City consultant recommends 12% water revenue increase, year‑round tiers and major connection fee update

Kyle Stevens, a consultant with Stantec, presented a comprehensive water utility rate study to the Columbia City Council at the May 5 pre‑council meeting, recommending a package of changes the firm says will put the utility on a “sustainable path.” Stevens told council that the study identifies a revenue shortfall and proposes a 12% revenue increase in fiscal year 2026, a 10% increase in fiscal year 2027 and ongoing indexing at about 3% thereafter.

The study, Stevens said, begins “first and foremost with answering the question of how much,” meaning how much revenue the system needs now and looking five‑to‑ten years forward. It uses fiscal 2024 audited balances and the adopted 2025 budget as the starting point and excludes purchase of AMI meters from the base forecast. The model shows the current trajectory would deplete operating fund balances by fiscal 2027 without rate increases.

Why it matters: The consultant said adopting the package would stabilize fund balances and allow the utility to pay projected debt and capital needs, including a projected debt referendum in 2030 the study estimates at about $50.1 million for a phase‑two water treatment plant upgrade. Stevens told council the recommended 12% first‑year increase, combined with the rate design changes the study proposes, would stop the erosion of the fund balance and place revenues and expenditures on a more sustainable footing.

Rate design recommendations: Stevens recommended recovering roughly 30% of the utility’s annual revenue requirement through fixed (base) charges rather than volumetric charges and simplifying base charges by folding public fire protection into a single base charge. He proposed scaling base charges by meter size so readiness‑to‑serve and meter costs are charged proportionally.

On volumetric pricing, the consultant recommended moving from a seasonally applied tiered structure to year‑round tiers sized to each customer’s winter average consumption. Under the proposal tier 1 would cover 0–100% of winter average at $2.30 per CCF, tier 2 would cover 100–200% of winter average at $6.33 per CCF, and tier 3 would charge $10.20 per CCF for consumption above 200% of winter average. Stevens said those prices were calculated from the study’s cost‑of‑service analysis so each volumetric dollar can be traced back to specific hydraulic capacity costs (average day, max day, peak hour).

Customer impacts: The consultant showed modeled bill impacts across customer classes. He said roughly 65% of residential accounts would see an annual bill decrease or modest change under the new structure because steady year‑round users would be billed more predictably; accounts with pronounced summer peaks — notably irrigation and pools — would bear larger increases because the study allocates peak‑capacity costs to the customers who cause them. Stevens illustrated the contrast with two customer examples: a steady residential user would see an annual decrease of about $61, while a sharply seasonal user could see an annual increase of roughly $244.

Connection (water system equity) fee: The study recalculated the city’s one‑time connection fee — described in the presentation as a “buy‑in” or water system equity charge — using current asset values, subtracting outstanding debt, and dividing by system capacity (32 million gallons per day). The calculated fee for a typical single‑family dwelling was $1,169 compared with the current listed fee of $5.78, reflecting decade‑old pricing that the consultant said has not kept pace with system asset inflation. Stevens and staff discussed phasing options; the study supports full cost recovery but notes phasing can soften near‑term impacts.

Miscellaneous fees and affordability metrics: Stevens recommended updating individualized service fees (turn‑ons, taps, meter work) toward cost recovery; many current fees are below calculated cost because they have not been updated for more than a decade. He also presented two affordability metrics: hours at minimum wage needed to pay a typical 5‑CCF monthly bill (estimated to fall from 2.25 to 1.88 hours under the proposed schedule) and water bill as a share of income at the 20th income percentile (estimated to drop from ~1.5% to ~1.2% for a 5‑CCF user under the proposal).

AMI and capital planning: The consultant noted AMI (advanced metering infrastructure) purchases were excluded from the base model; staff said AMI for electric may be funded under that utility’s rates but water lacks sufficient reserve to self‑fund AMI and would need grants, loans or a longer phase‑in. The study includes a capital plan intended to meet minimum operational needs and assumes no new personnel.

Council discussion and next steps: Members of the Water and Light Advisory Board were present and the board’s chair (Philip) and water expert (David) commended the study. David, who identified himself as an associate professor at the University of Missouri and a Water and Light Advisory Board member, called it “the gold standard” of water rate cost‑of‑service studies and rejected garden‑watering concerns as “a smokescreen,” saying the main peak users are irrigation systems and pools. Stevens and staff said the municipality could phase particular fees if council wanted, and staff advised changes to the billing system would be required to implement the design and that an October 1 start date would require prompt direction.

Action/direction: Council members indicated consensus to proceed with the consultant’s recommendations, to present the changes in the FY2026 budget process, and to begin public communications, key‑account outreach and necessary billing‑system work. Staff will present the study to the Water and Light Advisory Board and return council materials and a recommended schedule for adoption and implementation.

What remains: No ordinance or rate ordinance was adopted during this meeting. Specific motions, the final adopted rate schedule, any phasing for the connection fee and the possible inclusion of AMI funding mechanisms were left for later council action following public engagement and formal adoption steps.