Auditor reviews waterfront (water fund) finances; net position strong but capital needs noted
July 10, 2026 | Kalamazoo City, Kalamazoo County, Michigan
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Eric Stevens, the auditor who presented to the Utility Policy Committee, said the purpose of the audit is to “express opinions on the financial statements,” and walked members through 10‑year financial trends for the waterfront (water fund).
Stevens told the committee the water fund’s liquidity has been strong in recent years: current ratios ranged roughly 3–7 times over the last decade and were “a little more than 6” at Dec. 31, 2025. He reviewed the composition of net position, noting that much of the fund balance is invested in capital assets or is restricted by bond covenants and pension/OPEB liabilities, leaving a smaller unrestricted portion available for operations.
Stevens cited operating expenses of about $17,000,000 in 2025 and capital‑related debt service of roughly $11,100,000, and said a rough minimum unrestricted net position target would be near $33,000,000 given planned capital needs; the water fund ended 2025 near $38,000,000. He also summarized a common internal metric, saying the water fund’s debt service coverage ratio was just under 2 at the end of 2025 (committee target ~1.4), and noted that unrestricted net position and debt assumptions depend heavily on planned borrowing and capital projects.
Committee members asked where to find the full audit. Stevens and members pointed to the Michigan Department of Treasury and the audit package; members also asked that Stevens’ presentation be posted to the UPC website for reference.
Why this matters: the audit presentation showed that the water fund is currently meeting obligations and regulatory requirements, but committee members and staff should account for planned capital borrowing and large station projects when setting minimum reserve targets and evaluating future rate changes.
The committee did not take any formal action on the audit at the meeting; staff and members agreed to review the full audit materials and to post the presentation to the committee’s site.
Stevens told the committee the water fund’s liquidity has been strong in recent years: current ratios ranged roughly 3–7 times over the last decade and were “a little more than 6” at Dec. 31, 2025. He reviewed the composition of net position, noting that much of the fund balance is invested in capital assets or is restricted by bond covenants and pension/OPEB liabilities, leaving a smaller unrestricted portion available for operations.
Stevens cited operating expenses of about $17,000,000 in 2025 and capital‑related debt service of roughly $11,100,000, and said a rough minimum unrestricted net position target would be near $33,000,000 given planned capital needs; the water fund ended 2025 near $38,000,000. He also summarized a common internal metric, saying the water fund’s debt service coverage ratio was just under 2 at the end of 2025 (committee target ~1.4), and noted that unrestricted net position and debt assumptions depend heavily on planned borrowing and capital projects.
Committee members asked where to find the full audit. Stevens and members pointed to the Michigan Department of Treasury and the audit package; members also asked that Stevens’ presentation be posted to the UPC website for reference.
Why this matters: the audit presentation showed that the water fund is currently meeting obligations and regulatory requirements, but committee members and staff should account for planned capital borrowing and large station projects when setting minimum reserve targets and evaluating future rate changes.
The committee did not take any formal action on the audit at the meeting; staff and members agreed to review the full audit materials and to post the presentation to the committee’s site.
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