Water rate update: City Council supports 'smooth' increases

Michael Hutchins
Herald Democrat
Consultant Dan Jackson speaks before the Sherman City Council Monday night on proposed increases to the city's water and sewer rates.

Proposed increases to the Sherman water and sewer rates could cost residential customers. The update comes as a part of ongoing budget talks by City Council members and staff as they prepare the budget for the next fiscal year.

Under the proposed changes, residential customers who use 6,000 gallons of water each month could see their average monthly cost increase by $12.71. These funds will be used to offset nearly $95 million of investment in water and sewer infrastructure and increasing costs of water production that are being seen across the country.

"Water and wastewater rates are as much a social and community decision as it is a financial decision," Wildan consulting firm representative Dan Jackson said during Monday's meeting of the City Council. "You set policies and goals for the city of Sherman. The water rates that you implement are nothing more than a means to achieve those goals."

The topic of water and sewer rates was recently discussed last month during lengthy talks as a part of the city's annual budget retreat. Prior to the retreat, city staff noted that an increase in rates loomed on the horizon to help balance the city's utility fund.

Jackson started his discussion by commending the city for maintaining what are some of the lowest rates in the region despite maintaining and investing in the city's system. Some cities are able to maintain lower-than-average rates due to little to to investment in the system.

"I couldn't find a city that has a rate lower than yours," he said. "That is how competitive the city of Sherman's water and sewer rates are."

The city of Sherman's rate has remained unchanged since 2017. Meanwhile, other cities in the metroplex have increased their price by five to six percent each year, Jackson said.

Jackson's answer to balancing the city's utility cost is to roll out a series of gradual rate increases over the course of five years. Jackson noted that several factors, including expected growth, could affect the rate and potentially offset some of the proposed increases.

The city currently has about 20,000 active water accounts, but current projections call for the city to have more than 26,000 by 2030. These new customers could lower the later impact of any rate increases.

Jackson proposed two potential rate plans for the city to consider when adopting a new rate. The first scenario front loaded the majority of the increase into the first three years and gradually reduced the increase in the final two years. Under this plan, the average residential customer who uses 6,000 gallons of water would see their cost increase increase from 61.37 to 76.81 by 2025.

The second scenario smooths out the rollout of the rate changes, with rates increasing between 4.2 percent and 4.7 percent each year.

Jackson said he prefers the first scenario as it secures the fund and also avoids the pitfalls that come with having to do one major increase when a need arises.

"My personal opinion is it is better to increase rates sooner rather than later to ensure the financial integrity of the utility," he said.

"Ratepayers don't like surprises and they don't like big increases," he added.

Council Member Shawn  Teamann voiced his preference to delay any increases for 2021 as the city's production costs are not anticipated to increase this year. However, council member Sandra Melton cautioned that this line of thought is what led the city to the problems they face now, while advocating for the smooth rollout.

"That's what happened to us up to this point already," she said, noting that the council had similar talks in 2020. "We've said in the past — no rate increase — and then we end up hurting ourselves and we will hurt the next council."

Meanwhile, Council Member Josh Stevenson noted recent events that have highlighted the needs of a healthy water and sewer system. He voiced support for the first scenario, highlighting that it is the one supported by Jackson.

While Monday's discussion was not scheduled as an action item, the council held an informal vote in order to give direction to staff on which scenario to pursue. When put to a vote, the majority of the council voted in favor of the smooth rollout, setting the stage for it to be adopted formally later this year.