Is Leander's water and sewer fund healthy?

Is Leander’s water and sewer fund healthy? (DRAFT – not published)

In short

Leander runs water and sewer as a business-like fund paid for by customer bills. In the year ending Sept. 30, 2025, bills brought in about $51.7 million and day-to-day costs were about $37.3 million. The fund had about $137 million in cash, but most of it is set aside for set uses. It owed about $97.5 million in bonds and loans. By our rough math, cash from operations covered debt payments about 1.9 times, down from about 2.8 times in 2021. That is still above 1. But the city’s own bond document, using its own method, says the system’s net revenue for 2025 was negative $7.1 million, down from $26.5 million the year before. We could not reproduce that figure from the audit.¹²

The 30-second version

• Bills cover costs in the audit, but not in the bond document. Operating revenue was $51,666,630 and operating expenses were $37,336,528. That left $14,330,102, about 28 cents of each dollar.¹ The city’s bond document, using a different method, shows a shortfall (see below).²
• Lots of cash, but most is earmarked. Of $137.2 million in cash, $38.5 million was unrestricted. $98.7 million was restricted. That money is impact fees that by law must go to future building, customer deposits, and money set aside for bond-funded projects.¹
• Debt payments are rising faster than income. Interest paid jumped from about $4.2 million in 2024 to $7.7 million in 2025.³

The numbers

Year ended Sept. 30	2021	2024	2025
Operating revenue	$41.0M	$48.1M	$51.7M
Operating income	$10.4M	$13.1M	$14.3M
Depreciation (non-cash)	$6.3M	$7.5M	$9.2M
Debt paid (principal + interest)	$5.9M	$9.1M	$12.5M
Our rough coverage	2.81×	2.28×	1.88×
Unrestricted net position	$40.1M	$61.6M	$74.7M

“Rough coverage” = (operating income + depreciation) ÷ (principal + interest paid). If you also count $6.0 million in 2025 interest earnings, 2025 coverage is about 2.36×.¹³⁴

Bonds and other long-term debt fell from about $103.0 million (2024) to $97.5 million (2025). In 2021 the fund owed about $63.1 million in bonds and a note.³⁴

What the city’s bond documents say

When the city sells bonds, it publishes an “official statement” for investors. Its table on water and sewer debt uses the city’s own method, which counts Leander’s BCRUA bond payments as an operating cost.²

Fiscal year	Net revenue available (city’s method)	Tax-backed bond payments assigned to the system, next year	Share covered
2024	$26,461,796	$8,235,933	100% (fully covered)
2025	−$7,087,546	$8,235,933	−186% (not covered)

The April 2026 statement says the deficit came from higher wholesale water costs, supplies and upkeep, and regional service costs, while operating revenue grew only 3%. It says rate changes lagged behind rising costs during fast growth.²

What this means. The city pays for its water and sewer projects mostly with general obligation bonds and certificates of obligation, which are backed by property taxes. City policy is to repay them from water and sewer income, but the statement says this policy “is subject to change.” If water and sewer income falls short, property taxes are the backstop.²

Trying to match the two pictures. We checked the bond document’s 2024 figure against the 2024 audit. It matches to the dollar: operating income ($13,145,651) plus depreciation ($7,548,746) plus investment earnings ($5,767,399) equals $26,461,796.³⁵

2025, same method	Amount
Operating income	$14,330,102
Plus depreciation (not a cash cost)	$9,189,844
Plus investment earnings	$6,004,058
Our result	$29,524,004
Bond document’s figure	−$7,087,546
Gap we cannot explain	$36,611,550

Using the same method on the 2025 audit gives about $29.5 million, not −$7.1 million.¹⁵ We tested these items, one, two and three at a time: transfers out ($1.5 million), the city’s added stake in BCRUA ($7.0 million), building costs, debt payments and impact fees. No sensible mix closes the gap. The bond document’s note points to “significant capital contributions” to BCRUA, but it does not give the amount or show its math.² The bond document is preliminary. We have not seen the final version. It is also possible the figure has an error. We cannot tell which. How the city got this figure is an open question; the city has not published the steps.

BCRUA payments ahead

The same statement lists Leander’s share of BCRUA contract debt: $214,700,000 in principal and $296,649,905 in total payments through 2050. Yearly payments run about $15.8 million in 2026, rise to about $16.0 million in the mid-2030s, and then drop to about $8.9 million from 2039.² The audited report put the balance at $178,460,000 on Sept. 30, 2025.¹ The bond document’s figure is $36.24 million higher, and its 2026 payment is higher too ($15.8 million versus $13.6 million in the audit’s schedule).¹² Neither document says why. The budget shows one more fact: the city’s 2027 budget has payment lines for BCRUA series labeled 2025 and 2026 that start in 2027, and the audit does not list those series.⁶ No city document links them to the difference.

Together, the 2026 BCRUA payment ($15.8 million) and the tax-backed debt assigned to the system ($8.2 million) come to about $24.0 million a year.²

What the law says

Texas Government Code §1502.057 says a city that issues utility revenue bonds must charge rates at least high enough to pay operating and maintenance costs, depreciation, replacement and improvement costs, interest, and the debt itself. Rates must be equal and uniform for the same class of customer.⁷ In plain words: water and sewer bills, not property taxes, are supposed to carry the system and its bonds.

The other side

• Some costs sit off the books. Leander buys treated water through the Brushy Creek Regional Utility Authority (BCRUA), which it shares with Cedar Park and Round Rock. Those payments show up as operating expenses. The city’s audited report says Leander also owed $178,460,000 in BCRUA contract revenue bonds at year-end. That is on top of the $97.5 million above, so the fund’s total debt load is far larger than the balance sheet alone shows.¹
• Growth money is not steady. In 2025 the fund got $44.1 million in capital contributions: $24.1 million in pipes and plants built by developers and $19.9 million in impact fees. That money pays for growth. It cannot pay this year’s bills, and it slows if building slows.¹
• Restricted cash is not a rainy-day fund. The $98.7 million is tied to impact fees, deposits and bond projects.¹
• Coverage depends on the method. Our rough math says 1.9×.¹ The city’s bond document says net revenue was negative.² They measure different things, so read any single number with care.
• One year. The bond document gives its own reasons for the 2025 result.² This page does not predict future years.

Questions to ask

• When will the city post the rate study and its findings?
• How did the city figure the bond document’s estimate for the most recent year?

Changes to this page

• Nov. 2, 2026: We removed a guess about why two debt figures differ. The page now states the related budget fact without a cause.
• Nov. 2, 2026: We re-checked every figure against the saved audits, budget and bond documents. All matched. We removed a hedge about the preliminary bond document.
• Nov. 2, 2026: Rewrote the questions to ask so each is open, neutral and addressed to the public body.
• Nov. 2, 2026: Added questions to ask.
• Nov. 2, 2026: We linked to a new page that explains the difference in BCRUA debt between two documents.
• Nov. 2, 2026: We re-checked the cash and debt figures. We replaced other-side points that went beyond their sources.

What you can do

• The city plans a rate study in 2026-27 (see water and sewer). When results come out, compare the proposed rates with the coverage trend above.
• Ask at budget hearings what coverage level the city targets and how BCRUA costs are expected to change.

What we still don’t know

• What the coming rate study will recommend.
• How the bond document got −$7.1 million for 2025, when the same method that matches 2024 gives +$29.5 million.
• When the new BCRUA borrowing behind the difference in BCRUA principal was sold, and what it pays for. See city regional water share for how the two documents compare.
• How fast BCRUA payments will grow as its new plant phases come online.

Numbers marked “our math” are our estimates, not official figures. The notes show the inputs and the steps.

Footnotes

1. City of Leander FY2025 ACFR, utility fund statements of net position, revenues, expenses and changes in fund net position, and cash flows: operating revenue $51,666,630; operating expenses $37,336,528 (depreciation $9,189,844); operating income $14,330,102; investment earnings $6,004,058; capital contributions $44,055,258 (developer-built $24,115,258; impact fees $19,940,003); principal paid $4,832,955; interest paid $7,695,933; cash $38,499,758 unrestricted + $98,680,721 restricted; bonds and long-term debt $5,221,193 current + $92,285,375 noncurrent; unrestricted net position $74,652,518; BCRUA contract revenue bonds outstanding (city’s balance) $178,460,000 (management’s discussion); restricted assets defined in Note 1. (14,330,102 + 9,189,844) ÷ (4,832,955 + 7,695,933) = 1.88; with investment earnings 2.36. https://emma.msrb.org/P11938164.pdf. ↩ ↩² ↩³ ↩⁴ ↩⁵ ↩⁶ ↩⁷ ↩⁸ ↩⁹ ↩¹⁰ ↩¹¹

2. City of Leander, Preliminary Official Statement, General Obligation Refunding Bonds, Series 2026 (April 2026), Table 10 (computation of self-supporting debt: FY2025 net revenues $(7,087,546); GO requirements assigned to the system FY2026 $8,235,933; coverage −186.06%; note 2 on causes), Table 11 (BCRUA contract revenue debt schedule: principal $214,700,000, total $296,649,905; FY2026 $15,781,564) and the policy note on GO debt for the system. https://munihub.com/wp-content/uploads/2026/04/POS_S2026_Leander-City-of.pdf. FY2024 figure ($26,461,796, 100.00%) from the Series 2025 Preliminary Official Statement, Table 10, https://munihub.com/wp-content/uploads/2025/09/POS_S2025_Leander-City-of.pdf. $15,781,564 + $8,235,933 = $24,017,497. These are preliminary documents. ↩ ↩² ↩³ ↩⁴ ↩⁵ ↩⁶ ↩⁷ ↩⁸ ↩⁹ ↩¹⁰ ↩¹¹

3. City of Leander FY2024 ACFR, utility fund: operating revenue $48,121,951; operating income $13,145,651; depreciation $7,548,746; principal $4,885,000; interest paid $4,173,534; unrestricted net position $61,550,309. Coverage 2.28. https://emma.msrb.org/P21900727.pdf. ↩ ↩² ↩³ ↩⁴

4. City of Leander FY2021 ACFR, utility fund: operating revenue $41,044,333; operating income $10,443,224; depreciation $6,257,624; principal $3,420,159; interest paid $2,528,059; unrestricted net position $40,125,291. Coverage 2.81. https://emma.msrb.org/P11646005.pdf. ↩ ↩²

5. Our math from the utility fund columns of the audited statements of revenues, expenses and changes in net position. FY2024: $13,145,651 + $7,548,746 + $5,767,399 = $26,461,796, which equals the Series 2025 bond document’s Table 10. FY2025: $14,330,102 + $9,189,844 + $6,004,058 = $29,524,004, against $(7,087,546) in the Series 2026 bond document’s Table 10; gap $36,611,550. Items tested against the gap (FY2025 utility fund): transfers out $1,500,000; increase in investment in joint venture $7,041,717; acquisition and construction of capital assets $30,529,768; principal paid $4,832,955; interest paid $7,695,933; impact fees $19,940,003; capital contributions $44,055,258. Only coincidental, unrelated pairings came close. ↩ ↩²

6. City of Leander FY2027 adopted budget (saved copy), https://www.leandertx.gov/ArchiveCenter/ViewFile/Item/397, Utility Fund Debt Service (fund 85): FY2027 lines “INT - BRUA 2025” $2,181,250, “INT - BRUA 2026” $1,114,593, “PRIN - BRCUA 2025” $995,000 and “PRINCIPAL - BRCUA 2025” $3,020,000, all $0 in FY2023–FY2026; FY2025 actual “BCRUA 2024” interest $799,570 and principal $1,415,000. Audit Note 12 lists BCRUA issues through Nov. 15, 2024 ($70,590,000, for Leander and Round Rock) and Leander’s schedule totaling $178,460,000 (FY2026 $13,623,261). $214,700,000 − $178,460,000 = $36,240,000. ↩

7. Texas Government Code §1502.057. https://texas.public.law/statutes/tex._gov’t_code_section_1502.057. Read 2026-11-01. ↩