San Marcos staff outlines utility rate modeling, stormwater CIP shift and public-engagement concerns

City staff provided the San Marcos City Council an update on utility funds and public-feedback themes, saying the city is using incremental rate modeling for utilities and planning a hybrid funding approach for stormwater capital projects.

The staff member said, “The utility rate modeling is in process, and we're continuing with the incremental rate increase approach when rate increases are required for the utilities. The late penalties have been removed from the models as well as the budget as directed by city council.” The staff member added the Citizens Utility Advisory Board will make recommendations on any rate adjustments needed for fiscal year 2026.

The briefing said the city plans to have the stormwater fund pay for up to $5,000,000 of its capital improvement program beginning in fiscal year 2025. “This would save the general fund,” the staff member said, and staff estimated the change would reduce general-fund pressure by about $295,000 in fiscal year 2026; the staff member said the general fund would cover amounts above the $5,000,000 cap.

Council members and other speakers also raised questions about proceeds from property sales. One speaker asked, “What happens to those funds? The building that got moved to Valley Street, I believe, or and buildings like that.” The staff member responded that the city sold one small building and deeded the Mitchell Center rather than selling it; the speaker said the building sold had been moved and that staff would “check-in on that and get back to you on” the exact receipts.

On public engagement, staff summarized feedback collected during the budget process. The briefing said neighborhood commission input emphasized maintaining adequate staffing and equipment for police, fire and emergency medical services. Staff also said a series of meetings and “dream sessions” surfaced strong interest in mobility and connectivity—particularly sidewalks, transit and other transportation—and in riverfront and family-friendly environmental projects.

During the meeting a participant asked for details about the neighborhood commission’s membership and meeting frequency, noting limited attendance. “Attendance has been low, and I would argue not fully represented,” one speaker said, cautioning that the sessions and volunteer commission turnout may not produce a sample generalizable to the entire community.

No council vote on rate changes or on the stormwater funding approach was recorded in the discussion. Staff said the Citizens Utility Advisory Board will review the utility-rate work and make formal recommendations for fiscal year 2026; council action would follow that advisory review.

Staff also noted that late-payment penalties were removed from the rate models and the proposed budget as directed by council, but did not provide a specific date for any final rate proposal.

The city said it will follow up with the council on the precise proceeds from the building sale referenced during public comment and will incorporate Citizens Utility Advisory Board recommendations into any formal rate proposals for FY26.