Alexander City reviews wastewater fund models; commercial rate hike and lodging tax most protective

Alexander City council members and staff heard a presentation on wastewater fund forecasts and four revenue scenarios during a work session where consultants from Waterworks outlined how different combinations of rate increases and new taxes would affect the utility’s cash position.

The presentation matters because the wastewater fund faces large capital needs, including a roughly $20,000,000 Coley Creek maintenance project, and without revenue changes the city’s cash position falls below zero in the model as soon as 2027. The council and staff discussed trade-offs between commercial and residential rate adjustments and new revenue sources such as a hotel lodging tax and a self-storage tax.

Lynn Miller, a city staff member who introduced the item, turned the presentation over to consultants from Waterworks. "Waterworks is a software platform that empowers local governments like Alexander City to achieve financial sustainability while balancing affordability," Andrew, a member of Waterworks’ client success team, told the council. Andrew showed a status-quo forecast that layered operating expenses, existing debt service and projected capital spending; he said, "the cash position drops below 0 by 2027" in the model if no revenue changes are made.

Waterworks described four scenarios: - Scenario 1: impose a self-storage tax (projected at about $90,000 annually) plus 4% rate increases for two years (effective July 2025 and Jan. 1, 2026), then 3% annually thereafter; in that model cash remains positive until about 2031 before declining around the Coley Creek debt spike. - Scenario 2: adopt a hotel lodging tax (projected at about $150,000 annually) with two 5% rate increases (same timing) then 3% CPI thereafter; that holds cash above zero until about 2031–2032. - Scenario 3: reinstate the previously planned two 7% rate increases (July 2025 and Jan. 1, 2026) then 3% annually; that pushes the cash shortfall into early 2032. - Scenario 4: raise commercial rates by 13.62% in July 2025 and apply 3% CPI-based increases thereafter, while residential customers receive 3% increases starting July 2025; that scenario keeps the fund above the city’s operating floor and delays a negative cash position until approximately 2036 in the model.

Andrew identified the principal drivers for future shortfalls: inflation, existing amortization schedules, and a modeled $20,000,000 borrowed amount for the Coley Creek maintenance project that Waterworks amortized into an approximate $1,300,000 annual debt service for 20 years. Waterworks’ chart also included a policy-based operating threshold defined in the presentation as 25% of working capital and 100% of debt service; the status-quo projection fell below that threshold in 2025 and below zero by 2027.

Council members pressed on distributional effects. In response to a question about fairness and defensibility, Lynn Miller said officials must be able to justify class-based increases: "you've got to be able to defend that rate class increase." Miller and the consultants noted commercial classifications include restaurants, schools, municipal accounts and large retailers (Waterworks mentioned Walmart as an example), and that commercial customers’ bills are based on sewage volume and the city’s classification system.

A council member asked whether a smaller lodging tax combined with a reduced commercial increase could achieve similar results. Andrew ran a quick model combining the Scenario 4 commercial increase with the $150,000 lodging tax and reported that the combined package pushed the model’s negative cash event beyond 2038.

A member of the public, Charlton Holloway, asked about monitoring and frequency of review. "If I understood it correctly, we don't do that again until 2027 and that'd be done more frequently," Holloway said, referring to the ordinance schedule. Staff confirmed the existing ordinance calls for a five-year review cycle and that the city can still monitor revenues and report more frequently than the statutory revisit date.

No formal rate ordinance or tax was adopted at the work session; the discussion produced no motion on rates. Staff and the consultants provided scenarios and modeling for council consideration and noted the ordinance’s scheduled review date of Jan. 1, 2027. Council members asked for the ability to revisit forecasts as new development revenue and monthly results arrive.

The work session record shows the city is weighing options that trade near-term affordability against the risk of depleting wastewater fund reserves when projected capital-related debt service peaks. The consultants recommended monitoring growth and revisiting forecasts as development revenue becomes clearer ahead of the ordinance review date.

Alexander City staff will return with any ordinance language, recommended schedule, and updated revenue forecasts as requested by council; no final decision was recorded at the session.