Council asks for four rate scenarios as water and sewer fund faces debt-service pressure

Finance staff (Barry) presented an apples-to-apples look at water and sewer revenues and operating expenses and noted that bank-interest income and one-time ARPA timing had masked earlier shortfalls. With interest earnings falling, staff said operating revenues now struggle to cover debt service; the council discussed how to address the gap as part of FY27 budget work.

Why it matters: The town’s utility fund must cover operations and debt-service obligations; unless revenues, reserves or grants increase, councilors will face choices among rate increases, using restricted funds, or delaying capital work. Staff said that after recent cuts the projected FY27 rate baseline is about $3.30 under current assumptions but that covering full debt service without using reserves may require larger changes.

Council direction: The council asked staff to prepare four scenarios — a resident-protective option, a semi-balanced plan, a balanced plan and a capital-inclusive model — that show tradeoffs for rates, reserves and capital projects. Chair (speaker 3) asked whether any member would entertain a budget that did not fully cover debt service; council signaled no. Staff said they will return with scenarios and supporting CIP figures in time for the May budget meeting.

Next procedural step: Staff will provide the CIP project schedule, outstanding debt-service totals and the four rate/budget scenarios for council review; council will consider those scenarios during May budget deliberations.