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Huntsville reviews Zion's Bank water-rate study proposing steep rate increases and $1.5M bond
Summary
At a Aug. 21 work session, Zion's Bank presented a study showing current rates would yield a FY2026 shortfall and offered three options: an 80% increase with a $1.5M bond at 4.5%, a 70% increase with a lower-rate bond, or staged increases with no bond. Council and the water board discussed timing and next steps toward a September loan application.
Susie Becker of Zion's Bank presented results of a water-rate study to the Huntsville Town Council on Aug. 21, saying that "doing nothing would lead to negative net revenues and poor debt coverage." The study modeled three paths to fund roughly $1.5 million in capital needs: an immediate $1.5 million bond with an 80% rate increase at an anticipated 4.5% interest rate; a 70% rate increase with a lower-rate bond (modeled at 2.5%); or a two-step increase (70% in FY2026, 30% in FY2027) with no bond and projects starting in 2027.
The presentation listed financial targets that guided the modeling: a minimum 1.25 debt service coverage ratio and 150—60 days cash on hand, with operating expenses assumed to rise 5% annually. Under current rates the study showed a projected FY2026 shortfall of ($187,016) before debt service, prompting the need for rate adjustments or borrowing. The current in-town 3/4" base rate of $57.50 was used as the baseline to demonstrate how monthly bills would change under each option.
Council members and staff questioned financing routes and timing; Mark Anderson, the bonding agent, told the group the State Drinking Water Division could possibly offer a below-3% loan while private placement would likely cost more for a $1.5 million issuance. Anderson also clarified his minimum fee of $10,000, payable only if a bond is issued, and offered to review the financial portion of the town's loan application. The water board chair, Ron Gault, said he favored option one or two to allow immediate replacement of a troubled water line section in 2026 and plant sustainability upgrades.
No formal vote was taken at the work session. Staff noted rates would need to be adjusted before applying for a loan in September and the council directed staff to continue due diligence on the bonding route and the application process.
