BOARD AGENDA MEMORANDUM
Government Code § 84308 Applies: Yes ☐ No ☒
(If “YES” Complete Attachment A - Gov. Code § 84308)
SUBJECT: Title
Receive and Discuss Long Range Financial Planning Models for the Water Utility Enterprise Fund, the Watersheds Stream Stewardship Fund, and the Safe, Clean Water Fund.
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RECOMMENDATION: Recommendation
A. Receive information on the long-range financial planning models for the Water Utility Enterprise Fund, the Watersheds Stream Stewardship Fund, and the Safe, Clean Water Fund; and
B. Provide direction as necessary.
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SUMMARY:
The purpose of this item is to review the long-range financial planning models that staff has prepared for three of Santa Clara Valley Water District’s (Valley Water) major funds: the Water Utility Enterprise Fund (Fund 61 and Fund 63), the Watersheds Stream Stewardship Fund (Fund 12) and the Safe, Clean Water Fund (Fund 26).
To complement several annual processes, including water rate setting and budget setting and capital improvement program development, staff prepared long-range
financial forecasts, which include assumptions with regard to repair and rehabilitation of large assets beyond the typical 10-year forecasts presented annually.
Each major fund has a slightly different forecast time frame, ranging from 30 to 45 years, in part to demonstrate the long-term impact of various capital investment funding methods. While a forecast that far into the future would certainly include many assumptions, it would provide the Board with a comprehensive financial picture and could help the Board make decisions to address the long-term future.
Attachment 1 is a PowerPoint that identifies specific assumptions by fund.
Watershed Stream Stewardship Fund:
• Fund reserve balances are forecasted through FY 2059-60
• The main revenue source for Watershed Stream Stewardship Fund is Valley Water’s portion of Ad Valorem property taxes, budgeted at $140 million in FY 2026-27.
• The forecast includes assumptions related to revenue growth, operations cost growth and capital funding.
• The forecast also includes:
o Asset Management Projection placeholder cost estimates associated with the repair and maintenance of Valley Water assets by year.
o Rehabilitation of existing creek infrastructure includes structure repair and replacement; levee repair (e.g., rodent damage repair); erosion repair; and restoration of existing level of service.
o There are several unfunded projects that are not included in the forecast which include: San Francisco Bay, Shoreline Reaches 4 & 5; Berryessa Creek Phase 3; Calabazas/San Tomas Aquino Creek-Marsh Connection; South Babb Creek Long Term; Pond A4; Permanente & Hale Creeks; and Lower Llagas Creek Capacity Restoration.
• Based on the assumptions listed in Attachment 1, the forecast reflects that the Watershed Stream Stewardship fund has healthy reserve levels in most years. This balance was achieved following capital project prioritization actions discussed with the Board in November 2025; costs associated with the unfunded projects noted above are not included.
• Cost containment and the development of additional funding sources would strengthen financial sustainability.
Safe, Clean Water Fund:
• Fund reserve balances forecasted through FY 2065-66, summarizing three (3) 15-year program cycles for the Safe, Clean Water Fund.
• The main revenue source for the Safe, Clean Water Fund is a special parcel tax renewed by voters in 2020, budgeted at $56.5 million in FY 2026-27.
• The forecast includes assumptions related to revenue growth, debt proceeds, operations cost growth, debt service repayment obligations and capital funding.
• The forecast reflects a recent shift to leveraging the Safe, Clean Water Fund to deliver on large capital investments while the Watersheds Stream Stewardship Fund focuses on ongoing operations. This strategy includes transferring up to $70 million in available funds from the Watersheds Stream Stewardship Fund to the Safe, Clean Water Fund in FYs 2028-29 and 2029-30. Projects include:
o Sunnyvale East / West
o Coyote Creek
o Upper Llagas
• Based on the assumptions shown in Attachment 1, the Safe Clean Water Fund is financially sustainable through FY 2065-66, however it should be noted that there are many potential challenges that could cause costs to well exceed the limits of the special tax funding source. Cost containment and pursuit of grant funding would strengthen financial sustainability.
Water Utility Fund:
For the Water Utility Fund, staff has prepared a water rate forecast for all 4 groundwater benefit zones through FY 2069-70. Key assumptions are shown in Attachment 1.
District managed water use is forecasted at 221,500 acre-feet for FY 2026-27 with water use projections flattening out around 235,000 by FY 2039-40. Minimal growth each year thereafter results in 240,000 acre-feet of water use by FY 2069-70.
Staff has prepared several water rate forecast scenarios reflecting various water utility investments, with each successive scenario building on top of the former. The seven water utility investment scenarios are as follows:
1. Scenario 1: maintains existing assets and level of service (Including the adopted FY 27-31 CIP, Asset Management Rehabilitation projection, Master Plan estimates for pipelines, treatment plants and SCADA upgrades, Water Treatment Plant Reliability Improvements, and Anderson Dam Seismic Retrofit)
2. Scenario 2: Adds Dam Safety Program (Almaden, Calero, Coyote, Guadalupe)
3. Scenario 3: Adds Sisk Dam Raise at San Luis Reservoir
4. Scenario 4: Adds Delta Conveyance
5. Scenario 5: Adds Sites Reservoir
6. Scenario 6: Adds San Jose Purified Water Program Phase 2 Full-Scale Facility
7. Scenario 7: Adds groundwater banking diversification
Based on the assumptions listed, the scenarios depict the water rate projection for each
groundwater benefit zone that would be required to accomplish the corresponding projects and level of service through FY 2069-70. Additional scenarios can be prepared at the Board’s direction.
A host of challenges are evident for the Water Utility Fund including customer affordability, water use volatility due to changing weather patterns, and evolving regulatory requirements. Thoughtful investment decisions based on the adaptive management framework, cost containment efforts, and pursuit of additional revenue would help address the affordability challenge.
ENVIRONMENTAL JUSTICE IMPACT:
There are no environmental justice impacts associated with this item at this time.
FINANCIAL IMPACT:
There is no financial impact associated with this item.
CEQA:
The recommended action does not constitute a project under CEQA because it does not have the potential for resulting in direct or reasonably foreseeable indirect physical change in the environment.
ATTACHMENTS:
Attachment 1: PowerPoint
UNCLASSIFIED MANAGER: Manager
Darin Taylor, 408-630-3068