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Resolution No.
Resolution of the Council of the City of Palo Alto Approving the FY 2027 Water Utility Financial Forecast and Reserve Transfer, 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 Plans or Forecasts 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 Reserves Management Practices (Attachment A, Exhibit 3) and Water Utility Financial Details (Attachment A, Exhibit 2) attached to this resolution 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 15, 2026, 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 15, 2026 public hearing was mailed to all City of Palo Alto Utilities water customers on April 30, 2026.
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%) 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 RESOLVES as follows:
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SECTION 1. The Council hereby approves the Reserves Management Practices (Attachment A, Exhibit 3) and Water Utility Financial Details (Attachment A, Exhibit 2) presented to City Council on June 15, 2026, which are attached to this resolution and made a part of the staff report presented to the City Council.
SECTION 2. The Council hereby approves the transfer of up to $5,500,000 from the Operations Reserve to the CIP Reserve in FY 2026, as described in the FY 2027 Water Utility Financial Forecast.
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 Attachment A, Exhibit 1. Utility Rate Schedule W-1, as amended, shall become effective July 1, 2026.
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 Attachment A, Exhibit 1. Utility Rate Schedule W-2, as amended, shall become effective July 1, 2026.
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 shown in Attachment A, Exhibit 1. Utility Rate Schedule W-3, as amended, shall become effective July 1, 2026.
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 Attachment A, Exhibit 1. Utility Rate Schedule W-4, as amended, shall become effective July 1, 2026.
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 Attachment A, Exhibit 1. Utility Rate Schedule W-7, as amended, shall become effective July 1, 2026.
SECTION 8. The City Council finds as follows:
a. Revenues derived from the water rates approved by this resolution do not exceed the funds required to provide water service.
b. Revenues derived from the water rates approved by this resolution 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, consistent with any limitations imposed by Article XIII C and Article XIII D of the California Constitution. c. The amount of the water rates imposed upon any parcel or person as an incident of property ownership shall not exceed the proportional cost of the water service attributable to the parcel.
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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.
SECTION 10. The Council finds that the adoption of this resolution approving the FY 2027 Water Financial Forecast 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 the California Environmental Quality Act (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