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City receives utilities financial report; sewer fund reserves recovering slowly
Summary
Finance staff told council the Department of Utilities is in stable financial shape but faces inflationary pressures, higher FY26 costs due to increased gas use at the electric plant, and a sewer fund reserve that has been rebuilt to about 1.5 months from a shortfall and will likely need four–five years to reach the target eight months.
The Fremont City Council received a 2025 financial report for the Department of Utilities on Jan. 27 that outlined inflationary pressures, coal inventory adjustments and recovery plans for depleted reserves.
Jennifer Nab, the city's finance director, said the quarterly report (pre-audit) compares FY25 to FY24 and showed the Department of Utilities is "in good financial shape" overall but is seeing higher costs driven by inflation and additional gas consumption while unit 8 at the electric plant is offline. Staff adjusted coal inventory following a density study on the coal pile to reconcile recorded tonnage and burned coal.
Nab told council the city aims for approximately eight months of reserves in each fund; following prior spending from the sewer fund to complete improvements, the sewer fund currently has about a month-and-a-half of reserves and, "all things being equal," it will take roughly four to five years to rebuild toward the eight-month target. She also noted the city recently reissued bonds and maintained a "double A negative" rating during that process.
Council members asked technical questions about the coal density testing method and whether the reserve-rebuilding timeline would affect bonding. Staff described the density-testing process (core checks, compression factors, reconciliation with received/burned coal tonnage) and said the reserve trajectory was considered in bond discussions; staff indicated bonds were not adversely affected in the most recent reissuance.
Ending: Council voted to receive the utilities financial report; staff said more detailed audited reports will be available after the close of the fiscal year and the end-of-March audit process.
