City staff recommends 5% water and wastewater rate increase in 2026 after multi-year projections

Debbie Pack, the city’s director of finance and administration, told the commission during a July 14 study session that staff recommends a 5% water and wastewater rate increase for 2026 and included that increase in the draft budget. "This is our final plan study session for the 2026 budget. Today we're gonna discuss water and wastewater rates," Pack said.

The recommendation arrives after staff modeled utility fund revenues and expenses using the 2026 budget as a baseline and multiyear assumptions (4% personnel and benefits growth, 3% commodities and contractual, 1% capital outlay). Pack said the model also assumes the city will move some wastewater plant equipment projects from pay‑as‑you‑go cash to debt financing to reduce immediate rate pressure.

Why it matters: the utility fund carried a historically large balance in prior years that staff deliberately drew down to pay for large projects. Pack told commissioners the 2026 budget proposal would yield a lower year‑end balance than recent years but that a 5% rate path for the next five years would keep the fund broadly stable under current project assumptions and enable required capital work.

Key details: - Staff proposes a 5% rate increase in 2026 (after a 2.5% increase in 2025) and used 2% customer account growth in projections. - The 2026 utility fund revenue proposal is about $23.9 million; proposed expenditures about $28.4 million, leaving a projected 2026 year‑end balance of roughly $7.5 million under the model assumptions. - Staff moved wastewater treatment equipment upgrades from a cash project to debt financing in the model to reduce near‑term rate increases; the downtown water plant upgrade and groundwater remediation remain identified future capital needs. - Pack cautioned the current year revenue projection (through May) is likely low because water revenues concentrate in summer months.

Discussion and direction: commissioners asked staff clarifying questions about the 5% figure, timing, and how excessive‑use thresholds would be handled. Pack said the proposed rate change would be effective in January and that the city is not proposing to change the excess‑use threshold in this rate study. Commissioners did not take a formal vote on a rate ordinance at the study session; staff said the 5% increase is already entered in the draft 2026 budget and asked for direction to leave it there for publication.

Next steps: staff will finalize the draft budget materials and bring the formal rate ordinance and budget for public notice and commission action at a subsequent meeting. Any change to the 5% assumption would be made before publication if commissioners direct adjustments.