HomeMy WebLinkAboutRESO 102971
027060226
Resolution No. 10297
Resolution of the Council of the City of Palo Alto Approving the FY 2027 Water
Utility Financial Forecast and Reserve Transfer, and Amending Rate Schedules
W-1 (General Residential Water Service), W-2 (Water Service from Fire
Hydrants), W-3 (Fire Service Connections), W-4 (Residential Master-Metered
and General Non-Residential Water Service), and W-7 (Non-Residential
Irrigation Water Service)
R E C I T A L S
A. Each year the City of Palo Alto (“City”) assesses the financial position of its
utilities with the goal of ensuring adequate revenue to fund operations. This includes making
long-term projections of market conditions, the physical condition of the system, and other
factors that could affect utility costs, and setting rates adequate to recover these costs. The
City does this with the goal of providing safe, reliable, and sustainable utility services at
competitive rates. The City adopts Financial Plans or Forecasts to summarize these
projections.
B.The City uses reserves to protect against contingencies and to manage other
aspects of its operations, and regularly assesses the adequacy of these reserves and the
management practices governing their operation. The status of utility reserves and their
management practices are included in Reserves Management Practices (Attachment A,
Exhibit 3) and Water Utility Financial Details (Attachment A, Exhibit 2) attached to this
resolution and made a part of the staff report presented to the City Council.
C.Pursuant to Chapter 12.20.010 of the Palo Alto Municipal Code, the Council of
the City of Palo Alto may by resolution adopt rules and regulations governing utility
services, fees and charges.
D.On June 15, 2026, the City Council held a full and fair public hearing
regarding the proposed rate increase and considered all protests against the
proposals.
E.As required by Article XIII D, Section 6 of the California Constitution and
applicable law, notice of the June 15, 2026 public hearing was mailed to all City of Palo Alto
Utilities water customers on April 30, 2026.
F.The City Clerk has tabulated the total number of written protests presented
by the close of the public hearing, and determined that it was less than fifty percent (50%)
of the total number of customers and property owners subject to the proposed water
rate amendments, therefore a majority protest does not exist against the proposal.
The Council of the City of Palo Alto RESOLVES as follows:
Docusign Envelope ID: E7D125DF-2201-8490-802B-13B477564AE4
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027060226
SECTION 1. The Council hereby approves the Reserves Management Practices
(Attachment A, Exhibit 3) and Water Utility Financial Details (Attachment A, Exhibit 2)
presented to City Council on June 15, 2026, which are attached to this resolution and made a
part of the staff report presented to the City Council.
SECTION 2. The Council hereby approves the transfer of up to $5,500,000 from the
Operations Reserve to the CIP Reserve in FY 2026, as described in the FY 2027 Water Utility
Financial Forecast.
SECTION 3. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility
Rate Schedule W-1 (General Residential Water Service) is hereby amended to read as shown
in Attachment A, Exhibit 1. Utility Rate Schedule W-1, as amended, shall become effective
July 1, 2026.
SECTION 4. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code,
Utility Rate Schedule W-2 (Water Service from Fire Hydrants) is hereby amended to read
as shown in Attachment A, Exhibit 1. Utility Rate Schedule W-2, as amended, shall
become effective July 1, 2026.
SECTION 5. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate
Schedule W-3 (Fire Service Connections) is hereby amended to read shown in Attachment A,
Exhibit 1. Utility Rate Schedule W-3, as amended, shall become effective July 1, 2026.
SECTION 6. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility
Rate Schedule W-4 (Residential Master-Metered and General Non-Residential Water
Service) is hereby amended to read as shown in Attachment A, Exhibit 1. Utility Rate
Schedule W-4, as amended, shall become effective July 1, 2026.
SECTION 7. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility
Rate Schedule W-7 (Non-Residential Irrigation Water Service) is hereby amended to read
as shown in Attachment A, Exhibit 1. Utility Rate Schedule W-7, as amended, shall become
effective July 1, 2026.
SECTION 8. The City Council finds as follows:
a.Revenues derived from the water rates approved by this resolution do not exceed
the funds required to provide water service.
b.Revenues derived from the water rates approved by this resolution shall not be used
for any purpose other than providing water service, and the purposes set forth in
Article VII, Section 2, of the Charter of the City of Palo Alto, consistent with any
limitations imposed by Article XIII C and Article XIII D of the California Constitution.
c.The amount of the water rates imposed upon any parcel or person as an incident of
property ownership shall not exceed the proportional cost of the water service
attributable to the parcel.
Docusign Envelope ID: E7D125DF-2201-8490-802B-13B477564AE4
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027060226
SECTION 9. The Council finds that the fees and charges adopted by this resolution are
charges imposed for a specific government service or product provided directly to the payor
that are not provided to those not charged, and do not exceed the reasonable costs to the City
of providing the service or product.
SECTION 10. The Council finds that the adoption of this resolution approving the FY
2027 Water Financial Forecast and Reserve transfers does not meet the California
Environmental Quality Act’s (CEQA) definition of a project under Public Resources Code
Section 21065 and CEQA Guidelines Section 15378(b)(5), because it is an administrative
governmental activity which will not cause a direct or indirect physical change in the
environment, and therefore, no environmental review is required. The Council finds that
the adoption of this resolution changing water rates 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. 15273(a). 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: JUNE 15, 2026
AYES: BURT, LAUING, LU, LYTHCOTT-HAIMS, RECKDAHL, STONE, VEENKER
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
Assistant City Attorney City Manager
Director of Utilities
Director of Administrative Services
Docusign Envelope ID: E7D125DF-2201-8490-802B-13B477564AE4
GENERAL RESIDENTIAL WATER SERVICE
UTILITY RATE SCHEDULE W-1
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No W-1-1 Effective 7-1-20265
dated 7-1-20242025 Sheet No W-1-1
A.APPLICABILITY:
This schedule applies to separately metered single-family residential dwellings receiving Water
Service from the City of Palo Alto Utilities.
B.TERRITORY:
This schedule applies everywhere the City of Palo Alto provides Water Service.
C.RATES:
Per Meter
Monthly Service Charge: Per Month
For meters 5/8-inch to 1 inch ....................................................................................$ 29.92 27.63
For 1 1/2 inch meter .................................................................................................. 96.69 89.28
For 2-inch meter ........................................................................................................ 149.57 138.11
For 3-inch meter ........................................................................................................ 317.04 292.75
For 4-inch meter ........................................................................................................ 563.87 520.66
For 6-inch meter ........................................................................................................ 1,154.44
1,065.97
For 8-inch meter ........................................................................................................ 2,124.06
1,961.28
For 10-inch meter ...................................................................................................... 3,358.10
3,100.74
For 12-inch meter ....................................................................................................... 4,415.87
4,077.45
Per Hundred
Cubic Feet
Volumetric Rates: (To be added to Service Charge, applicable to all pressure zones.) Per Month
Commodity Rate:
Water Delivery Charge from SFPUC ......................................................................... $ 6.235.80
Attachment A, Exhibit 1Docusign Envelope ID: E7D125DF-2201-8490-802B-13B477564AE4
GENERAL RESIDENTIAL WATER SERVICE
UTILITY RATE SCHEDULE W-1
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No W-1-2 Effective 7-1-20265
dated 7-1-20242025 Sheet No W-1-2
Distribution Rate:
Tier 1 usage ........................................................................................................................ $
3.773.49
Tier 2 usage (All usage over 100% of Tier 1) .......................................................................
8.818.14
Drought Surcharges (deactivated):
A drought surcharge will be added to the Customer’s applicable commodity rate for Tier 1 and
Tier 2 Water usage when the City Council has determined that a Water reduction level is in effect
for the City as described in Section D.4. The drought surcharges in the table below are measured
in dollars per hundred cubic feet (ccf).
Water Usage
Reduction level Level 1 (10/15%) Level 2 (20%) Level 3 (25%)
Tier 1 0.20 0.43 0.64
Tier 2 0.58 1.21 1.85
Temporary Service – Developers
Temporary unmetered service to residential
subdivision developers, per connection ........................................................................ $ 6.00
D. SPECIAL NOTES:
1. Calculation of Cost Components
The actual bill amount is calculated based on the applicable rates in Section C above and
adjusted for any applicable discounts, surcharges and/or taxes. On a Customer’s bill
statement, the bill amount may be broken down into appropriate components as
calculated under Section C.
2. Commodity Rate
The Commodity Charge is based on the water delivery rate per the San Francisco Public
Attachment A, Exhibit 1Docusign Envelope ID: E7D125DF-2201-8490-802B-13B477564AE4
GENERAL RESIDENTIAL WATER SERVICE
UTILITY RATE SCHEDULE W-1
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No W-1-3 Effective 7-1-20265
dated 7-1-20242025 Sheet No W-1-3
Utility Commission (SFPUC) Water Rate Schedule W-25: Wholesale Use with Long-Term
Contract. The Commodity Charge will be passed through automatically via periodic rate
adjustments to account for increases in wholesale water charges, as well as inflation. The
pass-through period will be effective for fiscal years 2025 through 2029, inclusive.
Customers will be provided notice of any adjustments via their billing statements or by any
other mailing by CPAU to the customer’s regular billing address.
3. Calculation of Usage Tiers
Tier 1 Water usage shall be calculated and billed based upon a level of 0.2 ccf per day
rounded to the nearest whole ccf, based on Meter reading days of Service. As an
example, for a 30-day bill, the Tier 1 level would be 0 through 6 ccf. For further
discussion of bill calculation and proration, refer to Rule and Regulation 11.
4. Drought Surcharge
During period of Water shortage or restrictions on local Water use, the City Council may,
by resolution, declare the need for citywide Water conservation at the 10/15%, 20% or
25% level. While such a resolution is in effect, a drought surcharge will apply. The
purpose of the drought surcharge is to recover revenues lost as a result of reduced
consumption.
{End}
Attachment A, Exhibit 1Docusign Envelope ID: E7D125DF-2201-8490-802B-13B477564AE4
WATER SERVICE FROM FIRE HYDRANTS
UTILITY RATE SCHEDULE W-2
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No W-2-1 Effective 7-1-20252026
dated 7-1-20242025 Sheet No W-2-1
A. APPLICABILITY:
This schedule applies to all Water taken from fire hydrants for construction, maintenance, and
other uses in conformance with provisions of a Hydrant Meter Permit.
B. TERRITORY:
This schedule applies everywhere the City of Palo Alto provides Water Service.
C. RATES:
1. Monthly Service Charge.
METER SIZE
5/8 inch ........................................................................................................................... $ 50.00
3 inch ........................................................................................................................... 125.00
2. Volumetric Rate: (per hundred cubic feet)
Commodity Rate:
Water Delivery Charge from SFPUC ................................................................ $ 6.235.80
Distribution Rate: ........................................................................................................... $ 5.324.92
4. Drought Surcharges (deactivated):
A drought surcharge will be added to the Customer’s applicable Commodity rate when the City
Council has determined that a Water reduction level is in effect for the City as described in
Section D.6. The drought surcharges in the table below are measured in dollars per hundred
cubic feet (ccf).
Water Usage
Reduction level Level 1 (10/15%) Level 2 (20%) Level 3 (25%)
Surcharge 0.26 0.53 0.77
Attachment A, Exhibit 1Docusign Envelope ID: E7D125DF-2201-8490-802B-13B477564AE4
WATER SERVICE FROM FIRE HYDRANTS
UTILITY RATE SCHEDULE W-2
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No W-2-2 Effective 7-1-20252026
dated 7-1-20242025 Sheet No W-2-2
D. SPECIAL NOTES:
1. Monthly charges shall include the applicable monthly Service Charge in addition to usage billed
at the commodity rate.
2. The Commodity Charge is based on the water delivery rate per the San Francisco Public Utility
Commission (SFPUC) Water Rate Schedule W-25: Wholesale Use with Long-Term Contract.
The Commodity Charge will be passed through automatically via periodic rate adjustments to
account for increases in wholesale water charges, as well as inflation. The pass-through period
will be effective for fiscal years 2025 through 2029, inclusive. Customers will be provided notice
of any adjustments via their billing statements or by any other mailing by CPAU to the
customer’s regular billing address.
3. Any person or company using a hydrant without first obtaining a valid Hydrant Meter Permit
shall pay a fee of $50.00 for each day of such use in addition to all other costs and fees provided
in this schedule. A hydrant permit may be denied or revoked for failure to pay such fee.
4. A Meter deposit of $750.00 may be charged any applicant for a Hydrant Meter Permit as a
prerequisite to the issuance of a permit and Meter(s). A charge of $50.00 per day will be added
for delinquent return of hydrant Meters. A fee will be charged for any Meter returned with
missing or damaged parts.
5. Any person or company using a fire hydrant improperly or without a permit, or who draws Water
from a hydrant without a Meter installed and properly recording usage shall, in addition to all
other applicable charges be subject to criminal prosecution pursuant to the Palo Alto Municipal
Code.
6. During period of Water shortage or restrictions on local Water use, the City Council may, by
resolution, declare the need for citywide Water conservation at the 10/15%, 20% or 25% level.
While such a resolution is in effect, a drought surcharge will apply. The purpose of the drought
surcharge is to recover revenues lost as a result of reduced consumption.
{End}
Attachment A, Exhibit 1Docusign Envelope ID: E7D125DF-2201-8490-802B-13B477564AE4
FIRE SERVICE CONNECTIONS
UTILITY RATE SCHEDULE W-3
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No W-3-1 Effective 7-1-20252026
dated 7-1-2024 2025 Sheet No W-3-1
A. APPLICABILITY:
This schedule applies to all public fire hydrants and private fire Service connections.
B. TERRITORY:
This schedule applies everywhere the City of Palo Alto provides Water Service.
C. RATES:
1. Monthly Service Charges
Public Fire Hydrant .................................................................................................... $ 5.00
Private Fire Service:
2-inch connection .......................................................................................................$ 6.15
5.68
4-inch connection ....................................................................................................... 38.14
35.22
6-inch connection ....................................................................................................... 110.81
102.32
8-inch connection ....................................................................................................... 236.16
218.07
10-inch connection ..................................................................................................... 424.74
392.19
12-inch connection ..................................................................................................... 686.08
633.50
2. Commodity (To be added to Service Charge unless Water is used for fire extinguishing or
testing purposes.)
Per Hundred Cubic Feet
All water usage ..........................................................................................................$ 10.00
D. SPECIAL NOTES:
1. Service under this schedule may be discontinued if Water is used for any purpose other
than fire extinguishing or testing and repairing the fire extinguishing facilities. Using
hydrants and fire Services for other purposes is illegal and will be subject to the
Attachment A, Exhibit 1Docusign Envelope ID: E7D125DF-2201-8490-802B-13B477564AE4
FIRE SERVICE CONNECTIONS
UTILITY RATE SCHEDULE W-3
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No W-3-2 Effective 7-1-20252026
dated 7-1-2024 2025 Sheet No W-3-2
commodity charge as noted above, fines, and criminal prosecution pursuant to the Palo
Alto Municipal Code.
2. For a combination Water and fire Service, the Water Service schedule shall apply.
3. Utilities Rule and Regulation No. 21 provides additional information on Automatic Fire
Services.
4. Repairs and testing of fire extinguishing facilities are not considered unauthorized use of
Water if records and documentation are supplied by the Customer.
{End}
Attachment A, Exhibit 1Docusign Envelope ID: E7D125DF-2201-8490-802B-13B477564AE4
RESIDENTIAL MASTER-METERED AND
GENERAL NON-RESIDENTIAL WATER SERVICE
UTILITY RATE SCHEDULE W-4
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No W-4-1 Effective 7-1-20265
dated 7-1-20254 Sheet No W-4-1
A. APPLICABILITY:
This schedule applies to Water Services to non-residential buildings, and multi-family residential
dwellings served through a Master-Meter.
B. TERRITORY:
This schedule applies everywhere the City of Palo Alto provides Water Service.
C. RATES:
Per Meter
Monthly Service Charge Per Month
For 5/8-inch meter .................................................................................... $ 26.16 24.16
For 3/4-inch meter .................................................................................... 34.99 32.31
For 1-inch meter .................................................................................... 52.62 48.59
For 1 ½-inch meter .................................................................................... 96.69 89.28
For 2-inch meter .................................................................................... 149.57 138.11
For 3-inch meter .................................................................................... 317.04 292.75
For 4-inch meter .................................................................................... 563.87 520.66
For 6-inch meter .................................................................................... 1,154.44
1,065.97
For 8-inch meter .................................................................................... 2,124.06
1,961.28
For 10-inch meter .................................................................................... 3,358.10
3,100.74
For 12-inch meter .................................................................................... 4,415.87
4,077.45
Per Hundred
Cubic Feet
Volumetric Rates: (to be added to Service Charge, applicable to all pressure zones) Per Month
Commodity Rate:
Water Delivery Charge from SFPUC ...................................................... $ 6.235.80
Distribution Rate: ........................................................................................... 5.324.92
Attachment A, Exhibit 1Docusign Envelope ID: E7D125DF-2201-8490-802B-13B477564AE4
RESIDENTIAL MASTER-METERED AND
GENERAL NON-RESIDENTIAL WATER SERVICE
UTILITY RATE SCHEDULE W-4
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No W-4-2 Effective 7-1-20265
dated 7-1-20254 Sheet No W-4-2
Drought Surcharges (deactivated):
A drought surcharge will be added to the Customer’s applicable commodity rate when the City
Council has determined that a Water reduction level is in effect for the City as described in
Section D.3. The drought surcharges in the table below are measured in dollars per hundred
cubic feet (ccf).
Water Usage
Reduction level Level 1 (10/15%) Level 2 (20%) Level 3 (25%)
Surcharge 0.26 0.53 0.77
D. SPECIAL NOTES:
1. Calculation of Cost Components
The actual bill amount is calculated based on the applicable rates in Section C above and
adjusted for any applicable discounts, surcharges and/or taxes. On a Customer’s bill
statement, the bill amount may be broken down into appropriate components as
calculated under Section C.
2. Commodity Rate
The Commodity Charge is based on the water delivery rate per the San Francisco Public
Utility Commission (SFPUC) Water Rate Schedule W-25: Wholesale Use with Long-Term
Contract. The Commodity Charge will be passed through automatically via periodic rate
adjustments to account for increases in wholesale water charges, as well as inflation. The
pass-through period will be effective for fiscal years 2025 through 2029, inclusive.
Customers will be provided notice of any adjustments via their billing statements or by any
other mailing by CPAU to the customer’s regular billing address.
3. Drought Surcharge
During period of Water shortage or restrictions on local Water use, the City Council may,
by resolution, declare the need for citywide Water conservation at the 10/15%, 20% or
Attachment A, Exhibit 1Docusign Envelope ID: E7D125DF-2201-8490-802B-13B477564AE4
RESIDENTIAL MASTER-METERED AND
GENERAL NON-RESIDENTIAL WATER SERVICE
UTILITY RATE SCHEDULE W-4
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No W-4-3 Effective 7-1-20265
dated 7-1-20254 Sheet No W-4-3
25% level. While such a resolution is in effect, a drought surcharge will apply. The
purpose of the drought surcharge is to recover revenues lost as a result of reduced
consumption.
{End}
Attachment A, Exhibit 1Docusign Envelope ID: E7D125DF-2201-8490-802B-13B477564AE4
NON-RESIDENTIAL IRRIGATION WATER SERVICE
UTILITY RATE SCHEDULE W-7
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No W-7-1 Effective 7-1-20252026
dated 7-1-20254 Sheet No W-7-1
A. APPLICABILITY:
This schedule applies to non-residential Water Service supplying dedicated irrigation Meters.
B. TERRITORY:
This schedule applies everywhere the City of Palo Alto provides Water Services.
C. RATES:
Per Meter
Monthly Service Charge Per Month
For 5/8-inch meter .................................................................................... $ 26.16 24.16
For 3/4-inch meter .................................................................................... 34.99 32.31
For 1-inch meter .................................................................................... 52.62 48.59
For 1 1/2 inch meter .................................................................................... 96.69 89.28
For 2-inch meter .................................................................................... 149.57 138.11
For 3-inch meter .................................................................................... 317.04 292.75
For 4-inch meter .................................................................................... 563.87 520.66
For 6-inch meter .................................................................................... 1,154.44
1,065.97
For 8-inch meter .................................................................................... 2,124.06
1,961.28
For 10-inch meter .................................................................................... 3,358.10
3,100.74
For 12-inch meter .................................................................................... 4,415.87
4,077.45
Per Hundred
Cubic Feet
Volumetric Rates: (to be added to Service Charge, applicable to all pressure zones) Per Month
Commodity Rate:
Water Delivery Charge from SFPUC ........................................................... $ 6.235.80
Distribution Rate: ..................................................................................................... 8.117.49
Attachment A, Exhibit 1Docusign Envelope ID: E7D125DF-2201-8490-802B-13B477564AE4
NON-RESIDENTIAL IRRIGATION WATER SERVICE
UTILITY RATE SCHEDULE W-7
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No W-7-2 Effective 7-1-20252026
dated 7-1-20254 Sheet No W-7-2
Drought Surcharges (deactivated):
A drought surcharge will be added to the Customer’s applicable commodity rate when the City
Council has determined that a Water reduction level is in effect for the City as described in Section
D.3. The drought surcharges in the table below are measured in dollars per hundred cubic feet
(ccf).
Water Usage
Reduction level Level 1 (10/15%) Level 2 (20%) Level 3 (25%)
Surcharge 0.53 1.25 2.02
D. SPECIAL NOTES:
1. Calculation of Cost Components
The actual bill amount is calculated based on the applicable rates in Section C above and
adjusted for any applicable discounts, surcharges and/or taxes. On a Customer’s bill
statement, the bill amount may be broken down into appropriate components as
calculated under Section C.
2. Commodity Rate
The Commodity Charge is based on the water delivery rate per the San Francisco Public
Utility Commission (SFPUC) Water Rate Schedule W-25: Wholesale Use with Long-Term
Contract. The Commodity Charge will be passed through automatically via periodic rate
adjustments to account for increases in wholesale water charges, as well as inflation. The
pass-through period will be effective for fiscal years 2025 through 2029, inclusive.
Customers will be provided notice of any adjustments via their billing statements or by any
other mailing by CPAU to the customer’s regular billing address.
3. Drought Surcharge
During period of Water shortage or restrictions on local Water use, the City Council may,
by resolution, declare the need for citywide Water conservation at the 10/15%, 20% or
25% level. While such a resolution is in effect, a drought surcharge will apply. The
purpose of the drought surcharge is to recover revenues lost as a result of reduced
consumption.
Attachment A, Exhibit 1Docusign Envelope ID: E7D125DF-2201-8490-802B-13B477564AE4
NON-RESIDENTIAL IRRIGATION WATER SERVICE
UTILITY RATE SCHEDULE W-7
CITY OF PALO ALTO UTILITIES
Issued by the City Council
Supersedes Sheet No W-7-3 Effective 7-1-20252026
dated 7-1-20254 Sheet No W-7-3
{End}
Attachment A, Exhibit 1Docusign Envelope ID: E7D125DF-2201-8490-802B-13B477564AE4
The Water Utility Financial Details have been updated since the March 17, 2026 version
reviewed by the Finance Committee;1 the specific changes are summarized in Staff Report
2602-5894. This exhibit contains the following tables:
•Table 1: Updated June 15, 2026 Council Version of the Water Utility Financial Details. Key
Updated Numbers Shown in Red.
•Table 2: Water Utility CIP Details.
•Table 3: March 17, 2026 Finance Committee Version of the Water Utility Financial Details for
Reference.
1 Finance Committee Meeting Agenda March 17, 2026, Item 2:
https://cityofpaloalto.primegov.com/Portal/Meeting?meetingTemplateId=18550
Attachment A, Exhibit 2Docusign Envelope ID: E7D125DF-2201-8490-802B-13B477564AE4
1 FISCAL YEAR FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031
2 Projected
3 WATER SUPPLY
4 Purchases (CCF)4,757,199 4,785,384 4,709,184 4,210,399 4,419,628 4,543,561 4,427,313 4,510,198 4,510,993 4,458,595 4,437,643 4,403,541
5 Sales (CCF)4,670,827 4,770,922 4,458,594 3,866,832 4,146,876 4,275,199 4,171,209 4,203,938 4,204,679 4,155,839 4,136,310 4,104,523
6
7 BILL AND RATE CHANGES
8 Variable Charge (Supply)0%0%0%16%10%9%2%7%8%3%2%4%
9 Residential Variable Charge (Distribution)1%0%0%4%2%10%17%8%11%13%9%7%
10 System Average Rate 1%0%0%5%5%10%10%8%9%9%7%6%
11 Average Customer Bill (projected)10%8%9%9%7%6%
12
13 STARTING RESERVES
14 Reappropriations (Non-CIP)258,000 70,000 41,000 - - - - - - - - -
15 Commitments (Non-CIP)442,000 796,000 444,000 1,766,000 2,737,000 2,663,000 776,447 - - - - -
16 Restricted for Debt Service 3,260,000 3,260,000 2,906,000 2,906,000 2,813,000 2,678,000 2,552,181 2,552,181 2,552,181 2,552,181 2,552,181 2,552,181
17 Emergency Plant Replacement - - - - - - - - - - - -
18 Reappropriations & Commitments 15,090,505 11,036,000 10,147,000 12,168,000 16,066,000 12,245,000 6,026,222 4,452,820 - - - -
19 Capital Reserve 2,726,096 5,726,096 10,082,345 9,546,942 6,961,000 3,500,000 3,500,000 9,000,000 11,000,000 11,000,000 11,000,000 11,000,000
20 Rate Stabilization Reserve 4,069,437 9,069,437 9,069,437 9,069,437 6,069,000 4,000,000 4,000,437 4,000,437 3,000,437 2,000,437 1,000,437 437
21 Operations Reserve 12,839,358 13,664,023 14,081,995 13,829,986 7,957,000 7,076,000 16,351,229 12,175,184 12,305,405 9,546,420 9,829,520 12,323,101
22 Unassigned 7,384,714 5,171,932 6,263,962 162,355 - - - - - - - -
23 TOTAL STARTING RESERVES 46,070,109 48,793,488 53,035,739 49,448,720 42,603,000 32,162,000 33,206,517 32,180,623 28,858,024 25,099,039 24,382,138 25,875,719
24
25 REVENUES
26 Net Sales 47,136,524 47,434,047 44,058,867 42,570,047 48,085,282 54,456,483 57,398,178 62,363,940 68,227,216 73,819,339 78,264,195 82,250,394
28 TOTAL REVENUES 51,063,831 50,728,489 47,009,457 45,190,422 51,962,056 58,575,091 60,897,213 65,802,372 72,976,481 78,617,220 83,098,596 87,120,989
29
30 EXPENSES
31 Water Purchases 21,773,295 21,935,250 21,248,651 21,744,025 24,651,258 27,856,127 27,610,334 29,937,531 32,053,968 32,787,836 33,381,888 34,522,974
32 Operating Expenses
33 Administration
34 3,751,618 3,848,781 4,181,415 4,176,701 5,236,342 4,456,214 4,991,285 5,165,275 5,320,233 5,479,840 5,644,236 5,813,563
35 1,904,070 2,225,372 2,270,000 2,365,000 2,483,250 2,243,500 2,310,800 2,410,164 2,482,469 2,556,943 2,633,652 2,712,661
36 3,220,638 3,222,843 3,219,993 3,222,938 3,220,173 3,219,316 3,219,331 2,563,683 2,565,598 2,563,503 2,566,323 2,563,493
37
Allocated Charges
Rent1
Debt Service
Transfers and Other Adjustments 474,953 267,645 137,903 945,092 1,822,487 67,340 1,333,007 1,484,566 1,147,680 1,036,122 1,171,775 1,123,320
38 Subtotal, Administration 9,351,279 9,564,641 9,809,311 10,709,731 12,762,252 9,986,370 11,854,422 11,623,689 11,515,981 11,636,409 12,015,986 12,213,037
39 Resource Management 1,159,106 1,215,567 1,261,514 1,590,945 1,427,567 1,105,116 1,383,954 1,432,654 1,475,633 1,519,902 1,565,499 1,612,464
40 Operations and Mtc 7,010,251 7,400,625 7,195,632 7,531,468 9,121,406 8,616,998 10,077,228 10,279,613 10,838,002 11,163,142 11,498,036 11,842,977
41 Engineering (Operating)401,902 662,832 492,438 508,307 637,696 652,361 1,051,982 1,333,790 1,373,803 1,415,017 1,457,468 1,501,192
42 Customer Service 1,865,571 2,053,820 2,058,662 2,272,586 2,541,599 2,663,930 2,997,389 2,995,953 3,085,832 3,178,406 3,273,759 3,371,971
44
45 TOTAL OPERATING EXPENSES 41,561,404 42,832,735 42,066,208 44,357,062 51,141,778 50,880,904 54,975,310 57,603,229 60,343,219 61,700,713 63,192,636 65,064,615
46
47 Capital Contributions^6,737,917 4,356,249 10,015,866 12,432,100 4,766,278 6,245,118 10,097,948 9,068,921 16,392,247 17,633,407 18,412,380 18,568,203
48 TOTAL EXPENSES 48,299,320 47,188,984 52,082,074 56,789,162 55,908,056 57,126,022 65,073,258 66,672,151 76,735,466 79,334,120 81,605,015 83,632,818
49
50 ENDING RESERVES
51 Reappropriations (Non-CIP)70,000 41,000 - - - - - - - - - -
52 Commitments (Non-CIP)796,000 444,000 1,766,000 2,737,000 2,663,000 776,447 - - - - - -
53 Restricted for Debt Service 3,260,000 2,906,000 2,906,000 2,813,000 2,678,000 2,552,181 2,552,181 2,552,181 2,552,181 2,552,181 2,552,181 2,552,181
54 Emergency Plant Replacement - - - - - - - - - - - -
Table 1: Water Utility Financial Forecast
Updated June 15, 2026 Council Version of the Water Utility Financial Forecast. Key Updated Numbers Shown in Red.
Attachment A, Exhibit 2
1. Rent expense assumptions are based on the 2020 Appraisal and annual escalation factors.
Docusign Envelope ID: E7D125DF-2201-8490-802B-13B477564AE4
55 Reappropriations & Commitments 11,036,000 10,147,000 12,168,000 16,066,000 12,245,000 6,026,222 4,452,820 4,000,000 3,000,000 3,000,000 3,000,000 3,000,000
56 Capital Reserve 5,726,096 10,082,345 9,546,942 6,961,000 3,500,000 3,500,000 9,000,000 11,000,000 11,000,000 11,000,000 11,000,000 13,500,000
57 Rate Stabilization Reserve 9,069,437 9,069,437 9,069,437 6,069,000 4,000,000 4,000,437 4,000,437 3,000,437 2,000,437 1,000,437 437 437
58 Operations Reserve 13,664,023 14,081,995 13,829,986 7,957,000 7,076,000 16,351,229 12,175,184 12,305,405 9,546,420 9,829,520 12,323,101 15,811,272
59 Unassigned 5,171,932 6,263,962 162,355 - - - - - - - - -
60 TOTAL ENDING RESERVES 48,793,488 53,035,739 49,448,720 42,603,000 32,162,000 33,206,517 32,180,623 32,858,024 28,099,039 27,382,138 28,875,719 34,863,890
61
62 OPERATIONS RESERVE
63 Min (60 days of non-capital expenses)6,832,012 7,040,997 6,914,993 7,291,572 8,406,868 8,363,984 9,037,037 9,469,024 9,919,433 10,142,583 10,387,831 10,695,553
64 Target (90 days of non-capital expenses)10,248,017 10,561,496 10,372,490 10,937,358 12,610,301 12,545,976 13,555,556 14,203,536 14,879,150 15,213,874 15,581,746 16,043,330
65 Max (120 days of non-capital expenses)13,664,023 14,081,995 13,829,986 14,583,144 16,813,735 16,727,968 18,074,075 18,938,048 19,838,867 20,285,166 20,775,661 21,391,106
66
67 Bond Covenants
68 Available Reserves (5x Maximum Annual Debt Service)*15.9 14.5 8.1 5.8 6.7 7.4
Attachment A, Exhibit 2Docusign Envelope ID: E7D125DF-2201-8490-802B-13B477564AE4
1 Project #Project Name
Reappropriated & Carried
Current Year Current Year Current Year Reappropriation at Transfer to CIP FY 2027 (Budget)
2 ONE TIME PROJECTS 7 20 21 27 40 41 42 43 44
3
4
5
6 Subtotal, One-time Projects 1,560,518 2,691,092 300,000 - 100,000 2,391,092 933,186 833,186 1,950,000 10,176,512 - 7,776,412
7 WATER MAIN REPLACEMENT PROGRAM
8
9
10
11
12
13
14 Subtotal, Water Main Replacement Prog.751,979 4,783,569 10,332 - 3,500,000 1,273,237 3,500,000 - 5,450,000 524,507 11,056,610 582,683
15 Project #Project Name
Reappropriated / Carried Current Year Current Year Current Year Reappropriation Transfer to CIP FY 2027 (Budget)
16 ONGOING PROJECTS
17
18
19
20
21
22
23
24 3,698,809 7,152,500 2,749,560 2,151,197 852,820 2,950,120 4,333,272 3,480,452 6,109,940 3,972,528 4,382,729 4,616,696
25 CUSTOMER CONNECTIONS (FEE FUNDED)
26
27 Subtotal, Customer Connections 14,917 956,908 956,908 941,991 1,185,308 1,185,308 1,265,232 1,294,274 1,257,487 1,325,391
28 GRAND TOTAL 6,026,223 15,584,069 4,016,801 3,093,189 4,452,820 6,614,449 9,951,766 5,498,946 14,775,173 15,967,821 16,696,825 14,301,182
29 Total w/o S&B 14,002,929 2,435,660 1,512,048 8,354,644 3,901,824 13,140,782 14,286,733 14,986,275 12,498,262
30 Funding Sources
31 923,612 1,185,308 1,185,308 1,265,232 1,294,274 1,257,487 1,325,391
32 226,667 467,907 467,907 344,853 265,747 421,600 444,366
33 1,942,910 8,298,551 3,845,731 13,165,087 14,407,800 15,017,739 12,531,425
35
Current Year
Funding
FY 2027 (Budget)
Estimate FY27 Funding FY 2028 FY 2029 FY 2030 FY 2031
36
37
38 Total transfers in 226,667 467,907 467,907 344,853 265,747 421,600 444,366
39
40
41 Total transfers out 943,186 960,000 960,000 610,000 610,000 610,000 610,000
Enterprise Transfers In/Out for CIP Projects
Table 2: Water Utility Capital Improvement Program (CIP) Details
Attachment A, Exhibit 2Docusign Envelope ID: E7D125DF-2201-8490-802B-13B477564AE4
1 FISCAL YEAR FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031
2 Projected
3 WATER SUPPLY
4 Purchases (CCF)4,757,199 4,785,384 4,709,184 4,210,399 4,419,628 4,543,561 4,427,313 4,510,198 4,433,345 4,343,393 4,266,317 4,235,350
5 Sales (CCF)4,670,827 4,770,922 4,458,594 3,866,832 4,146,876 4,275,199 4,171,209 4,203,938 4,132,304 4,048,459 3,976,617 3,947,753
6
7 BILL AND RATE CHANGES
8 Variable Charge (Supply)0%0%0%16%10%9%2%8%7%3%2%4%
9 Residential Variable Charge (Distribution)1%0%0%4%2%10%17%12%12%14%9%7%
10 System Average Rate 1%0%0%5%5%10%10%10%10%10%7%6%
11 Average Customer Bill (projected)10%10%10%10%7%6%
12
13 STARTING RESERVES
14 Reappropriations (Non-CIP)258,000 70,000 41,000 - - - - - - - - -
15 Commitments (Non-CIP)442,000 796,000 444,000 1,766,000 2,737,000 2,663,000 776,447 - - - - -
16 Restricted for Debt Service 3,260,000 3,260,000 2,906,000 2,906,000 2,813,000 2,678,000 2,552,181 2,552,181 2,552,181 2,552,181 2,552,181 2,552,181
17 Emergency Plant Replacement - - - - - - - - - - - -
18 Reappropriations & Commitments 15,090,505 11,036,000 10,147,000 12,168,000 16,066,000 12,245,000 6,026,222 4,452,820 - - - -
19 Capital Reserve 2,726,096 5,726,096 10,082,345 9,546,942 6,961,000 3,500,000 3,500,000 9,000,000 11,000,000 11,000,000 11,000,000 13,000,000
20 Rate Stabilization Reserve 4,069,437 9,069,437 9,069,437 9,069,437 6,069,000 4,000,000 4,000,437 4,000,437 3,000,437 2,000,437 1,000,437 437
21 Operations Reserve 12,839,358 13,664,023 14,081,995 13,829,986 7,957,000 7,076,000 16,351,229 12,175,184 13,545,617 12,170,757 13,962,545 15,419,123
22 Unassigned 7,384,714 5,171,932 6,263,962 162,355 - - - - - - - -
23 TOTAL STARTING RESERVES 46,070,109 48,793,488 53,035,739 49,448,720 42,603,000 32,162,000 33,206,517 32,180,623 30,098,236 27,723,375 28,515,164 30,971,742
24
25 REVENUES
26 Net Sales 47,136,524 47,434,047 44,058,867 42,570,047 48,085,282 54,456,483 57,398,178 63,650,463 69,063,693 74,409,802 77,937,940 81,923,898
27 Other Revenues and Transfers In 3,927,307 3,294,442 2,950,590 2,620,375 3,876,773 4,118,608 3,499,035 3,438,431 4,749,265 4,797,881 4,834,401 4,870,596
28 TOTAL REVENUES 51,063,831 50,728,489 47,009,457 45,190,422 51,962,056 58,575,091 60,897,213 67,088,894 73,812,958 79,207,682 82,772,341 86,794,493
29
30 EXPENSES
31 Water Purchases 21,773,295 21,935,250 21,248,651 21,744,025 24,651,258 27,856,127 27,610,334 29,983,842 31,506,321 31,869,610 32,092,636 33,202,220
32 Operating Expenses
33 Administration
34 3,751,618 3,848,781 4,181,415 4,176,701 5,236,342 4,456,214 4,991,285 5,165,275 5,320,233 5,479,840 5,644,236 5,813,563
35 1,904,070 2,225,372 2,270,000 2,365,000 2,483,250 2,243,500 2,310,800 2,410,164 2,482,469 2,556,943 2,633,652 2,712,661
36 3,220,638 3,222,843 3,219,993 3,222,938 3,220,173 3,219,316 3,219,331 2,563,683 2,565,598 2,563,503 2,566,323 2,563,493
37
Allocated Charges
Rent1
Debt Service
Transfers and Other Adjustments 474,953 267,645 137,903 945,092 1,822,487 67,340 1,333,007 1,484,566 1,147,680 1,036,122 1,171,775 1,123,320
38 Subtotal, Administration 9,351,279 9,564,641 9,809,311 10,709,731 12,762,252 9,986,370 11,854,422 11,623,689 11,515,981 11,636,409 12,015,986 12,213,037
39 Resource Management 1,159,106 1,215,567 1,261,514 1,590,945 1,427,567 1,105,116 1,383,954 1,432,654 1,475,633 1,519,902 1,565,499 1,612,464
40 Operations and Mtc 7,010,251 7,400,625 7,195,632 7,531,468 9,121,406 8,616,998 10,077,228 10,279,613 10,838,002 11,163,142 11,498,036 11,842,977
41 Engineering (Operating)401,902 662,832 492,438 508,307 637,696 652,361 1,051,982 1,333,790 1,373,803 1,415,017 1,457,468 1,501,192
42 Customer Service 1,865,571 2,053,820 2,058,662 2,272,586 2,541,599 2,663,930 2,997,389 2,995,953 3,085,832 3,178,406 3,273,759 3,371,971
43 Allowance for Unspent Budget - -- -- - - - - - - -
43 Subtotal, Operatin Expenses (Excludin Purchases)19,788,109 20,897,485 20,817,557 22,613,037 26,490,520 23,024,776 27,364,976 27,665,698 28,289,251 28,912,877 29,810,747 30,541,641
44 TOTAL OPERATING EXPENSES 41,561,404 42,832,735 42,066,208 44,357,062 51,141,778 50,880,904 54,975,310 57,649,540 59,795,571 60,782,487 61,903,384 63,743,861
45
46 Capital Contributions^6,737,917 4,356,249 10,015,866 12,432,100 4,766,278 6,245,118 10,097,948 9,068,921 16,392,247 17,633,407 20,412,380 22,368,203
47 TOTAL EXPENSES 48,299,320 47,188,984 52,082,074 56,789,162 55,908,056 57,126,022 65,073,258 66,718,461 76,187,818 78,415,894 82,315,763 86,112,065
48
49 ENDING RESERVES
50 Reappropriations (Non-CIP)70,000 41,000 - - - - - - - - - -
Actual
Attachment A, Exhibit 2
Table 3: March 17, 2026 Finance Committee Version of the Water Utility Financial Forecast for Quick Reference.
1. Rent expense assumptions are based on the 2020 Appraisal and annual escalation factors.1. Rent expense assumptions are based on the 2020 Appraisal and annual escalation factors.
1. Rent expense assumptions are based on the 2020 Appraisal and annual escalation factors.
Docusign Envelope ID: E7D125DF-2201-8490-802B-13B477564AE4
51 Commitments (Non-CIP)796,000 444,000 1,766,000 2,737,000 2,663,000 776,447 - - - - - -
52 Restricted for Debt Service 3,260,000 2,906,000 2,906,000 2,813,000 2,678,000 2,552,181 2,552,181 2,552,181 2,552,181 2,552,181 2,552,181 2,552,181
53 Emergency Plant Replacement - - - - - - - - - - - -
54 Reappropriations & Commitments 11,036,000 10,147,000 12,168,000 16,066,000 12,245,000 6,026,222 4,452,820 4,000,000 3,000,000 3,000,000 3,000,000 3,000,000
55 Capital Reserve 5,726,096 10,082,345 9,546,942 6,961,000 3,500,000 3,500,000 9,000,000 11,000,000 11,000,000 11,000,000 13,000,000 19,300,000
56 Rate Stabilization Reserve 9,069,437 9,069,437 9,069,437 6,069,000 4,000,000 4,000,437 4,000,437 3,000,437 2,000,437 1,000,437 437 437
57 Operations Reserve 13,664,023 14,081,995 13,829,986 7,957,000 7,076,000 16,351,229 12,175,184 13,545,617 12,170,757 13,962,545 15,419,123 16,101,552
58 Unassigned 5,171,932 6,263,962 162,355 - - - - - - - - -
59 TOTAL ENDING RESERVES 48,793,488 53,035,739 49,448,720 42,603,000 32,162,000 33,206,517 32,180,623 34,098,236 30,723,375 31,515,164 33,971,742 40,954,171
60 ^ Capital Program Contribution represents CIP funding transferred from the Operations Reserve to the CIP Reserve beginning in FY 2021
61 OPERATIONS RESERVE
62 Min (60 days of non-capital expenses)6,832,012 7,040,997 6,914,993 7,291,572 8,406,868 8,363,984 9,037,037 9,476,637 9,829,409 9,991,642 10,175,899 10,478,443
63 Target (90 days of non-capital expenses)10,248,017 10,561,496 10,372,490 10,937,358 12,610,301 12,545,976 13,555,556 14,214,955 14,744,113 14,987,462 15,263,848 15,717,664
64 Max (120 days of non-capital expenses)13,664,023 14,081,995 13,829,986 14,583,144 16,813,735 16,727,968 18,074,075 18,953,273 19,658,818 19,983,283 20,351,797 20,956,886
65
66 Bond Covenants
67 Available Reserves (5x Maximum Annual Debt Service)*15.9 14.5 8.1 5.8 6.7 7.4
*Available Reserves consist of the Rate Stabilization Reserves of the Water, Gas, and Electric Funds and the Electric S ecial Pro ects Reserve Calaveras . Maximum Annual Debt Service is on outstandin debt of the Water,
Gas and Electric s stems.
Attachment A, Exhibit 2Docusign Envelope ID: E7D125DF-2201-8490-802B-13B477564AE4
Attachment A, Exhibit 3
WATER UTILITY RESERVES MANAGEMENT PRACTICES
The following reserves management practices shall be used when developing the Water Utility Financial Plan:
Section 1. Definitions
a) “Financial Planning Period” – The Financial Planning Period is the range of future fiscal years covered by the
Financial Plan. For example, for the Water Utility Financial Plan delivered in conjunction with the FY 2015 budget,
FY 2015 to FY 2021 is the Financial Planning Period.
b) “Fund Balance” – As used in these Reserves Management Practices, Fund Balance refers to the Utility’s
Unrestricted Net Assets.
c) “Net Assets” - The Government Accounting Standards Board defines a Utility’s Net Assets as the difference
between its assets and liabilities.
d) “Unrestricted Net Assets” - The portion of the Utility’s Net Assets not invested in capital assets (net of related
debt) or restricted for debt service or other restricted purposes.
Section 2. Reserves
The Water Utility’s Fund Balance is reserved for the following purposes:
a) For existing contracts, as described in Section 3 (Reserve for Commitments)
b) For operating and capital budgets re-appropriated from previous years, as described in Section 4 (Reserve for Re-
appropriations)
c) For cash flow management and contingencies related to the Water Utility’s Capital Improvement Program (CIP),
as described in Section 5 (CIP Reserve)
d) For rate stabilization, as described in Section 6 (Rate Stabilization Reserve)
e) For operating contingencies, as described in Section 7 (Operations Reserve)
f) Any funds not included in the other reserves will be considered Unassigned Reserves and shall be returned to
ratepayers or assigned a specific purpose as described in Section 8 (Unassigned Reserves).
Section 3. Reserve for Commitments
At the end of each fiscal year the Reserve for Commitments will be set to an amount equal to the total remaining
spending authority for all contracts in force for the Water Utility at that time.
Section 4. Reserve for Re-appropriations
At the end of each fiscal year the Reserve for Re-appropriations will be set to an amount equal to the amount of all
remaining capital and non-capital budgets, if any, that will be re-appropriated to the following fiscal year in accordance
with Palo Alto Municipal Code Section 2.28.090.
Section 5. CIP Reserve
The CIP Reserve is used to manage cash flow for capital projects and acts as a reserve for capital contingencies. Staff
will manage the CIP Reserve according to the following practices:
a) The following guideline levels are set forth for the CIP Reserve. These guideline levels are calculated for each fiscal
year of the Financial Planning Period and approved by Council resolution.
Docusign Envelope ID: E7D125DF-2201-8490-802B-13B477564AE4
Attachment A, Exhibit 3
Minimum Level 20% of the maximum CIP Reserve guideline level
Maximum Level Average annual (12 month)1 CIP budget, for 48
months of budgeted CIP expenses2
b) Changes in Reserves: Staff is authorized to transfer funds between the CIP Reserve and the Reserve for
Commitments when funds are added or removed from to that reserve as a result of a change in contractual
commitments related to CIP projects. Any other additions to or withdrawals fro m the CIP reserve require Council
action.
c) Minimum Level: If, at the end of any fiscal year, the minimum guideline is not met, staff shall present a plan to the
City Council to replenish the reserve. The plan shall be delivered by the end of the following fiscal year, and shall,
at a minimum, result in the reserve reaching its minimum level by the end of the next fiscal year. For example, if
the CIP Reserve is below its minimum level at the end of FY 2017, staff must present a plan by June 30, 2018 to
return the reserve to its minimum level by June 30, 2019. In addition, staff may present, and the Council may
adopt, an alternative plan that takes longer than one year to replenish the reserve, or that does so in a shorter
period of time.
d) Maximum Level: If there are funds in this reserve in excess of the maximum level staff must propose in the next
Financial Plan to transfer these funds to another reserve, return the funds to ratepayers, or designate a specific
use of the funds for CIP investments that will be made by the end of the next Financial Planning Period . Staff may
also seek City Council to approve holding funds in this reserve in excess of the maximum level if they are held for
a specific future purpose related to the CIP.
Section 6. Rate Stabilization Reserve
Funds may be added to the Rate Stabilization Reserve by action of the City Council and held to manage the
trajectory of future year rate increases. Withdrawal of funds from the Rate Stabilization Reserve requires Council
action. If there are funds in the Rate Stabilization Reserve at the end of any fiscal year, any subsequent Water
Utility Financial Plan must result in the withdrawal of all funds from this Reserve by the end of the next Financial
Planning Period. The Council may approve exceptions to this requirement, when proposed by staff to provide
greater rate stabilization to customers.
Section 7. Operations Reserve
The Operations Reserve is used to manage normal variations in costs and as a reserve for contingencies. Any portion
of the Water Utility’s Fund Balance not included in the reserves described in Section 3-Section 6 above will be included
in the Operations Reserve unless this reserve has reached its maximum level as set forth in Section 7(d) below. Staff
will manage the Operations Reserve according to the following practices:
a) The following guideline levels are set forth for the Operations Reserve. These guideline levels are calculated for
each fiscal year of the Financial Planning Period based on the levels of Operations and Maintenance (O&M) and
commodity expense forecasted for that year in the Financial Plan.
Minimum Level 60 days of O&M and commodity expense
Target Level 90 days of O&M and commodity expense
Maximum Level 120 days of O&M and commodity expense
b) Minimum Level: If, at the end of any fiscal year, the funds remaining in the Operations Reserve are lower than the
minimum level set forth above, staff shall present a plan to the City Council to replenish the reserve. The plan shall
1 Each month is calculated based upon 1/12 of the annual budget.
2 For example, in the Financial Plan for FY 2021, the 48 month period to use to derive the annual average is FY
2021 through FY 2024. In the FY 2022 Financial Plan, the 48 month period to use to derive the annual average
would be FY 2022 through FY 2025 etc.
Docusign Envelope ID: E7D125DF-2201-8490-802B-13B477564AE4
Attachment A, Exhibit 3
be delivered within six months of the end of the fiscal year, and shall, at a minimum, result in the reserve reaching
its minimum level by the end of the following fiscal year. For example, if the Operations Reserve is below its
minimum level at the end of FY 2014, staff must present a plan by December 31, 2014 to return the reserve to its
minimum level by June 30, 2015. In addition, staff may present, and the Council may adopt, an alternative plan
that takes longer than one year to replenish the reserve.
c) Target Level: If, at the end of any fiscal year, the Operations Reserve is higher or lower than the target level, any
Financial Plan created for the Water Utility shall be designed to return the Operations Reserve to its target level
within four years.
d) Maximum Level: If, at any time, the Operations Reserve reaches its maximum level, no funds may be added to this
reserve. Any further increase in the Water Utility’s Fund Balance shall be automatically included in the Unassigned
Reserve described in Section 8, below.
Section 8. Unassigned Reserve
If the Operations Reserve reaches its maximum level, any further additions to the Water Utility’s Fund Balance will be
held in the Unassigned Reserve. If there are any funds in the Unassigned Reserve at the end of any fiscal year, the next
Financial Plan presented to the City Council must include a plan to assign them to a specific purpose or return them
to the Water Utility ratepayers by the end of the first fiscal year of the next Financial Planning Period. For example, if
there were funds in the Unassigned Reserves at the end of FY 2015, and the next Financial Planning Period is FY 2016
through FY 2021, the Financial Plan shall include a plan to return or assign any funds in the Unassigned Reserve by the
end of FY 2016. Staff may present an alternative plan that retains these funds or returns them over a longer period of
time.
Docusign Envelope ID: E7D125DF-2201-8490-802B-13B477564AE4
COMMUNICATIONS PLAN /SAMPLES
The Fiscal Year (FY) 2027 water utility communications strategy covers these primary areas:
recently implemented cost containment measures, cost drivers for rate increases, including
operations and capital improvement, commodity costs, reserve balances, utility bill comparisons,
and efficiency programs and services to help keep utility bill costs low. The City of Palo Alto
Utilities (CPAU) communication methods include use of the utilities website, utility bill inserts,
messaging on utility bills, MyCPAU online account management platform, email newsletters,
print and digital ads in local publications, social media, community messaging platforms, and
through direct mailings of the Home Water Reports and online WaterSmart portal.
As a locally owned public utility, CPAU recovers its costs primarily through rate revenue. Any
increased supply costs are passed through rates to CPAU customers, including for capital
improvement. The cost to deliver water supply to Palo Alto and for CPAU to distribute water to
customers is high, as it includes maintaining and replacing water infrastructure, customer
service, billing, and administration.
CPAU’s communication about water utility rates will focus on the forecasted increase in costs
passed down from Palo Alto’s water supplier, the San Francisco Public Utilities Commission
(SFPUC), ongoing capital improvement and infrastructure upgrades, and what CPAU is doing to
keep costs down. Maintaining water pipes, mains, and service connections is necessary to
prevent leaks, which cost the utility and rate payers money, and prevents damage to
infrastructure which could exacerbate safety and reliability concerns in the long term.
CPAU promotes water use efficiency programs and easy water-saving behaviors to aid in our
water saving efforts and help customers keep utility costs low. Messaging reinforces that
although rates may increase, efficient usage can help customers avoid seeing a significant water
cost increase on the utility bill.
Staff maintain a dedicated webpage at cityofpaloalto.org/ratesoverview to provide an overview
on all utility rates, costs to the utility, updates to financial forecasts and proposed rate changes.
While print materials such as bill inserts and ads feature prominently, CPAU is exploring
additional ways to communicate directly to customers utilizing unique programs like the
relatively new WaterSmart portal and Home Water Reports, in addition to the near real-time
water usage data provided by new Advanced Metering Infrastructure (AMI) and the ability to
send customers alerts about high water usage. Staff continue to maintain an active presence in
social media and information sharing through citywide email newsletters. Staff attend
community outreach events and host educational workshops on these related topics.
Attachment A, Exhibit 4Docusign Envelope ID: E7D125DF-2201-8490-802B-13B477564AE4
Attachment A, Exhibit 4Docusign Envelope ID: E7D125DF-2201-8490-802B-13B477564AE4
Certificate Of Completion
Envelope Id: E7D125DF-2201-8490-802B-13B477564AE4 Status: Completed
Subject: RESO 10297 - Resolution for the FY 2027 Water Utility
Source Envelope:
Document Pages: 27 Signatures: 6 Envelope Originator:
Certificate Pages: 2 Initials: 0 Christine Prior
AutoNav: Enabled
EnvelopeId Stamping: Enabled
Time Zone: (UTC-08:00) Pacific Time (US & Canada)
250 Hamilton Ave
Palo Alto , CA 94301
Christine.Prior@PaloAlto.gov
IP Address: 170.85.155.40
Record Tracking
Status: Original
6/23/2026 4:46:19 PM
Holder: Christine Prior
Christine.Prior@PaloAlto.gov
Location: DocuSign
Security Appliance Status: Connected Pool: StateLocal
Signer Events Signature Timestamp
Aylin Bilir
Aylin.Bilir@paloalto.gov
Assistant City Attorney
Security Level: Email, Account Authentication
(None)Signature Adoption: Pre-selected Style
Using IP Address: 170.85.155.5
Sent: 6/23/2026 4:50:18 PM
Viewed: 6/23/2026 4:57:53 PM
Signed: 6/23/2026 5:23:01 PM
Electronic Record and Signature Disclosure:
Not Offered via Docusign
Lauren Lai
Lauren.Lai@paloalto.gov
Director Administrative Services/CFO
COPA
Security Level: Email, Account Authentication
(None)
Signature Adoption: Drawn on Device
Using IP Address: 170.85.54.117
Sent: 6/23/2026 5:23:02 PM
Viewed: 6/23/2026 5:57:13 PM
Signed: 6/23/2026 5:57:50 PM
Electronic Record and Signature Disclosure:
Not Offered via Docusign
Alan Kurotori
Alan.Kurotori@paloalto.gov
Director of Utilities
City of Palo Alto
Security Level: Email, Account Authentication
(None)
Signature Adoption: Pre-selected Style
Using IP Address: 170.85.54.101
Sent: 6/23/2026 5:57:52 PM
Viewed: 6/24/2026 10:34:08 AM
Signed: 6/24/2026 10:34:15 AM
Electronic Record and Signature Disclosure:
Not Offered via Docusign
Ed Shikada
Ed.Shikada@paloalto.gov
City Manager
City of Palo Alto
Security Level: Email, Account Authentication
(None)
Signature Adoption: Pre-selected Style
Using IP Address: 170.85.54.89
Sent: 6/24/2026 10:34:16 AM
Viewed: 6/24/2026 11:32:11 AM
Signed: 6/24/2026 11:32:19 AM
Electronic Record and Signature Disclosure:
Not Offered via Docusign
Signer Events Signature Timestamp
Veenker, Vicki
Vicki.Veenker@paloalto.gov
City of Palo Alto
Security Level: Email, Account Authentication
(None)Signature Adoption: Uploaded Signature Image
Using IP Address: 73.92.102.134
Sent: 6/24/2026 11:32:20 AM
Viewed: 7/9/2026 12:45:07 AM
Signed: 7/9/2026 12:45:52 AM
Electronic Record and Signature Disclosure:
Not Offered via Docusign
Mahealani Ah Yun
Mahealani.AhYun@paloalto.gov
City Clerk
Security Level: Email, Account Authentication
(None)Signature Adoption: Pre-selected Style
Using IP Address: 199.33.32.254
Sent: 7/9/2026 12:45:53 AM
Viewed: 7/13/2026 5:47:43 PM
Signed: 7/13/2026 5:47:54 PM
Electronic Record and Signature Disclosure:
Not Offered via Docusign
In Person Signer Events Signature Timestamp
Editor Delivery Events Status Timestamp
Agent Delivery Events Status Timestamp
Intermediary Delivery Events Status Timestamp
Certified Delivery Events Status Timestamp
Carbon Copy Events Status Timestamp
Witness Events Signature Timestamp
Notary Events Signature Timestamp
Envelope Summary Events Status Timestamps
Envelope Sent Hashed/Encrypted 6/23/2026 4:50:18 PM
Certified Delivered Security Checked 7/13/2026 5:47:43 PM
Signing Complete Security Checked 7/13/2026 5:47:54 PM
Completed Security Checked 7/13/2026 5:47:54 PM
Payment Events Status Timestamps