Kenai proposes 4% water/sewer rate hike to fund aging infrastructure

The City of Kenai is recommending a 4% increase in water and sewer utility rates to address aging infrastructure, including a wastewater treatment plant overhaul projected for fiscal year 2029.

Public Works Director Lee Frey told the Kenai City Council during a May 2 budget work session that the wastewater treatment plant faces significant aging infrastructure challenges. The proposed rate increase aims to build capital reserves for the anticipated treatment plant project, which Frey said could require bond financing.

The city is also losing $340,000 in annual revenue from processing leachate, a revenue stream that is ending. Frey said the city is seeing inflationary costs for chemical purchases, staffing and utility costs.

The rate increase is intended to help the city maintain current service levels while building reserves for long-term capital expenditures, Frey said.

Despite the proposed increase, Kenai's water and sewer rates remain among the lowest in Alaska. The increase would be the first in one year. The city last adjusted utility rates in fiscal year 2025.

Frey said the city is also working on multiple water and sewer infrastructure projects, including a pump house replacement, blower upgrades at the wastewater treatment plant and lift station control panel replacements. The city is using State Revolving Fund financing for the pump house project and received EPA loan or grant funding for the blower project. Both projects are underway.

The proposed 4% increase would take effect July 1, 2026, if approved by the council. The city's fiscal year 2027 budget will be introduced at the second council meeting in May. The council will hold a public hearing on the budget before final adoption.