Palo Alto council votes to donate water rights to East Palo Alto, Tanaka objects

Update, Monday, May 9, 10 p.m. — Palo Alto City Council approved the transfer of part of the city’s unused allocation of water from the Hetch Hetchy system to East Palo Alto at no charge.

The vote was 7-1 with Greg Tanaka in the minority, arguing that the water rights have value and the city shouldn’t give them away at a time when it is raising water rates for residents.

A lack of water has prevented EPA from moving forward with developments such as affordable housing.

City Manager Jim Keene and several council members said transferring the rights was something a good neighbor would do, and EPA will still have to pay for the water from the Hetch Hetchy system.

Original story, published Saturday, May 5

Daily Post Staff Writer

Palo Alto City Council will vote Monday (May 7) night on whether to give 500,000 gallons of water per day to East Palo Alto — an idea that has not been universally popular on the Palo Alto council.

Palo Alto Councilman Greg Tanaka spoke out against the idea last Monday (April 30), explaining that instead of giving away its extra water for free, he thinks Palo Alto should be selling its allocation to East Palo Alto, like Mountain View did last year.

“What city does that, right? Our neighboring city, Mountain View, sells it for $5 million. We give it away. What city does that? I mean, if we’re really hurting for money, we don’t give away money,” Tanaka said during a discussion about a possible ballot measure to raise taxes for infrastructure projects. “To me, this is totally inappropriate.”

Mountain View signed a $5 million agreement in May 2017 to sell 1 million gallons of water a day to East Palo Alto.

East Palo Alto has a disproportionately small water allocation from the Hetch Hetchy Regional Water System because the allocations were worked out before East Palo Alto was incorporated into a city in 1983.

Under the 2009 Water Supply Agreement between San Francisco and wholesale customers in San Mateo, Santa Clara and Alameda counties, transfers must be permanent and at least as large as 100,000 gallons per day.

Possible boost for affordable housing

East Palo Alto has had a moratorium on building new structures since June 2016 as a result of its water shortage, stopping projects such as the Primary School founded by Mark Zuckerberg and his wife Dr. Priscilla Chan, and a low-income housing project.
The city will be voting on whether to lift the ban this year. East Palo Alto leaders are also rehabilitating a well and building a new groundwater well while seeking water allocations from other jurisdictions.

The idea was first suggested at council in 2016, when Council members Eric Filseth, Karen Holman and Tom DuBois and former mayor Pat Burt called on the city to consider transferring or selling some of its water allocation to East Palo Alto.

In a memo to the rest of the nine-member council, the four focused on East Palo Alto’s well-being and ability to provide affordable housing as important for Palo Alto. It gained support from Mayor Liz Kniss and Councilman Greg Scharff.

Palo Alto has a permanent entitlement to almost 17.1 million gallons of water per day, which it hasn’t surpassed since the 1970s. Thanks to improved infrastructure and technology that uses less water, the city hasn’t even used 14 million gallons a day since the 1980s.

Giving away part of the city’s allocation could have an impact during a water shortage, according to City Manager Jim Keene. During droughts, the San Francisco Public Utilities Commission can cut water sales to San Francisco and the wholesale customers, including Palo Alto.

Transferring 500,000 gallons a day to East Palo Alto could require Palo Alto to reduce its water use by another 1% during water shortages. The transfer would bring East Palo Alto’s allocation up to just under 3 million gallons of water per day.


  1. This proposal makes no logical sense. I just got a notice of the water rate increases of 10%. I am so upset. Why can’t we use the water transfer money to keep rates down to something reasonable

  2. As a resident of East Palo Alto, I want to thank Palo Alto for trying to help right now with our water shortage. We know how hard guaranteed potable water is to come by, and this was not a small thing to consider, whether the transfer money matters to you or not.

    The $5 million paid to Mountain View for the 1 million gallon per day transfer was stitched together mostly from charity and advances on the water connections for developers who could justify it. Only a small piece to round it out to an even $5 million came from the general fund. We can’t really go back to the same people for that kind of money again – the ones that could pay already have and are building, the others couldn’t afford it the first time. It is my understanding that Mountain View put that $5 million aside to buy back water at market or penalty rates if they ever exceed their allocation.

    Water from the he Mountain View transfer isn’t flowing yet, but is close. The city of EPA still needs to and is spending money upgrading connections to make the additional water available. Developments are started, but taxes from them won’t arrive until they are actually completed and in use, which can’t happen if the water transfers are held up. Using up general funds on the additional needed allocations will cause delays in other projects, though which ones would depend on hard decisions that haven’t had to be made yet.

    The city’s own Gloria Way well cost about $3 million and took a couple of years to fund and rebuild. The water isn’t that nice, and might not be that reliable once we start pumping (a riskier source in many ways), but at the time it was the only water we knew could be developed. The city won’t be running a separate water system for the well water – (that would be expensive and disruptive), it’ll just be mixed into the existing Hetch Hetchy water allocation. The more we can dilute it, the better the water will still be to drink.

    East Palo Alto has never been able to swing the political muscle on its own to get SFPUC to make equitable water allocations when they are renegotiated once each decade. It is still a long way to 2020. I hope the cities of EPA, PA, and Mountain View would continue working together in the next system-wide reallocation negotiation, and that PA and MV would get full credit for these transfers as reductions going into these negotiations or mandatory drought reductions if they happen again.

  3. I did the calculation. With all the utility rate hikes, my yearly bill is increasing by $450 a year! Why am I forced to donate to EPA? This is even legal? This is forcing my family to reduce our PIE donations to our Palo Alto schools. Not everyone in Palo Alto is made of money.

  4. I just got a letter from the city, as I assume everyone else got, saying my water rates are going up, and we’re going to give our water away for free. I’m totally against this giveaway. What is the City Council thinking! Vote NO!

  5. All the sprinklers at the dog park end of Mitchell Park have been on for days starting on Friday. The fields are drenched. The dog park is drenched. Many people have called the city to report this and the city has said they’ll TRY to get someone out there on Monday.

    The waste is incredible, as is the city’s nerve in continuing to raise our rates WHILE spending lots of money to tell US to conserve and then justifying each rate hike on the grounds that WE don’t consumer enough. A total farce, esp. since they billed us $25 a month for 6 extra months of drought surcharge AFTER the drought officially ended. They wouldn’t offer refunds even though they took an extra $650,000 a month from us or $3,900,000 for the 6 months.

    Ridiculous. Just say not to all proposed tax hikes.

  6. You folks all understand we would not in fact give EPA any actual water, right?

    The idea is we would allow them to purchase some of our unused “allocation” from the San Francisco water district. Since we never buy anywhere near our full allocation, and we don’t pay SFPUC for water we don’t buy, there’s no cost to Palo Alto. Of course East Palo Alto would still have to pay SFPUC for any water they buy.

    Note this is different from Mt View, whose water contract is with the Santa Clara County water district. Under Mt View’s contract, they still have to pay the County for any water they forward to EPA. So it makes sense for EPA to reimburse Mt View.

  7. Eric is incorrect. The $5M went into a Water Fund Reserve which could be used for anything water related including capital improvements which is what is driving Palo Alto’s water rate increases.

    Mountain View is running a budget surplus and Palo Alto is running a budget deficit (taking money from the budget stabilization reserve). Yet, Mountain View sells their water rights, and Palo Alto gives away their water rights. EPA funded the Mountain View purchase through developer and *Palo Alto* resident donations. Why can’t they fund the Palo Alto purchase the same way?

    Mountain View might get charged if it doesn’t use a minimum amount of water. However, given all the development Mountain View approved and the lifted water drought restrictions, Mountain View staff anticipates the city will be way above the minimum.

    Nevertheless whatever cost basis Mountain View water rights have, the Palo Alto water rights are worth $2.5M based on market pricing and the City is giving them away for free forever!!

  8. While the facts surrounding the possible transfer of some portion of Palo Alto’s water allocation to East Palo Alto remain murky, one thing is crystal clear.

    At this time, when the city…

    – anticipates a budget deficit
    – proposes to raise water rates
    – plans to increase taxes or fees
    – intends to grow the population
    – faces inevitable drought

    …we should not give away our water, and certainly not for free or on a permanent basis.

  9. Selling water, a resource that will prove increasingly valuable, for a fixed sum of money is foolish. Can we swap the water allocation for land? There are some parcels on the west side of 101 that look promising.

  10. While waiting to talk on Airplane noise I got to hear this gem.

    What staff and most of Council didn’t understand is the concept of sunk costs. Although Mountain View has higher sunk costs because of minimum buys, Palo Alto water rights are still worth $2.5M even if there aren’t sunk costs because of no minimum buys. A financially literate staff and Council would have understood that sunk cost should be ignored for decisions going forward, hence the name sunk costs.

    Of course, this is too hard of a concept for our leaders to comprehend so the City just gave away an incredibly valuable resource while jacking up taxes and rates on residents.

    There needs to be an infusing of brainpower on Council.

  11. There wasn’t much brainpower on display last night as Keeme, Filseth, Du boos and the rest tried to bully Tanaka into dropping his objections. I think everybody knew these water rights had value, but for reasons of political correctness, they wanted to look like “good neighbors.” It was a staggering display of white guilt.

  12. This is crazy! We’re giving away water rights and getting nothing in return? EPA is running a surplus and could easily buy these rights.

  13. At first, I really supported this transfer. I got a mass email from Drekmeier linking to the staff report and thought that we were giving something of no value to us, to EPA residents in need. I sent an email in to support this, but now I feel rather foolish.

    When you look into this closely, you find a very different reality:
    * This “no value” gift is worth $2.5M
    * The water isn’t for poor EPA residents but for billionaire developer Sobrato
    * EPA is running a massive budget surplus, while PA is running a deficit while raising utility rates dramatically despite residents letting their gardens get destroyed by the drought

    Karen was right, the process wasn’t followed and so I and many others were fooled.

    I’m especially disappointed with Eric. I donated to his campaign and thought he would protect the interests of PA residents. What happened? I expected this out of Cory, Adrian, Liz and the rest of the pro development gang but not you.

    Eric, you lost my vote for your reelection.

  14. From reading Filseth’s comment above, it’s clear that he and the rest of council think the community is stupid. Yes, Eric, we know that EPA would have to pay the SFPUC the wholesale rate for water like every other city does. The transfer of these rights enables EPA to obtain this water. We got it, Eric. We’re not idiots.

    What you’re not addressing, Eric, is that these water rights are obviously valuable and you’re giving them away for free. Just because Palo Alto doesn’t use them doesn’t diminish that value. It doesn’t make Palo Alto unmoral or uncaring if it asks EPA to pay for these rights. It should be viewed as a straight-forward business transaction, not a morality play where Palo Alto has to pay reparations to an underprivileged, struggling neighbor to assuage our white guilt.

    We need new councilmembers who respect the intelligence of the community and approach the affairs of city government with a business like attitude. They figured they’d slip this one by us, and they would all get points for being Social Justice Warriors. Glad Greg Tanaka spoke up.

  15. This will benefit Amazon and Sobrato. Makes perfect sense that the Palo Alto Council would genuflect to them. Another big corporate rip-off.

  16. This week we were “highly” encouraged to show support on Palo Alto online and other outlets for this transfer. We also had to spend staff time lining EPA people up to speak at Monday’s meeting In favor of this.

    While I think PA residents are rich enough to give this donation even with the rate hikes/tax increases, I feel disgusted with management’s directive.

    This is not our fight. The politicians should be doing the campaigning. I feel staff should be neutral.

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