Metropolitan board adopts two-year budget, commits to addressing aging infrastructure, future reliability

Metropolitan Water District's Board of Directors unanimously adopted today a two-year budget that includes funding to rehabilitate aging infrastructure and advance planning of a major new recycled water project, ensuring the agency is able to continue delivering safe, reliable water to Southern California communities.

The approved operating budget, which totals $2.3 billion in 2026/27 and $2.4 billion in 2027/28, includes overall rate increases of 6.2% on Jan. 1, 2027 and Jan. 1, 2028, charged to Metropolitan's 26 member agencies. It also anticipates a small increase to the voter-approved special tax Metropolitan levies on properties in its Southern California service area, amounting to an increase of approximately $12 a year for the average value home in the area.

Importantly, the adopted two-year budget increases Metropolitan's Capital Investment Plan by more than $300 million, for a total CIP of $1.025 billion. This increased investment will help Metropolitan address a backlog of critical projects to replace and refurbish its aging water treatment and delivery system, as well as continue planning and design work on the Pure Water Southern California program.

"Parts of our system are nearly 100 years old, and despite this age, Metropolitan staff have done a great job of reliably delivering water. But we cannot keep kicking the can down the road. There are pumps and pipes that must be replaced now to prevent expensive, high-risk failures later," Metropolitan board Chair Adán Ortega, Jr. said. "Through this budget, we're making an important investment in our continued ability to deliver water, so it is available to residents 24/7. This includes funding to advance planning and final design of the Pure Water Southern California water purification project."

The CIP includes $150 million for the planning and final design of Pure Water's first stage, which would produce 45 million gallons of purified wastewater a day and could be later expanded.

Metropolitan's board will consider whether and how to construct Pure Water as part of a portfolio with other projects and water management strategies later this year through its Climate Adaptation Master Plan for Water process. The board is also considering other large-scale investments in new local supplies, storage, conservation and conveyance through the CAMP for Water process.

"The budget approved today advances Metropolitan's mission to prepare Southern California for the future. While we are reinvesting in the reliability of our existing water delivery system, we are also taking important steps to ensure the region has access to water supplies amid a changing climate," said General Manager Shivaji Deshmukh.

The budget has been in development for more than a year through a transparent process that began with a series of public workshops and board field visits to remote desert facilities to build understanding of cost drivers and system needs. It also included discussions of Metropolitan's business model that led to recent board actions to increase revenue stability with more fixed charges for treated water costs and a more stable methodology for anticipating water sales. Staff presented the draft biennial budget to the board in February, and four public workshops have been held since to consider the specific elements of Metropolitan's expenditures and revenues.

"This budget is the result of extensive and transparent feedback and deliberation and reflects careful analysis and understanding of what it takes to run a system of this scale responsibly," said Assistant General Manager/Chief Financial Officer Katano Kasaine. "Our ratepayers are best served when we invest wisely, equip our teams to do their jobs well and properly maintain our infrastructure."

The budget supports increasing Metropolitan's workforce by 79 positions, from 1,975 to 2,054, over the next two years, largely in operations and maintenance. These additional positions will allow for greater preventative maintenance and less reactive repairs, and reduce reliance on overtime, consultants and temporary labor.

It also includes $30.5 million annually for continued funding of conservation programs and funding for Metropolitan's Local Resources Program, which supports the development of local water supply projects by Metropolitan's member agencies.

In developing the budget, staff made significant efforts to improve efficiency and reduce costs, including limiting the use of outside consultants. As an additional cost-saving measure, Metropolitan's board also directed staff to conduct a market study in order to sell two of the four islands Metropolitan owns in the Sacramento-San Joaquin Delta.