Santa Rosa Water previews FY 2026–27 budget, proposes 6% water and 5% sewer rate increases

Santa Rosa Water staff on Tuesday presented a preliminary FY 2026–27 operations and capital budget that would raise water rates 6% and sewer rates 5% while advancing a capital program that includes a potential $35 million bond for treatment-plant electrical infrastructure.

Deputy Director Nick Harvey opened the review, describing the presentation as preliminary and subject to change as staff continues citywide budget entry and rate-modeling work. He said Santa Rosa collected roughly $52.1 million in water rate revenues last fiscal year across about 54,000 accounts and about $74.4 million in wastewater rate revenues across roughly 50,000 sewer accounts. Harvey told the board the Sonoma Water wholesale increase is 8.21%, putting the wholesale price at about $1,515 per acre-foot and projecting wholesale demand near 15,610 acre-feet, with an estimated wholesale budget of roughly $23.7 million.

"For the average household of four in the city of Santa Rosa, we're anticipating that the net effect of our 6% rate increase ... plus the 8.21% increase on the wholesale water rate will yield about a 6.4% increase or a $5.33 per month increase on the average family's water bill," Harvey said.

Why it matters: staff said the proposed rate changes are intended to keep pace with rising operating costs, wholesale water pass-throughs and planned capital work while maintaining minimum reserve policies. Board members pressed staff on stormwater shortfalls and on the size and management of the utilities' reserves during the question-and-answer period.

Bond timing and fiscal caution Harvey described a planned $35 million bond issuance to fund electrical infrastructure replacement at the treatment plant, assuming a 30-year amortization and 5.5% interest (roughly $2.6 million per year in modeled debt service). He said staff is timing any sale because equipment lead times and IRS rules about spending bond proceeds within about three years mean issuing too early could force the city to hold unused proceeds and pay unneeded interest.

Reserves, turnbacks and regional contributions Staff reviewed reserve balances and recent partner "turnbacks" that have increased the regional refund reserve to roughly $16.3 million. Harvey said staff plans to request board recommendation to council for additional regional appropriations so the city can manage refund and undesignated reserve balances without immediately increasing partner agency billing. He also described current local-enterprise deficits projected in the preliminary numbers and a cash-funded CIP that staff proposes increasing to about $13 million for next fiscal year.

CIP highlights and grant-backed projects Liz Hanley, supervising engineer for asset management, summarized CIP requests across funds: water roughly $16 million, local wastewater about $14.7 million, regional about $13 million and stormwater about $1.7 million. She highlighted major projects including a groundwater rehab (est. $7.9 million), reservoir seismic and pump-station upgrades (phase 5, est. $15.4 million), Piner Road water and sewer replacement (est. $5.3 million), Robles trunk rehabilitation (est. $9.2 million), Laguna Treatment Plant clarifiers rehabilitation (est. $8.9 million) and a Laguna plant flood-protection project (est. $21.2 million) that staff said would benefit from approximately $17 million in outside funding through FEMA and HUD grants.

Stormwater funding debate Vice Chair Noni and other board members used the discussion period to press staff on stormwater's funding limits. Harvey and others explained that the stormwater program is primarily funded by a parcel assessment placed on the county tax roll with a CPI escalator and that state and constitutional limitations under Prop 218 constrain how the city can structure stormwater as an enterprise utility. "We do have an outside assessment ... that is very small," Harvey said, and he added that general fund support currently supplements stormwater regulatory obligations.

"I continue to be concerned that we're responsible for maintaining the system where we don't have the money to do it," Vice Chair Noni said, urging that stormwater capital needs remain underfunded and that the city is at risk of relying on a disaster to prompt funding changes.

Public comment and access to materials A resident raised concerns about a recently approved nearby project (named in the comment record) that sits close to a creek and asserted confusion about whether the city or county handles illegal wells and waterway oversight. The speaker said local waterways meetings had been reduced and asked when the project was considered by waterways staff. Staff told the resident the presentation and agenda materials are posted with the item and offered to help locate the specific packet documents.

Next steps Harvey said staff will return to the subcommittee on the 18th to review the full budget package, present to the full board for a study session and then transmit recommendations to city council. He noted the council's budget study sessions are scheduled in May with a public hearing for adoption on June 16.

No formal votes were taken at the subcommittee meeting; the presentation was followed by Q&A and public comment and the board adjourned after the discussion.