DWSD eyes spring 2027 bond issue as lead line replacements drain construction cash

DWSD eyes spring 2027 bond issue as lead line replacements drain construction cashDetroit's aggressive push to replace lead service lines has significantly depleted its water fund construction reserves, prompting the utility's CFO to forecast a return to the capital markets by early 2027.

DWSD's water construction cash has been steadily declining since June 2025 due to heavy capital expenditures on lead service line replacements.

Chief Financial Officer Istakar Rahman expects the utility will need to go to market in early spring 2027 to raise additional capital.

The utility recently resolved a $4.1 million compliance issue with the EPA to secure federal funding for lead line replacements outside initially designated disadvantaged zones.

The board approved a $7 million contract amendment for hard surface restoration repairs, bringing the total contract value to $46.9 million.

The Detroit Water and Sewerage Department (DWSD) is preparing to return to the bond market in early 2027 to finance ongoing capital projects, following a sharp drawdown in construction cash driven by the city's lead service line replacement program. During a June 3, 2026, Board of Water Commissioners meeting, DWSD Chief Financial Officer Istakar Rahman reported that the utility's water construction cash has been consistently depleting since June 2025. "We spent a significant portion of that cash in lead service line replacement," Rahman informed the board. "My best estimate is we'll have to go to the market to raise additional funds to fund our construction capital projects that comes out of the water fund, most likely in the spring of 2027, early spring of 2027." In contrast, Rahman noted that the sewer construction cash account maintains a healthy balance expected to cover foreseeable future needs without immediate external financing. As of March 31, 2026, the utility held $249.1 million across its system-wide operating accounts, improvement and extension funds, trust accounts, and construction accounts. The financial update coincided with the presentation of the utility's FY2025 single audit, which highlighted the complexities of funding the lead replacement initiative. DWSD spent approximately $58 million in federal expenditures during the audited year, primarily through the Coronavirus State and Local Fiscal Recovery Funds and the Reducing Lead in Drinking Water program. External auditors from Plante Moran noted a temporary compliance issue regarding $4.1 million in expenditures. DWSD crews had shifted lead line replacement work outside of strictly defined "disadvantaged opportunity zones" when expected lead lines were not found underground. The utility retroactively secured an amendment from the US EPA to expand eligibility to "vulnerable zones," preserving the federal funding and avoiding the need to absorb the multi-million dollar expense. To support ongoing infrastructure work, the board also approved a $7 million amendment to a hard surface restoration contract with Major Contracting Group, Inc. The amendment, which extends the contract by 183 days and brings the total value to $46.9 million, was authorized to ensure uninterrupted street and sidewalk restoration following water main repairs and utility excavations during the peak construction season.