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San Antonio Water System officials say they are planning on seeking a lower rate increase in 2020 than the nearly 10 percent originally approved by City Council to pay for the Vista Ridge pipeline project, though they have not said how much lower.
Gavino Ramos, SAWS’ vice president of communications and external affairs, made the statement about a smaller rate hike in 2020 in response to questions from the Rivard Report following a key vote by SAWS’ Capital Improvements Advisory Committee, which recommends impact fees charged to developers. Impact fees are meant to ensure that existing SAWS customers don’t solely bear the burden of expanding the system to make room for more people.
The committee, made up predominantly of professionals in the real estate and development industry, generally meets every five years to reassess SAWS’ impact fees and make recommendations. The recommendations it approved in a Feb. 13 vote included that developers offset the costs of Vista Ridge to SAWS customers by more than $242 million over 10 years.
That $242 million is less than 9 percent of the $2.8 billion total cost to SAWS customers for Vista Ridge, a roughly 140-mile pipeline that will ship water to San Antonio from underground aquifers east of Austin. The pipeline is the most expensive water supply project in SAWS history.
The SAWS board is expected to vote on the impact fees at their April meeting, Ramos said. Ultimately, City Council would have to approve the new impact fees before they go into effect. The council last approved impact fee changes in 2014.
Asked whether the approval would lead SAWS to reduce its planned rate increase for all its customers, Ramos said, “SAWS intends to seek a smaller adjustment in 2020 than what was originally approved.”
The impact fee amount is significant because SAWS already received City Council approval in 2015 for rate increases through 2020 that would pay for all of Vista Ridge. Mary Bailey, SAWS’ vice president of customer experience and strategic initiatives, confirmed this at a Jan. 23 committee meeting.
“For the Vista Ridge contract, the preapproved rate increases will pay the entire cost of the water,” Bailey said. “That’s what we had to have in order to be able to be able to issue future debt after we signed the contract. We had to demonstrate that we had existing rates or preapproved rates to be able to pay for all of that water.”
Under the Vista Ridge contract, SAWS customers are projected to pay roughly $2,000 per acre-foot for 50,000 acre-feet per year. One acre-foot is 325,851 gallons.
These payments are set to begin in April 2020, when water from the new pipeline begins flowing, and end in 2050, when SAWS is expected to take over ownership from the consortium of private companies building the pipeline.
To help pay for projects like Vista Ridge, state law allows water utilities to assess impact fees to developers to offset the cost of major new water and sewer pipelines, pumps, water treatment facilities, and other infrastructure. The amount developers are charged is based on the volume of water and sewer service a new residential or commercial development is expected to need once complete. Impact fees can be waived as part of City-approved incentives.
“By including [Vista Ridge] in the impact fee calculation, we’re effectively saying that the impact fees are effectively reimbursing the [SAWS customer] for the amount that they’re already paying in rates,” Bailey said at the meeting.
Asked how much less SAWS customers will have to pay than originally proposed, Ramos said that SAWS officials are “not sure yet” and that they are “still going through finances.” He said that the break given to SAWS customers might not end up adding up to the full $242 million expected to be paid for by developers.
“Similar to other impact fee collections, the bulk of what will be collected via Vista Ridge-related impact fees will assist in offsetting future costs,” he wrote.
SAWS, the municipally owned water and sewer utility that serves more than 1.8 million people in the San Antonio region, has gotten City Council go-ahead to raise customers’ rates every year since 2006. The utility has been expanding its pipeline network, adding more water supplies to keep pace with population growth, and increasing the capacity in its sewer system to reduce raw sewage spills under an agreement with federal regulators.
In 2015, City Council voted unanimously on a SAWS rate schedule that’s raising average customers’ bills approximately 50 percent between 2016 and 2020. For 2020, Council members approved an increase of 9.9 percent in the water supply component of the bill, the biggest year-over-year jump during that five-year period.
But that 2020 increase didn’t consider any money raised for Vista Ridge via impact fees charged to developers. Capital Improvements Advisory Committee members hammered out these details in a series of meetings in 2018 that culminated in the Feb. 13 vote.
If the current recommended rates are approved, Vista Ridge alone would account for $5.91 per gallon per day out of the $24.92 per gallon per day impact fee, or 24 percent of the total impact fee, according to the committee’s recommendations.