For the first time in 15 years, Austin Water Utility will not be increasing its rates. On Aug. 9, Austin Water presented its $614.8 million Fiscal Year 2017-18 budget proposal to the Water and Wastewater Commission for approval.
Joseph Gonzales, the utility budget and finance manager at Austin Water, began on a high note when he informed commissioners that there would be no rate increases in 2018, and he managed to sustain the positive pitch by delivering a list of favorable changes for Austin residents who use city water. Gonzales explained that although the average water bill is only 1.4 percent of average median household income, he expected to see a decrease to 1.35 percent. This will happen even though the current cost of water will stay at 15 cents per 1,000 gallons. That’s because the average bill is not going to grow as fast as median household income is growing, he said.
He did acknowledge that this news didn’t address the utility’s most vulnerable customers.
To help some low-income customers, the department presented a renewed Customer Assistance Program solution. With approximately 17,000 estimated participants, this program will help economically disadvantaged households by waiving the monthly water meter charge, wastewater customer charge and tiered fixed fee. The water and wastewater rates will also be discounted in accordance with the volume used.
Austin Water has been able to readdress the needs of this customer demographic because it has successfully refinanced its debt, bringing it down to $205.1 million from $240.5 million. The department accomplished this by “refinancing much in the same way you might refinance your home loan to take advantage of lower interest rates,” said Gonzales. Had they not done so, Austin Water would have needed $60 million in additional revenue to service the same percentage of debt.
This $35.4 million reduction in arrears, coupled with the additional $41.5 million in surplus revenue for 2017, leaves Austin Water in a position to bring down debt service requirements overall, and minimize the impact of debt on our rain structure, according to Gonzales. Furthermore, Gonzales said, “These savings have allowed us to have zero wastewater service (charge) increase.”
Overall, Gonzales summarized the funds saying, “We’ve got a strong ending balance going forward.”
Due to the status of Austin Water’s debt service requirements, the department decided to increase expenditures on infrastructure. Currently, the five-year spending plan is $885 million. In the FY 2018 proposed budget, this number increased to $890.4 million.
Commissioner Nhat Ho noted that although the expenditures were going up, the allotment for capital improvement projects in 2018 was reduced. Referring to a budget plan he reviewed in August last year he said, “Capital improvement projects this year was $204 million, it seems like it’s a drop (in this proposal) to $184.8 million.”
“Projects get moved around,” Gonzales responded. He indicated that some of the money was moved to a larger wastewater plant expansion that will begin in the mid-2020s.
Additionally, to help finance upcoming improvement projects, Austin Water staff proposed a Revenue Stability Reserve Fund. In response to this fund proposal, Chair William Moriarty asked, “Have you thought about taking out an insurance policy on this? Instead of collecting $50 million to sit in the bank, it might be a lot cheaper.”
Gonzales explained the reserve fund would help “service our debt service requirement with minimizing the impact on our rate services.”
Despite the savings in the last fiscal year and the resulting stability of usage rates for customers, Gonzales said that Austin Water is still unable to increase its fixed fee structure so that the department’s revenue is stable. This leaves profit susceptible to changes in water usage by the customer base, which can be severely affected during drought periods. However, it is still in the plan to increase the fixed fee percentage to 25 percent. “Perhaps FY 2019,” he said.
There will also be 15 new full-time positions to be filled at Austin Water in 2018.
At the conclusion of the presentation, Moriarty praised staff saying, “This was an excellent presentation. I’ve sat through very many over the years and this was great.”
The commission voted unanimously to approve the Austin Water FY 18 budget for $614.8 million.
Photo: [Public domain], via Wikimedia Commons.
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Austin Water Utility: AWU is the municipal utility that provides water service for the City of Austin.
City of Austin Water and Wastewater Commission: Austin City Council advisory body; charged with oversight of "the policies and resources relating to the Water and Wastewater Utility of the City of Austin."
