Notice of Public Hearing on Proposed Water Rates

The 2024 Water Rate Study recommended a realignment of the existing Water Volume Rate tiers to reflect current water use patterns. With this realignment, residential water use will shift from 4 tiers to 3 tiers and all other use (commercial, institutional, irrigation, and multi-family residential) will shift from 2 tiers to a uniform rate. With an expanded first tier, more low water users will be able to stay within Tier 1. The current and proposed water rates are shown in the tables below. To help understand how your bills are likely to change as of January 1, 2025, we have provided a handy tool (at top of this page) that will calculate your new bill and the change from the current rates.

If adopted by the MPWD Board of Directors, the rate change will be effective January 1, 2025. The 2024 Water Rate Study is a 5-year study, and sets the maximum amount MPWD can change rates through Fiscal Year 2028-2029.

The exact increase to your bill will depend on your water usage, size of water meter, and whether your account is residential or commercial. To help understand how your bills are likely to change as of January 1, 2025, we have provided a handy tool at the top of this page that will calculate your new bill and the change from the current rates.

MPWD retained HF&H Consultants to conduct a Water Rate Study. This rate study was designed to ensure that the District does not collect more revenue than is necessary to cover its costs, and that the proposed rate structure aligns with the proportional cost of providing the services. The detailed study and analysis can be reviewed here.

All revenue that MPWD receives is used to pay for the water that customers use every day and is directly invested into less visible expenses like water system operations, maintenance, replacement, and improvement of the distribution system infrastructure, as well as costs for administration, and maintaining prudent financial reserves consistent with its Financial Management Policy. The 2024 Water Rate Study carefully analyzed current customer water use patterns and the District’s current and anticipated revenue needs. The proposed adjustments in water rates are needed to continue providing reliable service and cover the costs associated with:

• Purchasing treated water from the San Francisco Public Utilities Commission (SFPUC),
• Maintaining, replacing, and rehabilitating aging water infrastructure,
• Anticipated Operations and Management (O&M) expenses,
• Planned infrastructure improvements per its Capital Improvement Program (CIP), and
• Meeting legal and regulatory requirements, and other administrative and operating expenses.

The largest portion of MPWD’s expenses is for the District’s Capital Improvement Program. MPWD will make necessary investments in its operations and water infrastructure to secure water supplies, prevent costly emergency repairs, and prepare for major seismic events.

The proposed rate increases were determined through a detailed financial analysis conducted as part of the 2024 Water Rate Study. The study considered the District’s operating costs, infrastructure needs, and future water supply requirements. The Board of Directors considered and reviewed the study and water rate change at 10 public meetings from December 2023 through September 2024 to make sure that the water rate changes were necessary, proportional, and in the best interest of the District, its customers, and the community.

As a local government agency (a special district), MPWD does not and cannot generate a profit. The 2024 Water Rate Study was designed to ensure that the District does not collect more revenue than is necessary to cover MPWD’s costs, and that the proposed rate structure aligns with the proportional cost of providing the services. This does include maintaining adequate and appropriate reserve funds, which are outlined in the Board-adopted Financial Management Policy, and are consistent with applicable IRS codes and Governmental Accounting Standards Board standards.

Under the District’s Financial Management Policy, the District has the following specific reserve funds:

• Working Capital (Operating) Reserve. The purpose of the Working Capital (Operating) Reserve is to ensure that the District will always have sufficient funding available to meet annual operating costs, including temporary cash flow deficiencies that might occur because of timing differences between the receipt of operational revenue and expenditure requirements and unexpected costs that might occur because of doing business. Adequate operating reserves provide financial flexibility in the event of unanticipated expenditures or revenue fluctuations. This has a target level of 50% of the District’s annual budgeted expenditures, which is consistent with the Government Finance Officers Association (GFOA) best management practices standards.
  
  
• Capital Reserve. The purpose of the Capital Reserve is to ensure that the District can fund the repair, maintenance, or replacement of the water system’s infrastructure assets, during normal operations and emergencies. The reserve level combined with the District’s managed risk pooled insurance coverage should adequately protect the District and its customers in the event of a catastrophic loss. This reserve has a target level of $8.0 million, consistent with the 2023 Annual Water Main Replacement Cost Analysis developed by the District Engineer and included in the FY 2024-2025 CIP Update.
  
  
• Internal Revenue Code (IRC) Section 115 Irrevocable Exclusive Benefit Trust Plan for Other Post Employment Benefits (OPEB) and the Pension Rate Stabilization Program (PRSP) Reserve. The purpose of the IRC Section 115 Irrevocable Exclusive Benefit Trust Plan is to fund MPWD’s OPEB and PRSP IRC Section 115 Trust Account, established to pre-fund post employment healthcare and pension benefits for eligible retired employees, and to ensure that the District will have sufficient funding available to meet these obligations in the event of unanticipated operating expenditures or revenue fluctuations. The target level for this reserve is:
  • 100% of the District’s projected Total OPEB Liability plus 5% contingency, based upon its most recent GASB 75 Actuarial Report; AND
  • 100% of the District’s projected pension liability (Unfunded Accrued Liability) plus 5% contingency, based upon its most recent CalPERS Actuarial Report.
    
    
• Rate Stabilization Fund Reserve. The purpose of the Rate Stabilization Fund Reserve is to ensure that the District will always have sufficient revenues available to meet its annual rate covenants required by any outstanding debt issuance of the District. Adequate reserves for its debt service covenants provide the MPWD with financial flexibility in the event of unanticipated expenditures or revenue fluctuations and avoids or delays the requirement for imposition of a water rate increase to comply with the covenant requirements of any outstanding bond issue. This results in stabilization of the rates and charges imposed by the District. This reserve has a target level equal to one (1) year of debt service requirement ($1.2 million) on the MPWD’s 2016 Certificates of Participation Financing Program for capital improvements, or $500,000 if no bonds are outstanding.

The District’s reserve funds are reported to the Board of Directors monthly at its public meetings. Agendas for public meetings are available here.

MPWD has not increased its customer water rates except for pass-through SFPUC wholesale rate increases since July 2019. Below is a summary of the rate increases to our customers over the last five years:

• July 1, 2024 – SFPUC raised its rates by $0.46/HCF. MPWD passed the $0.46/HCF increase through to customers.
• July 1, 2023 – SFPUC raised its rates by $0.46/HCF. MPWD passed the $0.46/HCF increase through to customers.
• July 1, 2022 – SFPUC raised its rates by $0.65/HCF. MPWD passed the $0.65/HCF increase through to customers.
• 2021 – No Rate Increase
• 2020 – No Rate Increase

If the water rate change is not approved, it could impact the District’s ability to fund essential operations and infrastructure projects. Without adequate funding, the District could face challenges in maintaining the current level of service, and most of the planned capital projects that will improve our system’s reliability would be delayed indefinitely.

With the exception of the first year rate increase, rate increases may be less than identified in the 2024 Water Rate Study. The proposed water rates, if approved, are the maximum rates that MPWD can implement in the coming five years. However, each year the MPWD Board will evaluate budget conditions and may elect not to raise rates to the maximum approved. For example, after adopting the last 5-year rate study in 2015, the MPWD Board elected not to raise rates to the maximum allowed within the first 5 years, and has not raised rates since 2019, except for SFPUC pass-through costs. Several factors that could reduce the District’s revenue needs and corresponding rate increases include:

• Obtaining a lower interest rate on financing than the 5.5% assumed in the rate study,
• Capacity charge revenue generated from new commercial or multi-family housing development in the MPWD service area,
• Successfully obtaining alternative tax-based funding sources such as grants and local, state, or federal funds,
• Lower than anticipated inflation, and
• Lower than anticipated costs of materials.

The MPWD is committed to funding its necessary projects through a comprehensive funding strategy, and will continue to seek all opportunities to reduce the impact on customers.

The MPWD CIP is the backbone of the District’s efforts to ensure a reliable and sustainable water supply for the future. The CIP is a comprehensive plan that outlines the projects necessary to maintain and upgrade the District’s water infrastructure to enhance the quality of its services, increase system reliability, and meet the growing demands of the community. MPWD completed an update of its CIP in 2024, which is available at MidPeninsulaWater.org/cip.

Through its implementation of its CIP since 2015, MPWD has completed 28 system improvement projects, including replacing and installing more than 31,000 feet of old pipe, replacing two key water storage tanks, installing a much-needed new pressure regulating valve at a turn-out from the SFPUC system, modernizing its SCADA system, and more. As detailed in the 2024 CIP update, 78 additional infrastructure projects are needed to modernize the District’s complex distribution system so that it can provide drinking water and firefighting water for generations to come. The District has identified a subset of these projects as highest priority for the District, taking into account many factors to ensure that we continue to serve the needs of our community.

MPWD’s planned capital projects fall into three main categories:

• Replacement and Material Upgrades to Aging Water Mains
• Storage Tank Projects to Improve Seismic Resiliency and Increase Longevity
• Modernization of Operations & Administrative Buildings

• REPLACEMENT AND MATERIAL UPGRADES TO AGING WATER MAINS The District’s distribution system includes more than 95 miles of water mains, which bring water from SFPUC turnouts to each home and business within MPWD's service area. Most of these water mains were installed from the 1930s through 1960s, as the community was built out. These pipes have aged and the needs of the community have advanced. Therefore, the MPWD’s 5-year CIP budget includes projects to proactively replace aging pipelines before they see end-of-life failures. By installing new pipelines with new materials and technology that extend their lifespans (like cathodic protection), the MPWD’s system will meet the needs of the community today and into the future.
  
  
• STORAGE TANK PROJECTS TO IMPROVE SEISMIC RESILIENCY AND INCREASE LONGEVITY The District maintains 11 water storage tanks at six sites. Thes tanks are used for maintaining system pressure on a day-to-day basis and in times of emergency, to ensure delivery of water to households and business, as well as for use by the fire department to respond to fires. The 5-year CIP budget includes plans to replace two tanks originally constructed in 1952 with tanks designed to withstand a major seismic event. The 5-year CIP budget also includes projects to recoat and extend the lifespan of tanks at three locations, proactively investing in their maintenance and avoiding more costly replacement or rebuild of such tanks in the future
  
  
• MODERNIZATION OF OPERATIONS & ADMINISTRATIVE BUILDINGS MPWD’s Operations Center at 3 Dairy Lane in Belmont was flooded during the New Year’s Eve storm at the end of 2022. This resulted in administration staff being relocated to a leased office space since the event. The District conducted a comprehensive assessment of its operations and administrative buildings and identified two facility modernization projects. These projects will mitigate identified risks, including climate change, sea level rise, and earthquakes, as well as the Bay Area cost of living impacts on workforce. Modernization projects are included in the MPWD’s 5-year CIP budget and are integral to making sure that the District can continue to serve the community with excellent reliability and customer service for years to come.

The rate adjustments will help ensure that we have the resources needed to keep our facilities operating efficiently and continue delivering safe, high-quality water to all customers. Maintaining our high-water quality and service is always a top priority.

Yes! We encourage community participation. A public hearing will be held on November 21, 2024 at 6:30 pm at 1075 Old County Road, Suite A, Belmont as part of the Proposition 218 process. This is an opportunity for customers to share their feedback and ask questions before the rates are finalized. Meeting details are available in the Agenda that will be posted no later than 72 hours prior to the meeting.

All property owners and customers receiving water service are invited to attend the Public Hearing and be heard about proposed increases to the charges for water services. A District water customer or property owner may protest these proposed rate changes by submitting a written protest by mail to:

Mid-Peninsula Water District
Attn: General Manager
1075 Old County Road, Suite A
Belmont, CA 94002

Mailed written protests must be received (not postmarked) by the District by the close of the Public Hearing the evening of November 21, 2024. The protest must include all of the following:

1. A statement that you protest the proposed water rate changes;
2. The name of the property owner(s) or customer who is submitting the protest;
3. The assessor’s parcel number(s) or street address(es) of all property(ies) serviced; and
4. Original signature and legibly printed name of the record owner or customer of record who is submitting the protest.

Only one written protest per identified parcel or property will be counted for purposes of determining whether there is a majority protest. Oral comments during the Public Hearing are welcome, but will not qualify as a formal protest. Protests or comments received by email will also not qualify as a formal protest.

Ordinance No. 128 (Ordinance) was adopted by the MPWD Board at its September 26, 2024 Regular Board meeting. The full text of the Ordinance is available here. The Ordinance was adopted to provide customers who have an objection to the water rate change to submit those objections and for the District to provide them with a written response, prior to the Board taking action on the water rates.

The exhaustion procedure is separate from the Proposition 218 protest hearing and an objection will not be counted as a protest; the protest process is described in the Proposition 218 Hearing Notice, and the hearing will be held during the November 21, 2024 Board meeting. The Ordinance was developed to give customers the opportunity to provide the District with a reason(s) that they object to the water rate change, and for the District to provide a response to such objections prior to the Board taking action on the rate change. This differs from the Proposition 218 protest process, where customers and property owners are not required to provide a specific reason for their protest, and the District is not required to provide a response. Customers may participate in either or both processes if they wish.

No. These processes are only for customers who wish to protest and/or object to the water rate change, and are provided as options if a customer wishes to protest and/or object.

MPWD is transitioning from CivicPay to Xpress BillPay for electronic customer payments. This bill payment service change is being made to provide a better service to the customer and to reduce costs and staff time on bill processing. The change over to Xpress BillPay is expected to result in a net cost savings to the District and is entirely unrelated to the rate change process.