Title
Department of Utilities (DOU) Fiscal Year (FY) 2025/26 Adjustments to DOU’s Capital Improvement Program (CIP), Multi-Year Operating Project (MYOP), and Operating Budgets
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FileID
File ID: 2026-00360
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Location
Location: Citywide
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Recommendation
Recommendation: Adopt a Resolution authorizing the City Manager or designee to: 1) make allocation adjustments to the Fiscal Year 2025/26 Capital Improvement Program (CIP), Multi-Year Operating Projects (MYOP), Operating Revenue and Expense Budgets in the Water Fund (Fund 6005), Wastewater Fund (Fund 6006), Storm Drainage Property Fee Fund (Fund 6021), and Water Grant Fund (Fund 6205); 2) request approval to receive and recognize the second 3M settlement award received in the amount of $2,617,544; 3) request approval to receive and recognize the DuPont settlement award received in the amount of $836,291; 4) adjust the Fiscal Year 2025/26 Operating Revenue Budget in DOU’s Fiscal Operations Program (14001611, Account 395990, Fund 6005) in the amount of $1,984,872; 5) establish the appropriate transfer to the Storm Drainage Fund (Fund 6011) from the Storm Drainage Property Fee Fund (Fund 6021) to reimburse for eligible Fund 6021 expenses paid for in the amount of $609,445; 6) establish the appropriate transfer to the Storm Drainage Fund (Fund 6011) from the Storm Drainage Property Fee Fund (Fund 6021) to reimburse the foregone Pool A interest incurred by the Storm Drainage Fund (Fund 6011) during litigation of the 6021 Fund, in the amount of $180,295; 7) authorize an expenditure budget transfer from DOU’s Fiscal Operations Program (14001611, Fund 6005) to the Well Rehabilitation Program (Z14110100, Fund 6005) in an amount of $836,291; and 8) reset the City Manager’s administrative authority for identified projects.
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Contact
Contact: Dalia Fadl, Director, (916) 808-3765, dfadl@cityofsacramento.org; Chuong (Ryan) Pham, Business Services Manager, (916) 808-8995, rpham@cityofsacramento.org; Kelly Sherfey, Supervising Financial Analyst, (916) 808-1481, ksherfey@cityofsacramento.org; Department of Utilities
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Presenter
Presenter: None
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Attachments
Attachments:
1-Description Analysis
2-Attachment 1- Allocation Adjustments
3-Resolution
4-Exhibit A - Allocation Adjustments
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Description/Analysis
IssueDetail
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).
DOU was awarded the first payment of the overall PFAS litigation settlement in the amount of $1,468,963 that was received in FY2025/26 and accrued back to FY2024/25. The revenue accrual and the subsequent budgetary actions that followed reduced the FY2025/26 operating expenditure budget in DOU’s Fiscal Operations Program (14001611, Fund 6005) by $1,468,963. Staff are seeking council approval to move $1,468,963 in expenditure budget from Water Available Fund Balance (Fund 6005) to DOU’s Fiscal Operations Program (14001611, Fund 6005) to replenish operating budget after the completed budget transfer that was part of Resolution #2025-0253.
DOU recently received a second payment in the amount of $2,617,544 from 3M for PFAS litigation settlement award related to DOU’s groundwater wells. Staff is seeking council approval to receive and recognize the $2,617,544 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 awarded a separate settlement from DuPont in the amount of $836,291 related to DOU’s groundwater wells and PFAS litigation. Staff is seeking council approval to receive and recognize the $836,291 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 from this litigation will be utilized in DOU’s Well Rehabilitation Program (Z14110100; Fund 6005) to assess and repair damage to DOU’s rate payer groundwater well assets.
The litigation related to DOU’s Storm Drainage Property Fee Fund was recently settled in FY2025/26 and DOU is beginning to move forward with utilizing the revenues received as intended and approved by ratepayers. During the Storm Drainage Property Fee Fund (Fund 6021) litigation, the Storm Drainage Fund (Fund 6011) paid for various 6021 Fund eligible expenses. These expenses included Citywide projects, bad debt expenses, litigation fees, interest overpayment, and FY23 year-end auto-transfer expenses, in the amount of $609,445. Additionally, the Storm Drainage Property Fee Fund (Fund 6021) is also responsible for reimbursing the Storm Drainage Fund (Fund 6011) for foregone Pool A interest incurred during litigation of the 6021 Fund in the amount of $180,295.
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PolicyConsiderations
Policy Considerations: The recommended adjustments to the operating and CIP budgets are consistent with the DOU 2026-2030 Strategic Plan goals and objectives to effectively manage infrastructure assets 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.
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EconomicImpacts
Economic Impacts: Not applicable.
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EnvironmentalConsiderations
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).
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Sustainability
Sustainability: Not applicable.
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Commission/Committee Action
Commission/Committee Action: Not applicable.
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RationaleforRecommendation
Rationale for Recommendation: Reallocation of resources ensures that projects move forward in a timely manner and that financial resources are allocated based on the priority and necessity of the projects or operating needs for the applicable fiscal year. The recommended budgetary adjustments include three Operating Budgets, sixteen CIPs, and three MYOPs in the Water (6005), Wastewater (6006), Storm Drainage Property Fee (6021), and Water Grant (6205) Funds.
Accepting external revenues and executing the necessary budget tasks presented in this report ensures proper asset assessment, organized planning, operations budgeting, timely reimbursements, and timely repair and rehabilitation for rate payer groundwater well assets.
In addition, staff is requesting approval to reset the city council administrative authority for identified projects that have met the $250,000 threshold.
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FinancialConsiderations
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 the FY2025/26 Operating Revenue Budgets for new revenue. The revenue in the amount of $3,453,835 will be re-allocated to DOU’s Well Rehabilitation Program (Z14110100, Fund 6005). There is sufficient budget in the Water (Fund 6005) Available Fund Balance to facilitate the budget transfer to DOU’s Fiscal Operations Program (14001611, Fund 6005) in the amount of $1,468,963.
There is sufficient budget in the Storm Drainage Property Fee (Fund 6021) Available Fund Balance to facilitate the appropriate program transfers to the Storm Drainage Fund (Fund 6011) for reimbursement of expenses and Pool A interest in the total amount of $789,740.
Staff also recommend the City Council reset the administrative authority for the projects listed below:
|
Project Number |
Project Name |
|
I14510100 |
Conjunctive Use-Groundwater Wells |
|
I14710100 |
Drainage Master Plan Program |
|
W14000200 |
Base CIP Contingency-Drainage |
|
W14130100 |
Drainage Unplanned Repair Program |
|
W14140200 |
Hudson Way Drainage Improvements |
|
W14170100 |
Drainage Collection System Rehabilitation & Replacement |
|
X14120300 |
Sewer Unplanned Repairs Program |
|
Z14210100 |
Sacramento River Water Treatment Plant Improvements Program |
There are no General Funds planned or allocated for this effort.
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LocalBusinessEnterprise
Local Business Enterprise (LBE): Not applicable.
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