The Palm Coast City Council Tuesday approved a controversial plan to raise water and sewer rates 36 percent by October 2027 and borrow $455 million to expand the city’s sewer and freshwater capacity, comply with a state consent order forcing the city’s hand on capital improvements, and assure bond-holders that the city can soundly make good on its financial obligations.
Combining water and sewer costs, a household using 4,000 gallons of water per month would see its water and sewer bill go from $90.73 today to $123.46 in October 2027, a difference of $32.73, or $393 per year.
The two coming bond issues represent by far the largest borrowing spree in the city’s history. To put it in perspective, when the city in 2003 bought Florida Water, what became the city’s utility, in 2003, it paid $82.3 million ($143 million in today’s dollars), and took out a combined Utility System Revenue Bonds of $146.5 million ($256 million in today’s dollars). The utility fund had an outstanding debt of $114 million as of last September. The city’s total debt is at $135 million. The new bonds will vault that amount well past the half-billion mark, and depend on continued growth to ensure debt payments, making it difficult for council members to maintain anti-growth postures: bond holders will demand otherwise.
Tuesday’s 3-1 vote was the culmination of a yearlong debate about the city’s infrastructure needs that the consent order made moot, narrowing the city’s choices. Mayor Mike Norris and Council members Charles Gambaro and Ty Miller voted for the increase. Council member Theresa Pontieri voted against. The fifth seat is empty since the resignation of the ailing Ray Stevens last week.
Members of the public addressing the council were largely critical of the decision (“I was beginning to wonder if Palm Coast was turning into the Titanic,” one resident said, lambasting the city for lowering property taxes only to shift costs to fees like utilities. “I don’t need any more fees coming in the mail every month. I’ve had enough of them.”). But the extent of the criticism was less than expected: even though the item was scheduled for an evening meeting, presumably to encourage public participation, it did not draw the sort of full house and incensed response that similar proposals have in the past.
The council had its supporters, too. “It has to be fixed,” Ed Fuller, a resident with close ties to elected officials, and who frequently addresses public issues said. “No one wants a rate increase. But the question is: what happens if we don’t get a rate increase? This system is going to fail.” The pain is inevitable, and unavoidable. “It’s not to assign blame for the past but to chart our course for the future.”
Pontieri explained her dissent. “I agree with everybody up here. We need to pay for these things,” Pontieri said. “There are needs. But I also think that if we do not approve this rate increase as is, I do not think there is not a way to get this done. I don’t believe that. I think there is a way to get it done, or we can take some of these projects and prolong them, phase them out in a longer approach. I do think that there are alternatives. So while I would support a large part of what has been presented here today–as presented, I cannot.”
The revenue from the two bond issues–one to be issued this year, the other in 2028–will be used to upgrade and expand Water Water Treatment Plants 1 and 2 and expand the city’s well fields from 67 to 73, among other needs the city considers critical. “The rate is as if both bonds were adopted,” Norris said.
Norris said the city is under that consent decree from the state, but he also blamed “bad leadership” and “bad management” in the past, “but we are in this situation as a community and we have to do what’s right,” Norris said. “Our city has overpromised on water and past leadership has not kept that at the forefront of their minds.” But addressing occasional public requests for a “forensic audit” of the city’s books, he dismissed claims that the city misspent money in the past even as he suggested that the state could send auditors “to put to rest the auditing requests of our citizens.”
To Gambaro, “we can no longer admire this problem. As an army general, we have to attack it and fix it. But I will pledge to you that I will continue to fight as hard as I can with all the connections that I have to get federal funding” to offset the bond costs ahead. “It’s something that we’ve all been saddled with, but I’m prepared to move forward and get this done so we can get started to protect our water and wastewater system.”
Miller echoed Gambaro’s thoughts. “It’s been said before: nobody ever runs for office to raise your water rates. We run for office to make your pocketbook a little bit slimmer.” He said infrastructure was the main concern among residents he spoke with during his election campaign. Since then, he said, the state’s consent decree was issued. “It’s not a fun thing. Nobody’s here advocating for this because we’re trying to take money out of somebody’s pocket. We’re trying to do the right thing, or I’m trying to do the right thing, fixing this one time the right way, instead of what’s been happening in the past,” when election pressures would keep councils from voting in the necessary improvements. “In consideration of that, people have not funded the things that needed to happen the right way because they wanted to get reelected.” He added: “You have to get it done, otherwise you live in a broken home.”
Council member Theresa Pontieri described the state the city found itself in as “death by a thousand cuts,” and noted the increases in garbage and stormwater rates residents experienced in the last few years. But she was opposed to funding all $415 million through the proposed rate increase. She did not approve of the “all-or-nothing approach.”
But there was a running misconception, an unfair misconception about previous councils–that those councils sat on their hands while the water and wastewater system crumbled. That’s simply not true. In 2013, the council approved a 17.6 percent rate increase over three years on top of a 46 percent stormwater fee increase it had approved a year earlier. In 2018, the council again raised rates 20.6 percent over four years. In 2013, the council agreed to limit the rate increase by foregoing plans for a new $24 million sewer plant. But in 2015, the city borrowed $30 million to build that new plant. Water and sewer rates continued their annual increases uninterruptedly, every year.
Pontieri was correct, however, when she pointed out that a 2018 utility study did not project the needed expansion at Waste Water Treatment Plant 1. That looks like a serious strategic error in retrospect, though the city had not projected that it would experience the surge of growth it did starting right around that time.
It is also true that every time the council increased rates those previous times, council members pledged that it was the last time such large increases were necessary. They said what Miller said Tuesday: “Getting it done now versus trying to push it later” was essential to avoid higher costs down the road.
Public criticism is closer to the mark regarding the council’s punt in 2024, when the council voted to increase water and sewer impact fees (the one-time fee developers pay to defray the “impact” of development on infrastructure) but not water and sewer rates. That precipitated the consent order from the state. But it was public opposition–the very same public that paraded before the council Tuesday evening–that pressured the council against adopting the rate increases.
See the rate breakdown and the presentation outlining needs in the document below.
water-sewer-2025-plan
