By Kerry Lyman
Following a lengthy discussion last Wednesday, the Fernley City Council voted to revisit water rates annually and explore raising water and sewer connection fees to help curb future increases for existing users.
Facing more than $100 million in projected water and sewer upgrades over the next five years, the council reviewed a detailed rate study presented by Catherine Hansford, principal at Hansford Economic Consulting. Hansford emphasized that the proposed rate hikes are not based on annual percentages, but rather on the funding needed for capital improvement projects already planned.
Some of the anticipated increases are tied to inflation, Hansford said, noting that water costs typically rise about 8.5% annually and wastewater treatment climbing about 10.5%.
“It’s typical for utility costs to increase 1.5 to 2 percent more than the consumer price index,” she said.
The council expressed concern over the steep projections. For example, a household using 15,000 gallons of water per month could see its bill rise from $197 today to $252 by 2030.
Fernley already has some of the highest water and sewer rates in Northern Nevada, according to the study. A household in Reno using 15,000 gallons of water a month would get a bill of $135 a month, compared to $197 a month in Fernley. The same monthly usage would cost $116 a month in Sparks, $129 a month in Carson City, and $94 a month in Fallon.
However, Fernley’s connection fees remain comparatively low. The fee for a single-family home this year is $13,113, set to increase to $16,210 next year, far below Reno’s $24,431 and $28,605 in Sparks. Hansford called Fernley’s connection fees “very competitive,” saying they encourage development in Fernley relative to neighboring jurisdictions.
Councilman Ryan Hanan said he suggested raising connection fees more than two years ago, “and I still think we need to do that,” he said.
One factor helping to moderate future rate hikes is the city’s 2019 resolution establishing a robust utilities reserve fund. The policy requires maintaining unrestricted cash equal to nine months of operating expenses and 75% of accumulated depreciation for capital costs. Since 2018, the reserve has generated an average surplus of $2 million annually for water and $1.5 million for wastewater.
“When rates were set in 2018 and again in 2021, the goal was to cover all expenses and to set money aside for system rehabilitation, and that is exactly what happened,” Hansford said.” The city’s going to start drawing down on that money considerably. In fiscal year 2026, there’s going to be a large draw down on those capital reserves.”
Hansford said that over the next five years, water system improvements are expected to cost $65.6 million, with $25.1 million coming from the saved cash reserves, $5 million from connection fees and $35.4 million in bond proceeds. Upgrades to the wastewater treatment system are expected to total about $36.4 million over the next five years, with $12.2 million coming from cash reserves, $4.5 million from connection fees and $19.7 million from bonds.
Councilman Joe Mendoza asked whether grant funds the city is seeking had been calculated into the study. Hansford said it had not because no grants had yet been secured. If grant funds are received, “that’s when you want to re-evaluate, to ask, ‘do we need to increase the rates as much?’” Hansford said.
City Treasurer Robert Carson assured the council that revenues and rates would be reviewed annually. Deputy City Manager Lydia Altick added that the city expects to learn more about pending grant applications within the next year.
A frustrated Mendoza pointed out that the council eliminated the water ancillary fee this year from property tax bills, giving ratepayers some relief, but now, just a few months later, the city is looking at rate increases. Hansford said Fernley’s high utility costs stem from rapid growth and the demands of a young utility system. “You’ve had to build a lot of capacity rapidly,” she said.
Mayor Neal McIntyre said the elimination of the water ancillary fee did save residents money. Hanan agreed, estimating the reduction is $409 a year, or about $100 a quarter for those who pay property taxes directly rather than on their mortgage payments.
Hanan likened the elimination of the water ancillary fee to an audit, where the city took a look at costs and revenue and decided it did not need that fee anymore. “I hope we’re doing that every year,” he said.
The council agreed unanimously with that sentiment and voted to perform an annual review of finances and costs, and set rates accordingly. The council also unanimously agreed to consider raising connection fees to help reduce future rate hikes.
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