The Altoona Water Authority Thursday approved a rate increase of 9.75% for 2025.

The increase will take the bill of an average user of 4,000 gallons a month from $120 to $131, in round numbers.

The increase is in line with a 10-year rate study that initially called for the bills of those average users to rise incrementally to $164 per month by 2032.

All increases discussed in the study apply to charges that reflect the fixed costs for delivering water and collecting wastewater — rather than those that reflect volumes of water used by customers — to offset the “diminishing returns” of volumetric hikes that lead to reduced usage and thus a reduced percentage of revenues.

The authority last year raised its water-sewer rate for 2024 by almost 7% and raised that rate the previous year by 5.5%.

The 2025 water operations budget is $24.8 million.

Projected capital expenditures are $2.3 million for water.

Projected debt service payments for water are $2.9 million.

The water system serves 22,464 customers.

The sewer operations budget projects revenues of $20.4 million, with a $112,000 surplus.

Projected capital expenditures are $1.4 million for sewer.

Projected debt service payments for sewer are $3.1 million.

The sewer system serves 18,339 customers.

Through 2032, the authority’s overall capital plan calls for spending $122 million, according to Ben Kapenstein of PFM Financial Advisors, author of the study.

Operating expenses on the water side consume 64% of funds, while the annual lease payment to the city consumes 20% of funds and capital projects 16%, according to Kapenstein.

Operating expenses on the sewer side consume 50% of funds, while capital projects consume 38% of funds and the city lease payment 13%.

The authority pays the city a lease payment because several years ago, the city took back ownership of the authority systems, then leased back those systems for the authority to operate, in a move that allowed the city to obtain revenues from the systems to help shore up its shaky finances.

Such leaseback arrangements have become more common in recent years as municipalities seek to address financial shortfalls, said Mark Glenn of Gwin Dobson & Foreman, the authority’s consulting engineer.

The lease back arrangement was negotiated after City Council’s initial proposal to privatize the system led to an outcry from authority employees and community members.

The Altoona authority’s lease payment to the city for 2025 is $6.9 million, according to controller Gina DeRubeis.

The current agreement calls for an increase in the payment of 3% per year.

The authority’s charges are a little above average for Pennsylvania providers, both public and private, according to Kapenstein.

If the lease payment to the city is subtracted, the charges are about average, he said.

Water charges for the average Altoona customer are $759 per year.

The highest charges in the state are $983, while the lowest are $292.

Sewer charges for the average Altoona customer are $818 per year. The highest charges are $1,932 and the lowest are $339.