CITY OF SAN MATEO
CITY OF SAN MATEO
Agenda Report
City Hall
330 W. 20th Avenue
San Mateo CA 94403
www.cityofsanmateo.org
Agenda Number: 2 Section Name: STUDY SESSION Account Number: 72-4674 File ID: 26-10900 TO: City Council
FROM: Alex Khojikian, City Manager
PREPARED BY: Public Works Department
MEETING DATE: March 02, 2026
SUBJECT:
Clean Water Program and Wastewater Treatment Plant Upgrade and Expansion — Update RECOMMENDATION:
Receive an informational update on the Clean Water Program and the Wastewater Treatment Plant Upgrade and Expansion project.
BACKGROUND:
The City is currently under a Regional Water Quality Control Board Cease and Desist Order requiring improvements to its sewer collection system and Wastewater Treatment Plant (WWTP) to eliminate sanitary sewer overflows and unauthorized discharges of untreated or partially treated wastewater to San Francisco Bay. The Clean Water Program (CWP) is a $1 billion program that started in 2015 to comply with the Cease and Desist Order. The CWP includes numerous capital improvement projects that have either been completed, are currently under construction, or are soon starting construction. The projects include improvements to sewers, manholes, and pump stations, the new Underground Flow Equalization System (located at the San Mateo County Event Center), and improvements at the WWTP. The WWTP Upgrade and Expansion Project (WWTP Project) is the largest of these CWP projects, which will result in new liquid treatment facilities for processing wastewater required to meet regulations.
Since the CWP projects were chartered, CWP’s project budgets, including the WWTP Project, considered the costs associated with administrative services, program/project controls, project management, preliminary evaluations, engineering services, procurement, construction contracts, construction management, permits, outreach, risk contingencies, and escalation. A strategic funding and financing plan to deliver the CWP was executed and included raising sewer rates over several years, issuing bonds, and pursuing loans. The CWP successfully received three low-interest rate loans from State and/or Federal programs. These loans were able to reduce the fiscal impact of the City’s investment in the sewer infrastructure on the San Mateo rate payers. In June 2023, Council approved annual 3 percent inflationary sewer rate increase for five years, starting in Fiscal Year 2023-24; without the low-interest rate loans, sewer rate increases would have been higher.
Currently, staff anticipates completing the overall Clean Water Program at the end of this calendar year. In 2017, the CWP’s project budgets were baselined and the CWP’s estimate at completion was $991 million. In February 2025, Council received an updated $1.028 billion CWP estimate at completion, based on the best available information at the time.
Between February 2025 and June 2025 when Council adopted the 2025/26 capital budget, the estimate at completion went down to $1.025 billion. Due to risks, changes, delays, and unknowns identified over the past year, the CWP’s current estimate at completion has increased to approximately $1.035 billion. The new budget represents an overall increase of
4.4% from the original program budget in 2017 and can partially be attributed to the Covid 19 pandemic, a period of historic inflation, and significant material shortages due to supply chain interruptions, but overall is still a reasonable increase for a program of this size. This increased estimate does not require an adjustment to the currently approved 5-
CITY OF SAN MATEO
year sewer rate increase schedule.
In February 2025, staff also provided Council with details of the WWTP Project, which included construction progress updates, causes for delays and budget increases, and updated schedules. At that time, the WWTP Project budget and estimate at completion was $597 million. Due to risks, changes, delays, and unknowns identified over the past year, the WWTP Project’s current estimate at completion has increased by approximately $5.9 million and is now $603 million, which is still subject to change. Construction has been challenging while still progressing forward. Since February 2025, the Project has required several significant changes, including changes related to SCADA monitoring system programming, force main configuration at the headworks, flow equalization conversion, chlorine contact basin lighting, tower crane overrun, stormwater pollution prevention, power backup for critical controls as well as the associated soft costs for inspection, construction management, insurance, and engineering services. As a result of the realized and potential change orders, as well as schedule challenges, construction expenditures are expected to exceed the previously anticipated estimate at completion for the Project.
To ensure there is sufficient funding to complete the WWTP Project, staff will be proposing a $5.9 million budget increase in the coming Fiscal Year 2026-27 Capital Improvement Program to fund the completion of the WWTP Project; this increase will align the budget committed to the project account with the WWTP Project’s estimate at completion of $603 million. This $5.9 million increase includes costs associated with the construction contract ($3.85 million) and extended soft costs ($2.05 million). The $3.85 million budget request associated with the construction contract is inclusive of known changes and risks, potential delay costs, potential future risks and changes, and contingencies. The $2.05 million budget increases associated with the extended soft costs include project management, construction management, specialty inspections, owner-controlled insurance program, and engineering services during construction. The $5.9 million budget increase is based on information known today and is subject to change as the project progresses closer to completion and as the project team further evaluates potential costs such as those related to project delay. Staff anticipates the WWTP project will be complete by June 2026.
The program also anticipates a potential net budget increase for the collection system projects of $2.51 million that is attributed mostly to the increased cost of mechanical vault repairs at the Underground Flow Equalization System and resolution of standby generator issues at the Dale Avenue Pump Station, as well as projected cost increases for the remaining sewer collection system rehabilitation projects. A net increase in the cost estimated at $1.24 million is attributed to the Immediate Action Projects (IAP) Package III project due to unforeseen subsurface conditions and some closeout costs for the IAP Package II project, which are outside the main WWTP Project.
Based on the project cash flow estimates for the remainder of the current Fiscal Year 2025-26, there is sufficient budget and existing authorized construction contract contingencies to keep the projects progressing. Staff anticipates returning to Council after the Fiscal Year 2026-27 budget is adopted with requests to increase the construction contract contingencies as needed to complete the various projects in the CWP. The planned $9.65 million budget request is inclusive of the anticipated construction contract contingency amounts; however, waiting to make this request in the new fiscal year will allow the construction management team to further review all the potential construction contract changes with the intent to mitigate as much of the risk as possible and hopefully reduce the overall request.
As the Clean Water Program draws closer to completion, staff is looking to the post-CWP program of capital needs, including anticipated improvements to the solids processing facilities (portion of the old WWTP that will remain in service) as well as developing an updated Sewer Master Plan that will evaluate future condition or capacity needs within the collection system, including the many sewer pump stations, after completion of all of the CWP projects.
BUDGET IMPACT:
The budget information included in the update will be incorporated into the City's overall future Fiscal Year 2026-31 Capital Improvement Program, which will be presented to Council for approval in June.
ENVIRONMENTAL DETERMINATION:
CITY OF SAN MATEO
The City prepared a Final Programmatic Environmental Impact Report (Final PEIR) in accordance with the California Environmental Quality Act (CEQA) (SCH No. 2015032006). Council on June 6, 2016, certified the PEIR. In accordance with CEQA, the Final PEIR serves as the primary environmental compliance document for the implementation of the Clean Water Program. The City prepared Addenda to the Final PEIR that was approved on July 16, 2018 (Addendum 1) and April 15, 2019 (Addendum 2). This work is within the scope of the Project evaluated in the PEIR and Addendum.
NOTICE PROVIDED
All meeting noticing requirements were met.
ATTACHMENTS
None
STAFF CONTACT
Thomas W. Williams, Engineering Manager
[email protected]
(650) 522-7307