Tuscaloosa finance committee hears $7 million water and sewer capital proposal, schedules votes on several budget revisions

City of Tuscaloosa staff recommended a $7,000,000 package of water and sewer capital projects to the Finance Committee and asked that the projects be scheduled for full City Council consideration.

The recommendation is drawn from a 6% annual rate increase the council adopted in fiscal 2021 and that the city places into a dedicated 10‑year water and sewer escrow, staff said. Carly Standridge, a finance staff member, told the committee the escrow has been used to front‑pay design and acquisition costs and was holding about $9.5 million in 2024; staff said those fronted costs will be reimbursed from an upcoming bond issuance.

Kimberly Michael, a Water and Sewer Department staff member, described seven capital recommendations that together total $7 million and said most are intended to be smaller, quicker projects rather than larger bond‑scale work. She listed work that staff prioritized based on project readiness, timing with bond projects and emergent needs.

The projects staff presented included: an estimated $1.2 million engineering phase to rehabilitate the Mercedes Force Main and several lift stations (stations 39, 40, 41 and 15) to prepare the work for bidding; phase 3 improvements at the Water Resource Recovery Facility focused on aeration‑basin equipment, blowers and the return activated sludge (RAS) system; a Hillcrest tank rehabilitation that also requires variable frequency drives (VFDs) at Taylorville and Braun booster pump stations to allow the tank to be taken offline for painting; replacement of the remaining 300 feet of the plant outfall line on plant property to reach the river; a $400,000 sewer betterment (encasement) at the airport runway expansion for future sewer expansion that the grant does not cover; and repairs to a 36‑inch raw water main from Lake Tuscaloosa, to be engineered in‑house and constructed by a contractor.

Standridge and other staff explained how the $7 million relates to the city’s 10‑year water and sewer plan. The council in prior years authorized a 6% baseline increase intended for the 10‑year capital plan; staff said the city places that revenue into an escrow account, uses it for debt service and pays debt‑related reimbursements out of it. Staff said the city completed a roughly $35 million bond issuance in 2022 and is preparing a $75 million bond issuance that will reimburse some previously fronted costs.

Committee members asked questions about project selection, schedule and whether the funding choice would slow larger bond projects; staff said the $7 million is meant to address more immediate, smaller projects and engineering needs that do not require adding large bond debt. Staff also said the projects are timed to avoid conflicts with larger bond work.

On the operating side, staff presented a water and sewer enterprise budget proposal that projects $86,057,113 in revenues and $86,952,439 in expenses. The presentation said the utility serves about 62,000 water customers and roughly 50,000 sewer customers. Staff attributed recent revenue growth not to higher unit sales but to system clean‑up: implementing AMI (advanced metering infrastructure), replacing damaged meters, correcting service codes and recovering previously unbilled usage. Examples cited included finding a large leak that had been losing roughly one million gallons per day.

Staff noted several operating items of interest: an increase in bad‑debt expense (about $170,000), a recommended $2,000,000 increase in the depreciation line to better reflect asset depreciation, an IT increase tied to a Munis software upgrade, and an 8.3% increase in health insurance costs. Debt service was described as about 16% of the water and sewer budget and slightly lower this year due to two rolloffs; staff said one of the city’s advisors reported successful bond pricing with long‑term interest around 4.8% on recent sales.

The committee also discussed financing options for mid‑term cash needs, including lines of credit, short‑term bank financing and using escrowed cash to front projects until bond proceeds are available. Staff said a full line‑of‑credit would require a formal RFQ but that preliminary inquiries to local banking partners could inform structure and terms.

Votes at a glance

- Vehicle replacements using insurance proceeds: The committee approved a budget revision to use insurance proceeds ($62,000 and $24,060) to purchase two fleet vehicles. The motion passed by voice vote; individual roll‑call votes were not recorded in the meeting transcript.

- General reserve / neighborhood drainage: The committee approved moving two project close‑out amounts ($382,005.96 from one project and $500,000 from the Public Safety Logistics Center underrun) into neighborhood drainage to fund buyouts and immediate drainage needs. The motion passed by voice vote; individual roll‑call votes were not recorded in the meeting transcript.

Next steps and context

Committee members asked staff to put the $7 million capital list on the Council hearing schedule for earlier review and to run parallel project‑level discussions in the Projects Committee so members could examine scope while Finance focuses on funding. Staff asked for direction on what financing structures the committee wants to pursue and said they will bring financing options and project sequencing back to the committees in coming weeks.

No final Council vote on the $7 million capital package was recorded in the Finance Committee meeting; committee members instead agreed to schedule the items for Council consideration and to continue parallel review of financing and project details.