Mineral Wells council backs study of development impact fees, adopts modest rate increases and sets aside reserve for reverse-osmosis plant

The Mineral Wells City Council on Tuesday authorized a study of development impact fees, approved modest increases to water and sewer rates and adopted a resolution to create a debt-funded reserve to cover potential operating costs for a planned reverse-osmosis (RO) water treatment facility.

City staff presented a package of measures aimed at funding aging and planned water infrastructure while limiting immediate effects on typical residential customers. The council voted unanimously on the rate ordinance and on the RO reimbursement resolution; it directed staff to obtain a cost estimate for an impact-fee study.

Council members and local builders debated whether impact fees would discourage development or help catch up on deferred infrastructure needs. One councilmember and local builders said higher fees could drive developers to build in nearby cities with lower fees, while others argued appraisal limits and market forces reduce the risk of big price increases for buyers. A councilmember asked staff to bring back a price for a study before deciding whether to proceed.

City staff told the council the city contracted with NewGen Solutions in May 2025 to update utility rates. The ordinance adopted by the council raises the 1-inch base meter charge from $108.42 to $109.80 and the 1.5-inch base meter charge from $213.64 to $216.75; it raises the monthly sewer base charge from $15.00 to $15.77 and increases the volumetric sewer rate from $8.02 to $8.43 per 1,000 gallons. Staff said most residential customers, who use 3/4-inch meters, will see no change to their water base charge and that the average household impact from the sewer change is about $2.70 per month.

On the RO project, staff said the capital cost to install equipment is separate from the operational costs if the city ever needs to run the RO plant. “The RO project itself puts the equipment and necessary infrastructure online,” a staff presenter said, and noted that HCR — a contractor that provided an operating estimate — quoted roughly $1 million per month to run the system should the city activate it. To avoid immediate rate shocks should the system be needed, staff asked the council to authorize issuing debt and establishing a separate $12 million reserve as part of the debt structure; the council approved that resolution 6–0.

Staff explained the reserve would sit in a bond indenture account, earn interest subject to federal tax rules (arbitrage limits) and be available to cover up-front operating costs while the city implements any customer surcharge to replenish the fund. Staff said the reserve could only be repurposed later with legal steps and counsel review; it would essentially function as a project-specific bond fund until the city chose otherwise.

Councilmembers asked whether the city would pay interest on the reserved bond proceeds while they sat unused; staff confirmed the city would make the scheduled principal-and-interest payments on the issued debt but that the fund would earn interest as well, subject to arbitrage rules.

The council approved the rate ordinance, effective Nov. 1, 2025, and the RO reimbursement/reserve resolution by unanimous votes. The council did not adopt an impact-fee schedule; it instead agreed to seek a cost estimate for an impact-fee study and reconsider once staff returns with numbers.

The actions are intended to balance near-term financial strategy — including meeting a 1.25x projected debt service coverage and maintaining a 25% reserve target — while limiting immediate effects on most residential customers.

The council also discussed related long-term funding options including Texas Water Development Board financing and revenue bond structures as staff continues engineering and cost finalization with HDR and other consultants.

Less critical items and next steps include staff returning with the impact-fee study price, final numbers from HDR and the Texas Water Development Board application timeline that will govern bond issuance and SLGS availability.