Marsh: Water and sewer operations show midyear surplus but five‑year capital plan leaves large shortfall

Tom Marsh, the presenter for the council’s quarterly findings review, told council members the water and sewer consolidated operations are “very healthy” on an operating basis at midyear, but cautioned that the capital program presents a significant financing gap.

"We have in a total city, 11,000,000 for capital improvement projects, 271,000 for capital expenditures," Marsh said, and later quantified the unfunded need: "there was about a 7 to $8,000,000 shortfall in that." He said the city had considered borrowing — "we were looking at about 7,000,000 over maybe 20 to 30 year bond" — with debt service to be paid from system revenues.

Marsh described why operating balances can be misleading: rate increases and one‑time technical defeasance left the sewer O&M showing surpluses while reserves and funded depreciation needs still reduce net income once financing and reserve contributions are included. He said the council approved a rate structure in 2024 that split fixed and variable charges and that much of the five‑year program is maintenance and replacement rather than growth projects.

He recommended watching project completion rates: if capital projects reach about 70% completion by year‑end, staff will consider borrowing or shifting operating dollars back to capital from city sales/use tax. Until then, Marsh said some projects will be “scrapped, not done, change of plans, and or pushed off.”

The presentation did not include a formal motion or vote; Marsh offered to bring more granular cash‑flow and project schedules to the next meeting for council consideration.