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The city is considering significant increases to its water rates to shore up the finances of the Combined Utility System, a major piece of Houston's $4 billion budget that is used to pay for drainage projects, rehabilitate water and sewer lines and protect the water supply.
The increase could be spread over several years or applied all at once. Under the latter option, one estimate suggested as much as a 14 percent rate hike would be necessary to sustain the system and the infrastructure projects it pays for. That would equate to about a $3-a-month increase for the average residential water user.
Officials cautioned that no proposals are on the table and discussions about solutions are preliminary. Still, the issue has emerged as one of the earliest challenges in Mayor Annise Parker's administration.
“Council members are going to have to make some hard choices,” Parker said. “This is a problem that's been out there for a very long time.”
The city's water/sewer system was on the brink of insolvency shortly after Mayor Bill White took office in 2004. City Council refinanced its debt and set in motion automated increases based on inflation and, last year, population growth. Those increases no longer are adequate to keep pace with the upkeep of the system and the infrastructure projects the city needs to mitigate flooding, city officials said.
Parker said the decision about rate increases will revolve around how many capital improvement projects City Council members decide the city needs. A council committee and a group of transition advisers separately are working on the question of how to fund drainage and flooding projects.
The system also has struggled because the cost of chemicals and power needed to provide water to the city's 2.2 million residents has outpaced inflation. In addition, Houstonians have not used nearly as much water as was originally projected.
White, who was weighing the need for a hike before he left office and hired a consulting firm to look for ways to cut costs, said there is a “need for action” in the system.
The city, he said, may need to consider charging for water in the same manner that natural gas and electric utilities charge for those commodities, including a fixed charge to cover debt and a variable charge based on usage.
“I believe that kind of rate-making needs to be considered for water to plan for a day when your water does not go up every year with the population growth,” White said.
Another possibility that could lessen the need for water rate hikes would be to institute a drainage fee dedicated to infrastructure projects that could reduce flooding throughout the city. City Council rejected that idea during former Mayor Lee Brown's administration.
Several council members said that while a specific solution has yet to be ironed out, they believe the city has little choice but to confront the problem.
“The ultimate goal is to provide a sustainable water service for the community,” said Councilman Ed Gonzalez. “It's one of the primary functions of city government. The system has been strained over the years. ... At this point I think we have to be open to everything.”
Others said they would oppose any increases.
“Our economy is now sagging terribly down,” Councilman C.O. Bradford said. He added that he opposed any increases in taxes, fees or rates, “particularly when we haven't had a healthy, productive broad discussion about reducing spending. ... We must start with reducing spending and looking at core services.”
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