COMMITTEE AGENDA MEMORANDUM
Santa Clara Valley Water Commission
Government Code § 84308 Applies: Yes ☐ No ☒
(If “YES” Complete Attachment A - Gov. Code § 84308)
SUBJECT: title
Review and Provide Comment to the Board on Staff’s Preliminary Fiscal Year 2026 - 2027 Groundwater Production Charges.
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RECOMMENDATION: Recommendation
Discuss staff’s preliminary Fiscal Year 2026 - 2027 Groundwater Production Charge analysis; provide comment to the Board as desired.
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SUMMARY:
Summary of Groundwater Production Charge Analysis
Staff has prepared the preliminary FY 2026-27 groundwater production charge analysis, which includes several scenarios presented to the Board on January 13, 2026. Staff sought Board input on the preliminary analysis to incorporate into the development of the groundwater production charge recommendation.
The groundwater production charge reflects the benefit of Valley Water activities to protect and augment groundwater supplies and is applied to water extracted from the groundwater basin in Zones W-2, W-5, W-7, and W-8. Zone W-2 encompasses the Santa Clara groundwater subbasin north of Metcalf Road or the North County. Zone W-5 overlays the Llagas subbasin from northern Morgan Hill south to the Pajaro River. Zone W-7 overlays the Coyote Valley south of Metcalf Road to northern Morgan Hill, and W-8 encompasses the area below Uvas and Chesbro Reservoirs.
The groundwater production charge recommendation will be detailed in the 55th Annual Report on the Protection and Augmentation of Water Supplies that staff plans to provide to the Clerk of the Board on February 27, 2026. The Public Hearing on groundwater production charges is scheduled to open on April 14, 2026. It is anticipated that the Board will set the FY 2026-27 groundwater production charges by May 12, 2026, and become effective on July 1, 2026.
The FY 2026-27 groundwater production charge and surface water charge setting process will be conducted consistent with the District Act requirements, and Board Resolutions 99-21 and 12-10.
Water Use Assumptions
The estimated actual District managed water use for FY 2024-25 is approximately 219,000 acre-feet (AF), which is about 3,000 AF lower than budgeted water use. Lower water use when compared to last year’s budget was likely due to several factors including lower rebound from the 2023 drought than was anticipated combined with milder weather (dry but slightly cooler than usual).
Consistent with last years reduced long-term projections, adopted budget FY 2025-26 water use is 219,000 AF. The water usage forecast for FY 2026-27 is 221,250 AF, and may be modified as necessary during the upcoming rate setting process.
The multi-year projection reflects modest annual growth in District managed water use, returning to around 230,000 AF by FY 2031-32.
Groundwater Production Charge Projection Scenarios
Staff has prepared a preliminary baseline groundwater production charge projection scenario for Board review, consistent with the CIP Evaluation Team’s recommendation to fund two new projects. Staff can model additional scenarios for the Board as needed.
For the preliminary baseline scenario, the increase in the North County Zone W-2 Municipal and Industrial (M&I) groundwater production charge is 9.1% for FY 2026-27. In South County, the increases in the M&I groundwater production charge projections are 6.4% for Zone W-5; 8.6% for Zone W-7; and 8.0% for Zone W-8.
The overall impact of the preliminary analysis for the recommended baseline scenario for FY 2026-27 on the average household using about 11 HFC would be an estimated increase of $5.63 per month in North County, $1.01 per month in South County Zone W-5, $1.82 per month in South County in Zone W-7, and $0.93 per month in South County in Zone W-8.
Staff assumes the continuation of the Contract Treated Water Surcharge at $115/AF to maintain alignment with retailers’ costs to pump water from their wells.
Staff has prepared the following baseline scenario for Board consideration:
Scenario 1: Baseline
‒ Agricultural rates remain at 10% or less of lowest groundwater charge zone Municipal & Industrial rate
‒ District-managed water use projection of around 221,500 acre-feet
‒ Projects in the draft FY 27-31 CIP 5-Year Plan, including:
‒ Anderson Dam Seismic Retrofit with WIFIA loan
‒ Rinconada Water Treatment Plant Reliability Improvement Project
‒ Santa Teresa Water Treatment Plant Infrastructure Rehabilitation Project
‒ Pure Water Silicon Valley (Phase 1 Demonstration Facility & Phase 2 Full-Scale Direct Potable Reuse (DPR) Facility) with WIFIA loan
‒ Dam Safety Program: Almaden, Calero, Coyote & Guadalupe
‒ Water rates will fund 3.23% of Delta Conveyance Project planning costs, participation in the B.F. Sisk Dam Raise project at San Luis Reservoir, and 0.66% participation in the Sites Reservoir Project
‒ Master Plan Project placeholders: SCADA, Water Treatment Plants & Distribution System
A second scenario has been prepared for informational purposes: Baseline with expanded Sites participation.
Staff can model additional scenarios for the Board as needed.
Other Assumptions
All scenarios assume that it is necessary for Valley Water to pay for 100% of the State Water Project (SWP) expenses through levy of a SWP tax. Pursuant to Water Code Section 11652, Valley Water, whenever necessary, is required to levy on all property in its jurisdiction not exempt from taxation, a tax sufficient to provide for all payments under its SWP contract with the California Department of Water Resources (DWR). The baseline scenario assumes setting the SWP Tax for FY 2026-27 at $28M. The SWP Tax for the average household in Santa Clara would be about $42 per year.
All scenarios assume Water Utility operations cost $266.4M in FY 2026-27 versus the FY 2025-26 adopted budget of $269.6M.
The preliminary analysis does not include unfunded capital projects or additional unfunded operations cost needs identified by staff.
ENVIRONMENTAL JUSTICE IMPACT:
There are no Environmental Justice impacts associated with this item.
ATTACHMENTS:
Attachment 1: PowerPoint
UNCLASSIFIED MANAGER:
Manager
Darin Taylor, 408-630-3068