Santa Rosa utility board reviews $170M budget, flags rate increases tied to Sonoma Water wholesale pass‑through

The Santa Rosa Board of Public Utilities on Wednesday reviewed the proposed fiscal year 2026–27 budgets for the city’s water, local wastewater, regional reuse and stormwater enterprises, with staff presenting a $170.2 million package of operating and capital requests and warning of budgetary deficits driven largely by wholesale water cost increases.

“We are implementing 6% fixed and usage increases on the water side and 5% for both aspects on the sewer side as of July 1, 2026,” said Nick Harvey, deputy director of administration for Santa Rosa Water, summarizing the rate path the board adopted last year and the anticipated pass‑through of a Sonoma Water wholesale increase.

Staff told the board the water fund expects to deliver roughly 15,610 acre‑feet of wholesale demand next year and budgeted about $23.7 million in water purchase costs after an 8.21% wholesale increase that puts the wholesale price near $1,515 per acre‑foot. The department projects combined operating and cash‑funded CIP needs across funds of roughly $68.6 million (excluding debt service) and plans approximately $32.4 million in capital projects next year.

The presentation highlighted drivers that are increasing operating costs: negotiated labor contract adjustments that raise salaries across the department, higher electricity and utility budgets, and greater costs for bio solids handling and vehicle replacement in the regional enterprise. Harvey noted professional services and well‑operating fees are rising and that water billing costs have fallen after the adoption of a credit‑card fee pass‑through.

Harvey also described a modeled assumption of a $35 million bond issuance to fund electrical infrastructure work at the Laguna Treatment Plant; under a 30‑year amortization and a 5.5% interest assumption that scenario yields roughly $2.6 million in annual debt service. Staff said the timing for an issuance has not been set.

Board members pressed staff on contingency planning if rainfall and demand fall or if wholesale suppliers reduce deliveries. “We do have a water shortage contingency plan,” Harvey said, listing tools that include emergency rate adjustments and catastrophic reserves that staff can deploy in extreme conditions. He added that contingency funds sit on the balance sheet rather than inside the operating budget and can be accessed if needed.

Several board members raised operational and consumer‑protection questions during the two‑hour study session. Board member Mullen pressed staff on whether drought‑related demand reductions would force the utility to later raise rates to cover fixed costs; staff said contingency reserves and the water shortage contingency framework are intended to smooth those effects. Mullen also asked staff to return with a feasibility study on AMI (advanced metering infrastructure) read frequency and contract options; Harvey confirmed current contracted reads occur once per hour and staff will bring a feasibility review to the board.

The capital investment plan reviewed by supervising engineer Liz Hanley included planned allocations of $16.0 million for water projects (reservoir upgrades and water mains), $14.7 million for local wastewater projects (sewer mains and trunk work), $13.0 million for regional plant infrastructure and $1.7 million for stormwater and creeks projects. Highlight projects included seismic upgrades to reservoirs and pump stations, Piner Road main replacements, Robless trunk lining and design for Laguna Plant flood protection, which staff said may receive roughly $17 million in FEMA/HUD grant support.

Next steps: staff will brief partner agencies in early April, present the recommended preliminary budget to city council later in April, and pursue public hearings and council adoption through May and June, with final budget adoption slated for the council’s June 16 public hearing.