Megan Navarro
DRIPPING SPRINGS — Dripping Springs residents and commercial businesses can expect to see higher utility bills in a few months, following city council’s unanimous decision to approve wastewater and water adjustments at its Tuesday, May 19, meeting.
This is the first time that the rates have been adjusted since 2022 and the process to review them began in fiscal year 2025, when the city contracted with HDR to conduct a utility rate study, as previously reported by the News-Dispatch. Following a presentation by HDR in March, city council asked the rates to be further developed and reviewed — six scenarios were then presented to council May 7 before the proposed rates were voted on last week.
A combination of factors led to the urgency of adjusting rates, including rising operational expenses and construction costs, according to the city. Additionally, the city first applied for a permit through the Texas Commission on Environmental Quality in 2015 for a new wastewater treatment facility; however, that permit was delayed, due to legal challenges, and was not fully resolved until April 2025.
“During that same period, the water development board said, ‘We’re not going to allow you to do any construction on the project. You can still start planning it, but the construction phase, we’re going to hold off on until we get some resolution on that permit application,’” said deputy city administrator Shawn Cox during the May 19 council meeting.
The delays reduced the timing and collection of impact fees that would have otherwise helped offset infrastructure costs, so the city allocated approximately $2 million from the utility fund in FY 2026 to help cover debt service payments, while continuing to move forward with the project. The city also applied for $51.5 million in additional funding through the Texas Water Development Board.
City staff met with some council members and Planning & Zoning Commission chair Mim James — who has extensive background in finance — to review the rate model and look at different options, Cox explained.
In doing so, there were two scenarios put on the table.
The first scenario has a 30-day, or 8.3%, fund balance with a $2,500,000 general fund contribution through 2030. For FY 2026, wastewater base fee would be $43.32, along with a usage fee per 1,000 gallons of $5.67, for residential — the base would be the same for commercial, with a usage fee of $5.99, with differences based on living unit equivalents (LUE).
“Looking at the 2026 rates and average usage, you can see it’s going from $50 to $73, or about a $22 or $23 increase, to a $60 to $88, or about a $27 increase, on the residential side,” Cox explained.
The second scenario also has a 30-day fund balance, but with a $4,000,000 general fund contribution in FY 2026 and $2,500,000 through 2030. The wastewater base fee would be $40.43 with a usage fee of $5.35 for residential; the base would be the same for commercial, with a usage fee of $5.61, with differences based on LUE.
According to Cox, the city will be looking at this during the budget process, reviewing the expenditures and rates, seeing if changes need to be made based on what the model did. He anticipates doing another rate study within the next two or three years.
“We will look at that more on a regular basis to make sure that we are sustaining our rates to meet our needs and not having to do these giant increases at once, but if we can reduce when we can, [we are] taking that opportunity to present that to council, as well,” he said.
Council member Ana Grace Husted asked if city staff feels confident that the only way to get a clear picture on the numbers — actuals and revenues vs expenditures — is by doing a utility rate study.
“Without an influx of money or a stripping out of an expenditure, major expenditure somewhere, it's going to be the rate study to make sure our rates are covering what they're supposed to be covering for the division that they're supposed to be covering,” said Cox, adding that the model does a good job of anticipating the number of customers, usage, growth in expenditures and revenues, etc.
He continued that the city would be able to review the model every year to analyze if the rates are holding steady, as well as if it needs to look at going down or any potential errors.
Council member Taline Manassian questioned why an infusion of $4 million, in the second scenario, does not have as much of an impact as expected.
The city is not putting in all of the rates or money in the first year, so it is still buying down the fund balance, Cox explained.
“Even putting an extra $4 million in, you just start $4 million above. You're still not covering your expenditures with the rates yet … So, right now, in the model, we're at about 52% to 60% fund balance in reserve. We're still spending that down in all of these scenarios. Even though there's an influx of cash, it's being used in [fiscal years 2026, 2027, 2028 and 2029] and then that next year, in [20]29 is where you see that drop because that's when that major debt payment comes on,” he said. “We looked at any number of ways to spread that out and it just didn't bring the rates that much lower down.”
When figuring out the scenarios, council member Geoffrey Tahuahua said that he and council member Sherrie Parks — who was also part of the group who collaborated with city staff — looked at how the city can cover the debt payment at a minimum and “what the rates are doing is they're covering our operating expenses and kind of getting us through this sort of hump as that debt payment increases. So, it's really not until 2029 that we start to play a little bit more of a catch-up as opposed to working from behind.”
The city could potentially absorb a $4 million payment for one or two years, but it wasn’t “necessarily a sustainable model” when it came to the effect it would have on the overall budget, as compared to the $2.5 million option, Tahuahua continued.
Council voted 6-0 to approve the wastewater rate increase — based on the first scenario presented — with an expected increase of approximately $20-$30 per month for residential customers, depending on usage. There will also be a very slight increase in the water rates, but the more significant adjustment is to the wastewater.
To allow for the city to communicate the changes to the public across multiple billing cycles, the increase will be reflected when customers receive their bills in September.
To listen to the full presentation and find more information about wastewater services and the rate structure, visit www.cityofdrippingsprings.com.
