Item 16 - Austin Water FY 25-26 Proposed Budget Briefing — original pdf

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AUSTIN WATER FY 2026 1 PROPOSED BUDGET Water & Wastewater Commission | July 16,2025 1 2 3 4 5 6 7 Cost of Service Update Proposed FY 2025 Budget Overview Sources & Uses of Funds Capital Improvement Plan Debt Management Minimizing Bill Impacts Ongoing Budget Considerations AGENDA 2 COST OF SERVICE UPDATE 3 2024 Cost of Service Purpose 2024 Cost of Service Purpose 1. Bolster transparency in the rate-setting process 2. Raise awareness about the Cost of Service Study 3. Obtain customer input on pricing objectives 2024 Cost of Service Objectives • Develop rates that: • Meet annual Financial Plan needs • Ensure water and wastewater services are each self-sustaining • Meet AW objectives while ensuring equitable cost recovery from customer classes • Included a Public Involvement Committee (PIC) to review Cost of Service methodology and provide input and recommendations 5 2024 Cost of Service Recommendations 2024 Cost of Service Recommendations • Affordability for essential services and system resiliency. • Lower cash financing of CIP for large, generational projects. • Bill discount target of 50% for Customer Assistance Program (CAP) customers. • Community Benefit Charge increase from $0.15 to $0.30 per thousand gallons to support the Customer Assistance Program. • Future implementation of water budget billing to address high irrigation for commercial and multifamily customers. PROPOSED FY 2026 BUDGET OVERVIEW 7 Budget Considerations & Highlights Budget Considerations & Highlights  Balance affordability with necessary operational and infrastructure investments. • Residential average monthly residential bill increase of $8.71 per month. • Customer Assistance Program average monthly bill increase of $5.50 per month.  Continue phase in of Cost of Service and Community Engagement results.  Maintain financial strength and stable bond ratings.  Continue debt management strategies.  Continue strategic staffing investments with new FTEs and temporary conversions.  Additional investments to support water loss and conservation efforts 8 Fund Summary Fund Summary DESCRIPTION Beginning Fund Balance Revenue & Transfers In Expenditures & Transfers Out Change in Fund Balance Ending Fund Balance Debt Service Coverage Days Cash on Hand FTEs 9 FY25 AM ENDED FY25 ESTIMATED FY26 PROPOSED $272.6 $769.0 $773.6 (-$4.6) $268.0 1.93 252 1,410 $268.5 $784.3 $763.8 $20.5 $289.0 2.08 274 1,410 $289.0 $829.3 $849.9 (-$20.6) $268.5 1.88 248 1,439 SOURCES & USES OF FUNDS 10 Revenue Sources Revenue Sources Department Service Revenue: FY 2025 Amended: $705 million FY 2026 Proposed: $761.7 million $400 $350 $300 $250 $200 $150 $100 $50 $0 11 $367.2 $352.0 $369.3 $324.7 $3.7 $3.6 Water Services Wastewater Services Reclaimed Water FY25 Amended FY26 Proposed Services $24.6 $21.6 Miscellaneous Revenue Uses of Funds Uses of Funds Department Expenditures: FY 2025 Amended: $773.6 million FY 2026 Proposed: $849.9 million 12 Interdepartmental Transfers Interdepartmental Transfers 13 Significant Operating Req. Changes Significant Operating Req. Changes Wages and Benefits Contractuals and Commodities • $8.4M increase wages due to unbudgeted retention stipend conversion in FY2025 • $5.4M increase for City-wide wage adjustment • $2.4M increase for chemicals • $1.5M increase for water conservation education and advertising campaigns • $1.0M increase for street cut • $3.5M increase for 31 new FTEs • $1.0M increase for water meter accuracy Utility Billing System Support • ($1.7M) decrease testing contract • $1.0M increase for City-wide branding cost 14 Proposed New FTEs Proposed New FTEs 11 - Operational Optimization 6 - Customer Satisfaction 6 - Enterprise Resiliency 5 - Water Resource Sustainability 2 - Employee Leadership & Development 1 - Infrastructure Performance Total 31 new FTEs, 11 Temporary and Contractor conversions 15 CAPITAL IMPROVEMENT PLAN 16 CIP Plan Funding $2,294M $1,869M Strategic $1,368M $1,088M $2,740M Growth, Enhancement & Priority Improvements Rehabilitation & Replacements System Extension & Relocations Long-Range, Large-Scale Improvements FY22-26 Plan FY23-27 Plan FY24-28 Plan FY25-29 Plan FY26-30 Proposed Plan ) s n o i l l i M ( $2,750 $2,500 $2,250 $2,000 $1,750 $1,500 $1,250 $1,000 $750 $500 $250 $0 17 5-Year Capital Plan Highlights 2026 2027 2028 2029 2030 Total Water $101.2 $212.6 $150.2 $153.4 $256.3 $ 873.7 Wastewater 244.7 437.4 472.3 331.4 260.3 1,746.1 Reclaimed 21.2 25.7 27.0 20.0 26.1 120.0 Combined $367.1 $675.7 $649.5 $504.8 $542.7 $2,739.8 • Walnut Creek WWTP Expansion to 100 Million Gallons Per Day • Aquifer Storage and Recovery Full-Scale Project • Walnut Creek Primary Clarifier and Flow Equalization Basin Rehab • Walnut Creek WWTP Headwords Improvements • Williamson Creek Wastewater Interceptor • South Austin Regional WWTP Trains A & B Improvements • Ullrich WTP Inherently Safer Disinfection Conversion m i l l i o n s 18 DEBT MANAGEMENT 19 Debt Savings Achieve $625M Debt Savings Achieve $625M Total Debt Service Requirements Comparison FY2019 through FY2030 $60.8 $47.4 29.4% 28.7% $20.9 31.3% $46.1 $36.6 $86.3 $74.9 $44.8 $42.6 25.0% 23.3% 20.9% 22.3% 21.9% 22.6% Total Debt Service Savings* $625M $45.2 $8.3 $9.2 33.6% 25.1% 26.2% 50.0% 45.0% 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% $300 $250 $200 $150 $100 $50 $0 ) s n o i l l i m n i ( e c i v r e S t b e D 2018-19 Actual 2019-20 Actual 2020-21 Actual 2021-22 Actual 2022-23 Actual 2023-24 Actual 2024-25 Estimate 2025-26 Forecast 2026-27 Forecast 2027-28 Forecast 2028-29 Forecast 2029-30 Forecast Current Debt Service Requirements Fiscal Year Debt Svc Savings Debt Svc % of Total Requirements 20 *Total debt service savings includes saving for years prior to 2017 and after 2028 are not shown on graph Capital Recovery Fee Collections Capital Recovery Fee Collections Annual Capital Recovery Fee Revenues $13.69 $10.94 $12.12 $27.15 $30.58 $26.82 $9.38 $8.95 $21.28 $19.90 $7.17 $16.48 2020 2021 2022 2023 2024 YTD 2025 Water CRF Wastewater CRF 50.00 45.00 40.00 35.00 30.00 25.00 n o i l l i M n i $ 20.00 15.00 10.00 5.00 .00 21 MINIMIZING BILL IMPACTS 22 Average Residential Bill Impacts Average Residential Bill Impacts 2025 CURRENT 2026 PROPOSED CHANGE HOW MUCH PER GALLON WITH PROPOSED RATES? $45.49 $47.45 +$1.96 $45.71 $52.46 +$6.75 $91.20 $99.91 +$8.71 Water $0.008 Wastewater $0.013 Water 5,800 Gallons Includes Water Reserve Fund Surcharge + Community Benefit Charge Wastewater 4,000 Gallons Includes Community Benefit Charge Total Bill 23 Customer Assistance Program Customer Assistance Program FY 2026 Proposed Rates Monthly Average Residential Water Bill Comparison: Non-CAP vs CAP (5,800 Gals. Water and 4,000 Gals. Wastewater) NON-CAP CAP $ DISCOUNT % DISCOUNT Water Wastewater $47.45 $52.46 $20.65 $27.30 $26.80 $25.16 56.5% 48.0% Combined $99.91 $47.95 $51.96 52.0% Increase from FY25: $8.71 $5.50 • Over 22,000 Residential CAP participants as of May 2025 • Over 32,000 Multifamily CAP participants as of May 2025 • Waived residential monthly water and wastewater fixed fees • Discounted residential volumetric water and wastewater rates • Multifamily CAP monthly credit $17 ($11 Water and $6 Wastewater) 24 ONGOING BUDGET CONSIDERATIONS 25 Ongoing Budget Considerations Ongoing Budget Considerations Growing Capital Improvements Plan • Several large strategic projects on the horizon • Construction costs continue to rise • Continued debt management efforts Capital Recovery Fee Revenue • Slowing development is impacting defeasance funding availability Conservation and Drought Impacts • Continue to monitor inflows to Highland Lakes • GoPurple investment in reuse strategies and reclaimed water system • Rate design continues conservation focus • Water Forward supply strategies 26