Sonoma Water outlines $82 million FY25-26 budget; proposes 7.6% wholesale rate increase for Sonoma Aqueduct

Sonoma Water staff presented a proposed FY25-26 budget and wholesale-rate proposal to the City of Sonoma council on March 19, asking member agencies to recommend the package to the Water Advisory Committee for a vote on April 7.

The proposed combined budget across multiple funds is about $82 million, including approximately $18.3 million in capital projects and roughly $55.8 million in operations and maintenance. Finance Manager Jake Spalding and Lynn Roselli, Sonoma Water's financial services manager, told the council that aging infrastructure (many assets date to 1959'63) and lower water deliveries increase rate pressure because the transmission system uses fully volumetric rates.

Why it matters: Wholesale rates pay for critical regional water transmission infrastructure. Sonoma Water serves multiple contractors and 600,000 residents; rate decisions affect municipal budgets and customer bills across several jurisdictions.

Budget and rate drivers: Staff cited several drivers for the proposed increase: condition assessments showing assets with limited remaining useful life, multi-year water-treatment modernization needs, hazard-mitigation projects (some financed in part by FEMA or other grants) and the necessity to maintain emergency inventory (pipe, valves) to respond quickly to hazards. The Sonoma Aqueduct proposal includes a discretionary capital charge that helps stabilize rates; staff said Sonoma Aqueduct customers face higher discretionary charges because of a relatively smaller user base.

Spalding described how Sonoma Water calculates wholesale rates under the restructured agreement's volumetric approach (total operations and maintenance divided by water deliveries). He showed the sensitivity of rates to deliveries: a 500-acre-foot change in deliveries alters the rate by roughly 1.3% in his example. The proposed Sonoma Aqueduct increase in the current budget cycle is 7.6%; longer-range planning presented by Roselli shows scenarios where future years could see higher increases (she illustrated long-range impacts and a potential bond issuance sized about $123.5 million over the plan horizon to finance replacements and smooth rates).

Council reactions and direction: Councilmembers asked detailed technical questions about asset condition assessment methods, labor versus consultant spending in operations, and why Sonoma Water's overall wholesale rates historically were lower than some larger Bay Area wholesalers (staff cited prior delivery volumes, deferred maintenance in some years and a smaller system footprint). Councilmember Ding noted the burden of rate increases on local users and encouraged outreach to residents. Vice Mayor Wallander and others expressed support for the staff's management approach and for monitoring potential impacts of external projects (e.g., Potter Valley discussions) on rates. At the close of the discussion councilmembers indicated they would support or give direction to their WACC representative ahead of the April 7 vote; Sonoma Water asked the council to formally recommend the budget and rates to its WACC representative for consideration.

What happens next: The Technical Advisory Committee and Water Advisory Committee will consider the proposed budget and rates; the Sonoma Water board is scheduled to adopt final rates on April 22. Council members who serve on water advisory bodies will be asked to cast their representative votes or recommendations as the process advances.