Houston County water district seeks 4% wholesale increase as council weighs contract and long‑term risk

Sonny Rallo, introduced by staff as president of the Houston County Water Control Improvement District, told Crockett City Council the district raised its wholesale treated‑water rate from $2.10 to $2.18 per 1,000 gallons — a 4% increase that staff has included in the draft city budget. Rallo said the district has run operating losses in recent months and is carrying debt related to a $3.6 million bond that matures in 2038.

Rallo said the district recorded negative operating months totaling about $99,000 in the past nine months and that current charges still trail regional wholesale rates. "We're actually raising a lot less than what we need to raise them," Rallo said, adding that the district must act to meet bond and operating obligations.

Council and staff focused on two structural risks: falling wholesale demand because property owners and adjacent utilities are drilling private wells and commercial producers are taking water out of the basin, and uncertainty about whether the city's long‑standing contract with the district is legally enforceable. Rallo warned that more wells could lower the water table and undermine the viability of the treatment system over time.

City staff told council the FY24–25 draft operations budget includes the district's 4% increase but does not yet pass the charge to retail customers. Staff also said its legal review indicates the city's contract with the water district may require voter approval to be binding for a municipality in Texas, and that there is no public record of such a vote. "We're going to have to sit down at the table and renegotiate this," staff said, recommending council avoid acting hastily until the contract status is clarified.

Council members asked about contingency plans if the district's revenue falls short and whether the city could be left without an enforceable contract or a secure backup source of water. Staff and Rallo said both sides should pursue a long‑range plan together that accounts for debt service, changing demand, and infrastructure maintenance. Staff noted the draft budget reflects the district's rate increase for planning purposes but recommended renegotiation and public notice before any retail rate changes are implemented.

What happens next: the city included the district's wholesale increase in its budget projections but did not adopt retail charges for customers at this meeting. Staff was directed to work with the district and legal counsel to clarify the contract's enforceability and report back to council with options for renegotiation and contingency planning.