Committee warned EPA loan-and-forgiveness timing is creating temporary deficits in water and sewer funds

Finance Director John Duncan told the Finance Committee that recent EPA loan-and-forgiveness projects have created timing-driven cash shortfalls in the water and sewer funds and urged caution before committing new capital.

"Right now, we're owed $22,900,000 in in the water fund from the EPA from the loan and forgiveness," Duncan said, explaining that the city must pay project expenses up front and then seek federal reimbursement, after which some amounts will be forgiven and the remainder repaid on a multi-decade schedule.

Duncan outlined specific projects tied to those figures: a wastewater treatment plant, a well relocation and valve and hydrant work accounted for roughly $2.9 million in prior-year costs, and he said the total of recent and anticipated work could bring reimbursements closer to $3.9 million once current-year projects are included. "We could be in a position where we restore the water fund to the tune of about $1,000,000," he said, but added the timing of reimbursements could delay that improvement.

On the wastewater side, Duncan said the city has budgeted for a $4.4 million loan-and-forgiveness project and $1.5 million in CDBG lining expenses; he cautioned that those assumptions are contingent on receiving federal and grant reimbursements this fiscal year and suggested transfers from TIF funds could be considered if timing requires it.

Committee members pressed for how much of the shortfall is temporary versus structural and whether rate increases will be necessary. Duncan said the city does not currently generate enough from user fees to absorb significantly more debt without large rate increases and recommended pacing projects until reimbursements are confirmed.

No formal action was taken; Duncan said staff will update the final appropriation with corrected projections when reimbursements are clearer.