City of Sacramento
City Council - 2PM Report
915 I Street Sacramento, CA 95814
www.cityofsacramento.org
File ID: 2025-01589 9/16/2025
Fiscal Year (FY) 2025/26 Adjust the Department of Utilities (DOU) Capital Improvement Program (CIP), Multi Year Operating Project (MYOP), Operating Revenue and Expense Budgets, Create New CIP Program, Request Approval for Accepting Settlement Award, Establish Program Support Transfer Reimbursement from Water Fund to Risk Management Fund, Amend the Citywide Fees and Charges Schedule, and Reset the City Manager’s Administrative Authority for CIP and MYOP Programs
File ID: 2025-01589
Location: Citywide
Recommendation: Adopt a Resolution authorizing the Interim City Manager or designee to: 1) make allocation adjustments to the Fiscal Year 2025/26 Capital Improvement Project (CIP), Multi- Year Operating Project (MYOP), and Operating Budgets in the Water (Fund 6005), Wastewater (Fund 6006), Solid Waste (Fund 6007), Storm Drainage (Fund 6011), and Storm Drainage Property Fee (Fund 6021) Funds as shown in Attachment 1; 2) amend the FY2025/26 Capital Improvement Program (CIP) to create one new parent program for the Utility Billing System Program (Z14260100); 3) request approval to receive and recognize a partial settlement award in the amount of $1,468,963; 4) adjust the Fiscal Year 2025/26 Operating Revenue Budget in DOU’s Fiscal Operations Program (14001611, Fund 6005) in the amount of $1,468,963; 5) establish the appropriate program transfer in the amount of $2,484,342 to reimburse the Risk Management Fund (Fund 6502) from the Water Fund’s (Fund 6005) FY2025/26 Capital Reserve for the non-property related damages incurred at the California Fruit Building; 6) amend the Citywide Fees and Charges Schedule; and 7) reset the Interim City Manager’s administrative authority for identified projects.
Contact: Sherill Huun, Interim Director, (916) 808-1455, [email protected]; Chuong (Ryan) Pham, Business Services Manager, (916) 808-8995, [email protected]; Kelly Sherfey, Supervising Financial Analyst, (916) 808-1481, [email protected]; Department of Utilities
Presenter: None
Attachments:
1-Description Analysis
2-Attachment 1 - Allocation Adjustments
3-Resolution
File ID: 2025-01589 9/16/2025
4-Exhibit A - Allocation Adjustments
Description/Analysis
Issue Detail: As part of the Department of Utilities (DOU) ongoing management of its CIP, MYOPs, and Operating Budgets, a periodic review is conducted, and financial resources are reallocated to provide improvements in a timely and efficient manner. This process results in recommended budgetary adjustments to ensure progress continues for priority projects and operations and the replacement/rehabilitation of rate payer assets (Attachment 1).
Budget adjustment is necessary to fund two vehicles for positions added through FY26 Budget Development, specifically for homeless encampment efforts. These roles require vehicles capable of handling all-weather terrain and towing equipment. The total cost for the vehicles is $200,000, which DOU plans to fund through Storm Drainage Available Fund Balance (Fund 6011).
At the request of the Project Manager, staff recently moved the budget and expenses in the Drainage Trash Capture Program (W14230100) from Fund 6011 to Fund 6021. The initial budget for this effort was from Fund 6011 and was transferred in from the NPDES Stormwater Program (I14010200, Fund 6011) and the Base CIP Contingency Drainage Program (W14000200, Fund 6011) to move forward with the project. Budget in Fund 6021 is now available in the Drainage Trash Capture Program and staff is now seeking council authority to transfer the borrowed $600K in 6011 budget back to the respective parent programs. This transfer will result in a net-zero effect for the funds as illustrated in Attachment 1.
The creation of a new CIP is recommended for the Utility Billing System Program (Z14260100). The creation of the new CIP parent program will assist departments with better planning of Utilities’ major billing system upgrades and related projects for all enterprise funds.
DOU was awarded and recently received a portion of a settlement in the amount of $1,468,963 related to DOU’s groundwater wells and PFAS litigation that is still on-going. Staff is seeking council approval to receive and recognize the $1,468,963 in revenue and make the appropriate adjustments to the Fiscal Year 2025/26 Operating Revenue Budgets in our Fiscal Operations Program (14001611, Fund 6005). The current revenues received and future awards from this litigation will be utilized in our Well Rehabilitation Program (Z14110100; Fund 6005) to assess and repair damage to DOU’s rate payer groundwater well assets.
DOU was found liable for property damages related to a water main break at the California Fruit Building that occurred in calendar year 2021. The settlement involved the City’s Risk Department issuing two settlement checks in which $2,484,342 was for non-property related damages DOU is liable for paying. The total expense was realized in Fiscal Year 2025 solely by the Risk Management Fund. DOU is seeking council authority to establish the appropriate program transfer in FY2025/26 to reimburse the Risk Management Fund (Fund 6502) in the amount of $2,484,342 from the Water
File ID: 2025-01589 9/16/2025
Fund’s (Fund 6005) FY2025/26 Capital Reserve.
The current Citywide Fee Schedule, effective 7/1/2025, includes a new Utility Billing Inserts Fee which recovers the City’s costs for mailing printed materials with utility bills. Due to an administrative error, the fee amount is set too high and needs to be reduced to reflect true cost recovery, as indicated in the table below.
Fee # 334
Department Utilities
Fund Water
Fee Name Utility Billing Inserts Fee
Action Modify
Current Fee Department of Utilities Internal Tier $1,658 Non- Department of Utilities Tier $1,633
Proposed Fee Department of Utilities Internal Tier $158 Non- Department of Utilities Tier $133
Justification Print vendor does not levy a $1,500 charge to include inserts in bill prints. Fee reduced to recover
administrative staff time only. Res. 2025-0068.
Proposition 26 This charge is not a tax under Proposition 26, as it falls under Exception 2, a fee for government services.
Lastly, staff is also recommending resetting the City Council approved administrative authority to projects that have met the $250,000 threshold or any portion thereof.
Policy Considerations: The adjustments to the CIP and MYOP budgets are consistent with the DOU 2026-2030 Strategic Plan goals and objectives to effectively manage infrastructure assets, purchase equipment, and deliver reliable services. Adjustments to operating and project budgets of more than $250,000 and establishment of CIPs or MYOPs must be approved by the City Council.
Economic Impacts: Not applicable.
Environmental Considerations: The Community Development Department Environmental Services Manager has determined that the proposed activity is not a project pursuant to the California Environmental Quality Act (CEQA) Guidelines Section 15378(b). The fiscal management of the DOU’s CIP is an ongoing administrative fiscal activity and is not subject to CEQA pursuant to CEQA Guidelines Section 15060(c)(3).
Sustainability: Not applicable.
File ID: 2025-01589 9/16/2025
Commission/Committee Action: Not applicable.
Rationale for Recommendation:
Reallocating resources, creating a new CIP program, accepting external revenues, and making reimbursements are necessary administrative tasks to ensure timely projects, organized planning, proper asset assessment, timely reimbursements, and prioritized financial allocations. The recommended budgetary adjustments include two Operating Budgets, two MYOPs, and five CIPs in the Water (6005), Wastewater (6006), Solid Waste and Recycling (6007), Storm Drainage (6011), and Storm Drainage Property Fee (6021) funds.
The adoption of this resolution will modify the existing Utility Billing Inserts Fee to appropriately achieve full cost recovery.
Financial Considerations: The reallocation of resources to priority projects in the aforementioned funds will have a net-zero effect within the funds as illustrated in Attachment 1. Council’s approval of receiving revenue and adjusting FY2025/26 Operating Budgets allows DOU to true-up our FY2025/26 Operating Revenue Budgets for new revenue. Additionally, DOU is seeking authority to establish the appropriate program transfer in the amount of $2,484,342 to reimburse the Risk Management Fund (Fund 6502) from the Water Fund’s (Fund 6005) FY2025/26 Capital Reserve.
There is sufficient budget in the Water Available Fund Balance Capital Reserves to facilitate the appropriate program transfer. Staff also recommend the City Council reset the administrative authority for the projects listed below:
Project Number Project Name
I14510200 Water Master Plan Program
I14610300 Combined Master Plan Program
W14130400 Drainage Channel Improvement Program
Z14000700 Base CIP Contingency-Water
Z14001500 Drinking Water Quality 3330
Z14110100 Well Rehabilitation Program
Z14240100 Shasta Park Facility Rehabilitation & Replacement There are no General Funds planned or allocated for this effort.
The fee revision set forth in this resolution will help offset the costs associated with the administration of the Utility Billing Inserts program.
Local Business Enterprise (LBE): Not applicable.
Project / Dept ID Project Description 6005
Water Fund
6006
Wastewater
Fund
6007
Solid Waste
Fund
6011
Storm Drainage
Fund
6021
Storm
Drainage
Property Fee
Fund
Grand
Total
60001015-890020 Contingency Reserves - - - (200,000) - (200,000) 14001611 Fiscal Operations (1,468,963) - - - - (1,468,963) I06141026 Fleet FY26 - DOU Storm Drain - - - 200,000 - 200,000 I14010200 NPDES Stormwater Program - - - 200,000 - 200,000 W14000200 Base CIP Contingency-Drainage - - - 400,000 - 400,000 W14230100 Drainage Trash Capture Program - - - (600,000) - (600,000) Z14110100 Well Rehabilitation Program 1,468,963 - - - - 1,468,963 Z14170100 DOU IT Program - - (129,375) - (172,500) (301,875) Z14260100 Utility Billing System Program - - 129,375 - 172,500 301,875 - - - - - - Grand Total FY 2025/26 Allocation Adjustments
Attachment 1
RESOLUTION NO. 2025 –
Adopted by the Sacramento City Council
SEPTEMBER 16, 2025
FISCAL YEAR 2025/26 ADJUST THE DEPARTMENT OF UTILITIES (DOU) CAPITAL
IMPROVEMENT PROGRAM (CIP), MULTI YEAR OPERATING PROJECT (MYOP),
OPERATING REVENUE AND EXPENSE BUDGETS, CREATE NEW CIP PROGRAM,
REQUEST APPROVAL FOR ACCEPTING PFAS SETTLEMENT AWARD,
ESTABLISH PROGRAM SUPPORT TRANSFER REIMBURSEMENT FROM WATER
FUND TO RISK MANAGEMENT FUND, AMEND THE CITYWIDE FEES AND CHARGES SCHEDULE, AND RESET THE CITY MANAGER’S ADMINISTRATIVE
AUTHORITY FOR CIP AND MYOP PROGRAMS
BACKGROUND
A. As part of the DOU’s ongoing management of its CIP, MYOPs, and Operating Budgets, a periodic review is conducted, and financial resources are reallocated to provide improvements in a timely and efficient manner. This process results in recommended budgetary adjustments to ens ure progress continues for priority projects and operations and the replacement/rehabilitation of rate payer assets as shown in Exhibit A. The recommended budgetary adjustments include two Operating Budgets, two MYOPs, and five CIPs in the Water (6005), Wa stewater (6006), Solid Waste and Recycling (6007), Storm Drainage (6011), and Storm Drainage Property Fee (6021) funds.
B. The creation of a new CIP is being recommended for the Utility Billing System Program (Z14260100). The creation of the new CIP parent program will assist departments with better planning of Utilities’ major billing system upgrades and related projects for all enterprise funds.
C. DOU was awarded and recently received a portion of a settlement in the amount of $1,468,963 related to DOU’s gr oundwater wells and PFAS litigation that is still on - going. Staff is seeking council approval to receive and recognize the $1,468,963 in revenue and make the appropriate adjustments to the Fiscal Year 2025/26 Operating Revenue Budgets in our Fiscal Operati ons Program (14001611, Fund 6005). The current revenues received and future awards from this litigation will be utilized in our Well Rehabilitation Program (Z14110100; Fund 6005) to assess and repair damage to DOU’s rate payer groundwater well assets.
D. DOU was found liable for property damages related to a water main break at the California Fruit Building that occurred in calendar year 2021. The settlement involved the City’s Risk Department issuing two settlement checks in which $2,484,342 was for non-property related damages DOU is liable for paying. The total expense was realized in Fiscal Year 2025 solely by the Risk Management Fund. DOU is seeking City Council authorization to establish the appropriate program transfer in FY2025/26 to reimburse the Risk Management Fund (Fund 6502) in the amount of $2,484,342 from the Water Fund’s (Fund 6005) FY2025/26 Capital Reserve.
E. Due to an administrative error, the Utility Billing Inserts fee amount is set too high and needs to be reduced to reflect true cost recovery.
F. Reset the City Council approved administrative authority to projects that have met the $250,000 threshold or any portion thereof.
BASED ON THE FACTS SET FORTH IN THE BACKGROUND, THE CITY COUNCIL RESOLVES AS FOLLOWS:
Section 1. The City Manager or City Manager’s designee is authorized to adjust appropriations in the Water (Fund 6005), Wastewater (Fund 6006), Solid Waste Fund (6007), Storm Drainage Fund (6011), and Storm Drainage Property Fee (Fund 6021) as shown in Exhibit A
Section 2. One CIP is established for ongoing water, wastewater, solid waste, and drainage utility billing system planning as follows:
CIP Name/Description
Z14260100 Utility Billing System Program - The program will assist departments with better planning of Utilities’ major billing system upgrades and related projects for all enterprise funds.
Section 3. The City Manager or City Manager’s designee is authorized to receive and recognize a partial settlement award in the amount of $1,468,963 in FY2025/26 related to DOU’s groundwater wells PFAS litigation.
Section 4. The City Manager or City Manager’s designee is authorized to adjust the Fiscal Year 2025/26 Operating Revenue Budget in DOU’s Fiscal Operations Program (14001611, Fund 6005) in the amount of $1,468,963.
Section 5. The City Manager or City Manager’s designee is authorized to establish the appropriate transfer to the Risk Management Fund (Fund 6502) from the Water Fund (Fund 6005) Capital Reserve for reimbursement in the amount of $2,484,342 for the non-property related damages incurred at the California Fruit Building.
Section 6. The Citywide Fees and Charges Schedule is amended to reduce the following fee:
Fee # 334
Department Utilities
Fund Water
Fee Name Utility Billing Inserts Fee
Action Modify
Current Fee
Department of Utilities Internal Tier $1,658
Non-Department of Utilities Tier $1,633
Proposed Fee
Department of Utilities Internal Tier $158
Non-Department of Utilities Tier $133
Justification
Print vendor does not levy a $1,500 charge to include
inserts in bill prints. Fee reduced to recover
administrative staff time only. Res. 2025-0068.
Proposition 26
This charge is not a tax under Proposition 26, as it
falls under Exception 2, a fee for government services.
Section 7. The City Manager or City Manager’s designee is authorized to reset the administrative authority for the following CIP projects:
Project
Number
Project Name
I14510200 Water Master Plan Program
I14610300 Combined Master Plan Program
W14130400 Drainage Channel Improvement Program
Z14000700 Base CIP Contingency-Water
Z14001500 Drinking Water Quality 3330
Z14110100 Well Rehabilitation Program
Z14240100 Shasta Park Facility Rehabilitation & Replacement
Table of Contents
Exhibit A: Allocation Adjustments
Project / Dept ID Project Description 6005
Water Fund
6006
Wastewater
Fund
6007
Solid Waste
Fund
6011
Storm Drainage
Fund
6021
Storm
Drainage
Property Fee
Fund
Grand
Total
60001015-890020 Contingency Reserves - - - (200,000) - (200,000) 14001611 Fiscal Operations (1,468,963) - - - - (1,468,963) I06141026 Fleet FY26 - DOU Storm Drain - - - 200,000 - 200,000 I14010200 NPDES Stormwater Program - - - 200,000 - 200,000 W14000200 Base CIP Contingency-Drainage - - - 400,000 - 400,000 W14230100 Drainage Trash Capture Program - - - (600,000) - (600,000) Z14110100 Well Rehabilitation Program 1,468,963 - - - - 1,468,963 Z14170100 DOU IT Program - - (129,375) - (172,500) (301,875) Z14260100 Utility Billing System Program - - 129,375 - 172,500 301,875 - - - - - - Exhibit A
FY 2025/26 Allocation Adjustments
Grand Total