Sewer fund seeks 35% first‑step rate hike to restore cash reserves after emergencies

Sewer‑system officials told the Memphis City Council on May 19 that a string of major repairs and meter‑reading shortfalls have reduced the sewer fund’s cash reserves and left the fund vulnerable to future emergencies.

Staff said that large emergency sewer repairs in recent years — including one costing roughly $26 million in 2024 testimony — reduced cash on hand and that the discovery of faulty water meters at Memphis Light, Gas & Water (MLG&W) led to lower billed water volumes and, by extension, reduced sewer revenue. Finance staff said early, high estimates of the revenue loss were revised downward after further analysis; estimates discussed during the hearing ranged from a conservative $2–5 million in actual revenue impact rather than earlier larger figures.

To restore a recommended 120 days of cash on hand and to improve the city’s borrowing profile, consultants recommended a multi‑year rate package. Sewer officials summarized the first two steps as: "The first would be 35% effective January 1st, 2027," and a second increase of about 25% in FY29. Staff said the first increase would be a half‑year implementation and that the average residential customer would see the monthly bill rise from about $17 to roughly $23 (about $6 more per month).

Finance director Walter Person and sewer staff framed the rate proposal as a means to stabilize bond ratings and recover reserves: a recent GEO bond issuance was downgraded from AA+ to A+ amid thinner cash and no near‑term rate increases, staff said. The proposed increases are tallied in the sewer ordinance framework staff presented and will be subject to formal amendments and council approval in subsequent steps.

Council members pressed staff on alternatives and the meter‑reading problem. Several asked whether MLG&W could reimburse the sewer fund for lost revenue tied to faulty meters; staff said they were pursuing discussions with MLG&W and that earlier worst‑case numbers had been scaled back after more detailed analysis.

What happens next: sewer staff will supply more detailed bill‑impact tables, timing of ordinance language and documentation of conversations with MLG&W and the sewer rate‑study consultant ahead of any formal council action.