Capital Improvement Program

The Otay Water District is a potable water, recycled water, and sewer service provider. The District is a “revenue neutral” public agency where each end-user pays only their fair share of the District’s costs of acquiring, treating, transporting, or operating and maintaining the public water, recycled water, or sewer facilities. The District provides water service to a population of approximately 242,000, which is expected to ultimately increase to 271,500 by 2055. This growth, as well as the maintenance of existing assets, requires a long-term capital planning process. The process is dynamic, due to the evolving needs of the community, water supply issues, and changing regulations. As such, capital planning is part of the District’s overall strategic planning process. The capital planning process involves identifying current and future needs and prioritizing them based on specific operating assumptions. The primary objective of this planning effort is to support an orderly and efficient program of expansion, new water supply, replacement, and betterment while maintaining a stable long-range financial plan.

Capital Improvement Projects

To accommodate growth, the District must invest over $553 million in capital assets through ultimate build-out. The Fiscal Year 2026 Capital Improvement Program Budget is approximately $19.7 million and consists of 149 projects. The Six-Year Capital Improvement Program (CIP) totals approximately $185.5 million.

The $19.7 million of projects are broken down into the following three categories:

• Expansion Projects: $1,369,000
  • Expansion: Facilities required to support new or future users are funded from capacity fees or user rates.
• Betterment Projects: $6,108,000
  • Betterment: Facilities required because of inadequate capacity or new requirements that benefit existing users are funded from availability, betterment fees, or rates.
• Replacement or Renewal projects: $12,231,000
  • Replacement: Facilities required to renew or replace existing facilities that have deteriorated or have exceeded their useful life are funded from user rates.

The Fiscal Year 2026 Capital Improvement Program Budget and the Six-Year CIP are consistent with the District’s Water Facilities Master Plan (formerly known as Water Resources Master Plan), current capacity fees, and the District’s strategic financial objectives.

Assumptions and Criteria

As a component of the annual budget development process, the CIP budget is updated using the following:

• CIP projects are selected based on the Water Facilities Master Plan (WFMP), the Urban Water Management Plan (UWMP), Sub Area Master Plans (SAMP), Integrated Water Resources Plan (IRP), Wastewater Management Plan (WWMP), the Cathodic Protection Plan, the District’s Strategic Plan, and other focused or specific planning documents and reports to manage growth, maintenance, and the life extension of assets.
• The CIP goes through an iterative process to meet the criteria of growth, service levels, supply targets, and system reliability.
• CIP target expenditures for the next six years are refined and used in the rate model.

CIP Justification

The justification for each project is determined by whether it is required due to growth (Expansion), improvements or upgrades (Betterment), or to replace an existing asset (Replacement). As these projects are completed and placed into service, there may be an impact on the Operating Budget by increasing costs in the areas of maintenance, energy, or chemicals.

The following general criteria are used to determine the reasonableness of a project before it is considered for inclusion within the CIP budget:

• Safety and existing facility conditions
• Operating system conditions and energy improvements
• Water and sewer system deficiencies
• Regulatory and permitting requirements
• Developer-driven requirements
• Economic outlook
• Growth projections
• Water supply diversification goals
• Board and management directives