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Council hears caution about using wastewater revenues for general expenses; utility earned $2.2M interest since 2023
Summary
City staff reported the wastewater utility earned about $2.2 million in interest since 2023 but warned that diverting utility funds to general government could harm credit ratings and is not best practice for utilities.
City finance staff told the Marshfield City Council that while state law does not expressly forbid a contribution from the wastewater utility to the general fund, there are several reasons to be cautious about doing so.
“Municipalities can charge a pilot from its utilities,” Jennifer said during the budget review, noting that utility pilots are commonly used by electric and water utilities to fund general government services. But she added that “funding nonutility related operating or capital costs with utility revenues is not considered best practices for utilities, by rating agencies.”
Jennifer told the council that since 2023 the wastewater utility had earned approximately $2,200,000 in interest on its unrestricted cash balances. That revenue currently supports working capital and future capital needs as the utility upgrades facilities; the next capital-improvement plan projects about $16,000,000 in additional needs.
Council members asked about the likelihood of a negative credit impact if the city took utility contributions. Jennifer said Moody’s would consider both the presence and the magnitude of such transfers and would discuss the rationale during a ratings call; she warned that sustained or heavy reliance on utility transfers could lead to a negative outlook or downgrade.
Councilmember Andrew pressed on whether Moody’s would treat any contribution as a determining factor; Jennifer replied that the rating agency would weigh the contribution along with many other measures and that “it could be likely depending on how significant they see the contribution.”
Staff also noted the wastewater utility already contributes to general government through administrative charges (IT, HR, finance) and by sharing costs on joint street projects. Council members asked staff to continue studying options and to include any potential impact on the city’s credit profile in future recommendations.
