Agenda Date: 08/11/2026
Subject:
Title
Utility Rate Study Results Discussion - Part 2
Body
|
From: |
James L. Becklenberg, City Manager |
|
Prepared by: |
Ryan Germeroth, Deputy Public Works Director |
|
Presentations: |
Brent Soderlin, Director of Public Works & Utilities |
|
|
Laurie Matta, Director of Finance |
|
|
Ryan Germeroth, Deputy Public Works Director |
|
|
Todd Cristiano, Vice President Raftelis |
PURPOSE:
The purpose of this item is to provide Council with an overview of the final draft financial plan and proposed revenue increases for the Utility Rate Study. The content will cover the projected costs of both the sanitary sewer and stormwater utility capital and maintenance plans. Input received by Council at the May 12th study session has been incorporated. A proposed rate structure will also be presented that is intended to more equitably bill users as compared to the current flat rate system and encourage users to reduce water consumption if they can. Public engagement and the timeline for the review and future rate approval will also be discussed.
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 on May 12th. 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 the South Platte Renew treatment facility jointly owned with the City of Englewood.
• Debt issuance is limited to $65M to follow the City Charter allowance for indebtedness while still fully funding the capital program. This option smooths the increase over multiple years as requested by Council on May 12th. The following table shows a comparison of the projected revenue increases for the sanitary sewer fund.
Table 1. Projected Revenue Increases
|
|
Projected Revenue Increase |
|
Year |
May 12th Presentation |
August 11th Presentation |
|
2027 |
25% |
15% |
|
2028 |
25% |
15% |
|
2029 |
3% |
11% |
|
2030 |
3% |
11% |
|
2031 |
3% |
10% |
|
2032 |
3% |
10% |
|
2033 |
3% |
10% |
|
2034 |
3% |
10% |
|
2035 |
3% |
0% |
• 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 proposing 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. 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, 2027 fixed rate, and 2027 rates using AWC.
Table 2. Single Family Residential Monthly Bill Comparison
|
Scenario |
Inside City |
Inside City in District |
Outside City |
|
Fixed Rate Structure |
|
2026 Fixed Rate (All consumption) |
$30 |
$23 |
$27 |
|
2027 Fixed Rate (All consumption) |
$35 |
$26 |
$31 |
|
Flexible Rate Structure |
|
2,000 Gal (AWC) |
$23 |
$21 |
$25 |
|
3,000 Gal (AWC) |
$28 |
$24 |
$29 |
|
4,000 Gal (AWC) |
$32 |
$27 |
$33 |
|
5,000 Gal (AWC) |
$36 |
$30 |
$36 |
|
6,000 Gal (AWC) |
$40 |
$33 |
$40 |
Table 3. Multi-Family Residential (Per Unit) Monthly Bill Comparison
|
Scenario |
Inside City |
Inside City in District |
Outside City |
|
Fixed Rate Structure |
|
2026 Fixed Rate (All consumption) |
$26 |
$19 |
$23 |
|
2027 Fixed Rate (All consumption) |
$29 |
$22 |
$27 |
|
Flexible Rate Structure |
|
2,000 Gal (AWC) |
$20 |
$17 |
$21 |
|
3,000 Gal (AWC) |
$24 |
$20 |
$24 |
|
4,000 Gal (AWC) |
$28 |
$23 |
$28 |
|
5,000 Gal (AWC) |
$32 |
$26 |
$32 |
|
6,000 Gal (AWC) |
$36 |
$29 |
$35 |
Table 4. Commercial Monthly Bill Comparison
|
|
Inside City |
Outside City |
|
Use (gal) |
2026 Fixed |
2027 Fixed |
2027 Flexible |
2026 Fixed |
2027 Fixed |
2027 Flexible |
|
10,000 |
$12 |
$14 |
$19 |
$15 |
$17 |
$21 |
|
20,000 |
$12 |
$14 |
$22 |
$15 |
$17 |
$24 |
|
30,000 |
$17 |
$21 |
$26 |
$15 |
$17 |
$27 |
|
40,000 |
$22 |
$28 |
$29 |
$15 |
$17 |
$30 |
|
50,000 |
$28 |
$35 |
$32 |
$15 |
$17 |
$33 |
|
60,000 |
$33 |
$41 |
$36 |
$18 |
$21 |
$36 |
As can be seen in these tables, the average single family user’s bill within the city will go up anywhere from $1.66 per month under the AWC rate up to about $3 per month if the fully fixed rate remains in place. The benefit, though, is that users consuming less than average amount of water or who take measures to reduce their consumption, will see their sanitary sewer bills go down from what they were in 2026. 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 $4 to $8 per month depending on which rate structure is selected.
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)
|
|
Single Family Detached |
Multi-Family & Non-Residential Property |
|
|
2026 |
2027 - Proposed |
2026 |
2027 - Proposed |
|
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 |
|
Subdivided, undeveloped |
$31.12 / lot |
$49.79 / lot |
$259.33 / lot |
$414.93 / lot |
|
Unsubdivided, undeveloped |
$259.33 / lot |
$414.93 / lot |
$259.33 / lot |
$414.93 / lot |
|
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 can be studied in more detail as the rates above are finalized, is whether the city will provide a lower utility rate for customers who qualify for a reduced utility rate based on income. There are many ways to administer a program like this and it 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 council is interested at looking into the details of creating a program like this, this task can be added to the project with a summary provided at the final project presentation this fall.
Public outreach and communication will be a part of the project over the next several months as well. Staff were present during Council office hours on July 31st and will be present at the remaining Meet, Greet, & Eat events to share information and answer questions. Then staff will meet with the connector district staff in late August and hold two other public meetings. One will be in person at the Littleton Center on August 26th and the other will be a virtual meeting on September 3rd. These meetings will inform attendees of the purpose and need of the rate study and communicate the new rate structure. We will also ask for input from the public on preferences they may have on the frequency of billing whether that be monthly, bi-monthly, quarterly, bi-annually, or annually as currently billed. The feedback gathered from these meetings will be shared with Council in advance of the 2027 budget being finalized.
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.
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 fully fund both programs, this will require an initial revenue increase of 15% 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 $2 per month on their sanitary sewer bill if the flexible rate structure is implemented and about $6 per month on their stormwater bill.
STAFF RECOMMENDATION:
• Support the rate structure changes for the sanitary sewer system and move to billing for average winter consumption for residential properties and actual consumption for commercial properties instead of having a fixed rate regardless of water use.
• Support the proposed stormwater rate structure as shown.
• Direct staff to proceed with public outreach as proposed.
• Direction on whether or not to investigate implementation of a program that provides support to lower-income populations by reducing their sewer and stormwater rates if they qualify for the program. The financial impact to other customers who do not qualify or the city if subsidized is unknown currently but can be determined if council is interested in finding out more.
ALTERNATIVES:
• For sewer rates, alternative direction could be to proceed with the current (fixed) model for sewer rates by user class.
• Council could request different policy approaches to completing utility capital projects (e.g., only complete urgent projects without programming additional long-term maintenance and repairs). This approach is not advisable for long-term stewardship of the system but could result in lower short-term rates. If directed, staff would schedule subsequent study sessions for consideration of these policy alternatives.
Proposed Motion