Mesa City Council Study Session – September 11, 2025\n\nThe Mesa City Council held a study session on September 11, 2025, to review the upcoming council agenda, discuss proposed water and wastewater capacity fees, receive presentations on utility rate adjustments for fiscal year 2025-26, and hear an update on 2026 employee benefits. Councilmembers Duff and Adams were absent and excused. The meeting opened with a moment of reflection honoring September 11 and recent political violence. No public comments were made.\n\n### Consent Calendar\n- The council reviewed the agenda for the September 22 council meeting. They directed that items 7A (Park North Fam multifamily) and 7B be removed from the consent calendar due to anticipated public interest. The developer requested the items be placed back on the agenda for a final action; staff confirmed the plan and development agreement had no substantive changes.\n\n### Discussion Items\n- Water and Wastewater Capacity Fees: Staff presented a proposal for a new one-time capacity fee to ensure growth pays for growth, as existing impact fees sunset in 2023–2024. The fee would be approximately $9,500 per residential equivalent (combined water and wastewater) for a ¾-inch meter. The fee is based on an incremental cost methodology using the AWWA M1 manual, supported by a $400 million growth-related capital plan over 10 years. The fee would generate about $18 million per year, placed in a separate fund for growth projects. Council discussed the calculation methodology, equity across meter sizes, comparison to neighboring cities (e.g., Phoenix ~$30,000; Tempe $4,400), and the need to avoid burdening existing ratepayers. There was discussion on why the fee was not implemented sooner and the importance of complying with ARS 9-511.01.\n- Utility Rate Adjustments (Water, Wastewater, Electric, Natural Gas, Solid Waste): Staff presented recommended rates for FY 2025-26 with and without the capacity fee. Key proposals included:\n - Water: Without capacity fee – residential tier one increase of 4% (4.5% service charge, tier two 5.5%, tier three 6.5%, tier four 7.5%, multi-unit usage 14.5%, commercial 14%, landscape 15%, large commercial 20%). With capacity fee – residential tier one increase of 3.5% (tier two 3.5%, tiers three and four 4.5%, multi-unit 12%, commercial 13%, large commercial 19%).\n - Wastewater: Without capacity fee – residential 8%, commercial 9%. With capacity fee – residential 7.5%, commercial 8.5%.\n - Electric: Proposed $1 service charge increase (down from $3 earlier), with tiered usage increases (summer tier one 2%, tier two 4%; winter tier one 5%, tier two 36% final year to achieve inclining rate). Average residential bill expected to increase $2.27/month (1.7%) but overall monthly bill projected to drop to $137.88 due to lower commodity costs.\n - Natural Gas: Service charge left at $0, summer tier increases unchanged (7% and 15%), winter tier one 7%, winter tier two increased 24% to better align with large users. Average residential increase $1.43/month.\n - Solid Waste: Residential 5.5% increase ($1.82/month to $34.99 for typical 90-gal service). Commercial 5.5% increase across bins and roll-off services. Bulk item pickup fee proposed to rise $2 to $31.\n- Equity Discussion: Council stressed achieving parity between residential and non-residential rates. Audit and Finance Committee recommended accelerating equity from FY 28-29 to FY 27-28. Staff modeled this with higher commercial increases (14% water without capacity fee) to avoid sticker shock. Council asked about landscaping rates being lower than residential tiers. Staff agreed to model a higher increase for commercial landscaping to provide flexibility.\n- Capacity Fee and Rate Link: If the capacity fee is adopted, the water and wastewater rate increases could be reduced slightly (e.g., residential water tier one from 4% to 3.5%). Council discussed how to present this to the public without confusion. Staff will include the capacity fee assumption in the notice of intent and set rates higher initially (without capacity fee) to allow council to later lower them if the fee passes.\n- Employee Benefits for 2026: Jan Ashley presented the benefits package. Changes include moderate premium increases (9% to 73% range across plans) and increased out-of-pocket maximums (deductibles, copays) to manage rising healthcare costs. Prescription drug plan design will be unified across all plans. Flexible spending account maximums increased (dependent care to $7,500/year). New vendor (The Standard) for life and disability insurance offers higher coverage at lower cost. Health and Wellness Center continues free primary/preventive care. Open enrollment runs October 1–15, 2025.\n\n### Key Outcomes\n- Council directed staff to:\n - Model a higher increase for commercial landscaping rates (above 15%) to provide flexibility for rate-setting.\n - Adjust the tier structure in the water rates with capacity fee to maintain consistent incremental percentages across tiers (e.g., 3.5%, 4.5%, 5.5%, 6.5%).\n - Present updated rate recommendations at the September 22 study session.\n- The notice of intent for utility rate adjustments and the capacity fee ordinance will be introduced on September 22, with a 60-day public comment period.\n- Council expressed general support for the capacity fee concept and the utility rate proposals, with further refinements to be discussed.\n- The benefits package will proceed as presented with no changes directed.\n- The September 18 study session will be replaced by a strategic planning session at the new Northeast Public Safety Facility.\n- Meeting minutes for the Historic Preservation Board and Economic Development Advisory Board were approved unanimously.