A consultant presented a long-range financial plan to the League City City Council on Jan. 14 that shows current water and wastewater rates are insufficient to cover operating costs, debt service and roughly $468 million in capital projects over the next five years. Chris Ehrcutt, principal at NewGen Strategy and Solutions, told the council the study recommends phased rate increases beginning April 2025, including a 9.9% increase for an average residential customer under the firm’s proposed plan.

Ehrcutt said the utility must ensure “revenues have to match or exceed expenses,” adding, “If we don't, no pun intended, we're underwater.” The consultant recommended a strategy of gradual, multi-year increases to preserve intergenerational equity for capital projects paid with debt and to give customers time to adjust to higher monthly bills.

Why it matters: The plan is intended to fund major system projects the consultant cited as the primary drivers of increased costs. Ehrcutt identified three large projects that together account for the bulk of the five-year spending: replacement of a transmission line from the southeast plant to the Highway 3 pump station (about $100 million), expansion of a west-side wastewater treatment plant (just under $100 million), and a planned expansion of the southeast Houston water plant (estimated north of $150 million in early engineering estimates). Ehrcutt said those three projects represent roughly 70% of the near-term capital total.

Key findings and projected customer impacts:

- Five-year capital plan: $468,000,000 in projects (consultant’s projection for the period presented to council).

- Residential average (6,500 gallons): current combined water and wastewater bill $79.51; consultant’s proposed April 2025 bill $87.35, a $7.84 monthly increase (9.9%).

- 1-inch commercial (25,000 gallons): current $312.51; proposed April 2025 $344.34, a $31.83 monthly increase.

- Landscape example (50,000 gallons, 2-inch meter): current $413.76; proposed to $460.50 (roughly a $51.74 increase) under the study’s sample bills.

- Debt and reserves: The study models issuing new debt for long-lived plant projects (30-year terms for major treatment or supply plants; 20-year terms for other projects). The consultant recommended a 1.25 times debt service coverage policy for bond commitments and a reserves policy of roughly 90 days cash on hand; the plan showed reserves building somewhat then drawing down into 2029 around major issuances.

- Capital recovery fees: Ehrcutt told the council roughly $68–69 million in capital recovery fees are projected to apply against the $468 million five-year plan; timing and the mix of debt versus pay-as-you-go will affect cash flow and debt sizing.

Growth and assumptions: The study includes growth assumptions the consultant said range from about 800 to 1,400 new homes per year; the firm used a conservative upper bound of about 1,200 new homes per year in its modeling. Ehrcutt said faster or slower growth would change the pace at which capital recovery fees and rate revenues offset project costs and could require revisiting rates if growth materially slows.

Comparisons and rate design: Ehrcutt showed League City’s projected bills against a group of comparator cities and noted the comparison is not strictly apples-to-apples because cities differ in funding approaches and timing. The consultant recommended retaining League City’s current conservation-oriented inclining block rate design for residential customers while slightly adjusting blocks and volumetric charges to further encourage conservation. The volumetric charge was shown increasing 50 cents between April 2024 and April 2025 and then by roughly 25 cents per year thereafter in the model presented.

Council questions and staff notes: Councilmember Courtney Chadwell and other council members asked about timing, the interplay of growth and capital recovery fees, and options to push projects out or cash-fund work to reduce near-term rate pressure. City staff and the consultant said some projects are phased where possible, and the city can augment supplies (for example, with wells) to delay certain surface-water expansion timing; for other projects tied to partner utilities (for example, a Houston expansion module) the city has limited flexibility on schedule and must coordinate with those providers.

Next steps: Ehrcutt told the council the administration plans to present a five-year rate ordinance on Jan. 28 (first reading) with a second reading Feb. 11 and is targeting new rates to take effect April 1, 2025. No formal council vote on new rates occurred at the Jan. 14 work session; the presentation and discussion were for council information and direction ahead of ordinance hearings.

Other details and context: The consultant noted Gulf Coast Water Authority constitutes a little more than 13% of the utility’s expenses and that wholesale pass-through increases from that provider are a driver of supply-side cost increases. Ehrcutt said across the industry annual average changes in water rates have been roughly in the 4–6% range, higher in communities with rapid growth and large capital programs.

The council’s discussion on Jan. 14 centered on the study’s projections, project timing, funding mix and next steps for formal rate hearings; no votes were taken on Jan. 14.