Heart of Texas Water Suppliers will sell its water system to the city for $59 million, a move officials said will stabilize water rates for customers. City Manager Odis Jones was authorized to negotiate for the system with a maximum price of $63 million.
“This will mitigate the rate increases that were scheduled,” said Walter Kulakowski, managing director of public finance for Mesirow Financial, which teamed with the city to structure the deal. “We have been negotiating since January and this is a huge victory for the city.”
Although Hutto only uses 800,000 gallons of water per day, it is currently charged for 2 million gallons. By the end of August, the city’s contract called for the city to be charged for 3 million gallons per day from Heart of Texas. The city also buys smaller amounts of water from the city of Taylor and Manville Water Supply Corp.
“You’ll take ownership of the system and stabilize rates for the community for the foreseeable future,” Kulakowski said.
Jones said purchasing the water system rids the city of a bad contract and allows the city to grow and lower the rate over time as more customers come online to the system.
“That’s a big deal for the city,” Jones said. “You control your destiny. For a growing town, water is liquid gold.”
Earlier this week, Jones announced an agreement to stop a water increase from 2 million gallons per day to 3 million gallons per day. The increase in volume, and therefore the rate increase to customers, was put on hold as negotiations continued.
“Years ago when this contract was negotiated, under the take or pay provisions, a one-third increase in water volume was set to hit the city and then its residents in August,” Jones said. “Yesterday’s problem had become today’s reality, and would prove limiting to Hutto’s ability to grow economically.”
The contract, signed in 2004, was affected by slowed growth in 2008. Residents, officials said, have paid for the difference since, with the contract in place until 2054, until the purchase is finalized. The deal will save the city millions of dollars, Jones said.
“It’s good for the community,” he said. "It allows us to move forward."
Jones will now wrap up the purchase after City Council’s 7-0 approval. More information regarding the issuance of bonds will follow during September meetings.