Adopting a Resolution authorizing the issuance of short-term financing up to $10 million for the Water Fund, establishing a Pricing Committee within the parameters set forth in the Resolution, and recommended by the Public Utility Board.

Rochester continues to experience significant development activity that is increasing demand for water system infrastructure beyond historical capital investment levels. Planned growth-related projects include:

•    Country Club Road water main extension – approximately $1.2 million 
•    Kalmar Booster Station – approximately $2.15 million 
•    18th Street SW water improvements – approximately $1.1 million 
•    Oversized water mains for anticipated development (2026–2030) – approximately $450,000 annually ($2.2 million total) 
•    Ponderosa Booster Station – approximately $375,000 
•    Other known growth-related water projects – approximately $1.0 million 

At the same time, the Water Utility is implementing the Advanced Metering Infrastructure (AMI) program approved as part of the 2024 budget, with a current authorized project budget of up to $17,934,554. These concurrent capital investments create short-term financing needs until long-term funding strategies can be implemented.

RPU is currently updating its Water System Master Plan, which is expected to be completed in early 2027. The master plan will identify future infrastructure requirements and support updates to the Water Utility Cost of Service Study and long-term financial plan. Until that work is complete, short-term financing is recommended to bridge current capital investment needs. The borrowing is anticipated to be repaid through a combination of future water rates, development charges, and long-term Water Utility Revenue Bonds.  These bonds will be guaranteed by the revenues of the water utility and backed by the general obligation of the City.

The current 2027 Supplemental Water Utility budget update 2027 through 2031 will include $6 million in short-term borrowing for the known projects and cash management through the Advanced Metering Infrastructure (AMI) project. 

The attached Parameters Resolution authorizes a Pricing Committee consisting of the City's Director of Finance, the RPU General Manager, the RPU Finance Director, and the Assistant General Manager–Administration to select the underwriting team and approve the sale of fixed or variable-rate debt of up to $10,000,000 with a maturity not exceeding 36 months and a true interest cost not to exceed 5.5%, subject to the parameters recommended by the Public Utility Board and approved by the Common Council.  Baker Tilly Municipal Advisors, serving as financial advisor to the City and RPU, will advise the Pricing Committee throughout the financing process.

Upon completion of the Water System Master Plan and subsequent review of the Water Utility's long-term financial and rate requirements, management anticipates refunding the short-term financing through the issuance of long-term Water Utility Revenue Bonds.

The results of the bond sale will be presented to the Utility Board following the completion of the financing.

This action supports RPU's Strategic Plan by maintaining reliable water infrastructure, supporting sustainable community growth, preserving long-term financial stability, and ensuring adequate funding for critical capital improvements. The financing supports the strategic priorities of Reliability, Rates, and Responsibility by allowing timely investment while the Water System Master Plan and future rate strategy are completed.

March 25, 2025:  Utility Board approve a bond reimbursement resolution for metering project of up to $6 million.  Executed by City Finance Director on behalf of the City Council

April 28, 2026:  Utility Board approve a bond reimbursement resolution for growth related capital project of up to $15 million.  Executed by the City Finance Director on behalf of the City Council.

Authorizes issuance of short-term financing of up to $10,000,000 with a maximum rate of 5.5% and maturity of no more than 36 months. Debt proceeds will provide interim funding for Water Utility capital investments until permanent financing is established through future long-term Water Utility Revenue Bonds.

Debt service will be paid from Water Utility revenues.