City staff reviewed three proposed water-rate scenarios intended to bring the utility fund into financial balance and into compliance with the Texas Water Development Board requirement that revenue equal or exceed expenses. The rate study, which includes the Lower Colorado River Authority (LCRA) contract figures, was presented as part of the FY2025–26 budget workshop.

Why it matters: staff reported the utility’s current coverage ratio is roughly 0.81 (revenue divided by expenses), below the 1.0 threshold that the Texas Water Development Board expects for eligibility for grants and other funding programs. Council members repeatedly emphasized protecting low-use residential customers while shifting more of the cost burden to high-volume users.

What was presented: staff described three scenarios: Scenario 1 (conservation-weighted) increases the price for higher water users so high-volume consumers pay more; Scenario 2 preserves the current tier structure but raises rates across the board; Scenario 3 is a hybrid blending a base charge with tiered consumption increases. Staff said Scenario 1 produces the least impact on many low-use residential accounts and better incentivizes conservation; they also said roughly 70–75% of residential accounts use 5,000 gallons or less per billing period under current usage patterns.

Sewer and related timing: staff said a separate sewer rate study is forthcoming and they currently plan to budget a 15% across-the-board sewer increase for planning purposes; any sewer rate changes would be presented before March because new rates would not go into effect until that month. LCRA-driven electric increases (a separate pass-through) were also noted as outside the council’s ability to change.

Council direction and next steps: several council members voiced support for Scenario 1 or the hybrid Scenario 3 and asked staff to schedule the rate-study presentation for a public meeting or town hall. Staff said the consultants will present a formal rate study and that the council could consider implementing major changes over a two-year phased schedule and re-evaluate after two years. No formal vote was recorded at the workshop.

Compliance impact: staff said bringing the utility to break-even would restore compliance with the Texas Water Development Board and make the city eligible for grants and other funding programs that require utilities to demonstrate revenue coverage of costs.

Unresolved items: council members asked staff to provide clearer bill breakdowns, to separate residential and commercial rates in follow-up analysis, and to confirm whether all cost elements were properly included in prior studies; staff agreed to return with more detailed presentations and schedule the public meeting.