Boise voters will get to decide whether to approve a bond election for wastewater this fall.
On Tuesday, Boise City Council gave a hearty thumbs up to a request from the city’s public works department to ask for voter approval to take out a loan to help finance the next 10 years of upgrades to the city’s water renewal system. This will allow the city to pay for the $1.15 billion in major repairs and replacements of water treatment facilities, new capacity to accommodate growth and the city’s work to add recycled water infrastructure.
City says borrowing upfront = stability
The exact amount of the bond has not been set yet. It needs a simple majority of voters to approve and it will appear on all ballots, not just the districts where a city council member is up for election.
Public Works Director Steve Burgos said paying for the improvements through a combination of debt and cash financing means the costs for the upgrades will be paid for by customers over time, instead of all at once. If voters do not approve the bond, it will result in an up to 53% rate hike next year to pay for the improvements all at once.
And, if the city borrows the money instead of paying in cash, officials say it will allow rates to steadily increase more slowly over time instead of jumping drastically.
“If we had to move a few projects forward, our ability to borrow that money can help us reduce that potential impact on rates,” Burgos said. “If we were going cash only, we would have to quickly raise that cash through a cash increase.”
Higher long-term cost with bond
There is a trade off. Paying for these improvements with a bond is the equivalent to taking out a mortgage for your home instead of paying cash. Borrowing money means the city pays interest, so the long-term price will be higher than if the city pays up front. This means although rates will climb more slowly in the first five years instead of raising the money all at once, it will result in a higher final cost.
Under the cash and bond combination model, rates will climb between 9 and 10% for the first five years and roughly 5% until 2040. If the city chooses to pay in cash, rates would hike 53% the first year and then between 9 and 10% through fiscal year 2027. After that, they would only increase 1%.
Boise’s average water renewal bill is currently $36.82 per month. In the first five years, the average would increase to $64.11 per month using the bond and to $86.47 per month if the city uses cash only. But, by 2040 the monthly bill would be $91.79 with the cash payment system and $120.73 with the bond.
Boise to up utility assistance
City Council Member Patrick Bageant gave several reasons for his ardent support for using the bond over cash, but chief among them is to ensure new customers pay for the cost of the extra capacity.
“Cash is slightly cheaper, but it is terrible in every other way,” Bageant said. “It will hit rate payers early with the biggest cost at the beginning, which for long term financial planning is a terrible thing to do and for long term rate stability predictions it’s a terrible thing to do.”
“And it will cause present ratepayers to buy things for people who do not exist in Boise yet and in return, those people who do not exist in Boise yet will not have to pay for anything so there’s a fairness issue.”
The extra cost is not lost on city staff.
Multiple times throughout the presentation, Burgos said the city is aware of the extra cost to customers. He said the department will be bringing in suggestions for new programs to support low-income rate payers at the end of the summer and they will be more heavily promoting existing programs the city has to help with bills.
“The reality is we are obliged to treat the wastewater and there are improvements that are needed, but we want to do so with sensitivity to the people in the lower-income brackets who will be impacted by this,” he said.