Chesapeake staff outlines utility-rate choices that would fund $8.5M–$73.5M in repairs; no vote taken

City Manager Lonnie Price opened Chesapeake’s May work session with an update on the water and sewer enterprise, telling council the agenda item was “a continued conversation on water and sewer of the public utility system budget” and that “no action [was] necessary today.”

Stantec consultant Andrew Burnham and Public Utilities Director David Jurgens summarized a rates and revenue review that updated a 2021 rate study and modeled three near-term options for the city’s retail water and sewer rates. Burnham said the city’s current five‑year plan (approved in 2022) calls for 2.9% annual adjustments through fiscal 2027, but warned that “we’re gonna be looking at indexes that are higher than the current 2.9% plan” starting in fiscal 2028 to reflect higher construction and materials costs.

Why it matters: staff said longer‑term indexing at about 4.9% annually would better match current cost pressures from higher chemical, pipe and general construction prices, and would fund far more of the utility’s backlog of critical projects. The three alternatives presented differed mainly in the size and timing of increases in fiscal years 2026–27: leaving the current 2.9% plan for those two years (Option A), adding 1 percentage point to make them 3.9% (Option B), or adding 2 points to make them 4.9% (Option C). Burnham and Jurgens walked council through what each option could fund and what it would leave undone.

What the options would fund: under the consultants’ updated analysis, Option A (no change to the approved 2.9% for ’26–’27) would allow the utility to fund about $8.5 million of the department’s identified critical capital needs. Option B (3.9% in ’26 and ’27) would fund roughly $42 million. Option C (4.9% beginning in ’26) would fund the full $73.5 million list compiled by the utilities department. Burnham framed the monthly effect for a typical residential bill as modest: the difference between Option A and Option C was about $3 per month on the illustrative bill used in the presentation.

Scope of the need: Jurgens described aging electrical panels and control systems at Northwest River and Lake Gaston treatment plants, repeated leaks on transmission mains and deteriorating sewer pump stations installed in the 1970s and 1980s. He showed photos of corroded reverse‑osmosis skids, failing fiberglass transmission pipe and recent emergency field repairs that have cost tens of thousands of dollars (for example, a 14‑foot sewer repair that cost nearly $100,000, and a force‑main repair that was about $138,000).

Equity and structure questions from council: Council members asked whether the proposed increases would apply to residential and commercial users; Burnham said the city has “a single retail wide rate structure,” and that a 2.9% adjustment would apply to all customers. Council members pressed staff on tier structure and affordability questions, asking whether the low‑volume (affordability) tier could be enlarged and whether new large customers (for example a data center) could be charged a different starting rate or connection fee; staff said billing‑software limits and the utility’s current retail structure would make selective retroactive changes difficult and that connection‑fee changes could be structured but would need policy direction because higher connection fees can deter conversions from private wells/septic.

Timing and next steps: Price and staff said this was an informational discussion and that staff and the consultant would schedule follow‑up briefings over the next month or two before returning a formal rate proposal and ordinance to council. Burnham recommended the council consider modifying the final two years of the currently approved plan by adding 2 percentage points for fiscal 2026–27 and adopting a new indexing approach (4.9% thereafter) in a future five‑year plan.

What was not decided: Council did not vote on any rate change or adopt policy during the work session. No formal motion or ordinance was presented. Staff will return with additional analysis and proposed ordinance language if council directs it.

Costs, tradeoffs and caveats: consultants emphasized that years of below‑industry increases left the utility with fewer resources while the national cost of water capital and operations jumped after 2018; supply‑chain pressures and higher construction indices changed the “cost environment” underlying the 2021 study. Staff described most near‑term project work as contractor‑intensive capital work (replace panels, pump stations, pipe rehabilitation) rather than new in‑house programs.

Where to learn more: the city will schedule additional briefings for council and post supporting presentation materials with updated project lists and bill illustrations before bringing any ordinance or rate ordinance amendment to a meeting for possible action.

Ending: Council members thanked staff and the consultant for the update and signaled they wanted more time and information before any vote; the matter remains scheduled for further discussion and subsequent formal consideration at a future meeting.