Amherst County Service Authority reviews financial outlook, considers levelized rate increases and benefit changes

Good afternoon. The Amherst County Service Authority on April 1 heard a detailed financial presentation from Davenport & Company outlining capital-improvement needs, debt assumptions and three rate scenarios for water and sewer service that staff say would preserve debt covenants and liquidity.

Davenport & Company financial advisor R.T. Taylor told the board the authority now has a full fiscal-year (June 30) set of audited results for 2024 and that the authority’s master plan identifies roughly $11.5 million in short-term projects and about $29–30 million in longer-term needs spread over years six through ten. The short-term total includes an advanced metering infrastructure (AMI) project estimated at $2.7 million. Taylor said the firm modeled three scenarios: a conservative plan that retains current interim proceeds; a base plan assuming roughly $12.8 million of debt issuance over the next three years but no development revenue; and a development-supported plan that assumes new revenues and county contributions tied to the Gateway sewer project. Under the base scenario, the model would levelize water rate increases at about 9% beginning in fiscal 2026 and sewer increases near 10% until 2029, then tapering to lower levels in subsequent years. If development revenues and county contributions materialize, modeled increases would be somewhat smaller.

Why it matters: the authority must satisfy a revenue‑coverage covenant tied to borrowings from the Virginia Resources Authority requiring at least 1.15x net revenue coverage of debt service, and staff said the scenarios aim to preserve that covenant and a minimum year‑end flexible cash target (historically 50% of budget; planners discussed an aspirational 75% target). Taylor also described prior interim financings: a roughly $7.5 million interim borrowing related to a raw-water intake that the board later resolved to free up for other projects, and a $2.5 million interim note for the Gateway sanitary sewer project. The presentation assumed roughly $4.0 million of interim proceeds would be applied to near-term projects and the remaining proceeds used to prepay the interim note when long-term financing occurs.

Board discussion focused on timing, assumptions and risk. Board member Mr. Martin urged caution before spending gateway proceeds and asked staff to “look very carefully” at the Gateway effort before committing funds. Board member Mr. Perra questioned the base assumption of 3% annual expense growth, saying 5% might be more realistic; Davenport said higher expense growth would raise future annual rate increases but would not materially change the first-year recommendation. Staff and the consultants noted that upticks in commercial and industrial usage seen in late 2024 and early 2025 could mitigate future rate pressure if sustained.

Budget goals and employee benefits: Executive Director Stacy (surname not specified in the transcript) presented a draft operating and capital budget and a set of goals for fiscal 2026 that include continuing enterprise fund accounting, limiting rate shock to customers, and funding salaries. Stacy proposed switching the authority’s health plan to a high-deductible health plan with employer HSA seed contributions of $2,500 per covered employee (and paying 100% of individual premiums and higher employer shares for dual/family tiers). She presented an estimate that the change would reduce employer premium costs from about $347,000 to $282,000 and that after a one-time $2,500-per-employee HSA seed (about $60,000) net savings would be modest; she offered to present alternate contribution levels for the board to review. Board members asked for options and more time to consider the change; Stacy said she would provide additional scenarios ahead of the May meeting.

Capital projects and grants: Stacy and the consultant reviewed ongoing and proposed capital work. Staff said they are pursuing multiple funding sources for projects, including a $2 million EPA allocation to reimburse prior phase work and support a phase 2 project, FEMA hazard-mitigation grants for generators, county ARPA monies targeted to gateway work and other local contributions. A number of projects were mentioned: AMI meter rollout (est. $2.7M), Williams Creek pump station work, force main along Route 210 (VDOT approval obtained for plans), James Berger bank‑stabilization (EPA-funded, expected to go to bid this summer), South Madison Heights/Seminole Plaza stormwater and sewer improvements (FEMA/state grant planning underway), and various pump station and treatment-plant short-term needs. Stacy said the authority currently holds roughly $7 million in cash reserves and proposed drawing slightly more than $1 million from reserves in the draft capital plan to help fund FY26 projects.

Employee recognition and operations: the board recognized Seneca Haskins for passing the Class II water operator exam. Staff also reported progress on master-plan tasks such as locating manufacturer reps for Williams Creek pump station and compiling long-term withdrawal data for the DEQ VWP permit process.

Votes at a glance: The board approved the meeting agenda (motion by Mr. Martin) and approved the consent agenda (motion by Mr. Woods). No detailed roll-call tallies were recorded in the transcript for these routine approvals.

Next steps: staff will refine the draft numbers and return to the board at its May meeting; the board indicated it expects to set proposed rate adjustments for public hearing in June if direction is confirmed. The presentation and draft budget materials will be circulated to the board ahead of the May meeting, per board requests.