Montgomery reviews $27.4M plan to finance water and sewer projects, considers rate increases and 20- vs. 30-year terms

The City of Montgomery City Council discussed on Oct. 14 plans to finance roughly $27.4 million in water and sewer projects and a proposed package of water and sewer rate increases that staff said would generate about $1.1 million in additional annual revenue.

City staff told council members the $27.4 million estimate covers immediate projects at the water plant, sewer plant and supporting infrastructure, and presented two amortization options: 20-year and 30-year schedules. Staff said the proposed rate changes — including higher charges for single-family, commercial and institutional customers — would raise revenue enough to support a bond issue and debt service but would represent a significant change from rates last adjusted in 2018.

Why it matters: financing and rate decisions affect both the timing of critical water and sewer upgrades and monthly bills for residents and businesses. Council members expressed concern about relying heavily on impact fees or on a single financing approach while growth rates remain uncertain.

Staff presentation and numbers City consultants and staff outlined a financing timeline and revenue analysis. Staff estimated the rate package would add about $1,100,000 in annual revenue — which staff described as roughly a 37% increase in water and sewer revenues under the proposed structure. Using a single-family example, staff showed an average bill rising from $65.09 to $77.54 under the proposed changes presented at the meeting.

Staff also described potential short-term uses of the city's impact fee balance to help bridge debt service. That balance was shown in staff materials as an estimated $7.4 million (projected under the set of assumptions in the packet). Staff said one scenario that relied heavily on impact fees without additional revenue would deplete those reserves in the early 2030s.

Amortization, timing and issuance process Staff presented two principal financing options: 20-year and 30-year amortizations. A 20-year schedule reduces long-term interest costs but raises near-term debt service payments; a 30-year schedule lowers near-term payments at higher total interest cost. Staff and the consultant asked council to decide which amortization horizon to pursue as they prepare financing documents.

On process and timing, a staff member stated that the next formal steps would include publishing a notice of intent and bringing back an ordinance for council consideration; the notice would name a not-to-exceed amount and, depending on publication and meeting schedules, a sale could occur in January or February with a closing roughly 30 days after the sale. Another staff speaker described the publication and timing requirements that typically require a multi-week window between notice and sale.

Options discussed by council Multiple council members urged a more gradual approach to rate increases. Several members supported a "stair-step" plan to spread increases over two years rather than implementing the full package at once; staff said they would run those scenarios with the city's financial advisers and present cash-flow comparisons. Staff proposed example splits (for discussion only) such as splitting a $7 increase into smaller increments (for example, $4.50 then $3.00) and agreed to model the financial and debt-capacity impacts of those alternatives.

Council concerns and risks Council members pressed staff on the risk if growth slowed or construction costs rose. Several speakers warned that relying too long on impact fees to pay debt service could leave the city with depleted reserves if new development slowed. One council member asked whether a line of credit had ever been used and was told that low-cost state revolving loans (for drinking water and clean water) are a typical financing option and grants are unlikely in the near term for most of these projects.

No final action tonight Staff emphasized that the Oct. 14 workshop was informational: "Tonight is not a policy action. It's come back with the ordinance," a staff member said. No ordinance, bond sale authorization or vote on specific rate ordinances was taken at the meeting. Staff said they would return with modeled scenarios (two-year stair-step options, amortization comparisons and cash-flow projections) and recommended timing for publishing a notice of intent and for a later council vote.

Next steps and follow-up Staff will prepare ordinance language and run stair-step rate scenarios with the city's financial advisers, and will present a proposed notice/ordinance for council consideration at a subsequent meeting. Staff flagged potential calendar constraints tied to publishing timelines and asked the council to consider whether the regular November meeting would be used for the notice or if a special meeting would be necessary.

Votes and procedural actions from the meeting The only formal recorded vote in the transcript excerpt was a motion to adjourn: a motion by Miss Fox, second by Mister Zilovich, and the motion carried by voice vote. No votes on rate increases, bond issuance, or related ordinances were recorded.

Taper: Staff materials and the discussion indicated multiple financing permutations remain under consideration; council members asked for additional cash-flow scenarios and an updated ordinance and notice for a future meeting so that members can weigh near-term bill impacts against long-term borrowing costs and reserves.