BOARD AGENDA MEMORANDUM
Government Code § 84308 Applies: Yes ☐ No ☒
(If “YES” Complete Attachment A - Gov. Code § 84308)
SUBJECT:
Title
Approve the Central Fiscal Year 2025-26 Year-End and Fiscal Year 2026-27 Budget Adjustments.
End
RECOMMENDATION:
Recommendation
Approve the Central Fiscal Year 2025-26 Year-End and Fiscal Year 2026-27 Budget Adjustments.
Body
SUMMARY:
In adhering to Governance Policies of the Board and specifically Executive Limitations EL-4, staff respectfully submits central budget adjustments to the FY 2025-26 (FY26) Adjusted Budget and FY 2026-27 (FY27) Rolling Biennial Adopted Budget, which are necessary to better align limited allocated resources with the Board’s Ends, meet Board priorities, and to continue to provide for a balanced budget.
Descriptions of the FY27 central budget adjustments, primarily consisting of carry-forward unspent funding from FY26 to FY27, are presented below:
1. Operations Project: 00761071 Emergency Management ($402,074 Increase)
This budget adjustment request is to carry forward $402,074 in the Emergency Management Project from FY26 to FY27 to support critical initiatives across the Emergency, Safety and Security Division. Funding will be used to modernize Santa Clara Valley Water District's (Valley Water) Emergency Operations Center (EOC) technology infrastructure, which has been in service since 2019 and is experiencing increasing reliability, lifecycle, and supportability issues. The modernization effort will assess, replace, and enhance aging technology to improve situational awareness, emergency communications, information sharing, and coordination with partner agencies during emergencies and significant incidents. The carry-forward will also support the purchase, maintenance, and repair of security drones to strengthen operational security by enhancing the agency's ability to detect, deter, and respond to potential threats to staff, critical infrastructure, and essential systems. In addition, funding will provide consulting and program development support to implement an Integrated Pest Management Program that ensures regulatory compliance and effective pest management, as well as technical consulting to strengthen Valley Water's California Accidental Release Prevention (CalARP) Program by enhancing inspection processes and regulatory compliance for ammonia systems at the agency's four water treatment plants. This net-zero carry forward adjustment is funded by a corresponding decrease of $402,074 in FY26 to the Project appropriation.
2. Operations Project: 26061020 F6 Public Arts ($130,000 Increase)
This budget adjustment request is to carry forward $130,000 in the F6 Public Arts Project from FY26 to FY27 in support of Key Performance Indicator (KPI) #3 under the Safe, Clean Water and Natural Flood Protection Program (Safe, Clean Water). As outlined in the voter-approved program, Valley Water administers a public art initiative that allocates up to $1.5 million over 15 years to implement public art projects on Valley Water property and infrastructure. Valley Water developed a Public Art Strategic Plan to guide the effective implementation of Project F6, KPI #3. With the strategic plan now complete, Valley Water is developing the Public Art Program implementation strategy, including a proposed modification to expand program eligibility beyond Valley Water-owned infrastructure to better align with the organization's strategic goals, available funding, and staffing capacity. Because this modification requires a public hearing and Board approval, no public art projects funding was utilized in FY26. Carrying the FY26 budget forward to FY27 will ensure sufficient funding is available to implement public art projects following Board action. This net-zero carry forward adjustment is funded by a corresponding decrease of $130,000 in FY26 to the Project appropriation.
3. Operations Project: 26061021 F9 Safe, Clean Water Grants and Partnerships Projects ($3,086,086 Increase)
This budget adjustment request is to carry forward $3,086,086 in the F9 Safe, Clean Water Grants and Partnerships Project from FY26 to FY27 to execute all pending grant and partnership agreements. As outlined in the voter-approved Safe, Clean Water and Natural Flood Protection Program (Safe, Clean Water), Valley Water administers grants and partnerships annually to accomplish the Key Performance Indicators (KPIs) for Project F9: Grants and Partnerships for Safe, Clean Water, Flood Protection and Environmental Stewardship.
In FY26, the Board awarded $1,776,760 in standard grants on June 23, 2026, which resulted in insufficient time to execute the agreements before the end of FY26. The Board also approved carrying forward the remaining FY26 standard grant funding of $93,240 into FY27 to be available for mini-grants and refill station grants. In addition, there is $115,000 in FY26 refill station and mini-grants pending agreement execution. Not all of the funds allocated for grants and partnerships were awarded in FY26, and the remaining $260,000 is recommended to be carried forward to fund projects in FY27. Additionally, grant agreements totaling $841,086 awarded in prior fiscal years remain pending execution and require carry-forward funding in FY27.
All pending grant and partnership agreements and unspent allocated funds total $3,086,086 and are recommended for carry-forward to FY27. Funds already budgeted in FY27 will continue to support the annual delivery of Safe, Clean Water KPIs, while the carry-forward funding will provide the resources necessary to execute pending agreements and implement the Board's direction. This net-zero carry-forward adjustment is funded by a corresponding decrease of $3,086,086 in FY26 to the Project appropriation.
4. Operations Project: 91131006 Imported Water San Felipe Division Deliveries ($11,768,387 Decrease) / Operations Project: 91131009 B.F. Sisk Reservoir Expansion ($11,768,387 Increase)
This budget adjustment request is to carry forward $11,768,387 in the Imported Water (IW) San Felipe Division Deliveries Project from FY26 to FY27 for the B.F. Sisk Dam Raise and Reservoir Expansion Project. On April 8, 2025, the Valley Water Board authorized additional funding for Valley Water's share of planning costs for the B.F. Sisk Dam Raise and Reservoir Expansion Project through the San Luis & Delta-Mendota Water Authority Sisk Activity Agreement. The Board also authorized increasing Valley Water's storage capacity to at least 63,560 acre-feet, with the potential to expand to 70,000 acre-feet if additional capacity becomes available. Since the FY26 budget was adopted, the project cash flow schedule has been updated, with most planned cash-call payments now expected to occur in FY27 and FY28. As a result, the unspent FY26 appropriation is being carried forward and transferred to the newly established Sisk Reservoir Expansion Project to separately track Sisk project costs from Central Valley Project water operations. In addition, a Board item is planned for August 2026 to authorize the next phase of Sisk project costs. This net-zero carry forward adjustment is funded by a corresponding decrease of $11,768,387 in FY26 to the Project appropriation.
5. Operations Project: 91151001 Water Conservation Program ($5,550,000 Increase)
This budget adjustment request is to carry forward $5,550,000 in the Water Conservation Program Project from FY26 to FY27 to support ongoing water conservation initiatives. Funding was not fully utilized in FY26 due to declining participation in the Landscape Rebate Program, delays in awarding the Water Conservation Services and Assessment Request for Proposals (RFP), additional time needed to negotiate a cost-share agreement with the City of Gilroy for Advanced Metering Infrastructure (AMI), and delayed AMI discussions with other partner agencies. The carryforward funding will support the Water Conservation Services and Assessment contract, which includes an expanded scope to address inflation, cybersecurity, and Board Audit Committee recommendations, the City of Gilroy AMI cost-share agreement, and the Water Efficient Landscapers Dual Certification Program. These initiatives support Valley Water's long-term water conservation objectives and are consistent with the 2040 and 2050 Water Supply Master Plans. This net-zero carry forward adjustment is funded by a corresponding decrease of $5,550,000 in FY26 to the Project appropriation.
6. Operations Projects: 91151013 Water Banking Operations ($6,000,000 Decrease) / 91151015 Groundwater Banking Diversification ($6,000,000 Increase)
This budget adjustment request is to carry forward $6,000,000 in unspent FY26 funds to FY27 for new groundwater banking opportunities. The funding will be transferred to the newly established Groundwater (GW) Banking Operations Project (Project 91151015) to separately track new groundwater banking efforts from existing Semitropic-related banking activities. Valley Water's long-term water supply planning has identified a potential overreliance on the Semitropic Water Bank, whose current storage agreement expires in 2035, indicating that additional groundwater storage opportunities may be needed to diversify storage capacity and meet future level-of-service goals, consistent with strategies identified in the Water Supply Master Plan 2050. This net-zero carry forward adjustment is funded by a corresponding decrease of $6,000,000 in FY26 to the Project appropriation.
7. Operations Project: 91101004 Recycled & Purified Water Program ($1,468,524 Increase)
This budget adjustment request is to carry forward $1,468,524 in the Recycled & Purified Water Program Project from FY26 to FY27 to support ongoing recycled and purified water initiatives. Of the total amount, $500,000 is needed for the CalVal Agreement with the National Water Research Institute (NWRI), which was approved by the Board and executed on June 23, 2026, but could not be encumbered prior to the June 30 fiscal year-end encumbrance deadline. The remaining $968,524 will support the Source Control Project under the Pure Water Silicon Valley Program. As the project has advanced, evolving permitting requirements have led to revisions to the project scope, schedule, and consulting support needed to complete the work, resulting in a higher level of effort than originally anticipated. This net-zero carry forward adjustment is funded by a corresponding decrease of $1,468,524 in FY26 to the Project appropriation.
8. Operations Project: 91281008 SVAWPC Facility Maintenance ($275,000 Increase)
This budget adjustment request is to carry forward $275,000 in the Silicon Valley Advanced Water Purification Center (SVAWPC) Facility Maintenance Project from FY26 to FY27 to support ongoing maintenance of the microfiltration (MF) system. Of the total amount, $200,000 is needed to complete the second phase of the microfiltration (Pall system) solenoid valve manifold upgrade, and $75,000 is needed to purchase MF module endcaps. These activities were delayed because the related vendor and contractor work was extended to FY27. This net-zero carry forward adjustment is funded by a corresponding decrease of $275,000 in FY26 to the Project appropriation.
9. Operations Project: 91441003 Desalination ($300,000 Increase)
This budget adjustment request is to carry forward $300,000 in the Desalination Project from FY26 to FY27 to continue feasibility studies for the proposed project. Following the presentation of the draft feasibility study findings to the Recycled Water Committee in May 2026, additional work was identified to provide the Board with more complete information for future consideration of the project. The carryforward funding will support Amendment No. 3 for additional hydrodynamic and outfall modeling, water quality sampling, and stakeholder and regulatory agency engagement. The total cost of this work is estimated at $506,615, with the remaining $206,615 funded through the existing FY27 project budget. This net-zero carry forward adjustment is funded by a corresponding decrease of $300,000 in FY26 to the Project appropriation.
10. Operations Project: 91151001 Water Conservation Program ($2,000,000 Decrease) / Capital Project: 60204032 Headquarters Operations Building ($2,000,000 Increase)
This budget adjustment request is to carry forward $2,000,000 in the Water Conservation Program Project from FY26 to FY27 and transfer it to the Headquarters Operations Building Project to support the construction of the Demonstration Garden at Valley Water's Headquarters. The Demonstration Garden will showcase a watershed approach to landscaping and serve as a functional educational space where the public can learn about sustainable landscaping practices and Valley Water's Landscape Rebate Program. The approximately 26,000-square-foot garden will provide a tangible demonstration of water-efficient landscape design while also serving as a community gathering space. Design of the Demonstration Garden is expected to be completed by July 2026, with construction anticipated to begin in late FY27 and conclude in early FY28. This net-zero carry forward adjustment is funded by a corresponding decrease of $2,000,000 in FY26 to the Water Conservation Program Project.
11. Operating Projects:
91152001 GP5 - Mountain View AMI & Recycled Water Project ($582,306 Decrease in FY26 and $941,117 Increase in FY27);
91152002 GP5 - Palo Alto RWQCP Project ($746,894 Decrease in FY26 and $1,042,039 Increase in FY27);
91152003 GP5 - Purissima Hills Leak Detection Project ($1,325,299 Decrease in FY26 and $1,372,150 Increase in FY27);
91152004 GP5 - Stanford University RWQCP Project ($155,269 Decrease in FY26 and $229,376 Increase in FY27)
This budget adjustment request is to true-up $774,914 in FY26 interest earnings and carry forward the remaining $2,809,768 in unspent FY26 funds to FY27 for the four Guiding Principle 5 (GP5) projects. In 2021, the Board approved implementation of the GP5 grant program to provide Water Utility Funding to eligible retailers for water conservation, recycled and purified water, wastewater treatment upgrades that support water reuse, Advanced Metering Infrastructure (AMI), and related environmental projects. Under the program, participating retailers are eligible to request reimbursement for approved projects through June 30, 2033. This budget adjustment ensures that FY26 interest earnings are appropriately recognized and that unspent GP5 funds are carried forward to FY27 to support eligible projects in accordance with the Board-approved program. This budget adjustment is funded by a $774,914 decrease to the Water Enterprise Fund Operating and Capital Reserve, and a net-zero carry forward adjustment of $2,809,768 funded by a corresponding decrease in FY26 to the Project appropriations.
ENVIRONMENTAL JUSTICE IMPACT:
There are no Environmental Justice Impacts associated with this item.
FINANCIAL IMPACT:
Approval of the recommended central FY27 Budget Adjustments amends the FY27 Operating and Capital Budget which was adopted by the Board per Resolution 26-30 on May 12, 2026. As shown in the Operating, Capital, and Interfund Transfer Budget table below.
The central FY27 budget adjustments will increase project expenditures by $34,564,753 (Items 1-11) as follow:
• Carry forward unspent funding from FY26 to FY27 totaling $33,789,839 (Items 1-10 and $2,809,768 of Item 11), which does not impact the Operating and Capital Reserves.
• Reduce $774,914 from the FY27 Water Enterprise Fund Operating and Capital Reserve to fund Item 11, increasing the FY27 total budget.
The tables below summarize the changes.
FY 2026-27 Operating, Capital, and Interfund Transfer Budget
|
Fund |
Adopted Budget |
Recommended Budget Adjustment |
Adjusted Budget |
|
General Fund (11) |
113,855,152 |
2,000,000 |
115,855,152 |
|
Watershed & Stewardship Fund (12) |
126,331,955 |
201,037 |
126,532,992 |
|
Lower Peninsula Watershed Fund (21) |
2,731,816 |
0 |
2,731,816 |
|
West Valley Watershed Fund (22) |
819,476 |
0 |
819,476 |
|
Guadalupe Watershed Fund (23) |
910,837 |
0 |
910,837 |
|
Coyote Watershed Fund (24) |
2,459,121 |
0 |
2,459,121 |
|
Safe, Clean Water Fund (26) |
230,456,853 |
3,216,086 |
233,672,939 |
|
Water Enterprise Fund (61) |
865,360,489 |
29,147,630 |
894,508,119 |
|
State Water Project Fund (63) |
35,848,142 |
0 |
35,848,142 |
|
Fleet Management Fund (71) |
10,135,017 |
0 |
10,135,017 |
|
Risk Management Fund (72) |
12,753,661 |
0 |
12,753,661 |
|
Information Technology Fund (73) |
48,283,088 |
0 |
48,283,088 |
|
Total Appropriations |
1,449,945,607 |
34,564,753 |
1,484,510,360 |
FY 2026-27 Reserves Budget*
|
Fund |
Adopted Budget |
Change |
Adjusted Budget |
|
General Fund (11) |
12,141,979 |
0 |
12,141,979 |
|
Watershed & Stewardship Fund (12) |
211,228,917 |
0 |
211,228,917 |
|
Safe, Clean Water Fund (26) |
97,716,187 |
0 |
97,716,187 |
|
Water Enterprise Fund (61) |
152,421,083 |
(774,914) |
151,646,169 |
|
State Water Project Fund (63) |
14,890,000 |
0 |
14,890,000 |
|
Fleet Management Fund (71) |
2,003,803 |
0 |
2,003,803 |
|
Risk Management Fund (72) |
21,801,633 |
0 |
21,801,633 |
|
Information Technology Fund (73) |
6,113,174 |
0 |
6,113,174 |
|
Total Reserves |
518,316,776 |
(774,914) |
517,541,862 |
*The FY 2026-27 Reserves Budget Table illustrates the net impact of all central budget adjustments to the FY 2026-27 Reserves Budget.
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: SCVWD Resolution No. 26-30
Attachment 2: FY 2025-26 and FY 2026-27 Central Budget Adjustments
UNCLASSIFIED MANAGER:
Manager
Darin Taylor, 408-630-3068