The city of San Marcos is planning 5 percent and 1 percent rate increases for customers of the city’s water and wastewater services, respectively, in fiscal year 2015-16.

During a meeting July 27 to discuss next year’s budget, City Finance Director Heather Hurlburt said the city planned small rate increases to account for upcoming expenses related to the Hays Caldwell Public Utility Agency, which plans to pipe water from Gonzales and Caldwell counties to high-growth areas along the I-35 corridor, including San Marcos, Kyle and Buda.

In 2016 the city will fund $4.5 million of the first phase of the HCPUA project—a pipeline between Kyle and Buda—which will allow the two cities to share water.

According to Hurlburt’s presentation, the monthly water bill for the average city customer will be $66.33. The average monthly residential bill for a customer who uses 3,000 gallons of water each year will increase $1.74. For customers who use 6,000 gallons of water each month, the bill would increase $2.36.

Tom Taggart, executive director of public services, said the pipeline between Kyle and Buda will allow the city of San Marcos to sell water directly to Buda, which anticipates a water shortage as soon as 2017.

HCPUA Executive Director Graham Moore said the agency is having discussions with landowners about right of way acquisition for the pipeline, which will generally follow FM 1626 between Kyle and Buda. The project is on target to be completed by 2017, Moore said.

As a short-term solution, the agency is also working with the Guadalupe-Blanco River Authority to allow San Marcos, Kyle and Buda to share water using the GBRA pipeline along I-35. That water-sharing agreement could be in place by the end of August, Moore said.

“The HCPUA pipeline will be more advantageous for Buda in terms of where their growth is and where they could use some of that water,” Moore said. “Having both pipelines available to them would be helpful to Buda.”

The city of San Marcos plans to fund the $4.5 million investment using cash, rather than debt, Hurlburt said. Assistant City Manager Steve Parker said the city stands to save almost $1.7 million in interest payments and debt issuance costs by cash-funding the project.

“This project we do feel we will receive future revenues from, but by cash-funding this we are not applying this debt service to our current customers,” Hurlburt said. “We’ll be able to cash-fund this and be able to recoup some of those costs in the next few years whenever we start the transfer of water with Kyle and Buda.”