Consultant recommends holding water rates, raising wastewater 10% as council seeks options to shield residents

Grady Reid, the HDR consultant who presented the city’s water and sewer rate study, recommended the city hold water rates steady for FY27 while implementing a 10% across‑the‑board wastewater increase to keep the utility moving toward its 25% reserve target.

Reid told the council the combined water and wastewater budget for the coming fiscal year is projected at about $72.2 million, including roughly $42.5 million in proposed debt for capital projects that drives much of the expense growth. He said the utility fund currently meets a 25% reserve requirement and that separating water and wastewater revenues and expenses in the model better isolates each utility’s needs. “We would recommend no increase to the water rates,” Reid said, and “we would recommend a 10% across the board rate increase for wastewater.”

The recommendation includes a differential for senior customers: HDR modeled senior rates rising at half the residential rate (about a 5% wastewater increase for seniors under the proposal). Reid said using fund balance in the short term can limit water increases while prioritizing wastewater stability, but warned continued deferred action would lead to larger increases later.

Council members pushed back on the distribution of increases. One council member urged protecting residential customers and asked staff to model shifting more of the wastewater burden onto industrial and commercial accounts — suggesting, as an example, up to a 20% increase for industrial customers and a smaller increase for commercial users — so residents would feel little to no change. Reid responded that staff would model customer‑class‑specific scenarios and return the revenue implications to council.

Councilors also pressed for operational fixes to reduce upward pressure on rates. Several members raised concerns that the city’s billing system and meter reads have under‑captured usage for large commercial customers, with one member saying corporate accounts may owe “hundreds of thousands” because of estimated billing. Staff said billing department data and an assessment of active taps will be produced for council review and that the city would prioritize high‑use customers for meter testing or replacement.

Next steps: staff will return with modeled alternatives that isolate the effect of increases by customer class, provide data on collections and active taps, and show the sensitivity of the utility model to debt timing and grant assumptions. The council will consider those options as it finalizes the FY27 budget in August.