Amarillo officials warned an 8%‑a‑year revenue gap as consultants lay out plan for $1.5 billion wastewater plant

Chris Eert of New Gen Strategies and Solutions told the Amarillo City Council on April 14 that the city’s water and wastewater enterprise faces a substantial revenue shortfall over the next decade tied to a new wastewater treatment plant and wholesale water price increases.

“We are looking at about an 8.4% overall revenue increase every year from 2026 to 2036,” Eert said, summarizing New Gen’s revenue-sufficiency scenario that assumes the wastewater project and wholesale-supply cost escalation. The forecast folded in an industry planning estimate for a major wastewater treatment plant and anticipated cost increases from the Canadian River Municipal Water Authority (CRMWA/"Crimeo" in the presentation).

Why it matters: Amarillo’s utility is largely a fixed-cost business; lower customer volumes in dry years don’t reduce most operating and debt-service obligations. Council and staff said the plant is intended to ensure long-term treatment capacity and regulatory compliance but that funding it will require a multi‑year plan of rate adjustments and capital financing.

What New Gen recommended: Eert and staff recommended a staged approach rather than one large increase. He advised adopting smaller, predictable annual adjustments timed to the fiscal year (an October effective date was suggested) to limit rate shock. The consultant also asked Council to weigh policy choices — for example, the mix of increases between water (more billing units) and wastewater (fewer billing units but higher per‑unit cost) — and to set affordability and subsidy priorities before final rate design.

Debt and reserves: The report showed a material increase in anticipated debt service as the wastewater project debt comes online and said reserves could fall below targets unless rates are adjusted. New Gen used a 1.5x debt‑service coverage target recommended by the city’s financial advisor and warned that falling below it would harm Amarillo’s credit position and raise borrowing costs.

Wholesale water and assumptions: New Gen’s projection also included expected CRMWA supply-cost increases starting as early as 2027. The consultant said those wholesale increases and the wastewater project together drive most of the near‑term revenue need; staff said they would refine the estimate as engineering and funding decisions for the plant mature.

Council direction and next steps: Council members pressed for better cost details from engineering (30% design estimates were cited as the point where numbers will be much firmer) and asked staff to return with class‑allocation analyses (how the revenue need would be divided across residential, commercial and industrial customers). Staff committed to bring follow‑up presentations this summer that will include cost-of-service results, alternative rate designs, and affordability metrics.

A staff note emphasized that the draft revenue need in the presentation is not a final rate proposal and that actions to adopt new rates would be separate decisions in the coming months. The city also flagged possible revenue from an industrial agreement factored into the projection, but staff said those revenues remain subject to separate approvals and should not be treated as finalized when setting general rate policy.