Finance and Audit Board presses for deep dive on proposed budget, water-bridge plan and bonds

The Finance and Audit Board at its regular meeting discussed detailed review plans for the proposed 2026 budget and the council'backed water-bridge plan, and asked staff to provide focused presentations on bonds, investments and long-term water costs.

The board's work will aim to support the City Council's decision-making by analyzing financing options, reserve balances, bond timing and the board's investment policy rather than setting policy itself. Chair Berry, Chair, Finance and Audit Board, said the body's role is to "assist the council with a budget" and to provide technical and strategic analysis rather than replace council authority. Board members repeatedly asked staff for detailed briefings on how changes in bond size, market rates and use of reserves would affect utility rates and long-term costs.

Board members and staff focused discussion on the water-bridge plan that would add wells, storage and related infrastructure to reduce reliance on purchased wholesale water. Jay Ayers, staff member, presented a financial model built from a series of assumptions showing a 30-year comparison between continued purchases under the city's current MOU and construction of local wells. Key figures Ayers included in the model: an existing "take-or-pay" contract quantity the model used at 984,000,000 gallons per year (the MOU under negotiation was noted at 945,000,000 gallons), project population growth of about 3% annually through 2038'39, and projected peak-day demands derived from the 2020 impact-fee study. The model assumed six wells at about $6.6 million each (a $40 million capital need in the scenario), 25-year bonds at roughly 4.65% and estimated principal-and-interest of about $68 million. Under those assumptions Ayers'model projected gross savings of roughly $159 million over 30 years and an estimated upfront cost per thousand gallons near $92.80 falling to about $5.94 per thousand after debt service ends in the scenario.

Ayers cautioned that the spreadsheet relies on multiple assumptions'rate escalations, well yields, timing, and market rates'and that results will change with different inputs. He told the board the model uses a 7.2% annual escalation for purchased wholesale water (based on Central Texas municipal projections) and that some values (for example, peak demand and account growth) come from the city's 2020 impact-fee study and the council'adopted comprehensive plan. Ayers said the model does not include operations-and-maintenance estimates.

Board members asked for specific follow-ups. John Kenny, Board member, and others urged quarterly financial statements and early visibility into any mid-year budget transfers; Chris Shaw, Board member, suggested the finance board should be able to review interim reports before they are released to council. Several members asked staff to present: (1) current bond holdings and market-position analysis, (2) the investment policy and current fund balances/returns, and (3) a long-term maintenance and operations cost schedule for the wells and storage.

Jason Gray, consultant referenced by staff, previously presented rate impacts tied to a $72 million bond scenario; Chair Berry and others said new cost estimates and recent reductions in well cost projections had lowered the earlier $72 million estimate into the mid- to high-fifties million range for the capital-improvement plan in discussion. Board members emphasized the board's advisory role. Swayze, Board member, said the board should be "out ahead reporting information back" but cautioned that the board must not be used as political cover for council decisions.

Staff agreed to return with targeted presentations. Jay Ayers, staff member, told the board he had asked the rate analysts to revisit water-sales assumptions that the board had questioned, and Kimberly Horne, staff member, provided a high-level long-term maintenance outline that staff will refine. The board asked staff to schedule the next meeting promptly after the City Council finalizes the budget so the board can review bond sizing, timing and the items above before final rate or bond decisions.

The discussion closed with agreement on next steps: staff will provide the requested presentations (bonds/investments, investment policy, well O&M and sensitivity analyses on the spreadsheet) and the board will seek quarterly financial reports and earlier visibility on transfers and reserve use.