Lawmakers complained loudly Tuesday about soaring water and sewer bills in Utah’s capital as a new state audit found the city has borrowed heavily to pay for immense upgrades to its sewage treatment plant and faces more debt ahead — all, auditors said, without a feasible plan to pay it off.

Utility rates to Salt Lake Valley customers have risen several years running as part of paying down as much as $600 million in debt taken on by the city’s Department of Public Utilities for improvements.

That money has helped rebuild portions of the oldest water and sewer system in Utah and fueled an overhaul of the 55-year-old Water Reclamation Plant located in the Rose Park area, which carried an $850 million price tag.

More borrowing — and potentially bigger bills — may lie ahead for ratepayers as well, as the city faces a long list of future improvements to its regional water and wastewater networks amid persistent drought and the dire need to lift water levels in the Great Salt Lake.

Yet in a review released to state lawmakers on Tuesday, the Legislative Auditor General found that regardless of the city’s large increases in utility rates, “its current structure soon won’t be able to pay for upcoming debt service costs” or for additional debts the city expects to take on.

As of this year, Public Utilities is “in the negative with its income versus its debt payments,” the audit said. ”In other words, they will not be able to pay their debt.”

While already eye-popping to some residents and businesses, the current utility rates the city charges, said lead auditor Morgan Hagey, “don’t account for the fact that they are going to continue to need to take on more debt.”

The 51-page audit is urging the department to press Mayor Erin Mendenhall and the City Council to find alternative funding sources for those utility costs, including the option of a dedicated property tax or creating a special taxing district for water and sewer.

Such steps could raise future taxes for residential and business property owners.

House Speaker Mike Schultz, meanwhile, blamed city officials for amassing $600 million in debt on remakes of its utility systems after what he and city officials alike called “deferred maintenance” — without a plan for paying it off beyond blowing up household utility bills even more.

“Those are big numbers, and it sounds like fees are already through the roof inside Salt Lake City,” the Hooper Republican said. “Affordability is top of mind right now for every resident, not just in Utah, but across the country. And when you see stuff like this happening inside Salt Lake City, it raises big questions.”

City agrees, up to a point

At a Tuesday hearing on Capitol Hill, city officials generally agreed with the audit’s findings and said they have launched into preparing an updated long-term financial plan and a deeper study of revising utility rates, set for completion next summer.

Public Utilities Director Laura Briefer acknowledged the impact of rising water and sewer bills “on every household, every business, and every institution in our community.”

Briefer defended the city’s strategy for what she said were “generational” upgrades to water and wastewater systems, calling them “underpinnings to the health and prosperity of our communities.”

“They are truly essential services,” she said, “and the stewardship of our water and wastewater systems means investing in those facilities and infrastructure, investing in those water resources and ensuring the financial means exist to accomplish that.”

The recent centerpiece of that effort has been the $850 million in overhauls at its sewer plant, which are nearing completion. According to the city and the U.S. Environmental Protection Agency, which has also backed that project, the focus has been to rebuild the aging plant and comply with new limits on pollutants such as phosphorus in clean water returned to the Great Salt Lake.

The city, Briefer noted, has also moved to upgrade its City Creek water treatment plant, a 1950s-era facility, to the tune of $168 million.

“These are very large investments for our community that have been deferred for quite some time,” she said, “and we’re trying to tackle them in a smart way, but it does result in increases to our rates.”

The city is also making every effort to avoid more borrowing, Briefer said, including other sources of government funding, grants and lower-interest loans where projects serve disadvantaged neighborhoods.

“We are trying to be as creative as possible,”she said, “to reduce the future burdens on our residents.”

Auditors call for alternative tax approaches

Salt Lake City, according to Rachel Otto, Mendenhall’s chief of staff, is also dealing with water scarcity in drought conditions, a wave of environmental and health regulations and inflation, along with all those aging-out facilities and networks of pipes.

Utah’s capital delivers culinary water to nearly 400,000 people across Salt Lake County and sewage services to the more than 210,000 city residents.

“We continue to be committed to providing safe, reliable, equitable, and affordable public services,” Otto said in a formal response to auditors.

At the same time, auditors are noting that Public Utilities currently is limited to relying on rate increases in user fees for revenues to make ends meet. While the city raised its share of property taxes by 12.5% this year to counter its own rising costs for general operations, none of that added money has gone to support utilities.

The department instead substantially raised utility rates in its most recent budget on bills to homeowners and businesses, with the average home paying nearly $32 more per month. Similar hikes for businesses, meanwhile, followed a shift by Public Utilities in 2025 in the way it calculates water and sewer rates on non-residential customers, leading in some cases to a doubling or tripling in their costs year over year.

The audit asserts that how the city recalculated those rates may be unfairly burdening business and industrial users. Complaints about resulting hits for some of those ratepayers have raised the ire of pro-business forces on Capitol Hill.

Pressed by Rep. Casey Snider, R-Paradise, Briefer said the city would both review rate adjustments for some of those hardest hit by that shift in calculating fees, as well as consider possible reimbursements on some customers’ past bills.

Current system ‘can provide sufficient financial stability,’ city says

Along with potentially rejiggering tax bills for residential and commercial property owners, shifting to other revenue sources to pay for future utility upgrades — for example, with a new dedicated property tax or a special created taxing district — could have other effects.

Auditors and city officials note such moves could involve changing the way utility services and finances are governed, removing them from mayor-council purview and putting them in the hands of an independent taxing entity. Instead of supporting that step, Otto, with Salt Lake City, countered that existing mayor-council oversight “can provide sufficient financial stability” for the city’s utilities going forward.

The mayor and council, she wrote, have steadily anticipated and supported rate hikes over the past decade to fund the city’s replacement of water and wastewater facilities. That approach, Otto noted, has thus far helped Public Utilities keep its top-notch AAA bond rating with creditors.

Auditors noted that the city is also currently updating its aged utility billing system. That, they told lawmakers, might be an added chance to build in new monitoring and controls to ensure water sewer charges align with actual customer usage.

City officials said they agreed, adding that the system conversion is about one-third complete. A new software provider is supposed to improve city access to customer data while also allowing water users to monitor their consumption.

That system update, according to Otto, is expected to be completed by June 2027.