Conroe - Montgomery Edition | June 2020

WATER Committee directs San JacintoRiver Authority to not raise rates next fiscal year; costs to be paid in future

STEPS TO SETTING A RATE The San Jacinto River Authority is going through a process before setting its rates for the next fiscal year.

BY EVA VIGH

maintenance cost for the surface water plant and transmission system and GRP debt service. The rates would not be based on legal costs associated with lawsuits nor the uncollected revenue from Conroe and Magnolia. The legal costs—$1.76 million— would be included in the budget but not included in the rate. In Scenario L, the rates would cover all costs, including legal costs, except for the uncollected revenue from Conroe and Magnolia. The rates would increase by 3.3% over FY 2019-20. Repayment options In both scenarios, the SJRA would need to draw from its debt service reserve to pay for its legal fees and shortcomings from Conroe and Mag- nolia, Kelling said. Drawing from this reserve could have stipulations required by the Texas Water Devel- opment Board and bondholders, and this money must be replenished in future years, according to the SJRA. “Once you start pulling money from the debt services reserve, then that ends up being a whole other set of reporting you need to do,” he said. Kelling said they could theoreti- cally draw from this reserve for up to nine years, and it would need to be replenished by funds awarded by the court required of Conroe and Magnolia and any remaining revenue generated from rates. After about 30 minutes of discus- sion, the committee ultimately voted on Scenario K.

The legal outcomes largely hinge on the cities of Conroe and Magnolia, which have not paid rising SJRA fees since 2016 on the grounds that they have placed an exorbitant burden on residents; the resulting shortfall from these entities not paying full rates; and lawsuits filed by Quad- vest, a private utility company, against the SJRA. As it currently stands, Conroe and Magnolia will owe $4.7 million by August, according to the SJRA. When Kelling presented these rate options May 13 to The Woodlands Water Agency, the managing body for the 11 municipal utility districts in The Woodlands, the board said it

After outlining several possible rate increase scenarios for fiscal year 2020-21, the San Jacinto River Authority’s Groundwater Reduction Plan Review Committee opted May 26 to direct the SJRA to keep this year’s rates—$2.73 per 1,000 gallons for groundwater and $3.15 per 1,000 gallons for surface water. Not raising rates—while seemingly a win for residents footing increasing water bills—means entities will still need to pay for the costs in the future, officials said. “This is not free money,” SJRA Deputy General Manager Ron Kelling said. “At some point in time in the

JUNE 22 The Groundwater Reduction Plan Review Committee votes on the budget and rate order to be approved by SJRA. JUNE 15 The final budget and rate order are provided to GRP Review Committee. MAY 26 SJRA GRP Review Committee votes to direct SJRA board to not raise rates next fiscal year. SJRA staff uses this rate to draft a budget. MAY 13 Kelling presents scenarios to the Woodlands Water Agency. The board votes to direct its GRP representative to vote on a rate that does not include legal costs and short payments. APRIL 20 At the SJRA meeting, SJRA Deputy General Manager Ron Kelling outlines four rate scenarios for next fiscal year, depending on how lawsuits pan out.

near future, this money’s going to have to be repaid.” The committee’s objective for the meeting was to direct the SJRA staff to prepare a budget according to the rate that was chosen. The GRP review committee is slated to hear

would not be support- ive of continuing to pay for rate increases based on legal fees or other entities not paying their share. “Their request was ‘Go find somewhere else to pull that money from,” Kelling said. “As we indicated to them, there is no other place to pull from.”

“THIS IS NOT FREE MONEY. AT SOME POINT INTIME INTHE NEAR FUTURE, THIS MONEY’S GOING TO HAVE TOBE REPAID.” RON KELLING, SJRA DEPUTY GENERAL MANAGER

this budget at its June 15 meeting and if approved, the rate then goes to the SJRA board of directors for approval June 22. Rates considered In mid-April, Kelling provided four rate scenarios to the SJRA board based on legal outcomes that could raise rates by up to 14.5%.

Following the WWA meeting, Kelling said he went back to the drawing board and May 26 presented the GRP review committee with two additional rate increase scenarios: Scenario K and Scenario L. In Scenario K, requested by the WWA, the rates for next fiscal year would stay the same. The rates would cover only the operations and

SOURCES: SAN JACINTO RIVER AUTHORITY, WOODLANDS WATER AGENCY/COMMUNITY IMPACT NEWSPAPER

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CONROE - MONTGOMERY EDITION • JUNE 2020

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