The gist
The study shows that major issues will arise if the city maintains its current rates. These include:
- Not recovering revenue requirements as early as FY 2024-25
- Base charge revenues for water being lower than the utility’s fixed cost of service as early as FY 2024-25
- The city’s days of cash on-hand reserves dropping below 120 days as early as FY 2025-26
Additionally, the study projects that an increase in rates is needed to achieve fixed-cost coverage targets in FY 2027-28.
If the city does nothing and keeps the insufficient rates it currently has, then Georgetown will miss its financial metric goals on all fronts, Matthew Garrett, Georgetown’s NewGen management rate consultant, said.
To ease these issues and allow for continued growth, the study suggests changing the city’s rate design and increasing the top-tier differential for residential customers. Customers in tier 3 use on average approximately 15,001-25,000 gallons of water monthly, while tier 4 customers use 25,001 or more a month.
Currently, the city’s rate design has an increase from the third tier to the fourth tier of 75%, the proposal would have that go up to a 100% differential. So effectively the fourth tier would pay double that of the third tier, Garrett said.
The study also recommends combining the two tiers of irrigation customers into one group.
Georgetown uses a two-tier rate design for irrigation customers, but combining these rates would eliminate the preferential rate for the first tier, Garrett said. Instead, the city would have a blended rate, which is effectively the residential third and fourth tiers.
Georgetown Mayor Pro Tem Kevin Pitts spoke in favor of the adjustments.
“The concept of the rate tier structure was to try to make it where those who are using a higher amount of water aren’t just paying more, they’re paying a higher proportion of the water. Many who are using a large amount of water—100,000 gallons a month—don’t care what the price is, they just want green grass. And trying to lower the cost for those users who are not causing the demand would be nice to see, for example, domestic customers who use 7,000 gallons of water or less,” Pitts said.
The background
The presentation was delivered by Garrett, with Georgetown Chief Financial Officer Leigh Wallace and Georgetown Water Utilities Director Chelsea Solomon in attendance to assist with any questions the city council may have.
According to city documents, this presentation is a follow-up of an original draft that was presented in February 2024, which proposed two scenarios for water rates.
By the numbers
Rate Design Adjustments
- 0-7,000 gallons of water, Current: N/A, Proposed: N/A,
- 7,001-15,000 gallons of water, Current: 50%, Proposed: 50%
- 15,001-25,000 gallons of water, Current: 50%, Proposed: 50%
- 25,001+ gallons of water, Current: 75%, Proposed 100%
Rate Design Adjustments cost comparison per gallon
- 0-7,000 gallons of water, current rate: $2.30 per gallon, rate with differential change: $2.30, rate with 11.75% increase: $2.55
- 7,001-15,000 gallons of water, current: $3.45 per gallon, rate with differential change: $3.45, with 11.75% increase: $3.85
- 15,001-25,000 gallons of water, current rate: $6.05 per gallon, rate with differential change: $6.05, rate with 11.75% increase: $6.75
- 25,001+ gallons of water, current rate: $10.60 per gallon, rate with differential change: $12.10, rate with 11.75% increase: $13.50
Also of note
In this latest update, city officials and NewGen consultants adjusted assumptions for projected water line growth in FY 2024-25, where, previously, officials assumed a lower number of new water lines, Garrett said during the presentation. According to city documents, sewer line growth assumptions grew by a small amount for FY 2024-25, while assumptions were reduced or unchanged in the following years.
What else?
The study also projects a continued need for additional staff.
“[City officials] still have an assumption of a need for additional employees every year because it’s a fast-growing utility with a lot of operational needs. The study projects a need for twenty-plus new employees each year,” Garrett said.
Stay tuned
Proposed action timeline:
- First reading on Aug. 27
- Second reading on Sept. 10
- Effective implementation date on Oct. 1