HomeMy WebLinkAboutStaff Report 2602-5981CITY OF PALO ALTO
Finance Committee
Regular Meeting
Tuesday, April 07, 2026
Agenda Item
1.Recommend City Council Adoption of a Resolution Amending Utility Rate Schedule D-1
(Storm and Surface Water Drainage) Reflecting a 3.0% Consumer Price Index Rate
Increase to $18.14 Per Month Per Equivalent Residential Unit for Fiscal Year 2027; CEQA
Status - Not a Project Staff Presentation
Finance Committee
Staff Report
From: City Manager
Report Type: ACTION ITEMS
Lead Department: Public Works
Meeting Date: April 7, 2026
Report #:2602-5981
TITLE
Recommend City Council Adoption of a Resolution Amending Utility Rate Schedule D-1 (Storm
and Surface Water Drainage) Reflecting a 3.0% Consumer Price Index Rate Increase to $18.14
Per Month Per Equivalent Residential Unit for Fiscal Year 2027; CEQA Status - Not a Project
RECOMMENDATION
Staff recommends that the Finance Committee recommend that the City Council adopt the
attached resolution amending Utility Rate Schedule D-1 (Storm and Surface Water Drainage), to
implement a 3.0% rate increase consistent with the applicable Consumer Price Index, increasing
the monthly charge per Equivalent Residential Unit (ERU) by $0.53, from $17.61 to $18.14 for
Fiscal Year 2027.
BACKGROUND
On April 11, 20171, a majority of Palo Alto property owners approved a ballot measure
authorizing a monthly Stormwater Management Fee to fund storm drain capital improvements
projects, enhanced maintenance of the storm drain system, stormwater quality protection
programs, and more. City Council certified the results of the ballot proceeding on April 17,
2017. The approved ballot measure contains an annual fee escalator clause that permits the
Council to raise the Stormwater Management Fee each year to account for inflationary cost
increases. Specifically, the ballot measure stated that:
“In order to offset the effects of inflation on labor and material costs, the maximum rate for the
Storm Water Management Fee (and each component of the Storm Water Management Fee)
will be increased annually each July 1 (beginning July 1, 2018), by the lesser of (i) the
percentage change in the Consumer Price Index (CPI) for the San Francisco-Oakland-San Jose
CSMA (Consolidated Statistical Metropolitan Area), published by the United States Department
of Labor, Bureau of Labor Statistics during the prior calendar year or (ii) 6%. The City Council
would have the authority to set the rate for the Storm Water Management Fee (and each
1 City Council, April 17, 2017; Agenda Item#3; SR #7937
component of the Storm Water Management Fee) at any rate that is less than or equal to the
inflation adjusted maximum rate.”
3.
ANALYSIS
4 .
The new rate for the Stormwater Management Fee will be $18.14 per month per ERU. Single
family residential properties are billed a monthly amount based on parcel size, in accordance
with Table 1.
Table 1: Residential Rates (Single-Family Residential Properties)
Parcel Size ERU
< 6,000 sq. ft 0.8 ERU
6,000 – 11,000 sq. ft.1.0 ERU
> 11,000 sq. ft.1.4 ERU
3 City Council, June 16, 2025; Agenda Item #22; SR #2411-3776,
4 Utility Rate Schedule D-1; Effective July 1, 2025;
anticipated to be completed at the end of 2026 as well. Center Drive Capacity Upgrades (SD-
26001) design will be done in-house by staff and is anticipated to start in early 2027.
FISCAL/RESOURCE IMPACT
STAKEHOLDER ENGAGEMENT
ENVIRONMENTAL REVIEW
ATTACHMENTS
APPROVED BY:
***NOT YET APPROVED***
1
0014_20260319_mv30
Resolution No. ______
Resolution of the Council of the City of Palo Alto Amending Utility Rate
Schedule D-1 (Storm and Surface Water Drainage) to Increase Storm
Water Management Fee Rates by 3.0% Per Month Per Equivalent
Residential Unit for Fiscal Year 2027
R E C I T A L S
A. In April 2017, a majority of property owners approved a ballot measure adopting a
monthly Storm Water Management Fee to fund storm drain capital improvements
projects, enhanced maintenance of the storm drain system, storm water quality
protection programs, and related activities.
B. The ballot measure allowed for annual increases to the fee based on lesser of the local
rate of inflation (based on changes to the Consumer Price Index for the San Francisco-
Oakland-San Jose region as published by the Bureau of Labor Statistics) or 6%.
C. According to the Bureau of Labor Statistics, the Consumer Price Index for the San
Francisco-Oakland-San Jose region increased by 3.0% between December 2024 and
December 2025.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF PALO ALTO RESOLVES AS FOLLOWS:
SECTION 1. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate
Schedule D-1 (Storm and Surface Water Drainage) is hereby amended to read in accordance with
sheet D-1-1, attached hereto and incorporated herein. The foregoing Utility Rate Schedule, as
amended, shall become effective July 1, 2026.
SECTION 2. The Council finds that this rate increase is being imposed to offset the
effects of inflation on labor and material costs pursuant to the annual inflationary fee escalator
provision of the Storm Water Management Fee ballot measure, which was approved by a
majority of Palo Alto property owners on April 11, 2017.
SECTION 3. The Council finds that the revenue derived from the authorized adoption
enumerated herein shall be used only for the purpose set forth in Article VII, Section 2, of the
Charter of the City of Palo Alto.
//
//
//
//
***NOT YET APPROVED***
2
0014_20260319_mv30
SECTION 4. The Council finds that the adoption of this resolution changing the Storm
Water Management Fee to meet operating expenses, purchase supplies and materials, meet
financial reserve needs and obtain funds for capital improvements necessary to maintain service
is not subject to the California Environmental Quality Act (CEQA), pursuant to California Public
Resources Code Sec. 21080(b)(8) and Title 14 of the California Code of Regulations Sec.
15378(b)(4). After reviewing the staff report and all attachments presented to Council, the
Council incorporates these documents herein and finds that sufficient evidence has been
presented setting forth with specificity the basis for this claim of CEQA exemption.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
Assistant City Attorney City Manager
Director of Public Works
Director of Administrative Services
GENERAL STORM AND SURFACE WATER DRAINAGE
UTILITY RATE SCHEDULE D-1
A. APPLICABILITY:
This schedule applies to all Storm and Surface Water Drainage Service, excepting only those
users and to the extent that they are constitutionally exempt under the Constitution of the
State of California or who are determined to be exempt pursuant to Rule and Regulation 25.
B. TERRITORY:
Inside the incorporated limits of the city of Palo Alto and land owned or leased by the City.
C. RATES:
Per Month:
Storm Water Management Fee per Equivalent Residential Unit (ERU) .......................... $18.14
D. SPECIAL NOTES:
1. An Equivalent Residential Unit (ERU) is the basic unit for computation of storm
drainage fees for residential and non-residential Customers. All single-family
residential properties shall be billed the number of ERUs specified in the following
table, based on an analysis of the relationship between impervious area and lot size for
Palo Alto properties.
RESIDENTIAL RATES (Single-Family Residential Properties
PARCEL SIZE (sq.ft.) ERU
<6,000 sq.ft. 0.8 ERU
6,000 - 11,000 sq.ft. 1.0 ERU
>11,000 sq.ft. 1.4 ERU
All other properties will have ERUs computed to the nearest 1/10 ERU using the
following formula:
No. of ERU = Impervious Area (Sq. Ft.)
2,500 Sq. Ft.
2. For more details on the Storm Water Management Fee, refer to Utilities Rule and
Regulation 25.
{End}
CITY OF PALO ALTO UTILITIES
Issued by the City Council
GENERAL STORM AND SURFACE WATER DRAINAGE
UTILITY RATE SCHEDULE D-1
Effective 7-1-2026
Supersedes Sheet No.D-1-1 dated 7-1-2025 Sheet No. D-1-1
April 7, 2026 www.PaloAlto.gov
STORMWATER MANAGEMENT FEE
FY 2027 Proposed Rate
2
•A Base Component ~ 55% fund ongoing stormwater management
programs
•Litter and Water Pollution Prevention Programs
•Engineering staff
•Storm drain system maintenance and emergency response
•Projects and Infrastructure Component ~45% - sunsets on June 1, 2032
•New capital projects (13 voter approved projects)
•Storm system replacement and rehabilitation
•Green stormwater infrastructure and innovative programs
•Debt service for past capital projects ended payment in FY2024
Stormwater Management Fee
2
Capital Projects
funded by the
Stormwater
Management Fee
3
4
Proposed Rate
•3% increase in alignment with the applicable Consumer Price Index
Financial Impact
•Increases monthly charge per Equivalent Residential Unit (ERU) by $0.53 from
$17.61 to $18.14
•Increases estimated annual revenue by approximately $270,000
FY 2027 Proposed Rate Increase & Impact