Sandy’s water budget builds reserves for filtration plant and Portland‑pipeline projects; staff plans phased rate increases to spread costs

City staff presented the water fund budget and capital program during the May 5 Budget Committee meeting, describing major projects, financing plans and proposed rate steps to support multi‑year borrowing.

The proposed water fund budget shows a substantially larger beginning balance than the prior biennium as the city builds cash to fund and to meet coverage requirements for large capital projects. Staff identified two primary capital efforts: improvements at the Alder Creek Water Treatment Plant and a Portland‑pipeline transmission project. Staff said the combined capital program approaches tens of millions of dollars; loan proceeds are budgeted in the proposed biennium to advance design and construction.

To smooth the impact of borrowing and future debt service, staff proposed incremental rate increases rather than a single large step. In discussion, staff noted a model that steps rates over time (staff cited 11.25% year‑one and a second‑year increase) to raise revenue gradually and to meet annual debt service requirements. Committee members pressed on demand prospects and conservation: several noted residential consumption has declined in recent years, which factors into revenue forecasting.

Staff explained one driver of the large contingency is a need to meet coverage ratios required by lending covenants (industry standard of roughly 1.5x debt service was discussed). The budget also reflects interest revenue assumptions tied to current interest rates and larger fund balances; staff cautioned they were conservative and would not necessarily assume today’s rates for the full two‑year period.

Committee members asked whether carrying large contingency balances is preferable to paying down debt in the near term; staff replied contingency includes debt‑coverage reserves and an operating cushion until projects close and actual costs are known. The committee also requested additional detail on how reductions in per‑capita consumption would affect projected revenue and affordability metrics.

Ending: The committee did not adopt final rates or debt decisions; staff will provide more detailed project cost estimates, updated demand assumptions and clarifications of loan terms to support final rate setting for subsequent meetings.