Heath finance board presses staff on Water Bridge phasing, 24% water-rate increase and bond timing

The Heath Finance Board on Nov. 6 pressed city staff and advisers for details about the timing and cost of the Water Bridge plan and the link between that program and a proposed $39.9 million bond financing that underpins a 24% proposed water-rate increase.

Staff member Jay said the first phase of the Water Bridge plan covers construction associated with well No. 1, design work for wells 2'4 and a 1.5 million-gallon elevated storage tank, while a future Phase 2 would include the 3,000,000-gallon ground storage tank and would leave timing for wells 5 and 6 to be decided later.

"The 5,500,000.0 is just to build well number 1," Jay said, adding that the larger per-well estimates for additional wells (about $6.25 million to $6.5 million) cover construction and engineering design and "include tying that well into our water system" and treatment-building work. He clarified that ongoing operational costs such as chemical treatment and electrical costs are not included in those per-well figures.

Board members repeatedly asked whether the 24% rate model used to justify the bond issuance included future maintenance and operating expenses for the new wells. "The 24% does not include maintenance cost for these wells," Jay replied, and staff said a separate study is underway with technical staff to estimate future maintenance, electrical and treatment costs.

Several members urged a more phased approach to reduce the immediate rate impact. One board member suggested splitting the work into three phases instead of two so the utility-rate increase could be softened if spending is spread over a longer period. Jay responded that the council had directed staff to move expeditiously on the Water Bridge plan and that council asked staff to design wells 2'4 at the same time to capture economies of scale; those designs are now under contract to Kimley-Horn.

Board members also queried the interaction between fund balances and planned debt. Staff said the city's total fund balance shown on the slide (about $43.4 million) would be used alongside a planned bond issue (approximately $39.8 million for the example discussed). Staff reiterated that limits on property-tax-supported debt exist under state law but that revenue bonds typically include coverage ratios (for example, 1.5x coverage) that underwriters review to evaluate the issuer's ability to pay debt service.

On timing, staff confirmed the city can change utility rates at any time but typically does so annually; the current rate schedule assumes bond proceeds will be available after an anticipated February'March 2026 issuance and that revenues will be recognized in the FY25/26 budget cycle, which informed the October rate adjustment timing.

A staff member also described a reimbursement resolution that would allow the city to pay project costs from available funds now and reimburse those expenditures from a later bond issue; staff said that resolution would permit design and early-construction spending before the certificates of obligation (CO) sale.

What it means: The board left the meeting with a clearer picture of which costs are included in the per-well estimates, which costs remain to be studied, and the trade-offs between faster execution (and one larger issuance) versus more phasing to reduce short-term rate impacts. No final financing decision was made at this meeting; staff and advisers presented assumptions and schedules for council consideration.

Acknowledged uncertainties: Staff repeatedly cautioned that estimated rate impacts depend on construction timing, how much residents change water use in response to higher rates, and results of the on-going maintenance-cost study.