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HomeMy WebLinkAbout(P1) Council_Open_Session_2025-09_23_v2 (2)© 2025 NEWGEN STRATEGIES AND SOLUTIONS, LLC WATER AND SEWER RATE STUDY RESULTS PRESENTATION TO THE CITY COUNCIL CITY OF PORT ARTHUR September 23, 2025 © 2025 NEWGEN STRATEGIES AND SOLUTIONS, LLC AGENDA Background and Objectives Affordability Definition Rate Recommendation 2 BACKGROUND AND OBJECTIVES 3 © 2025 NEWGEN STRATEGIES AND SOLUTIONS, LLC STUDY BACKGROUND 4 •The 2025 Utilities Fund did not have any funding for Planned Capital Improvement Projects or emergencies. •At the End of the year 2025, the Utilities Fund operating budget projection is an Operating Fund deficit of $5.5 million and Capital Fund deficit of $8.38 million. •The General Fund does not have the resources to subsidize the Utilities Enterprise Fund. •Since January 2025, the General Fund has provided $7.6 million in funding for the Utilities Department. •The Utilities Enterprise Fund is not be able to repay the General Fund any of the $7.6 million borrowed during the 2025 budget year. •The Attorney General filed a lawsuit against the City on February 20, 2025 regarding the operation of the City’s wastewater system. © 2025 NEWGEN STRATEGIES AND SOLUTIONS, LLC STUDY OBJECTIVES 5 The City engaged NewGen to develop a FY 2026 water and sewer rate recommendation that: •Accounts for inflation in both operating and capital costs of at least the most recent Consumer Price Index (CPI) of 5.3%. •Enables the City to address the capital needs of the Wastewater System. •Results in the meeting a minimum fund balance policy as quickly as reasonably possible. •Ensures that essential water and sewer service remains affordable to City customers to the greatest extent possible. AFFORDABILITY EVALUATION © 2025 NEWGEN STRATEGIES AND SOLUTIONS, LLC LOCAL AFFORDABILITY EVALUATION •“Essential Service” = 3,500 gal/ mo. ̶43 gallons per person per day for typical household •The Household Burden Indicator (HBI): “Basic service” cost as a percent of the Lowest Quintile Income (LQI), i.e., lowest 20% income bracket. •The Poverty Prevalence Indicator (PPI): Percentage of households at or below 200% of the Federal Poverty Level. 7 © 2025 NEWGEN STRATEGIES AND SOLUTIONS, LLC LOCAL AFFORDABILITY EVALUATION 8 HBI - Water and Sewer Service Cost as % of LQI >= 35%20% to 35%< 20% >= 10%Very High Burden High Burden Moderate-High Burden 7% to 10%High Burden Moderate-High Burden Moderate-Low Burden < 7%Moderate-High Burden Moderate-Low Burden Low Burden PPI - Percent of Households Below 200% of FPL •Because of Port Arthur’s PPI of 47%, any water and sewer rate results in a Moderate-High Burden on households at the lowest 20% of income. © 2025 NEWGEN STRATEGIES AND SOLUTIONS, LLC STATEWIDE BENCHMARKING •Average statewide residential bill for 5,000 gallons per month based on Texas Municipal League (TML) annual Water & Wastewater Rate Survey. ̶Exclusively from Texas cities that directly provide and bill for these services, excluding those served via municipal utility districts or private agreements •Under the FY 2026 recommended rates, how does a Port Arthur residential bill for 5,000 gallons per month compare to the statewide average residential bill? 9 FY 2026 RATE INCREASE RECOMMENDATION © 2025 NEWGEN STRATEGIES AND SOLUTIONS, LLC SUMMARY OF FY 2026 RATE INCREASE RECOMMENDATION FY 2026 Rate Increase FY 2026 New Debt (Existing Deficit + New Capital) Annual New Debt for Capital FY 2027 –FY 2035 Recommended FY 2027 Rate Increase 20.0%$18,380,000 $10,000,000 5.7% •The FY 2026 recommended rates: ̶Generate revenues sufficient to meet operating and capital expenses including annual CPI inflation of 5.3%. ̶Include $3.0 million per year for emergencies / contingencies. ̶Eliminate Operating Fund deficit of $5.50 million within three years. ̶Eliminate Capital Fund deficit of $8.38 million in FY 2026. ̶Assume Capital Fund deficit and all future capital is funded with new debt. 11 © 2025 NEWGEN STRATEGIES AND SOLUTIONS, LLC RECOMMENDED RATES 12 Essential Service –3,500 gallons / month Actual FY 2025 Recommended FY 2026 Recommended FY 2027 Monthly Water and Sewer Bill $74.37 $89.24 $94.33 $ Increase $3.94 $14.87 $5.09 % Increase 5.6%20.0%5.7% Local Affordability Evaluation Moderate-High Burden Moderate-High Burden Moderate-High Burden Statewide Average Bill $95.64 $100.71 $106.05 Port Arthur Bill $83.27 $99.92 $105.62 Over/ (Under) State Average ($)($12.37)($0.78)($0.43) Over/ (Under) State Average (%)(12.9%)(0.8%)(0.4%) Note: Statewide comparison based on 5,000 gal./mo. + 5% annual increases. THANK YOU ERIC CALLOCCHIA, PARTNER ECALLOCCHIA@NEWGENSTRATEGIES.NET