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Council hears plan to apply water-fund dollars to debt service, lowering 2026 levy
Summary
City staff said they will use $100,000 from accumulated water-fund hook-up and user fees to transfer to the debt service fund, reducing the amount to be raised by property tax for 2026; staff explained water and sewer funds are enterprise funds and generally funded by users.
City staff told the council July 14 that the 2026 budget proposal includes a $100,000 transfer from the water fund to the city’s debt service fund to lower the levy required for 2026.
Mike (staff member) and other staff explained that the water fund contains accumulated hookup charges and other user receipts collected since the water system was installed and that staff propose using $100,000 of those accumulated funds to pay debt service rather than levying that amount in property taxes. "We're implementing a new line item ... the debt fund transfer ... using those dollars to actually pay some of this debt," Mike said.
Staff emphasized that the water and sewer budgets are enterprise (user-funded) funds and that the proposed transfer would be an expenditure of the water fund and a revenue to the debt service fund, not a new levy on water customers. Staff showed that operating water and sewer activities are funded by users and that the sewer fund sends wastewater to the Metropolitan Council treatment plant; professional services and treatment charges from the Met Council have increased as the customer base and flows rise.
Why it matters: using one-time or accumulated enterprise-fund reserves to reduce the levy can lower short-term property-tax impacts, but it also reduces the reserve balance in the enterprise fund and is an accounting choice the council must weigh against long-term needs.
Ending: staff said the water fund transfer is included in the 2026 model and invited council discussion and questions; no final action was taken July 14.
