The North Texas Municipal Water District (NTMWD) recently sent preliminary budget letters to its Member Cities and Customers, passing another milestone in the annual finance process. The letters are a preview of fiscal year 2026 rates for water, wastewater and solid waste.
Communicating with the Member Cities and Customers as the wholesale rates are developed helps them plan their rates and budgets.
“They have to cover the cost for the water that we deliver to them,” said Michael Klea, Assistant Finance Manager. “But they also have to maintain their own water infrastructure—things like storage tanks, underground pipes, billing and metering systems and all the other local costs that come with it. Member Cities and Customers must include all of these expenses when determining their own rates for their residents.”
The NTMWD Strategic Financial Plans (SFP) are developed annually and provide a higher-level, long-term projection of future water rates.
“Those are our 10-year financial models,” said Klea. “We start with the current year’s budget, and project future years’ costs to account for inflation, including all the long-term and future capital projects,” said Klea. “A city can look at the SFP and see what the rates are now and how they are projected to change over time. If a city knows a year or two ahead that rates are going up, they may start adjusting their rates now so there isn’t a big spike later.”
Rising water rates are inevitable as the cost of procuring, treating and moving water increases. The main causes of increasing rates are the capital improvement projects necessary to provide safe, reliable water to our rapidly growing area. The price tags on these projects are high, but the cost of not planning for future growth would be even higher.
“We can't risk not having enough water,” said Klea. “People are always going to need water. We have to plan for the growth in our area and conditions like drought. That’s why we take on big projects—building a new lake or bringing in water from other places—because if projections show increasing demand. We have to be ready.”
The engineering department meets regularly to determine capital improvement project priority and estimate costs. By July, the list for the next fiscal year is finalized. This, in turn, helps the finance team firm up the water rates.
The next step in the process occurs at the end of July, which also marks the end of the “water year,” which runs from August 1 to July 31. This is when the total volume of water used by our Members and customers during the year is calculated to finalize water rates.