Purcellville advisors say meals tax or rec-center fees could delay utility rate hikes but risk future spikes

At a special Purcellville Town Council meeting, financial consultant Dave Hyder of Stantec presented 10-year water and sewer fund models showing how different revenue scenarios affect reserve levels and the timing of rate increases.

Hyder said the firm’s model assumes a 9-month operating reserve target (roughly 75% of a 12-month target), declining water sales (1.5% annually through 2028 and 1% thereafter), and standard borrowing assumptions (30-year loans at 4.5%): “If you do a 1% increase in water rates, you get about $26,000 additional revenue,” he said. He gave a production cost for water of about $21.78 per 1,000 gallons and said a typical single-family customer using 8,000 gallons bimonthly currently pays less than that amount.

The presentation tested several paths. Under a zero-percent rate increase in fiscal 2026 combined with a three-year $620,000 meals-tax transfer into the water fund, the model showed the town would need large deferred increases (Hyder described increases of roughly 20–25% in later years) to maintain the 75% reserve once planned borrowings take effect. Hyder said planned water borrowing in the model included about $5 million in 2027 and $23 million in 2029 to fund major capital projects.

With a recurring meals tax for the projection period and the addition of a proposed Western Loudoun Recreation Center that would generate availability fees and new water demand, Hyder said the town could push substantial rate increases farther into the future. In one rec-center scenario Hyder modeled, the rec center contributes availability fees (Hyder cited about $1.3 million for water availability fees and 20,000 gallons per day of average demand), allowing smaller near-term increases and reduced near-term borrowing.

Davenport, the council’s financial advisor, cautioned against treating one-time transfers as long-term fixes: “Recurring revenues should meet recurring expenditures,” he said, noting rating agencies want sustainable plans and that relying on fund balances or temporary transfers is not a best practice. He added that a one-time draw can be acceptable for capital but that relying on fund balance for ongoing costs would raise sustainability concerns.

Council member Rayner pressed whether shifting meals-tax revenues to utilities would harm the town’s credit ratings. Davenport said it depends on what backfills the general fund and whether the general fund remains sustainable; rating agencies review multi-year plans rather than single-year actions. Hyder said he could run updated scenarios quickly once the council’s adjustments are provided.

Council members also sought clarification about the Western Loudoun Rec Center modeling. Director of Engineering Andrea said the county supplied preliminary sanitary-sewer numbers (20,000 gallons per day average, 40,000 max) and that the town had not completed full water modeling because the county had previously indicated it would provide its own water. Andrea said integrating the county’s smaller wells would mean additional infrastructure and treatment and that the wells the county described (one reported at about 680 feet yielding about 5 gallons-per-minute) are much weaker than the town’s existing sources; the town had secured a $580,000 grant for PFAS work that will include exploring alternate water sources.

A resident interrupted the presentation, yelling, “What the hell are you guys doing? You are defunding the police,” and demanded broader public discussion; the mayor asked the speaker to continue and the meeting proceeded. The record does not show a staff response connecting the meals-tax questions to public-safety budgeting in the hearing.

Hyder summarized unit-cost findings for sewer as well: gross sewer production cost about $33.40 per 1,000 gallons (roughly half of that in existing debt-service), net cost around $30, and a typical residential effective charge near $24 per 1,000 under current rates. Several modeled sewer scenarios—including recurring meals-tax revenue and the rec center—showed the sewer fund remaining closer to the 75% target and requiring smaller later increases than under the no-meals-tax baseline.

Staff and consultants agreed to run revised scenarios reflecting council direction; Hyder estimated model turnaround could be one to two days for the consultants and several days for staff to implement assumptions and quality-control checks. The council made no final rate decisions at the meeting. A motion to adjourn was made, seconded and carried by voice vote.