Director Neeraj Patel told the City’s Public Infrastructure & Utilities Committee on Jan. 14 that the Water Division faces an unsustainable financial trajectory: the division’s contingent (reserve) fund is projected to be depleted by the end of the fiscal year unless revenues or other funding sources are secured.

Patel outlined four main cost drivers: (1) aging infrastructure and rising emergency repair costs (he said 399 main breaks in 2025, with an estimated average repair cost of $13,000), (2) staffing and contract-labor costs as the utility competes for experienced workers, (3) volatile chemical prices (Patel cited chemicals as roughly a $15 million annual expense that has been rising), and (4) energy costs for pumping (approximately $5 million). Patel said the system is sized for about 1 million people but serves under 300,000, increasing per-customer cost burdens.

To address reliability, Patel identified 63 priority water-main replacement projects (average length ~1,300 feet; average project cost discussed in the presentation) and said the average replacement cost per mile has risen because of inflation and restoration costs. He listed a preliminary capital need of roughly $28 million for those mains and about $10.4 million for two pump replacements at treatment plants; he described an initial $700,000 earmark as part of planning and testing for other projects. Patel said the division has applied for and used subsidized loan programs (SRF) and other debt instruments, but debt capacity requires that future rates support debt service.

Patel also reviewed rates and delinquencies: he said the city’s rate was about $2.54 per CCF before a recent CPI-based adjustment and is now roughly $2.62 per CCF; he said more than 16,000 accounts were delinquent, totalling about $14 million in owed balances. The Water Division has a $1,000,000 ARPA-funded customer-assistance program (administered via a United Way contract) that has helped 400+ applicants with up to $500 each; Patel said about $840,950 remains available for qualified applicants after administration costs.

On process, Patel said the division has kicked off a rate sufficiency study that he expects to complete in March; he described that study as the basis for assessing whether rate adjustments are needed and for following with a cost-of-service study if indicated. He committed to return to the committee with the study results and recommendations.

Consumer advocates were present. Sandra Padgett, executive director of the Consumers Council, praised the division’s transparency but urged that any future rate increase be preceded by a formal, publicly available rate-review process and additional opportunities for public input. Padgett also warned about cumulative pressure on households given other recent utility and energy rate increases.

What to watch: the rate sufficiency study and the administration’s plans to identify funding (grants, low-cost loans or additional city appropriations). Committee members repeatedly urged increased capital planning and greater debt capacity to accelerate renewals; Patel said those options will be evaluated within the study.