Lennox council approves forgivable interfund loan to finance Lewis and Clark water expansion

The Lennox City Council on Oct. 27 approved a resolution authorizing an interfund loan from the sewer fund to the water fund to cover the city's share of the Lewis and Clark Regional Water System (LCRWS) expansion. The loan is structured as forgivable, without interest or required repayments, though the council discussed options to repay the sewer fund if desired.

City staff told the council the first major payment on the expansion is expected in 2026 and estimated at about $130,000. The city had previously planned to finance its share with a water-revenue bond and a customer surcharge, but the availability of Department of Corrections (DOC)-related funding and existing interest income prompted staff to propose using internal cash to avoid issuing new debt.

"Unlike other loans, this is treated as a forgivable loan with no interest and thus no payments due," staff said in the presentation, while noting the council could elect to repay the sewer fund via a rate surcharge over a multi-decade period if it chose to do so.

Council members asked whether alternative payback mechanisms exist, and staff said repayments would need to come from enterprise-fund revenue (for example, rates or a dedicated surcharge) if the council wished to restore the sewer fund balance. One councilmember said they preferred not to add another surcharge and staff noted that interest gains in the funds could support the project without a surcharge.

Action and outcome The council approved resolution 2025-10-27-01 to move the requested funds from sewer to water; the motion passed by voice vote.

Ending Staff indicated they will proceed with the transfer and recommended that any decision to repay the loan be considered in the context of future water/sewer rate decisions and the ongoing DOC funding discussions.