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 2026-30 Five-Year Plan.
(Continued from April 22, 2025)
End
RECOMMENDATION:
Recommendation
A. Open and conduct a Public Hearing to receive public comments and Board feedback regarding the Santa Clara Valley Water District’s Capital Improvement Program Draft Fiscal Years 2026-30 Five-Year Plan; and
B. Continue the Public Hearing to the subsequent Special Budget Hearings currently scheduled for April 24, 2025, and the Special Regular Meeting scheduled for May 16, 2025, and conclude the Public Hearing at the regularly scheduled Board Meeting on May 27, 2025.
Body
SUMMARY:
Santa Clara Valley Water District’s (Valley Water) Capital Improvement Program (CIP) Draft Fiscal Years (FY) 2026-30 Five-Year Plan (Attachment 1) includes 76 funded projects distributed among the following categories: 43 Water Supply, 14 Flood Protection, 12 Water Resources Stewardship, 3 Buildings and Grounds, and 4 Information Technology projects, for a total CIP value of $10.267B. This includes Valley Water's prior actuals and future years’ planned funding of $9.477B combined with received and planned outside funding of $1.305B, which includes grants from nonprofits, local public agencies, special districts, state and federal grants agencies, state subvention reimbursements and cost-share partnerships.
On March 11, 2025, the Board directed staff to release the CIP Draft FY 2026-30 Five-Year Plan for public review.
Subsequently, on March 12, 2025, the CIP Draft FY 2026-30 Five-Year Plan was released to all cities and land use authorities in Santa Clara County and the County of Santa Clara for review as to its consistency with their General Plans. Valley Water offered to meet with each of these agencies, and to date, planning and public works staff at the City of Santa Clara have requested a meeting to discuss projects and provide feedback on the CIP Draft FY 2026-30 Five-Year Plan.
As part of this outreach effort, staff requested letters of support. Copies of any letters received will be attached to the May 27, 2025, agenda memo recommending the adoption of the CIP Final FY 2026-30 Five-Year Plan.
Changes Identified for Final FY 2026-30 Five-Year Plan
Since the release of the CIP Draft FY 2026-30 Five-Year Plan, staff has identified the following pending changes. The pending changes are not incorporated into the CIP Draft FY 2026-30 Five-Year Plan. Finalized project plan updates will be incorporated for the Board’s final review and adoption of the CIP FY 2026-30 Five-Year Plan on May 27, 2025, Board Meeting.
A list of the projects with changes from the CIP Draft FY 2026-30 Five-Year Plan is provided below:
1. San Jose Purified Water, Phase 1 (91294001) - Overall schedule is extended by 1 year/Inflated Total Project Cost (TPC) increased by $62.08M (inflation only)
On February 27, 2024, the Board directed staff to place the Palo Alto Purified Water Project (PAPWP) on the CIP unfunded list due to affordability and instead add to the CIP an expedited potable reuse project with the City of San Jose to design and build a direct potable reuse (DPR) demonstration facility, which is the San Jose Purified Water Project (SJPWP) - Phase 1. The initial estimate was based on preliminary information. Adoption of the Direct Potable Reuse (DPR) regulations has also provided a clearer picture of future regulatory requirements and facility demonstration requirements that will enable the development of a full-scale purification facility. The overall project schedule is extended by 1 year due to the delay in obtaining the necessary agreements with the project partners, City of San Jose and City of Santa Clara, resulting in extension of the project completion into FY31.
Following the addition of the SJPWP to CIP, the project was further defined to determine size, flow, and location. In addition, the Project Management Consultant (PMC) for the PAPWP transitioned from providing services for the PAPWP to the new SJPWP - Phase 1. The scope of services for the agreement has been amended to close out tasks pertaining to PAPWP, to add the scope of services for the SJPWP - Phase 1, which consists of a DPR demonstration facility and the initial planning phase of Phase 2, the full-scale DPR facility, to extend the agreement expiration date by three years, and to incorporate administrative updates. The budget for the PMC was also transferred to the SJPWP (in the CIP), and the project design, construction costs and schedule have been updated to reflect the updated project definition. Expenditures previously not included in the SJPWP have been updated to include items such as Staff funding agreements between Valley Water and the City of San Jose, as well as the City of Santa Clara, updated Staff hours to better reflect the level of effort required for work related to CEQA, construction management, inspections, regulatory compliance monitoring, surveying, project management, and updated costs for the design and construction of the demonstration facility or Phase 1. The overall project schedule is extended by 1 year and the total project cost has increased by $62.08M (inflation only).
2. Coyote Creek, Montague-Tully (26174043) - Overall schedule is extended by 1 year/Inflated TPC increased by $23.45M
The Project Construction start is revised to April 2026 to facilitate acquisition of land rights and continue efforts to secure a $50M Flood Mitigation Assistance (FMA) grant with Federal Emergency Management Agency (FEMA). The Environmental, Right(s)-of-Way and Close-Out phases are being extended to align with the extension of the Construction Phase. The overall Project schedule is extended by 1 year. The Project cost increase is due to additional flood protection elements, unforeseen permitting requirements required by Regulatory Agencies, resulting in increases for mitigation credits, in lieu fees, and additional analysis to address regulatory requirements, design changes, utility relocation efforts, acquisition of land rights and additional land area needed, and unaccounted costs for hydraulic lift infrastructure (power & controls) for passive barriers in the parks. The revised inflated TPC is $244.58M.
3. Headquarters Operations Building (60204032) - Overall schedule reduced by 1 year and 11 months/Inflated TPC decreased by $87K (inflation only)
The project scope has changed from a building replacement to a full-scale renovation. The overall project schedule has advanced by one year and 11 months due to the change in scope. There is no change to the overall total project cost, only reallocation of expenditures to match the updated scope and schedule.
4. Enterprise Resource Planning (ERP) Replacement (73274013) - Overall schedule extended by 1 year/Inflated TPC increased by $1.73M (inflation only)
The start of the ERP project will be delayed by one year due to the postponed initiation of two critical operational projects: Payroll and Expense Management Bolt-ons, which are modules that are not part of the scope, but their completion remains essential for accurately scoping and planning the ERP initiative. Additionally, the same key staff members involved in these bolt-on projects will be responsible for the ERP implementation, making parallel efforts impractical. There is no change to the overall project cost, only a reallocation of expenditures to match the updated schedule.
Small Capital Improvement Projects Forecast Revisions:
The small capital project forecasts are revised each year. 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.
The following small capital improvement projects will require updates which are anticipated to be completed for inclusion in the CIP Final FY 2026-30 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. 73274008 Software Upgrades & Enhancements
6. 95274003 Water Utility Network Modernization
Administrative Project Plan Updates - Budget Reconciliation
Each year between the presentation of the CIP Draft Five-Year Plan and the CIP Final Five-Year Plan, the CIP team reviews the 2nd Pass Budget and, if applicable, 3rd Pass Budget to ensure CIP project planned expenditures for the next two Fiscal Years are in alignment with the proposed budgets. If necessary, the CIP team will reconcile the planned expenditures in the Five-Year Plan with the proposed budgets to ensure that the Final Budget and CIP Final Five-Year Plan that are presented to the Board each May are in alignment.
Projects Planned for Completion and Closure
For reporting on FY 2024-25 expenditures, the CIP Draft FY 2026-30 Five-Year Plan includes the eight (8) projects listed below that are anticipated to be completed and closed by June 30, 2025:
1. Coyote Percolation Dam Replacement (91864009)
2. Cross Valley Pipeline Extension (91864010)
3. Santa Teresa Water Treatment Plant Filter Media Replacement (93284013)
4. Rinconada Water Treatment Plant Residuals Remediation (93294058)
5. Permanente Creek, SF Bay to Foothill Expressway (10244001)
6. Permanente Creek, SF Bay to Foothill Expressway (26244001)
7. SCW Fish Passage Improvements (D4.3) (26044002)
8. Data Consolidation (73274009)
Operations and Maintenance Cost Forecast Revisions
It is understood that 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.
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 social media posts. 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 2024, 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, 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.
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, 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
Pursuant to California Government Code §65403(d), the governing body of a special district is required to hold at least one Public Hearing before adopting a capital improvement program. The public was informed of the time and place of this hearing through a notice published in the San Jose Post newspaper (Attachment 2).
*To allow the public additional opportunities to provide comments, staff recommends continuing the Public Hearing, opened on April 8, 2025, to the following Special Budget Hearing, if needed, scheduled for Thursday, April 24, 2025, at 5:00 p.m., and to the subsequent Special Board Meeting on Friday, May 16, 2025, at 1:00 p.m. The Public Hearing will continue to and conclude at the regularly scheduled Board Meeting on May 27, 2025, at 1:00 p.m., when the Board will consider staff’s recommendation to adopt the Resolution to approve the CIP Final FY 2026-30 Five-Year Plan.
ENVIRONMENTAL JUSTICE AND EQUITY 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 2026-30 Five-Year Plan has no environmental justice impact.
The CIP Draft FY 2026-30 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 2026-30 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 Board approval of the recommendations for this item. The total value of the CIP Draft FY 2026-30 Five-Year Plan is $10.267B, of which $1.305B may be funded by external sources.
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: CIP Draft FY 2026-30 Five-Year Plan
Attachment 2: Notice of Public Hearing
UNCLASSIFIED MANAGER:
Manager
Luz Penilla, 408-630-2228