Joint Utility Committee & Committee-Of-The-Whole Budget Workshop Agenda Packet - 6:40 PM

City of Oconomowoc Joint Utility and Committee-Of-The-Whole Budget Workshop Tuesday, October 20, 2026 - 6:40 PM City Hall - Council Chambers 174 E. Wisconsin Ave. Oconomowoc, WI 53066 (Or immediately following Protection & Welfare) Notice: If a person with a disability requires that the meeting be accessible or that materials at the meeting be in accessible format, call the City Clerk at least 48 hours prior to the meeting to request adequate accommodations. Tel: (262) 569-2186. 1. Call to order and confirmation of appropriate meeting notification 2. Roll Call 3. Committee Business a. Consider/recommend 2027 Sanitary Sewer Rate Schedule b. Consider/recommend 2027 Utility Budgets (Wastewater, Water, Electric) 4. Adjourn Gina Kozlik, City Clerk City of Oconomowoc Notice is hereby given that a majority of the Common Council will be present at the above scheduled meeting to gather information about a subject over which they have decision-making responsibility. This constitutes a meeting of the Common Council pursuant to State ex rel. Badke v. Greendale Village Board, 173Wis. 2d 553, 494 N.W. 2d 408 (1993) and must be noticed as such, although the Common Council will not take any formal action at this meeting. 1 1 MEMORANDUM FINANCE DEPARTMENT Date: October 20, 2026 To: Mayor and Committee of the Whole From: John Schuh, Utility Accounting Manager Steve Hatton, Finance Director Re: Proposed 2027 Sanitary Sewer Rates RELATES TO THE STRATEGIC PLAN Strategic Goal-N/A BACKGROUND A thorough cost of service study has been conducted to ensure the Wastewater Utility is recovering adequate revenues to meet its financial needs. Service rates based on the study have been developed so that all customers pay a fair and proportional share of all operating and capital costs. See the attached pages showing the current and proposed 2027 service rates. Wastewater treatment rates are not regulated by the Public Service Commission and are typically adjusted annually. ADDITIONAL ANALYSIS If approved by the Committee of the Whole, the rates would then require Common Council approval. FINANCIAL IMPACT The study calculated a recommended net increase of 3.9% for residential customers. An average customer’s monthly bill would increase by $1.30, from $33.69 to $34.99. This increase is lower than the prior three year’s annual adjustments. City commercial customer rates would increase on average 1.0% depending on volume and concentration of waste. The average net increase is lower for commercial customers because the rate study determined the price adjustment should only be made to the fixed monthly charge and not the variable per gallon rate. The increase is recommended to cover annual operating expenses and provide a positive rate of return that continues funding current and future capital projects necessary to maintain the integrity of our collection system, pumping stations and the treatment facility. Overall combined charges for the extraterritorial customers will also increase as a result of this rate review. Charges to this customer group consist of annual license fees based on the number of residential equivalent connections (RECs), and volumetric charges based on metered flow from each sanitary district. The license fees are municipal (non-utility) revenue that increase annually by 4.0% per year under the terms of the sewer service agreements. Volumetric charges are impacted by changes in operating and maintenance expenses, annual flows and capital costs. The volumetric rates vary by district and would increase 0.1% to 2.7%. 2 2 RECOMMENDATION Recommend approval of proposed 2027 sanitary sewer rates. SUGGESTED MOTION Motion to recommend approval of the proposed 2027 sanitary sewer rates. EXHIBIT The chart below shows the average wastewater monthly bill at our current and proposed rates compared to a peer group of neighboring communities. 3 City of Oconomowoc 2027 Wastewater Rate Forecast-Adjusted Current and Proposed Rates Proposed Retail Rates (Individually Metered Customers) Class Unit of Measure 2026 Rates 2027 Rates City of Oconomowoc Domestic Strength Volume A per 1,000 gallons 7.50 $ 7.50 $ Above Domestic Strength Volume B per 1,000 gallons 8.27 $ 8.27 $ High Sgrength Volume C per 1,000 gallons 7.50 $ 7.50 $ Fixed Customer Charge n/a per customer, per month 8.50 $ 9.80 $ Outside Contract Retail Domestic Strength Volume A per 1,000 gallons 8.21 $ 8.21 $ Above Domestic Strength Volume B per 1,000 gallons 8.30 $ 8.30 $ Fixed Customer Charge n/a per customer, per month 3.91 $ 5.29 $ Proposed Retail High-Strength Surcharges Class Unit of Measure 2026 Rates 2027 Rates Biochemical Oxygen Demand (BOD) C pounds over 250 mg/L 0.58 $ 0.55 $ Total Suspended Solids (TSS) C pounds over 270 mg/L 0.39 $ 0.36 $ Phosphorus C pounds over 7 mg/L 14.05 $ 13.60 $ Proposed Wholesale Contract Rates (Metered By District) Class Unit of Measure 2026 Rates 2027 Rates V. of Lac LaBelle: #3 Blackhawk Volume per 1,000 gallons 8.21 $ 8.22 $ Town of Ixonia #2 Volume per 1,000 gallons 6.27 $ 6.29 $ V. of Lac LaBelle: #2 Mary Lane Volume per 1,000 gallons 6.27 $ 6.29 $ V. of Lac LaBelle: #1 Lac LaBelle Volume per 1,000 gallons 6.27 $ 6.29 $ V. of Lac LaBelle: #4 Okauchee Volume per 1,000 gallons 8.82 $ 9.06 $ V. of Oconomowoc Lake Volume per 1,000 gallons 8.82 $ 9.06 $ V. of Summit: Silver Lake Volume per 1,000 gallons 8.82 $ 9.06 $ Y:\Financial Statements\2026\Month End\2026-09 Utility Financial Stmts, Rates 27a1 10/7/2026, 8:31 AM 4 City of Oconomowoc 2027 Wastewater Rate Forecast-Adjusted Average Residential Customer Impact Average Residential Customer Rate Impact 2027 Volume 2026 Rates % of Total 2027 Rates % of Total $ Change % Change Average Annual Usage 40,300 # of Months 12 Average Monthly Usage 3,358 Thousand Gallons 3.36 3.36 3.36 Volume Rate 7.50 7.50 - 0.0% Volume Charge 25.19 75% 25.19 72% - 0.0% Fixed Monthly Charge 8.50 25% 9.80 28% 1.30 15.3% Total Charges 33.69 100% 34.99 100% 1.30 3.9% Average Residential Customer Rate Impact 2027 Volume 2026 Rates % of Total 2027 Rates % of Total $ Change % Change Average Annual Usage 40,300 Thousand Gallons 40.30 40.30 40.30 Volume Rate 7.50 7.50 Volume Charge 302.25 75% 302.25 72% - 0.0% Fixed Monthly Charge 8.50 9.80 # of Months 12 12 Fixed Charge 102.00 25% 117.60 28% 15.60 15.3% Total Charges 404.25 100% 419.85 72% 15.60 3.9% Note, prior year budget average customer annual estimated consumption gallons was: 39,900 This represents a change in volume of: 400 1.0% per Monthper Year Y:\Financial Statements\2026\Month End\2026-09 Utility Financial Stmts, Avg Cust 27j1 10/7/2026, 8:34 AM 5 City of Oconomowoc 2027 Wastewater Rate Forecast-Adjusted Miscellaneous Fees 2026 2027 Unit of Current Proposed Description Measure Fee Fee Application and Registration Fees Renewal Application per firm 243.00$ 252.00$ Truck Registration per truck 21.00$ 22.00$ Initial Application per firm 353.00$ 367.00$ Analysis Fees Biochemical Oxygen Demand (BOD) per test 40.80$ 42.40$ Total Suspended Solids (TSS) per test 17.50$ 18.20$ Phosphorus per test 20.40$ 21.20$ Oil and Grease per test 40.80$ 42.40$ pH per test 5.30$ 5.50$ Rates may be set for a particular originator based on sampling averages. BOD TSS P Septic and Holding Tanks Assumed Strength (mg / L) (mg / L) (mg / L) Holding Tank 350 500 18.2 Septic Tank 5,000 11,000 23.9 High Strength Rate per Pound 0.55$ 0.39$ 13.60$ Unit of Current Proposed Description Measure Fee Fee Septic and Holding Tank Fees Holding Tank per 1,000 gal 10.20$ 10.20$ Septic Tank per 1,000 gal 67.30$ 67.30$ Other Fees Recreational Vehicle per load 5.00$ 5.00$ Administrative Charge per load 29.00$ 30.00$ Special Waste Review Fee (prepayment required) per review 103.00$ 107.00$ Misc Debris per load 279.00$ 290.00$ Y:\Financial Statements\2026\Month End\2026-09 Utility Financial Stmts, Misc Fees 27h3 10/7/2026, 8:41 AM 6 City of Oconomowoc 2027 Wastewater Rate Forecast-Original License Fees for Contract Communities Rate Rate Sanitary District 2026 2027 V. of Lac LaBelle: #1 Lac LaBelle 168.68$ 175.43$ V. of Lac LaBelle: #2 Mary Lane 168.68$ 175.43$ V. of Lac LaBelle: #3 Blackhawk 181.64$ 188.91$ V. of Lac LaBelle: #4 Okauchee 181.64$ 188.91$ Town of Ixonia #2 168.68$ 175.43$ Village of Oconomowoc Lake 181.64$ 188.91$ Village of Summit - Residential 181.64$ 188.91$ Village of Summit - Non-Residential 363.26$ 377.79$ Silver Lake - Residential 181.64$ 188.91$ Silver Lake - Non-Residential 363.26$ 377.79$ Note - Fee increases 4.0% annually per contracts. Note - License fees are revenue for the municipal general fund, not the wastewater utility. Y:\Financial Statements\2026\Month End\2026-09 Utility Financial Stmts, Lic Fees 27i 10/7/2026, 8:48 AM 7 1 MEMORANDUM FINANCE DEPARTMENT Date: October 20, 2026 To: Mayor Rosek and Committee of the Whole From: John Schuh, Utility Accounting Manager Steve Hatton, Finance Director RE: Proposed 2027 Utility Budgets RELATES TO THE STRATEGIC PLAN Strategic Goal-N/A BACKGROUND The details of the 2027 Utility Budgets were made available on the city website on October 21 for your review. The budget will be on the agenda at a joint Utility Committee and Committee-of-the-Whole meeting on October 20, 2026. This memo is intended to give you an overview of the budget and budgeting process. If the proposed 2027 Utility Budget is recommended, it is anticipated that it would proceed to the City Council meeting on November 3, 2026, for final approval. ADDITIONAL ANALYSIS Wastewater Budget Overview Unlike the PSC regulated water & electric utilities, wastewater rates are determined by the City Council and typically adjusted annually. As part of the annual budget process, a detailed rate study model is updated for the planned expenses. The study provides guidance on how to structure rates for both our metered city customers and the outlying adjacent sanitary districts. The model also reflects anticipated customer growth and changes in volume flow. For city customers, the study recommended an adjustment only to the fixed monthly charge and not the variable per gallon rate. For an average residential customer would have a net increase of 3.9% or $1.30/month. Sanitary district rates are adjusted by their agreements and the rate model results, with increases varying between 0.1% and 2.7%. Overall operating expenses are projected to increase 2.7% ($146,047). Because the Wastewater Utility is very capital intensive, depreciation is one of the largest components, representing 29% of total operating expenses. The Wastewater capital budget continues to fund sewer main replacements and reinforcements in conjunction with street repair projects. The capital budget of $1.05M is lower than most prior years. This 8 2 is partially due to the utility continuing to work complete studies for a future years’ major treatment plant facility upgrade and capacity increase. The Wastewater Utility is budgeted to produce an operating income of $439,550 and a rate of return of 1.98%. Actual operating expenses have historically been less than budgeted amounts. In addition, the utility currently has adequate cash reserves as it prepares for future capital projects. Water Budget Overview The Water Utility’s current PSC approved rates were implemented in October 2025. The PSC calculated those rates based on initial cost estimates for the Well #8 project that were below the subsequently approved construction bids. The 2027 budget does not include additional revenue from another rate increase. After the full year 2026 financial results and reporting are completed, we anticipate starting a rate adjustment application with the PSC for an increase that would likely become effective in early 2028. Operating revenue is projected to increase 5.1% ($319,231) due to the updated volume and customer growth projections. Overall operating expenses are projected to increase 4.7% ($208,273). The largest increases are from operating expenses of the new Well #8 and related iron filtration processes. The capital project budget includes about $2.3M of new projects. This includes $950,000 for water main replacements, which is the lowest in 10 years as the utility focuses on investing in infrastructure at a sustainable level while moderating its reliance on debt financing. The Water Utility is projected to produce an operating income of $1,944,203 and a rate of return of 5.48%. Electric Budget Overview Operating revenue is projected to increase 4.0% ($1,201,423). Most of this is related to the anticipated change in the cost of purchased power, increasing 5.0% ($1,019,337). WPPI provides our initial guidance in forecasting future sales and costs of purchased power. Changes in the cost of purchased power are recovered through monthly adjustments to the Purchase Cost Adjustment Charge (PCAC) rate, which minimizes the financial impact on our local utility operations. The budget does not include a PSC base rate increase for 2027. The current electric rates were implemented in August 2023. Due to the long approval process, next year we may evaluate the timing of a rate change application, which would likely be subsequent to the next water rate adjustment. The cost of purchased power from WPPI, as noted above, represents 74% of total operating expenses for the Electric Utility. Excluding that, other operating expenses are projected to decrease -0.4% (- $28,040), due to lower depreciation from project timing adjustments. The largest expense increases are due to wages & benefits. The capital project budget includes $1.2M of distribution system upgrade projects. This represents a continued effort to replace problematic cable, implement distribution voltage improvements, and upgrade industrial services. The capital budget also includes an underground cable bore rig replacement, purchase of transformers and replacement of a small excavator. Overall, the Electric Utility is projected to produce $2,034,115 in operating income with a rate of return of 4.67%. 9 3 FINANCIAL IMPACT Our customers will continue to benefit from competitive utility rates compared to other communities. The 2027 budget aims to balance service reliability, regulatory compliance, and long-term asset sustainability without imposing unnecessary financial burdens on our customers. The City’s utilities issue about 156,000 invoices per year using data from almost 20,000 meters and maintain about 600 miles of infrastructure. As the City grows, the demand placed on these essential services increases, making it imperative to strategically manage resources and maintain our high standards of service delivery. RECOMMENDATION Recommend approval of proposed 2027 Utility Budgets. SUGGESTED MOTION Motion to approve the 2027 Utility Budgets as presented. 10