Magnolia officials testify before Senate committee regarding institutional water rates, Magnolia ISD says water costs increased $500,000

City Administrator Paul Mendes, Texas Pastor Council President Dave Welch and Magnolia ISD CFO Erich Morris testified in front of the Water and Rural Affairs Senate committee April 8.

City Administrator Paul Mendes, Texas Pastor Council President Dave Welch and Magnolia ISD CFO Erich Morris testified in front of the Water and Rural Affairs Senate committee April 8.

Leaders from Magnolia ISD, the city of Magnolia and the Texas Pastor Council testified before the Water and Rural Affairs committee in the Texas Senate on April 8 regarding Senate Bill 2322—a bill that would prohibit municipalities from charging tax-exempt entities higher utility rates than entities receiving comparable utility services.

SB 2322, filed by Sen. Brandon Creighton, R-The Woodlands, was filed March 8 in response to the city of Magnolia's recently implemented institutional water rate category. State Rep. Cecil Bell Jr., R-Magnolia, filed House Bill 4114 on March 7 regarding the same topic.

The city of Magnolia implemented an institutional user category for water and wastewater users last spring, which applies to tax-exempt, nonprofit or government entities, Community Impact Newspaper previously reported.

"Senate Bill 2322 ensures that no municipally-owned utility charges a higher rate to those receiving tax exemptions to recoup lost revenue as a result of the exemptions," Creighton said during the committee hearing. "These acts of [rate] discrimination essentially render the tax exemptions obsolete. To make sure these tax exemptions are true relief, we must ensure that those with the benefits currently are not targeted and discriminated against."

The creation of the institutional category—charged higher rates than commercial businesses with which institutions were previously grouped—has caused budgetary constraints in MISD, said Erich Morris, MISD assistant superintendent of operations, during the April 8 hearing.

The district saw its water costs increase nearly half a million dollars after the institutional rate was implemented, Morris said.

In fiscal year 2016-17—prior to the implementation of the institutional rate—the district spent about $180,000 on water and wastewater bills for its six campuses within city limits. Following the new rate, the district paid about $720,000 for the same bills, Morris said.

"What that means is we have to pull money from somewhere else [in the budget]...pulling money from our classrooms, [and] we were only able to give a 1.5% teacher pay raise, whereas a 1% raise costs the school district roughly $500,000," Morris said at the hearing. "So you see how that kind of comes into play."

During the committee hearing, Magnolia City Administrator Paul Mendes said the city of Magnolia opposes SB 2322 due to concerns that the bill would not allow the city to adopt a rate for a non-taxpaying customer to fairly apportion the cost of the utility system.

"Magnolia pays the expenses arising from the owning, operating and maintaining of its water and wastewater utility system from multiple sources, namely rate revenues and ad valorem taxes," Mendes said during the hearing. "The solution [that was] developed [involved] the creation of the [institutional] customer class for the utility customers who do not pay taxes to the city and who have atypical usage patterns compared to the other customers to offset their portion of the debt service payment."

Magnolia Mayor Todd Kana said at an April 9 City Council meeting that neither Creighton nor Bell spoke with him about the water rates before filing the legislation.

"I do find it odd that every legislation that was proposed, not a single one of those legislators ever contacted the city, myself or any administration with questions in regard to our water rates, which was disappointing," Kana said during the meeting.

SB 2322 was considered in a public hearing April 9 and remains in committee as of publication April 10. Testimony was taken April 9 on HB 4114 by the Natural Resources committee in the Texas House. The bill is pending in committee as of publication April 10.

Texas Pastor Council President David Welch—representing churches in the city of Magnolia—told the Senate committee the churches have never opposed increased rates; the opposition comes from the creation of a separate rate category charged higher rates.

"I'm pleased to see that Mr. [Paul] Mendes has clarified that [City Council] did in fact pass these higher discriminatory rates specifically on churches, schools and nonprofits to offset the sales tax and property tax exemption," Welch said during the hearing. "The city of Magnolia is growing [and] the churches are part of the community. We certainly support proper and good infrastructure growth in our water and sewer system, but the simple request we had to the city was to charge churches, schools and nonprofits the same that they do everybody else."

If approved, SB 2322 would take effect September 1, 2019.

"This [institutional rate category] is something that would literally neutralize the exempt status of nonprofit institutions, churches, schools and charities all across the state of Texas if this were to be replicated and multiplied," Welch said during the hearing. "We believe that it does require a legislative remedy and that churches, schools and nonprofits be placed back in commercial rates simply to be charged the same as anyone else for the same services."

View the committee hearing here.
By Kara McIntyre
Kara started with Community Impact Newspaper as the summer intern for the south Houston office in June 2018 after graduating with a bachelor's degree in mass communication from Midwestern State University in Wichita Falls, Texas. She became the reporter for north Houston's Tomball/Magnolia edition in September 2018, moving to Alpharetta in January 2020 after a promotion to be the editor of the Alpharetta/Milton edition, which is Community Impact's first market in Georgia.


MOST RECENT

Houston City Hall in rainbow lighting
Greater Houston LGBT Chamber of Commerce celebrates five years of service

The organization is open to all and serves members throughout the Greater Houston area.

Montgomery County is set to receive its largest first-dose allocation during the week of March 1. (Ali Linan/Community Impact Newspaper)
Montgomery County set to receive largest vaccine allocation yet in first week of March

Nearly 20,000 vaccine doses were allocated to the county's two vaccine hubs and several additional providers for the week of March 1.

A coronavirus vaccine is given at Memorial Hermann's mass vaccine clinic Feb. 26. (Andrew Christman/Community Impact Newspaper)
Memorial Hermann closes out 2nd round of vaccines with 7,000 distributed among 2 clinics

The clinic will continue operations through 5:30 p.m. Feb. 27.

The new Fort Bend Epicenter multipurpose facility could be used as a spot for trade shows and sporting events, could act as a large-scale shelter for county residents in an emergency and more. (Community Impact Newspaper staff)
Large multipurpose complex coming to Fort Bend County; Sugar Land to widen University Blvd. and more top Houston-area news

Read the top business and community news from the past week from the Houston area.

Snow covers I-45 in Houston during a winter storm that hit Texas the night of Feb. 14. (Shawn Arrajj/Community Impact Newspaper)
Legislators probe energy officials over power failures, lack of preparation heading into winter storm

The Texas Legislature held hearings Feb. 25 with energy companies including Oncor Electric Delivery and the Electric Reliability Council of Texas in response to last week’s historic winter storm, which left millions of Texans without electricity for days.

Large-format printing service provider SpeedPro Magnolia was named 2020 Business of the Year by the Greater Magnolia Parkway Chamber of Commerce. (Courtesy SpeedPro Magnolia)
Here's a roundup of the latest business news in Tomball, Magnolia

The Tomball and Magnolia area has seen a number of recent business openings in recent weeks.

Keith Luechtefeld spoke with Community Impact Newspaper about some of the short-term and long-term repercussions of the storm as well as some of the reasons why so many homes saw burst pipes during the freezing weather. (Community Impact staff)
Q&A: Greater Houston Builders Association President Keith Luechtefeld discusses power, plumbing, frozen pipes after Winter Storm Uri

Keith Luechtefeld spoke with Community Impact Newspaper about some of the short-term and long-term repercussions of the storm as well as some of the reasons why so many homes saw burst pipes during the freezing weather.

With the notice lifted, the city recommends residents to flush household pipes, ice makers and water fountains prior to use. (Courtesy Fotolia)
JUST IN: City of Magnolia boil water notice lifted as of 4 p.m. Feb. 25

City residents were put under a nine-day boil water notice after freezing temperatures and electricity outages caused the city's water plants to suffer a loss of water pressure.

Harris County ESD No. 11 commissioners met for a meeting Feb. 25. (Courtesy Cypress Creek EMS)
Harris County ESD No. 11 begins construction process on new facility

District offiicials have said they hope Phase 1 of construction will be complete by August.

Winter Storm Uri led to closures across the Greater Houston area during the third week of February. (Courtesy Metropolitan Transit Authority of Harris County)
‘It’s been a rough year for us’: Expert explains economic effects of winter storm, ongoing pandemic in Houston region

“It's been a rough year for us economically; it's been a rough year for us public health wise. It's just been a rough year for us psychologically—first the coronavirus and then the freeze," said Patrick Jankowski, senior vice president of research with the Greater Houston Partnership.

The $560 million central processor, which is part of the new Mickey Leland International Terminal, will replace the parking garage for terminals D and E. (Courtesy Houston Airport System)
Parking garage at George Bush Intercontinental Airport to be demolished to make way for new Mickey Leland International Terminal

The international central processor, which is part of the new Mickey Leland International Terminal, will replace the parking garage for terminals D and E.