St. Louis water director says proposed FY27 budget is 'not sustainable,' warns of service and repair trade-offs

Neeraj Patel, director of public utilities for St. Louis City, told the Budget and Public Employees Committee on May 1 that the FY27 water-division budget “is not a sustainable budget” and said the division must defer work and cut services unless new revenue arrives. The presentation outlined system scale, current operating plans and a shortfall in reserves that has forced the utility to postpone projects and rely on limited staffing and contract services.

Patel said the division is presenting an FY27 operating plan with roughly $84,200,000 in operating expenses—balanced to projected revenues but without the contingent reserve used in prior years. He told the committee the division has deferred $11,400,000 in major projects and $3,800,000 in noncapital equipment to make the numbers work and has reduced planned chemical purchases from an anticipated $15,500,000 to $9,600,000, creating an expected $5,900,000 shortfall for treatment chemicals. “If we don't have another revenue stream coming in after the fiscal year opens…we will have to decide which water mains that are leaking or broken that we can go without repairing,” Patel said.

The director described the system the division operates—two treatment plants, more than 1,300 miles of mains, roughly 90,000 active service connections and more than 15,000 fire hydrants—and said the reserve fund that had reached roughly $35–40 million was drawn down over seven years of deficits and is now depleted. Without those contingency funds, he said, the utility cannot transfer money to cover emergencies and will be limited to reactive responses.

Patel summarized a completed rate‑sufficiency study (posted on the division website) that models multiple years of revenue and expense projections and the capital-improvement plan. He said the consultant’s recommended path includes a significant front‑loaded increase—Patel cited an initial 40% step in one scenario and an alternative phased approach—and then further annual increases to rebuild O&M and rate-stabilization reserves and to support bonded capital work. The study’s program-level funding target incorporates roughly $440,000,000 of bonded and cash-financed capital renewal and more than $700,000,000 of identified capital projects across the division.

Committee members pressed on several practical consequences: deputy commissioner Spencer Gould and Patel described use of ARPA and other grant funds for customer-assistance programs (up to $500 per eligible water account) and for capital-start money; Patel said the program had drawn about $300,000 of the $1,000,000 ARPA allocation to date. On staffing, Patel said vacancies have dropped somewhat (from 26% to 23%) but that the division struggles to recruit tradespeople (vacancy rates up to 46% in some trades) and that market wages often exceed what the city’s general pay ordinance currently provides, leading the division to contract for temp staff at market rates in many cases.

Patel cautioned that the FY27 plan, as presented, will force difficult choices between chemical purchases, electricity to run treatment and pumping, and emergency repairs. He urged elected officials to consider both near-term assistance (reallocations and ARPA/RAMS/Grama funds) and the structural rate adjustments recommended by the study so the division can move from reactive emergency spending toward proactive renewal.

The committee scheduled a follow-up public-infrastructure hearing to examine the rate-sufficiency study in depth later in the week.

Ending: The committee proceeded to questions from aldermembers and then heard budgets from the collector, sheriff, medical examiner and ITSA; no formal vote on water rates or binding action occurred during the session.