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Consultants model utility‑rate increases as much as 15% annually to fund $487 million water and sewer CIP unless grants or project timing change
Summary
A Stantec consultant told Goldsboro council members that the city’s water‑and‑sewer capital plan has grown substantially — about $487 million over 10 years in current dollars — and that, without significant grants or project delays, modeled scenarios show near‑term rate increases on the order of 15 percent annually to keep reserves and meet debt coverage requirements.
A consultant from Stantec presented Goldsboro council members with a 10‑year financial model that compares projected operating and capital costs for the city’s water and sewer system to forecasted revenues. The analysis incorporated a substantially expanded capital improvement plan that includes a proposed 3.5‑MGD wastewater treatment plant project (roughly $120 million) and a proposed water‑treatment plant project estimated at $220 million in today’s dollars (inflation‑adjusted later in the timeline). Together, the 10‑year CIP was summarized at roughly $487 million in current dollars.
Why it matters: The consultant said the utility fund currently holds a strong cash balance (about $33 million, roughly 24 months of operating expenses), but the proposed capital program — if funded primarily with debt and without significant grant support — would require sizable rate increases to maintain reserves and meet debt‑service coverage metrics needed for revenue bond financing. In a modeled scenario that assumes the large projects proceed on the presented schedule and a modest 2 percent base rate increase already adopted for FY25, consultants projected near‑term rate increases on the order of 15 percent for multiple years to meet targets. With grants (the consultant ran scenarios with 20 percent grants on major projects) or if the wastewater plant schedule is delayed, the size or timing of increases could be moderated.
Key modeling takeaways - Baseline and CIP: Starting FY25 fund balance was presented at approximately $33 million. The new CIP totals about $487 million across water, wastewater, stormwater and other funds; the two biggest drivers are the water treatment plant (modeled at $220M) and the wastewater plant (modeled at $120M). - Rate scenarios: Under the consultant’s base case (current CIP timing and limited grants), the model shows short‑term rate increases of about 15 percent annually for several years would be required to maintain minimum cash and meet senior debt coverage requirements for revenue bonds. Scenarios that included 20 percent grants to the two major plants reduced the number and magnitude of the top‑tier increases; delaying the wastewater plant also lowered near‑term pressure. - Borrowing and targets: The consultant emphasized that lenders expect minimum reserve levels (the modeling used a target of six months of operating expenses) and debt‑service coverage (125 percent on senior debt in the model). If the city seeks large SRF/WIFIA or revenue bond financing, showing the financial plan and agreed rate path is critical to access funding.
Council questions and implications Councilmembers expressed concerns about affordability and competitiveness with peer cities. The mayor asked staff to consider equity and competitive taxes/rates when setting water and sewer policy. Staff and consultants committed to returning with additional analyses, including possible tiered or lifeline rate structures, comparisons with peer utilities and runs that model alternative grant levels and project timing.
Ending: Consultants recommended the city continue seeking grant funding, consider phased project timing, and plan a multi‑year rate path to meet the financial targets needed to secure low‑cost financing. They also offered to prepare additional scenarios, including lifeline or tiered rate structures, for future council consideration.
