Presentation

FY 2026/27 Utility Fund Forecast &
Rates Recommendation
City Council Study Session
Presenters: Brian A. Ritschel – Management & Budget Director
Joe Giudice – Water Resources Director
Scott Bouchie – Energy Resources Director
Sheri Collins – Solid Waste Director
September 24, 2026

Utility Operations
Each utility is operated as a Reserve balance provides a safety Reserve balance can be used to
separate business center but net for unforeseen conditions smooth rate adjustments year to
year
treated as one fund
2

Financial Principles
BALANCE NET SOURCES 20% OR HIGHER RESERVE RATE ADJUSTMENTS THAT
AND USES FUND BALANCE ARE PREDICTABLE AND
SMOOTHED THROUGHOUT
THE FORECAST
EQUITY BETWEEN AFFORDABLE UTILITY
RESIDENTIAL AND NON- SERVICES
RESIDENTIAL RATES
3

FY 26/27 Adopted Budget
4

Updated Forecast – Budgeted Rate Adjustments
5

FY 25/26 Year End Estimate Updates
• Improvement in net sources and uses from Quarter 3 Year End
Estimates to Quarter 4 Year End Estimates
• Significant favorable items:
• $6.9M Higher than anticipated water consumption
• $2.6M Water Treatment and Water Reclamation Plant operating expenses
• $2.3M refunding of utility debt service
• $2.1M Water commodity purchases (CY 2025 CAP reconcile credit)
• $2.1M Solid Waste fleet and landfill charges
6

Water Resources Department
Rates Recommendations
Joe Giudice – Director
Chase Carlile – Deputy Director
Erik Hansen – Utilities Financial Analyst

Water Program
Recommended Rate Adjustments
8

Operating Costs – Water Utility
$140M
$120M
$107.3M
$103.9M
$101.0M
$98.3M
$100M $94.5M
$91.5M
$78.6M $77.9M
$80M $73.2M
$61.8M $64.0M
$60M
$40M
$20M
$0M
FY21/22 FY22/23 FY23/24 FY24/25 FY25/26 FY26/27 FY27/28 FY28/29 FY29/30 FY30/31 FY31/32
Actual Actual Actual Actual Estimate Projected Forecast Forecast Forecast Forecast Forecast
9

Debt Service – Water Utility
$100M $97.7M
$90.7M
$90M $86.1M
$21.3M
$81.4M $15.9M
$80M $76.5M $11.1M
$6.3M
$72.2M $3.9M
$70M $67.2M
$60M $57.1M
$52.2M
$50M $47.9M $49.3M
$40M
$72.6M $75.0M $75.0M $74.9M $76.4M
$30M
$20M
$10M
$0M
FY21/22 FY22/23 FY23/24 FY24/25 FY25/26 FY26/27 FY27/28 FY28/29 FY29/30 FY30/31 FY31/32
Actual Actual Actual Actual Estimate Forecast Forecast Forecast Forecast Forecast Forecast
Existing Debt Service Projected Future Debt Service
10

Rate Adjustments that are Predictable and Smoothed
Recommended Rate Adjustments
Budget Forecast
Rate Staff Recommended AF&E Recommended
Customer Recommended Rate
Component Rate Adjustment Rate Adjustment
Adjustment
Service Charge
All Customers +4.5% +4.0% +3.5%
Drought Commodity Charge
All Customers $0.08 $0.13 $0.13
Usage Charge
Residential
• Tier I (4,000 – 6,000 gallons) +3.5% +3.5% +3.5%
• Tier 2 (7,000 – 14,000 gallons) +3.5% +3.5% +3.5%
• Tier 3 (15,000 – 24,000 gallons) +4.5% +4.5% +4.5%
• Tier 4 (>24,000 gallons) +4.5% +4.5% +4.5%
Commercial +13.0% +13.0% +13.0%
11

Rate Adjustments that are Predictable and Smoothed
Recommended Rate Adjustments
Budget Forecast
Rate Recommended Rate
Customer Recommended Rate
Component Adjustment
Adjustment
Usage Charge
Large Commercial +13.0% +23.0%
Other Non-residential +12.0% +12.0%
Non-residential Landscape +15.0% +15.0%
Surcharge
Excess Surcharge - General
+13.0%
• Tier 1 (>100% – 150% of WWA) +13.0%
(>100% of WWA)
• Tier 2 (>150% of WWA) N/A +23.0%
Excess Surcharge - Landscape
+15.0%
• Tier 1 (>100% – 150% of WWA) +15.0%
(>100% of WWA)
• Tier 2 (>150% of WWA) N/A +25.0%
12

Excess Water Surcharge
Existing Excess Water Surcharge:
Commercial Landscape Example
16
14
12
Winter Water Average
10 8 kgals
$2.99/kgal
Existing Excess Surcharge Threshold (>100% WWA)
kgals 8
6
4
2
0
December January February March April May June July August September October November
13

Excess Water Surcharge
Proposed Tiered Excess Water Surcharge:
Commercial Landscape Example
16
14
$3.74/kgal
Excess Surcharge – Tier 2 (>150% WWA)
12
Winter Water Average
10 8 kgals
$3.44/kgal
Excess Surcharge – Tier 1 (>100 – 150% WWA)
kgals 8
6
4
2
0
December January February March April May June July August September October November
14

Historical Excess Surcharge Distribution -
Under Proposed Tiers
General Commercial
Percent of Bills Percent of Water Monthly Consumption by Percent Winter Water
Consumed Average
100% 100% 800K
22%
80% 80% 36% 600K
19% kgals
60% 60%
400K
23%
40% 40%
59% 200K
20% 20% 41%
0K
0% 0% 1 2 3 4 5 6 7 8 9 10 11 12
2025 2025 2025
15

Historical Excess Surcharge Distribution -
Under Proposed Tiers
Commercial Landscape
Percent of Water Monthly Consumption by Percent Winter Water
Percent of Bills
Consumed Average
100% 100% 800K
80% 45% 80% 600K
69% kgals
60% 60%
400K
16%
40% 40%
200K
14%
20%
20% 39%
17% 0K
0% 1 2 3 4 5 6 7 8 9 10 11 12
0% 2025
2025 2025
16

Equity Between Residential and Non-residential Rates
56%
52%
48%
44%
Estimate Projected Forecast Forecast
FY 25/26 FY 26/27 FY 27/28 FY 28/29
Residential Rate Revenue Non-residential Rate Revenue
Residential Consumption Non-residential Consumption
FY 25/26 FY 26/27 FY 27/28 FY 28/29
Estimate Projected Forecast Forecast
(parity) (equity)
Residential Rate Revenue 53% 50% 48% 47%
Non-residential Rate Revenue 47% 50% 52% 53%
Residential Consumption 46% 47% 47% 47%
Non-residential Consumption 54% 53% 53% 53%
17

Affordable Utility Services
High Water Burden
5%
4%
3%
2%
1%
0%
2023 2024 2025 2026 2027 (proposed)
EPA's Threshold of "High Water Burden"
Typical Customer's Annual Water and Wastewater Expenses as a percent of Minimum Wage (yearly)
Typical Customer's Annual Water and Wastewater Expenses as a percent of Median Household Income
The 4.5 percent threshold is widely used in literature (Cardoso & Wichman, 2022a; Berahzer et al., 2023; Heminger et al., 2023; Mack & Wrase, 2017). Use of the 4.5
percent threshold is largely consistent with the Hours of Labor at Minimum wage metric, which suggests a threshold of one day (8 hours), or 4.6 percent of work hours
in a month, assuming a 40-hour work week.
18

Customer Impact
Prior Forecast AF&E
Staff Recommended
Typical Customer Current Bill Recommended Rate Recommended Rate
Rate Adjustment
Adjustment Adjustment
Residential $44.64 +4.2% $46.51 +4.2% $46.50 +3.8% $46.33
(6 kgals/month) (+$1.87) (+$1.86) (+$1.69)
Multi-unit Development $41.48 $45.12 +9.2% $45.28 +9.0% $45.20
(6 kgals/month) +8.8% (+$3.64) (+$3.80) (+$3.72)
Commercial – General $87.83 +7.6% $94.51 +7.6% $94.53 +7.3% $94.26
(9 kgals/month) (+$6.68) (+$6.70) (+$6.43)
Commercial – Landscape $235.91 +12.4% $265.09 +12.9% $266.31 +12.8% $266.04
(33 kgals/month) (+$29.18) (+$30.40) (+$30.13)
19

Wastewater Program
Recommended Rate Adjustments
20

Operating Costs – Wastewater Utility
$70
Millions
$60 $56.7M
$52.6M $53.9M
$51.1M
$49.3M
$50 $47.3M
$42.7M
$40.1M
$40 $37.6M
$32.0M
$29.6M
$30
$20
$10
$0
FY21/22 FY22/23 FY23/24 FY24/25 FY25/26 FY26/27 FY27/28 FY28/29 FY29/30 FY30/31 FY31/32
Actual Actual Actual Actual Estimate Projected Forecast Forecast Forecast Forecast Forecast
21

Debt Service – Wastewater Utility
$100M
$90M
$80M
$70M $67.1M
$60.2M
$60M
$55.3M
$52.3M
$49.1M $29.3M
$50M $22.5M
$43.0M $44.3M $5.7M $10.9M $16.7M
$41.5M $41.1M
$39.5M
$40M $37.5M
$30M
$20M $43.3M $41.5M $38.7M $37.7M $37.9M
$10M
$0M
FY21/22 FY22/23 FY23/24 FY24/25 FY25/26 FY26/27 FY27/28 FY28/29 FY29/30 FY30/31 FY31/32
Actual Actual Actual Actual Estimate Forecast Forecast Forecast Forecast Forecast Forecast
Existing Debt Service Projected Future Debt Service
22

Rate Adjustments that are Predictable and Smoothed
Recommended Rate Adjustments
Prior Forecast
Rate Recommended
Customer Recommended Rate
Component Rate Adjustment
Adjustment
Service Charge
Residential +7.5% +7.5%
Non-residential +8.5% +8.5%
Usage Charge
Residential +7.5% +7.5%
Non-residential +8.5% +8.5%
23

Customer Impact
Recommended Rate Impact to
Typical Customer Current Bill
Adjustment Current Bill
Residential Service Charge: +7.5% $32.44
$30.18 +7.5%
(4 kgals/month) Usage Charge: +7.5% (+$2.26)
Commercial Service Charge: +8.5% $66.96
$61.70 +8.5%
(9 kgals/month) Usage Charge: +8.5% (+$5.26)
24

Energy Resources
Rates Recommendations
Scott Bouchie – Director
John Petrof – Senior Fiscal Analyst

Electric
26

Operating Costs – Electric Utility
$14
Millions
$12 $11.3M
$10.8M $11.0M
$10.5M $10.6M
$10.0M $10.1M
$10 $9.3M
$9.1M
$8.5M
$8.1M
$8
$6
$4
$2
$0
FY 21/22 FY 22/23 FY 23/24 FY 24/25 FY 25/26 FY 26/27 FY 27/28 FY 28/29 FY 29/30 FY 30/31 FY 31/32
Actuals Actuals Actuals Actuals Estimate Projected Forecast Forecast Forecast Forecast Forecast
27

Debt Service – Electric Utility
$50M
Millions
$45M
$40M
$35M
$30M
$25M
$20M
$15M $8.1M $8.8M $9.3M
$6.9M
$5.8M
$10M $1.9M $2.5M $3.0M
$1.3M
$4.1M $4.8M $4.0M $4.9M $4.8M $0.8M
$5M $3.2M
$5.0M $5.6M $6.2M $6.4M $6.3M
$0M
FY21/22 FY22/23 FY23/24 FY24/25 FY25/26 FY26/27 FY27/28 FY28/29 FY29/30 FY30/31 FY31/32
Actual Actual Actual Actual Estimate Forecast Forecast Forecast Forecast Forecast Forecast
Existing Debt Service Projected Future Debt Service
28

Total Residential Customer Electric Supply Cost – SRP vs COM
29

SRP/APS Increases
SRP – November 2025 Rate Increase
• Overall - 2.4% price increase
• Average residential user bill impact - $5.61
• Average Usage – 1,117 kWh
• Tiered Monthly Service Charge
• Tier 1 – Multifamily home - $20 (current)
• Tier 2 – Single-family home with average usage - $30
• Tier 3 – Large single-family home user - $40 (About 3% of residential customers)
APS – 2025 Rate Case
• Rate review process continues through end of 2026
• Average residential user bill impact - $20 per month
• Average Usage – 1,000 kWh
30

Residential Electric Bill Comparison
31

Residential Electric Bills
Small Average Large
Actual – FY 24/25 $64.06 $141.51 $235.10
Actual – FY 25/26 $63.88 $137.49 $228.34
Proposed $61.44 $126.76 $207.93
• Lower electric supply costs have assisted in lowering total bill amounts
*Based on weather normalized residential forecasted usage
32

Proposed Residential Electric Rates
COMPONENT CURRENT PROPOSED CHANGE PRIOR
FORECAST
SYSTEM SERVICE $20.50 $22.50 $2.00 $3.00
CHARGE
USAGE CHARGE Tier 1 - $0.05336 Tier 1 - $0.05496 3% 3%
SUMMER per kWh Tier 2 - $0.05228 Tier 2 - $0.05437 4% 4%
USAGE CHARGE Tier 1 - $0.04533 Tier 1 - $0.04805 6% 6%
WINTER per kWh Tier 2 - $0.04741 Tier 2 - $0.05026 6% 6%
MONTHLY BILL $123.10 $126.76 $3.66 $4.66
(Average Customers)
EFFECTIVE 3.0% 3.8%
INCREASE
33

Commercial Electric Bill Comparison
34

Proposed Commercial Electric Rates
COMPONENT CURRENT PROPOSED CHANGE PRIOR
FORECAST
SYSTEM SERVICE Single Phase - $24.72 Single Phase - $29.72 $5.00 $5.00
CHARGE Three Phase - $30.74 Three Phase - $35.74
USAGE CHARGE Tier 1 - $0.06491 Tier 1 - $0.06686 3% 0%
SUMMER per kWh Tier 2 - $0.05109 Tier 2 - $0.05417 6% 5%
USAGE CHARGE Tier 1 - $0.05375 Tier 1 - $0.05536 3% 0%
WINTER per kWh Tier 2 - $0.04114 Tier 2 - $0.04319 5% 5%
MONTHLY BILL $478.36 $490.10 $11.74 $5.00
(Average Customers)
EFFECTIVE 2.5% 1.0%
INCREASE
35

Gas
36

Operating Costs – Gas Utility
$30
Millions
$25
$24.9M
$23.5M $23.7M $24.3M
$22.6M $23.1M
$20 $21.3M
$19.6M
$19.0M
$17.8M
$15 $16.6M
$10
$5
$-
FY 21/22 FY 22/23 FY 23/24 FY 24/25 FY 25/26 FY 26/27 FY 27/28 FY 28/29 FY 29/30 FY 30/31 FY 31/32
Actuals Actuals Actuals Actuals Estimate Projected Forecast Forecast Forecast Forecast Forecast
37

Debt Service – Gas Utility
$50M
Millions
$45M
$40M
$35M
$30M
$25M $23.1M
$21.9M
$20.6M
$20M $19.6M $18.3M $6.6M
$17.3M $2.0M $4.4M $5.5M
$16.3M $3.2M
$15M $14.7M $14.1M
$12.6M
$10M $8.9M
$17.6M $15.2M $16.2M $16.4M $16.5M
$5M
$0M
FY21/22 FY22/23 FY23/24 FY24/25 FY25/26 FY26/27 FY27/28 FY28/29 FY29/30 FY30/31 FY31/32
Actual Actual Actual Actual Estimate Forecast Forecast Forecast Forecast Forecast Forecast
Existing Debt Service Projected Future Debt Service
38

Southwest Gas Increase
April 2027 Rate Increase
• Approximately 10.69% monthly bill increase for average residential customers
• From ~$49 to ~$54 monthly
• $5.18 per month
39

Total Residential Customer Natural Gas Supply Cost (Average Customer) –
Southwest Gas vs COM
40

Residential Gas Bill Comparison
$100
$90
$80
$70
$60
Bill
$50
Monthly
$40
$30
$20
$10
$-
Small Average Large
Mesa - Proposed $26.30 $44.63 $75.96
SWG - Proposed $20.35 $48.31 $93.12
Mesa - Current $24.60 $42.28 $72.32
SWG - Current $19.15 $43.65 $82.91
41

Proposed Residential Gas Rates
COMPONENT CURRENT PROPOSED CHANGE PRIOR
FORECAST
SYSTEM SERVICE CHARGE
SUMMER $17.31 $18.81 $1.50 $1.00
WINTER $20.24 $21.74
USAGE CHARGE Tier 1 - $0.7961 Tier 1 - $0.8319 4.5% 7%
SUMMER per therm Tier 2 - $0.4233 Tier 2 - $0.4488 6% 15%
USAGE CHARGE Tier 1 - $0.7961 Tier 1 - $0.8319 4.5% 7%
WINTER per therm Tier 2 - $1.0009 Tier 2 - $1.0609 6% 8%
MONTHLY BILL $42.28 $44.63 $2.35 $2.27
(Average Customers)
EFFECTIVE INCREASE 5.6% 5.4%
42

Commercial Gas Bill Comparison
$1,600
$1,400
$1,200
$1,000
Bill
$800
Monthly
$600
$400
$200
$-
Small Average Large
Mesa - Proposed $111.61 $487.68 $1,438.55
SWG - Proposed $109.54 $556.54 $1,392.52
Mesa - Current $107.46 $475.84 $1,405.53
SWG - Current $104.01 $513.56 $1,331.55
43

Proposed Commercial Gas Rates
COMPONENT CURRENT PROPOSED CHANGE
SYSTEM SERVICE CHARGE
SUMMER $47.66 $50.66 $3
WINTER $57.34 $60.34
USAGE CHARGE Tier 1 - $0.6107 Tier 1 - $0.6290 3%
SUMMER per therm Tier 2 - $0.4584 Tier 2 - $0.4814 5%
USAGE CHARGE Tier 1 - $0.6614 Tier 1 - $0.6812 3%
WINTER per therm Tier 2 - $0.6623 Tier 2 - $0.6955 5%
MONTHLY BILL $475.84 $487.68 $11.84
(Average Customers)
EFFECTIVE INCREASE 2.5%
44

Manual Meter Reading Fee
• Manual Meter Reading Fee for non-AMI meters
• Staff trip to read meter, document, provide information to billing
• Fee recovers cost of non-standard service
• No charge to customers with AMI meter
• $60 per meter, per billing cycle
45

Solid Waste
Rates Recommendations
Sheri Collins - Director

Solid Waste Operating Costs
$80
Millions
$70
$63.4M
$60.1M $60.7M $61.8M
$59.2M
$60 $57.4M
$51.8M
$49.0M $49.5M
$50
$45.3M
$40.9M
$40
$30
$20
$10
$-
FY 21/22 FY 22/23 FY 23/24 FY 24/25 FY 25/26 FY 26/27 FY 27/28 FY 28/29 FY 29/30 FY 30/31 FY 31/32
Actuals Actuals Actuals Actuals Estimate Projected Forecast Forecast Forecast Forecast Forecast
47

MRF Recycling
48

Solid Waste Residential Rate
5.5% Proposed Increase
Residential Current Proposed Increase Proposed Total
90-Gallon Trash Barrel $34.99 $1.92 $36.91
49

Solid Waste Neighborhood Cleanup Program
Proposed Proposed
Current Increase Total
Mesa Green
$1.00 $0.05 $1.05
and Clean Fee
50

Solid Waste
Total Residential Increase
Residential Current Proposed Increase Proposed Total
90-Gallon Trash Barrel $34.99 $1.92 $36.91
Mesa Green and Clean Fee $1.00 $0.05 $1.05
Total $35.99 $1.97 $37.96
51

Solid Waste Bulk Item Collection
Residential Current Proposed Increase Proposed Total
Bulk $31.00 $4.00 $35.00
52

Solid Waste Appliance Collection
Residential Current Proposed Increase Proposed Total
Appliance $19.00 $4.00 $23.00
53

Commercial Front Load Trash
6% Overall Rate Increase
• Increase base rate
• 6-yard trash bin increase from $127.48 to $138.50
• Increase Multi Bin Factor Discount
• 2YD, 3YD, 4YD from 36% to 40%
• 6YD from 31% to 35%
• 8YD from 28% to 31%
• Increase fee for out-of-zone collection from $33.00 to $35.00
54

Commercial Front Load Recycle
9% Rate Increase
• Increase base rate
• 6-yard bin increase from $107.87 to $117.57
55

Commercial Roll Off
6% Overall Rate Increase
• Increase tonnage rate to follow landfill increase
• Increase trash tonnage rate from $51.50 to $55.00
• Increase green waste tonnage rate from $59.82 to $63.32
• Increase haul fee by $5/$11/$12
• 15/20-yard roll off increase from $140 to $145
• 30-yard roll off increase from $150 to $161
• 40-yard roll off increase from $166 to $178
• $21.50 increase for a one-time trash and green waste
customer (30 yd)
56

Residential Overview
Residential Current Proposed Increase Proposed Total
90-Gallon Trash Barrel $34.99 $1.92 $36.91
Residential Current Proposed Increase Proposed Total
Bulk $31.00 $4.00 $35.00
Residential Current Proposed Increase Proposed Total
Appliance $19.00 $4.00 $23.00
Residential Current Proposed Increase Proposed Total
Mesa Green and Clean Fee $1.00 $0.05 $1.05
57

Commercial Overview
Proposed Proposed
Front Load Current Increase Total
6Yard Front Load Trash – 1x Week $127.48 $11.02 $138.50
6Yard Front Load Recycling – 1x Week $107.87 $9.70 $117.57
Proposed Proposed
Roll Off Current Increase Total
30Yard Rolloff Trash – 1x $454.50 $21.50 $476.00
30Yard Rolloff Green Waste - 1x $479.46 $21.50 $500.96
58

Utility Fund
Forecast Review

FY 26/27 Recommended Rate Adjustments
60

Next Steps
October 5, 2026 - City Council Action on Notice of Intent
December 1, 2026 - Introduction of Utility Rate Ordinances
December 8, 2026 - City Council Action on Utility Rates
February 1, 2027 - Effective Date for Utility Rate Changes
61

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