The Madison City Council took a deep dive into the city’s infrastructure problems Oct. 2 during a retreat and work session held at city hall.
According to City Manager John Klimm, the city has neglected its water and sewer, gas and stormwater infrastructure to some extent over the past decade, which will require a concentrated and expensive effort to correct.
“We’re not in a good place in terms of our equipment,” Klimm said, emphasizing that priorities are going to change frequently over the next five years based on unexpected failures of the system.
Public Works Director Shawn Wood added that much of the equipment the city will need is not only expensive but difficult to obtain.
The city brought in Walter Goldsmith of First Trion, a financial services firm, to help integrate capital and operating planning and measure and report performance outcomes According to Goldsmith, the city has a strong credit rating with S&P, but it has dropped from an AA-rating in 2022 to an A+ rating this year.
Goldsmith said Madison has not been maintaining enough cash in reserve with only 10 percent of its total expenditures put away for emergencies while it should be maintaining at least 25 percent.
However, Goldsmith said the city has already taken quantitative steps to correct past mistakes.
“To your credit, you put together a financial plan, raised millage rates, built a CIP (Capital Improvement Plan), launched a rate study and are developing a capital plan model,” Goldsmith said.
Still, Goldsmith said Madison has a history of transferring cash from one fund to another without a coherent policy in place.
Despite a recent increase, Goldsmith said Madison’s millage rate of 5.85 mills is only slightly higher than the median rate in place in several cities of similar size and geographical proximity.
The current rate is much lower than the city of Gray, for example, which has set its millage rate at 9.5. However, Dahlonega’s millage rate is substantially lower at 3.847. Greensboro’s rate is currently 5.2 mills.
Goldsmith said water and sewer rates for Madison customers need attention as well.
Trion compared rates using a water bill for 6,000 gallons. A Madison family would pay $120 for that water, while a family in Social Circle would pay more than $200. Residents of Covington would only pay $72.95 for 6,000 gallons.
But Madison is not alone, Goldsmith said.
“All of our clients in the Southeast on the utility side are dealing with aging infrastructure – plants that are old, lines that are old, rapidly increasing construction costs and higher interest rates.”
Inflationary pressures suggest that water and sewer rates are going to continue to climb, Goldsmith said.
Madison plans to spend $2 million on improvements to the water and sewer system in FY2027, $1.3 million on gas infrastructure and $1.2 million in stormwater upgrades for a total of $4.5 million.
According to Marty Boyd of the engineering firm Carter and Sloope, Madison has reached a critical juncture regarding its infrastructure.
“Infrastructure is the foundation of economic growth, public health and your quality of life,” Boyd said. “It supports every home, every business, every school and every future opportunity for Madison. Reinvestment is incredibly important. You have a ticking time bomb underneath your streets.
“Most of your infrastructure is 60, 80, 100 years old and well past its useful life. Without adequate reinvestment, the community is going to decline. If you had to go out and replace everything today, you’d spend over a billion dollars. There is a massive amount of work to be done, and some of it can’t wait.”
Boyd called the decisions the Madison City Council is making today “generational decisions.”
Larry Stephens of the Madison staff said the Indian Creek facility represents the city’s newest wastewater treatment facility, and it is already 18 years old and beginning to experience maintenance issues. The downtown water plant was built in 1957, he said.
Boyd said Madison’s infrastructure CIP for 2028 will cost approximately $7.3 million with another investment of $4 million earmarked for 2029, adding that these numbers are adjusted to reflect uncertainty factors, including inflation.
Unfortunately, expenses will skyrocket in 2030 to perhaps $32 million as improvements are made to the Southside water and wastewater treatment plant.
The good news is that expenses will decline in 2031, and the city’s bonds will mature, so new loans could be pursued to help pay for infrastructure.
The bad news is that the city will need to spend more than $25 million in upgrades to the gas delivery system.
Then in 2032, upgrades to the city’s Oconee Water Treatment Plant could cost anywhere from $10 to $35 million as the city seeks to increase withdrawal capacity from Lake Oconee to 4 million gallons a day. Permitting issues still have to be resolved in order to apply that increase.
“The good news is we can fix this,” Klimm said. “The bad news is we don’t have a lot of time left.”