Santa Rosa Water presents FY25–26 rate plan, projections show planned deficits and restored CIP funding

Santa Rosa Water staff presented their proposed fiscal year 2025–26 operating, maintenance and capital budgets for the water, local sewer, regional reuse and stormwater and creeks enterprises during a study session Thursday.

Nick Harvey, Deputy Director of Administration for Santa Rosa Water, told the Board of Public Utilities the department’s combined proposed revenues for next year total about $180,500,000 while proposed expenditures across enterprises are about $195,000,000, producing a planned department-wide budgetary deficit of roughly $14,600,000 that was incorporated into the rate modeling.

The proposals follow City Council adoption at a public hearing of a multi-year water and sewer rate package. Council approved three years of 6% increases followed by two years of 7% increases for the water enterprise and five years of 5% increases for the sewer enterprise, Harvey said. He said the rate structure changes both fixed and usage components.

Harvey and Liz Hanley, Supervising Engineer, reviewed major revenue and cost drivers behind the budget. Key figures and assumptions presented include:

- Water fund: approximately $47.3 million in rate revenues for the year ended June 30, 2024, from about 54,000 customer accounts; total projected wholesale water purchases budgeted at $21.6 million for FY25–26 (an increase of about $1.9 million from the current year).

- Local sewer: about $72.1 million in rate revenues across roughly 50,000 accounts in FY24; regional partner allocations are calculated on prorated flows into Laguna Treatment Plant.

- Regional enterprise: O&M request of $53.4 million (an 11% increase year over year) and a cash-funded CIP request of $12.0 million.

- Stormwater and creeks: funded by an annual parcel assessment; FY25–26 assessment is $42.46 per equivalent residential unit, up from $41.34 this year; the enterprise’s operating budget request is about 23% supported by the General Fund and 77% from enterprise revenues.

- Department totals and reserves: staff presented undesignated or reserve balances—water undesignated reserves about $15.3 million and sewer undesignated reserves about $14.8 million as of 06/30/2024. The regional refund reserve grew by $5.9 million in FY23–24.

Harvey said revenue assumptions used a 1.1% growth forecast, above-budget interest earnings, and the Sonoma Water wholesale rate increase of 8.68% for wholesale deliveries. On the expenditure side, staff budgeted a 9% compensation escalation (reflecting a 4% MOU increase effective 7/1/2025 plus up to 5% in equity adjustments), and included 11 proposed position changes in the department budget though those hires were noted as not yet formally approved by Human Resources or the City Manager’s Office.

Harvey also said the department is planning a $35 million bond issuance to fund electrical infrastructure replacement at the Laguna Treatment Plant, modeled on a 30-year amortization at 5.5% interest, with estimated annual debt service of roughly $2.6 million.

Board members asked staff to clarify the use of reserves in drought, the treatment of recycled water (urban vs. agricultural customers), and the department’s ongoing regional planning efforts. Harvey and Director Burke said the catastrophic reserve is available as an early source for revenue shortfalls; agricultural recycled water is billed as a miscellaneous fee (currently at $50 per acre-foot) rather than under the urban rate schedule; and the department is funding several master planning and regional resiliency studies, including participation in a Sonoma Water effort supported by a $2 million Department of Water Resources grant.

The study session was informational; no budget adoption vote occurred at the meeting. Staff said the remaining water, wastewater and stormwater-and-creeks budget items will return to the board on April 17 and that the regional recommendation would be taken to City Council on April 15 with a citywide public hearing for budget adoption scheduled for June 17.