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Commission weighs 2026 water and sewer budgets and a proposed 10% rate increase
Summary
At a Dec. 9 Public Utilities Commission meeting, staff reviewed draft 2026 water and sewer budgets, described Department of Health mandates and capital needs, and recommended a corrective 10% rate increase for water and sewer to stabilize reserves; commissioners agreed to continue the meeting Dec. 12 to decide.
Commission staff presented draft 2026 utility budgets and urged commissioners to consider a one‑time 10% increase in water and sewer rates to address rising capital needs, regulatory work and service costs.
Scott, who led the technical briefing, listed near‑term inspections the Minnesota Department of Health is requiring, including the Moose Tower reservoirs, the water plant clear well and the intake pipe from Lake Superior. "That's going to be somewhere in that 25 to $30,000 range to inspect all of that," Scott said, describing vendor use of underwater drones to evaluate structural condition.
Scott also warned of instrumentation and controls work: the plant's programmable logic controllers (PLCs) are no longer programmable and the current control vendor suggested a control‑system update that could cost "somewhere in that 70 to $100,000 range to update the control system," he said. Staff said they will pursue vendors and engineering options and ask the Department of Health whether it can assist in pressuring the vendor on warranty or service questions.
Finance discussion framed how depreciation and recent capital projects have increased the expense base: staff presented an expense budget for the water fund that includes a large depreciation line and debt service tied to recent projects (for example, a multi‑block Fifth Avenue pipe reconstruction). With projected revenues and reserves, staff said a 10% increase would close an immediate shortfall while allowing continued maintenance; they cautioned that the number could be adjusted if revenue assumptions change.
On wastewater, staff described higher hauling and processing costs for sludge and an engineering study that envisioned a major plant reconstruction — roughly a $10 million project — that could require multi‑year, double‑digit cumulative rate increases to finance the city’s share. "We are working diligently to get funded a major reconstruction project to the tune of $10 million," Scott said; he added the city’s required local match could drive substantial rate pressure in future years.
Commissioners discussed rate design options (fixed fee vs. volume charges), how recently built apartment buildings with a single meter affect measured sales and fee distribution, and how to treat hauled commercial waste revenue (a higher per‑gallon charge than residential flows). Staff emphasized conservative planning for less‑certain revenue lines such as leachate from legacy industrial ponds.
Because commissioners requested more time to review figures and supplemental materials, the commission agreed to continue the meeting to Friday, Dec. 12 at 9:00 a.m. for further deliberation; no vote to adopt the proposed rate increase occurred at the Dec. 9 session.
