Manassas Park presentation shows study that could require 41% water, 22% sewer revenue increases in FY2027

Manassas Park — Consultants contracted to study the city’s water and wastewater finances told the City Council on June 16 that current rates likely won’t cover projected costs and that a significant near-term revenue increase is needed if the council wishes to avoid drawing down reserves or deferring capital.

"This would require a 41% increase in revenue for FY2027," said Connor Dukus of New Gen Strategies and Solutions while walking the council through revenue-requirement charts that combine wholesale purchases, operating costs, debt service and cash-funded capital.

The consultants presented two principal rate approaches: a "current" design that relies heavily on a high flat monthly service charge and an "alternative" design that lowers the fixed-charge burden, bases the fixed portion on meter size and moves residential volumetric charges to a four-tier inclining-block structure intended to protect small users and promote conservation.

Under the firm’s modeling, the median residential water-and-sewer customer (assumed 4,000 gallons per month on a 5/8-inch meter) would see about a $28-per-month increase under the current design; that same median customer would face roughly a 4% combined increase under the alternative design because of the lifeline tier and smaller fixed charge. By contrast, a very large commercial user (about 17,000 gallons per month in the consultants’ example) could see substantially larger increases under the alternative design — the firm’s illustration showed about a 78% rise for that sample account.

Consultants emphasized that wholesale costs are the largest driver of future rate pressure: roughly 35% of water costs and 57% of sewer costs in the city’s model are paid to outside wholesale suppliers. The study also assumes wholesale cost increases of about 5% per year and a 3% annual inflation factor for local operating costs.

The presentation identified a $2 million annual transfer from the utility funds to the city’s general fund — an indirect cost allocation the consultants said is higher than nearby peers and recommended be validated by a formal indirect cost study. In response to council questioning, Dukus said the study’s high-level methods produced alternative allocations in the roughly $800,000 to $1.4 million range and that, "yes," a reduction of about $650,000 is plausible depending on the allocation method, but should be confirmed by a detailed study.

Council members repeatedly stressed concern about the distributional effects of large, near-term increases and asked for options that phase increases and protect vulnerable ratepayers. Mayor Mensing and other members noted that no rate action was required or taken at the June 16 meeting — staff and consultants characterized the session as informational, with potential policy decisions to follow after additional analysis and follow-up data (including multi-year CIP history, counts of large commercial customers and a formal indirect-cost allocation study).

Consultants recommended the council consider the alternative rate design for FY2027, adopt a schedule of regular rate reviews (annually), and commission a full cost-of-service study every three to five years. They also suggested the council explore options such as phasing increases, managing project timing to avoid cash shortfalls, and evaluating whether the city could generate revenue from excess treatment capacity.

What’s next: The council did not adopt new rates on June 16; staff said the presentation’s findings would be used to inform future budget and rate decisions, and that the city can run additional scenarios — including phased or mid‑year adjustments — and return with more detailed packet documents before any ordinance or vote.