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Council hears finance review: water, sewer funds lack reserves; staff to propose automatic rate adjustments and capital plans
Summary
Finance staff told the council Willard's water and sewer enterprise funds are not building cash reserves to cover depreciation and future replacement costs; the council asked staff to propose options including an annual inflation-tied rate mechanism and to prioritize capital expenditures.
WILLARD, Utah — Willard—ity finance advisers told the city council on June 12 that water and sewer enterprise funds do not currently generate sufficient cash to fund depreciation and future replacement of infrastructure, and recommended the council consider automatic, inflation-tied rate adjustments and other measures.
Finance explanation Ryan (identified in the meeting as a finance advisor) explained that depreciation expense for long-lived water and sewer assets is recorded on annual budgets, but user fees historically have been set to cover short-term cash obligations rather than accumulating reserves for phased replacements. "The depreciation expense... really should be covered with user fees," he said, adding that depreciation schedules reflect historical costs that do not capture current replacement costs inflated by years of price increases.
Council concerns and staff direction Councilmembers said a major repair or replacement could require debt if cash reserves remain low. The council discussed options including: (1) an ordinance to automatically increase water and sewer rates annually tied to an inflation measure, with a resolution to be revisited every five years; (2) delaying nonessential capital purchases already in the FY26 budget; and (3) pursuing state revolving funds or grants for large capital projects. The council asked staff to prepare a proposal that could be considered at forthcoming work sessions.
Operational notes Public works staff discussed equipment upgrades at pump sites and recommended installing variable frequency drives (VFDs) rather than the older soft-start devices; VFDs can reduce electricity demand and protect motors while yielding long-term energy savings, staff said.
Next steps Staff will produce a short list of rate-adjustment options, including an inflation-indexed automatic adjustment ordinance that could be renewed or revised on a 5-year cycle, and will provide cost estimates for VFD upgrades and other prioritized capital items.
