AGENDA CAPTION:
Title
Receive a Staff presentation and hold a public hearing to receive comments for or against Ordinance 2026-41, increasing Stormwater Utility Rates as authorized by Section 86.505 of the San Marcos City Code; including procedural provisions; and declaring an effective date; and consider approval of Ordinance 2026-41 on the first of two readings.
Body
Meeting date: September 1, 2026
Department: Finance
Amount & Source of Funding
Funds Required: N/A
Account or Project Number (C = CIP funds): N/A
Funds Available: N/A
Account Name: N/A
Fiscal Note:
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City Council Strategic Initiative: [Please select from the dropdown menu below]
Stormwater
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Comprehensive Plan Element (s): [Please select the Plan element(s) and Goal # from dropdown menu below]
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N/A Economic Development - Choose an item.
N/A Environment & Resource Protection - Choose an item.
N/A Housing + Neighborhoods - Choose an item.
N/A Land Use + Community Design and Character - Choose an item.
N/A Parks & Public Spaces + Health, Safety & Wellness - Choose an item.
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N/A Core Services
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Master Plan: [Please select the corresponding Master Plan from the dropdown menu below (if applicable)]
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Background Information:
During Budget Policy, Council directed staff to use an incremental rate approach for all utilities. Stormwater last increased rates in Fiscal Year 2023. At that time, Council chose not to raise rates and instead used General Fund support to pay for Stormwater capital projects.
Because inflation reached over 4% as of June 2026, Fiscal Year 2027 is an appropriate time to resume the incremental approach for this fund. In addition, due to growing pressures on the General Fund, Stormwater began covering capital costs directly - up to $5M starting in Fiscal Year 2025. A modest, incremental rate adjustment would help strengthen the fund and support future project needs.
Impact to ratepayers of a 1% rate adjustment:
• R1 - Small Residential - $9.14 to $9.23 (increase of $0.09 monthly)
• R2 - Medium Residential - $14.90 to $15.05 (increase of $0.15 monthly)
• R3 - Large Residential - $21.77 to $21.99 (increase of $0.22 monthly)
• NR - Non Residential - $14.90 to $15.05 per equivalent residential unit - ERU (increase of $0.15 monthly)
During the August budget workshop, Council asked staff to model different rate scenarios based on varying capital project sizes. Staff evaluated projects costing $10M, $17M, and $24M. To fund projects of those sizes, annual rate adjustments of 1.9%, 3.8%, and 5.8% would be needed for the next three years. These increases would result in Fiscal Year 2027 R2 - medium residential rates of $15.18, $15.47, and $15.76 per month respectively.
Stormwater capital projects typically require several years of lead time. The Stormwater Master Plan is expected to be completed by the end of this year. Final project selection could be decided after the Master Plan is completed. For Fiscal Year 2028, the City can start the design on the top projects identified in the stormwater master plan with the goal of starting construction in 2030 on a few projects. By identifying project costs through Fiscal Year 2029, the City can sequence projects gradually and align them with a steady, predictable rate strategy. A final consideration is that other funding sources, such as General Fund, Water-Wastewater, etc., would also need capacity within the fund for other components of the project.
Council Committee, Board/Commission Action:
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Alternatives:
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Recommendation:
City Council approve a 1% incremental rate adjustment or higher for a future capital project.