Prescott budget workshop lays out five‑year capital plan, flags $150M wastewater borrowing need

Prescott City finance staff on May 11 told the City Council that the FY2027 budget process will lean heavily on capital spending and that a set of large wastewater projects will require long‑term borrowing.

Lars Johnson, the city’s finance director, opened Workshop Two with an overview of fund‑balance policy and the five‑year capital improvement plan. Johnson said the city’s budget policy reserves a minimum of 20% of general‑fund operating revenue and that “eligible uses of fund balance are capital projects — one‑time uses. We don't want to see use of fund balance for ongoing needs.” He walked council through how beginning fund balances, projected revenues and capital expenditures produce the ending balances for FY27 and beyond.

Johnson presented a five‑year capital plan that staff summarized as roughly $681.6 million for FY27–FY31 plus about $180 million in later‑column projects, producing a combined planning total of roughly $862.5 million for the horizon under review.

Public works and capital staff then detailed a concentrated wastewater program that would be the largest single driver of near‑term borrowing. Gwen Roage, public works director, and Tim Sherwood, the city’s capital program manager, described a set of trunk‑sewer and lift‑station projects — including the Sundog trunk main Phase C (about 27,000 linear feet of new pipe and associated lift‑station and odor‑control work), the Willow Creek gravity sewer (≈6,600 feet of 30‑inch pipe and reconstruction of the Prescott Lakes regional lift station) and the Deep Well/Airport distribution loop required by development agreements — that together push the five‑year wastewater capital total to about $150.3 million.

Roage and Sherwood told council that, under present assumptions, the scale of the wastewater program will require debt financing. Finance staff noted that WIFA/WIFFA loans remain an option for water projects but that wastewater projects face different program rules and shorter typical repayment terms; council heard a staff recommendation to model multiple borrowing scenarios — including longer‑term revenue bonds — to spread the cost over a more appropriate period rather than compressing repayment into shorter loan windows.

Staff said projected revenues and rate‑study assumptions were included in the five‑year financial projections; the water fund forecast showed a healthy projected ending balance (staff cited an FY31 ending balance in the low‑tens of millions), but wastewater borrowing will add a new debt‑service line the council must consider in future rate and budget votes.

What happens next: staff will provide more detailed financing scenarios and model sensitivity to timing and grant availability. Council scheduled follow‑up budget discussion at the May 26 voting meeting and asked staff to return with contract proposals and financing options where required.