Kent County staff present utility rate study recommending phased 4% annual increases and reserve targets

A consultant presented Kent County commissioners with a multi-year rate study that recommends phased annual increases of about 4% for user rates and a similar annual increase for one-time allocation fees to help fund water and wastewater capital needs and reserves.

The consultant said the study separates customer counts from per-customer usage and assumes conservatively low usage growth and roughly 3% annual escalation in operating and maintenance costs: “We’re just being conservative here using about a 3% escalation rate,” the consultant said. The study also recommends two reserve targets: an operating reserve equal to a minimum of 90 days or 25% of operating expenses, and a capital reserve sized at about 2% of the value of fixed assets.

Why it matters: the county faces several large capital needs over the next five years, and the study shows the largest near-term driver is a 2026 set of projects that would create a one‑year spike in revenue requirements unless funded by subsidy or debt. The sewer program in particular shows larger dollar needs, driven mainly by treatment-plant projects. The Millington wastewater treatment plant — a major project anticipated to allow Millington customers to join the system in 2028 — is shown in the study as a significant capital driver; the consultant called the chart a “worst-case scenario” if grants are not secured.

Top findings and assumptions: the study assumes about 2% annual customer growth for water and 1% for sewer, with a single larger customer addition in 2028 tied to Millington; it treats operating expenses as rate-funded and recommends that non-growth capital be funded by user rates while growth-related capacity costs be funded by allocation (one-time) fees where possible. The consultant noted risks if allocation fees are set below the cost of capacity: “If the allocation fees are set at less than the cost of that capacity… you really don't have a revenue source to charge,” the consultant said.

Reserve and subsidy numbers: the consultant recommended contributing roughly $3,035,000 per year toward the water capital reserve and about $130,000 per year for sewer to reach the 2% fixed-asset target over time. The study shows a general‑fund subsidy contribution to blunt rate increases in several years; commissioners and staff referenced roughly $1.3 million of subsidy for water in one model year and roughly $3 million for sewer when showing the spike driven by 2026 projects.

Rate options discussed: the consultant modeled a baseline 4% annual increase and an alternative 8% annual increase. The 4% scenario was presented as the study’s historical benchmark and as the consultant’s recommended phased approach; at 4% the county would still need subsidies in peak years but would avoid a single large upfront jump. Modeling an 8% annual increase would reduce future subsidy needs substantially through compounding; the consultant said an 8% path could lower required future subsidies by about 25% compared with the 4% path, but would increase customer bills faster now.

Customer impacts: the consultant showed sample quarterly bills under the 4% scenario. For a household using the presentation’s example of 12,000 gallons per quarter, the combined water and sewer bill would rise from about $340 to about $353 (approximately a $13.50 quarterly increase) under the 4% scenario.

Structure and local comparisons: Kent County’s current rate structure relies on a relatively high fixed charge that includes 12,000 gallons of usage; that contributes to Kent County being near the top locally for a typical residential bill using 12,000 gallons but comparatively low for commercial customers that exceed the included usage, because Kent County’s variable usage rates are relatively modest in the county’s commercial example.

Next steps: no rate ordinance or formal vote occurred at the meeting. Commissioners asked staff to consider additional modeling scenarios and to use study outputs while finalizing the FY26 budget. The consultant noted the numbers should be revisited annually as capital plans, grant availability and customer counts evolve.