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STAFF REPORT <br />DATE: March 17, 2026 <br /> <br /> <br /> <br />TO: Mayor and Council <br />FROM: Nina Kraemer, Finance Coordinator <br />REVIEWED BY: Clarissa Hadler, Finance Director <br />AGENDA ITEM: Utility Financial Management Plan Updates <br /> <br />CORE STRATEGIES: <br /> <br />☐ Vibrant, inclusive, connected community ☐ Efficient, reliable, innovative services <br />☐ Responsive, transparent, adaptive governance ☒ Balanced Finances now and future <br />☐ Managed Growth ☒ Resilient Infrastructure <br /> <br />BACKGROUND: <br />In 2025, the Finance Department completed a comprehensive utility study that informed updated utility <br />rates and revised assumptions from the original long-range plan prepared by Northland Securities, Inc. <br />Based on this analysis, sewer and water rates each increased by 20% over 2024, stormwater rates remained <br />unchanged, and new Multi-Family Residential water, sewer, and stormwater rates were implemented. The <br />same increase percentages for each of the funds was also recommended for 2026, but that has since been <br />revised. <br /> <br />Previous rate adjustments occurred in 2016, 2020, and 2023 following the City’s engagement with <br />Northland Securities, Inc. to prepare a long‑range financial management plan for the water, sewer, and <br />stormwater funds. Those increases averaged approximately 3% in each of those years and were heavily <br />subsidized by development revenues. <br /> <br />Updated assumptions—including the 2026–2035 Capital Improvement Plan (CIP) and the City Council’s <br />directive to review stormwater fees—required adjustments to the 2025 utility study for 2026 rates. <br /> <br />ISSUE BEFORE THE CITY COUNCIL: <br /> 1) Does the Council support the modified plan and rate adjustment for 2026? <br /> <br />REVIEW: <br />The financial management plan is a key tool used to set rates and plan for future operations and capital <br />investments in the utility funds. The plan incorporates capital improvement projects from the 10‑year <br />Capital Improvement Plan (CIP), projected growth in customers and operations, financing strategies, and <br />fund balance policies to determine the rates needed to sustain each utility fund. <br /> <br />Assumptions have been updated from last year’s plan to reflect the 2026–2035 CIP, actual 2025 customer <br />counts and usage changes, MPCA grant information, and updates to the development activity table. <br />One of the more significant updates to the Northland Securities model for 2025 and future years was the <br />change in the number of new MPCA‑funded connections and irrigation customers. <br /> <br /> <br />