Pleasanton Votes To Continue Water Rate Increase Process

PLEASANTON, CA — The Pleasanton City Council voted 4-1 Tuesday to move forward a series of significant water rate increases for residents that will likely amount to 62 percent over three years.

Residents will now be mailed a finalized report by Aug. 5, starting a public comment period ahead of a public hearing on Sept. 19. If the council approves the final report in September, water rates will increase by roughly 30 percent starting Nov. 1, which staff say would amount to roughly $33 more every other month for the average single-family residential customer. This will be followed by a 20-percent increase starting Jan. 1, 2025, and a 12-percent increase on Jan. 1, 2026. The package also includes a more moderate sewer increase of about $1.50 per bill period starting Nov. 1.

City staff say that the significant increases are vital to keeping up with rising costs and restoring a diminishing water fund. For the past three years, per a council vote in 2017, the city has not implemented any rate increases, and Pleasanton water prices are currently the lowest in the region and will remain so even with the increases, according to staff.

Costs have outpaced revenues, and the city is drawing on reserve funds to cover costs. If current rates remain in place, the city’s Water Enterprise Fund will be insolvent by 2025, staff estimate. By fiscal year 2026, it could face a deficit of $26 million.

Staff say that the increases will enable the city to meet its reserve policy targets of 35 percent of operation and management costs for fiscal year 2026, maintain adequate debt coverage, and better position the city for future repairs. The city will not profit from the increases, which is illegal in California.

After stabilizing the situation and drafting a Water Master Plan, the city hopes to embark on a more long-term Phase II to address PFAS, begin replacing pipes and other infrastructure improvements, and shoring up supply issues for droughts. For example, the city needs to replace pipes every hundred years, and replacing the city’s 300 miles of pipe could cost as much as $9 million per year, according to Pleasanton City Manager Gerry Beaudin.

“We can take a big bite and step now, because nothing gets cheaper and there’s not less to do in the future, reset and get to the starting line, and have a longer period of time to pay for costs that we know are on the horizon in a way that doesn’t impact rates in the way we’re talking about impacting them today,” Beaudin said at Tuesday’s meeting.

“We will have more control over keeping rates lower for the period of time where we have to address some bigger system improvements. This is not a great position for all of us to be in tonight, but there’s a rip-the-bandaid-off approach here that really does reset our water program, and puts on a totally different path than we’re currently on.”

Councilmember Valerie Arkin wondered if the rate increases could be spread out more evenly over the years, but Beaudin said that will lead to higher rate increases in the future.

“Anecdotally, we’re looking at double-digit increases for the first three years, which positions us for more traditional and typical single-digit increases in future years,” he said. “If we were to defer the larger increases in the first three years, we’re going to be looking at double-digit increases for a longer period of time if we don’t do the harder increases on the front end to get the Enterprise Fund reset.”

Tamara Baptista, Pleasanton’s deputy director of business services, said that even with the 30-percent increase, ending fund balances will not reach the city’s reserve target of 35 percent by the end of fiscal year 2024. Even with all three increases, Baptista said the city will “barely get to our reserve levels.”

Vice Mayor Jack Balch, the lone vote against the measure, said that while he agreed that rates need to be increased, he feels there are currently too many unknown variables and alternatives to explore. He expressed concern about an anticipated $6 million loan that the city plans to take out for near-term service projects, the source and interest rate of which is currently unknown. Balch also wondered if supply alternatives, like working more closely with the Zone 7 Water District, could provide another solution.

“The loan of $6 million staff has talked about a 1.4 [percent] interest rate internal loan, or a five-plus percent exterior borrowing loan. That significantly changes the amount of money we need,” he said. “It’s not that I think the analysis is insufficient in any way, I just think that there are some variables in the analysis and some assumptions made where we could look at alternatives that would help the community with the rate increase, but also achieve the goals.”

Beaudin said that specific financing options will come back for council approval. “There’s front and back a page and a half of assumptions. They’re not all going to be perfect, but with our professional services team and with our staff team, within the realm of what we think we need in the next three years,” he said, noting he believes staff will return in about three years with more rate adjustments.

The other council members voiced reluctant approval for the increases, characterizing them as a necessary evil.

“None of us want to vote to increase water rates 60 percent over three years. We’ve all struggled with this, but we sit here to make those tough decisions, so I am prepared to support staff knowing that we have talked up, down, sideways, so much, all of us, our city manager did not get any time to himself this weekend, we’ve all been on the phone struggling,” said Councilmember Julie Testa.

“The city, and I was part of it, made a mistake by not instituting rates back a few years ago,” Mayor Karla Brown said. “Three years with no rate increases is exactly how we created this problem, and I’m not willing to go months more when we need to stop the bleed, or start repairing the fact that we have a repair and replacement fund that’s not sustainable. We have a commitment to our ratepayers to provide reliable, clean, safe drinking water, and when you’re functioning in the negative on your repair and replacement fund, we’re not doing that.”