Milan budget workshop outlines 4.5% water increase, $1M annual utility capital plan

City Administrator Jim Lancaster presented the Milan City Council with a detailed FY2027 utility rate model on April 7, asking council to consider proposed rate changes and a multi‑year capital plan.

Lancaster said the model assumes $1 million per year in capital improvements split evenly between water and sewer, paid from current cashflow, and suggested the council revisit the rate model annually or bi‑annually. The presentation noted the city's water and sewer fund climbed out of deficit in FY2023 following rate changes adopted in 2022.

Under the presentation's proposal, the commodity water rate would move from $5.22 to $5.84 per 1,000 gallons; the sewer commodity rate would remain at $8.47 per 1,000 gallons. The combined commodity rate would increase from $13.69 to $14.31 per 1,000 gallons (a 4.5% increase). The slides also stated the Ready‑to‑Serve (RTS) charge would not change under the current model.

The rate model uses a seven‑year horizon to smooth increases and targets working capital growth from an approximate $3.7 million starting balance (as of June 30, 2025) toward $5.4 million. The presentation described the model as a "cash‑needs basis," excluding depreciation, and identified four working capital buckets: an operating reserve (120 days), next year’s debt service (listed at ~$940,000 while 2015 sewer bonds fall off in 2026), emergency capital replacement (5%), and planned capital replacement ($1,000,000).

Slides flagged several maintenance and capital needs: an annual water maintenance package estimated at $275,000 (valve replacement, vertical asset CIP, lead service line replacements of 8–10 full replacements per year estimated at $60,000/year, GIS at $15,000/year), sewer maintenance budgeted at $200,000/year (vactor payment, cleaning, televising and manhole lining), and a capital improvement plan that included the option of a $10,000,000 bond to address main trunk line work (approximately 8,700 linear feet) while smaller projects would be paid from CIP cash.

The presentation cited historical sales patterns—a 39% decline from 2013–2019 and a subsequent 20% rebound over five years—and noted a 9% drop in volume in the most recent year tied in the slides to Georgia Pacific and Ford. A sample monthly bill shown in the materials estimated an impact of about $5.30 more per month (about $63.60 annually) for the sample household under the presented changes.

Lancaster concluded by asking the council to "consider approving rates as presented," finalize plans for specific projects and funding sources, and consider additional adjustments if future capital or debt service needs change. Contact information for consultants Brian Camiller, CPA, and Kari Shea, CPA (Plante Moran) was provided on the slides.

Next steps: the slides recommend formal council consideration of the proposed rates at a future agenda; no formal rate changes were adopted at the April 7 meeting.