Palm Coast Plans to Sharply Raise Water-Sewer Rates and Borrow $456 Million to Finance Needs, Dwarfing Previous Debt

The Palm Coast City Council is moving toward a plan to raise water and sewer rates 28 percent over the next four years and borrow $456 million over the next two years to finance some of the $700 million in repairs, expansions and new construction of a water and sewer infrastructure under strain from age and rapid growth.

The two bond issues would dwarf all previous city bond issues and its existing total debt, which stands at $134 million. The rate increases would, for a household using 4,000 gallons of water a month, result in bill increases of $40 a month by October 1, 2028, or an annual increase of nearly $500–more for households consuming more water.




Palm Coast Mayor Mike Norris and Council member Ty Miller, over Council member Theresa Pontieri’s dissent, gave the administration direction to draft an ordinance that would sum up that approach and go before the council and the public at two public hearings, on March 4 and March 18, fr approval. The hearings are likely to draw large and possibly angry crowds. If the council’s history is any guide, that kind of response may change the council’s direction, though Norris and Miller repeated a half dozen times Tuesday evening the metaphor of the can having been kicked down the road for too long. They are not willing to kick on.

Pontieri was willing to approve financing the $265 million for the most urgent need: the $265 million modernization and expansion of Waste Water Treatment 1 the sewer plant, and perhaps even $315 million for a planned third sewer plant. Beyond that, additional plans should be financed wither with grants or a longer timeline that allows existing revenue to limit the hit on rate-payers. Meanwhile, “Reconsider this total package. Just reconsider it and look at what that rate would look like for our taxpayers,” Pontieri urged.

That’s what happened in November on the council, Miller said, when the council bet too much on receiving state appropriations to defray local costs. It didn’t happen. “I’d rather just rip the band aid off and fix the system,” Miller said. “That’s what I ran on. I obviously did not run on raising your rates and putting more bills towards you. But we can’t continue to operate where our water systems are not doing what you deserve.” He added: “We can plan for success without help, but if we receive that help, we have the opportunity to reduce those rates in the future.”




According to the plan presented to the council at an evening workshop Tuesday, 70 percent of the funding program would be financed with long-term debt: the first bond issue would be $284 million, and would be issued as early as October 2025, coinciding with construction at Waste Water Treatment Plant 1 starting at the end of the year. The second would be $172 million, in October 2027. The remaining costs would be paid through customer rates and impact fees, which would also, of course finance the bonds.

Norris said that that scenario leaves the door open to reconsider the size of the second bond issue and possibly limiting future-year rate increases.

The council discussed the matter over a three-hour segment of its first-ever evening workshop, with sparse attendance. Murray Hamilton, a certified public accountant and Vice President of Raftalis, the consultancy Palm Coast hired to draft a “gap analysis” that outlines the gap between city’s infrastructure needs and its revenue, and how to close it, presented the findings alongside Carl Cote, the city’s stormwater and engineering director. Council members Charles Gambaro and Ray Stevens were absent. But Gambaro has spoken of the city’s urgent infrastructure needs in terms similar to Miller’s, suggesting that the council has the votes to move forward with the most ambitious infrastructure plan in the city’s history.

Beyond the most critical needs at Waste Water Treatment Plant 1, which is under a state consent order because it’s often over capacity, the consultant and the city list nine additional projects that need financing. Those include a $58 million expansion of two of the city’s three water plants, $27 million for wellfield expansions, $25.6 million to upgrade the city’s PEP tanks, and numerous other projects. The list is not exhaustive.

The city is also planning a third waste water treatment plant. Where will it go? That’s not clear yet. That’ll be driven by the gravity center of future development. “We don’t know where people are going to build,” Cote said. The cost of that plant was not listed. The third plant will not be needed for current entitlements–the remaining ITT lots in the older portion of Palm Coast, or the subdivisions the council has approved to date.




The consultant places the cost of the wastewater treatment plant’s improvements at $265 million, not the $240 million council members were given as recently as last week. When he adds all the other necessary utility infrastructure projects the city has identified, the overall costs rise to $700 million. “We believe the use of revenue bonds is an appropriate means to recover those costs from customers who will benefit from the improvements over an extended period of time,” Hamilton said.

The utility has revenue of $70 million, without impact fees. That will rise to an estimated $79 million by 2029, by Hamilton’s calculation. Hamilton’s figure appears to be grossly low-balled. Between 2016 and 2021, revenue for water and wastewater, including charges for service and impact fees, increased from $28.2 million to $66.7 million, or by an average increase of $7.7 million per year. That average includes years when impact fee revenue was very low. Excluding impact fees, revenue grew from $27.8 million in 2016 to $47.7 million in 2021–an average of $4 million a year.

Absent a severe recession, it is almost inconceivable that, based on current trends and the city’s own bullish projections, average annual growth will suddenly slow to $2.2 million a year. The low-balling appears to be designed to make the overall proposal for steep rate increases and bonding figures justifiable.

Based on current numbers the utility is covering its operating costs, leaving some $30 million to finance debt, reserves and capital expenses. In Council member Theresa Pontieri’s estimate, almost $18 million could go toward repair or renew and replacement, or “R&R.”




That breakdown bluntly and unequivocally shows that growth does not pay for itself–not by a long shot: while impact fee revenue will assume a share of the debt financing, rate-payers will bear the heavier burden for two reasons: first, while impact fee revenue fluctuates up and down, rates do not, and only go up. Bond-holders look at rates before they look at impact fees, knowing that in a downturn, rate-payers will be filling the gap. Second, impact fee revenue may be applied only toward expansion of plants or new construction of plants–not repair and replacement.

“There are some limitations with” impact fees, Cote told the council, “because it’s not guaranteed revenue, so you can’t pledge only future impact fees that may or may not come to fruition.” That “pledge” is to bond-holders.

The figures underscored Pontieri’s opposition to lumping all projects on the back of bond issues and locking in higher rates. “Our current residents, due to the exponential amount of growth very quickly, are having to pay for that growth,” Pontieri said. “And I’ve said it from this seat, and I’ll continue to say it from this this seat. I am ardently against that. I think that growth should be paying for itself.” She concedes that it never does. But for that reason, she’s willing to finance the $265 million sewer plant, but not beyond that for now. “I’m seeing $265 million as a big ask already, so we got to stop it somewhere,” she said. “My position is that we need to trim this down even more.”

To Pontieri, the utility is generating enough revenue to cover operations and maintenance, with additional revenue that goes to debt service and capital improvements, but not the $15 million a year in needed capital maintenance. Operating expenses represent only 55 percent of the operating budget, with debt service and capital improvements and maintenance accounting for the rest.




“To me, if we weren’t relying on taxpayers to pay for all of these, sure, let’s do them all. Why not? But we are. So I have to think to myself, what do we absolutely need in this moment? And for me, the only thing we need in this moment is expansion, rehabilitation of Wastewater Treatment Facility 1. These other items that are on here, yeah, I agree that these probably need to get done at some point. But do we need to raise rates at this level over the next five years? Because you’re talking about a lot. The percentage over in that aggregate is a lot of money.” She does not expect bills to go down if more revenue is generated. So the rates must be set at the right point now. “If we overshoot this,” she said, the money won’t come back to rate-payers.

But several of the additional projects are there to prevent the city from facing another consent order from the state, Johnston said, while Hamilton discouraged looking at the two bond issues as if one were optional. They go together, he said.

The original cost of Waste Water Treatment Plant 1’s upgrades and expansion was placed at $80 million several years ago, Miller noted. “It was pushed down the road, and now it’s $265 [million],” Miller said, “so if we’re talking about cost savings, paying for it sooner than later, or getting it started now, when we can capture that cost before it grows, it is a service to the community. Because of that, I’d rather be paying some of this stuff now, than asking in four years to raise rates again, extremely.” (The initial $80 million was for the expansion of the plant only, and a more limited expansion than now planned, and not for its conversion to modern technology.)

“We just have to go through the process of shifting that weight over to unburden those people in that monthly bill as far as their city utility,” Norris said. “But we can’t keep kicking the can down the road.” He added: “We have to do it. We don’t have a choice in it.” He said the can-kicking has been happening for more than a decade. That’s not quite accurate: Last November’s kicks aside, the council raised impact fees and utility rates in 2018, and raised utility rates in 2011, both times for five-year cycles. It just did not plan for a boom-bust-boom cycles that threw population and demand projections out of whack.

Last November, the city administration recommended a 21.5 percent rate increase that would have phased in from May 2024 to October 2026. The administration also recommended increasing development impact fees for water 35.72 percent over the same time span, and 25 percent for wastewater. (See the proposed chart here.) The council voted to forego the rate increase and only raise impact fees. It was as if the council were can-kicking Rockettes.




Palm Coast was not yet under a consent order from the state to expand Waste Water Treatment Plant 1–the conversion of its technology alone costing $90 million, and the expansion costing $180 million. That consent order has been a masked blessing for the administration and the council, because it has given both the necessary cover to craft the enormous infrastructure package and tell the opposition: we have no choice.

Miller asked about consequences if the city does not satisfy the consent decree. He only got half an answer: the city would face fines if it does not comply with the order by 2028 or complete projects that would invalidate the fines. The fines are not burdensome: What he wasn’t told is that if the city violates its consent order, bond-rating agencies would punish the city with a downgrade, which would substantially increase the city’s cost of borrowing and financing its needed capital improvements. Those cost increases would be measured in the millions, compared to the thousands, in fines from the Department of Environmental Protection. “Generally, the higher the credit rating assigned to the bonds, the lower the interest rate on the bonds due to a lower risk,” Hamilton said.

In the end, it’s not entirely the council members who are voting, but the bond-holders.

Click to access utility-gap-analysis-2025.pdf