Lake Elmo staff propose 20% annual water and sewer rate increases for five years to cover new treatment and depreciation

Finance Director Clarissa Handler told the Lake Elmo City Council workshop on March 11 that staff are recommending a 20% increase in water and sewer rates each year for five years to put the utility funds on a sustainable footing.

"So we are here to discuss the 2025 utility rates," Finance Director Clarissa Handler said. "...we are recommending 20% every year for the next 5 years, and that would, essentially double the rate over a 5 year period slightly."

Why it matters: the city plans to bring more than $50,000,000 in capital projects online over the next three years for new water treatment plants funded by Minnesota Pollution Control Agency (MPCA) grants. Staff told the council the capital will be grant-funded but that operating and depreciation costs will fall to the utility funds. Handler said the plan assumes those operating costs will not be covered by the grant and that the treatment plants will substantially increase annual operations expenses.

The finance presentation and council discussion focused on three problems: operating losses in utility funds going back to 2019, underfunded depreciation for system assets, and uncertain future revenue from development connections. Handler said modeling uses a…