BOARD AGENDA MEMORANDUM
Government Code § 84308 Applies: Yes ☐ No ☒
(If “YES” Complete Attachment A - Gov. Code § 84308)
SUBJECT:
Title
Receive and Approve the Mid-Year Operating and Capital Budget Adjustments to the Fiscal Year 2025-26 Rolling Biennial Adopted Budget.
End
RECOMMENDATION:
Recommendation
Approve the Mid-Year Operating and Capital Budget Adjustments to the Fiscal Year 2025-26 Rolling Biennial Adopted Budget.
Body
SUMMARY:
In adhering to Governance Policies of the Board and specifically Executive Limitations EL-4, staff respectfully submits the mid-year budget adjustments to the FY 2025-26 Rolling Biennial Adopted Budget, which are necessary to better align limited allocated resources with the Board’s Ends, meet Board priorities, and to continue to provide for a balanced budget.
The FY 2025-26 (FY26) mid-year budget adjustments are presented in Attachments 1 and 2 and summarized below:
1. Capital Project: 91854003 Almaden Calero Canal Rehab ($550,000 increase)
A $550,000 increase in FY26 is being requested to support the environmental and design work for Almaden Calero (AC) Canal Rehabilitation Project. Re-evaluation of the previous CEQA Internal Decision Memorandum (IDM) led to a change in the Environmental Impact Report (EIR) designation to an Initial Study/Mitigated Negative Declaration (IS/MND) designation. The CEQA and design milestones have been revised to be performed four (4) months earlier in FY26 than planned. The $550,000 needed in FY26 will be reduced from FY27 with no increase to the Total Project Cost. This budget adjustment for FY26 is funded by a decrease of $550,000 to the Water Enterprise Fund Operating and Capital Reserve in FY26.
2. Capital Project: 91094009 South County Recycled Water Pipeline ($2,902,000 increase)
A $2,902,000 increase in FY26 is being requested to implement Phase 1C of the South County Recycled Water Pipeline Project. The South County Recycled Water Pipeline Short-Term Phase 1B/2A/1C/2B Project (Contract No. C0668), with Phase 1C included as a supplemental item, was unable to proceed because easements were not secured in sufficient time. An additional amount of $2,902,000 is needed to implement Phase 1C and cover the costs to repackage, rebid, award, and perform close-out activities. This budget adjustment is funded by a decrease of $2,902,000 to the Water Enterprise Fund Operating and Capital Reserve in FY26. The proposed FY27 Draft Capital Improvement Program, scheduled for Board consideration on March 10, 2026, reflects this proposed budget adjustment.
3. Capital Project: 10394001 Palo Alto Flood Basin Tide Gates Replacement ($680,000 increase)
A $680,000 increase in FY26 is being requested to cover cost impacts due to unforeseen challenges during piling construction. The project needed to retain structural, geotechnical, and biological consultants, as well as Santa Clara Valley Water District (Valley Water) subject matter experts, to complete construction. In addition, previously unidentified areas requiring repair were discovered. As a result of these unforeseen challenges, $680,000 is requested to meet the required budget in FY26. The budget adjustment is funded by a decrease of $680,000 to the Watershed Stream Stewardship Fund Operating and Capital Reserve. The proposed FY27 Draft Capital Improvement Program, scheduled for Board consideration on March 10, 2026, reflects this proposed budget adjustment.
4. Capital Project: 26174051 Llagas Creek - Upper, Reimbursable (E6b) ($250,000 increase)
A $250,000 increase in FY26 is being requested to ensure sufficient funds are available to cover the cost of a relocated unknown AT&T conduit that was encountered during construction and additional PG&E work to provide an electrical service to Valley Water’s Groundwater Recharge Facility Fish Screen Inlet. This budget adjustment is funded by a decrease of $250,000 to the Llagas Creek - Upper, Reimbursable (E6b) Project Reserve in FY26.
5. Technical Budget Adjustment - Update FY26 budget reserves to align with FY25 audited actual reserve balances
The FY26 Adopted budget reserves are based on FY 2024-25 (FY25) projected year-end reserves because the budget is adopted before the end of the fiscal year. After the FY25 Annual Comprehensive Financial Report (ACFR) is finalized and approved by the Board, Staff conducts a fund balance reconciliation of FY25 projected year-end reserves with the final FY25 actual reserve balances. The purpose of this reconciliation is to implement budget adjustments to align the FY26 Beginning Budget Reserves with prior year’s actual reserve balances. Net impact of these technical budget adjustments is an increase of $79.2 million to FY26 budget reserves. Attachment 2 shows the detailed reserve adjustments to each fund.
ENVIRONMENTAL JUSTICE IMPACT:
There is no environmental justice impact associated with Fiscal Year 2025-26 Mid-Year budget adjustments.
FINANCIAL IMPACT:
Approval of the FY26 mid-year budget adjustments amends the FY26 Operating and Capital Budget, which was adopted by the Board per Resolution No. 2025-41 on May 27, 2025.
The recommended budget adjustments (items 1 to 4) will increase FY26 budget appropriations by $4,382,000 and decrease Operating the Capital Reserves by $4,132,000 and Llagas Creek - Upper, Reimbursement (E6b) Project Reserve by $250,000. Attachment 1 shows the detailed Operating and Capital Project budget adjustments to each fund.
The technical budget adjustment (item 5) will align the FY26 Budget Reserves with FY25 Actual Reserve balances, net increase to FY26 beginning budget reserves is $79,201,584. Attachment 2 shows the detailed reserve adjustments to each fund.
CEQA:
The recommended action does not constitute a project under CEQA because it does not have the potential for resulting in direct or reasonably foreseeable indirect physical change in the environment. To the extent any funds included in the proposed budget adjustment would be used to pay for projects or activities that are subject to CEQA, those funds will not be expended unless and until the appropriate CEQA review has been completed.
ATTACHMENTS:
Attachment 1: FY25-26 Mid-Year Budget Adjustments, 1-4
Attachment 2: FY25-26 Mid-Year Budget Adjustments, 5
Attachment 3: Resolution No. 2025-41
UNCLASSIFIED MANAGER:
Manager
Darin Taylor, 408-630-3068