Originally Published in the Sierra Sun 

HOMEWOOD, Calif. – The water system that serves Homewood neighborhoods is on track to enter its next phase of replacement. The Tahoe City Public Utility District Board of Directors authorized the use of unrestricted cash to cover the entire cost of Phase 3 of the Madden Creek Water System replacement. The board made the decision at a special meeting held Wednesday, Feb. 5.

The district divided the system’s entire replacement into four phases due to size and complexity. The first two phases are now complete, and TCPUD has a goal of getting this third phase underway this year.

The multi-phased replacement will increase the system’s capacity and reliability to provide safe drinking water and drastically improve pressures as well as flow rates that are critical for fire suppression.

TCPUD acquired the over 80 year old water system from a private water company in 2018. The district says the system was originally built to serve small summer cabins and received very little investment over the years. These factors necessitated the replacement project, in addition to leaks and other signs that the infrastructure had exceeded its useful life and was actively failing.

In addition to a full replacement, the project also adds 32 new fire hydrants, elevating the community to modern fire hydrant spacing standards. Further, the installation of water meters will improve water conservation efforts and minimize undetected leaks, collectively improving operational efficiency.

Phase 3 is estimated to cost $6.7 million. The district had planned and budgeted the phase with general fund unrestricted cash while also pursuing a reimbursement loan through the United States Department of Agriculture (USDA) that would reimburse the general fund after project completion.

However, after several months of work to secure this financing, staff were informed in early January of significant delays in the timing of a USDA financing agreement. These delays would have prevented TCPUD from awarding a bid in time to commence construction in 2025.

At the Feb. 5 meeting, the board elected to use unrestricted dollars to fully fund the project with no reimbursement from a loan. They had concluded that the general fund’s unrestricted cash was in a strong enough position to accommodate the project. Unrestricted cash is the cash balance available after revenue, expenses, debt payments, property tax revenue, reserves and other pay-go capital projects have been accounted for. According to the district, this is the lowest cost financing alternative available.

Staff are continuing to pursue USDA financing for Phase 4 of the replacement project.

According to a decade long forecast, the unrestricted cash balance dips following the Phase 3 project as well as other planned capital improvement projects, but recovers in a number of years once loan proceeds are recovered. Staff expressed confidence in the plan and found no evaluations that would deter them from making the recommendation.

The district has also identified the Tahoe Cedars water system for replacement. The system serves a large portion of Tahoma and was also previously owned privately. This project is currently in the planning and design stage, including environmental compliance, permitting, and securing necessary funding. Like the Madden Creek project, the Tahoe Cedars’ project will also be separated into multiple phases as it replaces over 15 miles of water main. Construction is projected to start in 2026 for that project.

Funds for both of the Madden Creek and Tahoe Cedars projects will ultimately come through a combination of water rates, property tax revenue, and any available grant funding.

Another funding source is the infrastructure improvement charge, which is a fixed $43.58 per month charge for a 30-year period. The charge applies to customers in the Madden Creek and Tahoe Cedars service areas. The funds from this charge can only be used for the reconstruction of the Madden Creek and Tahoe Cedars water systems.

A rate study also contemplated the revenue necessary to fund the Madden Creek and Tahoe Cedars reconstruction projects, along with a significant number of other water system infrastructure improvement projects. The Board of Directors adopted the 2025-2029 Rate Study and set new water rates for 2025 in November 2024. The study proposes rates increases for both residential and commercial customers over the next five years.

TCPUD staff members are currently calling for bids for Phase 3 with the goal of awarding a contract in order commence construction in 2025.