Austin Water presents $2.74 billion five‑year CIP, commission approves proposed FY26 budget

Austin Water staff told the Austin Water Commission that the utility’s proposed FY2026 operating and capital plans would support a $2.74 billion five‑year capital improvement program and a FY2026 expenditure budget of about $849.9 million, and the commission voted unanimously to approve the item at the meeting.

The presentation, led by Joseph Gonzales, Austin Water assistant director for financial services, framed the FY2026 proposal around a cost‑of‑service study completed in 2024 and a growing capital program that includes a major Walnut Creek Wastewater Treatment Plant expansion. Gonzales said the proposed package would produce an average increase of $8.71 per month for the average residential customer and about $5.50 per month for customers in the utility’s Customer Assistance Program (CAP). Gonzales said the proposed budget seeks to balance affordability with infrastructure needs and to maintain financial metrics that support stable bond ratings.

Why it matters: the utility is undertaking one of its largest multi‑decade capital programs, including large generational projects staff say are best financed over longer terms. That work, combined with growing operating and debt service costs, is the principal driver of the proposed rate and revenue changes that will be considered as Council conducts its budget work sessions.

Summary of key points from staff presentations

- Cost of service and public outreach: Gonzales said Austin Water ran a 2024 cost‑of‑service process with public involvement, which prioritized affordability for essential services and system resilience. The utility said the process informed a recommendation to target lower cash financing shares for very large generational projects.

- Capital improvement program: Christina Romero, financial manager, said the proposed five‑year CIP (FY26–30) totals about $2.74 billion, a roughly 20% increase over the prior five‑year plan. The largest single project highlighted is the Walnut Creek Wastewater Treatment Plant expansion, which staff said is roughly a $1 billion project and is a driver of the increased capital plan.

- Operating and revenue numbers: Sonli Floyd, division manager (Accounting), said proposed service revenue totals about $761.7 million (an 8% increase versus the FY25 budget). Austin Water’s FY2026 proposed expenditure budget is approximately $849.9 million; staff said much of the year‑over‑year increase is related to transfers and debt service costs.

- Rates and customer assistance program: staff said the cost‑of‑service recommendations include rate design that aims to keep essential use affordable (lower tiers) and target conservation through higher tiers for discretionary use. Staff reported there are approximately 54,000 CAP participants and that CAP discounts average roughly 50%; the proposed budget would keep the CAP discount near that target.

- Debt and financing strategy: staff described an active debt management program that uses commercial paper to fund CIP draws and converts short‑term borrowings into long‑term bonds as needed. Romero said Austin Water projects significant net present value savings from past debt actions and is working to secure low‑interest loans (including from TWDB and federal programs) to reduce long‑term costs.

Questions and clarifications from commissioners

Commissioners asked about (1) where Austin Water found budget efficiencies and how the utility prioritized projects, (2) whether Austin Water could change procurement practices so more projects receive multiple bids, (3) effects on renters and multifamily properties if irrigation or budget billing strategies are extended beyond single‑family customers, and (4) how commercial paper is used and the threshold that triggers issuance of long‑term bonds. Staff responded that the CIP presented is largely carryover and prioritized through a business case review process that ranks hundreds of projects; that procurement difficulties for plant work are driven in part by a small universe of specialty contractors and market timing; and that commercial paper is converted to long‑term bonds when program thresholds are reached (staff cited an increased commercial paper threshold of about $400 million).

Commission action

After the presentation and additional discussion, the commission voted unanimously to approve the budget and the associated capital spending plan (item 15 on the agenda). Staff noted Council will hold multiple work sessions on the budget in late July and August and that the public will have additional opportunities to comment.

Ending note

Staff told commissioners the proposal aims to protect utility operations and system resilience while phasing in cost‑of‑service changes to limit year‑to‑year bill shock. Commission members requested follow‑up briefings on asset management, facility performance during recent floods, and procurement practices for plant work. The utility said it will coordinate those briefings and follow up with commissioners.