The city of McKinney is concerned that a possible Public Utility Commission of Texas ruling could lead to a change in the North Texas Municipal Water District’s nearly 30-year-old water contract with its member cities—and cost the city more money when new infrastructure is needed as the city moves toward build-out.
Since 1988, McKinney and 12 other member cities have abided by an NTMWD contract that requires them to pay for the same amount of water each year based on the highest amount of water they used in any single year in the past, regardless of whether they ever use that much water again—a structure district officials say is necessary to pay for fixed costs, infrastructure, future projects and more.
Although most of the member cities have balked at steadily increasing water rates from the NTMWD, meetings last year with the member cities to discuss amending the contract did not result in any changes because the cities could not come to a consensus about how the contract should be changed, according to Janet Rummel, public relations manager for the NTMWD.
In December, the four largest contributing member cities—Plano, Garland, Mesquite and Richardson—challenged the contract by asking the PUCT to decide whether the contract is fair to all its member cities.
Cities such as McKinney that still have a significant amount of development left before build-out are concerned that major changes to the contract could cost them more money in the long run.
“Also complicating the issue is that to modify the [contract] requires unanimous approval by all member cities, yet all member cities are not in the same place from a growth standpoint,” McKinney Mayor Brian Loughmiller said.
Loughmiller said he wants a fair resolution, especially for cities such as McKinney that paid the current rate structure that supplied infrastructure and capital improvements for member cities that are now built out.
Other water district member cities include Allen, Frisco, Farmersville, Forney, Princeton, Rockwall, Wylie and Royse City.
The NTMWD provides water and wastewater management services to the more than 1.6 million people in the 10-county service area, and an additional 2.1 million people are projected to live in the area by 2070.
PUCT process
PUCT spokesperson Terry Hadley said consumer groups occasionally petition the PUCT regarding water utility rates.
“If a settlement among parties cannot be reached and the petition meets legal requirements, an evidentiary hearing can be held to be followed by a PUC decision by the three commissioners,” Hadley said. “The next milestone in this case is for the North Texas Municipal Water District to file a pleading responding to the petition no later than Feb. 6.”
Rummel said the NTMWD is open to continuing contract discussions while the request is being considered by the PUCT.
She said there is no way to know if the PUCT will conduct the requested review or what it may recommend.
Rummel said any reduction in one city’s share of the system costs would result in increases to the other cities’ share to maintain and operate the system.
'Outdated' water rate alleged
More established cities closer to build-out, such as Plano, use roughly 60 percent of the water they purchase on a monthly basis. In contrast, growing cities such as McKinney use about 80-90 percent of the water purchased or may set new annual highest-usage marks each year,
officials said.
“The majority of the wholesale water rate covers fixed costs—or costs that must be paid regardless of the amount of water used, such as debt repayment, maintenance, regulatory requirements and construction of new projects,” Rummel said.
Rummel said cities that use less water than they purchase receive a rebate for costs not incurred for treatment and delivery, such as chemicals and power. Since 1990, rebates have totaled nearly $92 million for these variable costs.
However, the cities of Plano, Richardson, Garland and Mesquite said NTMWD contract is discriminatory, does not take water conservation into account and is not in the public interest. Plano officials said the four cities have paid $178 million for water they did not use.
“We are losing tens of millions of dollars at the expense of our taxpayers because the North Texas Municipal Water District’s current rate methodology is outdated and does not incentivize water conservation,” Plano City Manager Bruce D. Glasscock said in a statement released shortly after the PUCT filing.
Possible Impact on growing cities
The city of McKinney, which has a current population of about 168,000, is expected to grow to 284,000 by 2040 with a build-out projection of 357,000 people.
Loughmiller said the original concept of the NTMWD contract was to factor in fast growth as a component for water usage and cost of infrastructure.
“Now there is an issue of fairness for those cities which see that they don't have the same infrastructure needs while [less built-out] cities are still in the development growth stage,” Loughmiller said.
He said the major capital improvement projects needed throughout the district must factor into future contract decisions.
“One city alone cannot assume the debt service for these types of capital expenditures, which is why a regional water district was formed to begin with,” Loughmiller said. “This will continue to be an issue for all of our cities as we look for a resolution that will take into consideration the needs of our member cities who are at differing points in their development cycle.”
Since 1988, McKinney and 12 other member cities have abided by an NTMWD contract that requires them to pay for the same amount of water each year based on the highest amount of water they used in any single year in the past, regardless of whether they ever use that much water again—a structure district officials say is necessary to pay for fixed costs, infrastructure, future projects and more.
Although most of the member cities have balked at steadily increasing water rates from the NTMWD, meetings last year with the member cities to discuss amending the contract did not result in any changes because the cities could not come to a consensus about how the contract should be changed, according to Janet Rummel, public relations manager for the NTMWD.
In December, the four largest contributing member cities—Plano, Garland, Mesquite and Richardson—challenged the contract by asking the PUCT to decide whether the contract is fair to all its member cities.
Cities such as McKinney that still have a significant amount of development left before build-out are concerned that major changes to the contract could cost them more money in the long run.
“Also complicating the issue is that to modify the [contract] requires unanimous approval by all member cities, yet all member cities are not in the same place from a growth standpoint,” McKinney Mayor Brian Loughmiller said.
Loughmiller said he wants a fair resolution, especially for cities such as McKinney that paid the current rate structure that supplied infrastructure and capital improvements for member cities that are now built out.
Other water district member cities include Allen, Frisco, Farmersville, Forney, Princeton, Rockwall, Wylie and Royse City.
The NTMWD provides water and wastewater management services to the more than 1.6 million people in the 10-county service area, and an additional 2.1 million people are projected to live in the area by 2070.
PUCT spokesperson Terry Hadley said consumer groups occasionally petition the PUCT regarding water utility rates.
“If a settlement among parties cannot be reached and the petition meets legal requirements, an evidentiary hearing can be held to be followed by a PUC decision by the three commissioners,” Hadley said. “The next milestone in this case is for the North Texas Municipal Water District to file a pleading responding to the petition no later than Feb. 6.”
Rummel said the NTMWD is open to continuing contract discussions while the request is being considered by the PUCT.
She said there is no way to know if the PUCT will conduct the requested review or what it may recommend.
Rummel said any reduction in one city’s share of the system costs would result in increases to the other cities’ share to maintain and operate the system.
“The majority of the wholesale water rate covers fixed costs—or costs that must be paid regardless of the amount of water used, such as debt repayment, maintenance, regulatory requirements and construction of new projects,” Rummel said.
Rummel said cities that use less water than they purchase receive a rebate for costs not incurred for treatment and delivery, such as chemicals and power. Since 1990, rebates have totaled nearly $92 million for these variable costs.
However, the cities of Plano, Richardson, Garland and Mesquite said NTMWD contract is discriminatory, does not take water conservation into account and is not in the public interest. Plano officials said the four cities have paid $178 million for water they did not use.
“We are losing tens of millions of dollars at the expense of our taxpayers because the North Texas Municipal Water District’s current rate methodology is outdated and does not incentivize water conservation,” Plano City Manager Bruce D. Glasscock said in a statement released shortly after the PUCT filing.
