget
FY 2024
Estimate
FY 2025
Adopted FY 2026 FY 2027 FY 2028 FY 2029
5-Year
Total
SOURCE OF FUNDS
Other
WS-80013 Water System Customer
Connections 1,100,000 1,100,000 1,128,500 1,140,100 1,152,000 1,118,000 1,118,000 5,656,600
Other Total $1,100,000 $1,100,000 $1,128,500 $1,140,100 $1,152,000 $1,118,000 $1,118,000 $5,656,600
Transfer from Gas Fund
WS-02014 Water, Gas, Wastewater Utility GIS
Data 171,100 171,100 176,300 181,000 186,400 194,000 200,000 937,700
Transfer from Gas Fund Total $171,100 $171,100 $176,300 $181,000 $186,400 $194,000 $200,000 $937,700
Transfer from Wastewater Collection Fund
WS-02014 Water, Gas, Wastewater Utility GIS
Data 171,100 171,100 176,300 181,000 186,400 194,000 200,000 937,700
Transfer from Wastewater Collection Fund
Total $171,100 $171,100 $176,300 $181,000 $186,400 $194,000 $200,000 $937,700
Total Sources $1,442,200 $1,442,200 $1,481,100 $1,502,100 $1,524,800 $1,506,000 $1,518,000 $7,532,000
USE OF FUNDS
Customer Connections
WS-80013 Water System Customer
Connections 1,072,157 1,072,157 960,500 989,000 1,018,700 1,100,000 1,100,000 5,168,200
Customer Connections Total $1,072,157 $1,072,157 $960,500 $989,000 $1,018,700 $1,100,000 $1,100,000 $5,168,200
Main Replacements
WS-14001 Water Main Replacement - Project
28 1,792,989 1,792,989 0 0 0 0 0 0
WS-15002 Water Main Replacement - Project
29 9,105,861 6,016,759 3,089,102 0 0 0 0 3,089,102
WS-16001 Water Main Replacement - Project
30 425,000 10,000 840,000 8,959,000 0 0 0 9,799,000
WS-19001 Water Main Replacement - Project
31 0 0 0 447,950 472,140 9,952,696 0 10,872,786
WS-20000 Water Main Replacement - Project
32 0 0 0 0 0 485,035 682,207 1,167,242
Main Replacements Total $11,323,850 $7,819,748 $3,929,102 $9,406,950 $472,140 $10,437,731 $682,207 $24,928,130
System Improvements
WS-11003 Water Distribution System
Improvements 769,768 99,380 975,388 314,000 323,000 335,000 345,000 2,292,388
WS-13002 Water General Equipment/Tools 50,000 0 100,000 50,000 50,000 50,000 50,000 300,000
WS-80015 Water Meters 2,100,340 1,988,729 367,440 342,270 407,130 404,930 427,630 1,949,400
WS-07001 Water Recycling Facilities 391,000 0 0 0 0 0 0 0
WATER FUND
632 • CITY OF PALO ALTO FISCAL YEAR 2025 ADOPTED CAPITAL BUDGET
WS-07000 Water Regulation Station
Improvements 1,257,059 1,238,540 18,519 0 0 0 0 18,519
WS-80014 Water Service and Hydrant
Replacement 400,000 369,421 412,000 424,000 437,000 450,000 464,000 2,187,000
WS-11004 Water System Supply Improvements 3,616,440 197,734 4,133,706 366,000 377,000 390,000 402,000 5,668,706
WS-09000 Water Tank Seismic Upgrade and
Rehabilitation 8,019,938 462,167 1,037,832 7,000,000 7,000,000 900,000 1,000,000 16,937,832
WS-02014 Water, Gas, Wastewater Utility GIS
Data 1,021,055 971,055 578,800 544,000 560,000 583,000 600,000 2,865,800
System Improvements Total $17,625,600 $5,327,026 $7,623,685 $9,040,270 $9,154,130 $3,112,930 $3,288,630 $32,219,645
Total Uses $30,021,607 $14,218,931 $12,513,287 $19,436,220 $10,644,970 $14,650,661 $5,070,837 $62,315,975
Water Fund (Continued)
Project
Number Project Title
FY 2024
Budget
FY 2024
Estimate
FY 2025
Adopted FY 2026 FY 2027 FY 2028 FY 2029
5-Year
Total