Libby council approves pursuit of USDA emergency flood-recovery funding option
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Summary
The Libby City Council voted to authorize staff to pursue an emergency flood recovery funding alternative involving USDA assistance, while discussing use of restricted reserves, potential borrowing and coordination with FEMA and Montana DES. Council approved keeping the USDA avenue open to meet a May allocation deadline.
At a special meeting, the Libby City Council voted to approve a request authorizing staff to pursue an emergency flood-recovery funding alternative with the U.S. Department of Agriculture.
Sam Sykes, a city staff member who led the briefing, told council members that USDA officials have shifted terms during recent conversations, at one point saying “they want us to spend half before they even come in” and still expect the city to borrow money for part of the project. Sykes said the city is weighing whether to draw on some restricted reserves—particularly water-related funds from an IP settlement—while also pursuing state and federal reimbursements.
The briefing walked council through the city’s cash report and restricted accounts. Sykes said the council typically keeps a 50% reserve in both general and utility budgets as a six-month emergency cushion; he said USDA has suggested reducing some reserves to about 25%, which would “knock out” substantial balances and is a significant policy change for the city’s risk posture. He also described a repair-first approach at the water plant that would cost roughly $300,000 per filter system compared with a $12 million full replacement, and said staged repairs could minimize borrowing.
Councilors and staff discussed the IP settlement fund, which Sykes said is restricted to water uses, and the need to preserve other earmarked reserves—such as a $400,000 sewer lift-station project that had missed a grant award. Sykes told the council the city’s current cash position is stronger than it was in 2020 but that drawing down multiple restricted lines would require careful legal and accounting review; he warned that certain restricted deposits cannot legally be repurposed.
Sykes said the USDA timetable creates an urgency: allocations must be made by May, and the city’s application window is short. He also said staff are coordinating with Montana DES and FEMA and expect additional conversations with USDA, attorneys and engineers before any signature or binding commitment.
Unidentified Speaker (S2) moved that the council approve the request to pursue the emergency flood recovery funding alternative. Mayor Mary Taylor called for a vote; vocal support was registered and the mayor announced that the motion carried. The motion authorizes staff to keep the USDA alternative open while continuing to pursue state and FEMA reimbursement and to report back to council with updated terms.
Next steps: staff will continue negotiations with USDA, Montana DES and FEMA, refine cost estimates and legal constraints for using restricted funds, and return to the council with recommended terms before any binding agreement or signature.
