Detroit targets spring 2027 bond issue as water construction cash dwindles

Detroit targets spring 2027 bond issue as water construction cash dwindlesThe Detroit Water and Sewerage Department is preparing to tap the bond market next year to fund ongoing water projects after reporting a steady decline in its construction account balances.

DWSD expects to go to the bond market in spring 2027 to raise funds for water infrastructure projects.

Water construction cash balances fell to $16.3 million by the end of May 2026, prompting the financing plans.

System-wide operating cash remains stable at $237 million across all accounts.

Utility staff noted that pushing collection rates closer to the 95% national average will be critical for future rate-setting.

The Detroit Water and Sewerage Department (DWSD) is preparing to tap the bond market in the spring of 2027 to finance upcoming water infrastructure projects, driven by declining balances in its dedicated construction accounts. Speaking at the utility's August 5 Finance Committee meeting, Chief Financial Officer Istika Rahman confirmed that DWSD is closely monitoring its construction funds. At the end of May 2026, the utility's water construction cash stood at $16.3 million, following a $280,000 decrease from the previous month. "It shows the balance pretty low and it's going down," Rahman told commissioners. "So all likelihood, we will be going to the bond market in spring of 2027 to raise funds for our water projects." Sewer construction cash also saw a significant drop, falling by $22.6 million to close May at $26 million due to ongoing capital expenditures. Despite the tightening construction fund balances, the utility's broader liquidity remains stable. Rahman reported a system-wide operating cash position of $237 million across all accounts, including $77.7 million in the water fund and $159.9 million in the sewer fund. The utility's ability to smoothly finance future debt will rely on maintaining strong revenue collection. For May 2026, combined system collections effectively met the monthly target, bringing in $36.6 million against a $36.7 million goal. Commercial and industrial three-month rolling average collection rates have stabilized at 91.9% and 91.3%, respectively. However, residential collections averaged 87.7% over the previous three months, prompting discussion among staff and commissioners about the need for improvement. A staff member, identified during the meeting as Mr. Brown, noted that the national average for utility collection rates is 95%. "The closer we can get to that, the better off we'll be when it comes time to doing rates," he said. The planned 2027 bond issuance drew immediate attention during the meeting's public comment period, with a local advocacy representative questioning how the additional debt would impact customer rates. Further details on the anticipated size and structure of the bond offering were not disclosed during the committee session.