The City of Allen continues to face water and sewer fund operating cost increases from the North Texas Municipal Water District (NTMWD) as well as the need to fund water and sewer system maintenance and capital improvements internal to the City's water and sewer systems. We are experiencing increased internal expenses that are due to City growth and requirements to comply with the wastewater Capacity, Management, Operations and Maintenance (CMOM) Program.  The City developed the CMOM program following a 2015 inspection by the Environmental Protection Agency (EPA) and the Texas Commission on Environmental Quality (TCEQ).  It is also important that the City plan water and sewer rates to assure the Water and Sewer Fund can financially support new water and sewer infrastructure, have the capital improvement funding to replace or rehabilitate the older parts of the water and sewer system reaching the end of their life cycles, and pay its debt service.

Almost all of the revenues in the water and sewer fund are from water and sewer charges to customers.  Water revenues make up about 55 percent of the total fund revenues while wastewater revenues make up about 40 percent of the total fund revenues.  Water revenues are a function of water usage and this usage is susceptible to the unpredictability of the weather.  Additionally, water revenues are reduced when the area enters drought conditions and water usage for landscape irrigation becomes constrained by drought declaration.  Water revenues naturally increase in the four to five hotter, dryer months of the year.  Sewer revenues are not as susceptible to unpredictable weather and droughts.

NTMWD Cost Increases:

In the FY20 projected water and sewer fund budget, NTMWD expenses to the City for water and wastewater represent about 61 percent of all fund expenses.  The District's rates are increasing due to costs associated with providing water and wastewater services to a rapidly growing service population, to provide for the operations and maintenance (O&M) of its aging infrastructure, and to make expenditures/investments related to new Federal and State regulation.  A list of recent and ongoing NTMWD the key projects and related costs are in the table below.

For Fiscal Year 2020, NTMWD's projection for wholesale water rate increase is from $2.92 per thousand gallons in FY19 to $2.99 per thousand gallons in FY20.  This is a 2.4 percent rate increase.

For Fiscal Year 2020, NTMWD's projection for wholesale wastewater transport and treatment rate increase is from $3.23 per thousand gallons in FY19 to $3.86 per thousand gallons in FY20.  This is a 19.5 percent rate increase.

All City water and sewer rate increases are applied to both the minimum bill and the volumetric charge on water and sewer accounts.  In the Water and Sewer Rate Tables below, the current rate resolution charges that took effect November 1, 2018, are shown in the rates in the column titled "Nov 18."  The proposed rates appear in the column titled "Nov 19." The Tables below provide a representative summary of water and wastewater billing charges by rate class and meter size.  The attached Rate Resolution provides a complete reference of all rate classes and rates.

The city uses 10,000 gallons as a benchmark for measuring the monthly cost impact of water rate increases as the average Allen residential annual monthly water use is currently 9,454 gallons per month. The combined monthly impact of the recommended water and wastewater rate changes on a residential account using 10,000 gallons: The current $97.62 bill would increase to $105.95, an increase of $8.33 per month.

The combined monthly impact of the recommended water and wastewater rate changes on a commercial account with a 2-inch water meter using 50,000 gallons: The current $475.25 bill would increase to $515.80, an increase of $40.55 per month.

The proposed rate resolution also establishes volumetric charges (surcharges) for periods of constrained water supply in Section 3 of the resolution. This section of the rate resolution is for initiation based upon the North Texas Municipal Water District requesting a drought rate surcharge to be implemented due to constrained water supply. Section 3 of the rate resolution reflects rate surcharges from 25 percent up to 150 percent. The surcharge amounts are not applied to inside building (domestic) uses in the non-residential rate category.  The surcharge is applied to residential consumption above 15,000 gallons; and the irrigation, fire protection, and construction (fire hydrant meter) rate classes above 1,500 gallons of usage. The resolution specifies the initiation and termination of a rate surcharge to be upon NTMWD's request; with the charge being initiated and/or terminated on billings mailed the first day of the month after NTMWD requests the charge to be initiated or terminated.

Staff recommends that the City Council adopt a Resolution implementing the Water and Sewer rate increases recommended for Fiscal Year 2019-2020.

I make a motion to adopt Resolution No. __________ setting new rates for residential and commercial water and sewer services.