State agency approves doubling water fees on local water connections

Water system meter (KXAN Photo)
Water system meter (KXAN Photo)

AUSTIN (KXAN) – The Texas Commission on Environmental Quality has predicted a $2.5 million shortfall in its main water program account, and the agency has approved doubling a local water utility connection fee to compensate for the shortage.

The proposed fee change has concerned leaders of several major water utilities, including Austin Water. In letters to TCEQ, water utility officials say increasing this fee will ultimately hit residents and businesses. The fee funds TCEQ’s Water Resource Management Account, which essentially pays for all the agency’s water-program related activities, according to state records.

“The agency does a lot of good,” said Greg Yturralde, TCEQ director of financial administration. “We need to have the revenues to come in to support the programs.”

The shortfall is due to diminishing state appropriations and escalating costs of TCEQ employee benefits, including fringe benefits such as retirement expenses. TCEQ expects it can bridge the $2.5 million deficit by increasing the so-called Public Health Service Fee, which taxes each individual water connection operated by a utility. Large utilities with more than 160 connections will pay the bulk of the fee increase. Those larger utilities currently pay $2.15 per connection; TCEQ will increase that fee by 15 percent in the next fiscal year, and the agency has approval to nearly double the fee to $4 in the future. Smaller utilities, which currently pay a flat rate of $100 or $175, depending on their size, will see an increase of $25 in fiscal year 2017, with a potentially higher fee in the future. You can see a cost breakdown of the fee increase for each utility tier at the bottom of this page.

Some water utility leaders blasted the rule change in public comments submitted to the TCEQ.

“This fee is nothing more than a ‘state tax increase’ on municipal water customers.” — John Carman, water director, City of Fort Worth

“This fee is nothing more than a ‘state tax increase’ on municipal water customers,” said John Carman, water director with the City of Fort Worth Water Department, in a letter to the TCEQ.

The fee will be passed along to utility ratepayers, who are “already overburdened with government-imposed taxes and fees,” Carman added.

Plano Mayor Harry LaRosiliere called the fee increase an “unfunded mandate” that would increase utility rates for residents and businesses, according to a letter sent to TCEQ.

Austin Water Utility Director Greg Meszaros said TCEQ’s water programs are vital, but the agency should move away from assessing specific fees to fund the water program account.

Yturralde said the water program account balance has not had enough state funding to keep up with rising employment costs.

“It has not been as drastic, but we’ve maintained a consistent decline in the fund balance in that account to where we don’t have sufficient funding to operate our water programs,” Yturralde told KXAN by phone. “It is a combination of we have additional costs hitting the account, such as our benefits are going up, additional costs are being applied to us for retirement and retiree costs.”

In fiscal year 2016, the Legislature appropriated $56.1 million for the TCEQ’s Water Resource Management Account. That funding decreases to $55.8 million in fiscal year 2017, according to HB 1.

While TCEQ has approved the rule change to double the fee, the agency only expects to increase the fees upward by 15 percent in 2017, and the agency will adjust the fee upward as necessary to meet future needs.

TCEQ has created a three-tiered structure for the fee, based on a utility’s number of connections.

  • Tier 1. Utilities with fewer than 25 connections — fee increases to $200 from $100 ($125 in first year)
  • Tier 2. Utilities with 26 to 160 connections — fee increases to $300 from $175 ($200 in first year)
  • Tier 3. Utilities with 160 connections or more — fee increases to $4 per connection from $2.15 ($2.45 in first year)

In the state’s last appropriations bill, lawmakers proposed TCEQ make up for any shortfall in the account balance by increasing the Water Quality Fee or Public Health Service Fee.

The fee increase will hit more than 6,900 entities throughout the state, each entity will see an increase from $25 – $300,000, depending on its size, according to a TCEQ report filed with the Secretary of State.

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