City staff present sewer-rate scenarios; recommend reinstating 7% increases to meet operating threshold

City staff presented six financial scenarios for Alexander Citys sewer utility at a council work session, saying the system needs rate increases and growth to remain viable and to prepare for a large capital expense projected for 2030.

Lynn Miller, a consultant with SewerLakes, told the council the models—built with software funded through ARPA—show a "do nothing" scenario would leave the utility below its operating threshold and therefore not viable. Miller said the models baseline projects through 2032 and that only the scenario combining reinstated rate increases and predicted customer growth would allow the utility to maintain operations and build reserves.

The scenarios presented included: (1) no change; (2) increases only tied to a 3% CPI; (3) CPI plus a $5-per-month self-storage unit tax on roughly 2,000 units; (4) the previously planned multi-year increase; (5) a hotel-tax option mentioned by council members; and (6) the previously planned increase plus an assumed customer-growth projection tied to local development. Miller said scenario 6, which assumes a 7% increase in the near term and a sustained 3% annual customer growth beginning after 2026 (about 50 new customers per year on an estimated 5,000-customer base), is the only scenario that produces sustained positive cash positions and allows the utility to put money into reserves for future capital projects.

Miller summarized the operating shortfall: "We're not meeting operating…