(Red Oak) The City of Red Oak is considering three potential sewer rate adjustment scenarios to fund its wastewater treatment plant project and additional annual sewer capital improvements. The proposed funding plan would use interim financing followed by long-term USDA completion bonds for the wastewater plant project, in accordance with the USDA Letter of Conditions.
The plan also includes annual cash-funded sewer capital projects, with funding levels increasing to account for assumed construction inflation of five percent annually. The proposed annual funding amounts are $300,000 in fiscal year 2027-28, $315,000 in fiscal year 2028-29, and $330,000 in fiscal year 2029-30. The plan assumes a similar annual approach will continue in future years.
Chip Schultz with PFM Financial Advisors presented the three sewer rate adjustment scenarios to the City Council on Monday night.
The three scenarios outline changes to both the basic service charge and usage rates per 100 cubic feet of water consumed.
Scenario A calls for a 40-percent adjustment in the basic service charge beginning January 1, 2027, followed by a 35-percent increase on July 1, 2027, and a 10-percent increase on July 1, 2028. Usage rates would increase 15 percent on January 1, 2027, then 10 percent on July 1, 2027, and 5 percent on July 1, 2028.
Scenario B proposes a 35 percent adjustment in the basic service charge on January 1, 2027, another 35 percent increase on July 1, 2027, and a 15 percent increase on July 1, 2028. Usage rates would increase 12.5 percent on January 1, 2027, another 12.5 percent on July 1, 2027, and five percent on July 1, 2028.
Scenario C would increase the basic service charge by 40 percent on January 1, 2027, then by 5 percent on July 1, 2027, and by another 40 percent on July 1, 2028. Usage rates would increase 12.5 percent on January 1, 2027, five percent on July 1, 2027, and another 12.5 percent on July 1, 2028.
Under the proposed plan, sewer customers located outside the city limits would pay utility bills set at 200 percent of the rates charged to city residents and businesses.
Schultz says, for example, a residential household using 3,000 gallons of water is currently paying $38.94. The adjustment on July 1, 2027 would move to $47.00.
He says Commercial and industrial customers would also pay higher basic service charges than residential customers. The proposed commercial and industrial basic service charges would be set at 150 percent of residential rates, or 50 percent higher, to account for the larger infrastructure and associated costs required to provide service.
The three scenarios outline different approaches to phasing in sewer rate increases while funding the wastewater treatment plant project and maintaining annual investment in sewer infrastructure.
