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Council Discusses Interfund Loan From Water to Wastewater to Advance Combined-Sewer Overflow Project; No Final Vote
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Summary
City staff presented an ordinance authorizing an interfund loan from the water fund to the wastewater fund to finance a combined-sewer overflow project with an estimated cost of $4.5 million. Council held a first-reading discussion; staff will return with further details including bid timing, water-fund cash levels and grant opportunities.
City staff presented an ordinance Oct. 6 that would authorize an interfund loan from the water fund to the wastewater fund to support the combined-sewer overflow (CSO) project. Council discussed the proposal during the meeting but did not take a final vote; staff said they will return to council at a future meeting with additional information.
What staff proposed
Finance staff explained the wastewater fund is projecting financial strain in 2026 and that the CSO project has an engineering estimate of $4,500,000. To allow the project to move forward sooner, staff proposed a five-year interfund loan from the water fund to the sewer fund backed by an interest charge in accordance with the State Auditor—s BAR manual. Staff identified a proposed internal interest rate of 3.61%, citing the current five-year U.S. Treasury rate as the basis for that calculation.
Council questions and staff responses
Councilmembers asked whether the project design is complete, whether the full $4.5 million is required up front and whether the ordinance could be adopted after bids are returned so the loan amount matches the bid. Staff said the design is nearly complete and that the loan amount could be set to the actual bid amount after bids are received; authorizing the loan now would allow the city to start sooner but staff acknowledged the water fund cash position should be reviewed before a final loan authorization.
Councilmembers also asked about grant opportunities and whether any grants or low-interest funding sources might reduce the amount needed from the water fund. Staff did not have a list of potential grants on hand but agreed to provide information. Councilmembers discussed sensitivity to interest-rate changes, noting the proposed 3.61% rate is pegged to the current five-year treasury and would change if market rates move.
Outcome and next steps
No final vote was taken on the ordinance at the Oct. 6 meeting. Staff said they would bring the item back — including water-fund cash data, final design status, bid timing and any available grant information — at a subsequent meeting, with a planned return on Oct. 13.
Ending
Council closed discussion on the item for Oct. 6 and set a return for further consideration; staff will provide the requested financial and project details before council acts on any loan authorization.
