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 Proposed Fiscal Year 2026-27 Groundwater Production Charge and Provide Feedback.
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RECOMMENDATION: Recommendation
Review proposed Fiscal Year 2026-27 Groundwater Production Charge and provide feedback.
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SUMMARY:
Why Groundwater Production Charges Are Necessary
The proposed groundwater production charges for FY 2026-27 are necessary to pay for ongoing operations and maintenance of the existing water utility system, investments in water supply infrastructure rehabilitation and upgrades, and new water supply reliability investments. Investing in key rehabilitation and upgrade projects and securing new water supply has resulted in a multi-year era of investment for the water utility. Investing now remains the prudent path to ensure that our water utility projects continue to do their job of providing safe, clean, and reliable water to all of Santa Clara County.
The proposed groundwater production charges for FY 2026-27 that are detailed below are necessary to (1) advance the Anderson Dam Seismic Retrofit project; (2) to fund key baseline projects such as the Rinconada Water Treatment Plant reliability improvement and the 10-year Pipeline Rehabilitation Program; (3) to participate in the B.F. Sisk Dam Raise and Sites Reservoir projects, which would provide additional water storage capacity; and, (4) to pay for general inflation.
The groundwater production charge recommendations are detailed in the Annual Report on the Protection and Augmentation of Water Supplies that was filed with the Clerk of the Board on February 27, 2026. The public hearing on groundwater production charges is scheduled to open on April 14, 2026 and will continue on April 22, 2026 with a focus on South County, and conclude April 28, 2026. It is anticipated that the Board would set the FY 2025-26 groundwater production charges by May 12, 2026, with an effective date of July 1, 2026.
The FY 2026-27 groundwater production charge and surface water charge setting process will be conducted consistent with the District Act, and Board resolutions 99-21 and 12-10.
Groundwater Production and Treated Water Charge Recommendations
Staff proposes a 9.1% increase in the North County Zone W-2 Municipal and Industrial (M&I) groundwater production charge, from $2,450.00 per acre foot (AF) to $2,673/AF. Staff recommends maintaining the treated water surcharge on treated water delivered under the contracts with retail agencies at $115/AF, and maintaining the non-contract treated water surcharge at $200/AF. The proposal equates to a monthly bill increase for the average household of $5.63 or about 19 cents a day.
In the South County Zone W-5, staff proposes a 6.6% increase in the M&I groundwater production charge from $624.50/AF to $665.50/AF. The proposal equates to a monthly bill increase for the average household of $1.04 or about 3 cents per day.
In the South County Zone W-7, staff proposes a 9.4% increase in the M&I groundwater production charge from $834.50/AF to $913.00/AF. The proposal equates to a monthly bill increase for the average household of $1.98 or about 7 cents per day.
In the South County Zone W-8, staff proposes an 8% increase in the M&I groundwater production charge from $464.00/AF to $501.00/AF. The proposal equates to a monthly bill increase for the average household of $0.93 or about 3 cents per day.
Customers in both areas of North and South County may also experience additional charge increases enacted by their retail water providers.
For agricultural groundwater users, staff proposes an increase of 8 percent from the prior year, which equates to setting the agricultural groundwater charge at 9.25 percent of the lowest M&I rate (Zone W-8). The proposed agricultural groundwater production charge in any groundwater benefit zone would change from $43.00/AF to $46.50/AF, or roughly a $0.58 increase per month per acre, assuming two acre-feet of water usage per acre per year.
Surface Water and Recycled Water Charge Recommendations
Staff recommends a 9.1% increase to the surface water master charge from $67.00/AF to $73.00/AF to align revenues with costs related to managing, operating and billing for surface water diversions. This increase results in a proposed 9.1% increase to the North County (Zone W-2) M&I surface water charge, to $2,746.00/AF. For South County zones, staff proposes the following M&I surface water charge increases: for Zone W-5, a 6.8 percent increase to $738.50/AF; for Zone W-7, a 9.4 percent increase to $986.00/AF; for Zone W-8, an 8.1 percent increase to $574.00/AF. Staff recommends that the total agricultural surface water charge be increased 8.6 percent in all zones, to $119.50/AF.
For recycled water (Zone W-5), staff recommends increasing the M&I charge by 6.8 percent, to $645.50/AF, and increasing the agricultural charge by 4.8 percent, to $76.85/AF. The increase maximizes cost recovery while concurrently providing an economic incentive to use recycled water. This pricing is consistent with the provisions of the “Wholesale-Retailer Agreement for Supply of Recycled Water Between Santa Clara Valley Water District and City of Gilroy.”
State Water Project Tax and Additional Details
Staff recommends setting the State Water Project Tax at $28 million for FY 2026-27. This translates to a property tax bill for the average single-family residence of roughly $46.00 per year. This tax amount is necessary to pay for State Water Project costs. If the recommended FY 2026-27 State Water Project Tax is not approved, the impact translates to a needed increase in the M&I groundwater production charge of an additional $158/AF in North County Zone W-2 and in South County an additional $37/AF in Zone W-5, $49/AF in Zone W-7 and $38/AF in Zone W-8 in South County. The open space credit would increase by roughly $962,533.00.
Santa Clara Valley Water District’s (Valley Water) 55th Annual Report on the Protection and Augmentation of Water Supplies, among other information, contains a financial analysis of the Valley Water’s water utility system and additional details about the above recommendations. This report can be found at www.valleywater.org <http://www.valleywater.org>.
Staff is seeking the Commission’s feedback, or input, with regard to these proposed groundwater production charges for FY 2026-27.
A PowerPoint presentation will be provided at the meeting.
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