Talk of the Town Podcast
Talk of the Town Podcast with Kevin Cole and Cameron Cole, where we're about local stories, local leaders, and local impact.
Talk of the Town Podcast
Talk of the Town Podcast: Understanding Pearland’s Water Rates
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On this episode of the Talk of the Town Podcast, we take an in-depth look at Pearland’s water and wastewater rates, the major infrastructure investments driving those costs, and what they mean for residents today and in the years ahead.
Over the past six to eight years, the City of Pearland has constructed or is in the process of constructing—three major water and wastewater infrastructure facilities. We examine why these projects were necessary, how they are financed, and how those investments ultimately impact the rates residents pay for water and sewer services.
We also discuss a significant financial issue facing the City: the encouragement by Mayor Wiltz to add at least $28 million in additional debt to the Enterprise Fund. What could that mean for the city’s long-term financial position and for future water rates? We take a closer look at the potential consequences of continuing to defer costs and what “kicking the can down the road” could mean for taxpayers and ratepayers.
Water rates and utility billing can be complicated, but they affect every household and business in our community. Our goal in this episode is to break down the numbers, explain the decisions behind them, and help residents better understand how Pearland’s water system and billing process work.
This is an important conversation for every Pearland resident. We hope you’ll take the time to listen to the entire episode and come away with a better understanding of where your water bill comes from—and where it may be headed.
Why Water Billing Matters
SPEAKER_06So welcome to the next episode of the Talk of the Town Podcast, where we bring to you local leaders, local stories, and today local impact. I'm Cameron. This is Kevin. Even though it's very, very hot outside of the month of August, we're going to talk about a very wet subject today. We're going to talk about water billing inside the city of Parryland. Why are we getting those increases, the history of it all, voter-approved projects, and things of that nature? So today we're just going to dive right in because it is a lot of information. And what I want to say to you right now, listening to right now, don't just listen for a two or three-minute clip. This is a very intense and complex topic. And in order for you to and what we're trying to do is help educate. Right. And so please stick around for the whole episode. Please stick around for um uh go listen to council meetings. It's kind of hard to when you sit there listening for an hour or two about water, right? But so important. So go ahead and uh I'm gonna toss it over to you, and yeah, you go ahead and as we as we get into this.
SPEAKER_05Um let's keep in mind for just a second the critical nature that water represents. Correct. Uh, as human beings, we cannot live physically, we cannot live without air and water. Period. We can get by without a lot of things in our lives, but you cannot get by and live without air and water. So, and it and water has been in the news a tremendous amount right now. Yes. Go look at data centers, go look at the city of Corpus Christi. Right. Okay, and just Google Corpus Christi water and you'll see it. And literally, the folks in Corpus have been praying for a tropical storm so they can fill up their reservoirs.
SPEAKER_07Think about that.
SPEAKER_05Okay, because they haven't properly planned for projects to come online so they can have enough
Water Scarcity And Planning Pressure
SPEAKER_05water to survive. Okay. So as a city, way back, you know, many, many years ago, uh, the first old town site was a water district was created. In fact, uh, the Lions Club, the Pearling Alliance Club, helped establish the very first water system in Perlin. Okay, so it dates all the way back in those days. So fast forward, we've talked in some of our episodes about um about uh uh the uh growth that we've experienced as a city. And then so obviously, as you're a growing city, and it's it's you know, we're not uh telling anything that people don't know. Fast growth city. Pareland was one of the fastest growing growing cities in the nation uh for a time. And so that puts a stress and strain on water. We knew way back in the uh 80s and even 90s that the city of Parland was going to grow. We knew it was going to grow uh rapidly at some point. It grew faster than we thought, but we knew it was going to grow. So water has always been a subject that that city council and staff and the mayors had talked about over the years. I'm gonna give you some uh hindsight in talking about this because one of the criticisms is well, all of this is happening because there's been no planning. Well, just the opposite. There has been a tremendous amount of planning. What people don't like is the execution of it.
unknownCorrect.
SPEAKER_05At the end of the day, you've got to pay for critical infrastructure, or you don't have the water necessary. So let's I'm gonna talk some history about water, and then we'll go into uh the water billing and those types of things that we have. And I'll give you some history that I've been involved in. So go all the way back into the mid to late 90s, we knew that the city of Parliament was going to grow. And we knew at some point in time we needed to bring on water sources beyond just the wells that the city had. Remember, the mud districts, I think, you know, last month we talked about the, or last week we talked about the uh the mud districts, you know, two, three, and six. They have water wells that feed their uh water system, okay, as an example. And so the city of Paraland has groundwater. Uh groundwater, when I hear that, that's wells. When you hear surface water, that's coming out of a lake or a river or a stream, okay. So we knew we needed water for our future, okay. So Mayor Reed was a member of the Gulf Coast Water Authority board. Um, and there was a point in time, it was around 97 or 98, that uh some water rights were available. So City of Parland entered into an agreement with Gulf Coast Water Authority to purchase the rights. And it we I term it the rights to the rights.
Pearland’s Long Water Planning Timeline
SPEAKER_05We didn't purchase the water because we didn't have a place to put it, but we purchased the rights to get to the water.
SPEAKER_06Yeah, he's talking about that. Put up the slide 21. So, what I'm putting up there for you guys to see is the Gulf Coast Water Authority timeline. Oh, okay. Well, you're mentioning. Okay. So uh you're checking, you're checking me 98.
SPEAKER_05Checking, 98.
SPEAKER_06Which the discussion started in 97, but okay.
SPEAKER_05And uh, but but anyway, we we purchased the rights to the rights first 10 million gallons a day, 10 MGD, 10 million gallons a day uh from the American Canal uh at some point in the future. And and memory serves me, but it was about $95,000 a year to purchase, it was an insurance policy, really, to have that in our back pocket to go and do that. So fast forward, um, we purchased the second 10 billion. Uh, I was on council in I believe it was 07, 08 up here, 08 time frame. We purchased the the the next 10 million gallons a day, uh the rights to it from Gulf Coast Water for that gave us 20 million gallons a day. In the middle of all that, we actually uh purchased 10 million gallons a day and bought into the Southeast water plant in the city of Houston. We did that, I believe, in 06, 07 timeframe, and we are an actual equity owner. So a lot of people are saying, well, why are we getting water from Houston? Well, we're getting water from Houston because we actually own a piece of that plant. Yep. Okay, we're an equity owner in that plant. And I might add, we purchased all of that and our rights to it and our pro rata share of the cost of the plant for 10 million gallons a day, plus the pipeline to get it here was 40 million dollars. Now never forget the night we did that, that was the largest single purchase, single item that the city council had ever voted on, and $40 million. We're gonna talk in just a minute about the plant we constructed $175 million to deliver 10 million gallons a day. So that's the difference in time. So groundwater, surface water, excuse me, surface water is very expensive to bring in. It's very expensive to treat, uh, and then certainly the pipe. And so 40 million gallons. So our surface water that we are bringing in from the city of Houston in that particular area is the cheapest surface water we will ever have. Okay. And so we're not going to get rid of it because to replace it would be astronomical in cost. So along the way, when Shatter Creek was built, we have a take point uh from the city of Houston over there as well. It's called the take or pay system. We have to, we get, we pay for a 1.2 or 1.3 million gallons a day. Uh we can go up to, I think it's five or six million gallons a day. We just have to pay uh a surplus to go over the 1.2 or 1.3. Uh so we only use that in emergency situations or times that we just we have to have all of our water available. So that's kind of the history of where our water is gone. And then in 2010, all the way back in 2010, right before I left the council, uh, we actually purchased the site where our now surface water treatment plan sits. So we purchased that in 2010. So for people saying we just didn't plan 208, we've been talking about water for 25 plus years. Yeah. So in 98, again in 06, 07, again 08, 2010, these are all discussions and timelines and markers, knowing at some point in time we're going to build a plant. Okay. Um, when exactly, still depends on growth, still depends on when we need to bring that water online, but we knew we needed to bring that water online at some point in the future. And so uh we now have. So what is where our rate action is? What are the driving factors? Yes, the rate action. Yeah. So so when you when you see the rates that we've had over the last several years, um, those are driven by our capital cost in the plants. So what has the city constructed and done when it comes to plants? Because we have not only water, but we also have wastewater. So when you flush your toilet, that water goes somewhere, and we have a legal obligation to handle that in a certain way, right? So, and and there's some rules and regulations that even the city has to follow, because remember, we we have to operate under state guidelines and as well as federal guidelines in how we do a few things. So somewhere, so the city is in the middle of, or actually on the tail end of a little over $500 million capital investment program in plants. A hundred and I'm gonna talk about all three of them. They had $175 million uh surface water treatment plant that gives us 10 million gallons a day. We had a $75 million plant expansion for JHEC, which is on picture of our surface water.
SPEAKER_06But if you go to slide 40 and then 41, um there I'm just giving some pictures for those who are actually watching of the plants that you're you're talking of. So go ahead and keep going.
SPEAKER_05So if you're driving through town and and you see um uh you're you're on magnolia. Yeah, so go one slide before this one. Yep, there you go. Right there. There's J Heck. So that's J Heck. Uh it's John Hargrove Environmental Center for anybody that wants to know everything around it. John Hargrove was city engineer for many years and in fact spearheaded uh a lot of these projects way back when, like the original plant that was here, John was was very much in part of that. So we upgraded this plant. Um, and it it had to go through some rehab as well. It was uh 20 or so years old and had to go through some rehab. That project was $75 million. None of this is cheap. No, none of this is so.
SPEAKER_06So we we you bought you mentioned $175 for service water treatment plate.
SPEAKER_05Now another $775 further rec uh reclamation. So that's $250. Okay. And and on this particular plant, it's an existing plant, law says the law dictates and says once
Groundwater Vs Surface Water Costs
SPEAKER_05you are at 75% capacity, you have to start engineering for an expansion. You don't have to start the expansion, but you have to start the uh engineering for the expansion. Once you hit 90% capacity, you have to be under construction. Right. Okay. So that's out of our hands. That's the state dictating that. Okay.
SPEAKER_06And we do have a capacity history of JHEC. If you scroll just one more down to 42, slide 42. So this is the average flow in one more. So this is the permitted capacity of JHEC. So if you notice the the black line is the 75% capacity that you mentioned, the red line is the full capacity. So when you start hitting that black 75% capacity, that's when the state regulations kind of start kicking in. Um, so and in and if you guys, this is all on the city website. They have this for every single one of our our our our areas and and different plants. So you can actually see this isn't Peri Land City Council going, let's just build because we can build. Right. There's there's some thoughts behind it, there's some reasons behind it, there's some regulations behind it. There's lots of planning behind it. A lot of planning behind it.
SPEAKER_05And so go back one more slide, too. So it it it's also important to note, well, what what if we don't really need if I'm at 90%, I don't need to expand it. Right? I mean that somebody might ask that question. Well, if you are at capacity and it's full and it can't take anymore, do you think that's going to leave your house? So I want to flush my toilet, wheel of flush. No. Exactly. Okay. So you're gonna have a problem. And so when you look at policymakers, they want to make sure the trash gets picked up, they want to make sure that clean water is turned on, and they want to make sure that the toilet's flush. Okay. Very basic services that those get taken care of. And if they don't, you've got some real profits, okay? So then, well, the next project is Barry Rose and that expansion. So if you drive over massive, massive project. So if you go, and it's complicated, it is, and I'm gonna walk through it. But if you go over on Pearland Parkway at Berry Rose, you will see this massive plant under construction. So that plant is actually two plants in one. Okay. So you have the Berry Rose plant, which is along the creek, okay, and that plant is now 56, 57 years old. Okay. And if you go over and drive on Dixie Farm Road and you're going up into Harris County into Houston, as you get to Clear Creek, you have the Longwood plant uh right there on the east side of Dixie Farm Road, which is right on the creek. I mean, it's right on the creek. On the creek. And so this this whole project and everything got really exacerbated because of Longwood. So Longwood itself, when it was built, it is now 61 or 62 years old. So again, yeah, I I turned 62 in September. This thing was built basically when I was born. Okay. And it was in the not in the floodway, it was not in the creek, it wasn't, you know, none of that. But creeks move. Their banks move over time. And so we found out because of Harvey, that that plant is now in the flood way. What does that mean for everyone that when we say flood way, what does that mean? So under a 100-year event, which is the old number used to be 13, 14 inches over 24 hours. It's a little more than that now. Um, time period, that is a hundred-year event, then that plant goes underwater. So Harvey, four days of 50 inches of rain, right? The Longwood plant was under water, which means affluent and raw sewage were being released in the creek. Friendswood was not real happy.
SPEAKER_06Which for the record, I lived south of that creek. I just just thinking that just makes me kind of go a little ick.
SPEAKER_05But that's just besides the point at the moment. And you got three and a half feet of water in your house, you know, in that storm. So so that that it was moving that direction. So that obviously that is a raw sewage spill, which causes all kinds of TCEQ has to be notified, EPA has to be notified, and everything else. Well, naturally, the regulators, TCEQ and and and uh uh the feds, you gotta fix this. Yep. You gotta fix this. You're not gonna pick it up. There is no space to add on and move it because it's very, very constrained. So that project was combined to Barry Rose. So the project at Barry Rose is taking um is taking Longwood
The 500 Million Dollar Plant Buildout
SPEAKER_05offline. So the city is putting in a massive uh lift station. So the affluent that's going there now is going to Longwood. It will be picked up in a uh lift uh in a lift station and it's pumped back to uh in the route. So if you drive Paraland Parkway right now, and as you're getting close to Barry Rose, you'll see some construction along the roadway. That's the sewer line that's going to be coming from uh Longwood over to Berry Rose. At the same time, Berry Rose, again, very close to the creek. It's in the flood plain, not floodway, but it is a plant that is at 56 or 57 years of age. Both of these plants had basically outlived their useful life. Okay. So Longwood and Berry Rose are being replaced with what you see uh out there in front of the road. Now, I will say this if that ever goes underwater, you better call Noah and that cost of just the Berry Rose plant itself is $223 million, but the cost to decommission and do everything over at Longwood adds some cost to this. The total all in is about $260 million. So you add $175, $75, and $260, you're at $560 million in those three plans. So a lot of people wonder well, where does the money come from? How do we pay for this? To to build these plants. Right. They come from your water and sewer rates. Period. There are no property taxes in the water and sewer enterprise fund. Right. Okay. There's no uh property taxes in collecting your garbage. All of that is through direct fees to to you and your household. If you use more water, you pay more. If you use less water, you pay less. Garbage fees are are flat on on homeowners. And and so those are those are how that system works. Your property taxes are not in it. So knowing this, you know, council knew at some point in time we were gonna have to do the the water plant. It was coming. But like I said, it was coming. They bought the rights in 2010, as I mentioned. And well, we bought the site in 2010. And then and then fast forward 75%, 90%, you know you're gonna have to increase you know the the uh the JHEC project, and then Harvey hits, and you've got to do something because we entered into fact we asked the state and the feds, look, we've got these plants already in the works. Can we move this one to here? And it's called an agreed-upon order. So the city of Paraland has an agreed-upon order, an order, order, not a request, it is an order of the EPA and TCQ that thou shalt do something about this. And if not, you're gonna hit fines, you're gonna get fined. And be under a very strict clock to get it done. So the you know, the the regulators understood where and what we were doing.
SPEAKER_06Yeah, and so they said, Yeah, we'll they gave us the city some grace period. They gave us some time.
SPEAKER_05They gave us some time to do that. Because of the projects, but we can't not do it. Right. You you have to do it. So, so all of this is in the run-up of why these cost increases are drivers. And so um, you know, it it's very expensive. Uh, we modeled this out when I became mayor in 20 late 2020. Uh, we had a rate model that only showed three years, a projection of three years. A projection of three years. We actually have a rate model. What does it cost to add this stuff? What's the cost of debt? It is debt. We're adding debt to the water and sewer fund. What does that debt service look like? What does it cost? To operate and maintain these plants? What is the cost of people? Because if there's people in those plants that are running those plants, uh, and the like, right? So it is a it's an actual business model that shows what this is going to look like. Okay. And so one of the things that I asked for, I said, this stuff is further out. Can we do a five-year projection, not three-year projection? So what will be the reasoning for doing these projections then? So you understand where these rates are going. And part of the projections and part of the model also contemplates how much water we're selling. True. So if we have a drought year where we're selling more water, it actually helps your rates come down because you're selling more water. When you have a very wet year and you're not selling as much water, it can actually exacerbate your rates. Right. Okay.
SPEAKER_06That is uh, well, it'll late to no pun intended, but it's a fluid and and to your like to your point of planning, these five-year projections helps the city communicate to residents this is what's coming. Right. Start preparing now for what's coming next year in the the year before and year after, year after year after. Right. So uh just it's part of the planning that you mentioned beforehand, uh this notion that oh the city is not planning.
SPEAKER_05Yeah.
SPEAKER_06Make the difference.
SPEAKER_05Well, so let's talk about the um surface water treatment plant. Again, lots of plans in buying the rights, lots of plans in buying the site. And so when did this project actually start? Right. It went under um design phase in 1617. Okay, 2016-2017, and it went under construction in 2019. Yep. 2019. For the record, I became mayor in November of 2020. This was under construction when I became mayor. Okay. And so then, let's go to JHEC. The engineering, 75% forced engineering, started in about 2018 and went under construction in early 2020. Okay, during COVID. Uh, I actually remember uh some council members, excuse me, council meetings in both of these plants where we did some quote early works packages where we bought steel and those types of things early on so we can lock in cost. Because COVID was coming, it's here. You know, so um our engineers and our our our people to help us do these kind of things said we need to go and lock in rates, we need to go in and lock in some prices. So we did that to keep those plants from escalating in cost. If you go to Corpus, we mentioned that, you know, part of their problem down there is their their estimates on the plants to do keep moving drastically. They're not getting good costs on their plants. Our costs have been spot on from day one with inflation factors factored in. Obviously, delaying could cost more and does, but you also understand it's a target that's moving. And so you want to you want to do that. So JHEC went under construction in 2020. Design for Barry Rose, again, we needed to show the feds we were in design phase, started in 2020. Again, I'm gonna defend myself for just a second. Um, I became mayor in November of 2020. All three of these plants were in some form of moving forward construction phase and design phase before I was elected. Now, I say all that to say this. I didn't cry about it either. Okay, I didn't go out there and say, poor me, you know, while yes, we had to pay for this. What do you do? A leader steps up, takes on what is dealt with them, and deals with it. Right. Okay, we have to pay for these plants. If not, you're gonna default. And if you default on any of this, now your credit ratings are in the toilet pun intended, because that's what it is. Okay. And and so when we say credit ratings, just like you have a credit score at home. So anybody watching or anybody listening, you have a credit score. So if you go buy a car and finance it, if you go buy a house and finance it, they check your credit. Right. The city has a credit rating too, and all of this matters. In fact, we had a a credit rating hit a few years ago because of the size and scale of the capital improvements that were going on in our water and wastewater, and we had a person on council that demagogued it so mad that the rating agencies were not sure that we had the intestinal fortitude to do the rates necessary to make sure that the debt was paid. We got a downgrade for that. That person exited council and the credit rating went back to normal. Funny how that works. But rate increases matter, rates matter, history of our rates matter as well. Um, and so I'm not gonna sit here and and
Harvey, Floodways, And Sewer Overflows
SPEAKER_05criticize future counts or past councils. It would have been nice that the water plant probably started two years before. It would have streamlined some of this a little bit, but it is what it is, right? And so council stood up and did the right thing, charged the rates necessary. We run these enterprise funds. Uh, we try to run them at a at a net zero. Very tight. We have to have a certain amount of cash for bond coverage that's in our covenants when we sell bonds, and we have to have enough reserves in the event that we had things happen. In addition to that, there are things that go on with our existing plants. There's some rehab, there's you know, things that break, there's things that go on in these plants, and you have to be able to respond to it. So that's just the normal operations of plants, and then you're adding all this capital investment to it. But we've had some zero rate increases over the years as well. So let's talk a little bit about that.
SPEAKER_06Yeah, put up 70, slide 70 for us. So I'm gonna go ahead and read the the rates out loud just for those that are listening and can't be watching right now. Uh just kind of quickly give you an overview of what the rate increases that have looked like since 2009. Right. Uh so in FY29, there's a 13% increase in the water rates. And in FY10, 11%, 12, 13, and 14, there's all a 0% interest, uh, 0% um rate increase. Right. Now you mentioned in 2010, that's when you per that's when council purchased the site. So they knew this was eventually coming, but in 15, there was a 5% increase. And then 16 and 17, there were back-to-back 16% increases. And that was also roughly when some of these designs and construction and everything were starting were starting up. Makes sense why these are in the model or these are in the the history. 2018, another another 10%, 2019, 0%, uh, 2020 1.6%, and again, FY21, zero. And then the last five years has been when we've really kicked in and started trying to pay some of these debt because again, you mentioned these three projects were on the table come 2020. Right. We have to start making these debt payments, right? Well, we were issuing debt to pay the the construction costs, and then obviously debt payments while you're under so in 20 FY22, 5%, FY23, 13.1, FY24, 14%, FY25, 7%. The current year that we're sitting at was a 5.5%, but then the proposed um was 12%, which council is actually looking at moving that from 12 to 9.9%. Just under 10%. Yeah, just under 10%. So that is the historical data and the historical rate increases from 2009 to 2027.
SPEAKER_05And and this chart brings up some conversations that I've had uh with staff over the years and and had council all the way back uh the budget year of 2010, 11, 12, 30, all those years that you see 0%, had we knowing this was coming, uh proposed, say, a 3% across the board increase, earmark those dollars as cash, so we less less borrowing, you know, but cash, what happens to these rates? The spikes are still there, but they're greatly lowered, right? And so instead of a 16% in those two higher 16 and 17, you know, they they may have been uh around 10, 12, right? So lessen the blow instead of the 9.9 that we're dealing with, it could be somewhere around the six or seven. Right. And and so it would have had an effect out here. Now that's playing 2020. Hindsight's always 2020. It's in a perfect view. Council in the middle of these years also had a ramp up of other things that were going on in our city. And so I'm not I'm not gonna sit there and and say would have, should have, and could have. These were great people who are on this council that loved our community, but that could have lessened it. But we we have what we have, and so you're gonna get a 9.9% increase in your water and sewer rates this year because that's what's necessary to pay the debt service and maintain our plants. Without it, what do you run a risk of?
SPEAKER_06Right. So I saying that, I want to bring up a quick video. Um, it's gonna be um number two, the video number two, Byrum and staff first question. So council member Clint Byrum asked this question uh Monday night. Monday night, this past Monday night on the 27th, a week ago, or two weeks ago, excuse me. Uh, for those that are watching, this discussion is actually happening tonight again. Yep, per the calendar. So tune into tonight's council meeting as it will be on. But real quick, yeah, let's take a listen to this interaction between the Clint Byrum and the staff, and let me just get your thoughts after that.
SPEAKER_04Questions that I had related to our rates in general, um, there there are fixed drivers,
How Rates Pay Debt And Operations
SPEAKER_04and and you put them up there, slide 16, I think, is what showed some of these rates. And yeah, well, that would work, right? So, what happens for for the public to understand if we fail to meet our fund balance policies and we fail to meet our bond coverage ratio, what happens? And one thing that I think would be important for us to see as we have these conversations is there's a trade-off, right? If and and if we don't set these rates at the responsible levels, and I believe we should set our rates at the lowest responsible level possible, but if we don't set them at the appropriate levels, there's going to be an offset on the bond, the debt service side. Correct me if I'm wrong, staff. So, what does that look like? And I'll speak to that a little bit.
SPEAKER_00So it's a bit of an unknown, but we did talk to our financial advisor, and he's pretty confident in the downgrade. We assumed that that would be about half a percent on our future interest rate. And so we ran that as a model through 2061. What that additional interest would be and you know, through 2061 on our future plan debt issuances, that's about $28 million in additional interest. Payments just on the water and sewer side. Um, so that ranges between anywhere between $300,000 and over a million dollars annually that we estimate that that might cost us, you know, all other potential economic influences aside.
SPEAKER_04So there's there's a rate of diminishing return that comes in there at some point. If we if we artificially deflate the rate, then we're gonna have a potential credit down. I'm I'm summarizing to tell me if I'm thinking about this correctly. We'll have a potential credit down downgrade, which will result in a interest increase, and therefore our rates are gonna have to go up to cover the debt service side. Is that a fair summary?
SPEAKER_01Yes, that's a very fair summary. The other um equally worrying aspect to this is that any downgrade would likely impact all our debt, not just that service by the water and sewer fund. So we would see a consequential impact on the general fund as well, with increased debt costs there.
SPEAKER_06Fair enough. So let's summarize what he just said. So the lease, the least amount that the council could put together that's still fiscally responsible is that 9.9%.
SPEAKER_05So anything lower to that, much less a zero percent, could so so, real quick, what I was discussing earlier, there's a couple of drivers, uh, there is a bond coverage ratio, right? That's that's built in, and and we can't go below that. Okay, we can't go below that. We can stay above it, we can't go below it. We also have a reserve amount that if we go below the reserve amount, so both of those things, if we go below the bond coverage amount, it's detrimental. If we go below the reserve amount, that's detrimental. Going to a zero percent change, freezing the rate collapses both of those, which causes what you just heard Zap talk about.
SPEAKER_06Right. And so I mean both situations suck, right? Oh, okay, absolutely. So those that are watching, here's your here's your options. Putting yourself in council's shoes just for a moment while you're listening to this video. You either vote in favor of a 9.9% increase in wire, which they it's gonna be about $11 to $12 a month, or do you vote anything below that, much less a zero, which you just heard staff say it cost an interest payment alone a $28 million increase increase over time? Over time, it's $28 million more than you had. And that is zero economic drivers, that is zero anything else happening. That is just what I call the minimum right increase. Yeah, both scenarios suck, but one of them makes sense more than the other. Right. And there's another question that was brought up by member Byron uh with staff interaction. I'm gonna go ahead and play this one too. This is our second, the second clip. Um, because he further he goes on and talks about this even further. And I do think it's important for us to pay attention to this interaction as well.
SPEAKER_04Uh my other question was I understand that there, I mean, we all understand that there were decisions made prior to all of us being here that drove us to where we are today. If we had, if prior councils had not chosen to make these capital investments, what were the potential impacts? Like what can the TCEQ do as far as leveraging penalties against us if we're not meeting their standards?
SPEAKER_02So I I think maybe a good example is what Houston's dealt with many years, many times over, is that they've been under uh what's called an agreed order with TCEQ, which forces has you know forced them into spending now, they're larger than us, but spending billions of dollars in their water and wastewater systems um for not meeting uh you know some of the TCEQ requirements, not having the capacity, not addressing overflows and things like that.
SPEAKER_04Does the TCEQ have the ability to fine us if we don't meet these their requirements?
SPEAKER_02They can they can fine us and then uh you know force us to go into uh an agreed order which we would agree to spend you know basically the money that we are have already planned for and manage to to make sure we don't run afoul of the TCEQ, we'd just go into a mandatory agreement with them where we'd have to spend those dollars um anyway.
SPEAKER_06So there it is right there. If you have to do these projects, it's it's either now or mandated later.
SPEAKER_05And and again, the Barry Rose and Longwood is an agreed-upon order because of what happened at Longwood and the overflow and being in the flood way. And again, capitalized, could you imagine if if these projects had all been literally stacked on top of each other, yeah, what your rates would have been? I mean, you would have been having 30 and 40 percent rate increases the last several years as opposed to what we have. And so the city council and the and the decisions to do them back to back to back was right, um, but exacerbated by the whole um Barry Rose Longwood redo exacerbated the whole thing because of what happened.
SPEAKER_06Is there a of these two scenarios? What's the in your mind physically responsible?
SPEAKER_05Well, the the so a policymaker damaging the city, if you go to a zero percent or you go below 9.9, you're putting the city's credit rating in jeopardy, which means bonding for roads, bonding for water, wastewater, and bonding for drainage. Remember, we have projects that are in the queue that voters have approved, it's going to cost more, which in turn on that side of the house impacts your property taxes. So the the proper thing to do is you got to thread this needle, you've got to stand up and do the 9.9. You have to. Uh, that's the responsible thing to do. And then the fact that they're having this conversation, credit agencies watch this conversation. They're watching the stability of the council. They're watching the stability of the council, and they're watching the stability of the
Rate History And The Cost Of Delay
SPEAKER_05city in the midst of this.
SPEAKER_06Well, and and uh and and I'm gonna play one more clip for us today. So the responsible thing to do is to unfortunately is the 9.9 percent. And you said it earlier, no one wants to pay more. Yeah, I don't want to pay more. You don't want to pay more. I feel the burden just like everybody else. Uh video number five. Um, so this is our uh mayor Quentin Ziltz, and he this is what he said.
SPEAKER_03So I know I don't technically have a vote, but um it's been passed that uh are said that we're looking at a 9.9 increase as opposed to the staff recommended 12 percent. Um I would urge my colleagues to really consider holding rates given the nature of where we are in our society. Um it's as if nothing has happened in the past three to four years outside of how we're operating. Uh, we just had major uh federal legislation in the big beautiful bill, where now uh taxpayers, especially those, many of them in our communities who are having children go off to college, have more burdens uh in what they have to pay versus student loans and debt. Insurance rates are going up. These are added bills for all of our residents. Um I I really understand how important it is uh for us to maintain our debt rating. However, I think this is just a delayed uh keep it on that slide, by the way. Thank you. It it would this is just what we're experiencing are the delayed effects of how and why we arrived at this particular situation uh with our enterprise fund and uh the assets and the different debt and the structure that we've taken on.
SPEAKER_06This is all on record. This people can go back and watch the meeting in its entirety. Um, I don't want to get stuck replaying the vid all the video here. People can go back and watch it, but he just mentioned those two videos that he even though he doesn't get a vote, encourage council to stay at zero, hold the rate, and then not to not to play up the credit downgrade as much is what I heard. So we mentioned earlier today that and staff has mentioned it, that if we were to hold the line, anything less than 9.9 will result, not if, but will result in a minimum of a $28 million increase in interest. So while it's great right now, great, zero percent inter uh uh zero percent rate. So what happens if we go zero next year? I like back to back years? Yeah, exactly. No, no, if you go zero this year, oh it what happens next year? So back up the video to about the Five second mark and just freeze it for us. Yeah, right there. And just freeze it. So right there, kick the can. Staff even put zero. Staff put a three percent. Let's do a modest three percent. What would it look like next year? 22.1.
SPEAKER_05So anybody that's watching, you see this FI27, 28.
SPEAKER_06So we're looking at the top right corner? Right. Okay. Yeah. So this is what it would look like if we were to kick the can this year. If we were to kick the can this year and do a modest three percent, that means next year we're looking at a 22.1% and over time cumulative a higher rate increase than what we're doing, what council gave consensus at 9.9. Right. I I again, I'm gonna say it again. Not there are two scenarios and not the two greatest scenarios, but you have one that we can actually live with, kicking the can further down the road. And he actually mentions that in in this meeting, if you go back and look at it, he mentions that we're here because of some delaying by previous councils. Well, what is he just proposed?
SPEAKER_05Delaying it's delaying more. So, yeah, so the responsible thing to do is you gotta body, which means again, everyone out there, the buying power continues to go down. We get it, everyone gets that. But it's even worse if you go to zero, it's even worse out here, and so I would rather deal with the known
Council Tradeoffs, Credit Ratings, And 9.9
SPEAKER_05than an unknown. There is more unknown coming, there is a a system breakdown at a plant, there is something that sits out here, right? I would rather deal with what we know than what the unknown is, right?
SPEAKER_06So we so today was just some educational purposes. We have been talking about you've been talking about water billing for years, long time, guys. Tonight there's a council meeting. If you can't be there, just watch it, just be informed. Um, they there this is just gonna we're gonna keep talking about water billing. You're gonna keep talking about it for the next five years, even more so.
SPEAKER_05So let me end it on a good note. Yeah, let me end it on a positive note that these plants are almost complete.
SPEAKER_06Correct.
SPEAKER_05Uh the Berry Rose plant over there is probably 18 months away from from completion, okay, which means that's the large capital intensive nature is almost over. Yep. Which means these large increases are almost over. Okay. You're still gonna have some some small increases along the way because you, I mean, things continue to go up, but these large increases are almost done. So hold hold tight. It's getting better. And I will say this the city of Pearland in the grand scheme of the Houston metro area and the greater state is probably uh one of the best places that has planned its future, planned its water and sewer systems. In fact, there are cities in our area that do not know where they're going to get future water and they haven't even planned it yet. Right. And so that is going to be incredibly detrimental. It's going to be incredibly expensive for them. We have locked in our sources. We can still add 10 million, 10 million gallons a day to the surface water treatment plant. We planned upfront cost in what we've just completed so we don't have to double what we do when we add the next 10. So we already got some capital costs covered at the last few years cost versus future year cost. Okay. That's forward thinking, forward planning. There are cities in our area that this is going to be an absolute fiscal killer.
SPEAKER_06To our cities to the south of us, the Alvin, the Mamble, the Alva Colony areas. And in every city's city is different. You got we, I'm not here blaming anyone in those areas, uh, but water is just going to become more and more expensive. And like you said, Peri Land set up for their future. There's other cities that are growing rapidly. Mamble and Alva Colony are the in my mind the two at the forefront. Yeah. That when the time is coming for them to expand their water. Uh, and and I say that I don't, and people say our water is expensive, our base rates actually already cheaper than Alvin and Mamble. And again, that is, I am not throwing one city under the bus. That's just where they're at right now. Right. And yes, we're paying for it, but I can see us uh see us by tears from now going, wow, city was actually planning and actually thought about it at tell you.
SPEAKER_05Yeah, days gonna come where people look back and say, man, Parliament did something right with their water and sewer. We also have three different sources for our water. True. Uh very few cities across the state had that and have the resiliency to build into not resiliency, but the redundancy uh built into their system. So if we do have a problem in Houston, we cut it off and have our own have our own water to do. So very, very important. We we we told you this was going to be a very difficult subject to get through. It's very complicated. Uh, I wish it was as easy as turning on your water is there, but it's not. Uh it takes a lot of time and effort and a lot of things to get water to you, and it takes a lot of things to get the wastewater out and and gone and treated, and and being proper and responsible with that. So thank you for indulging us uh with this. It's very difficult. Council's got some difficult decisions in front of them. It would help if you self-educate on some of this issue that understand where they are.
SPEAKER_06Yes, and that's and I'll we want to hear from you guys. We want to hear from you guys watching uh wherever you're because again, I'll I'm gonna I said it a couple of times already. Put yourself in council's shoes. Yeah.
SPEAKER_05And and I'll say this and the last thing we'll say, we'll close this out. Um what Mayor Wilts is is is saying is from his heart. Hold line, freeze the ray, zero percent, every single member of council that is in their heart. It's in my heart. I don't want to, I don't want to see an increase on anybody. But it's irresponsible if you know the outcome of that and you do it anyway. And so so I would just I and I get where he's at. I don't want to be hypercritical of it, but that that's an that's an irresponsible statement. In fact, credit rating ratings agencies watching that clip and seeing the leader of your city make that statement, that alone could could cause negative downgrade. Yeah.
SPEAKER_06So so more to come on water building, pay attention to count your council, pay attention to your mayor, be be educated on this issue. Ask us questions if you see us out in the public because and you've got the knowledge of it as well. But uh, we're we're actually going to stay true to our word and move away from parent land city politics. We have a special guest for you guys coming up next week. I hope you guys tune in. But that was our episode today for the Talk of Town Podcast, where we brought you today local impact. Next time we'll bring you a local leader. So stay tuned. Have a good one.