City staff and council members presented a water capital-improvement plan and a proposed rate package after repeated public comment opposing large increases. Staff said the water capital improvement plan (CIP) lists roughly $14 million in needed improvements; the rate-study work prioritized roughly $4 million of the most critical needs for the coming years.

Staff said operating expenses at the water plant increased about 38% over the last three fiscal years and distribution expenses increased about 66% over the same period (operating expenses, not salaries). By contrast, cumulative water-rate increases over those years totaled about 16%, staff said; the city does not currently meet its bond covenant of a 1.0 coverage ratio and would need some rate increase to meet debt obligations.

The proposed rate package discussed in budget workshops would include a flat base increase of about $10 and tiered per-unit increases; staff said one of the purposes of the $10 base increase is to help cover potential costs to raise the height of the dam and to contract with Llano River Authority (LRA)/LCRA-related services to increase firm water yield during droughts. Staff also described a placeholder for a potential additional position in the water/wastewater department; the proposed position was budgeted conservatively (salary plus benefits) so the budget does not underestimate potential costs, but council has not approved hiring the position.

Several residents and civic commenters urged more public communication, said they could not absorb large increases on fixed incomes, and proposed alternative revenue or cost-control measures. Public commenters suggested pursuing state and federal infrastructure grants, exploring small-scale hydroelectric generation at the dam (micro-hydro) as a revenue source, drilling a horizontal well to access water beneath the riverbed, and improved efficiency to reduce losses. One commenter offered to help pursue grants and said she had previous experience obtaining infrastructure funding.

Council said it plans a town hall on water rates for September 6 to give the public more time and detail; staff said the rate study selected critical projects that could be funded first, and that the CIP does not represent a single five-year program the city can fully fund at present. No final rate ordinance was adopted at the meeting.