For the 10th year in a row, the North Texas Municipal Water District has increased the water rates that it charges its member cities.

The NTMWD, a nonprofit wholesale water provider, is increasing its rates almost 10.5 percent, or 24 cents per 1,000 gallons. The rate will increase from $2.29 per 1,000 gallons to $2.53 per 1,000 gallons for fiscal year 2016-17.

Frisco’s proposed $439-million budget includes a 5-percent increase in the water rate and a 2.5-percent increase in the sewer rate.

According to NTMWD projections, rates are projected to increase 29 cents per 1,000 gallons again late next year and an additional 28 cents in FY 2018-19. Rates are projected to continue to increase until at least 2034, when the projected water rate is $4.26 per 1,000 gallons.

District challenges

NTMWD public relations manager Janet Rummel said three factors drive water rate increases: costs associated with rehabilitation and replacement of aging infrastructure, complying with strict state and federal regulation requirements and finding additional water supplies to support the district’s rapidly growing service area.

The population in the NTMWD’s service area in 2015 was 1.6 million.  The district is projecting a population of 2.5 million residents by 2040 and 3.7 million people by 2070.

Since 2006, the district has spent nearly $1.05 billion in supplementing existing supplies, complying with mandated regulations and working to develop additional water sources. Rummel said these projects are the primary reason for increases to its wholesale water rate.

“Adequate funding through rates is required to cover increasing fixed costs and repay bonds for capital projects,” Rummel said. “From 1993 to 2001, NTMWD held water rates flat while the population in our communities grew by more than a quarter million people. With the continued significant growth projected, NTMWD could no longer wait to invest in new [water] supplies and infrastructure.”

In addition, the high population growth projection in the district—particularly in Collin County—requires the water district to work ahead now to supply water for the future, she said.

Rummel said the NTMWD is closely monitoring major developments in its service area, including the $5 Billion Mile in Frisco.

Since 2006, the district has been working on land acquisition and permitting in Fannin County for the Lower Bois d’Arc Creek Reservoir, which is expected to supply the district’s water needs through 2040. The district has already spent more than $125 million, and the total cost of the project is projected at $1.2 billion.

A national problem

According to a 2014 American Water Works Association study, water rates have been increasing steadily across the country for the past two decades. The AWWA polled water utilities across the U.S. and found rates increased on average at least 12 percent from 2008-14.

“If a utility has been putting off rate increases or implementing very small ones, it likely has some catching up to do to keep its infrastructure sound and to comply with regulations,” said Tommy Holmes, the legislative director for the AWWA.

He said he thinks there are some “reality checks” taking place at many utilities across the country about the cost of providing water. In addition, many are working toward correcting water rates that have been too low.

“I think in the coming years we are going to see lots of utilities striving toward full-cost pricing—the true cost [of water],” Holmes said.

He said the South and Southwest U.S., in particular, have struggled to keep up with water demands because of a growing population and drought. Increasing rates are also caused by the need to replace aging infrastructure.

Holmes said the AWWA has been campaigning for a decade to get policymakers and the public to better understand the need to reinvest in water infrastructure.

He said the AWWA knows there is a need for low-cost capital for utilities to be able to do large-scale projects, such as major infrastructure work or new water supplies.

The AWWA, along with other organizations, worked to get the Water Infrastructure Finance Innovation Act past Congress in 2014, Holmes said. WIFIA will allow utilities or municipalities to apply for low-interest federal loans for drinking water, wastewater or stormwater projects. Projects that qualify for WIFIA funds must be at least $20 million, he said.

Holmes said the Environmental Protection Agency has spent the past two years putting together the program administration.

The EPA is developing application documents, and the AWWA expects a formal application process to be unveiled soon, Holmes said.