Chesapeake staff outlines water and sewer rate options as council backs plan to fund public-safety priorities without raising real-estate tax

City staff and consultants told the Chesapeake City Council on April 19 that Chesapeake Public Utilities faces sharply higher operating and construction costs and that current rates will not keep pace without adjustments.

The city’s financial consultant, Andy Burnham of Stantec Consulting, said the 2.9 percent annual rate plan adopted in 2021 was based on forecasts that have since changed: treatment chemicals, fuel and natural gas for the utility rose roughly 87 percent from 2021–2024, salaries and benefits rose about 41 percent, and a broader basket of operating costs increased roughly 25 percent over the same period. Burnham said the utility’s average annual capital need has grown from about $40 million per year in the 2021 plan to about $61 million per year in the updated forecast.

“The last study simply could not have anticipated the magnitude of those input-cost increases,” Burnham said. “We’re seeing challenges trying to maintain a rate plan that was adopted and established several years ago in today’s economic conditions.”

Why it matters

City staff and consultants warned that, under the status-quo 2.9 percent annual increases, revenues will lag expenses and the utility would draw down reserves and approach insufficient debt-service coverage later in the forecast period. Burnham emphasized the city’s financial-policy pillars — adequate reserves and debt-service coverage — and said the updated plan seeks to keep revenue and expense bars aligned so reserve and bond covenants are maintained.

Rate options and customer impacts

Stantec presented two modeled options. Option A assumes about $21 million in tax-increment…