BOARD AGENDA MEMORANDUM
Government Code § 84308 Applies: Yes ☐ No ☒
(If “YES” Complete Attachment A - Gov. Code § 84308)
SUBJECT: Title
Conduct a Public Hearing to Consider the Santa Clara Valley Water District’s Capital Improvement Program Draft Fiscal Years 2027-31 Five-Year Plan and Adopt a Resolution Approving the Capital Improvement Program Final Fiscal Years 2027-2031 Five-Year Plan. (Continued from April 29, 2026)
End
RECOMMENDATION: Recommendation
A. Conduct the continued Public Hearing from April 29, 2026, to receive public comments and Board feedback regarding the Santa Clara Valley Water District’s Capital Improvement Program (CIP) Draft Fiscal Years (FY) 2027-2031 Five-Year Plan;
B. Close the Public Hearing;
C. Direct staff to incorporate the identified changes to the CIP Draft FY 2027-2031 Five-Year Plan and finalize the FY 2027-2031 Five-Year Plan by June 30, 2025; and
D. Adopt the Resolution APPROVING THE CAPITAL IMPROVEMENT PROGRAM FISCAL YEARS 2027-2031 FIVE-YEAR PLAN.
Body
SUMMARY:
Each year, Santa Clara Valley Water District’s (Valley Water) Capital Improvement Program (CIP) prepares a Five-Year Plan for Board consideration and approval. The CIP Five-Year Plan describes Valley Water’s capital investment priorities. It provides information on the planned capital projects and Valley Water’s intended source(s) of funding. Staff presents the CIP Five-Year Plan to the Board at the Preliminary and Draft stages for the Board to make decisions and provide direction. The CIP Final Five-Year Plan is approved with the annual budget, wherein funding is appropriated to the projects for the following fiscal year.
For our water supply projects, to ensure consistency with Valley Water’s Water Supply Master Plan (WSMP) 2050, CIP staff continues coordinating with water supply planning staff. The WSMP 2050 assumes that capital projects included in the Five-Year Plan, which complete repair or replacement of existing infrastructure, are part of the baseline to meet future water supply needs.
Capital Investments Not Included in the CIP
Valley Water contributions to capital investments led by external agencies are not included in the CIP Draft FY 2027-31 Five-Year Plan. While not included in the CIP, these investments are evaluated annually and budgeted and forecasted through operating projects. They are also included and reflected in the financial modeling that is analyzed during the development of the CIP Five-Year Plan.
These investments include:
1. Sisk Dam Raise Project
2. Delta Conveyance Project
3. Sites Reservoir Project
Additionally, to align with the approach taken for the water supply projects referenced above, this year staff recommended and the Board approved the transfer of the San Francisquito Creek Flood Protection Project (26284002) from the CIP Five-Year Plan into an operating project for budgeting and long-term forecasting. This action does not impact Valley Water’s commitment to the voters under the Safe, Clean Water and Natural Flood Protection Program or the delivery of this project by the San Francisquito Creek Joint Powers Authority. While this capital project number is planned for closure, it will remain in the CIP FY 2027-31 Five-Year Plan to allow for close-out reporting of FY 2026 actuals. The project will be removed the following year from the CIP FY 2028-32 Five-Year Plan.
CIP Development Cycle for the FY 2027-31 Five-Year Plan
The Board reviewed the CIP Preliminary FY 2027-31 Five-Year Plan on January 13, 2026, in conjunction with the preliminary FY 2026-27 groundwater production charges. At that meeting, the Board received information and provided direction regarding key capital investments under the Watershed Stream Stewardship Fund (Fund 12), the Safe, Clean Water and Natural Flood Protection Program (Safe, Clean Water Program) Fund (Fund 26), and the Water Utility Enterprise Fund (Fund 61).
On March 10, 2026, the Board approved the CIP Draft FY 2027-31 Five-Year Plan (Attachment 1), which was prepared to align with the Board’s direction for all funds. The CIP Draft FY 2027-31 Five-Year Plan was transmitted to all cities and land use authorities in Santa Clara County and the County of Santa Clara to solicit feedback and obtain confirmation that Valley Water’s CIP Draft FY 2027-31 Five-Year Plan is consistent with their applicable General Plans. To date, Valley Water has received five letters of support, confirming alignment and consistency with their general plans (Attachment 2).
In response to the Board direction received on January 13, 2026, the CIP Draft FY 2027-31 Five-Year Plan included the following three newly validated capital projects:
1. Aquatic Resource Creation at Ford Road Percolation Pond; $6.4M (Fund 12)
2. Pure Water Silicon Valley - Full-Scale Direct Potable Reuse (DPR) Facility; $2.45B (Fund 61)
3. Santa Teresa Water Treatment Plant (STWTP) Rehabilitation; $242.7M (Fund 61)
Changes Identified for CIP Final FY 2027-31 Five-Year Plan
For purposes of annually updating the CIP Five-Year Plan, the baseline is the Board adopted CIP Five-Year Plan from the prior fiscal year (FY 2026-30). Each year, staff identify any necessary changes to a project’s scope, schedule, and cost through the project plan updating process. These project plan updates (Attachment 3) were reviewed by the CIP Committee and the Board and reflected in the CIP Draft FY 2027-31 Five-Year Plan.
Since the release of the CIP Draft FY 2027-31 Five-Year Plan, staff identified the following change:
1. Upper Llagas Creek Flood Protection Project (E6) (26174055)
Upper Llagas Creek Flood Protection Project - Phase 2B began construction in fiscal year 2025 with a contract bid award of $129M, not including the 10% contingency. The construction expenditures were distributed throughout FY25-FY27 for the construction of the flood protection improvements and throughout FY28-FY30 for the 3-year mitigation vegetation establishment period. Currently, construction is ahead of schedule due to the mild 2026-2027 winter, which allowed the contractor to continue completing the contract work. The FY26 projected construction budget has been spent, and there is now a need to reallocate $15M from the FY27 projected construction budget to pay for construction tasks being completed sooner than anticipated. In addition, to pay updated projected FY28 labor costs for Regulatory Compliance, $688,000 will be re-allocated from FY27 to FY28. The Total Project Cost will remain unchanged since no new scope is being added.
While the change was not incorporated into the CIP Draft FY 2027-31 Five-Year Plan, it will be incorporated in the CIP Final FY 2027-31 Five-Year Plan, to reflect the Board approved budget adjustment. Attachment 3 provides detailed explanations of all changes from the Adopted CIP FY 2026-30 Five-Year Plan.
Administrative Project Plan Updates - Budget Reconciliation and Small Capital Projects Forecast Revisions
Each year between the presentation of the CIP Draft Five-Year Plan and the CIP Final Five-Year Plan, the CIP team conducts a budget reconciliation process and implements small capital forecast revisions.
Reviews are conducted after each pass of the Budget to ensure CIP project planned expenditures for the next two FYs are in alignment with the proposed annual budget. For the CIP Final FY 2027-31 Five-Year Plan, staff have reconciled the planned expenditures in the Five-Year Plan and confirmed that the Final Budget and CIP Final Five-Year Plan presented to the Board are in alignment.
For small capital projects, asset rehabilitation projects are added, removed, and rescheduled based on asset condition and project need. In addition, project costs are updated each year based on market conditions. These revisions to both schedule and costs cause several minor changes in expected expenditures over the forecasted period. The change is not caused by a single asset rehabilitation project but by the cumulative total of multiple changes.
Updates to the following small capital improvement projects are included in the CIP Final FY 2027-31 Five-Year Plan:
1. 91214010s San Felipe (Reaches 1-3)
2. 92764009 Raw Water Transmission
3. 94764006 Treated Water Transmission
4. 93764004 Water Treatment
5. 60204016 Facility Management
6. 73274008 Software Upgrades & Enhancements
7. 95274003 Water Utility Network Modernization
CIP Final FY 2027-31 Five-Year Plan
As shown in the Final CIP Financial Overview (Attachment 4), the CIP Final FY 2027-31 Five-Year Plan includes 73 funded projects distributed among the following categories: 42 Water Supply, 13 Flood Protection, 12 Water Resources Stewardship, 3 Buildings and Grounds, and 3 Information Technology projects, for a total CIP value of $10.386B. This includes Valley Water's prior actuals and future year planned expenditures of $9.549B combined with received and planned outside funding of $837M, which includes grants from nonprofits, local public agencies, special districts, state and federal grants agencies, state subvention reimbursements and cost-share partnerships. Capital projects with excess funding will release excess funds to the respective operating and capital reserve fund upon completion and closeout of the project.
Key capital investments include Dam Seismic Retrofits, Pure Water Silicon Valley, Rinconada Water Treatment Plant Reliability Improvement, Coyote Creek Flood Protection, Upper Llagas Creek Flood Protection, and Ogier Ponds (creek/lake separation).
Expenditure Projections
Valley Water regularly updates operations and capital expenditures based on the best information available. Capital and operations expenditure projections are the foundation for the development of Valley Water’s budget.
Each capital project cost estimate includes the yearly expenditures through completion based on the project’s scope and schedule. The expenditures are monitored regularly and updated when necessary, for example, when a project’s scope, schedule, or cost changes. A management review process is enforced to ensure only justified expenditure changes are approved.
Construction Cost Escalation Factors
The construction priorities for Valley Water are both significant and complex in nature, and as such, have considerable capacity to be impacted by fluctuations in local market conditions. On an annual basis, Valley Water hires an independent cost estimator to produce a Market Study Report to review the Construction Cost Escalation Factors and Market Rate Factors and provide forecasted escalation rates to be utilized in the preparation of the CIP Five-Year Plan (Attachment 5). For the FY 2027-41 Market Study Report, Valley Water utilized O’Connor Construction Management, Inc. (OCMI), an on-call independent cost estimator consultant. Included below is the Escalation Outlook table for FY 2027-41.
Operations and Maintenance Cost Forecast Revisions
New capital projects impact future operations and maintenance (O&M), which is included in the financial analysis. Throughout the various phases of a capital project, projections of this impact are regularly considered and updated as needed to reflect changes in project elements. This information is considered during long-term forecasting by the respective operating project managers. Appendix D of the CIP Draft FY 2027-31 Five-Year Plan (Attachment 1) provides operating cost impacts for each project within the CIP.
Projects Planned for Completion and/or Closure
Five (5) projects in the Board Adopted CIP FY 2027-31 Five-Year Plan are anticipated to be completed and/or closed out by June 30, 2026, as listed below:
1. Coyote Percolation Dam Replacement (91864009)
2. Pacheco Reservoir Expansion (91954002)
3. South County Recycled Water Pipeline, Short-term Phase 2 (91094010)
4. San Francisco Bay Shoreline, EIAs 1-4 (E7) (26444002)
5. Hale Creek Enhancement Pilot (D6) (26164001)
6. San Francisquito Creek Flood Protection (E5) (26284002)
The projects listed above are planned for closure but will remain in the CIP FY 2027-31 Five-Year Plan to allow for close-out reporting of FY 2026 actuals. The projects will be removed from the CIP FY 2028-32 Five-Year Plan unless a project plan update occurs, necessitating an extension of the schedule.
Communications and Community Outreach
Informing community members about the CIP efforts, process, and program details remains an integral part of Valley Water’s communications and public engagement. Staff regularly invites community members to participate in the CIP public comment period, the CIP public hearings, and other milestone dates through frequent posts across all of our social media platforms. Staff promotes monthly CIP committee meetings on Nextdoor, Facebook, and X (formerly Twitter), and boosts them on Facebook once the meeting agenda is posted online, typically within the week leading up to those scheduled meetings.
In early December 2025, a detailed blog about the CIP Five-Year Plan and process was shared with the community, and a three-blog series to highlight projects within the CIP launched in January. These blogs were posted on valleywaternews.org and shared in Valley Water’s newsletter, Facebook, and X. Staff also posts on the CIP webpage and project pages about how to submit public comments and other reminders about ways community members can participate in the CIP process.
Additionally, Valley Water’s public events, including scheduled Speakers Bureau presentations, serve as venues for staff to remind community members about the CIP efforts and how they can participate in that process, and CIP projects are highlighted at community events where Valley Water hosts booths throughout the year. In short, staff supports all Board-approved CIP efforts with year-round community engagement. CIP project outreach includes distributing information through mailings, social media updates, email blasts, Nextdoor notifications, hosting public meetings, during community events, and updating project webpages with details about current project progress. On average, staff posts about CIP projects approximately five times per month across all our platforms.
Next Steps
Upon the Board’s adoption of the resolution approving the CIP Final FY 2027-31 Five-Year Plan (Attachment 6), staff will prepare the Five-Year Plan document, which will be provided to the Board and made available to the public on Valley Water’s website at <https://www.valleywater.org/how-we-operate/five-year-capital-improvement-program> by no later than June 30, 2026.
ENVIRONMENTAL JUSTICE IMPACT:
Individual capital projects may have environmental justice impacts. When this occurs, staff will conduct outreach to and engagement with impacted communities, which will be reported to the Board accordingly. Conducting a Public Hearing for the CIP Draft FY 2027-31 Five-Year Plan has no environmental justice impact.
The CIP Draft FY 2027-31 Five-Year Plan is a projection of Valley Water’s capital funding for planned capital projects. Its purpose is to document planned capital projects to help integrate Valley Water work with the larger community by aligning Valley Water planning with other local agency planning efforts. The CIP Draft FY 2027-31 Five-Year Plan documents any changes to capital projects’ planned funding and expenditures. It is updated and brought to the Board of Directors for approval each year in February.
Each February, upon the Board’s direction, staff provides a copy of the CIP Draft Five-Year Plan to all cities and land use authorities in Santa Clara County and the County of Santa Clara to ensure meaningful engagement of all Santa Clara County communities in the decision-making process. It publishes a public notification for review before the Board of Directors adopts the Resolution to Adopt the CIP Five-Year Plan in May.
The CIP Five-Year Plan is thus produced each year in collaboration with government, academic, private, non-governmental, and non-profit organizations, as well as diverse and disadvantaged communities, and as such, adheres to the Board’s General Principles and Ends Policies, which are integral in ensuring that Valley Water meets its mission.
FINANCIAL IMPACT:
There is no financial impact associated with this item to conduct and close the Public Hearing on the CIP Draft FY 2027-31 Five-Year Plan and adopt a Board resolution to finalize and approve the CIP Final FY 2027-31 Five-Year Plan. The total value of the CIP Final FY 2027-31 Five-Year Plan is $10.386B, of which $837M may be funded by external sources through cost-share agreements, partnerships, and grants, resulting in a total CIP cost to Valley Water of $9.549B.
CEQA:
The recommended action does not constitute a project under CEQA because it does not have a potential for resulting in direct or reasonably foreseeable indirect physical change in the environment.
ATTACHMENTS:
Attachment 1: Draft FY 2027-31 Five-Year Plan
Attachment 2: Agency Letters of Support
Attachment 3: Project Plan Updates
Attachment 4: Final CIP Financial Overview
Attachment 5: Market Study Report
Attachment 6: Resolution
Attachment 7: PowerPoint
Handout 3.4-A: City of Santa Clara Letter of Support
UNCLASSIFIED MANAGER: Manager
Luz Penilla, 408-630-2228