A position paper submitted this week to a federal judge could provide a potential path for reducing a proposed water rate increase, though it would require the city to assume an additional $40 million in financial obligations.
The document was presented to U.S. District Judge Linda Carver on January 7 by Interim Third-Party Manager Michael Redden. It was not filed as an official court document and, therefore, will not be included in the court record.
According to Redden’s paper, a planned 12% rate increase could be scaled back to 5% if the court orders the city to take over water and sewer bond payments for 2026 and 2027. Redden estimates this funding is necessary to support ongoing sewer infrastructure projects and to provide working capital, enabling River City Water to remain solvent while it works to improve collections to industry standards by 2029.
However, the proposal has met resistance from some city officials. Ward One Councilmember Brian Harper criticized the idea, calling it “unwise to try to unwind things that are normally put together.”
“Bonds issued against the system should remain tied to the system itself,” Harper said. “Trying to separate obligations like this just makes it harder to determine accountability. It doesn’t seem like a real solution.”
Redden, in his paper, argued that the approach is not novel. “When there is a revenue shortfall, the city already has agreed to make up the difference from other sources or to permit bondholders to recover funds through a sales-tax diversion,” Redden wrote. “Before River City Water took over, revenue often fell short of operating and debt service costs. This has been done before and can be done again.”
Redden outlined three options for the court:
- Approve the 12% Rate Increase: River City Water would continue to pay the city’s debt service, allowing access to state sewer loans and providing funds to support operations.
- Approve a 5% Increase: The city would assume bond debt payments for 2026 and 2027. This would enable River City Water to access Department of Environmental Quality loans and provide up to $50 million in working capital through 2029.
- Deny the Increase: River City Water would stop paying the city’s bond debt and would need to cut $20 million per year from its budget. Redden warned that to achieve such cuts, the utility would likely have to eliminate water and sewer repair contracts, amounting to about $24 million annually. “This would mean no water or sewer breaks would be repaired at all,” he wrote.
Redden’s preferred option is the 12% increase, which would allow River City Water to resume bond payments starting June 1, when a $2.4 million payment is due. This increase would also secure access to state loans and provide operating revenue as the utility continues to address billing and collections challenges.
Redden also addressed allegations that River City Water has failed to remit sanitation fees to the city. He stated that an agreement reached in June 2024 with former Mayor Charles Anderson allowed the utility to retain $5.5 million in sanitation fees to offset water deposits previously collected by the city but not transferred to River City Water after the federal takeover in 2022. Typically, customer deposits are set aside to be refunded when service ends, but the city had not turned over these funds.
According to Redden, between October 2023 and December 2024, River City Water remitted $9.3 million in sanitation fees to the city; however, the city failed to pay some or all of its own water bills. In July 2025, the utility requested payment of outstanding balances, warning that it would deduct the amount from future sanitation fee payments. By November 2025, the city still owed $6.9 million.
As a result, River City Water is holding $10.1 million in sanitation fees until the city’s debts are settled. “We believe the city’s $6.9 million water bill should be offset from the $10.1 million in sanitation fees. The remaining $3.2 million can be returned to the city by the end of the first quarter of 2026,” the paper states.
Residential customers currently pay $37 per month for sanitation, which is intended to fund curbside trash collection and landfill tipping fees. River City Water maintains that fee collection should be the city’s responsibility.
Mayor Patricia Logan has indicated her administration is exploring alternatives for collecting these payments, such as billing customers directly or adding sanitation fees to annual property tax bills.
