Council weighs using city loan as match for $5M USDA grant amid looming state water fees

GUNNISON — City staff told the Gunnison City Council on Feb. 18 that the city has been awarded $5,000,000 in Community Project Funding from the U.S. Department of Agriculture for the Tar Canyon water project and must complete an application and environmental review to access the grant.

Dennis, a city staff member, said the USDA explained the city may qualify for an expedited approval process if it can demonstrate non‑federal matching funds. He proposed using part of the city's existing CIB loan as the required match — specifically, taking $125,000 (described by staff as 25% of a required match) from the CIB borrowing to document the match — rather than pursuing a separate USDA loan.

"The money is ours, but we still have to go through an application process and go through the environmental process," Dennis said, and added that demonstrating matching funds could put the application into a streamlined review.

Council members pressed staff on how the financing choices would affect household water bills. Staff said the USDA portion is a grant and would not by itself increase customer rates, but using the full CIB loan could raise average monthly household bills. One council member summarized staff's estimate as "roughly a $12 increase" per month if the entire loan were used for the project; staff cautioned that final figures depend on the loan amount used and project costs.

Members also discussed how the city's local decision timing intersects with state legislation. Mike Warner, presiding at the meeting, and others noted House Bill 501 would impose a state water‑system monitoring fee and a broader rate standard tied to median household income; staff said portions of the bill take effect in 2027, with a 2031 deadline for full compliance if jurisdictions do not seek state funding.

Dennis told the council a substitute to HB501 would let jurisdictions keep raised fee revenue locally rather than sending it to the state, a change members said would reduce the fiscal impact on the city.

Council indicated a preference to proceed with the option that uses the CIB funds as the match and complete the USDA application so work can move forward while staff refines cost and rate estimates and prepares public messaging. No final loan closing or ordinance was approved at the Feb. 18 meeting; staff were directed to advance the application and return with firm numbers and recommended motion language.

What happens next: Staff will complete the USDA CPF application and environmental review, provide more detailed cost and rate estimates for council review, and prepare public messaging that explains how state requirements and city decisions affect local rates.