Sedona staff sound early alarm: FY27 wastewater capital needs outpace current rates, rate study planned

Sedona’s proposed FY27 budget flags a large near‑term capital requirement in the wastewater fund and staff told council they will issue a wastewater rate study RFP to develop a multi‑year plan for rates and debt.

Roxanne, the wastewater division lead, and finance staff summarized a 10‑year capital program that would substantially increase near‑term capital spending. Staff estimated a FY27 funding gap of roughly $4.8 million that would have to be covered by the general fund if projects proceed with cash and without debt. They said an orderly approach is to complete a rate study to determine a sustainable multi‑year rate schedule and then phase debt issuance so that wastewater debt is ultimately supported by wastewater rates rather than general‑fund transfers.

"The rate study should provide for us an achievable plan and a rate structure that we can get to a place where we're no longer subsidizing with tax dollars," finance staff said. Until that study is complete and the city adopts a rate schedule, staff said short‑term borrowing of general fund cash or issuing excise‑tax backed bonds will be the likeliest tools to start priority capital work.

Councilors pressed timing, reserve levels and how debt issuance would be structured; staff said the rate study responses are expected shortly and a completed study could arrive in the fall to inform bond market timing. Roxanne emphasized the need to balance capital work with rate adjustments and suggested that cash can be used for early projects but that larger investments will require debt and an adopted long‑term rate plan.

Council gave staff direction to proceed with the RFP and return with options and timing for rate changes and bonding strategies during the budget cycle.