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 and Adopt a Resolution Approving the Capital Improvement Program Final Fiscal Years 2026-2030 Five-Year Plan. (Continued from May 16, 2025)
End
RECOMMENDATION:
Recommendation
A. Open and conduct the continued Public Hearing continued from May 16, 2025, to receive public comments and Board feedback regarding the Santa Clara Valley Water District’s Capital Improvement Program (CIP) Draft Fiscal Years (FY) 2026-2030 Five-Year Plan;
B. Close the Public Hearing;
C. Direct staff to incorporate the identified changes to the CIP Draft FY 2026-2030 Five-Year Plan and finalize the FY 2026-2030 Five-Year Plan by June 30, 2025; and
D. Adopt the Resolution APPROVING THE CAPITAL IMPROVEMENT PROGRAM FISCAL YEARS 2026-2030 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.
Capital Investments Not Included in the CIP
Valley Water contributions to water infrastructure capital investments led by external agencies are not included in the CIP Preliminary FY 2026-30 Five-Year Plan. While not included in the CIP, these investments are being evaluated through the development of the Water Supply Master Plan (WSMP) 2050 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
Additionally, to ensure consistency with Valley Water’s various planning efforts, CIP staff continues coordinating with staff leading the development of the WSMP 2050. The WSMP 2050 assumes that capital projects included in the Five-Year Plan that repair/replace existing infrastructure are a baseline for inclusion in their planning efforts.
CIP Development Cycle for the FY 2026-30 Five-Year Plan
The Board reviewed the CIP Preliminary FY 2026-30 Five-Year Plan on January 14, 2025, in conjunction with the preliminary FY 2025-26 groundwater production charges. At that meeting, the Board provided direction regarding key capital investments under the Water Utility Enterprise Fund (Fund 61) and received information and provided feedback regarding the Watershed Stream Stewardship Fund (Fund 12) and the Safe, Clean Water and Natural Flood Protection Program (Safe, Clean Water Program) Fund (Fund 26). In response to the recommendations presented for Funds 12 and 26, the Board directed staff to hold a public hearing to consider modifications to the Safe, Clean Water Program, Project E7: San Francisco Bay Shoreline Protection. The public hearing was held on February 11, 2025, and continued to February 25, 2025. On February 25, 2025, rather than provide direction on the proposed modifications during this year’s CIP Development Cycle, the Board directed staff to hold a Public Hearing during next year’s CIP Annual Development Cycle to align with the development of the CIP FY 2027-31 Five-Year Plan. Based on the Board’s direction, the San Francisco Bay Shoreline Protection - EIA 11 (Project 00044026) project cost increase of ~$87M will result in a funding shortfall for FY 2028-32 that will be addressed during next year’s CIP Annual Development Cycle.
On March 11, 2025, the Board approved the CIP Draft FY 2026-30 Five-Year Plan (Attachment 1), which was prepared to align with the Board’s direction for all funds. The CIP Draft FY2026-30 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 2026-30 Five-Year Plan is consistent with their applicable General Plans. To date, Valley Water has received 4 letters of support, confirming alignment and consistency with their general plans (Attachment 2).
The CIP Draft FY 2026-30 Five-Year Plan included three newly validated capital projects in the CIP as approved by the Board:
1. Enterprise Resource Planning (ERP) Replacement Project; $33.2M (Fund 73)
2. Coyote Dam Seismic Stability; $406.5M (Fund 61)
3. Pipeline Maintenance Program; $55.4M (Fund 61)
Changes Identified for CIP Final FY 2026-30 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 2025-29). 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 2026-30 Five-Year Plan.
Since the release of the CIP Draft FY 2026-30 Five-Year Plan, staff has identified the following changes. Finalized project plan updates have been incorporated in the Final CIP Financial Overview for the Board’s final review and adoption of the CIP Final FY 2026-30 Five-Year Plan.
Below is a list of projects with changes.
1. San Jose Purified Water - Phase 1 (91294001) : There were changes to scope, schedule and cost. The overall schedule is extended by 1 year. The inflated Total Project Cost (TPC) increased by $62.08M (inflation only).
2. Coyote Creek, Montague-Tully (26174043): There were changes to schedule and cost. The overall schedule is extended by 1 year. The inflated TPC increased by $23.45M.
3. Headquarters Operations Building (60204032): There were changes to scope, schedule and cost. The overall schedule is reduced by 1 year and 11 months. The inflated TPC decreased by $87K (inflation only).
4. ERP Replacement (73274013): There were changes to schedule and cost. The overall schedule is extended by 1 year. The inflated TPC increased by $1.73M (inflation only).
Attachment 3 provides detailed explanations of all changes from the Adopted CIP FY 2025-29 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 2026-30 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 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. 60204016 Facility Management
6. 73274008 Software Upgrades & Enhancements
7. 95274003 Water Utility Network Modernization
CIP Final FY 2026-30 Five-Year Plan
As shown in the Final CIP Financial Overview (Attachment 4), the CIP Final FY 2026-30 Five-Year Plan 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 $10.321B. This includes Valley Water's prior actuals and future year planned expenditures of $9.016B 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.
Key capital investments include Dam Seismic Retrofits, Pacheco Reservoir Expansion Project, Rinconada Water Treatment Plant Reliability Improvement Project, Coyote Creek Flood Protection Project, Upper Llagas Creek Flood Protection Project, and Ogier Ponds Project (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 2026-30 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 2026-40.
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 2026-30 Five-Year Plan (Attachment 1) provides operating cost impacts for each project within the CIP.
Projects Planned for Completion and/or Closure
For reporting on FY 2024-25 expenditures, the CIP Final FY 2026-30 Five-Year Plan includes the eight (8) projects listed below that are anticipated to be completed and/or 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)
The projects listed above are planned for closure but will remain in the CIP FY 2026-30 Five-Year Plan to allow for close-out reporting of FY 2025 actuals. The projects will be removed from the CIP FY2027-31 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 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 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. 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
Upon the Board’s adoption of the resolution approving the CIP Final FY 2026-30 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>
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 and adopting a resolution approving the CIP Final FY 2026-30 Five-Year Plan has no environmental justice impact.
The CIP Five-Year Plan is a projection of Valley Water’s capital funding for planned capital projects produced annually on a rolling basis. 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 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. Valley Water publishes a public notification for review before the Board of Directors adopts the Resolution to Adopt the CIP Final 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. As such, it 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 2026-30 Five-Year Plan and adopt a Board resolution to finalize and approve the CIP Final FY 2026-30 Five-Year Plan. The total value of the CIP Final FY 2026-30 Five-Year Plan is $10.321B, of which $1.305B may be funded by external sources through cost-share agreements, partnerships, and grants, resulting in a total CIP cost to Valley Water of $9.016 billion.
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 2026-30 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: Hare Letter
UNCLASSIFIED MANAGER:
Manager
Luz Penilla, 408-630-2228