A new water rate study could trigger a rate increase later this year for Tyler Water Utilities customers who remain under mandatory water restrictions.
Tyler officials plan to launch a new study that examines what customers pay for their water usage as compared to the future costs of doing business in a state hammered by drought and wildfires.
The estimated $35,000 study would be conducted by J. Stowe & Co., a company versed in weighing available resources with projected customer needs.
“Tyler Water Utilities, about every four years, does a rate study,” Public Works Director Greg Morgan said. “We’ve been doing them since about 1995-96.”
Studies enable the city to evaluate when, and if, increases are needed and schedule adjustments incrementally over time, as opposed to a sudden, double-digit increase, Morgan said.
Results also reveal whether the city maintains enough revenue on hand to address future needs, officials said.
As it stands, services provided by Tyler Water Utilities are funded by revenue generated from the water and sanitary sewer service.
Customer rates are based on the amount of water sold and wastewater treated, officials said.
But Tyler water customers remain on notice to cut back on their water usage, potentially reducing city coffers along with the usage.
The city imposed mandatory water restrictions last month after receiving word from the Texas Commission on Environmental Quality that the agency was issuing a call for some of its water rights.
Tyler officials plan next week to meet with the commission and discuss the order, which would require the city to artificially lower Lake Tyler, Lake Tyler East and Bellwood Lake to November drought levels and send the water to communities located near the Texas gulf coast.
Utilities financial manager James C. Yanker said in a prepared report for the council that local customers pay among the lowest rates in the state.
“Based on data compiled by the Texas Municipal League in 2011, when compared to the largest participating 65 cities … Tyler ranks as the fourth lowest combined water rates in the state,” he said.
Rates must be periodically reviewed to ensure there is adequate revenue for operations, debt services and capital reserve.
The last increase went into effect Oct. 1, 2010 when the city imposed a 6 percent increase.
With much of Texas still mired in drought, the lieutenant governor is creating a committee to examine ramifications of a continued drought and wildfires, Yanker said.
Consequently, Tyler city leaders are preparing to deal with new measures that could be imposed at the state level, starting with the study.
“A new rate study is necessary at this time to not only ensure that adequate revenue is generated, but to also be proactive in anticipation of conservation regulations which may be promulgated in the near future,” Yanker said.
J. Stowe & Co. director Darrell Cline said the company plans to create new conservation rates and a five-year forecast for Tyler that includes revenues requirements, operating expenses and customer demands, according to records obtained by the city.
Morgan said utilities are being encouraged to implement water conservation rates, based on an inclining block rate so the more a customer uses, the more they pay.
But Tyler’s rates are just the opposite.
“Tyler Water Utilities historically had a declining block rate, so we asked the consultant to create an inclining rate,” Morgan said.
Revenue projections are based on historic use, dating back at least 10 years.
Neighboring East Texas communities report varying rates for residential service, according to a 2011 survey conducted by the Texas Municipal League.
Residential service in Tyler costs $18.02 per 5,000 gallons used, $32.42 for 10,000; in Longview, it’s $16.47 per 5,000 gallons, $27.97 for 10,000; Whitehouse, $45.61 for 5,000 gallons, $70.81 for 10,000 gallons, the survey shows.
In Jacksonville, residential rates are $20.81 for 5,000 gallons, $32.56 for 10,000; Kilgore, $21.60 for 5,000 gallons, $36.35 for 10,000; Mineola, $35.86 for 5,000 gallons, $62.26 for 10,000 gallons: Canton, $30.81 for 5,000, $55.06 for 10,000 gallons; Chandler, $24.50 for 5,000 gallons, $40.50 for 10,000 gallons, according to the survey.
Other reported numbers include Winona, $27 for 5,000 gallons, $42 for 10,000; Brownsboro, $28 for 5,000 gallons, $43 for 10,000; Frankston, $29.50 for 5,000 gallons, $52 for 10,000; Big Sandy, $25.25 for 5,000 gallons, $39 for 10,000; Hawkins, $26.75 for 5,000, $43 for 10,000; Troup, $23.81 for 5,000 gallons, $38.72 for 10,000; and Van, $24 for 5,000 gallons, $39.75 for 10,000 gallons.
Morgan said typical rate hikes for Tyler Water Utilities customers average about 6 percent and typically are implemented at the beginning of the new fiscal year.
An end-of-year increase is not imminent, but it’s possible, depending in the results of the study, Morgan said.
“We’re starting the study now to analyze our needs and develop a plan,” Morgan said. “If there needs to be a rate increase, we want to be in the position to implement it on Oct. 1. There will not be any rate increase prior to Oct. 1.”
Officials predict the study will take three or four months to complete.