Keene staff warn water and sewer funds face $1.4M shortfall; failing meters and higher electricity cited

Finance staff told the council that the utility fund — which covers water and sewer operations — is not projected to generate enough revenue to cover expenses under current assumptions and that staff is modeling responses.

“Water sewer, as it is, we are not making enough revenue to cover our expenses by 1 form $1,400,000,” Finance Director Lam said, summarizing the shortfall and calling out major drivers: increased electricity costs (an encore rate increase staff estimated would add roughly $411,000 in annual cost), sewer CIP items totaling about $608,000, and historic unbilled water linked to meters that went offline. City staff traced the revenue declines to widespread smart-meter register and battery failures dating back to when the water tower and antennas were out of service; those failures produced an apparent drop in billed usage even as the city grew.

Staff described programmatic next steps: pursue a TWDB (Texas Water Development Board) grant for water-loss mitigation that could fully reimburse the meter-replacement line (about $51,500 in the current CIP), prioritize legally obligated projects such as the canyon sewer-line work and the belt-press replacement, and consider using enterprise reserves for unavoidable capital items. Council discussed options including deferring the ambulance CIP, keeping a planned 3% personnel increase, or using reserves to smooth the budget while pursuing grants.

Utilities staff also noted that meter reads and production are tracked daily (the Harmony system) and that replacing blind meters should restore billed usage and revenue over time. Staff asked the council for policy direction on prioritization while modeling remained underway.