The Gainesville Regional Utilities (GRU) Authority approved Wednesday a budget for the next fiscal year, starting Oct. 1, with a 1.75% increase in water and a 1% increase in wastewater rates.
CEO Ed Bielarski said the budget is lean as the authority works to make the utility fiscally healthy. Key metrics from the current budget will remain flat, like electric rates, gas rates and the $8.5 million general service contribution (GSC) sent to the city.
“My goal is to make GRU so financially strong that it can return to helping the city with its obligations,” Bielarski said. “It’s not to penalize or punish the city. We’re just in the transition where we’re trying to make ourselves healthy.”
The utility predicts earning roughly the same profit next year ($45 million) as the current year’s estimate ($42 million). The six-month numbers show the utility is on track to hit the revenue estimate this year.
The GRU Authority also aims to keep a high level of accelerated debt reduction. The utility budget shows accelerated debt payments of $29 million for the current fiscal year and $27 million in the approved budget for next year.
Those payments are on top of the scheduled principal and interest debt payments of $106.4 million for this year and $104.8 million for next year.
Bielarski directed the GRU Authority back to the profit estimates to show that the utility isn’t simply able to grow its customer base in order to improve its finances.
“This is a heavy lift in a lot of ways—to try to do this without growing your way out of it. We’re managing our way out of it,” Bielarski said.
A cornerstone of that management is the reduction in GSC that has occurred in the last two years.
Bielarski and GRU Authority directors said that the reduction in the GSC has allowed the utility to stabilize rates and move toward the Florida state average for electric bills. GRU customers were paying around $30 per bill more than the state average in 2022, the largest gap. But now that difference is just under $10 per bill.
Bielarski said the water and wastewater increases for the next fiscal year will result in a 0.4% increase to the average customer’s total bill for a month.
Chair Eric Lawson said that as GRU returns to the state average for electric bills, and is already in line with state averages for water and wastewater, the utility would return to normal practices of annual increases like other utilities.
“I think [our bond rating agencies] need to hopefully hear from us that this was a short period to get us back to where we need to be from a competitive standpoint, but long term, we will resume a normal operating model,” Lawson said.
Wednesday’s meeting comes within a week of the latest bond rating agency report on GRU. Fitch Ratings marked GRU as stable and kept an A+ bond rating.
The report highlighted four key metrics that help GRU: a monopolistic position as an essential services provider, favorable demand characteristics in its service area, autonomous rate-setting ability and relatively affordable rates.
But Fitch Ratings said it would keep an eye on the governance questions that remain open following the transition from the Gainesville City Commission to the GRU Authority.
“Although the transition has faced legal challenges, some of which remain unresolved, the board has been functioning effectively since its appointment on May 16, 2024,” the report said. “Fitch remains attentive to the outcomes of these legal proceedings and their potential impact on the utility’s governance and operational stability.”
Director Jack Jacobs said the utility will benefit from a multiplier effect. By taking GSC savings and paying down interest, he said the utility can pay less in interest down the line, saving more money.
Bielarski highlighted areas where GRU will need money in the coming years, especially for capital projects. He presented a $56.5 million price tag for the 10 most expensive infrastructure projects ahead of the utility. The remaining 308 projects totaled $75.6 million.
GRU has a capital expenditures reserve of $132 million. That fund will help cover those costs, along with grants and more loans. Bielarski said he wants to pay for 50% of projects out of cash or grants to reduce the amount of new debt the utility accumulates.
Bielarski said the utility needs to keep a capital expenditure reserve, not to hold back funds but to keep strong bond rating metrics. He said he’d hate to think of the interest payments on bonds if GRU had no capital expenditure reserve.
GRU also maintains a utility plant improvement fund with $40 million at the moment.
As federal grants remain uncertain, Bielarski said the utility will monitor and look to adjust capital projects.
Director Robert Skinner said that’s why slight increases, like the water and wastewater for next year, remain important. The increases will help cover some of the money for infrastructure projects as GRU tries to keep costs down year to year.
Of the top 10 infrastructure projects, eight were within the water and wastewater systems. These include underground main line improvements, water main replacements, lift station pumping equipment, Murphree Water Plan equipment, reclaimed water wetlands project and treatment and disposal equipment at the Main Street Treatment Plant, which recently started significant capital improvements.