Knoxville Utilities Board approves $31m in water and wastewater bonds alongside FY27 rate hikes

Knoxville Utilities Board approves $31m in water and wastewater bonds alongside FY27 rate hikesThe utility is returning to the bond market for wastewater infrastructure for the first time in several years, backed by upcoming rate increases of 6% for water and 2% for wastewater taking effect in August 2026.

The board approved FY 2027 budget appropriations of $111.2 million for the Water Division and $146.7 million for the Wastewater Division.

Funding includes the issuance of $19 million in water system revenue bonds and $12 million in wastewater system revenue bonds.

Wastewater debt is projected to fall to $420 million by the end of FY 2027, down from a historical peak of approximately $520 million.

Multi-year commitment appropriations allocated $48.9 million for water and $55.9 million for wastewater projects extending beyond June 2027.

The Knoxville Utilities Board (KUB) unanimously approved its fiscal year 2027 budget on May 21, 2026, authorizing $257.9 million in combined water and wastewater appropriations alongside new debt issuances and rate increases. To support its capital investment program, the board passed Resolution 1516, requesting the City Council to authorize $19 million in water system revenue bonds and $12 million in wastewater system revenue bonds. The bonds will have a 30-year term maturing in 2057, with an eight-year call provision beginning in 2035. Mark Walker, Senior Vice President and Chief Financial Officer, noted the utility has budgeted an average interest rate of 4.25% for the issuance, which is expected to go to a competitive public sale in late 2026 or early 2027. The $12 million wastewater bond marks the division's first debt issuance in several years. According to Walker, KUB has focused on reducing its wastewater debt footprint following a period of heavy borrowing tied to a federal consent decree. Outstanding wastewater debt is projected to end FY 2027 at $420 million, down from around $520 million five to six years ago. The utility plans to pay off $189 million—representing 45% of its outstanding wastewater bonds—over the next ten years. The approved FY 2027 budget appropriations (Resolution 1517) allocate $111.2 million for the Water Division and $146.7 million for the Wastewater Division. To generate necessary revenues and maintain financial metrics, previously approved rate adjustments will be reflected on customer bills starting in August 2026, comprising a 6% increase for water and a 2% increase for wastewater. The board also approved Resolution 1518, authorizing commitment appropriations for multi-year contracts extending beyond June 2027. This includes $48.9 million for the Water Division and $55.9 million for the Wastewater Division. Future capital commitments outlined in the budget documents include $17.4 million for MBW filters and backwash pumps, $20.4 million for cast iron main replacements, and $32.1 million for wastewater main rehabilitation and replacement across FY 2028 and beyond. Additionally, the board's Audit and Finance Committee established FY 2027 debt service coverage targets of 2.0x for the water system and 1.75x for the wastewater system, with the lower wastewater target reflecting the legacy of past consent decree borrowing.