Flagstaff water commission: stormwater utility remains on course despite rising capital costs

FLAGSTAFF, Ariz. — The Flagstaff Water Commission on Oct. 16 heard a midterm financial review showing the city’s stormwater utility remains largely on track despite substantially higher capital costs.

Consultant Sanjay of Water Resources Economics told commissioners the 2023 rate study projected a 12% annual rate increase through January 2028 and that revenues have grown because the number of equivalent residential units (ERUs) rose about 17% over three years. "We have a lot more ERUs, 17% over the 3 years, so that's a $4,000,000 increase," Sanjay said. He also said capital spending has grown faster than expected, producing a larger cash‑funded capital program; the three‑year cash (rate‑funded) capital projection rose by roughly 32%, about $5.1 million.

The consultant summarized the net effect as roughly balanced: higher revenues and slightly lower operating or debt service in some areas offset larger capital needs, leaving an ending balance change the presentation showed at about $435,000. "You're still on the course," Sanjay said, adding a technical memo with details was available.

Why costs rose: commissioners asked whether the added capital reflected new projects or price escalation. Staff and the consultant attributed most of the increase to construction inflation. "I would say it's a…