Flagstaff council weighs shifting reclaimed-water pricing to cost-of-service model

Flagstaff City Council members on Feb. 18 heard recommendations to rethink how the city sets reclaimed-water prices, and signaled support for staff to study a cost-of-service approach and pursue water-conservation and demand-smoothing options.

The issue returned to council after a Water Commission work group, made up of reclaimed-water customers and commissioners, recommended moving away from the current policy of setting reclaimed-water charges as a fixed percentage of potable rates. Erin Young, Water Resources Section Director, told council staff could include a formal cost-of-service analysis in the next reclaimed-rate study, scheduled for January 2026, and recommended convening a stakeholder group to pursue conservation measures and options for smoothing seasonal demand.

The recommendation matters because reclaimed water supplies and customers create seasonal imbalances: the city currently delivers much of its reclaimed output in summer to golf courses, apartment irrigation and other large users, while in colder months significant volumes are discharged to the Rio de Flag. Young said reclaimed revenues run about $800,000 a year today and, under the potable-rate increases council adopted in 2024, could reach about $1.2 million by year five of the rate plan. The work group argued a cost-based approach would be more transparent, align reclaimed pricing with potable and wastewater cost-recovery methods, and provide funding logic to support system improvements such as storage and conservation programs.

"The reclaimed water pricing today is arbitrary in that it is a percent of potable rates," Young said in her presentation. "A cost-of-service approach would let us align rates to actual delivery, timing and system costs and would create a path to address demand-smoothing and capital needs."

Nicole Elman, representing Aspen Valley Golf Course and a member of the work group, told council the course supports a cost-of-service study and called the current percentage-based approach "arbitrary". "The next step is a rate study that develops a specific rate structure for the cost of delivering reclaimed water and for the specific treatment steps to meet A-plus standards," Elman said.

Council members asked how the change could affect customers and utility goals. Council Member Aslan urged conservation be made a priority and cautioned that reclaimed pricing should also be used to discourage wasteful irrigation practices. Council Member Spence emphasized the need to remain open to new technologies such as advanced water purification (direct potable reuse) while noting those would require significant capital. Council Member Matthews and others supported staff exploring the cost-of-service analysis and starting stakeholder conversations now; no formal ordinance or rate was enacted at the meeting.

Background: Flagstaff has provided Class A-plus reclaimed water since the mid-1990s and currently prices reclaimed water as a percentage of potable rates (general reclaimed-water categories are set at 35% of potable for many customers, with exceptions such as off-peak golf-course delivery and hydrant meters). The city—s reclaimed-water system serves roughly 30 commercial/irrigation customers and several residential subdivisions; Snowbowl and the larger golf courses are among the largest users. Young said a cost-of-service study would explicitly allocate treatment, distribution and capital costs to customer classes and could examine tiers or seasonal pricing to encourage conservation and smoother summer demand.

Council direction and next steps: Council members broadly favored the first option staff presented: explore conservation and demand-smoothing measures now and direct staff to include a reclaimed-water cost-of-service analysis in the January 2026 rate study. Staff will form a stakeholder group of reclaimed-water customers and return with findings and proposed study scope; no final rate changes were adopted on Feb. 18.

Why this matters: Reclaimed water is a locally produced, lower-quality supply the city uses to reduce potable demand for outdoor irrigation and other nonpotable uses. Pricing changes shape incentives for large users, affect utility revenues that pay for operations and targeted capital work (storage or distribution improvements), and could influence longer-term water management options such as recharge, recovery or indirect/direct potable reuse.