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Water director: FY27 budget ‘unsustainable’ without big rate increases to fund repairs
Summary
Water Division Director Neeraj Patel told the Budget & Public Employees Committee that depleted reserves and $700M+ in identified capital needs force deep FY27 cuts and a rate‑sufficiency plan recommending a large initial increase and multi‑year hikes to restore stability.
Neeraj Patel, director of St. Louis City Public Utilities, told the Budget and Public Employees Committee that the water division’s FY27 budget is balanced on paper but “unsustainable” in practice because the division cannot draw on a now‑exhausted contingency fund.
Patel opened the presentation by listing system scale and operations: two treatment plants (Chain of Rocks and Howard Bend), roughly 129,000,000 gallons per day of treatment capacity, more than 90,000 active service connections and about 1,300 miles of water mains. He said the division performs roughly 27,000 state‑certified tests annually and monitors for more than 150 potential contaminants.
Why it matters: Patel said operating expenses and revenues are both about $84.2 million for FY27 but the division has no reserve to cover the normal fluctuations and emergency repairs that historically required transfers. “For over seven years we’ve been operating in a deficit,” he said, and the contingent fund that once approached $35–40 million is now depleted.
Key budget tradeoffs and shortfalls: To balance the proposed FY27 budget the division deferred roughly $11,400,000 in major projects and $3,800,000 in non‑capital equipment and cut across materials, supplies and contractual services. Patel said the budget as presented would leave the division short on treatment chemicals (budgeted $9,000,000 versus an anticipated $15,500,000 need, a gap of about $5.9 million) and underfunded for electrical power and emergency repairs. He warned that without another revenue stream the division will face choices about which leaking mains and broken assets to repair.
Staffing and operations: The presentation reported personnel costs of about $36,000,000 and said the division had reduced its vacancy rate from roughly 26% to 23% while requesting additional positions (the request shows 378 positions on the table of organization versus 369 last year). Patel said the division sometimes uses contract staff at market rates to fill difficult positions, while civil‑service hiring remains a long‑term goal.
Main breaks and workload: Patel said crews had completed more than 200 repair activities so far in the year and more than 5,700 distribution work orders, driven in part by recent extreme weather that caused a spike in main breaks.
Rate sufficiency study and capital needs: The division has posted a rate‑sufficiency study that Patel described as a data‑backed model showing long‑term deficits. The study — and Patel’s presentation — outline a multi‑year path to rebuild operations and capital reserves and to support about $440,000,000 in bonded and cash‑financed capital renewal; the report includes scenarios with a significant initial increase (Patel cited a 40% initial option) followed by multi‑year increases to reach a sustainable debt‑coverage ratio and a 45‑to‑90‑day O&M reserve target.
Federal and one‑time funds: Patel said the division is aggressively pursuing federal funds and increased a state revolving fund application to roughly $65,000,000 to seed CIP work; he also described ARPA allocations — about $1,000,000 for a customer assistance program (up to $500 per account) and approximately $1.2M earlier allocated for capital projects — and recent reallocations of board bill funds totaling about $6.7M to support immediate infrastructure repairs.
Delinquent balances and assistance uptake: The division reported a delinquent balance that peaked near $14.5 million; Patel said the ARPA‑funded assistance program has been used to cover just under $300,000 so far and that staff are working to expand eligibility and outreach. If ARPA funds are not expended by the federal deadline they may be reallocated to revenue replacement categories in consultation with city leadership.
What happens next: Patel said the division will appear before the Public Infrastructure and Utilities Committee for a deeper discussion of the study and recommended rate changes. He cautioned that without a new revenue stream the division will continue to defer necessary maintenance and rely on expensive emergency contracting.
