San Dieguita Water District introduces FY‑26 budget, upholds planned rate changes

The San Dieguita Water District board on May 21 introduced its proposed fiscal year 2026 operating and capital budget and unanimously upheld previously approved water rates and meter service charges.

Finance manager Kazangu presented the draft FY‑26 budget, saying, “This item is the introduction of the FY '26 district operating and CIP budget,” and walked the board through key assumptions: the district is planning for lower local supply from Lake Hodges, a lower overall demand estimate of about 5,500 acre‑feet, and a County Water Authority (CWA) rate increase built into the budget at 16 percent per guidance from the Water Authority.

The nut graf: The budget sets projected district revenues at about $25 million — roughly a 9 percent increase over current‑year projections — while projecting district‑wide expenditures of about $27.5 million. Board members pressed staff on the practical effects of reduced local supplies from Lake Hodges and on how conservation lowers water sales revenues but not the fixed costs of operating the system.

Board discussion centered on four points: the assumed water demand (5,500 acre‑feet versus the 6,010 acre‑feet projected in the 2020 Urban Water Management Plan); the district’s continuing loss of local storage behind Lake Hodges Dam; an anticipated 12–16 percent range for CWA rate increases; and the effect of conservation on revenues. Board member Schaeffer framed the tension plainly: “...we get penalized by people using less water financially,” a point other board members said reinforces the importance of long‑term rate design and reserves.

Staff highlighted budget details and clarifications: the FY‑26 revenue mix assumes about 59 percent of revenue will come from potable water sales; operating expenditures are expected to rise roughly 3 percent (driven largely by higher water purchase and treatment costs, contract and labor inflation, and internal cost allocations); and district capital projects for FY‑26 total about $4.4 million. The district also factored a projected 750 acre‑feet of local water from Lake Hodges in FY‑26 and noted year‑to‑date deliveries from Lake Hodges through April were ahead of that assumption at 903 acre‑feet.

On two formal votes the board acted unanimously. First, board members moved and carried a motion to introduce the FY‑26 operating and CIP budget and direct staff to return with the final budget for adoption at the board’s next meeting. Second, after a presentation on the district’s capital program execution, the board voted to “uphold the previously approved fiscal year 25/26 water rates and meter service charges,” a motion staff said was justified by the district meeting a previously expected CIP encumbrance/execution rate.

Why it matters: The decisions confirm the district’s near‑term revenue plan and rate path while acknowledging operational pressures from higher wholesale purchase costs and reduced local supply. Board members signaled they expect staff to return with any updates — including revised CWA estimates — ahead of final adoption.

The board also received a separate capital program update showing staff had encumbered and advanced multiple pipeline and valve projects; staff reported the district is managing replacement of aging mains, pressure‑reducing stations and ARV/blow‑off valves in Encinitas Boulevard and surrounding corridors.

Next steps: Staff will return to the board next month with the final FY‑26 budget for adoption and with updated figures that may reflect any change in the County Water Authority’s final rate action.