Deltona eyes 6% rate hike to safeguard bond ratings and water permit

Deltona eyes 6% rate hike to safeguard bond ratings and water permitUtility staff warned that a lower inflation-pegged adjustment would fail to fund critical alternative water supply projects required by state regulators.

Staff recommended a 6% across-the-board rate increase (Option 1) to ensure revenue sufficiency and bond covenant compliance through fiscal year 2030.

Officials explicitly warned against 'Option 3'—a lower increase pegged to construction indices (approx. 2.6%)—stating it would likely trigger credit rating downgrades.

The revenue plan is necessary to fund alternative water supply projects, including Aquifer Storage and Recovery (ASR) wells, which are required to renew the city's Consumptive Use Permit.

Discussion highlighted regional capacity issues, noting that while Deltona is stable, neighboring Volusia County faces supply pressures from new industrial growth like Amazon facilities.

Deltona Water officials presented a revenue sufficiency study to the City Commission on February 16, 2026, arguing that a sustained 6% rate increase is necessary to fund capital improvements and satisfy bond market requirements through 2030. Staff and consultants from GovRates outlined three potential rate structures. Option 1, the staff recommendation, proposes a uniform 6% increase across water, wastewater, and reclaimed water rates. Option 2 suggests a 9% hike in base charges coupled with a 3% tier increase, though officials noted this might discourage conservation. Option 3, which would peg increases to the ENR Construction Cost Index plus 1% (resulting in approximately 2.6%), was strongly discouraged. Utility staff warned that adopting Option 3 would result in insufficient funds for the five-year Capital Improvement Plan (CIP). "We could see losing the bond rating agencies' current level of assertiveness," a staff member told the commission, adding that the lower rate would likely lead to a failure in maintaining critical infrastructure or meeting the debt coverage targets typically required for favorable ratings. The utility recently secured a rating affirmation from Fitch based on its current financial trajectory, a status officials are keen to protect. Beyond financial metrics, the rate increase is tied to regulatory compliance. The St. Johns River Water Management District requires the utility to demonstrate alternative water supply projects to renew its Consumptive Use Permit (CUP). Current initiatives include testing Aquifer Storage and Recovery (ASR) wells, currently permitted for a 4 million gallons per day (MGD) test, and exploring surface water withdrawal from Lake Monroe for reclaimed use. The workshop also highlighted regional water disparities. While Deltona officials stated their system has sufficient capacity, they noted that neighboring Volusia County is facing pressure from rapid industrial development, including new Amazon facilities in the "Dell North" area. Staff pointed out that the county has not conducted a rate study since 2011—well outside the recommended three-to-five-year review cycle for Florida utilities—and may face supply constraints, potentially positioning Deltona to sell water via bulk rate interconnects in the future.