Palm Coast Set to Take On $582 Million Debt Over 30 Years and Invest $600 Million in City’s Utility Over the Next 5

In a financial step that dwarfs all others in the city’s 26-year history, the Palm Coast City Council is set to approve the April issuance of $280 million in bonds and the refinancing of $45 million in old bonds that will result in total debt, with interest, of $582 million. It will be repaid over the next 30 years. The cost is already reflected in water and sewer rates. 

The debt will yield an immediate $283 million to help the city pay for a $599 million capital improvement plan as it expands and modernizes its water and sewer system. Most of the figures were already familiar to the council and the public except for the details, and the size of the overall debt. 

The council took stock of the plan at a workshop on Tuesday, and appears ready to approve it at a meeting later this month. (See the bond presentation here.)

Last March the council approved a 31 percent water and sewer rate increase over three years as part of the anticipated spending plan to modernize and expand the city’s utility infrastructure. An 8 percent increase took effect last April, and another 8 percent increase took effect last October. A 4 percent increase is scheduled for Oct. 1. 

Revenue from the rate increase alone could not come close to paying for the needed improvements, some of them required by a state consent order. The council also approved issuing $280 million in bonds–borrowed money to help pay for the improvements. That step was ahead. 

On Tuesday, Joel Tindal, the managing director at Hilltop Securities and a city consultant, outlined for the council the mechanics and cost of the bond issue. It will be the equivalent of a 30-year mortgage, to be issued in April. The 2026 bonds will be secured by pledged revenue from utility customers. 

The city also has $45 million in outstanding utility bonds. Tindal is proposing a refinancing scheme that would result in a net $1.7 million saving, or reduction, on the repayments the city would have had to make otherwise, the equivalent of 3.4 percent of the principal. “From a financing standpoint, you’re getting rid of old debt and you’re replacing it with new debt,” Tindal said. 

But the refinancing of that $45 million is not yielding new money for the city to spend on utility improvements. “The new debt will have a lower payment, essentially, than your existing debt that you have right now,” Tindal said. The annual reduction in expenses–about $200,000–will not be enough to translate into lower utility rates for customers.  

In the end, the city’s utility bonds will have a new principal of $330 million and incur interest of $276 million for a total debt load of $582 million, with a maximum annual debt service (essentially, a mortgage payment) of $24.2 million. Annual payments average out to just under $20 million over the next 30 years. 

Of that principal, and accounting for the refinanced bonds, the city will have immediate net proceeds of $283 million to spend on the utility system. (It costs $2 million just to issue the bonds.) That’s less than half the overall debt. 

There are 54,163 active utility accounts in the city, both residential and commercial. That means about $31 from each utility customer’s monthly bill, on average, will go toward repaying the debt. That share will decline as the number of accounts increases, but utility bills themselves will not decrease proportionately, as new customers mean yet more needed capital expansions. 

Palm Coast’s utility capital improvement plan for 2026 to 2030 is a $599 million behemoth only partly financed by the new bonds. Impact fee revenue and ongoing revenue from customers account for the remaining dollars to be spent, with about 5 percent attributed to grants. 

Brian Roche, the city’s relatively new utility director, outlined the five-year plan to the council. (See the plan here.)

The expansion of Wastewater Treatment Plant #1 in the Woodlands, the city’s oldest and largest–and the plant under a consent order–will account for $200 million in modernization and expansion costs. It will be expanded from a capacity of 6.83 million gallons per day to 10.83 million gallons. The city’s three water treatment plants will see $80 million in investments. The city’s replacement and maintenance of 700 PEP tanks and 3,300 water meters a year will take another $50 million share of the money. 

“I don’t envy you right now, Brian, I think out of all of the hires that we have made in the last several months, you came into the toughest job,” Council member Theresa Pontieri told the utility director when he was done.  So I’ll preface my comments with that.”

She had another concern: “I am tired of hearing about our failure to get grants,” she said. “We have a failure to get grants in this department, period, whether it’s from state appropriations, federal monies. I know we had Rep. [Randy] Fine here, and I haven’t heard any updates. Obviously we don’t have money. I don’t know if we are consistently following up. I don’t know if we’re being aggressive enough. We’re missing something, whether that is hiring a consultant to say, find us money for water. I don’t know if that’s what that looks like. I don’t know if it looks like somebody in-house. I know that this council approved the position for a grant writer, and it was funded, and we don’t have one. I’m not happy about that. I want to see some movement in this department.” 

Pontieri commended Roche for taking on the job, but she added, “I implore you and our new city manager to look at whether or not we are sufficiently staffed and or have consultants to go after grants” for water. “If I am wrong, then I want to know what we are doing. I think our residents deserve to know what we’re doing, because this, what we’re talking about, doesn’t exist without our residents. We don’t have a CIP without our residents and their money.” CIP is the acronym for capital improvement plan. City Manager Michael McGlothlin said the issue would be a topic of discussion with directors this week.

Pontieri was equally concerned about “tinged” water coming out of water pipes. She acknowledged the steps underway to improve matters. “Water has not been a priority in this city for many years,” she said. “Well, it is now. I think your actions show that, our actions show that,  our residents, in paying their utility bills, are investing in the very system that they are getting their water from.” 

The current council is by no means the first to focus on water and sewer infrastructure, though the size of its investment is unquestionably unprecedented. That may be less a reflection of negligence than the compound deterioration of age. The council raised utility rates 12.5 percent in 2008, at the height of the housing crash and as the city’s population stopped growing. In 2012, it refinanced utility bonds to finance $21 million in new utility projects. In 2013, still with a stagnant population, it raised water and sewer rates 17.6 percent. In 2018, the council approved a four-year, 21 percent rate increase. 

All along, previous councils approved repeated and steeper stormwater rate increases that have paid for part of the city’s sewer infrastructure. Every rate increase was attributed to the city’s aging system. Like the current council, every time previous councils were faced with recommendations to raise rates more steeply, they scaled back a little to spare residents. The current council opted for a less ambitious bonding and spending plan when it adopted both last March. In sum, the current council has followed the same pattern as previous councils, adopting rate increases about every five years.