The City of Allen continues to face 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 water and sewer fund revenues are from water and sewer charges to customers.  Water revenues make up about 58 percent of the total fund revenues while wastewater revenues make up about 42 percent of the total fund revenues.

NTMWD Cost Increases:

In the FY21 projected water and sewer fund budget, NTMWD expenses represent about 59 percent of all fund expenses.  The District's rates are increasing due to capital improvement/debt service 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 key projects and related costs are in the table below.

For Fiscal Year 2021, the wholesale water rate will remain at a cost of $2.99 per thousand gallons. This is a zero percent rate increase.  As a result, the City will not need to increase any water rates in FY21. 

For Fiscal Year 2021, the wholesale wastewater transport and treatment payments to NTMWD for the City's expected wastewater flows will increase about 7 percent.  Due to this NTMWD payment increase and to serve our internal sewer revenue requirements, the City will increase sewer fees by five percent (5%) in FY21.   

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, 2019, are shown in the rates in the column titled "Nov 1, 2019."  The proposed rates appear in the column titled "Nov 1, 2020." 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 combined monthly cost impact of both water and sewer sewer rate increases as the average annual Allen residential monthly water use is 9,780 gallons per month. The monthly impact of the recommended wastewater rate changes on a residential account using 10,000 gallons: the current $105.95 bill would increase to $108.78, an increase of $2.82 per month.  This cost increase is only on wastewater charges as water charges are unchanged. 

The monthly impact of the recommended wastewater rate changes on a commercial account with a 2-inch water meter using 50,000 gallons: the current $515.72 bill would increase to $528.26, an increase of $12.54 per month.  This cost increase is only on wastewater charges as water charges are unchanged. 

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 water 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.

The increase in sewer fees will result in approximately a four percent increase in wastewater revenues in FY21.

Staff recommends that the City Council adopt a Resolution setting new rates for residential and commercial Water and Sewer services recommended for Fiscal Year 2020-2021.

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