Franklin staff recommend multi-year water and sewer rate path; board weighs sewer impact-fee scenarios

City of Franklin staff and consultants presented a cost-of-service study and a rate plan for water and sanitary sewer on Jan. 14, recommending baseline increases for 2026 and showing how different sewer-impact-fee choices affect long-term borrowing and customer bills.

The briefing matters because Franklin plans to add major wastewater capacity (a proposed south plant) and must decide the mix of development-paid impact fees, debt and customer-rate increases to fund that growth without jeopardizing utility financial health.

Fernando (Hazen consultant) summarized the analysis. For water, staff recommended a roughly 6% annual increase in 2026 (and similar levels through 2031 under current assumptions) driven primarily by purchased-water costs and operations/maintenance; the model seeks to restore a positive net position by the end of the planning window. For sewer, consultants proposed a required 5.7% increase for 2026 to meet debt-service-coverage and near-term obligations; after 2027, the planned increases depend on the sewer-impact-fee approach the board adopts.

Hazen ran four fee scenarios to illustrate trade-offs: (1) retain the existing impact-fee indexing (approximately the current fee, with inflationary adjustments); (2) a 5-year phase to a higher per-unit fee; (3) a 6-year phase to the full maximum fee the formulas justify; and (4) an immediate full increase to the maximum justifiable fee (roughly described in the presentation as a move toward an $18,000-per-single-family-unit equivalent). Across the 10-year window, consultants showed the mix of funding that results under each scenario: a more aggressive impact-fee approach shifts greater capital cost to development and reduces required rate revenue and city debt issuance; a conservative approach increases dependence on rate revenue and borrowing.

Fernando explained the model numbers: retaining the existing indexed fee produces roughly $99–$100 million of impact-fee revenue in the 10-year window in the staff model; phasing to higher fee levels raises projected impact-fee collections to roughly $198–$270 million depending on the chosen phase-in. That choice, the consultants said, changes the amount of debt the city would need to issue to build the south plant and related sewer work (the range of modeled borrowing ran from roughly $138 million under an immediate full-fee approach to about $250 million under the least aggressive-fee scenario). The consultants cautioned that impact-fee revenue is growth-dependent and therefore carries collection risk.

Board members focused on distributional impacts and long-term obligations. The staff showed how a 2026 rate package that recovers the required 5.7% sewer increase could be designed: options ranged from putting most of the increase into the fixed monthly service charge to increasing volumetric charges or a mix. The consultant showed that a fixed-charge-first approach yields roughly a $3–$4 monthly increase on an average residential bill (depending on class and usage), while a volumetric-first approach concentrates the burden on higher water users. The consultant also highlighted irrigation meters as a distinct cost driver because seasonal peaking requires system capacity even if consumption is intermittent; he offered scenarios where irrigation rates are increased more than domestic rates to reflect that cost-to-serve.

Several board members expressed concern about layering higher sewer impact fees on top of recently increased road-impact fees and other development charges, noting the potential for discouraging development or shifting growth patterns. Alderman Blanton and others asked for more time and comparison material; Vice Mayor Potts and Alderman Barnhill emphasized the need to proportion financing between ratepayers and new development to preserve coverage ratios and maintain financial flexibility. "If we be a little bit more aggressive that doesn't mean full bore aggressive. I think that would help us," Alderman Blanton said, voicing a preference for a path that reduces long-term ratepayer exposure while not overburdening development.

Staff requested guidance from the board on a preferred fee/design approach; they agreed to return with additional detail on long-term debt-service implications, an extended view beyond the initial 10-year window, and further scenario analysis to show total lifetime payments under different combinations of impact fees and debt. Staff will incorporate feedback and present refined choices for the board to consider before final rate ordinances are adopted.