Study recommends 40% sewer rate increase in FY25 to restore reserves and meet bond covenants

A consultant who prepared a five-year sewer financial plan recommended substantial near-term rate increases to the Hopewell City Council to ensure the sewer fund meets bond-covenant coverage tests and can fund capital projects.

Ford Moiardi, the presenting consultant, said the model used the FY25 operating budget as a base, assumed no customer growth, modest declines in per-customer usage, and embedded inflationary escalators. The plan includes a near-term capital need: the Queen Anne Pump Station project, estimated at about $3,000,000, and assumed funding from cash reserves and the rate-stabilization fund.

To meet debt-service coverage tests and prevent reserves from going negative, the firm proposed a 40% across-the-board rate increase in FY25, a 15% increase in FY27 and 5% increases in later years. Moiardi showed coverage charts and said without increases the fund would likely fail debt-coverage tests in 2026. He emphasized the fund should maintain about 180 days of cash in the general reserve and at least 1.5 times net revenues coverage for debt service.

Councilors asked about customer impacts and examples. The consultant gave a residential example for a typical 3,000-gallon user: the current monthly sewer charge of $16.26 would rise to $22.76 under the initial increase — roughly a $6.50 monthly increase for that representative bill. Moiardi noted the last rate increase occurred in 2017 and characterized the proposed change as a catch-up to inflation and deferred maintenance rather than a single new ongoing spending initiative.

Next steps: staff will return with a formal ordinance, detailed billing-impact tables and timing for public outreach. Council discussion flagged the need to pair any rate change with clear communication to residents about what the increases will fund and the plant and system repairs that necessitate the change.