August 5th, 2011
San Marcos council members ponder utility rate increases

San Marcos City Manager Jim Nuse during an Aug. 4 budget workshop. Nuse's proposed city budget would raise water, wastewater and drainage fees. PHOTO by SEAN BATURA

by SEAN BATURA

San Marcos residents may face increased water, wastewater, and drainage fees beginning in October.

Under the city’s proposed fiscal year 2012 budget, the average residential customer could expect a $4.21 increase for the three city-provided utility services — $1.94 more for water service; $1.15 more for wastewater; and $1.12 more for drainage.

City staff recommend six percent increases in the water rate and 3.5 percent increases in the wastewater rate for the next two budget years. Staff anticipate a $1.2 million shortfall in the water/wastewater utility fund next fiscal year.

City staff recommend a 20 percent drainage rate increase over the next two years, and they anticipate a $400,000 shortfall in the drainage utility fund next budget year.

During a budget workshop on Thursday, city staff said the rate increases are necessary to keep the water/wastewater and drainage utilities self-sustaining, and to prepare for future population growth. City Manager Jim Nuse said the city has the infrastructure to serve 90,000 to 100,000 water/wastewater customers. The 2010 U.S. Census put the city’s population at 44,894. Hays County had the highest growth of any local county, with a 60.99 percent jump to 157,107 in the last 10 years.

A recent city rate study that examined 14 water/wastewater utilities found residential customers of the City of San Marcos water/wastewater utility had the fourth-highest water/wastewater bills.

City staff said it will be necessary to use $1.4 million from the city’s general fund over the next two years to restore the water/wastewater fund to the optimum level, lest credit rating agencies downgrade the city and make future loans more expensive. Staff said the water/wastewater utility will have a negative fund balance of about $12 million by 2017 unless it receives more funding.

City staff said the drainage utility will have a negative fund balance of between $4.5 and $5 million in 2013 unless it receives more funding.

San Marcos City Council Place 4 member Chris Jones sparred with Nuse at length on the matter of water/wastewater utility funding. Jones said the proposed $700,000 in the next two years for the utility should be taken from the utility itself rather than from the general fund.

“I don’t feel we have to sacrifice our future water supply to keep our rates reasonable and low,” Jones said. “what I’m saying is, pull back and look at our operations costs…the citizens are not happy about us raising rates.”

Nuse said he sees no way to cut the water/wastewater utility budget by $1.4 million in the next two years. Nuse said the only way the utility has been able to lose money for four years is the city’s “sound” savings account.

“If you tell me to cut (the water/wastewater utility’s budget), I will get it done, but I will tell you it will not be sustainable, and I will tell you, long term, it would be a poor move for this utility,” Nuse said. “The utility needs to stand on its own two feet. And we can’t start taking the legs out of it if we want it to stand on its own two feet.”

City staff proposed incremental yearly increases in water/wastewater rates beginning in 2008, said San Marcos City Council Place 1 member Kim Porterfield during Thursday’s budget workshop. No council member or staff member disputed her statement.

“Part of the reason we’re playing this catch-up is this council did not listen to the recommendations of staff for the last four years and did not raise the rates incrementally,” Porterfield said. “So I don’t want to sacrifice our future water supply (due to) past errors, or past decisions that were made by council members before us.”

About 75 percent of water served by the city is surface water, which is significantly more expensive than groundwater.

City of San Marcos Director of Public Services Tom Taggart said the city probably could not acquire additional groundwater rights due to the regulatory and market climate.

“There’s no one out there willing to sell (groundwater water rights),” Taggart said.

Taggart said the city could legally pump more groundwater with existing permits, though he said there is no reason to use less surface water due to the nature of the city’s contract with the Guadalupe-Blanco River Authority (GBRA).

“I have to pay for that (surface) water whether it’s actually utilized or not,” Taggart said.

Taggart said the city would have depleted its water supply by now if it had not begun using surface water.

“San Marcos residents invested more than $25 million 15 years ago to help build a 20-mile pipeline from the Guadalupe River, to pay for surface water rights and to build a surface water treatment plant,” said Nuse in July. “We have reduced our reliance on the Edwards Aquifer by 75-80 percent, a significant contribution in protecting the aquifer as well as spring flow into the San Marcos River.”

San Marcos voters approved the surface water project in 1990, began paying for surface water in 1995, built a 20-mile pipeline in conjunction with the GBRA in the late 1990s, and constructed the surface water treatment plant that opened in 2000.

Taggart said the costs for wastewater treatment are high in San Marcos due to the environmentally-sensitive nature of the San Marcos River, into which the city discharges treated wastewater.

“The bottom line is, if we put out lower-quality effluent, we would compromise the water quality in the river beyond what state and federal law allows,” Taggart said.

Taggart said the prospect of state and federal effluent standards becoming less-stringent is “nigh impossible.”

City of San Marcos Finance Director Steve Parker said the city will need approximately $40 million to gain access to water from the Carrizo-Wilcox Aquifer within three to five years. The water supply project is referred to as the Hays Caldwell Public Utility Agency (HCPUA) project. Parker said the project’s estimated total cost of $115 million would be shared among Kyle, Buda, San Marcos, and Crystal Clear Water Corporation. City staff propose $586,431 be allocated for HCPUA from the water/wastewater utility budget next fiscal year. According to the HCPUA, San Marcos is projected to undergo a water shortage beginning in 2026.

Staff anticipate additional water/wastewater rate increases once the HCPUA project gets off the ground, which may be in three to five years. Parker said city officials are trying to forestall the project as long as possible while they find other sources of funding.

San Marcos resident Lisa Spencer attended the Aug. 2 city council meeting to protest the HCPUA. She was the only resident to address the council on the matter that day. Spencer said the HCPUA project would cost “more money than this town can afford.”

“I hope you do not consider the citizens as your own personal ATM, because we are not,” Spencer said.