HomeMy WebLinkAbout04-20-26 Special Board Meeting Packet 1
OTAY WATER DISTRICT
SPECIAL MEETING OF THE BOARD OF DIRECTORS
BY TELECONFERENCE
DISTRICT TRAINING ROOM
(LOWER-LEVEL PARKING LOT)
2554 SWEETWATER SPRINGS BOULEVARD
SPRING VALLEY, CALIFORNIA
MONDAY
April 20, 2026
12:00 P.M.
AGENDA
1. ROLL CALL
a) BOARD ACTION TO APPROVE REMOTE ATTENDANCE FOR DIRECTOR
GARY CROUCHER DUE TO JUST CAUSE. HE WILL REMOTELY ATTEND THE
MEETING FROM 10566 VILLA BONITA, SPRING VALLEY, CA 91978
2. PLEDGE OF ALLEGIANCE
3. APPROVAL OF AGENDA
4. PUBLIC PARTICIPATION – OPPORTUNITY FOR MEMBERS OF THE PUBLIC TO
SPEAK TO THE BOARD ON ANY SUBJECT MATTER WITHIN THE BOARD’S JU-
RISDICTION INCLUDING AN ITEM ON TODAY’S AGENDA
PUBLIC HEARING
5. COMPLIANCE WITH NEW LEGAL OBLIGATIONS REGARDING PUBLIC HEARING
ON OTAY WATER DISTRICT VACANCIES AND RECRUITMENT AND RETENTION
EFFORTS (ASSEMBLY BILL 2561, GOVERNMENT CODE §3502.3) [SUZIE LAW-
SON]
WORKSHOP
6. DISCUSSION OF THE FISCAL YEAR 2027 BUDGET KEY FIGURES AND ASSUMP-
TIONS IMPACTING THE UPCOMING BUDGET PROPOSAL [JON RAVAGLIOLI/
JOE BEACHEM]
RECESS TO CLOSED SESSION
2
7. CLOSED SESSION
a) CONFERENCE WITH LEGAL COUNSEL – ANTICIPATED LITIGATION [GOV-
ERNMENT CODE §54956.9 (d)(4)]
INITIATION OF LITIGATION PURSUANT TO SUBDIVISION (d)(4) OF GOVERN-
MENT CODE §54956.9 (ONE [1] POTENTIAL CASE)
RETURN TO OPEN SESSION
8. REPORT ON ANY ACTIONS TAKEN IN CLOSED SESSION. THE BOARD MAY AL-
SO TAKE ACTION ON ANY ITEMS POSTED IN CLOSED SESSION
9. ADJOURNMENT
All items appearing on this agenda, whether or not expressly listed for action, may be delib-
erated and may be subject to action by the Board.
The Agenda, and any attachments containing written information, are available at the Dis-
trict’s website at www.otaywater.gov. Written changes to any items to be considered at the
open meeting, or to any attachments, will be posted on the District’s website. Copies of the
Agenda and all attachments are also available by contacting the District Secretary at
(619) 670-2253.
If you have any disability which would require accommodation in order to enable you to par-
ticipate in this meeting, please call the District Secretary at 670-2253 at least 24 hours prior
to the meeting.
Certification of Posting
I certify that I posted a copy of the foregoing agenda near the regular meeting place of the
Board of Directors of Otay Water District, Spring Valley, California, said time being at least
24 hours in advance of the special meeting of the Board of Directors (Government Code
Section §54954.2).
/s/ Jenny Diaz, District Secretary
1
STAFF REPORT
TYPE MEETING: Regular Board MEETING DATE: April 20, 2026
SUBMITTED BY:
Suzie Lawson
Human Resources Manager
PROJECT: Various DIV. NO. ALL
APPROVED BY: Kevin Koeppen, Chief of Administrative Services
Jose Martinez, General Manager
SUBJECT:
COMPLIANCE WITH LEGAL OBLIGATIONS RE: PUBLIC HEARING ON OTAY
WATER DISTRICT VACANCIES AND RECRUITMENT AND RETENTION EFFORTS
(ASSEMBLY BILL 2561/GOVERNMENT CODE § 3502.3)
GENERAL MANAGER’S RECOMMENDATION:
The Board of Directors will conduct a public hearing and receive a
report on vacancies in Otay Water District positions, recruitment and
retention pursuant to Assembly Bill 2561/Government Code § 3502.3.
PURPOSE:
Assembly Bill 2561 (AB 2561) requires public agencies, including the
Otay Water District (District), to hold at least one (1) public
hearing per fiscal year, prior to the adoption of the final budget,
to discuss vacancies and recruitment and retention efforts. This
report discusses the District's legal obligations under the law,
effective January 1, 2025, and ensures compliance with such legal
obligations.
ANALYSIS:
Background: On September 22, 2024, AB 2561 was signed into law to add
Government Code § 3502.3 to the Meyers-Milias-Brown Act to address the
issue of job vacancies in local government, which may adversely
affect the delivery of public services and employee workload. Among
other requirements, the bill mandates that public agencies present
the status of vacancies and recruitment and retention efforts during
a public hearing before the agency’s governing body at least once per
AGENDA ITEM 5
2
fiscal year. The bill was enacted into law and is codified at
Government Code § 3502.3. The law went into effect on January 1, 2025.
Compliance Requirements: In compliance with the legal obligations,
the District is required to do the following:
1. Public Hearing: At least once each fiscal year, at a public
hearing before the Board of Directors (Board), the District
shall present information regarding the status of vacancies and
recruitment and retention efforts (GC § 3502.3(a)(1)) and
identify any necessary changes to policies, procedures, and
recruitment activities that may lead to obstacles in the hiring
process (Gov. Code §3502.3(a)(3)).
If the Board of Directors adopts an annual or multi-year budget
during the fiscal year, this presentation must occur prior to
the Board of Directors’ adoption of the final budget for the
District. (Gov. Code §3502.3(a)(2)).
2. Employee Organization Participation: Allow the recognized
employee organization at the District, the Otay Water District
Employees’ Association (OWDEA), to make a presentation during
the public hearing concerning vacancies and recruitment and
retention efforts. (Gov. Code §3502.3(b)).
3. Additional Reporting for High Vacancy Rates: If vacancies within
a single bargaining unit meet or exceed 20% of authorized full-
time positions in that bargaining unit, upon request of the
recognized employee organization, the District must provide
additional information during the public hearing, including the
following: (1) the total number of vacancies; (2) the number of
applicants; (3) the average time to fill positions; and (4)
opportunities to improve compensation and working conditions for
employees in the bargaining unit. (Gov. Code §3502.3(c)).
In 2025, there were 114 budgeted positions represented by OWDEA.
The vacancy rate as of December 31, 2025 was 8.8%; therefore,
the District is not currently subject to additional reporting
upon request of OWDEA.
Vacancies:
During the 2025 Calendar Year, recruitments were initiated to fill 32
total vacancies within the District. By December 31, 2025, there were
ten (10) of 114 budgeted positions (8.8%) represented by OWDEA that
remained vacant, 1) Asset Management Specialist; 2 and 3) Two (2)
Customer Service Representative I/IIs; 4) Equipment Mechanic I/II; 5)
Lead Recycled Water Specialist; 6) Meter Maintenance Worker I/II; 7)
3
Senior/Engineering Technician; and 8 through 10) Three (3) Utility
Worker I/IIs.
As of December 31, 2025, two (2) of 34 budgeted unrepresented
positions (5.9%) remained vacant: 1) Confidential Executive
Assistant; and 2) Finance Manager, Treasury & Accounting Services.
Recruitment and retention efforts:
The Human Resources team collaborates with the hiring department to
identify sources of targeted outreach, which include the District
website as well as professional organization websites (e.g., American
Water Works Association, California Water Environment Association,
Water/Wastewater Jobs, California Special Districts Association,
Association of California Water Agencies, San Diego Water Works,
Brown & Caldwell Water Jobs, and Construction Management Association
of America), Jobs Available, mailing lists, social media, and direct
contact with qualified applicants who have previously applied.
Community outreach includes advertising with local newspapers and
community colleges. The District’s website provides updated
frequently asked questions on the recruitment process and provides
the opportunity for applicants to submit job interest cards to
receive email notification when a position of interest becomes open
to applications. The District tailors supplemental questions to allow
for efficient screening of applications, and is conducting a review
of hiring procedures to identify areas for increased efficiency. To
help prepare for potential future vacancies, department chiefs submit
a long-term staffing & succession plan each year as part of the
budget process.
The District values its employees and in addition to offering
competitive pay and benefits, has created retention initiatives,
which include an employee recognition program to acknowledge employee
contributions and accomplishments, employee service awards for those
achieving milestones of 5-year intervals, and an education
reimbursement program. The District also offers flexible work
schedules, a Health Reimbursement Arrangement (HRA), and a deferred
compensation plan. The District demonstrates its commitment to its
employees’ professional growth by offering a variety of training and
development opportunities through Vector Solutions, ACWA JPIA, the
Liebert Cassidy Whitmore Training Consortium, professional
organization memberships, conference attendance, and the Centre for
Organization Effectiveness. In addition, temporary assignment
opportunities provide employees with direct, hands-on experience
performing the duties of higher-level positions when filling-in for
employees on leave. The District has not experienced issues regarding
4
retention efforts, as the current average employee tenure is 10.32
years.
FISCAL IMPACT: Joe Beachem, Chief Financial Officer
There is no direct fiscal impact associated with conducting the public
hearing required under Government Code § 3205.3. However, if deemed
necessary, addressing future recruitment and retention issues may
involve budget and bargaining considerations, which will be presented
to the Board as appropriate.
LEGAL IMPACT:
None.
ATTACHMENTS:
Attachment A – AB 2561 Text
Attachment B – PowerPoint Presentation
SHARE THIS:Date Published: 09/23/2024 09:00 PM
AB-2561 Local public employees: vacant positions.(2023-2024)
Assembly Bill No. 2561
CHAPTER 409
An act to add Section 3502.3 to the Government Code, relating to public employment.
[ Approved by Governor September 22, 2024. Filed with Secretary of State
September 22, 2024. ]
LEGISLATIVE COUNSEL'S DIGEST
AB 2561, McKinnor. Local public employees: vacant positions.
Existing law, the Meyers-Milias-Brown Act (act), authorizes local public employees, as defined, to form, join, and
participate in the activities of employee organizations of their own choosing for the purpose of representation on
matters of labor relations. The act requires the governing body of a public agency to meet and confer in good
faith regarding wages, hours, and other terms and conditions of employment with representatives of recognized
employee organizations and to consider fully presentations that are made by the employee organization on
behalf of its members before arriving at a determination of policy or course of action.
This bill would, as specified, require a public agency to present the status of vacancies and recruitment and
retention efforts at a public hearing at least once per fiscal year, and would entitle the recognized employee
organization to present at the hearing. If the number of job vacancies within a single bargaining unit meets or
exceeds 20% of the total number of authorized full-time positions, the bill would require the public agency, upon
request of the recognized employee organization, to include specified information during the public hearing. By
imposing new duties on local public agencies, the bill would impose a state-mandated local program. The bill
would also include related legislative findings.
The California Constitution requires local agencies, for the purpose of ensuring public access to the meetings of
public bodies and the writings of public officials and agencies, to comply with a statutory enactment that amends
or enacts laws relating to public records or open meetings and contains findings demonstrating that the
enactment furthers the constitutional requirements relating to this purpose.
This bill would make legislative findings to that effect.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs
mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement shall be made pursuant to these statutory provisions for costs
mandated by the state pursuant to this act, but would recognize that a local agency or school district may
pursue any available remedies to seek reimbursement for these costs.
Vote: majority Appropriation: no Fiscal Committee: yes Local Program: yes
Home Bill Information California Law Publications Other Resources My Subscriptions My Favorites
11/16/24, 4:00 PM Bill Text - AB-2561 Local public employees: vacant positions.
https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202320240AB2561
ATTACHMENT A
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. The Legislature finds and declares as follows:
(a)Job vacancies in local government are a widespread and significant problem for the public sector affecting
occupations across wage levels and educational requirements.
(b)High job vacancies impact public service delivery and the workers who are forced to handle heavier
workloads, with understaffing leading to burnout and increased turnover that further exacerbate staffing
challenges.
(c)There is a statewide interest in ensuring that public agency operations are appropriately staffed and that high
vacancy rates do not undermine public employee labor relations.
SEC. 2. Section 3502.3 is added to the Government Code, to read:
3502.3. (a) (1) A public agency shall present the status of vacancies and recruitment and retention efforts during
a public hearing before the governing board at least once per fiscal year.
(2)If the governing board will be adopting an annual or multiyear budget during the fiscal year, the
presentation shall be made prior to the adoption of the final budget.
(3)During the hearing, the public agency shall identify any necessary changes to policies, procedures, and
recruitment activities that may lead to obstacles in the hiring process.
(b)The recognized employee organization for a bargaining unit shall be entitled to make a presentation at the
public hearing at which the public agency presents the status of vacancies and recruitment and retention efforts
for positions within that bargaining unit.
(c)If the number of job vacancies within a single bargaining unit meets or exceeds 20 percent of the total
number of authorized full-time positions, the public agency shall, upon request of the recognized employee
organization, include all of the following information during the public hearing:
(1)The total number of job vacancies within the bargaining unit.
(2)The total number of applicants for vacant positions within the bargaining unit.
(3)The average number of days to complete the hiring process from when a position is posted.
(4)Opportunities to improve compensation and other working conditions.
(d)This section shall not prevent the governing board from holding additional public hearings about vacancies.
(e)The provisions of this section are severable. If any provision of this section or its application is held invalid,
the invalidity shall not affect other provisions or applications that can be given effect without the invalid provision
or application.
(f)For purposes of this section, “recognized employee organization” has the same meaning as defined in
subdivision (a) of Section 3501.
SEC. 3. The Legislature finds and declares that Section 2 of this act, which adds Section 3502.3 to the
Government Code, furthers, within the meaning of paragraph (7) of subdivision (b) of Section 3 of Article I of the
California Constitution, the purposes of that constitutional section as it relates to the right of public access to the
meetings of local public bodies or the writings of local public officials and local agencies. Pursuant to paragraph
(7) of subdivision (b) of Section 3 of Article I of the California Constitution, the Legislature makes the following
findings:
It is in the public interest, and it furthers the purposes of paragraph (7) of subdivision (b) of Section (3) of
Article I of the California Constitution, to ensure that information concerning public agency employment is
available to the public.
SEC. 4. No reimbursement shall be made pursuant to Part 7 (commencing with Section 17500) of Division 4 of
Title 2 of the Government Code for costs mandated by the state pursuant to this act. It is recognized, however,
that a local agency or school district may pursue any remedies to obtain reimbursement available to it under Part
7 (commencing with Section 17500) and any other law.
11/16/24, 4:00 PM Bill Text - AB-2561 Local public employees: vacant positions.
https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202320240AB2561
AB 2561
Vacancy
Report
April 20, 2026
ATTACHMENT B
AB 2561 – Vacancy Report Requirements
1. Annual Public Hearing
Once per fiscal year, prior to
adoption of the final
budget, hold a public
hearing before the Board of
Directors regarding the
status of vacancies and
recruitment and retention
efforts.
2. Employee Organization
Participation
Allow the employee organization to
make a presentation concerning
vacancies and recruitment and
retention efforts during the public
hearing.
3. Additional Reporting
for High Vacancy Rates
Upon request of the
employee organization,
if vacancies within the
bargaining unit meet or
exceed 20% of the
authorized FTEs within
that bargaining unit.
(Does not apply for
April 20, 2026 report.)
2
AB 2561 – Vacancy Report Vacant Positions
Vacant Positions as of December 31, 2025
OWDEA Represented Vacant Positions:
1. Asset Management Specialist
2. Customer Service Representative I/II
3. Customer Service Representative I/II
4. Equipment Mechanic I/II
5. Lead Recycled Water Specialist
6. Meter Maintenance Worker I/II
7. Sr./Engineering Technician
8. Utility Worker I/II
9. Utility Worker I/II
10. Utility Worker I/II
Unrepresented Vacant Positions:
1. Confidential Executive Assistant
2. Finance Manager, Treasury & Accounting Services
% Within
Bargaining
Unit
# Budgeted
FTEs
# Vacant
Positions
Bargaining
Unit
8.8%11410OWDEA
5.9%342Unrepresented
14812Total
3
AB 2561 – Vacancy Report Recruitment
& Retention Efforts
Standard Advertising Sources:
San Diego Water Works
SD Reader (Classified)
Star News (Classified)
Grossmont Cuyamaca Community College
Disabled American Veterans
Navy Nuke Job Finder-Facebook group/LinkedIn Group
Military Transition Center
Veterans Village
Able2Work
Work for Warriors
Commonly Requested Advertising Sources:
Brown and Caldwell (BC Water Jobs)
AWWA
ACWA
WaterDistrictJobs.com
Jobs Available
CSDA (CA Special District Association)
CWEA (CA Water Environment Association)
Recruitment Efforts
Robust Targeted Outreach
•Professional Organizations
•Social Media
•Local newspapers
Website
•Updated FAQs
•Job Interest Cards
•Information for Military Applicants
Tailored Job Postings & Supplemental Questions
•Tailored to each job to attract qualified
applicants and for efficient screening
4
AB 2561 – Vacancy Report Recruitment
& Retention Efforts
Retention Efforts
Competitive Pay & Benefits
Employee Recognition Program
•Kudos & High Five Awards
•Employee Services Awards
Employee Assistance Program
Education Reimbursement Program
Flexible Work Schedules
Health Reimbursement Arrangement
Training & Development Opportunities
•In-person Training & Webinars
•Professional Organization Membership &
Conferences
•Centre for Organization Effectiveness
•Vector Solutions
•LCW Training Consortium
•ACWA JPIA Training
•Temporary Assignments
5
AB 2561 – Vacancy Report
Questions?
6
STAFF REPORT
TYPE MEETING: Budget Workshop MEETING DATE: April 20, 2026
SUBMITTED BY: Jon Ravaglioli,
Finance Manager
PROJECT: DIV. NO. All
APPROVED BY: Joseph R. Beachem, Chief Financial Officer
Jose Martinez, General Manager
SUBJECT: Informational Item to Present FY 2027 Budget Key Figures and
Assumptions Impacting the Upcoming Budget Proposal
GENERAL MANAGER’S RECOMMENDATION:
This is an informational item presenting the FY 2027 budget key
figures and assumptions.
PURPOSE:
The purpose of this informational item is to present to the Board key
figures and assumptions impacting the FY 2027 budget.
BACKGROUND:
The District’s budget process typically begins in January and ends
with the adoption of the next fiscal year’s budget at the June Board
meeting, with implementation of rates occurring the following
January. In this Budget Workshop, staff will elaborate on key budget
assumptions and notable inputs affecting this year’s budget including
growth projections, capital improvement projects, significant changes
to administrative and materials expenditures, sales volume
projections, and water purchase costs.
The final presentation of the consolidated budget is scheduled for
the June 3 Board meeting. At that meeting, staff will present the
consolidated FY 2027 budget and request that the Board:
•Approve the FY 2027 Operating and Capital Improvement Program
(CIP) Budgets and the associated implementation of potable,
recycled, and sewer rate changes.
•Approve the fund transfers for potable, recycled, and sewer.
AGENDA ITEM 6
• Adopt the Salary Schedule.
• Approve the continued advance funding of the District’s unfunded
pension and unfunded Other Post-Employment Benefits (OPEB)
liabilities.
• Direct staff to draft and mail water and sewer rate increase
notices.
The budget is assembled using the most realistic set of factors and
assumptions based on information received from various sources,
including wholesale water suppliers—the Metropolitan Water District
of Southern California (MWD), the San Diego County Water Authority
(CWA), and the City of San Diego (the City)—as well as vendors such
as SDG&E and developers. Staff use this information in conjunction
with other economic indicators affecting taxes and revenues, such as
inflation and interest rates, to prepare the budget.
FY 2026 Projected Operating Results
Through February 28, 2026, the District has an operating surplus of
$0.9 million. Staff project ending the fiscal year with a surplus of
$2.1 million. The primary drivers of this surplus include:
• $1.9 million under budget in payroll and benefit costs,
primarily due to unfilled vacancies
• $1.6 million under budget in recycled water purchases due to
early termination of the take-or-pay agreement
• $1.3 million under budget in potable water purchase costs due to
lower-than-budgeted sales
• $600 thousand under budget in administrative expenses due to
lower-than-budgeted insurance premiums and deferred contracted
services
• $490 thousand under budget in fixed costs due to CWA and MWD
adopting final fixed costs below budget
These savings are partially offset by lower-than-budgeted potable
water sales ($3.9 million) and recycled water sales ($500 thousand).
This surplus will be incorporated into the FY 2027 rate projections.
Budget Strategy
The culmination of the budget process is the recommendation of
changes to potable water, recycled water, and sewer rates, guided by
the following primary budget objectives:
• Recommend rates that comply with the requirements of Proposition
218;
• Maintain reserve levels at or above target levels in each of the
next six (6) years;
• Maintain debt coverage, excluding growth, above the target of
150% for both water and sewer over the next six (6) years;
• Support the Strategic Plan initiatives; and
• Maintain the District’s financial strength to keep an AA credit
rating.
Reserve target levels are defined in the District’s Reserve Policy
found in the District’s Code of Ordinances. The targeted debt
coverage, excluding growth, of 150% is set to provide financial
strength and assurance that the District meets its debt service
covenant of 125% for water and 115% for sewer.
Strategic Planning
In addition to the budget and rate-setting process, the District’s
continued emphasis on strategic planning supports the agency’s
overall financial strength. This year, the District is renewing its
Strategic Plan. As the District transitions into a new Strategic Plan
cycle, this effort ensures that long-term priorities remain closely
aligned with financial planning and resource allocation.
Through disciplined management of staffing, the use of business and
operational technologies, and the application of best management
practices, the District continues to improve efficiency and cost
effectiveness. The Strategic Plan serves as a key framework for the
budget process, guiding and prioritizing investments in core services
and operations.
The strategies and objectives defined in the FY 2027 to FY 2030
Strategic Plan, adopted by the Board at the April 1, 2026 Board
meeting, have been incorporated into the FY 2027 budget. Strategic
Plan initiatives and updates are available on the District’s website
to promote transparency and accountability.
Proposition 218
The State of California has established legal constraints regarding
utility rate setting, foremost among them California Constitution
Article XIII D, Section 6 (commonly referred to as “Proposition
218”). Proposition 218 requires that water and sewer utilities
establish cost-based rates for the services provided. To comply with
this requirement, the District performs periodic cost-of-service
studies and conducts Proposition 218 hearings.
A water cost-of-service study was completed and presented to the
Board on April 27, 2022, followed by a Proposition 218 hearing on
October 5, 2022. At the conclusion of the hearing, the Board approved
the terms outlined in the 218 Notices, which allowed for rate changes
over a period of up to five (5) years. These changes include all
future pass-through costs and cost increases or decreases to cover
changes to rates, fees, or charges from the District’s water and
energy suppliers, as well as overall non-supplier cost increases not
to exceed the annual increase in the Consumer Price Index-U for the
San Diego-Carlsbad area as of January 31 of the preceding year. The
next water cost-of-service study is projected to be completed in FY
2027, with results incorporated into the FY 2028 budget and rates
effective January 1, 2028.
A sewer cost-of-service study was completed and presented to the
Board on April 2, 2025, followed by a Proposition 218 hearing on
October 1, 2025. At the conclusion of the hearing, the Board approved
the terms outlined in the 218 Notices, which allowed for rate changes
over a period of up to five (5) years, pursuant to Government Code
Section 53756. The five years of rate increases are limited to the
approved schedule of rates, with some minor possible adjustments.
Real Estate Sales
Proceeds from the sale of the Salt Creek property are projected to be
received in FY 2030. Due to multiple extension options, potential
development modifications, and entitlement challenges, the final
sales price and closing date cannot be accurately predicted at this
time.
FY 2027 Challenges
For the FY 2027 budget and six-year projection, there are several
challenges putting upward pressure on water rates, including water
purchase costs, administrative and material expenditure drivers, and
CIP projects. Many of these pressures are consistent with those
communicated in the FY 2026 budget and six-year projection.
Water Costs
Water purchase costs from the District’s suppliers are a significant
component of the District’s overall budget. Potable and recycled
water costs constitute approximately 61.9% of the water operating
budget.
Potable
CWA’s 2026 Long-Range Financing Plan, issued October 2025, projected a
5.8% rate increase for calendar year 2027. Due to recently established
water agreements and additional pending actions, CWA has indicated that
updated guidance will not be provided until May. Upon receipt, this
information will be incorporated into the budget that staff will present
to the Board in June.
Administrative and Material Expenditures
There are several one-time and ongoing increases to administrative
and material expenditures that are putting upward pressure on rates.
These increases are partially mitigated through reductions from
savings or expiration of FY 2026 one-time expenditures.
Miscellaneous/All Other Increases
One-time and ongoing increases in the Miscellaneous/All Other
category include increases in District-wide use of temporary help,
increases attributable to the District’s hydraulic modeling, and
costs related to fire mitigation consulting.
Regulatory Creep
Cross-connection regulations continue to be a significant driver of
regulatory expenditures, due to additional administrative costs
related to hazard assessments and other requirements under the Cross-
Connection Control Plan. Additional scope related to the water cost-
of-service study is also contributing to increased regulatory
expenditures.
Metro and County Sewer Charges
The majority of the increase in Metro and County Sewer costs is
attributable to increases in non-Pure Water CIP costs, as well as the
commencement of Pure Water’s Phase 1 operations. The District is also
seeing increases in County sewer charges related to transportation
and odor control.
FY 2027 Administrative and Material Budget Increase Breakdown
Increase Driver/Category
Ongoing
Increases
One-time
Increases Amount
% Inc of the Total
Admin &
Materials Budget
Miscellaneous/All other increases 518,600$ 132,800$ 651,400$ 3.7%
Regulatory creep 510,000 - 510,000 2.9%
Metro and County sewer charges*466,000 - 466,000 2.6%
Inflationary 437,800 - 437,800 2.5%
Strategic plan 278,800 - 278,800 1.6%
Emergency main breaks 190,000 - 190,000 1.1%
Planning and study efforts - 140,000 140,000 0.8%
Total increases before savings 2,401,200 272,800 2,674,000
All other savings/budget decreases (2,183,500)
Total FY 2027 overall budget increase 490,500$
*Sewer charge increases: Metro $380,000; County $86,000. The Metro sewer increase is driven by 51% various factors,
42% regulatory, and 7% inflation. County sewer increase is attributable 100% to inflation.
Inflationary
Inflationary increases continue to impact the District’s operating
expenditures; however, the rate of inflation has subsided from the
highs experienced a few years ago. Drivers of inflationary pressure
on the FY 2027 budget include increases in fuel and oil, rising
subscription and maintenance costs, and increases in credit card
fees.
Strategic Plan Initiatives
Strategic Plan increase drivers include increases in legal consulting
fees related to the classification and compensation study, as well as
Memorandum of Understanding (MOU) negotiations; Automated Metering
Infrastructure (AMI) cellular charges stemming from the AMI project;
and costs related to the Leadership Enhancement Program.
Emergency Main Breaks
As the District continues to absorb the costs of main breaks and
related repairs in-house, the budget for as-needed construction
services is being right-sized, accordingly. The District expects to
see positive impacts on insurance premiums as previous years with
substantial claims continue to roll off.
Planning Document Updates
This increase consists of expenditures associated with periodic
updates to the District’s long-term planning documents for
infrastructure and water supplies. The current update is scheduled
for completion in FY 2028. These updates are necessary to ensure that
the District’s infrastructure and water supplies can reliably and
efficiently meet the District’s current and projected demands, as
well as evolving regulatory requirements as they are known and
projected today.
CIP Projects
The six-year CIP projection is increasing mainly due to new CIP
projects and inflation. The total six-year CIP budget is increasing
by $1.4 million, from $185.5 million in FY 2026 to $186.9 million in
FY 2027. When compared to the five-year period carried over from the
FY 2026 budget, the CIP for FY 2027 through FY 2031 is decreasing by
$7.9 million. A total of 11 projects will close at the end of FY
2026, with approximately $2.4 million in unspent budget. Project
schedules have been adjusted to account for the longer material
procurement timelines.
Significant impacts to the CIP budget include $8.4 million in new
projects, including $2.6 million for pipeline replacements, $0.8
million for recycled water treatment system maintenance, $1.1 million
in disinfection replacement and upgrade projects, $1.0 million for
additional pumping capacity, and $0.9 million for maintenance
efficiency investments.
The proposed six-year CIP budget is discussed in further detail in
the CIP section of this staff report.
Sewer Updates
A primary long-term challenge for sewer continues to be the City’s
increasing wastewater fees.
The City’s Pure Water Program (PWP), which incorporates a secondary
equivalency for the Point Loma Wastewater Treatment Plant (WWTP),
impacts the wastewater fees paid for by the District’s sewer
customers for sewage treatment. The ultimate cost of the City’s PWP
remains a significant cost for the District’s sewer customers. As
Phase 1 of the PWP nears construction completion and enters the
commissioning phase, capital costs are decreasing while facility
commissioning costs are increasing and impacting Otay’s Metro
operating budget.
The City of San Diego, with input from Metro staff, is evaluating
options for Phase 2 of the PWP, with preliminary recommendations
expected at the end of the calendar year. Significant spending on the
next phase of the PWP is not scheduled until FY 2028, with
expenditures projected to ramp up thereafter.
The Metro operating budget, which includes Metro operating expenses
and Metro capital projects not related to the PWP, is increasing from
$535 thousand in FY 2026 to $915 thousand. The majority of this
increase is attributable to a lower projection that was provided and
used by the District in the FY 2026 budget. A higher estimate of $825
thousand was provided later by Metro. This estimate is more
consistent with prior budgets and the FY 2027 budget.
Even with this adjustment, there are substantial increases in future
years which are primarily due to Phase 1 commissioning of the PWP and
several large Metro capital projects, including Pump Stations 1 and
2, Alvarado Laboratory improvements, and cybersecurity and controls
projects.
The District continues to mitigate the cost of the PWP through a 2021
reduced daily Metro capacity from 1.287 MGD to 0.38 MGD, which
reduces the District’s ultimate Pure Water cost burden.
On February 4, 2026, the Board approved the Metro Second Amended and
Restated Agreement. The agreement outlines a modified billing
structure to more appropriately allocate user costs. It clarifies how
Otay will be billed, and minimal net impact is anticipated as a
result of the billing structure. The new billing will take effect
after approval by all 12 Participating Agencies and the City of San
Diego.
Overall, new CIP projects and increases to existing CIP projects were
relatively minor for the sewer fund.
For FY 2027, staff project an increase in sewer salaries and benefits
of $180 thousand, from $940 thousand in the FY 2026 budget to $1.1
million in the FY 2027 budget. The primary driver of the labor
increase is the allocation of additional staff hours to maintenance
of the collections system, which is needed to address existing
deferred maintenance. Other drivers include the FY 2027 cost-of-
living adjustment (COLA), as well as additional overtime and standby
pay compared to FY 2026.
CalPERS and OPEB Update
The pension and OPEB liabilities carry an interest cost of 6.8%,
which is the District’s highest interest cost. By reducing and
eliminating the unfunded pension liability, the District is reducing
the highest interest cost liability, thereby creating savings.
As of June 30, 2024, the most recent CalPERS actuarial pension
valuation, the District’s pension plan was 84.4% funded, and the OPEB
plan was 94.0% funded. The District’s next CalPERS actuarial
valuation will take place after the close of FY 2026.
Staff will recommend continuing the Board’s prior direction to
advance fund the defined benefit programs. The FY 2027 budget
proposal will include $830 thousand advance funding for these plans.
This recommendation is consistent with the Board’s past practice.
The objective of this advance funding is to reduce costs to
ratepayers and provide additional assurance that the plans are
adequately funded, benefiting both the employees and the District.
Continued advance funding of the District’s OPEB and CalPERS plans is
expected to save the District approximately $5.5 million over the 12-
year advance funding period that began in 2021. As part of the
ongoing efforts to reduce the District’s highest-cost debt, the FY
2027 budget is projected to include continued advanced funding of
these unfunded obligations.
Major Assumptions
Growth Projections
Staff has incorporated a 0.2% growth projection into the six-year
growth projection. This metric is based on projected meter count and
Equivalent Dwelling Unit (EDU) growth throughout FY 2027.
Potable Sales Volumes
Through February 2026, actual potable water sales totaled 8.0 million
units, which is 3.0% below the budget of 8.2 million units. The
underage is due to above-average rainfall from September through
November and cooler-than-average temperatures. Through February 28,
2025, year—to-date rainfall is 0.43” or 5.4% above average, while
year-to-date temperatures are 0.83 degrees cooler than the three-year
average.
Staff proposes continuing the practice of using an average of
historical actual volumes to calculate future budgeted volumes. The
District began using this method in 2020. Prior to using this method,
the District relied on long-term weather forecasts, which often
resulted in significant volume variances when actual weather
conditions deviated from predictions. Using the historic average
method has provided a more stable and accurate outlook on long-term
volumes and revenues.
For the FY 2027 budget, and consistent with FY 2026 practice, staff
are using a four-year average from FY 2023 to FY 2026, plus a growth
factor of less than 1.0% annual customer growth. The assumption that
new customers will connect throughout the year and will use
approximately half the average volume of the existing customer base
translates to an assumed volume growth of 0.22% annually. The
following table presents historical potable volumes, rainfall, the
four-year average, and the FY 2027 budgeted volume calculated as the
four-year average plus growth.
Historical Unit Sales (in million HCF) and Rainfall (in inches)
Actual Projected Average Budget
FY 2023 FY 2024 FY 2025 FY 2026 4-Year FY 2027
Rainfall 17.1 12.2 4.7 11.8 11.4 N/A
Units 11.2 11.3 12.1 11.6 11.6 11.6
The table on the following page contains the projected unit sales
assumptions proposed for the FY 2027 six-year rate model. Additional
discussion pertaining to the projected volumes can be found
immediately following the table.
Projected Unit Sales (in million HCF)
Six-Year Rate Model Projection
FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 FY 2032 6-year Avg Growth %
11.6 11.7 11.7 11.8 11.8 11.8 11.7 0.2%
The analysis on the following page shows historic and projected
volumes compared to historic highest and lowest applicable volumes.
• The green line represents a maximum volume year based on
relevant historical actual volume.
• The red line represents the minimum volume year based on
relevant historical actual volume.
• The blue section represents the average volume associated with
the existing customer base.
• The yellow section represents the volume associated with growth.
Recycled Sales Volumes
Through February 2026, actual recycled water sales volume totaled 1.10
million units, which was 3.0% below the budgeted 1.13 million units.
The underage is due to above-average rainfall and cooler-than-average
temperatures, as discussed in the potable sales volume section of this
report.
The FY 2027 recycled water volume projections have been prepared using
the same historical average plus growth methodology used for the potable
volume projections. The following tables and chart contain historical
Otay Water District
Potable Sales Projection Analysis
FY 2027 Budget and Six-Year Projection
(in million units)
recycled volumes, rainfall, the four-year average, the FY 2027 projected
volume (calculated as the four-year average plus growth), and the six-
year forecast.
Historical Unit Sales (in million HCF) and Rainfall (in inches)
Actual Projected Average Budget
FY 2023 FY 2024 FY 2025 FY 2026 4-Year FY 2027
Rainfall 17.1 12.2 4.7 11.8 11.4 N/A
Units 1.4 1.4 1.8 1.6 1.6 1.6
The following are the projected unit sales assumptions proposed for
the FY 2027 six-year rate model. Additional discussion pertaining to
the projected volumes can be found immediately following the table.
Projected Unit Sales (in thousand HCF)
Six-Year Rate Model Projection
FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 FY 2032 6-year Avg Growth %
1,558 1,561 1,564 1,567 1,570 1,573 1,564 0.22%
The following analysis shows historic and projected volumes compared
to historic highest and lowest volumes (see chart on the following
page).
• The green line represents a maximum volume year based on
relevant historical actual volume.
• The red line represents the minimum volume year based on
relevant historical actual volume.
• The blue section represents the average volume associated with
the existing customer base.
• The yellow section represents the volume associated with growth.
Capital Improvement Program (CIP) Budget
As a component of the annual budget development process, the
Engineering staff update the CIP budget using the following process:
• CIP projects are selected and prioritized based on the Water
Facilities Master Plan (WFMP), the Urban Water Management Plan
(UWMP), Sub Area Master Plans (SAMP), Integrated Water Resources
Plan (IRP), Wastewater Management Plan (WWMP), the Cathodic
Protection Plan, the District’s Strategic Plan, Asset Management
Plan, and other focused or specific planning documents and
reports which are used to manage growth, maintenance, and the
life extension of assets.
• The CIP goes through an iterative process to meet the criteria
of growth, service levels, supply targets, and system
reliability.
• CIP target expenditures for the next six (6) years are refined
and used in the rate model.
The following general criteria are used to determine the
reasonableness of a project before it is considered for inclusion
within the CIP budget:
• Safety and existing facility conditions
• Operating system conditions and energy improvements
• Water and sewer system deficiencies
• Regulatory and permitting agencies’ requirements
• Developer driven requirements
• Economic outlook
Otay Water District
Recycled Sales Volume Analysis
FY 2027 Budget and Six-Year Projection
(in thousand units)
• Growth projections
• Water supply diversification goals
• Board and management directives
The total six-year CIP budget is increasing $1.1 million from $185.5
million in FY 2026 to $186.9 million in FY 2027. The total water CIP
budget for the six-year period is $165.8 million, which is a $0.8
million decrease compared to FY 2026. The sewer CIP of $20.8 million is
increasing $2.0 million compared to FY 2026. To maintain reserves at
target levels for both water and sewer, staff are currently projecting
multiple debt issuances for both water and sewer.
There is $8.4 million budgeted for new CIP projects, predominantly
consisting of the following:
• $2.6 million for pipeline replacements
• $1.1 million in water quality investments
• $1.0 million in additional pumping
• $900 thousand in maintenance efficiencies
• $800 thousand in recycled water treatment
Financing Plan
The District uses a comprehensive approach to financing. The Debt
Policy provides guidance for debt issuance and refinancing. The
Reserve Policy provides guidance on both fund transfers and reserve
balances. With these policies, a six-year financing plan is
formulated that identifies the timing and amounts of debt issuances,
the level of rate increases, debt coverage ratios, reserve balances,
and necessary transfers.
The District’s comprehensive financing approach establishes financial
targets that maintain the financial strength of the District. These
strengths include:
• AA credit rating, which saves ratepayers money by reducing debt
costs.
• Financial stability, which enables the District to focus on the
long-term financial needs of the District and anticipate future
financial challenges.
Open Items
Below is a list of items that are in process and will be presented at
the final Budget Board presentation on June 3:
• Overall budget summary
• Rates and rate increases
• Implementation of water and sewer rates to be effective January
1, 2027
• Debt service coverage
• CWA Rates and Fixed Charges
• Labor and benefits
• Materials and maintenance expenses
• Administrative and legal expenses
• Salary Schedule
• Rate comparison
• Fund transfers
• Budget approval
FISCAL IMPACT: Joe Beachem, Chief Financial Officer
This is an informational item. Each one of the items discussed above
will impact the proposed rate increases over the next six-year
period. Recommended changes to rates will be based on the District
maintaining reserves at target levels and meeting its debt coverage
targets.
For sewer and water, staff estimates that debt service coverage and
reserves will meet or exceed targeted levels for the six-year period.
STRATEGIC GOAL:
The District ensures its continued financial health through long-term
financial and debt planning.
LEGAL IMPACT:
None.
Attachments:
Attachment A – Presentation: FY 2027 Budget Workshop
FY 2027
Budget
Workshop
April 20, 2026
1
Attachment A
Workshop Agenda
2
Introduction and ObjectivesJoe Beachem
Challenges, District Actions, and StrengthsJose Martinez
Administrative and Material Budget ImpactsJon Ravaglioli
Capital Improvement Program BudgetBeth Gentry
Key Assumptions, Financing Plan, and
ConclusionJon Ravaglioli
Budget Objectives
Support Strategic Plan
objectives, including
affordability
Support essential
operations of the District
Maintain reserves at
target for all six years
Maintain debt coverage,
excluding growth, above
target of 150% for both
water and sewer for all
six years
Fund the Six-Year CIP
budget
Establish rates that are
compliant with
Proposition 218
3
Budget Timeline
April
Board Meeting (4/1/26)
▪Legislative update presented
▪FY 27-30 Strategic Plan adopted
Budget Workshop (4/20/26)
▪Budget Key Figures and Assumptions
June
Board Meeting (6/3/26)
▪Budget Approval
January 2027
Rate Change Effective (1/1/27)
▪Water and Sewer Rates
4
Budget Process
Six-Year
Rate Model
MWD/CWA &
City Sewer Rates
Assumptions
Interest Rates
Inflation
Growth
Sales
Debt
Targets
Debt Coverage
Reserve Levels
Operating
Budget
CIP
Budget
Water
&
Sewer
Rates
DroughtYear-end
Balances
Six-Year CIP
Budget Input
Operating
Budget InputStrategic
Plan
5
Proposition 218: Sewer
▪Cost of Service Study Performed – FY 2025
❖Proposition 218 Hearing –October 2025
▪Cost of Service Study –FY 2030
❖Next Proposition 218 Hearing –October 2030
Timeline
▪Five-year schedule of rates, pursuant to Government Code Section 53756, passing through costs including unforeseen inflationary increases directly to customers in future years if overall inflation or construction inflation increases exceed projected assumptions.
Board Approved Terms
6
▪Cost of Service Study Performed – FY 2022
❖Proposition 218 Hearing –October 5, 2022
▪Cost of Service Study –FY 2027
❖Next Proposition 218 Hearing –October 2027
Timeline
▪Five years
▪100% pass-through of supplier-related costs, including SDG&E
▪Pass-through of non-supplier cost increases, not to exceed the annual increase in the CPI for the San Diego-Carlsbad area as of Jan. 31 of preceding year
Board Approved Terms
Proposition 218: Water
7
Challenges,
District
Actions, and
Strengths
Jose Martinez
8
Challenges
Dynamic Water Supply Environment
MWD/CWA Rates
Metro Wastewater Rates
Affordability
Drought and Extreme Weather
Education
Transitioning Workforce
Regulatory Creep and Unfunded Mandates
Proposition 218
9
Metro O&M Cost
Projections
($ in thousands)
10
FY 2024
Approved
Budget
FY 2025
Approved
Budget
FY 2026
Approved
Budget
FY
2027
FY
2028
FY
2029
FY
2030
FY
2031
FY
2032
FY 2026:
Board Approved
$735 $900 $535 $567 $624 $661 $701 $743 N/A
FY 2026:
Revised
$825 $875 $962 $1,020 $1,081 $1,146 N/A
FY 2027:
Projections
$915 $1,469 $1,246 $1,057 $1,056 $1,095
Transitioning Workforce
11
0
1
2
3
4
5
6
7
8
9
10
2014 2016 2018 2020 2022 2024
Me
d
i
a
n
Y
e
a
r
s
Year
National Employee Tenure
Private sector Federal government
State government Local government 0 2 4 6 8 10 12
All private
Mining, quarrying, and oil and gas…
Manufacturing
Financial activities
Construction
Information
Other services
Transportation and utilities
Education and health services
Professional and business services
Wholesale and retail trade
Leisure and hospitality
All public
Federal government
Local government
State government
Otay Water Distrct
Median years of tenure (2024)
Otay Water District
Transitioning Workforce
12
0
2
4
6
8
10
12
14
16
43
44
45
46
47
48
49
50
51
52
53
202620252024202320222021202020192018
Ye
a
r
s
o
f
S
e
r
v
i
c
e
Ag
e
Average Years
Age Years of Service
Cross Connection Control Policy UPDATED
•SWRCB CCCPH updates benefiting District customers
o Issued in response to water community feedback
•Fire sprinkler systems (low-hazard sites)
o New guidance allows waiver of backflow requirements for existing residential fire
sprinklers
o Requires letter from local fire authority confirming system modification could pose risk
•Auxiliary water supplies (including residential wells)
o Proposed revision (Board action April 21)
o Eliminates blanket air-gap requirement
o Aligns with Otay practice by allowing RP backflow devices
o Avoids significant, unnecessary costs to customers
13
District
Actions
14
•Long term water supply strategies
•Long-term strategies for recycled water and wastewater services
•Customer education and engagement
•Artificial Intelligence
•Leadership development programs
Bold and Comprehensive Strategic Plan
Proactively leading efforts to mitigate and counter unfunded mandates and regulatory creep.
•AB2180 -Bill would clarify how water agencies comply with
Proposition 218 when setting water rates. This clarification will provide
predictability for agencies, support California’s water-use conservation goals, and help minimize unnecessary legal disputes over water rates.
•SB1072
•Cross Control Handbook Updates
•Wildfire, Drought, ACF –AB 1594 (2024) & SB 496, SB 454 (PFAS
mitigation fund)
•Drought –SB 366 (2024) District supported but Governor vetoed, SB 72 (California Water Plan Long-Term Supply Targets).
Proactive Legislative and Regulatory Efforts
District
Actions
15
•Avoided $8.4M additional costs
•Removal of the Take-or-Pay provisions
New Recycled Agreement
•Clean Air for All Grant (CARB/APCD) – Awarded $128K in Jan. 2025;
spending anticipated in FY27
•Climate Adaptation and Resiliency Plan (CARP) –Awarded $231K in Nov. 2023
•Cybersecurity Grant Program (CalOES) –Awarded $250K in Dec.
2024; spending anticipated in FY26/27
•WaterSmart USBR AMI Upgrade -Phases 2 and 3
o Phase 2: Awarded $500K in Feb. 2025
o Phase 3: Applied for $2M in funding in Nov. 2024
•Water Recycling Funding Program –Joint project with Sweetwater
Authority
o Awarded June 2024; total agreement exceeds $300K
o Cost shared 50/50 with Sweetwater Authority
Grant and Cost-Sharing Efforts
Strengths
Strategic Planning Process
CWA Diversification of Regional Supply (drought-proofing San Diego)
Land Sale
▪Continue annual advance funding practice
▪$5.5M estimated savings over the 12-year advance funding period, which began in 2021
OPEB and Pension Funding
▪30% increase in customers per FTE
Efficiency Gains (since 2007)
▪S&P ‘AA’ rating
Bond Rating
▪Reserve, Debt, and Investment Policies
Sound Financial Management
16
Board’s Proactive Approach to Financial
and Operational Stability
Financial strength through
establishing debt coverage targets and Reserve Policy
Invested in District Resources (staffing, software,
equipment, and other infrastructure to achieve efficient operations)
Investment in emergency
preparation from policies to equipment
Efficient use of
District Resources
Bond Management (Refinancing and converting variable to fixed bonds)
Limited exposure to CalPERS changes in
future discount rates by making advanced payments
Administrative Exhaustion
17
Administrative
and Material
Budget
Impacts
Jon Ravaglioli
18
FY 2027 Administrative and Materials Budget
Increase Breakdown
Increase Driver/Category Ongoing
Increases
One-time
Increases
Total % Inc of the Total
Admin &
Materials Budget
Miscellaneous/All other increases 518,600 132,800 651,400 3.7%
Regulatory creep 510,000 -510,000 2.9%
Metro and County sewer 466,000 -466,000 2.6%
Inflationary 437,800 -437,800 2.5%
Strategic Plan initiatives 278,800 -278,800 1.6%
Emergency main breaks 190,000 -190,000 1.1%
Planning and study efforts -140,000 140,000 0.8%
Total increases before savings 2,401,200 272,800 2,674,000
All other savings/budget decreases (2,183,500)
Total FY 2027 overall budget increase $ 490,500
19
Capital
Improvement
Program
FY 2027 –
FY 2032
Beth Gentry
20
Capital
Project
Development
21
Growth & Efficiency
Master Plan
Growth
Water usage
Reliable and efficient
operation
Condition-Based
Asset Management
Program
Asset lifespan
Rehabilitations
Replacements
Growth & Efficiency Master Plans
New residential development includes more multi-family dwellings in proportion to
single-family dwellings with commercial/industrial outpacing residential
Near term development trend is expected to be slightly lower in FY 2027 and the five-
year projection
In preparing the budgets for the individual CIP projects, the Engineering Department used recent construction and bidding data to adjust costs for each project
Reprioritized projects based on the District’s planning documents to control spending and to keep rates stable
22
Condition:
Asset Management Plan
23
Condition Assessment
Score:
Failure/
Consequence
Action:
Rehab/Replace
Before:
After:
Rolling Hills (1100)
Hydropneumatic Pump
Station
Construction Climate/Mitigation
Factors
Influencing
Construction
Climate
Extended delivery times
Regional competition for contracting resources
Materials/Equipment cost escalation due to demand and material shortages
Shortage of skilled & unskilled labor and increase in labor costs
Uncertainty in international trade policies (e.g., tariffs, etc.)
Increase in the Consumer Price Index
Mitigation
Strategies
Pre-purchasing of some materials
Grouping projects to attract bidders
Value engineering
Extended contract timelines for non-urgent projects
Grant funding
24
CIP Six-Year Budget Look Forward
($ Millions)
FY 2026
FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031
Totals $ 19.7 $ 34.6 $ 38.7 $ 36.2 $ 31.7 $ 24.6
Six-Year Total: $ 185.5
FY 2027
25
FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 FY 2032
Totals $ 18.9 $ 32.7 $ 37.7 $ 35.2 $ 33.4 $ 29.0
Six-Year Total: $186.9
Significant CIP Project Expenditures
Fiscal Year 2027 CIP ($ Millions)
Reservoir Construction or Rehabilitation
Vehicles and Equipment
Meter Replacement
Pump Station Upgrades & Modifications
Various Pipeline Replacements (12 Total)
RWCWRF Projects
$ 5.3
3.3
3.2
1.6
1.3
0.5
Total Expenditure Projection
% of Total FY 2027
$ 15.2
80%
26
Pipeline Replacement Projects (35 Total)
Reservoir Construction or Rehabilitation
Meter Replacement
Pump Station Replacement and Rehabilitation
Vehicles and Capital Equipment
Valve Replacement
RWCWRF Treatment
$ 52.0
38.1
32.3
25.0
7.8
4.6
4.4
Total Expenditure Projection $ 164.2
% of Total FY 2027 – FY 2032 Budget 88%
Significant CIP Project Expenditures
Fiscal Year 2027 – 2032 CIP ($ Millions)
27
Key
Assumptions,
Financing Plan,
and Conclusion
Jon Ravaglioli
28
FY 2027
Assumptions
▪Budgeted volumes
▪Growth revenues
Revenues
▪CWA Costs
Operating
▪Advance fund
Pension Strategy
29
Water Volumes
•Four-year historic average usage
•Ceiling based on highest volume/driest year
•Floor based on lowest volume/wettest year
Average Usage Approach
•Long-term accuracy of rate projections
Goal = Projected Volumes at the Midpoint
30
FY 2027 Budget Volumes
31
*Rainfall through March 31, 2026.
Potable Units
(in millions)
Recycled Units
(in millions)
Rainfall
(inches)Type
2023 Actual 11.2 1.4 17.1 Wet
2024 Actual 11.3 1.4 11.9 Wet
2025 Actual 12.1 1.8 4.7 Dry
2026 Projection 11.6 1.6 8.3*Dry
4-year Average 11.6 1.6 10.58
Growth 0.2%0.2%
FY 2027 Budget 11.6 1.6
Potable Water Volumes
Unit Sales (In Millions)
32
12.1
12.3
11.4
11.2
FY 2027
11.6 11.8
10.0
10.5
11.0
11.5
12.0
12.5
13.0
2023 2024 2025 2026 2027 2028 2029 2030 2031 2032
Base Volume Cumulative Growth Ceiling Floor
Recycled Water Volumes
Unit Sales (In Thousands)
33
FY 2027
1,558
1,573
1,794 1,812
1,392 1,410
1,000
1,200
1,400
1,600
1,800
2,000
2023 2024 2025 2026 2027 2028 2029 2030 2031 2032
Base Volume Cumulative Growth Ceiling Floor
CWA Rate Increase Drivers
34
Rate Increase and Projections
* CWA will not be providing guidance until May, given ongoing water deals and further pending actions. The above are based on
CWA's 2026 Adopted Long Range Financing Plan
CY 2027 CY 2028 CY 2029
CWA Projected 5.8%5.9%5.2%
Six-Year Projected Wastewater Operating Costs
35
FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 FY 2032
Metro O&M Costs $ 915,000 $1,469,000 $1,246,000 $1,057,000 $1,056,000 $1,095,000
County/Spring Valley Sewer
Charges
316,000 335,000 355,100 376,400 399,000 422,900
Total $1,231,000 $1,804,000 $1,601,100 $1,433,400 $1,455,000 $1,517,900
Metro O&M cost drivers: Pure Water phase 1 operations; Non-Pure Water/Metro CIP; RWCWRF contingency; higher
flow from agency exits; and inflation.
County sewer cost driver: Inflation.
Rate Factors
Water
Water purchase costs
Proposition 218
Land sale
Six-Year CIP projection
Debt coverage above target for six years
Reserves at or above target over six years
Regulatory creep, strategic plan initiatives, inflation
Sewer
City of San Diego Pure Water Project
Six-Year CIP projection
County shared facility projects
Reserves at or above target over six years
Regulatory creep
Labor cost increases
36
Financing Plan
37
▪2027 Debt Issuance
▪2029 Debt Issuance
▪2031 Debt Issuance
Water
▪2028 Debt Issuance
▪2031 Debt Issuance
Sewer
Closing Comments
June 3rd Presentation
▪Budget Summary
▪Rate Recommendations
▪Debt Coverage Projection
▪Final CWA Rates and Charges
▪Labor & Benefit Costs
▪Direction to Mail Water and Sewer Rate
Increase Notices
▪Customer Educational Insert
▪Administrative and Materials Expenses
▪Salary Schedule
▪Fund Transfers
▪Rate Comparison
▪Budget Approval
38
Questions
39