Denton staff present preliminary utility budgets; council hears proposal for water, wastewater rate increases and new convenience fee

Jessica Williams, the city’s chief financial officer, presented Denton’s preliminary utility budgets for fiscal year 2025–26 to the City Council on July 15, laying out separate forecasts for solid waste, electric (DME), customer service, water, wastewater and drainage.

Williams said the utilities process is intended to look holistically at revenue, reserves and capital. “We are looking at what are we really spending and what do we really need,” she told council. The presentation emphasized efforts to shift more projects from debt funding to revenue funding, reduce discretionary spending and hit multi‑year fund balance targets.

Water and wastewater were the most closely watched items. Williams recommended a 3% retail rate increase for water (residential and commercial) and an 11% increase for wastewater for FY2025–26. She said the city had completed wholesale and retail rate studies, worked with consultant Raftelis and aligned water CIP timing with Texas Water Development Board financing and a pending WIFIA application. “We are going to be looking at tremendous outlays for the Water Fund as we build infrastructure,” she said, noting the water five‑year capital plan included $94.9 million in the current year and significant debt and WIFIA assumptions going forward.

Denton Municipal Electric (DME) General Manager Tony Puente told council DME is not recommending a base rate increase for FY2025–26 but remains subject to ECA (energy cost adjustment) and other riders. DME’s FY2025–26 budget would increase, staff said, driven largely by purchased power; DME expects to strengthen its fund balance through a mix of revenue funding and adjustments to contingency and insurance costs.

Council members asked detailed questions about outage insurance, contingency, DME’s large‑load ECA, and the city’s strategy to return to revenue‑funding vehicle replacements and capital where possible. Puente said staff had recommended not buying certain outage insurance lines because of cost and limited payout terms; the utility will instead rely on contingency funding and conservative forecasting.

Convenience fee proposal

Customer service staff proposed recovering the costs the city currently pays for card and e‑check processing by charging a flat convenience fee on internet, phone and kiosk payments. Williams said the city currently absorbs roughly $1.3 million per year in card‑processing fees; a $2.90 flat fee would recover nearly 100% of that amount based on 2024 volumes, while a $1 fee would recover about $460,000.

Staff asked council for “generalized direction” on whether to pursue a convenience fee and how to structure it. Several council members said they supported recouping costs but asked staff to return with options that would be less regressive — for example, a tiered flat fee by transaction amount or other mitigations to avoid penalizing low‑use or low‑income residents. Councilmember (District 4) specifically asked staff to explore a per‑transaction pass‑through amount rather than a blunt flat fee. Staff said a January 1 effective date would be achievable if council directed staff to proceed; they also noted bank drafts and some recurring payment types would remain fee‑free.

Solid waste, drainage, customer service and other items

• Solid waste: no base rate request; the department identified $980,000 in preliminary reductions and plans to revenue‑fund more vehicle replacements over time. • DME: no base rate request for FY2025–26; DME projects revenue of roughly $526 million and continues to use ECA and other mechanisms for cost recovery. • Drainage: staff launched a cost‑of‑service study (kicked off June 27) and noted the Drainage Fee has not changed since 2002 despite large increases in inlets and infrastructure. Staff said future recommendations may include fee adjustments.

What council directed

Council asked staff to return with more detailed options on the convenience‑fee structure — including possible tiered or amount‑based fees and clearer estimates of collection and delinquency impacts — and to continue the multi‑year work to align CIP, WIFIA/TWDB financing and reserve targets for water/wastewater. Several council members expressed support for the proposed water and wastewater increases in principle but asked staff to model the impacts under alternative federal/state funding scenarios.

Why it matters

Denton faces major capital needs for water, wastewater and electric infrastructure tied to growth. Staff told council they are trying to balance affordability for ratepayers with long‑term debt strategy and the city’s credit position. Council’s direction on convenience‑fee design and the water/wastewater rate path will shape budget proposals returned during the August–September budget workshops.

Next steps

Staff will bring the full capital improvement program and updated rate proposals to council workshops later this summer, with the budget and tax‑rate hearing set for Sept. 16, 2025.