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City and new EPASD leadership present proposed $13.7M fiscal plan, warn connection-fee timing is uncertain
Summary
Finance staff presented a proposed East Palo Alto Sanitary District FY 2025–26 budget showing $13.7M in revenue and a $7.1M surplus driven largely by projected connection fees; staff cautioned that timing and receipt of those fees is uncertain and that overhead allocations will be finalized in a forthcoming cost-allocation plan.
City finance staff presented the East Palo Alto Sanitary District (EPASD) proposed budget for fiscal 2025–26 and walked board members and the public through the document’s principal revenue drivers. The proposed budget shows $13.7 million in revenue and $6.6 million in expenditures, producing a $7.1 million projected surplus; staff said much of that apparent surplus depends on $5.9 million in connection (impact) fees tied to pipeline development work.
Tomo Oku, the city’s finance director serving as EPASD treasurer, cautioned that the connection-fee estimate is timing-sensitive: “We are projecting $5,900,000 estimate for fiscal year 25-26 based on pipeline development projects,” he said, but he added that state law (SB 937) and the district’s ongoing impact-fee and sewer-master-plan work could delay when developers actually pay those fees. Oku noted that connection fees are one‑time capital revenues intended to pay for capacity-related capital projects rather than recurring operations.
Staff also described a new overhead approach: after the city absorbed EPASD in October 2024 the city prepared a professional cost-allocation study to capture fair shares for finance, legal, human resources, IT, insurance and executive oversight. Oku said those overhead charges are not finalized and will be presented for council review on June 17. The presentation also detailed operating changes: a West Bay Sanitary District contract now covers day‑to‑day maintenance and pipe-cleaning operations, while the city provides in‑house executive, legal and financial oversight through a cost-allocation mechanism.
Board members and public commenters pressed staff on the probability and timing of the $5.9 million estimate, and on treatment-plant costs. Tomo Oku said the prior EPASD administration had underbudgeted property-tax receipts (the prior estimate of roughly $680,000 proved too low; actual receipts were closer to reported results near $1.7 million), which made the current projections appear larger in comparison. Staff also said Palo Alto’s planned wastewater‑plant capital program is likely to push up member-agency treatment fees and that the city will seek additional clarity at a scheduled meeting with Palo Alto staff.
The board did not adopt the budget that night; staff said they would bring the cost-allocation plan and any material updates to the June 17 council meeting, with final EPASD budget adoption to follow. The presentation included a timetable for further work on the sewer master plan and related impact-fee and rate studies that will inform any future changes to sewer service charges.
