Birmingham water board defers FY2027 rate vote as affordability debate overrides capital case
Birmingham Water Works Board, Alabama · Meeting date: October 23, 2026 · Published: October 25, 2026
The Birmingham Water Works Board deferred selection of its FY2027 rate resolution until its regular November meeting, rejecting an immediate decision on a proposed 6.4% increase. The delay follows presentations showing a $1.5 billion, 10-year capital improvement plan and limited financial headroom for the utility.
Key points
- The board voted to postpone the rate-resolution decision to its regular November meeting after a motion to adopt the 6.4% option initially failed to secure a second.
- Rate Option 1 would raise the residential volumetric charge from $4.72/CCF to $5.02/CCF; at median usage of 4 CCF, the estimated bill impact was $3.03 per month.
- Staff said the FY2027 budget, based on flat revenue, would leave only about $4.5 million after operating costs, debt service and planned capital spending if rates were unchanged.
- Consultants presented a 10-year CIP totalling about $1.5 billion, focused principally on a backlog of aging infrastructure, with further borrowing capacity constrained by the utility's lack of bond-market access.
- The board had previously voted on October 9 to move residential billing from a tiered structure to a uniform volumetric rate structure.
Full report
The Birmingham Water Works Board has deferred its FY2027 rate decision until its regular November meeting, after an extended board debate over the affordability of a proposed increase clashed with the utility's case for more capital investment and stronger reserves.
The board had been asked to choose among three options: a 6.4% increase reflecting two years of Consumer Price Index growth; a 3.4% one-year CPI increase; or no increase. Raftelis recommended the 6.4% option, which Jacobs Engineering also supported.
Under that option, the residential volumetric rate would rise from $4.72/CCF to $5.02/CCF. The consultant estimated that a residential customer using 4 CCF, described as the median level of use, would see a monthly bill increase of $3.03. The 3.4% option would set the charge at $4.88/CCF, with a $1.60 monthly impact at 4 CCF.
A motion to adopt the 6.4% option was eventually seconded, but the board approved a substitute motion to postpone the vote until the November regular meeting. During the discussion, one director argued that even a $2-$3 monthly increase would be unaffordable for some elderly customers and called for other solutions. Staff responded that the utility works with customers through payment plans, while the chairman said the system's financial health must be protected to provide reliable water service.
The rate debate came after a presentation setting out a substantially larger long-term infrastructure requirement. Jacobs presented a 10-year capital improvement plan valued at approximately $1.5 billion, including 249 projects. The plan is largely directed at a backlog of aging assets and does not include capacity additions for population growth beyond projects already identified for known development areas.
FY2027 is the first year of the plan. The proposed capital budget totals $56.2 million, including $19.3 million expected to be reimbursed through WIFIA and state revolving fund financing, leaving $36.9 million of board-funded spending. Major elements include approximately $3.2 million to replace about three miles of 2-inch galvanized and unlined cast-iron pipe in Sandusky; a condition assessment of a 43-mile inland raw-water main; the first phase of remote SCADA communications upgrades; and the first year of an advanced metering infrastructure rollout.
The AMI programme is estimated to cost $65 million-$70 million over five years. The FY2027 allocation is approximately $3 million, with procurement expected to begin near year-end and installation anticipated to start in late Q3 or early Q4 of 2027. The programme would cover roughly 200,000 residential meters, while the utility's 2-inch and larger commercial meters are already AMI-capable and would require endpoints.
Financial advisers said the utility has nearly $900 million of debt outstanding, although current senior debt service is projected at about $63.5 million annually. The utility also has access to up to $171 million under a 4.38% WIFIA loan, of which $35 million has been drawn. However, Porter White & Company said the utility cannot currently issue additional senior debt in the bond market because it needs a validity opinion linked to ongoing legal matters.
The proposed FY2027 operating budget holds revenue at roughly the FY2026 level of $233 million and reduces operating expenditure to $126.7 million, a 3.2% decrease. Management said the plan incorporates savings from eliminating 19 vacant positions and keeps most expenditure categories below FY2026 levels, although chemical costs are budgeted to rise by about 9%.
With no rate increase, Raftelis projected approximately $4.5 million remaining after operating expenditure, debt service and capital spending. The 6.4% option would provide about $18 million for reserves or contingencies. The utility reported approximately 160 days of cash on hand under S&P's calculation and about 205 days under Moody's methodology. Raftelis recommended a minimum combined operating and capital reserve equivalent to 250 days of cash on hand.
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Source: Special Called Board Meeting, Birmingham Water Works Board