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Severance hears utility rate study proposing two 10‑year financial scenarios, tiered residential rates and a North Weld‑linked surcharge
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Summary
Consultants presented two 10‑year financial scenarios for Severance utilities and offered two water rate structure options: maintain the uniform rate or adopt a three‑tier residential volumetric structure. Council questioned reserve levels, bond timing and how an annual surcharge tied to North Weld would interact with monthly tiers.
Todd, an Actillis consultant, presented the town's utility rate study during the Jan. 13 work session, outlining a three‑part approach—financial planning, cost‑of‑service allocation and rate design—and asking the council for feedback on two 10‑year financial scenarios.
The first scenario relies on no additional revenue increases beyond the 4% the council already adopted for 2026 and would allow the town to cash‑fund roughly $10.2 million in repair and replacement projects while drawing down reserves over the study horizon. The second scenario uses modest, inflationary annual increases; it draws down the fund balance less and preserves a larger cushion for unplanned events, such as a major main break, according to Todd.
Todd told council members the wastewater utility is in a closer position of risk. That analysis assumes a $15 million program of cash‑funded repair and replacement and a roughly $14 million bond for a new wastewater treatment plant; roughly half of the treatment‑plant costs are assumed to be growth‑related and paid for with impact fees. Todd said the wastewater scenario’s debt‑service payments are the primary driver of a projected decrease in operating‑fund balance and merit close monitoring.
On rate design, consultants recommended two water options for consideration: keep the status quo (a base charge that varies by meter size and a uniform volumetric rate) or adopt a three‑tier residential volumetric structure billed monthly (0–5,000 gallons, 5,001–15,000 gallons, and >15,000 gallons) while keeping commercial on a uniform volumetric rate. Under the tiered proposal, many low‑use single‑family customers could see slightly lower bills while the highest‑volume customers would pay more; the consultants suggested phasing large structural changes over several years if the council seeks to avoid billing shocks.
Todd also proposed revising the annual surcharge so it is explicitly tied to the two North Weld components—a plant investment fee and a water‑rights/line fee—and to apply an illustrative lease rate (3%) to produce a surcharge estimate. He said linking the surcharge to North Weld charges would allow the town to update surcharge amounts when North Weld’s costs change, since Severance purchases 100% of its potable supply from North Weld County Water District.
Council members pressed for clarity on fund‑balance trajectories and asked why some fund balances jump by millions in particular years; Todd attributed the bumps mainly to timing of CIP projects and to when bond proceeds and debt service begin. Council members also asked about ways the general fund could temporarily support the enterprise fund if a large emergency occurs and about legal/accounting constraints on mixing enterprise and general funds.
No action was taken; staff and the consultant said they would return with additional detail in March or April and that council may consider changes as part of the 2027 budget process.
