Isanti staff urges base fee hike, new high-usage tier to shore up water system funding

City staff on Wednesday laid out a multi-decade water and sewer rate plan that includes a recommended $2 increase to the monthly water base rate in year one and the addition of a fourth, conservation-oriented top usage tier. The presentation framed the changes as necessary to finance near-term capital work, including a new well, and to avoid pushing costs onto future residents.

The utility presentation, given after the committee reconvened from recess, compared Isanti’s rates with nearby cities and walked the council through multiple financial scenarios. The presenter said long-term planning is essential because Isanti’s small customer base increases per-user costs and that “if you want utility rates to be lower, the best way to do that is to be bigger” so the city can gain economies of scale. He warned that worst-case scenarios could leave the water fund underfunded by tens of millions over decades if no action is taken.

Staff recommended a straight $2 increase to the water base rate in the first year to guarantee revenue that does not vary with usage, followed by 3% annual adjustments. The presenter said, “I’m recommending just a straight $2 in the first year on the base rate,” and argued that the modest, certain revenue is preferable to relying solely on usage-based increases that fall if customers reduce consumption.

To discourage extreme irrigation, staff proposed a fourth usage tier set about 25% higher than the then-top tier. The presenter said the state is likely to view the tier as a conservation measure and showed local examples: in July 2023, 51 residential accounts exceeded 50,000 gallons and several nonresidential accounts reported monthly usage in the hundreds of thousands of gallons. Staff noted one nonresidential account that used roughly 551,000 gallons in a month and others that reached 650,000 gallons in split-meter irrigation profiles.

Council members and staff discussed potential mitigation for businesses that need large volumes (for example, businesses that reclaim water). Staff suggested targeted outreach, technical assistance and the option of bespoke rate treatments for industrial accounts. The presenter described visiting two high-usage customers; both lowered irrigation after staff contact.

Financial projections in the study showed year-end cash available for capital turning negative in some scenarios. The presenter gave an example: cash available for CIP at the end of 2028 was initially shown as negative $109,000 and later revised toward a larger shortfall. Staff said capital projects that could be affected include a new well (near-term) and a water tower project in the 2030s; covering those projects without timely revenue would likely require issuing debt.

Council members signaled support for further study and outreach rather than immediate adoption. Staff was directed to continue refining the rate study, increase engagement with major water users, and return to council with a final recommendation and ordinance language for rates proposed to take effect in 2025. The committee did not take a formal vote on rates at the meeting.

The council’s next procedural steps are staff follow-up with high-usage accounts, additional analysis of business-metered accounts, and a future vote at council for any rate ordinance changes.