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Lynchburg utility funds meet policy targets, but council presses staff on repeated rate increases
Summary
City staff reported water, sewer and stormwater funds met debt-coverage and fund-balance policies, yet a council member questioned repeated rate increases while funds remained sizable; staff cited a consent order, capital needs and emergency risk.
City staff told the Lynchburg Finance Committee Dec. 9 that the water, sewer and stormwater funds finished FY25 within or above council financial-policy targets, but several council members pushed staff for clearer public explanations about why rate increases continue despite large fund balances.
Tim Mitchell reported the water fund closed the year with a debt-coverage ratio of 1.33 and a fund balance of 36%. The sewer fund exceeded budgeted revenues by about $1.7 million and reported a debt-coverage ratio of 1.51 and a fund balance of 51%. The stormwater fund had a debt-coverage ratio of 2.46 and a fund balance of 39%. Mitchell said much of the sewer fund balance and rate-setting is driven by a Richmond consent order requiring investments to address combined sewer overflows (CSO); staff said they expect to complete required CSO work before 2030.
A council member (S8) challenged the ongoing practice of incremental fee increases, asking why residents continue to face higher bills when some utility funds show sizable balances. The councilor said, "we're asking folks to pay more more more more, and the argument is, well, the service cost more," and pressed staff to explain what portion of the year-end balance represented new, unanticipated revenue versus reserves or committed funds. Staff explained that the reported $47.4 million unassigned general fund balance is a snapshot on June 30 that includes amounts already appropriated by council, encumbrances and reserves; after appropriations and policy-set rainy-day reserves, staff said the immediately available one-time funds are substantially smaller (staff cited roughly $9–9.5 million available for one-time items after allocations). Staff also said some apparent "surplus" results from conservative budgeting and timing: unspent appropriations roll forward from departments, and certain revenues (like federal/state-dedicated funds or interest earnings) are not taxes that could be rebated.
Mitchell and other staff emphasized the need to keep reserves to meet debt-coverage ratios, meet consent-order compliance and provide funding for unexpected events such as large breaks. The committee did not take formal action on rates at the meeting; staff said pay-as-you-go capital allocations will be presented as part of the FY27 proposed budget.
