Discussion and possible action to adopt RES. 2023-71 regarding a proposed adjustment to the water and wastewater rates, making the new rates and fees effective July 1, 2023 and July 1, 2024.

Water and wastewater rates and charges are adjusted from time to time to ensure water and wastewater system revenues cover operating and capital costs, provide revenue and rate stability, and achieve equity and conservation objectives.

City staff presented the recommended water and wastewater rate adjustments to Council at the February 21, 2023 and March 7, 2023 Council Study Sessions. The presentation included discussions on the factors influencing the rate adjustments including the drought, increasing water delivery costs, and repairs and maintenance of aging infrastructure. Inflation is also driving up the cost of electricity, chemicals and other materials and supplies. 

Over the past year, FCS Group worked with city staff to conduct a water/wastewater utilities rate study. The cost pressures on the utilities system and proposed rate adjustments are addressed in detail in the final FCS Group report.

The City complied with the requirements of ARS §9-511.01 by noticing the public of its intent to consider a rate adjustment in a public newspaper 20 days prior to the public hearing date and has made a written report available with the Office of the City Clerk and on the City website 30 days prior to the public hearing date.

Council is asked to hold a public hearing and consider formal adoption of the recommended water and wastewater rates and charges as the final steps in the rate setting process for water and wastewater.

If adopted, the new water and wastewater rates and various administrative fees for FY 2024 will be effective on July 1, 2023 and the new rates and fees for FY 2025 will be effective on July 1, 2024.

At the February 21, 2023 and March 7, 2023 Council Study Sessions, staff presented the recommendations for water and wastewater rates and discussed the operating budget and capital program factors that are influencing the recommended rate adjustments.

At the March 7, 2023 Council Meeting, Council adopted the statutorily-required Notice of Intention to adjust rates and charges, notifying the public that adjustments to water and wastewater rates and fees will be considered at the May 16, 2023 Council Meeting in a Public Hearing. This Notice was published in the Peoria Times newspaper during the week of April 10, 2023 to comply with state statutes applicable to water and wastewater rate setting.

On April 13, 2023, the City filed the Rate Report required under A.R.S §9-511.01 with the Clerk's Office and on the City website.

A: Adopt the attached Resolution adjusting the water and wastewater rates and fees, making the new rates and fees for FY 2024 effective July 1, 2023 and the new rates and fees for FY 2025 effective July 1, 2024.

B: Not adopt the attached Resolution adjusting the recommended water and wastewater rates and various administrative fees planned to be effective on July 1, 2023 and July 1, 2024. Not adopting all, or any portion of the recommended rates would continue the rates and fees currently in effect.

The proposed water and wastewater rates and fee adjustments provide the revenues necessary for the utility systems to ensure cost recovery, fund capital projects, and meet rate objectives of revenue stability, equity, and conservation.

The rate adjustments are also necessary to ensure compliance with the City’s reserve and debt service coverage policies within its Principles of Sound Financial Management.  

As shown in the attached Table 1, the average residential customer currently pays $71.51 for water and wastewater services. The proposed rate adjustment would increase the typical residential customer’s water and wastewater charges by 7.7% or $5.54 in FY 2024 and by 7.1% or $5.46 in FY 2025.

In general, non-residential customers would experience the same rate increases as residential customers. The water rate increase would be 12.0% in FY 2024 and 9.0% in FY 2025, and the wastewater rate increase would be 1.5% in FY 2024 and 4.0% in FY 2025.

The City believes that with these rate adjustments, the City's water and wastewater rates continue to be affordable and among the lowest when compared to peer cities in the Phoenix metro area.