Agenda Date: 10/06/2026
Subject:
Title
Utility Rate Study Final Report Discussion
Body
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From: |
James L. Becklenberg, City Manager |
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Prepared by: |
Ryan Germeroth, Deputy Director of Public Works & Utilities |
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Presentations: |
Brent Soderlin, Director of Public Works & Utilities |
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Laurie Matta, Director of Finance |
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Ryan Germeroth, Deputy Director of Public Works & Utilities |
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Todd Cristiano, Vice President Raftelis |
PURPOSE:
The purpose of this item is to provide Council with an overview of the final draft report and final proposed rate structure for the Utility Rate Study. The content will cover a very brief overview of the final financial plan and the proposed rate structure based on average winter consumption for residential and actual use for commercial. Input received by Council at both the May 12th and August 11th study sessions has been considered. A discussion will also be provided on considerations around an affordability program for those that qualify based on income. Finally, a summary of the public outreach including results of the billing frequency poll will be shared.
LONG-TERM OUTCOME(S) SERVED:
Sustainable Community with Natural Beauty; Safe Community; High-Quality Governance
DISCUSSION:
Littleton is planning for the future with a comprehensive study to update sewer and stormwater rates. These updates are essential to funding critical repairs and maintaining the infrastructure that protects Littleton homes and businesses, public health, and the South Platte River. While our 129 miles of sanitary sewer, 53 miles of storm drains, and 30 miles of drainage ways operate 24/7, many parts of the systems are aging. Proactive upgrades will prevent service disruptions and public safety concerns by providing resilience through fiscal responsibility.
Sewer and stormwater bills directly fund essential infrastructure improvements and proactive maintenance. Over the next 10 years, the City plans to repair or replace 24 miles of sanitary sewer, work with partners to modernize the South Platte Renew wastewater treatment facility to meet federal environmental requirements and replace 15 miles of storm drains. By addressing these needs now, Littleton avoids the significantly higher costs and public safety risks associated with emergency repairs like those on Jackass Hill Road or Broadway and Lee Gulch. It also assures the City charges a fair and consistent rate to the nine water and sanitation districts that connect into the sanitary sewer system for treatment only.
Over the past few months, City staff have partnered with the staff from Raftelis to create a 10-year financial plan that accounts for the costs of the day-to-day maintenance and annual capital project needs of the sanitary and storm sewer systems. The goal is to align future bills with the actual cost of service, including upgrades to critical infrastructure and regular maintenance, and ensure the City can continue to provide reliable service. The current proposed financial plan has been updated to reflect feedback received from Council at both the May 12th and August 11th study sessions. Below is a summary of the findings of the 10-year plan:
• The total capital program need for the sanitary sewer system is projected to be about $256 million over the next 10 years. About $180 million of that is needed for projects at South Platte Renew.
• Debt issuance is limited to $65M to follow the City Charter allowance for indebtedness while still fully funding the capital program. This debt cap is one of the reasons for the difference in projected revenue in 2029 through 2035 when compared to the May 12th presentation. However, on August 11th, Council provided direction to have higher increases in the first two years followed by lower increases in the future years which has been accomplished. The following table shows a comparison of the projected revenue increases for the sanitary sewer fund.
Table 1. Projected Revenue Increases - Sewer Fund
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Projected Revenue Increase |
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Year |
May 12th Presentation |
August 11th Presentation |
October 6th Presentation |
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2027 |
25% |
15% |
25% |
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2028 |
25% |
15% |
25% |
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2029 |
3% |
11% |
5% |
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2030 |
3% |
11% |
5% |
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2031 |
3% |
10% |
5% |
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2032 |
3% |
10% |
5% |
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2033 |
3% |
10% |
5% |
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2034 |
3% |
10% |
5% |
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2035 |
3% |
0% |
5% |
• The total capital program need for the stormwater system is projected to be about $73 million over the next 10 years. The largest portion of that funding would cover stormwater pipe replacement projects. Rate increases and tap fees would fund about $50 million in projects while about $23 million would be funded with revenue bonds and loans.
• To meet the need for the stormwater sewer program a revenue increase of 60% will be needed for 2027 and 2028 with increases dropping to 5% per year for 2029 through 2035.
• The plan also includes the addition of three staff in 2027 and three staff in 2028. Four of these staff would join the Water Resources Engineering team and two would join the field operations team. These additional staff will be needed to keep up with the engineering and maintenance work needed on the system as the additional revenue is put to work.
The information from the financial plan was used to develop the cost of service for each class of user (single family, multi-family, and commercial) and then a proposed rate structure for both sanitary and storm was developed.
Historically, Littleton has charged sanitary sewer rates as a fixed rate for residential properties regardless of water use while the commercial rate has a minimum charge that is based on the average monthly volume of the lowest two months of use. For uses that exceed 22,000 gallons per month in the city and 44,000 gallons per month outside the city a billable rate per 1,000 gallons is used. While the fixed rate can provide a predictable bill for each user, it does not incentivize users to conserve water or equitably charge each user for water they are sending into the system for conveyance and treatment. The result is that some users are subsidizing the bill of others. Based on this, staff are proposed moving from the current fixed rate system to one that has a fixed portion for administrative costs with the rest of the charge based on actual use. Council was supportive of this recommendation at the August 11th meeting. For both single family and multi-family residential properties, the average use will be based on average winter consumption (AWC) from January through March while the use rate for commercial properties will be based on actual water use. Currently the average residential user consumes about 3,000 to 4,000 gallons of water per month in the winter. Under this proposed system, the following charts show the sanitary sewer monthly bill comparisons for single family, multi-family, and commercial properties for 2026 fixed rate and 2027 rates using AWC.
Table 2. Single Family Residential Monthly Bill Comparison
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Scenario |
Inside City |
Inside City in District |
Outside City |
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Fixed Rate Structure |
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2026 Fixed Rate (All consumption) |
$30 |
$23 |
$27 |
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Flexible Rate Structure |
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2,000 Gal (AWC) |
$28 |
$25 |
$30 |
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3,000 Gal (AWC) |
$32 |
$28 |
$34 |
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4,000 Gal (AWC) |
$36 |
$31 |
$37 |
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5,000 Gal (AWC) |
$41 |
$34 |
$41 |
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6,000 Gal (AWC) |
$45 |
$37 |
$45 |
Table 3. Multi-Family Residential (Per Unit) Monthly Bill Comparison
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Scenario |
Inside City |
Inside City in District |
Outside City |
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Fixed Rate Structure |
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2026 Fixed Rate (All consumption) |
$26 |
$19 |
$23 |
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Flexible Rate Structure |
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2,000 Gal (AWC) |
$23 |
$20 |
$24 |
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3,000 Gal (AWC) |
$27 |
$23 |
$28 |
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4,000 Gal (AWC) |
$32 |
$27 |
$32 |
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5,000 Gal (AWC) |
$36 |
$30 |
$35 |
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6,000 Gal (AWC) |
$41 |
$33 |
$39 |
Table 4. Commercial Monthly Bill Comparison
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Inside City |
Outside City |
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Use (gal) |
2026 Fixed |
2027 Flexible |
2026 Fixed |
2027 Flexible |
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10,000 |
$12 |
$23 |
$15 |
$26 |
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20,000 |
$12 |
$26 |
$15 |
$29 |
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30,000 |
$17 |
$30 |
$15 |
$32 |
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40,000 |
$22 |
$34 |
$15 |
$35 |
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50,000 |
$28 |
$37 |
$15 |
$38 |
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60,000 |
$33 |
$41 |
$18 |
$41 |
As can be seen in these tables, the average single family user’s bill within the city will go up $6.43 per month under the AWC rate with the 25% financial plan revenue increase. This is about $5 more per month than the 15% revenue increase scenario presented to Council in August. The benefit, though, is that users consuming less than average amount of water or who take measures to reduce their consumption, may either see their sanitary sewer bills go down from what they were in 2026 or be able to temper the increase they experience by using less water. The same is true of multi-family users as well. Finally, the change for commercial users is very much dependent on use. The average commercial customer uses around 50,000 to 60,000 gallons per month. The average commercial user’s bill within the city will go up about $9 per month under the use-based rate structure.
In addition to sewer rates, the new connection tap fee was also reviewed as a part of the final steps of this project. The current tap fee is $5,000 to $5,656 for residential class properties depending on if the property is located within the city limits or outside the city limits. The commercial class tap fee ranges from $5,000 to over $3M based on the size of the water meter. The current Littleton tap fees are higher than neighboring jurisdictions like the city’s South Platte Renew partner Englewood which range from $2,300 to $179,000. The difference is due to a different methodology in how the tap fee is calculated. From an industry standard, either method can be used so it is up to each utility to select how to calculate tap fees. Based on the current analysis using the same method as South Platte Renew partner Englewood, the tap fee for the city of Littleton could be reduced to about $1,700 for residential class properties and range up to $1,026,000 for commercial properties with larger meter sizes. This change in tap fee is projected to reduce the sanitary sewer revenue currently collected for tap fees by about $480,000 per year. To accommodate this lower tap fee, the sanitary sewer customer rates shown previously would need to increase about an additional 2% or about $0.65 to $0.75 more per month per average residential customer. If the previous method is used for the calculation of the tap fee, no change would be recommended to the tap fee and the customer rates would not need to increase to cover the reduction in revenue.
For stormwater rates, the structure is the same as what it was previously where the rate is different for single family versus muti-family and non-residential structures depending on if the lot for the given property is developed versus undeveloped. The following table shows the comparison of the current rates to the proposed rates using the cost-of-service model developed.
Table 5. Stormwater Rate Comparison (Annual Rates)
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Single Family Detached |
Multi-Family & Non-Residential Property |
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2026 |
2027 - Proposed |
2026 |
2027 - Proposed |
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Developed |
$124.54 / lot |
$199.26 / lot |
$1,037.31 / paved acre plus $259.33 / landscaped acre |
$1,659.70 / paved acre plus $414.93 / landscaped acre |
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Subdivided, undeveloped |
$31.12 / lot |
$49.79 / lot |
$259.33 / lot |
$414.93 / lot |
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Unsubdivided, undeveloped |
$259.33 / lot |
$414.93 / lot |
$259.33 / lot |
$414.93 / lot |
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Vacant & undisturbed |
$25.95 / acre |
$41.52 / acre |
$25.95 / acre |
$41.52 / acre |
As can be seen in the table, the increase for a typical single-family home will be about $6 per month or $75 per year.
Even with the proposed rate increases in both sanitary sewer and stormwater, Littleton’s rates would still be about average or less than many of the other comparable jurisdictions along the Front Range.
One other consideration that has been studied in more detail, is the need and impact of an affordability program that would provide a lower utility rate for customers who qualify for a reduced utility rate based on their income. There are many ways to administer this kind of program. The recommendation would be to use Xcel Energy’s qualification criteria to ease the administrative work needed by city staff to determine eligibility. At this time, access is not available to detail Xcel customer data until a data sharing agreement is created with the city so a more general analysis based on census data has been completed. Overall, the metrics show the customer base in Littleton can afford their utility bills when reviewing all affordability metrics. However, based on census data, there may be about 2,000 households that could qualify for long-term assistance in Littleton. This is about 5 to 10 percent of the customer base. If directed by Council, implementing this program may result in higher utility rates for those who do not qualify to keep the revenue stream the same or the city would need to subsize the reduced rate with city funds. If the discount is applied to the fixed portion of the sewer bill, the annual cost of the program is estimated to range from about $114,000 for a 25% discount to about $343,000 for a 75% discount. This would save those that qualify for the program anywhere from about $5 to $14 per month depending on the discount. If funded by rate payers, the cost to the average rate payer would go up about $1.10 to $3.25 per month depending on the discount.
Public outreach and communication have been a part of the project for the past several months as well. A project page was created and regularly updated on Let’s Talk Littleton. There was also a total of 14 articles shared through Littleton Report (5), Littleton Links (7), and Littleton at Work (2). This was in addition to a total of 27 social media posts on the City’s social media channels. Staff were also present during Council office hours on two occasions and were present at the four Meet, Greet, & Eat events to share information and answer questions. We also had meetings with connector district staff and staff with Littleton Public Schools. There were also two public meetings one was in person at the Littleton Center on August 26th and the other was a virtual meeting on September 3rd that was recorded and shared on the project webpage. We also asked for input from the public on preferences they may have on the frequency of billing whether that be monthly, bi-monthly, or quarterly. This poll closes on October 5th so we will share the results during the presentation with Council. Finally, a citywide mailer is tentatively planned for early 2027 as the new rates go into effect.
BACKGROUND:
To continue delivering the high-quality sewer and stormwater services Littleton customers expect and deserve, the City must periodically adjust utility rates to recover the costs of operating, maintaining, and providing these services. The City is reviewing its stormwater and sewer rates to ensure that future revenues are sufficient to operate and maintain each utility and to support the reliability and resilience of our critical infrastructure in the future.
Prior Actions or Discussions
Council approves the utility rates for stormwater and sanitary sewer each year as a part of the annual budget process. The last rate study was completed in 2020 with presentations to Council occurring at that time.
Staff provided an overview of the goals and objectives for the Utility Rate Study and gathered initial feedback at the March 10th, 2026, study session.
Staff then provided an overview of the first draft of the financial plan at the May 12th, 2026 study session. Council provided feedback on the plan including a desire to reduce or smooth the increase of the revenue increase on the sanitary sewer fund since the increases appeared higher than needed.
Staff provided a final overview of an updated draft of the financial plan at the August 11th, 2026 study session. After some discussion, Council provided feedback to go back to the plan presented in May with two higher increases the first two years and lower increases the subsequent years. A request was also made to provide more information on a rate affordability program.
FISCAL IMPACTS:
The 10-year financial plan is projected to need about $256 million in capital funding for the sanitary sewer system and about $73 million in capital funding for the stormwater system. To fund both programs, this will require an initial revenue increase of 25% per year for 2027 and 2028 for the sanitary sewer system and 60% per year for the same two years for the stormwater system. The annual increases would then reduce per year for the remainder of the 10-year planning timeframe as shown earlier. For the average customer, this would result in an increase of about $6 per month on their sanitary sewer bill for 2027 if the flexible rate structure is implemented and about $6 per month on their stormwater bill for 2027. If Council direct staff to also lower the new connection tap fee for sanitary sewer service, an additional $0.65 to $0.75 per month would be added to each average use residential customer bill. Otherwise, the tap fee would remain the same and customer rates would not need to be adjusted.
STAFF RECOMMENDATION:
Staff recommend that council support the rate structure changes for the sanitary sewer system by using an average winter consumption for residential properties and actual consumption for commercial properties. In addition, staff recommend that council support the proposed stormwater rate structure as shown. Staff also recommend that council reduce the new connection tap fee to better align with the city’s South Platte Renew partner Englewood which will result in a needed increase to customer rates for sanitary sewer service. Finally, staff recommend that council give direction on whether to proceed in developing a program that provides support to lower-income populations by reducing their sewer and stormwater rates if they qualify for the program.
ALTERNATIVES:
N/A
Proposed Motion