Valley Water officials tell Sunnyvale council planned rate increases aim to fund billions in dam, treatment-plant upgrades

Valley Water leaders on April 8 told the Sunnyvale City Council that the agency is recommending a nearly 10% increase in groundwater production charges for fiscal 2026 to help pay for an era of large, multi‑decade water system investments.

The presentation by Valley Water officials outlined a staff recommendation of a 9.9% increase to groundwater charges in FY26 — which the agency said would amount to roughly $7.60 a month for the average household before any additional charges that retail water providers might add. Valley Water officials said planned rate increases continue for years in their projection, then taper in later decades.

Why it matters: Valley Water supplies or supports wholesale water and groundwater services across Santa Clara County; the agency argues that aging dams, treatment plants and climate changes require major capital spending now to avoid longer‑term shortages, economic losses and irreversible ground subsidence.

Key points from the presentation - Recommended groundwater charge increase for FY26: 9.9%, estimated monthly impact to the average household: $7.60 (does not include additional retail charges). (Darren Taylor, Chief Financial Officer, Valley Water) - Major capital projects identified as drivers of the rate outlook include the Anderson Dam seismic retrofit (presented as a $2.4 billion project), Rinconada Water Treatment Plant reliability improvements (presented as roughly $720 million), a placeholder estimate for a San Jose purified water program (~$2.8 billion) and a Chico Reservoir expansion (roughly $2.7 billion). Valley Water also listed potential participation in projects led by other agencies, including a Delta conveyance program. (Darren Taylor; Aaron Baker, Chief Operating Officer) - Local supply: Valley Water staff said local groundwater and surface supplies are in good condition now excluding storage in Anderson Reservoir, which remains restricted due to an FERC‑ordered restriction that has contributed to a long‑running retrofit program. Staff described an emergency tunnel project and a multi‑year seismic retrofit plan for Anderson that would be built in staged segments; the agency said the Anderson retrofit schedule targets completion in the early 2030s. (Aaron Baker; Bavani Yaputu) - Water reuse: Valley Water presented regional goals for potable reuse of about 24,000 acre‑feet per year by 2035 and described a phased purified‑water demonstration program and coordination with the San Jose–Santa Clara regional wastewater facility. The agency said reusable water will be required for drought resilience. (Aaron Baker) - Cost containment: staff cited paused positions (about 30 water utility positions and 45 district‑wide “paused” positions), deferred lower‑priority capital projects and applications for low‑cost federal loans and WIFIA financing as cost‑containment steps. Valley Water said it recently applied for about $1.3 billion in low‑cost federal loans to support dam safety work. (Darren Taylor) - Process and schedule: staff noted public hearings continuing April 9 (Water Commission) and a May 16 continuation of the Valley Water rate hearing where input will be considered in the board decision. Valley Water also described an adaptive Water Supply Master Plan 2050 intended to guide sequencing of investments. (Darren Taylor; Aaron Baker)

What council members asked: Sunnyvale council members pressed Valley Water on sea‑level‑rise work in the Bay shoreline study (phaseing of Army Corps feasibility work and how phase results would affect Sunnyvale), the Anderson retrofit schedule and costs, and how demand uncertainty can interact with long‑term capital needs. Valley Water staff emphasized an adaptive planning approach and said some large projects remain preliminary and that sequencing could reduce near‑term rate pressure but carries risk and higher future inflationary costs.

What Valley Water said about affordability: Valley Water described assistance programs for ratepayers and said the agency plans to restore a previously sun‑set rate assistance program in June or July. The agency emphasized that staff recommend balancing affordability with investments needed to avoid future shortages.

Looking ahead: Valley Water staff asked cities and retailers to provide comment at the commission and board hearings in April and May; the board will adopt rates after the conclusion of its public hearing process.

Ending: Valley Water’s presentation framed the FY26 recommendation as the near‑term step in a decades‑long investment plan. Council members did not act on rate setting — Valley Water’s board will decide — but the presentation gave Sunnyvale officials and the public specific financial and schedule details to use in upcoming comment to the Valley Water board.