Minnetonka staff, consultants propose rate‑structure changes; council asks for clearer bills and to return with November recommendations

Council heard a rate‑study presentation that translates the city’s asset renewal needs into near‑term revenue recommendations and structural changes to water, sewer and stormwater charges.

Ryan Graff of A2S Nexus presented the study and financial model, which incorporated AE2S’s R&R projections and the city’s CIP. The consultants recommended simplifying residential water tiers from four to three, adjusting tier volumes to reflect contemporary household usage, and introducing clearer separate infrastructure charges for both water and sewer rather than a single shared line item. The study also proposed modest stormwater rate increases (roughly 3% annually in the short term) and recommended continuing to monitor irrigation and commercial allocation factors.

Graff said the goal is to align fixed and variable revenues with the costs the utilities will carry, improve transparency on bills and give the finance team an ongoing model for annual updates. The model recommends a combination of fixed‑charge increases and moderate volumetric increases so utilities can support planned capital, existing debt service and reserve contributions tied to the R&R plan.

Finance director Darren Nelson told council that historically streets have been funded from property taxes and municipal state aid while enterprise utilities use user fees; he said staff will pursue grants and consider borrowing to smooth peaks. Nelson noted implementation timing depends on billing‑software vendor timelines and that rate changes planned for 2026 may need a slight delay to align with billing platform updates.

Council members uniformly asked for clearer customer communications. “A lot of people say it’s not the rate increase, it’s the extra fees,” councilmember Deb Calvert said; several members suggested a concise bill insert or short video explaining fixed fees, Met Council pass‑through charges and what the infrastructure fee pays for. Members also debated whether to shift more cost recovery to the volumetric rate (usage) to better link bill amount and consumption; consultants recommended modest structural moves now and an annual review after customers have a full billing year under the new structure.

Staff will return in November with rate recommendations for the FY2026 budget process and will include bill visualizations and implementation timing. Council indicated general support to proceed with the proposed structure pending the November follow‑up and clearer communications to residents.