*NOT YET APPROVED*
Attachment B
1 027060325
Resolution No.
Resolution of the Council of the City of Palo Alto Approving the FY 2026 Water Utility Financial Forecast, Reserve Management Practices, and Reserve Transfers, and Amending Rate Schedules W-1 (General Residential Water Service), W-2 (Water Service from Fire Hydrants), W-3 (Fire Service Connections), W-4 (Residential Master-Metered and General Non- Residential Water Service), and W-7 (Non-Residential Irrigation Water Service)
R E C I T A L S
A. Each year the City of Palo Alto (“City”) assesses the financial position of its utilities with the goal of ensuring adequate revenue to fund operations. This includes making long-term projections of market conditions, the physical condition of the system, and other factors that could affect utility costs, and setting rates adequate to recover these costs. The City does this with the goal of providing safe, reliable, and sustainable utility services at competitive rates. The City adopts Financial Forecasts or Plans to summarize these projections.
B. The City uses reserves to protect against contingencies and to manage other aspects of its operations, and regularly assesses the adequacy of these reserves and the management practices governing their operation. The status of utility reserves and their management practices are included in Reserve Management Practices (Exhibit 3 1) and
Financial Forecast (Exhibit 12) attached to and made a part of the staff report presented to the City Council.
C. Pursuant to Chapter 12.20.010 of the Palo Alto Municipal Code, the Council of the City of Palo Alto may by resolution adopt rules and regulations governing utility services, fees and charges.
D. On June 16, 2025, the City Council held a full and fair public hearing regarding the proposed rate increase and considered all protests against the proposals.
E. As required by Article XIII D, Section 6 of the California Constitution and applicable law, notice of the June 16, 2025 public hearing was mailed to all City of Palo Alto Utilities water customers by May 2, 2025.
F. The City Clerk has tabulated the total number of written protests presented by the close of the public hearing, and determined that it was less than fifty percent (50%)
1 Exhibit 3 https://www.paloalto.gov/files/assets/public/v/1/agendas -minutes-reports/agendas-minutes/city- council-agendas-minutes/2025/june-16/rates-attachments/attachment-b-exhibit-3-fy26-water-reserve- management-practices.pdf
2 Exhibit 1 https://www.paloalto.gov/files/assets/public/v/2/agendas -minutes-reports/agendas-minutes/city- council-agendas-minutes/2025/june-16/rates-attachments/finalized-attachment-b-exhibit-1-fy26-water-utility- financial-forecast-and-cip-detail.pdf
*NOT YET APPROVED*
Attachment B
2 027060325
of the total number of customers and property owners subject to the proposed water rate amendments, therefore a majority protest does not exist against the proposal.
The Council of the City of Palo Alto does hereby RESOLVE as follows:
SECTION 1. The Council hereby adopts the FY 2026 Water Utility Reserve Management Practices (Exhibit 3) and Financial Forecast (Exhibit 1) presented to the Finance Committee on April 1, 2025 (Meeting Agenda Item 1:
https://cityofpaloalto.primegov.com/Portal/Meeting?meetingTemplateId=16017) and as updated by the June 16, 2025 Council report, which are attached to and made a part of the staff report presented to the City Council.
SECTION 2. The Council hereby approves a transfer from the Rate Stabilization Reserve to the Operations Reserve of up to $3,000,000 in FY 2025 as described in the FY 2026 Water Utility Financial Forecast (Exhibit 1).
SECTION 3. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule W-1 (General Residential Water Service) is hereby amended to read as shown in Exhibit 2. Utility Rate Schedule W-1, as amended, shall become effective July 1, 2025.
SECTION 4. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule W-2 (Water Service from Fire Hydrants) is hereby amended to read as shown in Exhibit 23. Utility Rate Schedule W-2, as amended, shall become effective July 1, 2025.
SECTION 5. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule W-3 (Fire Service Connections) is hereby amended to read as shown in Exhibit 2.
Utility Rate Schedule W-3, as amended, shall become effective July 1, 2025.
SECTION 6. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule W-4 (Residential Master-Metered and General Non-Residential Water Service) is hereby amended to read as shown in Exhibit 2. Utility Rate Schedule W- 4, as amended, shall become effective July 1, 2025.
SECTION 7. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utility Rate Schedule W-7 (Non-Residential Irrigation Water Service) is hereby amended to read as shown in Exhibit 2. Utility Rate Schedule W-7, as amended, shall become effective July 1, 2025.
3 Exhibit 2 https://www.paloalto.gov/files/assets/public/v/1/agendas -minutes-reports/agendas-minutes/city- council-agendas-minutes/2025/june-16/rates-attachments/attachment-b-exhibit-2-fy26-water-utility-rate- schedules.pdf
*NOT YET APPROVED*
Attachment B
3 027060325
SECTION 8. The City Council finds that the revenues derived from the water rates approved by this resolution do not exceed the funds required to provide water service, do not exceed the proportional cost of the water service attributable to the parcel, and shall not be used for any purpose other than providing water service and the purposes set forth in Article VII, Section 2, of the Charter of the City of Palo Alto.
SECTION 9. The Council finds that the fees and charges adopted by this resolution are charges imposed for a specific government service or product provided directly to the payor that are not provided to those not charged, and do not exceed the reasonable costs to the City of providing the service or product.
//
//
//
//
//
//
//
//
//
*NOT YET APPROVED*
Attachment B
4 027060325
SECTION 10. The Council finds that the adoption of this resolution approving the FY 2026 Water Financial Forecast, Reserve Management Practices, and Reserve transfers does not meet the California Environmental Quality Act’s (CEQA) definition of a project under Public Resources Code Section 21065 and CEQA Guidelines Section 15378(b)(5), because it is an administrative governmental activity which will not cause a direct or indirect physical change in the environment, and therefore, no environmental review is required. The Council finds that the adoption of this resolution changing Water rates to meet operating expenses, purchase supplies and materials, meet financial reserve needs and obtain funds for capital improvements necessary to maintain service is not subject to CEQA, pursuant to California Public Resources Code Sec. 21080(b)(8) and Title 14 of the California Code of Regulations Sec. 15273(a). After reviewing the staff report and all attachments presented to Council, the Council incorporates these documents herein and finds that sufficient evidence has been presented setting forth with specificity the basis for this claim of CEQA exemption.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
Assistant City Attorney City Manager
Director of Utilities
Director of Administrative Services