LADWP advances $1.56B preliminary water budget featuring major CAPEX alongside 3.2% rate reduction

LADWP advances $1.56B preliminary water budget featuring major CAPEX alongside 3.2% rate reductionThe Los Angeles Board of Water and Power Commissioners has approved the transmission of its $11.56 billion overall preliminary budget to the City Council, highlighting a $1.56 billion water system plan driven by heavy investments in groundwater replenishment and sedimentation infrastructure.

The preliminary FY 2026-2027 water system budget includes a $183 million increase over the current year, primarily driven by a $142.7 million increase in contracts for water quality capital projects.

Major project allocations include a $113 million increase for the groundwater replenishment project and a $105 million increase for the Fairmont Sedimentation Plant.

Despite the capital surge, the water system average rate is projected to decrease by 3.2% to $10.62 per billing unit.

The water system plans $1.44 billion in capital investments supported by $987 million in borrowing.

The Office of Public Accountability formally requested additional justification for 22 department-wide line items showing expenditure increases greater than 25%.

The Los Angeles Department of Water and Power (LADWP) Board of Commissioners approved the transmittal of its preliminary fiscal year 2026-2027 budget to the City Council on March 10, advancing a $1.56 billion spending plan for the water system. While the department's overall budget is proposed at $11.56 billion, the water system accounts for $1.56 billion—a $183 million, or 13%, increase over the current year's approved budget. Director of Budget Sunny Beetz detailed that the primary driver is a $142.7 million increase in contracts tied to major water quality capital projects. Specifically, the preliminary budget includes a $113 million increase for the groundwater replenishment project and a $105 million increase for the Fairmont Sedimentation Plant project. These increases are partially offset by a $37 million decrease in recycled water and stormwater capture projects at various parks, reflecting updated project schedules, as well as a $37.6 million decrease in trunk line and major system connection projects. Despite the heavy capital outlay, LADWP projects a rate reduction for water customers. The financial plan anticipates a system average rate of $10.62 per billing unit, representing a 3.2% reduction from the current $12 rate. The budget supports a total water capital investment plan of $1.44 billion, backed by $987 million in borrowing, while purchased water expenses are forecasted to drop to $227 million. The preliminary budget drew scrutiny from the Office of Public Accountability (OPA). Tim O'Connor, representing the OPA, urged the board to implement a more formalized review process, noting that the OPA had identified 22 capital and operational expenditure items across the department showing year-over-year increases of more than 25% or exceeding $50 million. O'Connor requested additional data on investment needs, expected outcomes, and implementation readiness to evaluate the reasonableness of the estimates before they translate into long-term rates. The board approved the transmittal of the preliminary budget to the city for planning purposes. A final budget will be brought back to the board for approval in May.