Rio Rancho proposes multi-year water and wastewater increases, raises water-rights fee and bulk-fill charge

City of Rio Rancho utilities staff presented a proposed five-year rate package that would increase water and wastewater user rates by 3% annually beginning July 1, 2025, update water-rights acquisition fees and raise the offsite bulk-fill station price to help fund major capital projects and rising operating costs.

The proposal matters because the utilities department projects large capital needs — including $64M in wastewater and $82M in water production projects over the planning period — and rising operating costs; staff said the rate package and planned debt will keep the system solvent and fund planned reinvestments without a sudden, larger single-year increase.

Steve Gallegos, acting director of utilities, reviewed recent rate history and drivers. He said the current ordinance already schedules a 1.75% annual water-rate increase (wastewater has remained at 0% since 2017). Staff modeled two scenarios: status quo (1.75% water, 0% wastewater) and a study scenario that assumes 3% annual increases for both water and wastewater plus bond proceeds in FY 2026–27. Under the status-quo model, staff showed reserves falling and shortfalls as capital projects proceed. Under the 3% scenario staff said the system meets its revenue requirements and maintains healthier cash positions across the planning period.

Gallegos listed major capital projects driving the need for revenue: a membrane-bioreactor expansion at Wastewater Treatment Plant 2 (estimated over $25M), relocation of Lift Station 2 ahead of the Southern Boulevard project, installation and replacement of sanitary force mains along NM-528 and a program of well rehabilitation/redrilling and water-production projects. Staff said utility bond proceeds — roughly $50M projected for the period to fund about a third of the utilities ICIP — are expected in FY 2026–27 and were included in the modeling.

On water-rights acquisition, staff said the city must buy 728 acre-feet every five years under its current permit and has a remaining liability of roughly 3,400 acre-feet to acquire. Using an illustrative future average cost of $38,000 per acre-foot, staff estimated a long-term acquisition need on the order of $130 million; current acquisition fees generate roughly $3.4 million per year and staff proposes a fee adjustment that would add about $0.30 per month to the average residential bill in FY 2026 and about $1.66 per month by FY 2030.

Staff proposed increasing the bulk-fill station charge (a station outside city limits that serves customers without system access) by roughly 5% over the FY26–30 period — adding about $0.50 per thousand gallons in FY 2026 — to keep that facility covering costs; the bulk-fill station has about 368 customers and generates about $90,000 annually under the current $10 per thousand-gallon rate.

Gallegos summarized the package as a combined effect of approximately $2.90 more per month in FY 2026 on an average water and wastewater customer (staff later noted that combining water, wastewater, water-rights and bulk-fill adjustments yields roughly $3.25–$3.75 in the first year) and a cumulative average-bill increase of about $15–$16 by FY 2030 under the proposed schedule. Councilors emphasized predictability and smaller annual increases rather than a large single jump; Councilor List said, “I would much rather budget $3 a year or $3 a month now than for you to ask me to do $15 a month in the future.”

Councilors and staff discussed cost drivers: energy, chemicals, contract operator costs, construction cost inflation and potential PFAS-related regulations that could increase wastewater-treatment costs. Staff recommended keeping smaller, steady increases and reassessing water-rights acquisition fees and the bulk-fill rate at intervals; staff proposed bringing ordinances to adopt the FY26–30 rate schedule in March so the new rates could be incorporated into the FY26 budget and take effect July 1, 2025.

No formal vote was taken at the work session; staff will return with draft ordinances and supporting analysis for readings in March.