Watertown Financial Report: Record Cash Reserves Meet Strategic Debt Limits

Northeast Radio SD News – Watertown, SD - During the April 20, 2026, City Council meeting, Finance Officer Kristen Bobzien presented the city’s preliminary 2025 financial statements, revealing a picture of healthy liquidity paired with historically high debt levels. While the city ended the year with more than $110 million in cash, officials warned that major infrastructure investments have pushed the city’s borrowing capacity to its prudent limit.

The General Fund: A “Strong” Foundation

The city’s General Fund remains in a healthy position despite a slight decrease of $326,000 in its fund balance. It maintains an unassigned balance of $13.2 million, which exceeds the Government Finance Officers Association (GFOA) recommendation of three months of operating reserves. Bobzien noted she targets a more conservative four-month reserve.

“In general, the general fund is very strong at the end,” Bobzien told the council.

Rising Debt and “Second Penny” Pressures

The primary concern highlighted in the report was the city’s total debt load, which increased by $14 million over the last year to $96.5 million. Much of this growth was attributed to multi-generational investments in the wastewater treatment plant.

The Capital Improvement Fund—often called the “second penny” sales tax—is feeling the strain of these obligations. Debt service now consumes roughly 37% of the fund’s total annual revenue, totaling $5.4 million.

“Our debt level... has reached what I would say is the point where we don’t want to incur more,” City Manager Alan Stager cautioned. “We will be in that position for another about 7 years before we start to pay down the debt below that mid-30% range of our general fund revenues”.

Councilman Allen echoed this sentiment, emphasizing that the city must be disciplined in rejecting requests for new facilities.

“We’ve taken on about as much debt as we can possibly handle at this juncture,” Allen said.

Enterprise Funds: Performance and Deficits

The city’s enterprise funds, which operate like businesses by charging fees for services, were described as generally stable. However, two specific areas drew scrutiny:

·         Airport Fund: The airport reported an operating loss of between $600,000 and $800,000 in 2025. Stager noted that the city has spent seven years making “generational” investments in the terminal and airfield, largely funded by federal grants.

“Major investments are behind us. It’s time to make some money on them,” Stager said, calling for increased aviation-related business development.

·         Park and Recreation Fund: This fund saw a decrease of over $600,000, ending with $1.7 million. Stager explained that Watertown’s high ratio of park acres and amenities per capita creates a unique financial burden.

The “Growth Equation”

The recurring theme of the financial presentation was the necessity of population growth to support the city’s extensive amenities, such as the zoo and trail systems.

“To sustain the amenities that we’ve built up over generations, we need the population growth coming between now and 2030 to make these amenities that we have financially viable again,” Stager concluded.

The council unanimously approved the preliminary report, with official audits from Eide Bailly to follow. At the close of the report, Finance Officer Bobzien confirmed that the city’s $110.1 million in cash is currently earning an average interest rate of 4.5% to 5% at Reliabank.