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Finance committee backs staff recommendation for 16% wastewater collection rate increase to rebuild treatment plant
Summary
City staff proposed a 16% FY2027 wastewater collection rate increase (about $10.70 per typical residential customer) to fund treatment-plant upgrades, replenish a depleted CIP reserve and restart sewer replacement projects; the Finance Committee voted to forward the staff recommendation to council.
The Palo Alto Finance Committee voted March 17, 2026, to forward staff’s recommendation that the City Council adopt the FY2027 wastewater collection financial forecast and amend the wastewater rate schedule, a plan that includes a 16% rate adjustment for the collection utility.
Eric Wong, resource planner for the Utilities Department, told the committee the proposed 16% increase would translate to “approximately $10.70 for the typical residential customer” and is primarily driven by Palo Alto’s share of rebuilding an aging treatment plant to meet increasingly stringent wastewater discharge regulations, higher CIP costs (including several one‑time projects) and the need to replenish a CIP reserve that staff described as depleted.
The presentation said staff expects to restart a multi‑mile sewer replacement program in FY28 and that the wastewater collection fund currently carries a $3 million loan from the city’s fiber fund, which staff expects to repay with interest by the end of FY26. Eric Wong also told the committee that the Utilities Advisory Commission (UAC) voted 6–1 to recommend council adopt the 16% increase.
Committee members questioned the reserve policy and asked staff about the external reserves review being prepared by the auditor. Staff said drafts are under review and the auditor’s management‑response will be agendaized for policy and services in the spring. Council members also pressed staff about cost drivers — distinguishing expenses driven by the regional treatment plant from collection system costs — and asked how vacancies and budgeted labor reductions affect the forecast.
Staff said the forecast uses the adopted FY26 budget as a baseline and that some near‑term labor savings can moderate costs, but the main drivers for the FY27 increase are treatment‑related costs, CIP timing and the need to rebuild depleted reserves to maintain budgetary flexibility.
The committee formalized its recommendation that the City Council consider the resolution approving the FY27 wastewater forecast and amended rates. The committee recorded its vote in the meeting (Council member Lou — yes; Chair Lowing — yes; Council member Bert — yes) and moved the recommendation on to the full council for final action.
Next steps: the City Council will consider the staff‑recommended resolution and the associated rate schedule amendment as part of the council’s normal agenda process.
