City staff outline utility fund and propose 10% water and sewer rate increase

City staff reviewed the utility (enterprise) fund and told council the FY25–26 top-line utility budget is approximately $14.7 million, with debt service composing a large share of the enterprise’s nondepartmental costs.

Staff presented a recommendation to propose a 10% increase in water and sewer rates to support the Water Resource Recovery Facility (WRRF) upgrade and expansion, attributing the recommendation to the Stantec/Davenport study that was previously presented to council. The public-utilities director said the increase is driven by system needs and the anticipated debt-service and operating requirements that will come with the WRRF upgrade.

"Our rate increases are based upon our needs, not a comparison to other municipalities," the public utilities director said, adding staff uses UNC School of Government dashboards for comparative context. The director also noted that the utility fund’s unrestricted net position appropriation after planned debt issuance would be lower than the current fiscal year but that interest-only payments for the WRRF upgrade will be a factor in FY25–26.

Staff reviewed proposed utility capital requests and replacement items and noted one previously proposed utility maintenance-technician position is currently proposed to be cut because the utility fund cannot sustain the addition at this time. Staff also reviewed the utility capital reserve funded by system-development fees, estimating roughly $700,000 in water SDFs and $2.1 million in sewer SDFs next year and a projected reserve increase of about $2.8 million.

No formal rate adoption occurred at the work session. Staff said the 10% proposal will be refined and presented as part of the manager’s recommended budget and any ordinance or rate schedule changes would return to the council for formal consideration.