LCRA Draws Criticism Over Proposed Rate Hikes

Citing millions of dollars in lost revenue and unrecovered costs, the Lower Colorado River Authority is proposing significant rate increases for Central Texas cities and Gulf Coast-area rice farmers. 

The LCRA says the proposed rate hikes — 16 percent for cities and power plants, and as much as 91 percent for some farmers — are needed to address costs. But those increases would not go toward new water supply projects, meaning users could face more rate hikes to fund the $200 million off-channel reservoir the agency plans to construct in Wharton County by 2017. The agency, which has been holding public meetings on the proposal since January, says its board of directors could vote on the plan in June. 

Legislators and users along the basin have criticized the proposed increases, saying the agency should focus more on scaling back its spending. 

“What they need to do is cut expenses,” said state Sen. Troy Fraser, R-Horseshoe Bay, whose district includes part of Travis County. “They’re basically trying to balance their books on the back of my constituents because of their bad business decisions.”

“We can always improve,” said Phil Wilson, the agency's new general manager, who has solicited opinions from all LCRA employees on cutting costs and has a track record of doing so while leading the Texas Department of Transportation. “I want to do it in a smart, strategic way. I want to do it in a way that’s best value for customers.”

Fraser added that he strongly opposes the LCRA board of directors' decision to give Wilson a pay raise while raising costs for its customers. Wilson took over in February. 

In his previous position as the executive director of TxDOT, Wilson earned $292,500 a year. His new annual salary, not including bonuses, will be $425,000, though he is now leading an agency with fewer employees and about a 10th of the budget of TxDOT. Wilson’s predecessor at the LCRA, Becky Motal, made $395,000 a year in base pay, and walked away with a several-hundred-thousand-dollar severance package.

In an interview, Wilson said executive salaries are a tiny portion of the agency's overall budget. He added that he had already increased efficiency at the LCRA by reorganizing his 10-member executive team. Despite creating two new high-salary positions, his team makes less money than that of his predecessor, Wilson pointed out. 

Wilson added that the LCRA is not recovering the full cost of its operations today. For years, the agency says farmers have underpaid for water to the tune of $1 million to $2 million a year because their rates do not cover the full cost of delivering water through 1,100 miles of canals. And because most farmers have been cut off from buying any LCRA water for the past two years due to drought conditions, the agency has lost millions more in revenue.

The agency is proposing that farmers in Wharton County pay 37 percent more for water when supplies return, which would require significant and repeated rainstorms near the Highland Lakes and would not happen until next year at the earliest. In Matagorda County, rates would jump 91 percent. (Even that would not fully pay for the cost of delivering the water and maintaining the canals; rates in Matagorda County would have to be more than 160 percent of what they are now.)

Rice farmers, and officials in the Gulf Coast counties where they reside, have reacted in dismay to the proposals. “We as a community depend on these guys,” Mitch Thames, president of the Bay City Chamber of Commerce, said at a recent public meeting held by the LCRA to address the increases. “This is affecting all of Matagorda County in a huge way, from banking to grocery stores all across the entire community.”

The river authority’s “firm” water customers, including Central Texas cities that are guaranteed water even in times of drought, aren’t happy either. The LCRA proposes that they would pay 16 percent more for water starting in January 2015. Between 2016 and 2019, rates would increase another 9 percent, the LCRA proposes. The biggest municipal user of LCRA water, Austin, would not be affected because the city has a special contract agreement for water supplies.

Emotions ran high at recent public meetings in Marble Falls and Bee Cave regarding the changes. Some cities have suggested that they should not face a rate increase and that even more costs should be borne by downstream farmers. 

With the proposed rate increases marked to help cover operating costs, questions remain on how the LCRA will pay for the major reservoir project in Wharton County that it has said will save the stressed river basin. “There’s not a way to pay for that $200 million downstream reservoir,” Fraser pointed out.

The LCRA has applied for a $250 million loan from the Texas Water Development Board with a low interest rate, but the money would still need to be paid back eventually.

Wilson said he is exploring creative ways to fund the reservoir, including securing grants rather than taking on more debt, and that users would probably not see any rate increases to pay for the reservoir for 20 years.

But he said he could not be more specific about possible funding mechanisms, saying they were subject to approval by the LCRA’s 15-member board of directors.

Disclosure: The Lower Colorado River Authority is a corporate sponsor of The Texas Tribune. A complete list of Texas Tribune donors and sponsors can be viewed here.