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1 | City of Rexburg, Revenue Requirement Recommendations
fcsgroup.com | bowman.com
November 10, 2025
Matt Nielsen
City of Rexburg
Memorandum: City of Rexburg, Revenue Requirement Recommendations for the Water and Sewer
Utilities
Introduction
FCS, a Bowman company (FCS), was engaged by the City of Rexburg (City) to conduct a utility rate study
for the water, sewer, and sanitation systems in addition to a water and sewer capitalization fee update.
The purpose of the study is to provide a rate forecast and financial plan targeting stability, revenue
sufficiency, and rate equity. The methods used to establish user rates are based on principles that are
generally accepted and widely followed throughout the industry. These principles are designed to
produce rates that equitably recover costs from each customer class by setting the appropriate level of
revenue to be collected from users of the systems and establishing a rate structure to equitably collect
those revenues.
The key analyses to be completed as part of the rate study include:
Revenue Requirement - identifies the total revenue levels needed to fully fund each utility on a
self-supporting basis.
Cost of Service - equitably distributes costs to customer classes based on their proportional
demand and use of each system.
Rate Design - development of rate structures that generate sufficient revenue to meet each
system’s revenue requirement forecast and to address the City’s pricing objectives.
This memorandum will focus on the Revenue Requirements recommendations for the Water and Sewer
utilities. Several key assumptions were made for both the water and sewer Revenue Requirements. The
forecast period occurs from 2025 to 2030. Utilizing a minimum operating reserve target of 90 days and a
maximum operating reserve target of 120 days as per fiscal policy. Several escalation factors were
incorporated. General cost inflation was set at 3.5% based on the Consumer Price Index – West. The labor
escalation rate was set at 5%, and the benefits escalation rate was set at 4%, based on the Employment
Cost Index and input from City staff. The growth rate of 2.15% per year was provided by City staff. The
full capital plan has been integrated, and the entire plan is scheduled to be completed within the
expected year. Costs are escalated using the Engineering News Record Construction Cost Index (ENR-CCI)
to the anticipated year of construction.
Memorandum
2 | City of Rexburg, Revenue Requirement Recommendations
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Water Utility
Revenue Requirement/Financial Plan
A revenue requirement analysis forms the basis for a long-range financial plan and multi-year rate
management strategy. The analysis is developed by completing an operating forecast that identifies
future annual operating costs and a capital funding plan that defines a strategy for funding the capital
improvement needs of the water system. The operating forecast was developed for the 2025-2030 study
period. Exhibit 1 provides a summary of the water system revenue requirements findings.
Exhibit 1: Water Utility Revenue Requirement Summary
Key findings of the revenue requirement analysis include:
Current revenue levels are sufficient to meet cash operating expenses, managing to keep ahead of
annual cost increases with the 2.15 percent annual growth rate until 2030.
The operating expenses decrease from 2025 to 2026 due to the elimination of $500k in expenses.
Rate revenue capacity available for capital is eroding over time as new debt is required to fund the
planned $33.7 million in capital projects. New debt of $3.5M in FY2027 and $11.5M in FY2030 will be
needed to supplement existing resources. Annual debt service of $310k to $1.33M is added to the
required revenue
Dedicated system reinvestment to protect infrastructure investment and support future replacement
needs is being phased in at $165k in 2026 to $1.21M in 2030.
To accomplish the capital plan and phase in system reinvestment funding, an 8% increase
implemented in January 2026 is necessary and will be effective for 8 months. The remaining
forecasted increases are 8% for FY2027, 6.00% for FY2028, and 4% for FY2029–FY2030.
The operating reserve target of 120 days is also met throughout the forecast period.
Exhibit 2 incorporates the updates to the revenue requirement with the proposed rate increases.
Memorandum
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Exhibit 2: Revised Water Utility Revenue Requirement
The proposed across-the-board rate increases are shown in Exhibit 3. If the 8% FY2026 increase is not
incorporated in January 2026, the following proposed rate increases would be 15% in FY2027, 11.25% in
FY2028, and 3% in FY2029 – FY2030, effective October 1st of each fiscal year.
Exhibit 3: Water Utility Across-the-Board Rate Increases
Across-the-Board Rate Schedule Existing ATB ATB ATB ATB ATB
FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030
Annual System-Wide Rate Increase 2.70% 8.00% 8.00% 6.00% 4.00% 4.00%
Months Effective 12 8 12 12 12 12
Monthly Charges by meter size
Single Family - 0.75 inch meter $22.29 $24.07 $26.00 $27.56 $28.66 $29.81
Increases to Monthly Charges $1.78 $1.93 $1.56 $1.10 $1.15
Use Rate: per 1,000 gallons
Over 6,000 gallons $1.18 $1.28 $1.38 $1.46 $1.52 $1.58
Memorandum
4 | City of Rexburg, Revenue Requirement Recommendations
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Sewer Utility
Revenue Requirement/Financial Plan
The long-range financial plan and multi-year rate management strategy were developed by completing
an operating forecast that identifies future annual operating costs, as well as a capital funding plan that
defines a strategy for funding the capital improvement needs of the sewer system. The operating forecast
was developed for the 2025-2030 study period. Exhibit 4 provides a summary of the sewer system
revenue requirements findings.
Exhibit 4: Sewer Revenue Requirement Summary
Key findings of the revenue requirement analysis include:
Current revenue levels are sufficient to meet cash operating expenses, managing to keep ahead of
annual cost increases with the 2.15 percent annual growth rate until 2030.
The operating expenses decrease from 2025 to 2026 due to the elimination of $566k in expenses.
Rate revenue capacity available for capital is eroding over time as new debt is required to fund the
planned $62.99 million in capital projects. New debt of $3.5M in 2027 and $20M in 2029 will be
needed to fund the capital improvement plan, which will supplement existing resources. Annual debt
service of $310k to $2.08M to be added to the required revenue.
Dedicated system reinvestment to protect infrastructure investment and support future replacement
needs is being phased in at $310k in 2026 to $2.08M in 2030.
To accomplish the capital plan and phase in the system reinvestment fund, an 8% increase by January
2026 is necessary and will be effective for 8 months. The remaining forecasted increases are 8% for
FY2027, 6.5% for FY2028, 6% for FY2029, and 3% for FY2030.
The operating reserve target of 120 days is also met throughout the forecast period.
Exhibit 5 incorporates the updates to the revenue requirement with the proposed rate increases.
Memorandum
5 | City of Rexburg, Revenue Requirement Recommendations
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Exhibit 5: Revised Sewer Utility Revenue Requirement
The proposed across-the-board rate increases are shown in Exhibit 6. If the 8% FY2026 increase is not
incorporated by January 2026, the following proposed rate increases would be 15% in FY2027, 13% in
FY2028, and 3% in FY2029 – FY2030, effective October 1st of each fiscal year.
Exhibit 6: Sewer Utility Across-the-Board Rate Increases
Summary
The primary goal of the financial forecast for each utility is to develop a multi-year rate strategy that
generates sufficient revenue to cover the City’s operating costs and execute the capital program
identified. Following discussions with staff, the recommendation is to implement the proposed rate
increases for each utility by January 2026, effective for 8 months. Next, FCS will continue the Cost-of-
Service Analysis and Rate Design for each utility, delivering the comprehensive findings in a final report
and presentation.
Across-the-Board Rate Schedule Existing ATB ATB ATB ATB ATB
FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030
Annual System-Wide Rate Increase 0.0% 8.0% 8.0% 6.5% 6.0% 3.0%
Months Effective 12 8 12 12 12 12
Monthly Charges by meter size
.75 inch /1 inch SFR/1 inch Non-SFR $18.36 $19.83 $21.42 $22.81 $24.18 $24.90
Increases to Monthly Charges $1.47 $1.59 $1.39 $1.37 $0.73
Use Rate: per 1,000 gallons
In city $5.12 $5.53 $5.97 $6.36 $6.74 $6.94
Sugar City/Teton $3.14 $3.39 $3.66 $3.90 $4.13 $4.26