AGENDA CAPTION:
Title
Consider approval of Ordinance 2026-40, on the second of two readings, amending rates for the Water, Wholesale Water, Reclaimed Water, and Wastewater Treatment Utility Services in accordance with Chapter 86 of the San Marcos City Code; including procedural provisions; and declaring an effective date.
Body
Meeting date: September 15, 2026
Department: Utilities and 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:
Prior Council Action: N/A
City Council Strategic Initiative: [Please select from the dropdown menu below]
Public Safety, Core Services & Fiscal Excellence
Choose an item.
Choose an item.
Comprehensive Plan Element (s): [Please select the Plan element(s) and Goal # from dropdown menu below]
N/A Arts and Culture - Choose an item.
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.
N/A Transportation - Choose an item.
Yes Core Services
N/A Not Applicable
Master Plan: [Please select the corresponding Master Plan from the dropdown menu below (if applicable)]
Choose an item.
Background Information:
The City conducts an annual water and wastewater rate study and the results are reviewed by staff and the Citizens Utility Advisory Board (CUAB). The CUAB met during the summer and received a presentation on the estimated revenues and major cost drivers of the water and wastewater system. The CUAB voted to recommend an effective 3.4% increase for water and wastewater rates, 5.0% adjustment for water and 2.0% adjustment for wastewater, for Fiscal Year 2027. The recommended increase will cost an estimated $2.76 per month for water and $1.14 per month for wastewater for the average residential user.
In May 2024, Council approved a cost sharing agreement with multiple developers to fund a new Water Reclamation Facility (FM 1978 WRF) in a rapidly developing area in the southern part of San Marcos. The new facility will allow the City to avoid multiple, small package plants throughout the area around and upstream of the San Marcos River. The new facility is anticipated to treat 2 million gallons per day (MGD) initially and be expandable to 8 MGD.
Once the payments from the developers in the cost sharing agreement are depleted, the City will need to take on an average of $7.5M in annual debt service. Council’s approach to adjusting rates incrementally should deter larger increases in the future to cover expenses for the water-wastewater system.
The City scheduled a public hearing that was held on September 1, 2026. A notice for the public hearing was published in the San Marcos Daily Record on August 26, 2026.
Council Committee, Board/Commission Action:
The Citizen Utility Advisory Board met and voted to recommend an effective 3.4% increase for water and wastewater rates, 5.0% rate adjustment for water and a 2.0% rate adjustment for wastewater.
Alternatives:
1. Not approve the incremental rate adjustment, which could require a larger rate increase in the future.
2. Approve the incremental rate adjustment, which minimizes the need for larger rate increases in the future.
Recommendation:
City Council approve the Ordinance amending rates as recommended by the Citizen Utility Advisory Board.