City finance staff recommend no water/sewer/refuse rate increases; 5% stormwater fee bump proposed

City finance staff presented the recommended 2026 enterprise fund budgets and said they are recommending no rate increases for water, sewer and refuse but a 5% increase for the stormwater utility fee.

Cameron McCormick, assistant city manager for finance, told council the water fund faces major capital needs, chief among them an estimated $8,000,000 upgrade to the Shenandoah Village Drive pump station. The city began funding debt service for that project in 2025 and intends to continue setting aside approximately $500,000 per year to smooth the eventual debt payment, McCormick said. Staff recommended holding water rates flat for 2026 while monitoring inflation and planned capital needs.

On the sewer side, staff described a package of treatment‑plant needs — a digester cover, heat exchanger, grit classifier and lab upgrades — and said insurance notified the city it would not cover the digester cover failure, which staff said will leave the city responsible for that cost. McCormick said the city successfully pursued a loan‑forgiveness program through the Virginia Department of Health (VDH) that is due to close around 2028; staff also began funding a $292,000 debt reserve toward that project. Because of revenue growth in both funds, staff recommended no rate increases for sewer in 2026 but proposed conducting a rate study to inform future years as several large projects move forward.

The refuse fund also showed revenue growth that allowed staff to hold rates flat for 2026, though McCormick said the city must continue to monitor landfill costs, tipping fees and rolling‑stock replacement. For stormwater, McCormick said the five‑year MS4 permit cycle will determine much of the program’s needs; staff recommended a 5% increase to the stormwater utility fee (from $4.84 per month to $5.08 per month) to address inflationary pressure and program needs.

McCormick recommended engaging a consultant to perform rate studies for water, sewer and refuse in preparation for the 2027 budget; he suggested sequencing the stormwater rate study after the next MS4 permit cycle is clearer so staff and consultants can plan work without overloading resources.

A council member asked about the loss of a federal grant that had been sought for the water pump station and who would pay the replacement cost if other grants are not identified. That council member said the pump replacement number discussed earlier in the community was $4,000,000; McCormick replied that the project estimate presented in staff materials for the Shenandoah Village Drive pump station was about $8,000,000 and that staff has applications pending for state and federal loan programs (including the clean water revolving loan fund). McCormick said favorable interest rates and some principal forgiveness are possible but that, if the city must go to the public market, the city would bear the full cost.

Why it matters: The staff recommendations will shape utility rates and capital planning. Large projects such as the pump station and wastewater improvements will require borrowing or grant/loan proceeds, and the city’s choice of timing and rate policy determines how costs fall on current ratepayers versus future users.

What’s next: Council did not take action; staff recommended rate studies and will return with follow‑up information during the budget process.