McAllen utility proposes $183 million groundwater desalination plan; proposes $2.25 per 1,000-gallon rate to fund most debt service

Mark [last name not specified], general manager for McAllen Public Utility (MPU), told the McAllen City Commission at a workshop that MPU will propose raising the water commodity rate to $2.25 per 1,000 gallons to fund most of a proposed groundwater desalination project and related capital work.

"We will be proposing $2.25 a thousand," Mark said, summarizing the recommendation the utility intends to present to the Public Utility Board next week. He said about 80% of the cost of the project would be covered by the proposed rate increase as planned debt service, and that MPU will aggressively pursue grants to reduce borrowing needs.

Why this matters: MPU says the project aims to diversify McAllen's supply away from sole reliance on Rio Grande deliveries after persistent low reservoir levels and worsening source-water quality. Mark presented reservoir and water-quality data showing both Amistad and Falcon reservoirs running unusually low (presenter cited roughly 25–30% for Amistad and about 15% for Falcon at the time of the briefing) and described higher salinity reaching the city's intake from the upstream Murillo Drain.

Project description and cost: MPU's engineers recommended a multi‑phase groundwater desalination approach. Phase 1 was described as about $23 million for wells (four deep wells and four shallow wells, a total of eight) and a subsequent treatment facility estimated near $160 million; the presenter gave an engineer total of roughly $183 million for wells plus the plant. Mark said test wells indicate a possible 7,000,000 gallons-per-day capacity from the selected sites and reported a sample salinity near 4,500 mg/L TDS at one test location, which the utility expects to treat by reverse osmosis.

Funding plan and grants: Mark said MPU expects to seek multiple grant sources to reduce net borrowing. He noted an anticipated Bureau of Reclamation award of $9.8 million (staff said an award had been approved and expected to be confirmed) and referenced new Texas state desalination funding that the utility will pursue. MPU staff said they are also engaging other lenders and funders and that a first tranche of a Texas Water Development Board loan for $30 million is being planned as part of the financing strategy. Mark said federal interest-rate movements affect projected debt costs and that recent rate reductions could lower borrowing costs for the city.

Rates and customer impact: The utility presentation compared current local and valley rates and said the average McAllen single-family residential use this year was about 8,500 gallons per month. Using the state's customary 10,000-gallon benchmark for comparison, Mark showed how the proposed commodity rate would change the sample bill; he said that because average McAllen use is lower than the 10,000‑gallon benchmark, typical residential bills would rise less than the stated 10,000‑gallon example. MPU staff said commercial rates will also increase and noted that, even with the proposal, MPU would remain below many peers on commercial comparisons.

Water-quality and supply drivers: MPU stressed two drivers for the project: reliability and source-water quality. Mark said Mexico's deliveries under binational agreements have been short by roughly 913,000 acre-feet over the five-year cycle cited in the presentation and that deliveries from the Murillo Drain have shown elevated salinity (presenter gave values rising from about 1,000 historically to almost 3,000 and then as high as 4,000 TDS in recent samples). He described reverse osmosis treatment as appropriate for the site salinity and said the utility is exploring a geothermal test well to reduce operating costs for desalination.

Timeline and next steps: MPU staff described the program as a multi-year, multi‑phase initiative and called the first construction tranche a four-year effort. The utility will present the proposed rates to the Public Utility Board at its next meeting and continue pursuing grant funding and loan tranches. Mark said MPU hopes grant and loan packaging will limit the need for another major rate increase in the near term, but that future adjustments could be required if costs or financing change significantly.

Ending: MPU presented the proposal and data for commission and public review at the workshop; no formal City Commission vote occurred. Staff said the utility will present the formal rate request to the Public Utility Board and continue legislative and grant-seeking work to secure funding ahead of construction.