City manager outlines water and wastewater budget; West Lubbock expansion will use revenue bonds

City Manager Jared opened the enterprise portion of the budget work session with a review of water and wastewater finances, saying the city expects slightly higher water revenue next year and does not plan to dip into combined water/wastewater reserves for the coming year. "We do think that will hold," Jared said of higher consumption following a wet year.

The budget model combines revenues, operations, debt and capital. The nut graf: the utility fund projects to finish the current fiscal year with modest positive results and plans significant cash capital spending next year while financing the remaining portion of the West Lubbock water expansion with revenue bonds rather than property tax-backed debt.

Most of the fund-level details presented were technical but consequential: projected combined water/wastewater revenue was shown at roughly $168.6 million for the current fiscal year, rising to about $171.1 million in the proposed year. The manager noted operations-and-maintenance and transfer allocations (including a transfer to Lubbock Power & Light for billing costs) are a sizeable share of the fund. Debt service increases are tied principally to the first and upcoming second portions of the West Lubbock expansion; Jared said the second half appears later in the capital plan.

Key financial metrics: the city presented a projected debt-service coverage ratio of 1.83x for the new budget year, above the internal target of 1.75x the council uses to preserve bond ratings. The city’s reserve policy for these utilities was reiterated at 25% of revenue; the combined fund is modeled to end the current year with a reserve level below that policy but to recover over future years.

On rates, Jared said the model shows base rates covering about 56% of debt-service obligations at present (down from 96% last year because of revenue and structure changes), and the staff is not proposing fee increases for water or wastewater in this cycle. He explained the difference between base (fixed) and volume (consumption) charges, noting the base rate includes the first 1,000 gallons and the example three-quarter-inch meter base remains $18.75 under the proposed budget.

Capital priorities highlighted on the water side include valve locating/repair, large valve replacements, new meter sets, terminal storage reservoir improvements near the airport and pumping system improvements. Jared said all listed water projects will be paid in cash except the West Lubbock expansion (about $36.4 million of the total roughly $48.9 million water and wastewater capital package is revenue-bond financed). On wastewater, projects include plant improvements, lift station rehabilitation, sanitary sewer expansion and SCADA cybersecurity and modernization work.

Councilmembers asked clarifying questions about debt-service timing and how projects are funded; staff responded that the West Lubbock project has phases with preliminary engineering funded earlier and principal construction funding staged across fiscal years.

Looking ahead, staff said they will monitor consumption, interest earnings and the sewer lateral assistance program results and will update the model before final budget adoption.