Queen Creek staff propose 15% water rate increase to stabilize utility finances; council to consider notice of intent in March

Scott McCarty, Queen Creek’s deputy town manager and chief financial officer, told the Town Council that staff is proposing an interim 15% increase to the town’s water rates to stabilize the utility’s finances while the town completes a comprehensive rate and capacity-fee study.

"The overarching goal here is to continue to ensure we provide safe, reliable water to our 40 plus thousand customers," McCarty said, describing the proposal as an interim step that would help the town refinance an $85 million interim loan and meet legally required debt-coverage ratios on water utility debt. He said a 15% increase would generate roughly $4.3 million in additional annual revenue under current consumption patterns.

Why it matters: McCarty and water staff described a multi-year change in the utility’s scale and costs: the system now covers roughly 70 square miles and about 40,000 accounts; annual billings total about $30 million; water pumping has grown roughly 63% over the last decade; and the town has invested in water supplies and infrastructure through purchases and debt issuance (McCarty cited approximately $240 million in debt issued to finance acquisitions and infrastructure). Staff said the utility carried a working deficit of roughly $16.7 million at the close of the most recent fiscal year and that an $11 million annual debt payment is a key fiscal pressure.

McCarty explained how the town has used groundwater-replenishment assets to lower customers’ Central Arizona Groundwater Replenishment District (CAGRID) assessments in recent years, producing about $45.1 million in aggregate CAGR savings since the policy began and about $9.2 million in 2024 alone. "We use all of those tools or levers through this policy to reduce the CAGR bill as much as we can," he said, noting that the town has different legal options for customers whose homes were built before or after 2004 and that the lowest possible CAGR assessment is zero for some accounts.

Net impact to customers: McCarty and communications staff presented an outreach model showing how the proposed 15% water-rate increase and the town’s ongoing CAGR reductions would combine for many customers. Using staff examples, McCarty said a typical single-family household would see a $3–$6 monthly increase in consumption months, and that in many cases the reduction to the CAGR assessment will still leave the average household paying less annually than if the town had not pursued initial CAGR reductions. Constance Helenon Wilson, the town’s communications and marketing manager, said staff will publish a web-based bill modeler that will let customers enter their address and see estimated changes and CAGR savings, and that the town will begin outreach with a news release, video, e-blast and water-bill inserts.

Policy choices and next steps: Staff identified a set of policy questions for the comprehensive study, including the town’s goal of becoming a designated water provider (which would shift replenishment responsibility to the town), whether customers outside the town boundary who do not return treated wastewater to the town’s system should face different rates, and how to allocate the cost of water acquisitions between one-time capacity fees and ongoing monthly rates. McCarty recommended an incremental, multi-step approach: adopt a near-term revenue increase to stabilize annual operations and coverage requirements, then refine structure and allocations during the comprehensive study.

Timeline: McCarty walked the council through a proposed schedule. Staff recommended the council consider a formal notice of intent to increase rates at a March 5 meeting, set a public hearing for May 7, and make any final rate ordinance/resolution then; the earliest customers would see new rates on their bills is late July, given the notice-and-billing cycle described by staff.

Council reaction: Members from across the council acknowledged the complexity of the issue and the town’s prior actions to reduce taxes and fees. Council member McClure said the proposal’s fairness dimensions need careful design but supported differential treatment for customers whose water costs more to serve. Council member Brown pressed staff on how much of the working deficit would be closed by the interim 15% increase versus additional measures and asked staff to clarify that some expense adjustments cited were recurring savings. McCarty said the 15% proposal was intended to improve the annual position of the fund while the comprehensive study determines the multi-year path to fully address the cumulative deficit.

No final action was taken at the meeting. Staff said they will return to council with formal documents if the council directs the notice-and-hearing process to begin.