Needs clarification. If the bonds are fixed-rate fixed-payment, growth is not a real issue. If payments or interest ramp up over time, then yes growth would prevent rate increases, but is that the case? Population may decelerate but it won’t drop here. If the current rate-payer base can handle the last payment (how long is amortization?) then what are you saying?
That’s a fair question, but the key point is this: the bonds may be fixed, but the burden on ratepayers is not.
Yes, the revenue bonds are expected to have fixed interest rates and fixed annual payments. That means the total amount the town must pay each year does not increase.
However, those payments are made entirely from water and sewer revenues. They are not backed by property taxes, and they do not adjust downward if growth slows.
If the customer base grows as projected, the fixed payment is spread across more users, helping keep individual rate increases smaller. If growth slows or flattens, the same fixed payment must be covered by fewer customers, resulting in higher per-customer rates.
So growth is not required to “make the bond payment,” but it is required to keep rate increases lower than they otherwise would be.
The documents do not show a scenario where growth underperforms, nor do they present a rate model for flat or slow growth. The financing assumes future demand, and the only mechanism available if that demand does not materialize is higher utility rates.
In short, the risk is not whether the town can pay the debt. The risk is how much each ratepayer will pay if growth does not meet projections.
Remember the town of Holly Springs does not control rate increases for purchasing water, we are a consumer. The price of water will increase, count on it. Therefore financing expansion of the water treatment plant is part of a budget that has several moving parts.
Needs clarification. If the bonds are fixed-rate fixed-payment, growth is not a real issue. If payments or interest ramp up over time, then yes growth would prevent rate increases, but is that the case? Population may decelerate but it won’t drop here. If the current rate-payer base can handle the last payment (how long is amortization?) then what are you saying?
That’s a fair question, but the key point is this: the bonds may be fixed, but the burden on ratepayers is not.
Yes, the revenue bonds are expected to have fixed interest rates and fixed annual payments. That means the total amount the town must pay each year does not increase.
However, those payments are made entirely from water and sewer revenues. They are not backed by property taxes, and they do not adjust downward if growth slows.
If the customer base grows as projected, the fixed payment is spread across more users, helping keep individual rate increases smaller. If growth slows or flattens, the same fixed payment must be covered by fewer customers, resulting in higher per-customer rates.
So growth is not required to “make the bond payment,” but it is required to keep rate increases lower than they otherwise would be.
The documents do not show a scenario where growth underperforms, nor do they present a rate model for flat or slow growth. The financing assumes future demand, and the only mechanism available if that demand does not materialize is higher utility rates.
In short, the risk is not whether the town can pay the debt. The risk is how much each ratepayer will pay if growth does not meet projections.
Thank you for reading HSU!
Remember the town of Holly Springs does not control rate increases for purchasing water, we are a consumer. The price of water will increase, count on it. Therefore financing expansion of the water treatment plant is part of a budget that has several moving parts.