Friday, April 19, 2024
In order to meet maintenance requirements and continue to provide the same level of service, a consultant is recommending the city of Gatesville raise water rates and also restructure its tiers so that customers who use more water and have larger meters pay more.
The Gatesville City Council heard the recommendations and reasons why a rate increase is needed during its Aug. 16 meeting. Chris Ekrut, chief financial officer for NewGen Strategies, said the city would be in a financial hole in the next few years if the Council did not take action soon. If the Council approves the rates at an upcoming meeting, the cost increase would go into effect for residential and commercial customers of Gatesville water in April 2023. The Texas Department of Criminal Justice would begin paying a higher rate in October.
Gatesville City Manager Bill Parry said the city reviews its rates every two years to determine if the fee charged is adequate to cover the cost of providing services. He said every five years, the city uses a consultant to review its rates. Gatesville previously had NewGen review the rates in 2018.
"To be successful, revenues have to match or exceed expenses or you're under water — no pun intended," Ekrut told the Council. He said the water department is a business and "you have to reinvest in the business (by maintaining equipment) so you can continue to be in business providing services in the future."
If the recommended rate is approved, the average home with a three-quarter inch line and using 5,000 gallons a month for water and sewer would pay $71.45 per month — up from the current rate of $64.75. For water, the current bill is $36.75 and would increase to $40.56. For wastewater, the current bill of $28 would rise to $30.89.
Ekrut said if a rate increase is not approved, "financial performance is projected to be insufficient through (fiscal year) 2027." He said the "key driver is needed capital investment and inflation."
Without a rate increase, the city would not meet the 25% reserve requirement for the 2025-2027 fiscal years and would have to dip into reserves to cover a projected $3.3 million revenue shortfall. A negative fund balance would be anticipated by the 2027 fiscal year.
To maintain and upgrade equipment, an estimated $9.5 million in capital improvements has been proposed over the next five years. In order not to overburden local residents with even larger rate increases, city leaders anticipate having to fund some of these improvements through debt.
NewGen has also recommended a tiered structure in which higher rates would be charged for customers who use more water — or have a larger meter that can accommodate more water use.
"We recommend the more you use, the more you pay," Ekrut said. "Ideally, we are trying to encourage conservation. Water is a limited resource."
Rate increases have also been recommended for the following two fiscal years.
"The good news is as we look out — if we can get through this push — rates will moderate, but there's a little bit of a hill to climb," Ekrut said.
Although a vote on the rate increase will take place at a future meeting, Mayor Gary Chumley talked about the importance of maintaining the water system properly.
"If we don't do anything, we'll end up like Marlin and Groesbeck and wake up without any water."
