Pueblo West weighs financing options for $30M wastewater plant expansion

Pueblo West weighs financing options for $30M wastewater plant expansionFaced with aging infrastructure and state regulatory mandates, the Colorado district is weighing low-interest state loans against faster market-rate debt to fund critical wastewater capacity upgrades.

The $30 million expansion is required by the Colorado Department of Public Health and Environment after the plant reached 80% capacity.

State Revolving Fund (SRF) loans offer the lowest interest rates but are capped at $20 million and face uncertain funding availability.

Market-rate options, including Certificates of Participation and revenue bonds, offer faster closing but could cost up to $10 million more over the life of the loan.

The district has approximately $4 million in wastewater reserves to contribute, with the remainder funded by debt that could raise monthly customer bills by $10 to $15.

Pueblo West Metropolitan District is mapping out a financing strategy for a $30 million wastewater treatment plant expansion after the facility reached 80% of its treatment capacity, triggering regulatory mandates from the Colorado Department of Public Health and Environment (CDPHE). During a June 8, 2026, board meeting, utility officials and financial advisors detailed the district's options for funding the critical infrastructure upgrade. The existing plant is 64% depreciated and is operating near its design limits during peak flows. Director of Utilities Kevin Niles informed the board that the district has initiated the design phase to satisfy CDPHE requirements. Once the project reaches 30% design in approximately one year, the district plans to engage a Construction Manager at Risk (CMAR). Construction is estimated to take three years from the completion of the design phase. To fund the $30 million project, Melissa Buck of UMB Bank presented three primary debt structures: State Revolving Fund (SRF) loans, Certificates of Participation (COPs), and Water/Sewer Secured Revenue Bonds. The SRF option presents the lowest cost of borrowing, offering interest rates between 3.25% and 3.5% depending on a 20- or 30-year term. Buck noted that utilizing the SRF could save the district $6 million to $10 million in interest over the life of the loan compared to tax-exempt market bonds. However, the SRF route has significant drawbacks, including a lengthy 6-to-12-month timeline and an upcoming application deadline of January 5, 2027. Furthermore, SRF loans are currently capped at $20 million, meaning the district would need to cover the remaining balance. While Pueblo West scores as a disadvantaged community under the state's MHV criteria—which improves its prioritization score—Buck warned that SRF funding is not guaranteed due to high demand across Colorado. If the district requires faster execution, it may turn to market-rate options. COPs and Water/Sewer Secured Revenue Bonds offer closing timelines of 60 to 120 days but come with higher interest rates ranging from 4.12% to 4.77%. While COPs provide maximum structural flexibility by avoiding water enterprise pledges, they require the district to pledge real estate as collateral. Conversely, Water/Sewer Secured Revenue Bonds offer slightly tighter market spreads but require a combined pledge of both water and wastewater revenues. The debt service will have a direct impact on the district's 13,600 sewer taps. Currently, the sewer rate is $4.32 per 1,000 gallons. UMB Bank estimates the new debt will add between $10.62 and $14.95 per tap, per month, depending on the chosen term and financing vehicle. Extending the debt term to 30 years would lower the monthly ratepayer impact by approximately $2 to $3 but add $8 million to $12 million in total lifetime interest. To soften the rate impact, the district plans to utilize cash reserves. While Pueblo West holds approximately $47 million in total enterprise reserves, Niles clarified that only about $4 million remains dedicated to the wastewater fund for the 2026 budget year. The June 8 presentation was for informational purposes only. The board will vote on a final authorizing resolution and financing structure at a future date as the project progresses through the design phase.