Consultant: water and wastewater costs set to push Heath rates sharply higher; council weighs tier, seasonal or budget-based options
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Summary
A Willdan consultant told the Heath City Council that rising wholesale and interceptor costs — and a proposed $72 million bond for wells and storage — would require substantial near-term water rate increases; council debated tier differentials, seasonal surcharges and water-budget models and asked staff for more modeling before deciding.
Jason Gray, vice president of Willdan Financial Services, told the Heath City Council’s special budget workshop that rising wholesale and capital costs mean water and wastewater rates for many U.S. communities are increasing rapidly and could “essentially triple” over 15 years according to industry forecasts.
Gray said the city of Heath currently recovers the cost of service but faces significant upward pressure from two sources: projected increases from wholesale providers (Rockwall/North Texas Municipal Water District) and large capital needs, including a proposed water-bridge capital program. He walked council through the components of current charges — a residential water base charge of $33.49 with 2,000 gallons included and tiered volume rates — and explained how wholesale water and Buffalo Creek interceptor costs are expected to rise steeply through 2030.
Under a scenario tied to a proposed $72 million bond to fund six wells, elevated and ground storage tanks, Gray’s preliminary model showed a roughly 25% water-rate increase in year one, followed by additional increases in years two and three and much smaller adjustments thereafter. He presented an illustrative typical residential combined bill of $236.13 today that would rise to about $283.11 under year-one changes and could approach $450 over a multi-year path in one modeled plan.
Council members and staff focused discussion on how to design rates to both fund capital and change peak-season behavior. Gray described three common approaches: (1) widening tier differentials (charging progressively more for very high users year-round), (2) seasonal or drought-contingent surcharges (higher rates during peak months or declared stages), and (3) water budgets that set an annual or monthly allowance and levy steep penalties above it. He noted trade-offs: more aggressive structures can send stronger price signals but increase administrative complexity and revenue uncertainty.
Council members pressed staff on practical issues — whether the billing system can toggle schedules, how fast markets and construction costs are rising, and what portion of next year’s increase is driven by debt service for the water-bridge bond versus wholesale cost increases. Council direction: modify tier differentials first as a lower-administration step, monitor results and consider seasonal or contingency charges if behavior and peak-day usage do not decline. Staff and Willdan agreed to return with more granular modeling showing per-well unit costs (including O&M and replacement assumptions) and alternative phasing or bond-structure scenarios for council review before final rate decisions.
The next procedural step for rate-setting is tied to the budget calendar: if council moves forward with rate changes in the FY26 budget, staff said new rates could be implemented Oct. 1 with the budget adoption process that includes a proposed-rate setting meeting on Aug. 11, public hearings on Sept. 9 and final adoption targeted for Sept. 23.
Why this matters: Heath’s water system is residential-heavy (about 93% of water use is residential in the consultant’s test year) and a relatively small portion of high users account for a large share of peak demand. Council members repeatedly framed the choice as balancing the need to fund multi-million-dollar capital and rising wholesale charges with protecting most households from disproportionate bill impacts.
