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Finance board reviews proposed FY2025–26 budget and water/wastewater rate study; $72M CIP and Buffalo Creek charges drive major rate increases
Summary
Consultant Jason presented a model that shows steep near-term water and wastewater rate increases tied to a proposed $72 million debt issuance for the Water Bridge Plan and rising Buffalo Creek interceptor costs. Board members requested further analysis on well count, timing, take-or-pay exposure and public outreach.
The HEAT Finance Board reviewed the city’s proposed fiscal 2025–26 budget and a consultant’s water and wastewater rate study that projects multi-year rate increases if the city issues $72 million in debt to fund the Water Bridge Plan.
Jason Grama, the consultant who delivered the rate study presentation, told the board that the model assumes issuing about $72 million in 2026 — roughly $70 million net of issuance costs — to fund water-supply projects, including six new wells, storage tanks and distribution improvements. Under those assumptions Grama said the water system would need a roughly 25% rate increase in 2026, then roughly 21% in 2027 and another near‑20% increase in 2028 to cover debt service and other costs. For combined water and wastewater service the example residential bill used in the presentation would rise from about $236 per month today to $283 in year 1 (an increase of ~$47), then by roughly $52 the following year.
Grama said two principal drivers in the model are (1) the planned debt issuance and associated debt service and (2) rising wholesale costs the city pays to treat and purchase water. He highlighted that the North Texas Municipal Water District’s Buffalo Creek interceptor system — used to convey wastewater for regional treatment — faces large capital improvements; Grama said Heath’s share of interceptor-related costs could rise materially in coming years and that the district’s treatment and interceptor debt will flow through to participant cities.
City staff and board members stressed the study’s many assumptions and pressed for more detail. Jay Ayers, City of Heath finance staff, and City Manager Steve Alexander told the board the budget packet was presented to council first because of timing; the board would receive the same materials immediately afterward and was asked to test financial assumptions and offer recommendations to council. Ayers said staff seeks the board’s feedback on assumptions including population and sales tax growth, the structure of fund balances, and whether the proposed funding approach (the proposed combination of certificates of obligation and revenue pledges) makes sense.
Board members asked targeted questions the group said must be resolved before recommending a course to the council: how much incremental capacity the six wells would deliver (the Water Bridge Plan is intended to add up to about 6 million gallons per day of capacity), whether Heath would remain constrained by its take-or-pay water contract with Rockwall (Grama said the model uses the current take-or-pay volume — about 983.8 million gallons annually — but noted a memorandum of understanding with Rockwall could alter that exposure), and how much of the CIP would be actually spent in the first year. Board members also asked for a breakdown of operating costs associated with new wells (power, maintenance, staffing) and whether the city should phase borrowing rather than issue the entire $72 million at once.
Several members urged staff to produce a short packet of alternatives: how the rate model would look if fewer wells are built or if the debt issuance is reduced or phased; a cost-per-gallon analysis for wells and for the take-or-pay contract; and an explicit reconciliation that shows which capital projects are already funded from prior bond proceeds or fund balances. Board members also asked for clarity on outreach plans; staff said there have been mailers and materials in recent utility bills and social media posts explaining the Water Bridge Plan but that direct public engagement on potential bond issuance would follow the normal public hearing process.
No formal budget approvals or rate changes were made by the board at the meeting. Members requested follow-up materials from staff and the consultant and signaled willingness to hold one or more special meetings to review a revised model and to prepare a recommendation for council ahead of the scheduled public hearings in September.
