City Council
Staff Report
From: City Manager
Report Type: INFORMATION REPORTS
Lead Department: Utilities
Meeting Date: October 20, 2025
Report #:2509-5258
TITLE
Informational Report on the City of Palo Alto One Water Plan and Associated Letter from the Utilities Advisory Commission for Future Water Supply and Conservation Planning Purposes; CEQA Status – Not a Project
RECOMMENDATION
This report is provided for information only and requires no Council action. This report was reviewed by both the City Council Climate Action & Sustainability Ad Hoc Committee and Utilities Advisory Commission.
EXECUTIVE SUMMARY
The One Water Plan1 (OWP) presents a framework for evaluating water supply and water conservation alternative portfolios that may mitigate the impact of future water supply uncertainties such as severe multi-year drought, changes in climate, water demand, and regulations. Transmission of the report completes a key action in the Sustainability and Climate Action Plan (S/CAP) Update to develop a plan for implementing a One Water portfolio, a water supply plan that will analyze the City’s potential water supply priorities and conservation opportunities. Specifically, development of this report completed one goal and one key action in the Council-approved 2022 Sustainability and Climate Action Plan. • Goal: Develop a water supply portfolio which is resilient to droughts, changes in climate, and water demand and regulations, that supports our urban canopy. • Key Action W4: Develop a tool for dynamic water planning in the future.
The Utilities Advisory Commission (UAC) unanimously voted to forward a letter to the City Council (Attachment A) offering additional context on water supply and conservation planning.
The letter was intended to accompany the transmittal of the plan—not as a request for acceptance or approval, but for Council to receive it as informational. The Climate Action and Sustainability Committee (CASC) received both the report and the UAC letter for staff’s use as a
1 One Water Plan https://cityofpaloalto.primegov.com/Portal/viewer?id=0&type=7&uid=c42ee7f3- 8caf-4c48- 99e3-57bb8e437775
framework for evaluating future projects considering, where appropriate, the opinions expressed in the UAC’s letter. After discussing the plan and the UAC’s concerns, the CASC voted unanimously to receive the One Water Plan and forward for City Council information. OWP provides an adaptive tool to aid in evaluation of future projects or actions. Such future projects or actions may be implemented by Palo Alto or, more likely, through regional partnerships.
One Water Plan Summary: The OWP compares potential water supply and conservation portfolios using the City’s weighted criteria, offering an initial analysis of alternatives and a framework to support future Council decisions on which project types to explore further. A key product of the OWP effort is the excel-based tool which may be used to adjust its overall water supply strategy as the future unfolds, conditions change, and uncertainties are resolved.
Assumptions that may be adjusted in the tool include water demand, project costs, and expected supply reductions during droughts or other events. The weighting or scoring methodology may be modified as well. The OWP water supply and conservation options and the resulting portfolios that scored highest, given the rough cost estimates and evaluation criteria, include:
• Portfolio A – Baseline: Existing potable water supply from the Hetch Hetchy Regional Water System (RWS);
• Portfolio B: Baseline with enhanced water conservation; • Portfolio C: Baseline with enhanced conservation plus desalinization; • Portfolio D: Baseline with enhanced conservation plus groundwater; • Portfolio E: Baseline with enhanced conservation plus Palo Alto-operated Direct Potable Reuse (DPR);
• Portfolio F: Baseline with enhanced conservation plus Palo Alto-operated Indirect Potable Reuse (IPR); and
• Portfolio G: Baseline with enhanced conservation Regional DPR.
Before the Council approves any water supply or conservation project, further project-specific studies and analyses will be required to assess the need for additional supplies or conservation, as well as to evaluate project feasibility, including detailed cost estimates and potential funding sources. To support this future evaluation and refinement, the One Water Plan (OWP) includes a comparative scoring of the portfolios.
BACKGROUND
In June 2022, Council approved a contract with Carollo Engineers to develop the OWP (Staff Report 134342). City staff from the Public Works and Utilities Departments closely collaborated and worked with the consulting team to develop the attached OWP .
One of the City Council’s priorities for 2024 was Climate Change and Natural Environment – Protection and Adaptation. The attached OWP fulfills a key action in the City’s Sustainability and Climate Action Plan (S/CAP) and identifies an evaluation framework for water supply and conservation projects as well as possible project alternatives for meeting the community’s water needs in the future.
Palo Alto’s Sustainability and Climate Action Plan (S/CAP) was completed in 2023, and it includes two water-specific goals:
1. Reduce Palo Alto’s potable water consumption by 30% compared to a 1990 baseline (subject to refinement based on forthcoming California water efficiency standards expected in 2025).
2. Develop a water supply portfolio which is resilient to droughts, changes in climate, and water demand and regulations, that supports the City’s urban canopy.
Two of the key actions supporting these goals are satisfied by the OWP: 1) Develop and implement projects that result from a “One Water” portfolio of alternative water supply and water conservation options for Palo Alto, including but not limited to: stormwater, recycled water, on-site-reuse, conservation and groundwater, and 2) develop a tool for dynamic water planning in the future.
“One Water" is an integrated approach to water management that views all forms of water – imported water, groundwater, wastewater, stormwater, water conservation and efficiency and more-- as interconnected resources. The primary purpose of the OWP for the City of Palo Alto is to provide a 20-year adaptable roadmap of prioritized alternatives, organized into water supply portfolios, and a project evaluation tool, to guide decision-making around the City’s water supply and conservation goals.
ANALYSIS
The OWP provides a comprehensive list of water supply and water conservation options (“options”) considered, including input from stakeholders. The list of 27 options was sorted into three “buckets”.
Bucket 1 - Ongoing or Already Planned
• Planned/ongoing conservation
• Advanced metering program
• Distribution system water loss reduction
2 Staff Report 13434 https://portal.laserfiche.com/Portal/DocView.aspx?id=59530&repo=r -704298fc
Bucket 2 - Not Currently Feasible (due to cost or lack of partnership interest) • Indirect potable reuse at Lake Lagunita (groundwater recharge using purified water) • Blackwater capture and reuse
• Valley water treated water via a new pipeline
• Interagency transfer agreements
• Tuolumne River purchases
• Atmospheric water generators
• Local surface water reservoir
• Temporary dewatering sites (basement construction)
• Permanent dewatering (as a way to increase the volume of other reuse options)
Bucket 3 – Selected to be Included in the Screening Process • Regional Water System supply (current potable water supply) • Enhanced conservation
• Next-level enhanced conservation
• Groundwater
• City park irrigation with groundwater
• Direct potable reuse of purified water via a Palo Alto facility • Direct potable reuse of purified water via a Palo Alto facility and utilizing the new salt removal equipment at the Regional Water Quality Control Plant • Direct potable reuse of purified water via a regional facility • Indirect potable reuse via groundwater injection of purified water • Expanded distribution of non-potable water (recycled water to Stanford Research Park and customers in the foothills)
• Greywater capture and reuse
• Residential rainwater capture
• Green Stormwater Infrastructure
• Multi-source storage including stormwater detention
• Desalination of bay water
The OWP analyzed this initial list of options in a high-level pre-screening process that resulted in 15 remaining options. The One Water Plan (OWP) applied three initial screening criteria to the 15 options, narrowing the list to nine. For these nine options, the OWP developed planning- level cost estimates and conducted a comprehensive evaluation using four criteria, which included unit cost and several non-cost factors. The OWP then assembled seven water supply and water conservation portfolios (“Portfolios”) named Portfolio A through Portfolio G that include groups of top scoring options. The following is a list and a brief description of the seven portfolios.
Portfolio Descriptions
• Portfolio A – Baseline: Portfolio A represents the baseline portfolio which is the City’s existing potable water supply from the Hetch Hetchy Regional Water System (RWS) and serves as the benchmark for comparing other potential portfolios. • Portfolio B – Enhanced Conservation Phase 1 and 2: Portfolio B builds on Portfolio A with the addition of Enhanced Conservation Phase 1 and Phase 2, each encompassing a series of targeted water conservation measures. Enhanced Conservation Phase 1 includes measures that are easier and less costly to implement while Enhanced Conservation Phase 2 consists of more challenging and more costly measures. Table 1 shows the difference between conservation measures already planned for implementation and the Enhanced Conservation measures contemplated in this OWP.
Table 1: Ongoing and Planned Conservation versus Enhanced Conservation Phases 1 and 2
Each portfolio C through G includes Enhanced Conservation Phase 1 and Phase 2 measures, plus one local water supply infrastructure project, with the remainder of the water supplied by the RWS.
• Portfolio C adds a Bay Water Desalination plant that would supply 4,480 acre feet per year of water during a normal year.
• Portfolio D adds groundwater. Under this portfolio, the City would equip two of the existing emergency groundwater supply wells with treatment facilities and convert these from emergency supply to regular potable use. The wells would provide 2,250 acre feet (af) per year of water supply during a normal year. Notably, Valley Water’s 10-year projection anticipates that the groundwater production charge will more than double
from the 2023 rate of $1,724/af to $4,147/af by 2032, reflecting approximately 9.5 percent annual escalation. Valley Water expects this increase to primarily pay for critical capital program needs including water treatment plant upgrades and dam seismic retrofit work. For reference, SFPUC’s expected rate in 2032, assumed in the OWP, is $2,630/af.
• Portfolio E adds a Palo Alto Direct Potable Reuse (DPR) facility that would supply 4,723 acre feet per year of water during a normal year.
• Portfolio F adds a Palo Alto Indirect Potable Reuse (IPR) water purification facility with groundwater injection wells. This Indirect Potable Reuse facility would supply 5,150 acre feet per year of water supply during a normal year.
• Portfolio G adds a Regional DPR water purification facility constructed by Valley Water and located in Palo Alto instead of a dedicated Palo Alto DPR facility. The estimated water supply from this facility for Palo Alto is 1,769 acre feet per year during a normal year.
Figure 1 illustrates the water supply and demand for each portfolio during a normal year in 2045.
Figure 1: Normal Year Supply and Demand Analysis by Portfolio in 2045
The OWP calculates a weighted average unit cost for each portfolio considering the volume of supply from each water supply source during a normal year. Table 1 shows the weighted average unit cost for each portfolio in 2023 dollars and 2045 dollars. The cost estimates are planning-level or order-of- magnitude cost estimates with a typical estimating accuracy of -50% to +100% due to limited level of project information often coupled with significant uncertainties at this planning stage. The weighted average unit costs are calculated based upon these cost estimates and are not rounded for consistency across the OWP and appendices.
Table 2 – Estimated Weighted Average Unit Cost of Water for Portfolio A through Portfolio G Portfolio Name Est. Weighted Avg Unit Cost
($/Acre Foot)
2023 Dollars 2045 Dollars
Portfolio A – Baseline $2,210 $4,088
Portfolio B – Enhanced Conservation Phase 1 and 2 $2,075 $3,093 Portfolio C – Enhanced Conservation Phase 1 and 2 with Bay Water Desalination
$3,854 $6,663
Portfolio D – Enhanced Conservation Phase 1 and 2 with
Groundwater
$2,556 $5,330
Portfolio E – Enhanced Conservation Phase 1 and 2 with Palo Alto DPR
$2,645 $4,938
Portfolio F – Enhanced Conservation Phase 1 and 2 with Palo Alto IPR $3,323 $6,440 Portfolio G – Enhanced Conservation Phase 1 and 2 with Regional DPR
$2,355 $4,552
Effluent Transfer Agreement
In 2019, Council approved an Effluent Transfer Agreement with Valley Water and the City of Mountain View Staff Report #10627.3 This 76-year agreement enables an effluent transfer from the Regional Water Quality Control Plant (RWQCP) to Valley Water to be reused in Santa Clara County, likely south of Mountain View. Valley Water has the option to exercise an effluent transfer within 13 years. A Council study session with Valley Water on September 12, 2022 provides updated information Staff Report #14650.4 The governing bodies of Palo Alto, Mountain View and Valley Water have established policy goals for long-term sustainability, including expanding use of recycled water. The RWQCP is a local source of drought-proof, sustainable water. This agreement aims to promote regional collaboration to advance resilient water reuse programs in Santa Clara County.
Some of the OWP portfolios depend on Valley Water not exercising the effluent transfer option, which would ensure there is sufficient treated effluent volume available for constructing local reuse facilities in Palo Alto. Those portfolios are Portfolio E – Enhanced Conservation Phase 1 and 2 with Palo Alto DPR, and Portfolio F – Enhanced Conservation Phase 1 and 2 with Palo Alto IPR. Portfolio G is only feasible if Valley Water exercises the effluent transfer option and decides to build a Regional DPR facility located in Palo Alto. Figure 2 summarizes the dependencies of OWP portfolios on the effluent transfer decision.
Weighted Evaluation Criteria Portfolio Scores
Unit cost was only one of several evaluation criteria used. The One Water Plan (OWP) also scored the options based on factors such as reliability, environmental benefits, and ease of implementation. Table 2 presents the rankings for each portfolio, reflecting the weighted results
3 Staff Report 10627 https://www.cityofpaloalto.org/files/assets/public/v/1/agendas -minutes- reports/reports/city-manager-reports-cmrs/year-archive/2019/id-10627-mini-packet-11182019.pdf?t=60382.02 4Staff Report 14650 https://portal.laserfiche.com/Portal/DocView.aspx?id=59240&repo=r -704298fc
of both cost and non-cost criteria. If Valley Water does not exercise its option to transfer a portion of RWQCP treated effluent, the most cost effective and beneficial option to add to the enhanced water conservation options is the Palo Alto DPR Facility, in Portfolio E. This portfolio’s overall weighted criteria score is 3.43, the highest score of any portfolio, as shown in Table 2. If Valley Water exercises its option to transfer a portion of RWQCP treated effluent, the most cost- effective and beneficial option to add to the enhanced water conservation options is the Regional DPR facility as combined in Portfolio G. The overall weighted criteria score of this portfolio is 3.06 as shown in Table 2. The baseline portfolio scores the lowest of all the portfolios using the weighted criteria
Table 3 - Evaluation Results - Weighted Criteria Scores By Portfolio Criteria Sub-Criteria Criteria
Weight
A.
Baseline
B. Enhanced
Conservation
Phase 1 and 2
C. Enhanced
Conservation
with Bay Water
Desalination
D. Enhanced
Conservation
with
Groundwater
E. Enhanced
Conservation
with Palo Alto
DPR
F. Enhanced
Conservation
with Palo Alto
IPR
G. Enhanced
Conservation
with Regional
DPR
Estimated
Portfolio Weighted
Unit Cost in 2045
($/AF)
- - $4,088 $3,903 $6,663 $5,330 $4,938 $6,440 $4,552 Estimated Start
Year
- - 2025 2025 2035 2025/2030 2035 2030 2040
Unit Cost Unit Cost 20% 0.95 1.00 0.20 0.59 0.70 0.26 0.81 Reliability Reliability 35% 0.35 0.60 1.43 0.85 1.39 1.37 0.90 Environmental
Benefits
Efficient Use of
Water
10% 0.20 0.23 0.27 0.23 0.31 0.27 0.26
Ecological
Benefit
10% 0.20 0.22 0.19 0.24 0.22 0.22 0.22
Reliance on
Tuolumne
10% 0.10 0.14 0.29 0.21 0.29 0.31 0.20
Subtotal 30% 0.50 0.59 0.75 0.68 0.82 0.80 0.68
Ease of
Implementation
Implementation
Timeline
5% 0.25 0.24 0.17 0.22 0.16 0.18 0.21
Operational
Complexity
5% 0.25 0.24 0.17 0.22 0.17 0.18 0.24
Public
Acceptance
5% 0.25 0.24 0.21 0.22 0.19 0.20 0.22
Subtotal 15% 0.75 0.72 0.55 0.66 0.52 0.56 0.67
Total 100% 2.55 2.91 2.91 2.78 3.43 2.99 3.06
Notes:
(1) Based on estimated year 2045.
(2) Portfolio G (Enhanced Conservation with Regional DPR) assumes that Valley Water does exercise its option to transfer a portion of RWQCP treated effluent (selected “Yes” in the Tool). All other portfolios assume that Valley Water does not exercise its option (selected “No” in the Tool). (3) The weighted criteria scores are normalized to a scale of 1-5.
Portfolio Evaluation Summary
Figure 2 compares the portfolios’ dependency on the Valley Water Transfer option decision.
Figure 2. Portfolio Results and Dependence on Valley Water Option to Transfer Decision
Sensitivity Analysis
The One Water Plan (OWP) includes a sensitivity analysis to assess how the findings might change under different weightings of the evaluation criteria. The flexibility of the tool enables staff to perform additional sensitivity analyses to assess how findings change as cutback and demand assumptions are adjusted in the future.
Key findings from the sensitivity analysis are:
• Portfolio E (Enhanced Conservation + Palo Alto DPR) is the top-performing option if Valley Water does not exercise its effluent transfer option, even when evaluation criteria weights (cost, reliability, etc.) are adjusted. The only exception is when unit cost is heavily prioritized, in which case Portfolio B (Enhanced Conservation only) ranks highest.
• If Valley Water does exercise the effluent transfer option, Portfolio G (Enhanced Conservation + Regional DPR) becomes the highest-scoring infrastructure portfolio.
However, Portfolio B or Portfolio C (with Bay Water Desalination) may outperform it depending on how cost or reliability are weighted.
Events that May Trigger Revisiting One Water Planning in the Future While staff is not recommending any action or decision at this time, revisiting the One Water planning framework may be appropriate in the future. Some of the conditions that may warrant a re-evaluation of the City’s water supply portfolio include the following.
• 2027: SFPUC updated Alternative Water Supply Plan
• 2032: Valley Water decision regarding option to transfer effluent from RWQCP for south Santa Clara County uses
• State decision regarding Bay Delta Plan implementation • Other events or conditions affecting water supply reliability or cost • New water supply technologies or regional partnership opportunities
FISCAL/RESOURCE IMPACT
This report is informational only with no financial resource impact .
The OWP, cost estimates, and Evaluation Tool along with considerations raised in the UAC’s letter provide an adaptable roadmap for the City’s water strategy. To illustrate the potential rate impacts for water utility customers stemming from the various portfolios in the OWP, staff utilized the projected weighted unit costs for each portfolio in FY 2045 as the basis for Palo Alto's water purchase costs. This was coupled with an assumed average annual rate increase of 6% for the distribution system. All other assumptions are the same as outlined in the OWP. This analysis does not take into consideration other unexpected costs that may impact the cost of water and does not consider sensitivities to demand changes. This analysis is for illustration purposes only, and provides an approximation of the relative rate impact of different portfolio average unit costs (from Table 1) under the assumptions stated in the OWP. For reference, under Palo Alto’s current rates in FY 2025, a residential monthly bill at 9 CCF of water usage costs $113.47. Also shown is the capital cost associated with each portfolio.
Table 4 – Residential Monthly Bills in FY 2045 for Each OWP Portfolio This analysis indicates that the difference in residential bills across the portfolios relative to the baseline Portfolio A ranges from negative 1% for the least expensive Portfolio B (Enhanced Conservation Phase 1 and 2) to 17% for the most expensive Portfolio C – Enhanced Conservation with Bay Water Desalination. Note that capital costs are planning level and actual costs are -50% to +100% of estimated.
STAKEHOLDER ENGAGEMENT
The following is a timeline of public meetings and community workshops on the OWP to date:
- July 7, 2021 - the Utilities Advisory Commission (UAC) reviewed a draft objectives, scope, and community engagement plan for the OWP (Staff Report #12332)5 - November 2021 - Palo Alto Utilities Department in collaboration with the Public Works Department issued OWP Request For Proposals
- June 2022 - Council approved the contract with Carollo Engineers to develop the OWP (Staff Report 13434)6
- September 28, 2022 - First Community Workshop, Community Needs and Priorities7 - December 6, 2022 - Second Community Workshop Exploring Water Supply and Water Conservation Options8
- February 1, 2023 - staff provided an update to the UAC on the development of the OWP (Staff Report 14974)9
- June 3, 2024 - staff provided an update to the UAC on the OWP background, goals, approach, overview and initial results (Staff Report 2404-2968)10 - January 7, 2025 – staff provided the final One Water Plan to the UAC (Staff Report 2407- 3234)11
- September 19, 2025 – the CASC received the final One Water Plan and the related letter from the UAC (Staff Report 2505-469712)
Utilities Advisory Commission Review: At the UAC meeting on November 6, 2024, the SFPUC (Palo Alto’s water supplier) through its Assistant General Manager of the Water Enterprise, Steve Ritchie, provided an overview of the RWS and SFPUC’s planning efforts including drought planning and Alternative Water Supply Program. At the same UAC meeting, the Bay Area Water
5 Staff Report 12332: https://www.cityofpaloalto.org/files/assets/public/agendas -minutes-reports/agendas- minutes/utilities-advisory-commission/archived-agenda-and-minutes/agendas-and-minutes-2021/07-07-2021- special/id-12332-item-1.pdf
6 Staff Report 13434: https://www.cityofpaloalto.org/files/assets/public/v/11/agendas -minutes-reports/agendas- minutes/city-council-agendas-minutes/2022/20220620/20220620pccsm-amended-final-final.pdf 7 Presentation and results from the live polling:
https://www.cityofpaloalto.org/files/assets/public/v/1/utilities/water -drought/stakeholder-mtg-1-community- meeting.pdf
8 Slides: https://www.cityofpaloalto.org/files/assets/public/v/1/utilities/water -drought/stakeholder-workshop- 2_community.pdf Recording: https://youtu.be/YEguKgxzRNY 9 Staff Report 14974: https://www.cityofpaloalto.org/files/assets/public/v/1/agendas -minutes-reports/agendas- minutes/utilities-advisory-commission/archived-agenda-and-minutes/agendas-and-minutes-2023/02-feb-2023/02- 01-2023-uac-agenda-and-packet.pdf
10 Staff Report 2404-2968 https://www.cityofpaloalto.org/files/assets/public/v/2/agendas -minutes- reports/agendas-minutes/utilities-advisory-commission/archived-agenda-and-minutes/agendas-and-minutes- 2024/06-jun-2024/06-03-2024-packet-v2.pdf
11 Staff Report 2407-3234 https://cityofpaloalto.primegov.com/Portal/viewer?id=0&type=7&uid=5b035426- 3a84- 4050-84eb-a2d44ebdb28f
12 Staff Report 2505-4697 https://cityofpaloalto.primegov.com/viewer/preview?id=0&type=8&uid=dd0a3d30- 3782-42d4-b2df-20a7389a196f
Supply and Conservation Agency (BAWSCA), through its CEO/General Manager, Nicole Sandkulla, also presented additional information on water supply, water conservation and reliability regionally, pertaining to the 26 wholesale customers (including Palo Alto) of the SFPUC comprising BAWSCA’s membership. This provides additional regional context for the Palo Alto OWP , which focuses on the local area within the Palo Alto city limits.
At the January 7, 2025 UAC meeting, staff recommended that the UAC advise the City Council to accept the One Water Plan. The UAC did not take any action. The UAC expressed a desire to provide additional information to the City Council regarding water supply and conservation planning. As a result, as discussed by the Commission, three commissioners (Gupta, Mauter and Phillips) were appointed to draft the letter for the full Commission’s consideration. The letter contents fall into three main categories. First, it outlines concerns about the portfolio scoring methodology. Second, it questions the worst-case water supply shortage scenario which was provided by the SFPUC, the City’s water supplier and the owner and operator of the Regional Water System. Third, the letter promotes regional collaboration, a practice that staff routinely engages in as part of their ongoing responsibilities. At the March 5, 2025, UAC meeting, the commission voted unanimously to send the letter (Attachment A) to Council.
Climate Action & Sustainability Ad Hoc Committee: On September 19, 2025, staff recommended the CASC receive both the report and the UAC letter for staff’s use as a framework for evaluating future projects if so directed by Council, considering, where appropriate, the opinions expressed in the UAC’s letter. After discussing the Plan and the UAC’s concerns, the CASC voted unanimously to receive the One Water Plan. Potential future direction to staff related to the OWP will require separate Council action.
ENVIRONMENTAL REVIEW
The informational report including the OWP and UAC letter on water supply and conservation planning is not a project requiring California Environmental Quality Act review, because it is an administrative governmental activity which will not cause a direct or indirect physical change in the environment. Any future proposals to implement the OWP would be subject to CEQA analysis at that time.
ATTACHMENTS/LINKS
Attachment A: UAC letter to Council
Link: One Water Plan
https://cityofpaloalto.primegov.com/Portal/viewer?id=0&type=7&uid=c42ee7f3-8caf- 4c48-99e3-57bb8e437775
APPROVED BY:
Alan Kurotori, Director of Utilities
Staff: Karla Dailey, Assistant Director of Utilities, Resource Management