Pearsall residents may face rate hike

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Consultant offers suggestions

Study reviewed city’s operating history, debt obligations, current rate structure

Following a recent rate study conducted by Capex Consulting, Pearsall citizens may soon face a hike in their water and wastewater utility bills.
The objective of the rate study was to review the city’s operating and capital costs in order to develop a financial plan and cost-based rates for water and sewer utilities.
According to Jeff Snowden, representative for Capex Consulting, the comprehensive rate study reviewed the city’s operating history, debt obligations, and evaluated the current rate structure.
“The city asked me to look at your water and wastewater rates and give some recommendations based on some escalating expenses and some new debt the city has incurred since my last rate study,” the consultant said. “I did a five-year plan about five years ago.”
Records show Snowden conducted a utility rate study in 2020 that led to a unanimous decision by council to repeal a surcharge.
In 2020, Snowden proposed a $2.26 rate increase for water beginning October 1 and a $2.25 increase each year for the next five years; the rate increase was subsequently approved by councilors.
The current study conducted by Capex Consulting shows the city’s water accounts have grown by one percent; the wastewater accounts have grown by one-half percent. These numbers reflect an average of 27 new accounts per year.
However, Snowden did note an area of concern with a comparison of water to wastewater accounts.
“Water [accounts] versus sewer [accounts] there is a pretty big delta,” the consultant said. “It is worthy of consideration.”
According to the study, there are 1,661 residential water accounts within the city limits compared to the 1,481 sewer accounts.
“So either there are 200 residents not receiving sewer inside the city limits or they are not being billed,” Snowden said. “If they are not being billed, we can take rate pressure off customers by fixing it.”
Furthermore, Snowden noted City Manager Federico Reyes is actively working on a number of potential projects that could lead to additional utility revenue.
“The various projects that Mr. Reyes is working on may lead to new connections, new connections lead to revenues,” the consultant said.
Currently the city has debt obligations from certificate of obligations in 2024 and 2023.
“You were invited by the Texas Water Development Board to participate in the Series 2026 clean water,” Snowden said. “There is potentially a forgiveness of up to $10 million to the city.”
According to Snowden, engineers hired by the city have designed and proposed $15.5 million in projects. The consultant said that of the proposed projects, he anticipates $5.5 million to come in as debt and ‘hopefully the other $10 million is in forgiveness.’
The $4.1 million Series 2024 debt has a substantial payment, according to the consultant, who noted the city’s plan was to liquidate the debt.
“That debt had a very high payment; the plan was that you would liquidate that prior to the years where the higher payments came into your system,” Snowden said. “Of the $5.5 million in new debt, $4.1 million will go to liquidate that series. That will leave about $1 million for new projects plus whatever forgiveness you receive. It will free up a lot of cash and help keep rate increases very modest.”
According to data presented to councilors, the city will pay $658,000 in yearly debt service payments until 2028; in 2028, the debt payment increases to $781,000; in 2039, debt service payments are projected to drop to $687,000.
“So it is my job to prepare the system to fund that debt plus operations and not require any subsidy from the general fund,” the consultant said.
Snowden noted the gradual rate increase has not affected the consumption rate.
Snowden proposes a five-percent increase, which equates to $4 a month, on an average consumption of 10,000 gallons per month, beginning October 1, 2025 and $4 increase each year for the next five years.