Murray outlines plan for up to $20 million power department bond to finance critical upgrades

City staff and financial advisor Matt Duggell presented a proposal to underwrite major power-department repairs and upgrades through a revenue bond. The presentation listed project needs including rebuilding a sinking central substation, upgrading turbine controls, relining a penstock and covered vehicle storage. The staff estimate discussed a planning target of about $18 million and a working bond issuance plan of roughly $19'$20 million with a maximum par amount set at $25 million (SEG 1460'SEG 1567).

Staff explained the rationale: without bonded financing, the power fund's projected cash position would fall below required reserve levels by 2027 in scenarios with limited rate increases, leaving the city exposed to price shocks like those experienced in 2023. Staff proposed bond parameters including a maximum interest rate of 6.5 percent, a possible term up to 30 years and a cap on discount/sale at 2 percent; staff said a parameters resolution would be considered April 15 and a public hearing set for May 6 (SEG 1548'SEG 1566, SEG 1618'SEG 1640).

Councilors pressed on alternatives, potential increases to cost if federal tax-exempt status for municipal bonds changed, and whether the bond would materially affect rates; staff said additional analysis (master plan and rate study) would follow the bond parameters approval and that the intent is to prefer smaller incremental rate adjustments over large one-time increases (SEG 1660'SEG 1760, SEG 2014'SEG 2032).

Staff also described operational drivers including earlier maintenance decisions, the need for controls upgrades to restore multiple turbines and contractual obligations tied to a Sandy siphon pipe that the city must maintain. No final bond sale occurred at this meeting; council will consider a parameters resolution on April 15.

Quotes in this story are drawn from the presentation and council discussion recorded at the meeting.