Agenda

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14.

City Council Regular Meeting

Meeting Date:

07/27/2021

BACKGROUND

The City of Schertz Public Works Department contracted with Utility Engineering Group (UEG) to perform a Water and Wastewater Rate Study. Traditionally, the City has performed full rate studies approximately every five years with smaller updates as needed. The rate study done this year is independent of previous studies in order to provide a complete analysis.

The analysis performed by UEG and City Staff involved reviewing historical financial information, water billing data, as well as future forecasting that our partner agencies have completed such as CCMA and SSLGC. The analysis concluded there are two driving factors that effect the future rates for the City of Schertz. Those factors are capital improvement projects, including recapitalization, and increases in the cost of purchased water as a result of the SSLGC Guadalupe Project.

In previous rate studies, an assumed capital improvement project cost was generally plugged into the analysis. This general approach has resulted in underfunding in the Water & Sewer Construction Reserves to ensure safe and reliable water. Now that City Staff has developed a full ten-year Capital Improvement Plan (CIP) the rate analysis was accomplished using the estimated costs of necessary projects. The CIP includes projects that are due to the growth of the City as well as recapitalization of aging infrastructure. By using the CIP, the rates can be structured and scaled to generate appropriate funding to support the Water and Wastewater services and staffing in the City.

The SSLGC Guadalupe Project is under construction and is expected to begin delivering water to the City of Schertz during the 2022 - 2023 fiscal year. The water produced from this project does not have the same rate as the Gonzales Project water and will result in the City's cost of water to increase by approximately 11% from fiscal year 2021 - 2022 to 2022 - 2023. This increase was considered when completing the rate analysis in order to phase in the increase to the customers.

Based on these factors, as well as others, such as growth and simplifying the rate structure, UEG and City Staff are recommending a combined Water and Wastewater target revenue increase for fiscal year 2021 - 2022 of 4%.

GOAL

To gain approval of the proposed Water and Wastewater Rates for Fiscal Year 2021-2022.

COMMUNITY BENEFIT

Evaluating the entire financial picture of the Water Department over a five year window helps to keep rate increases as minimal as possible while also keeping the revenue at an adequate level for current and future operations and projects. Having a properly funded Water and Wastewater program allows the City of Schertz to continue to provide a high level of service to all customers.

SUMMARY OF RECOMMENDED ACTION

Staff recommends approval of Resolution 21-R-68 adopting the proposed Water and Wastewater rates for Fiscal Year 2021-2022.

FISCAL IMPACT

The proposed Water and Wastewater rates will increase the combined Water and Wastewater overall revenue by 4%. Through a more nuanced approach to the rate increase than a flat increase to all customers, Staff and UEG are recommending integrating the increases on the Water rates into the new rate structure. The proposed rates also keep the City of Schertz in the same relative position in the regional market for both residential and commercial customers. Ultimately, this will result in NO Water rate increase for the largest customer group, which is 0-6,000 gallons per month.

RECOMMENDATION

Staff recommends approval of Resolution 21-R-68 adopting the proposed Water and Wastewater rates for Fiscal Year 2021-2022.

Attachments
21-R-68
Exhibit A FY 21-22 Rate Structure