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City staff recommend modest 1% water/sewer rate increase this year; model shows larger out‑year increases without additional measures
Summary
Utility staff presented the water and sewer rate model and recommended a 1% increase for FY27 that meets debt-service and days‑cash targets while smoothing customer bills; the model projects sharper increases in the mid‑2030s if capital projects proceed as planned.
City utility staff recommended a modest 1% increase to the city’s water and sewer rates for FY27 while showing council two modeled scenarios that demonstrate the long‑term impact of capital projects and debt service.
Sabrina, the utility presentation lead, described the model’s two components — a fixed charge based on meter size and a consumption-based variable charge — and reviewed the city’s historical approach to rate-setting. “We first contracted with a company called Raptellis back in March of 2009 to deliver the first rate model to the city,” she said, explaining the model is used to allocate costs, project revenue needs, and avoid large, infrequent rate shocks.
Staff noted the city has generally followed an annual increase policy of about 2.25% since 2019, with occasional deviations when grant or ARPA funding reduced the need for a rate change. For FY27, staff presented an alternative: a 1% annual increase for the next three years which meets the model’s minimum financial covenants (including a debt service coverage target and a 365‑day minimum cash‑on‑hand requirement) while lowering the projected average customer bill in the 2030s compared with a higher short‑term increase.
The model includes current CIP projects and a proposed land acquisition; staff cautioned that the water/wastewater master plan (underway) could change the CIP and therefore alter projections. In the model’s out years (2035–2036) the scenario without additional smoothing shows multi‑digit increases (8.99% and 12.9% in one panel), while the 1% plan keeps long‑run targets met with smaller incremental increases.
Councilors asked about current fund balances and major capital costs, including a roughly $60 million Western Regional project that the staff said is mid‑execution. Staff also confirmed about $23 million in state funding (ARPA allocations referenced to the project) helped avoid larger rate increases in prior years.
Why it matters: water and sewer rates affect household bills and development capacity. The model ties rates to capital needs and bond covenants, so council decisions now shape customer bills and the utility’s financial health for years.
What’s next: staff included the 1% increase in the draft FY27 budget and will return with the rate ordinance and fee schedule during the budget process.
