City staff recommend 7% water and sewer increase for FY26; phased correction to low-tier water rate continues

City staff and the water-rate consultant recommended a 7% increase to both water and wastewater rates for fiscal 2026, a reduction from an earlier 8% projection because of updated wholesale-cost assumptions and FY26 budget changes. Matthew Garrett of NewGen reported the consultant’s analysis and said a 7% increase is sufficient for the near-term modeling given updated North Texas Municipal Water District cost assumptions.

The rate action continues a three-year phase-in to correct the subsidized low-volume residential tier. Garrett said last year the council moved to reduce the subsidy for the first tier (1–5,000 gallons) because the billed price was below wholesale cost; this year the recommended increase includes a $1.25 per thousand-gallon rise in that lowest tier and a 7% adjustment across minimum and volumetric tiers. Garrett said about 70–72% of utility costs are wholesale charges and that further increases may be necessary in later years to fully cover costs and capital needs.

Staff presented sample bill impacts (residential and commercial) and compared neighboring-city rate adjustments; staff said Plano would remain middle-of-the-pack regionally after the increase. Council asked for confirmation on neighboring jurisdictions’ actions and the rationale for matching water and sewer percentages; staff said different cities have various rate structures and capital needs and that the city’s approach seeks to have water pay for water and sewer pay for sewer.

If council approves the rate change as part of the budget process, staff would implement the adjusted rates and continue planned multi-year rate reviews for enterprise funds.