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Committee hears finance summary: operating revenues near target; $200M CIP driven by multi-year projects and DWSRF reimbursement
Summary
Kalamazoo City finance staff told the Utility Policy Committee that 2025 operating expenses ran below budget, operating revenues were about 95% of target, and the large $200M capital plan reflects multi-year carryovers and DWSRF and bonding timing rather than one-year spending.
Peter Hefner, speaking from the committee, summarized the city's 2025 utility financials and why capital-expenditure totals differ from year-to-year. He told members operating expenditures were budgeted at roughly $25 million and recorded near $19.4 million for 2025, and operating revenues were about 95% of budget in the report the committee received.
Hefner and city finance staff (Stephen) explained that the CIP's near-$200 million figure includes multi-year projects, carryovers from prior years and one large $100 million DWSRF (Drinking Water State Revolving Fund) project that is reimbursed by the state as work completes. "A lot of that $200 million is the accumulation of everything we've previously approved that's in progress," Hefner said.
Finance staff described bonding strategy and cash management: they typically plan to bond 75% of a project in their financial plans and sell bonds in a September-October window; bond proceeds can be invested while awaiting expenditure. Staff said observed bond turnover recently is roughly 18 months; legally the city has up to three years to expend bond proceeds.
Committee members pressed whether capital under-expenditure signaled inability to execute projects or merely timing differences. Staff said long procurement and multi-year construction schedules, DWSRF reimbursement timing, and planned bond-sales cadence explain much of the difference between budgeted and expended capital.
Hefner highlighted two revenue-related items in the packet: interest on restricted bond reserves (one line showing roughly $1.4 million) and fees related to extensions and connections, including a neighborhood extension fee (about $7,350 per property referenced in the neighborhood extension appendix) and a system buy-in (capacity) charge of $1,175 per connection.
Why it matters: the magnitude and timing of capital projects shape bond planning, cash flows, and the utility's ability to execute well-rehab and treatment projects. Committee members supported continuing quarterly financial summaries for UPC and receiving ad-hoc updates for major events such as grant awards or bond issuances.
Next steps: staff will prepare quarterly summaries and ad-hoc verbal updates when notable actions occur; the committee asked staff to surface anomalies and be prepared to explain large variances in future reports.
