Editor's note: Updated July 7 to clarify the rate increase schedule and correct the month Jones received City Council permission to negotiate the system purchase to April.

Hutto City Manager Odis Jones said he is hopeful the city will strike a deal to purchase the water system it uses from Heart of Texas Water Suppliers L.P.

Contracts signed with Hutto’s water suppliers, including Heart of Texas, expire decades from now.

When signed, city leaders said the contracts would accommodate Hutto’s growth at the turn of the century and anticipated growth in the next 50 years.

But the growth, Jones said, slowed in 2008, and the city has been charged for millions of gallons of water its residents and businesses can’t use.

Rates charged to Hutto have continued to increase. As a result, customer rates have continued to increase as well, with a 7 percent increase in June and another 7 percent scheduled for 2018.

These rate increase are in response to a water volume increase from teh Heart of Texas scheduled for August. These increases prompted Jones to look into the contract and ask City Council for the ability to negotiate buying the system to curb city costs.

In April, council gave Jones permission to negotiate and execute an agreement not to exceed $63 million. Jones said purchasing the system will help stabilize rates and help the city grow its infrastructure.

“We can control the growth and rate structure,” Jones said. “The residents need that. We have one of the worst water deals in the state. We inherited this situation, and we need to fix it.”

Hutto receives water from three sources, including the city of Taylor, Manville Water Supply Corp. and Heart of Texas. The city of Taylor sells Hutto a minimum of 175,000 gallons per day at $4.30 per 1,000 gallons up to 300,000 gallons. Anything over 300,000 gallons is charged at $6.45 per 1,000 gallons. Manville charges $3.50 per 1,000 gallons for the 500,000 gallons it sells Hutto daily. Anything over 500,000 is $4.20 per 1,000 gallons. Heart of Texas charges $3.91 per 1,000 gallons and bills for 62 million gallons per month.

However, consumption falls well below what the contracts call for. The biggest difference is the contract with Heart of Texas: City residents and businesses used 36.4 million gallons of water but were billed for 62 million gallons by Heart of Texas alone in May.

The daily average water usage in May was 1.18 million gallons. The range each day was between 346,000 gallons and 1.24 million gallons used. The city pays for 2.675 million gallons per day.

The contract, signed in 2004 when Hutto’s population was growing by 40 percent to 80 percent each year, was based on the growth staying consistent. Growth stalled in 2008, and residents have paid the difference since. Hutto renegotiated with Heart of Texas to lower the rate in 2006, but the contract lasts through 2054.

In April, Hutto Mayor Doug Gaul addressed water rates via a letter to residents and business owners.

“We are directing the city manager to negotiate and determine if we can purchase the water system,” Gaul said in the letter. “But if we cannot reach an agreement for the city to purchase the system,  then we as the City Council must direct the city manager and the city’s attorneys to bring whatever actions are necessary to reduce the water rates and get the city out of this contract that was executed in 2004. Because of this contract with Heart of Texas, it is hurting the city’s taxpayers now, and in the future, and is stifling the city’s ability to grow.”

“We have to do something now for our residents, and we have to position the city for the future and for the future of our children,” Jones said. “Wherever we end up here, we will be in a better position. I feel good about the negotiations. But these are big issues for us.”

Due diligence will continue, said Jones, who expects the city to close on a deal in the fall.