Water and sewer budgets show rising debt service and potential need for future rate increases to access large grants

City finance staff outlined the water and sewer enterprise budgets and warned that recent borrowing and planned capital work will raise debt service and reduce reserve balances, potentially requiring rate adjustments in coming years to pursue large grants.

The water fund presentation showed forecasted 2026 revenues of roughly $13.1 million (charges for service) and grants/loans near $4.4 million. Operating expenses were budgeted at about $9 million, while debt service jumps materially in the coming year to roughly $2.0 million to begin repayment on nearly $18 million in bonds issued last year for water-plant improvements and the Broadway water-main replacement. The result is a projected net loss in the operating year; staff said the fund will draw down reserves from about $19 million projected at year-end to roughly $4.7 million, close to the council’s adopted $4.0 million reserve requirement.

Staff said the utility will receive a $2.0 million transfer from the general fund in the coming fiscal year to help support capital projects; the presentation also noted the supplementary transfer approved in the current year’s budget. Finance staff warned council members that without ongoing transfers the water fund would not generate sufficient internally available cash to support the volume of capital work the city has been pursuing and that continuing the current pace of street and utility projects will require addressing the gap through transfers or other options.

On grants, the water fund listed an EPA grant of $2.6 million among items in the grants and loans line; staff noted an apparent $200,000 discrepant subtotal in the packet but presented grant sums as the operating assumption. Finance staff also discussed the longer-term and much larger need for lead-service-line replacement — staff estimated that project series could cost on the order of $50 million over 10 years and that many state grant programs require rate structures above set thresholds to qualify. Staff said Quincy’s current typical residential bill is roughly $38–$39 per month and that qualifying for some grant programs administered by what staff called the state department of commerce (minimums set as a percentage of median household income) could require average household bills near $50 per month, implying future rate increases if the city wants to be eligible for large grant funding.

On the sewer side, staff presented a similar picture: modest revenue increases, growing operating expenses and capital demands tied to street-replacement projects. Sewer beginning reserves were shown at roughly $5.1 million and projected to end the fiscal year near $3.3 million, again near the policy minimum. Staff noted planned sewer capital allocations to street projects like Jackson (Fifth–Eighth) and Cherry (Fourth–Eighth) and said the sewer operating budget produces a smaller amount available for capital (about $1.1 million), so transfers are needed to meet the capital plan.

Council members asked about options other than rate increases; staff suggested continued reliance on a portion of home-rule sales tax transfers, targeted borrowing for specific plant work, and federal or state loans and grants for treatment-plant projects, while noting those options either reduce future flexibility or do not replace general-purpose funding for street projects.

Finance staff said there likely will be a rate discussion for fiscal 2027; for fiscal 2026, staff said the rate increase adopted in the prior year takes effect May 1 and no additional increase is planned for fiscal 2026.