SAN JOSE (KPIX) — Drought conditions are contributing to a battle brewing in the South Bay over a proposed water storage project that has the Santa Clara Valley Water District pushing for a series rate hikes to fund a new dam near Highway 152.

The proposed Pacheco Dam project would greatly expand an existing small reservoir in the hills east of Gilroy, allowing it to store as much water as all current Santa Clara Valley reservoirs combined.

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“This is an essential element to our master plan. As communities continue to grow and as the engine of Silicon Valley we need water to keep functioning,” said Christopher Hakes, Deputy Operating Officer for the Santa Clara Valley Water District.

But the price tag recently jumped to $2.5 billion. At the same time, the Valley Water District is proposing water rate hikes upwards of 9% a year
for consumers over the next ten years, in part to help pay for infrastructure like the dam.

“We’ve heard a lot of concerns from residents and small businesses all of whom have been struggling,” said San Jose Mayor Sam Liccardo, who called a news conference to voice his opposition to the project because of the proposed rate increases.

Liccardo said he learned from Valley Water’s own experts that the dam would be used primarily to store imported water the district buys from other parts of the state. Liccardo says the water can be easily stored elsewhere for a much cheaper cost.

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“The cost has tripled and the project is worthless if our focus is on creating new water supply,” the mayor argued.

But Liccardo was called out by the Valley Water’s CEO, who said the city of San Jose is also proposing rate increases on consumers for garbage collection.

“What the mayor is doing is saying ‘Look over there, don’t look over here,’ as they are trying to increase garbage rates in the city of San Jose,” said Rick Callender, who defended the project. “Here’s the thing: we have to evaluate this project. We are in an emergency drought situation.”

Discussions over the rate increase will take place next week.

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The dam is still under consideration, but would take a decade or more to construct.