Montgomery reviews $24M in water, sewer and drainage needs; staff proposes rate, grant and developer funding options

Montgomery City Council members and staff on Jan. 13 reviewed a portfolio of capital improvement projects for water, sewer and drainage and discussed rate, grant and developer-funding options to close a multi‑million‑dollar gap.

At a city workshop meeting, staff summarized project updates — including an unexpected tank foundation replacement at Water Plant No. 2, a higher-than-estimated design proposal for the Town Creek wastewater plant and a major anticipated utility-relocation bill associated with a TxDOT 105 project — and asked council for direction on next steps, rate scenarios and where to look for outside funding.

Why it matters: staff told the council the projects the city must address or is committed to could total “almost $24 million.” Council members were shown an impact‑fee account balance of about $681,666 and a rate-analysis that, under one proposed structure, would raise the average combined water-and-sewer residential bill from about $52 to about $63 per month and generate roughly $750,000 a year in additional system revenue. Staff and the council noted that rate increases alone would not close the funding gap and discussed borrowing, developer cost‑sharing and grant/lending programs as complementary strategies.

Staff highlighted several near‑term items: the Water Plant No. 2 improvement project is ongoing but required replacement of a cracked tank foundation that was not expected; staff estimated that foundation work added roughly $85,000 to the contract. The Town Creek wastewater plant design proposal from Path & Associates came in at about $720,000, higher than a two‑year‑old estimate of about $600,000; staff said the contract will be recommended for approval at a future council meeting. College Street drainage and “Booster Pump No. 3” (an ARPA‑funded project) will be packaged for bids and were expected to appear on an upcoming council agenda.

Council members spent substantial time on College Street drainage, where staff described replacing three 18‑inch culverts, regrading ditches, installing riprap to dissipate energy and adding guardrail and road repair. Staff said the scope is a replacement “in kind,” not an upsizing, and that access and temporary traffic matting during construction would likely raise the cost beyond the preliminaries.

Staff also briefed council on a proposed emergency interconnect with the adjacent Stanley Lake municipal utility district as a redundancy measure. The city share was estimated at roughly $75,000 in the scenario shown, with a private developer potentially covering $200,000–$260,000 of the total if the work were done as part of a larger development. Staff noted metering for emergency interconnects can cost about $100,000 and that most emergency‑supply agreements include mutual consent provisions so water is supplied only when both parties authorize it.

A major cost driver the council discussed is utility relocations required for TxDOT’s planned work on Highway 105; staff estimated relocations and conflict remediation could be about $1.3–$1.4 million. Staff said TxDOT typically does not pay to relocate existing utilities that are inside TxDOT right of way, and so the city and affected owners bear relocation costs unless easements and other arrangements place the utilities outside the right of way.

On funding, staff reviewed options including low‑interest state and federal loans (Water Development Board, USDA programs), targeted grant searches and use of impact fees toward capacity expansions. Staff presented a revenue/borrowing rule of thumb used by the city’s financial advisor: about $75,000 in additional annual water-and-sewer revenue roughly supports $1 million of debt capacity. Council members asked staff to pursue multiple scenarios with the city’s financial adviser — including staged (multi‑year) rate increases, larger commercial-rate adjustments, and combinations of revenue bonds, impact fees and grant/loan funding — and to return with side‑by‑side comparisons.

No binding decisions were made at the workshop. The meeting packet included specific next steps staff said they would pursue: refine rate scenarios and a side‑by‑side comparison for council review; confirm developer participation language in existing development agreements; pursue potential grants/loan programs with outside grant specialists; and bring the Path & Associates contract and bid authorizations for College Street and the Booster Pump project to upcoming council meetings for formal action.

"These workshop items on the agenda are for discussion only and no action will be taken," the meeting chair said at the outset.

The meeting adjourned by unanimous motion at the end of the workshop.