Attachment 2
Finance and Administrative Services Department
DATE: November 3, 2025
TO: City Council
FROM: Elliot Young, Principal Financial Analyst
Grace Zheng, Assistant Finance and Administrative Services Director Derek Rampone, Finance and Admi nistrative Services Director
VIA: Kimbra McCarthy, City Manager
SUBJECT: Fiscal Year 2024-25 Annual Compliance Report for Capacity Charges
BACKGROUND
California Government Code (CGC) Section 66013(d) requires local agencies that establish Water and Sewer Capacity Charges pursuant to CGC Section 66013 to make certain information available to the public within 180 days after the last day of each fiscal year. This report provides the required information for the City’s Water and Sewer Capacity Charges.
ANALYSIS
Capacity charges are governed by CGC Section 66013 and are a charge for existing public facilities or new public facilities to be ac quired or constructed in the future that are of proportional benefit.
1. Water Capacity Charges Fund
Description of the Charges Deposited in the Fund—CGC Section 66013(d)(1):
The City retained a consulting firm, Bartle We lls Associates (Bartle Wells), to review the existing fee systems and recommend updates based on the current development patterns of infill, redevelopment, and land use intensific ation. On April 8, 2014, the City Council adopted Water Capacity Charges with an effectiv e date of July 1, 2015. These fees are to capture the increased demand from all development projects by assessing a capacity-based charge that is calculated proportionally to the increased demand each project places on the City’s water system.
Fiscal Year 2024-25 Annual Compliance Report for Capacity Charges November 3, 2025
Beginning and Ending Balances, Amount of Fees Collected, and Interest Earned—CGC Section 66013(d)(2)-(3):
Beginning Balance, July 1, 2024 $1,911,666
Water Capacity Charges $ 62,868
Capital Project Refunds 1,576,000
Investment Earnings 294,245
Total Unaudited Revenues 1,933,113
Total Unaudited Expenditures (2,173,000)
Unexpended/Available Balance, June 30, 2025 $1,671,779
During Fiscal Year 2024-25, there were $62,868 in charges deposited, $1.6 million in capital project refunds, $294,245 in investment earnin gs, and $2.2 million in expenditures. As of June 30, 2025, there is an unexpended/available balance of approximately $1.7 million. The expenditures of $2.2 million provide funding for capital projects. These, as well as capital projects previously funded by these fees, are listed in the following section, and the funds will be expended over the life of the capital project.
Identification of Each Public Improvemen t on Which Charges We re Expended in Fiscal Year 2024-25—CGC Section 66013(d)(4)(A )-(B) (dollars in thousands):
The table below shows active project(s) during the reporting period that have been partially or fully funded by Water Capacity Charges.
Total
Project
Cost
FY 2024-25
Expenditures
LTD
Expenditures
Total
Water
Capacity
Charges
Funding
% of Project
Funded by
Water
Capacity
Charges
Project
Completed
Shoreline Boulevard
Interim Bus Lane and
Utility Improvements,
Design (16-58) $4,656 $ 359 $ 3,830 $ 444 9.5% No Water/Sewer Main
Replacement Crossing
101 (16-61) $1,662 443 1,464 600 36.1% No
Shoreline Boulevard
Interim Bus Lane and
Utility Improvements,
Construction (18-43) $29,758 51 3,328 86 0.2% No
Misc. Water Main Repl.
(19-21) $4,964 92 3,843 2,406 48.5% No
Fiscal Year 2024-25 Annual Compliance Report for Capacity Charges November 3, 2025
Total
Project
Cost
FY 2024-25
Expenditures
LTD
Expenditures
Total
Water
Capacity
Charges
Funding
% of Project
Funded by
Water
Capacity
Charges
Project
Completed
Water & Sewer
Replacement 101 at
Two Locations,
Construction (20-41) $21,649 6,985 19,509 3,067 14.2% No Misc. Water Main/
Service Line Repl.
(21-21) $4,260 198 2,834 600 14.1% No
Annual Water
Main/Service Line
Repl. (23-08) $4,298 266 286 4,298 100.0% No
Annual Water
Main/Service Line
Repl. (24-08) $1,576 -0- -0- 1,576 100.0% No Annual Water
Main/Service Line
Repl. (25-08) $3,200 -0-
-0- 1,802 56.3% No
TOTAL $7,449 $22,629 $11,343
Identification of Each Public Improvement Anticipated to be Undertaken in the Following Fiscal Year—CGC Section 66013(d)(4)(C):
The Shoreline Boulevard Interim Bus Lane and Utility Improvements, Design (16-58), project was adopted in Fiscal Year 2015-16 and is pa rtially funded with $444, 000 from the Water Capacity Charges Fund. The project will design a reversible bus lane along with bicycle and pedestrian improvements along Shoreline Bo ulevard from Middlefield Road to Pear Avenue, including improvements to replac e water and sewer mains along Shoreline Boulevard from Middlefield Road to south of U.S. 101. The project is currently in the construction phase, and the remaining funds are being used for design completion, construction, and construction support. Construc tion is anticipated in Spring 2026 and is anticipated to be completed by Fall 2027.
The Water/Sewer Main Replac ement Crossing Highway 101, Design (16-61), project was adopted in Fiscal Year 2015-16 and is part ially funded with $600,000 from the Water Capacity Charges Fund. This project is to design the replacement of a new water and sewer main to cross under U.S. 101 south of Shorel ine Boulevard as well as a new water main under U.S. 101 at Macon Avenue to improve water service re liability to North Bayshore.
Construction for the Macon Avenue water pipeline was completed and accepted by the City Council in December 2020. Construction for th e water and sewer lines crossing U.S. 101 was completed and accepted by the City Council in October 2025.
Fiscal Year 2024-25 Annual Compliance Report for Capacity Charges November 3, 2025
The Shoreline Boulevard Interim Bus Lane and Utility Improvements, Construction (18-43), project was approved with the Fiscal Year 20 17-18 budget and is partially funded with $86,000 from the Water Capacity Charges Fund. The project will construct the interim reversible bus lane along with bicycle a nd pedestrian improvements along Shoreline Boulevard from Middlefield Road to Pear Avenue, including improvements to replace water and sewer mains along Shoreline Boulevard from Middlefield Road to south of U.S. 101.
The construction phase began in 2021 and is anticipated to be complete in 2025. The project is currently in the co nstruction phase, and the remain ing funds are being used for design completion, construction , and construction support. Cons truction is anticipated in Spring 2026 and is anticipated to be completed by Fall 2027.
The Annual Miscellaneous Water Main/Service Line Replacement (19-21) project was adopted in Fiscal Year 2018-19 and is partially funded with $2,406,000 from the Water Capacity Charges Fund. These funds are being used to complete the Thaddeus Drive, Emmons Drive, Whitney Drive, Whitney Court, Parker Court, Alison Avenue, Begen Avenue, and North Whisman Road Water Main Replac ement. Construction was completed and accepted by the City Council in May 2025.
The Water & Sewer Replacement 101 at Two Loca tions, Construction (20-41), project was adopted in Fiscal Year 2019-20 and is partia lly funded with $3.1 million from the Water Capacity Charges Fund. This project is for the replacement of a new water and sewer main to cross under U.S. 101 south of Shoreline Boulevard as well as a new water main under U.S. 101 at Macon Avenue to improve wate r service reliability to North Bayshore.
Construction for the Macon Avenue water pipeline was completed and accepted by the City Council in December 2020. Construction for th e water and sewer lines crossing U.S. 101 was completed and accepted by the City Council in October 2025.
The Annual Miscellaneous Water Main/Service Line Replacement (21-21) project was adopted in Fiscal Year 2020-21 and is part ially funded with $600,000 from the Water Capacity Charges Fund. These funds were used to complete the San Antonio and Miramonte Avenue Water Main Replacement Projects. The San Antonio Water Main Replacement Project was completed and acce pted in September 2021. The Miramonte Avenue Water Main Replacement was completed and accepted in June 2024. This project remains active as there are additional co mponents not funded by the Water Capacity Charges Fund, which is still ongoing. As a result, the project remains active for the City.
The Annual Water Main/S ervice Line Replacement (23-08) project was adopted in Fiscal Year 2022-23 and is fully funded from the Wate r Capacity Charges Fund. These funds are being used to complete the Old Middlefield Way, Alvin Street, Drucilla Drive, Carla Court, Bonita Avenue, Gretel Lane, and Barbara Avenue Water Main Replacement. Project design Fiscal Year 2024-25 Annual Compliance Report for Capacity Charges November 3, 2025
has been completed. Construction is anticipated to begin in late 2025 and be completed in early 2027.
The Annual Water Main/S ervice Line Replacement (24-08) project was adopted in Fiscal Year 2023-24 and is fully funded from the Water Capacity Charges Fund. The scope of work for the Annual Water Main/Service Line Repl acement (23-08) project was increased. To accommodate the expanded scop e, funding from the Annual Water Main/Service Line Replacement (24-08) was appropriated and transferred to the Annual Water Main/Service Line Replacement (23-08) to support construction.
The Annual Water Main/S ervice Line Replacement (25-08) project was adopted in Fiscal Year 2024-25 and is partially funded with $1. 8 million from the Wate r Capacity Charges Fund. These funds are being used to design th e Pettis Avenue, Villa Street, Lauella Court, Whisman Station Drive, and Minaret Avenue Wa ter Main Replacement. Project design is anticipated to be completed at the end of 2026 with construction to follow and completed early 2028.
Description of Each Interfund Transfer or Interfund Loan Made from the Fund—CGC Section 66013(d)(5):
During Fiscal Year 2024-25, a $2.2 million Interf und Transfer was made to Capital Projects for the projects listed below and referenced in CGC Section 66013(d)(4)(A)-(C) above:
Project 20-41—Water & Sewer Replacement 101 at Two Locations, Construction— $371,000 Interfund Transfer
Project 25-08—Annual Water Main/Service Line Replacement—$1.8 million Interfund Transfer
During Fiscal Year 2024-25, a $1.6 million refund from Capital Projects was made for the project listed below and referenced in CGC Section 66013(d)(4)(A)-(C) above:
Project 24-08—Annual Water Main /Service Line Replacement
2. Sewer Capacity Charges Fund
Description of the Charges Deposited in the Fund—CGC Section 66013(d)(1):
The City retained a consulting firm, Bartle Wells, to review the existing fee systems and recommend updates based on the current development patterns of infill, redevelopment, and land use intensification. On April 8, 2014, the City Council adopted Sewer Capacity Charges with an effective date of July 1, 2015. These fees are to capture the increased Fiscal Year 2024-25 Annual Compliance Report for Capacity Charges November 3, 2025
demand from all development projects by as sessing a capacity-based charge that is calculated proportionally to the increased demand each project places on the City’s sewer system.
Beginning and Ending Balances, Amount of Ch arges Collected, and Interest Earned—CGC Section 66013(d)(2)-(3):
Beginning Balance, July 1, 2024 $8,904,285
Sewer Capacity Charges $ 45,094
Investment Earnings 462,184
Capital Project Refunds -0-
Total Unaudited Revenues 507,278
Total Unaudited Expenditures (8,916,000)
Unexpended/Available Balance, June 30, 2025 $ 495,563
During Fiscal Year 2024-25, there were $45, 094 in charges deposited, $462,184 in investment earnings, no capital project ref unds, and $8.9 million in expenditures. As of June 30, 2025, there is an unexpended/availa ble balance of approximately $496,000. The expenditures of $8.9 million provide funding for capital projects. These projects, as well as capital projects previously funded by these fees, are listed in the following section, and the funds will be expended over the life of the capital project.
Identification of Each Public Improvemen t on Which Charges Were Expended in Fiscal Year 2024-25—CGC Section 66013(d)(4)(A )-(B) (dollars in thousands):
The table below shows active project(s) during the reporting period that have been partially or fully funded by Sewer Capacity Charges.
Fiscal Year 2024-25 Annual Compliance Report for Capacity Charges November 3, 2025
Total
Project
Cost
FY 2024-25
Expenditures
LTD
Expenditures
Total Sewer
Capacity
Charges
Funding
% of
Project
Funded
Sewer
Capacity
Charges
Project
Completed
Shoreline Boulevard Interim
Bus Lane and Utility
Improvements, Design
(16-58) $4,656 $ 359 $ 3,830 $ 148 3.1% No
Water/Sewer Main
Replacement Crossing 101
(16-61) $1,662 443 1,464 200 12.0% No
Shoreline Boulevard Interim
Bus Lane and Utility
Improvements, Construction
(18-43) $29,758 32 3,328 391 1.3% No
San Antonio Sewer
Improvements (19-45) $6,753 2,230 2,454 6,223 92.2% No
Water & Sewer Replacement
101 at Two Locations,
Construction (20-41) $21,649 6,984 19,509 871 4.0% No
Middlefield and Moffett Sewer
Replacement, Design (22-42) $10,440 59 457 3,350 32.1% No Annual Storm/Sanitary Sewer
Main Replacement (23-09) $6,640 264 264 3,675 55.3% No Annual Storm/Sanitary Sewer
Main Replacement (25-09) $2,002 7
7 2,002 100.0% No
TOTAL $10,378 $31,313 $16,860
Identification of Each Public Improvement An ticipated to Be Undertaken in the Following Fiscal Year—CGC Section 66013(d)(4)(C):
The Shoreline Boulevard Interim Bus Lane an d Utility Improvements, Design (16-58 & 18- 43), project was adopted in Fiscal Year 2015-16 and is partially funded with $148,000 from the Sewer Capacity Charges Fund. The status of this project is identified in the Water Capacity Charges section of this report.
The Water/Sewer Main Replac ement Crossing Highway 101, Design (16-61), project was adopted in Fiscal Year 2015-16 and is part ially funded with $200,000 from the Sewer Capacity Charges Fund. The status of this project is identified in the Water Capacity Charges section of this report.
The Shoreline Boulevard Interim Bus Lane and Utility Improvements, Construction (18-43), project was adopted in Fiscal Year 2017-18 and is partially funded with $391,000 from the Fiscal Year 2024-25 Annual Compliance Report for Capacity Charges November 3, 2025
Sewer Capacity Charges Fund. The status of this project is identified in the Water Capacity Charges Fund section of this report.
The San Antonio Sewer Improvements (19-45) project was adopted in Fiscal Year 2018-19 and is partially funded with $6.2 million from the Sewer Capacity Charges Fund. The project consists of replacing and improving the sewer mains in the Sondgroth Way and Showers Drive area. Project design has been completed. Construction is anticipated to begin early 2026 and be completed by the end of 2026.
The Water & Sewer Replacement 101 at Two Loca tions, Construction (20-41), project was adopted in Fiscal Year 2019-20 and is part ially funded with $871,000 from the Sewer Capacity Charges Fund. The status of this project is identified in the Water Capacity Charges section of this report.
The Middlefield and Moffett Sewer Replacement, Design (22-42) project was adopted in Fiscal Year 2021-22 and is fully funded from the Sewer Capacity Charges Fund. This project will abandon a sewer main that parallels St evens Creek and crosses State Route 85 by redirecting sewage to south on Moffett Boulevard and west on West Middlefield Road. The project design is substantially completed, wi th pending sewer easement acquisition from other public entities. Construction will follow once the necessary sewer easement has been secured.
The Annual Storm/Sanitary Sewer Main Replacement (23-09) project was adopted in Fiscal Year 2022-23 and is partially funded with $3 .7 million from the Sewer Capacity Charges Fund. Project design is anticipated to be completed spring 2025 with construction to follow in summer 2025.
The Annual Storm/Sanitary Sewer Main Replacement (25-09) project was adopted in Fiscal Year 2024-25 and is fully funded from the Se wer Capacity Charges Fund. These funds are being used to design the Pettis Avenue and V illa Street Sewer Main Replacement. Project design is anticipated to be completed at the end of 2026 with construction to follow and completed early 2028.
Description of Each Interfund Transfer or Interfund Loan Made from the Fund—CGC Section 66013(d)(5):
During Fiscal Year 2024-25, an $8.9 million Interfund Transfer was made to Capital Projects for the projects listed below and referenced in CGC Section 66013(d)(4)(A)-(C) above:
Project 18-43—Shoreline Boulevard Interi m Bus Lane and Utility Improvements, Construction (Renamed to Shoreline Boul evard Active Transportation and Utility Improvements, Construction) —$33,000 Interfund Transfer Fiscal Year 2024-25 Annual Compliance Report for Capacity Charges November 3, 2025
Project 19-45—San Antonio Sewer Improvem ents, Construction—$3.9 million Interfund Transfer
Project 20-41—Water & Sewer Replacement 101 at Two Locations, Construction— $371,000 Interfund Transfer
Project 22-42—Middlefield and Moffett Se wer Replacement, Design—$2.6 million Interfund Transfer
Project 25-09—Annual Storm/Sanitary Sewe r Main Replacement—$2.0 million Interfund Transfer
CONCLUSION
The Water and Sewer Capacity Charges are in comp liance with CGC Section 66013 for annual reporting regarding the collection and use of capacity charges.
cc: PWD(A), APWD—Au, SMA—Goedicke, SMA—Doan