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The prolonged drought results in a stepped-up district effort to seek new sources of water supply through recycled water projects, the storage of excess water in other regions (called water banking) and an aggressive water conservation program.

Flooding in San Jose in 1995 highlights the need to complete flood protection projects, especially on the Guadalupe River through downtown San Jose.

In 1996 the district initiates a long-term water supply planning process, the Integrated Water Resources Plan (IWRP). Projections indicate future severe droughts could result in a significant water supply shortfall-up to 100,000 acre-feet. To address this gap, the district, with help from IWRP stakeholders, selects four main water supply components: water conservation, water recycling, water banking and long-term water transfers.

The district embarks on a multi-year project to upgrade all three water treatment plants in order to continue to meet all state and federal water quality standards. The upgrades include changing the primary disinfectant to ozone, increasing the treatment capacity at Rinconada Water Treatment Plant and performing seismic upgrades.

Changing community priorities, more stringent state and federal regulations and an evolving environmental ethic lead the district into the 21st Century. The district's role as steward of the local watersheds is the driving force behind its mission: a healthy, safe and enhanced quality of living in Santa Clara County through the comprehensive management of water resources in a practical, cost-effective and environmentally sensitive manner