Fredericksburg City Council discussed recommended 8% increases in both water and sewer rates for fiscal years 2027 and 2028 during a budget work session on March 31, 2026. The proposals aim to ensure the long-term sustainability of the city’s utility funds.
PFM consultants, working with city staff, presented the rate study. The primary goals are to make the water and sewer funds self-supporting—covering operating expenses and capital needs without general-fund subsidies—and to maintain minimum cash reserves of about 150 days of operating expenses.
For the typical residential household using 8,000 gallons every two months, the effect remains modest: roughly $2 more per month for water and $4 more per month for sewer. Katie Piper, PFM senior management consultant, stated that the water increase equates to “roughly two dollars a month for the average resident user,” with a comparable effect on the sewer side.
A new high-usage Tier 2 rate is proposed for customers exceeding 25,000 gallons bimonthly. This involves a one-time structural adjustment in FY27 (approximately 15% effective increase for Tier 2 users, reflecting a 6–7% structural shift plus the standard 8% increase). The change primarily affects the roughly 10% of customers who account for about 50% of total system usage—mainly apartments, higher-education institutions, and large facilities such as the hospital. Typical residential users stay in Tier 1 and face only the 8% adjustment.
PFM Partner Scott explained the tier’s purpose: “Approximately ten percent of the customers count for about fifty percent of the total system usage… [placing] a little bit more of a disproportionate strain on the long-term investment of the system” due to higher peak demands that drive capacity needs. He noted the adjustment would not impact residential customers and that, after implementation, roughly 67% of revenue would come from Tier 2 usage.
Ninety percent of city customers are served by 5/8-inch meters and are largely residential. The proposed structure seeks greater fairness across customer classes.
Historically, water and sewer revenues have fallen short of combined operating and capital expenditures over the past 10 years, leading to cash drawdowns. Recent rate adjustments have generally ranged from mid- to high-single digits. Consultants described the 8% proposals as consistent with past practices (“business as usual”), with further projected increases in later years (water remaining at 8% annually; sewer stepping down to 7% after FY28).
The adjustments also support major capital projects, including the city’s share of upgrades at the Motts water plant (shared with Spotsylvania County) and renovation of the aging wastewater treatment plant. A planned $60 million Clean Water Revolving Loan Fund loan at a subsidized 2.95% interest rate will help finance the WWTP, supported by a revenue pledge and 115% debt-service coverage covenant. Significant state and ARPA contributions (totaling about $110 million for the WWTP) have helped moderate the local rate impact.
Following the increases, Fredericksburg’s annualized residential water and sewer bills are projected at approximately $360 and $624, respectively, positioning the city “in the middle of the pack” relative to peer communities.
Impacts differ by customer type. Average homeowners using typical volumes would see only the modest monthly increases. Higher-usage customers, including apartment complexes, the University of Mary Washington, and the hospital, would pay more under the new Tier 2 structure, shifting a greater share of capacity-related costs to those driving disproportionate demand.
Finance Director Amanda Licki and city staff stressed the importance of proactive, transparent planning to address aging infrastructure without future rate shocks or reliance on general-fund support.
The March 31 work session was led by Mayor Kerry P. Devine, with participation from Vice-Mayor Charlie L. Frye, Jr., and Council members Jannan W. Holmes, Dr. Will B. Mackintosh, Matt D. Rowe, Joy Y. Crump, and Susanna R. Finn.
Council is expected to consider formal adoption of the FY27–28 rate recommendations, along with the broader capital improvement plan and budget elements, in upcoming meetings. A public hearing is anticipated as part of the formal rate and debt approval processes.
