Ashley Kontnier
BUDA — During its second budget meeting of the year, held Thursday, July 23, Buda City Council heard a presentation on proposed water and wastewater rate increases for fiscal year (FY) 2027 and received an update on the 43.6% rate hike for staff health insurance premiums.
Grady Reed, financial analyst for HDR Engineering, began by providing backgrounds for both water and wastewater.
For water, he explained that revenue is planned for an “average” year, which accounts for residential use of 6,500 gallons of water per month, although this can be higher in hot, dry years.
Water expenses for FY 2027 are expected to total $8.4 million. However, looking ahead, they are projected to increase to $10.4 million in FY 2031, due primarily to anticipated capital improvement plan (CIP) projects.
According to agenda documents, the largest increase in the CIP projects comes from the Public Works & Parks facility expansion, which are estimated at $2.5 million and $13 million for FY 2030 and FY 2031, respectively.
With the expected rise in expenses, Reed recommended a 6% across the board rate increase for water services. For 7,500 gallons of use, customers would pay an additional $4.46 per month.
Future large CIP projects are also on the horizon for wastewater, with expenses projected to increase from $9.2 million in FY 2027 to $11.3 million in FY 2031. Although, according to Reed, the fund has reserves above the required amount, he still recommends a 4% rate increase for wastewater. For 5,000 gallons of use, customers would pay an additional $2.74 per month.
“I am always asked, ‘Well, if we're above the current reserves, then why are we doing any rate increases?’ And the answer is, there's two things kind of at play here. One, you don't want to draw the reserves down too fast because then, whenever you hit your reserve target, you're going to be facing a really large rate increase in that year or those couple of years to try to stop that momentum and that's kind of painful to your customers,” Reed explained. “Most customers, while they may not like rate increases, I think it's generally a better idea to try to do some rate increases every year, in a more controlled manner, than maybe to skip it for a couple of years and then, you’re facing a 15% or 20% rate increase to try to catch up.”
The analyst also said that there could be some potential larger expenses that go beyond the five-year planning period that are not shown, such as an additional water supply the city may need, so by FY 2031, it might be good to carry a little more fund balance than the currently required three-month reserves.
Closing out his presentation, Reed compared the residential and commercial proposed rates to various surrounding cities. This showed that the residential rates remain less than Pflugerville, Liberty Hill, Taylor, Hutto and Kyle, while being higher than San Marcos, Georgetown and Leander.
The commercial rates remain lower than Hutto, Kyle and Pflugerville, while being higher than Liberty Hill, San Marcos, Taylor, Georgetown and Leander.
Additionally, the city has been looking at health insurance costs for staff members, after receiving notice that the current rate plan would be increasing by $659,363.88 to a total of more than $2.1 million for the upcoming fiscal year.
Currently, for the base health plan, the city contributes 100% of the employee’s premium and 72% of the premium for spouses and dependents.
During the meeting, council was presented with various cost-saving options, which include adding a high-deductible health plan, with a health savings account, to the options for employees who may be interested and/or decreasing the city’s contribution for spouses and dependents.
There were no votes on any items covered at the meeting; everything will be brought back to council as a part of the full proposed budget, which will be posted on the city’s website Aug. 7 and presented to council Aug. 13.
There will be a public hearing on the budget Sept. 1 and a public hearing on the tax rate Sept. 15.
Buda City Council will meet next Tuesday, Aug. 4.
