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Utilities director outlines council proposal to reallocate income-tax money; water and sewer rates could rise
Summary
City staff told the Board of Public Utilities about a City Council proposal to reallocate a portion of the 1.5% income tax away from the Water & Sewer Capital Improvement Fund to other government capital funds; the presentation included modeled revenue impacts and projected water and sewer rate increases if the change proceeds.
The Board of Public Utilities heard a staff briefing on a City Council proposal to change how part of the city's 1.5% income tax is distributed, and on the potential consequences for the Water & Sewer Capital Improvement Fund and utility customer rates.
Brian (last name not recorded), the utilities director, explained that current ordinances allocate 33.3% of the first 1.5% income tax to the Water & Sewer Capital Improvement Fund (equivalent to 0.5% of the city's income tax). The council proposal discussed June 12 would reduce that allocation by 0.05 percentage points (from 0.50% to 0.45% of the tax) for the next three years and then set the allocation at 0.35% going forward.
Using the 2025 budget as a baseline, staff estimated the Water & Sewer Capital Improvement Fund would collect about $6.7 million in the budget year under current allocations and about $4.7 million under the proposed future distribution; staff characterized that change as a drop of roughly $2.0 million in annual receipts under the presented assumptions. To sustain the same level of capital work without the income-tax share, staff estimated the utilities would need roughly $1.5 million in additional revenue over the three-year period, which translates to an estimated water-rate revenue increase of about $750,000 and a similar $750,000 for sewer by the end of the three years.
Brian outlined modeled rate adjustments that would be needed to bridge the gap if council adopts the reallocation and no other revenue source is found: water rates were estimated to rise about 5% per year (about 15% total over three years) and sewer rates about 4.7% per year (about 14% total). Using sample consumption assumptions (500 cubic feet), the staff table showed a residential water charge increasing from $13.70 in 2025 to about $15.80 in 2028, and the sewer charge moving from $23.25 to $26.55.
Brian emphasized these are preliminary estimates. If council approves the reallocation, staff told the board they would likely commission a cost-of-service study (the city typically uses Courtney & Associates) to refine rate design and determine how to equitably allocate costs across residential, commercial and industrial customers. Any rate changes would require follow-up board review and likely subsequent council action. No rate or distribution change was adopted at this meeting.
