For the second time in four months, members of Killeen City Council have received analysis on the city’s water infrastructure, including on Tuesday when a consultant explained how his contract with Bell County Water Control and Improvement District No. 1 is structured.
“You have a contract for a bulk water supply — all the water the city needs up to a maximum delivery rate of 42 million gallons per day,” said Lauren Kalisek of the law firm of Austin Lloyd Gosselink. “The term of this contract is for the life of the neighborhood’s outstanding bonds which, at this time I believe, extends to approximately 2040.”
Killeen and the Water District agreed to a four-page contract in April 1956.
“In the early 1950s, Bell County WCID #1 entered into a long-term lease with the federal government to lease Belton Lake, which was the first or major water treatment plant serving the local community” , Kalisek said. “Now WCID #1 is a regional entity serving several towns beyond Killeen. Its raw water supply comes from contracts it holds with the Brazos River Water Authority.
The Brazos River Authority, according to its website, was created by the Texas Legislature in 1929 as the first governmental entity in the United States created to develop and manage the water resources of an entire river basin. The agency distributes water supplies, provides water and wastewater treatment, and monitors water quality.
“So ultimately the water that is delivered to the town of Killeen comes from water rights held by the Brazos River Authority under contract with Bell County WCID No. 1,” Kalisek said. “Under the terms of your contract, you can get water from another source with the prior written consent of the municipality. From time to time, the district issues contract revenue bonds in consultation with other wholesale customers to fund major capital projects.
In addition to Killeen, other WCID-1 customers include Fort Hood, Harker Heights, Copperas Cove, Belton, Bell County WCID No. 3, and 439 Water Supply Corporation.
“You have a contractual right to the raw water supply itself, and you also have a capacity reservation in the wholesale system that was built by WCID No. 1 for the benefit of its customers, including the City of Killeen,” Kalisek said.
According to its website, the water district is the Brazos River Authority’s largest municipal customer, contracting more than 62,000 acre-feet of water annually from Belton and Stillhouse Hollow lakes, where WCID-1 has plants. water treatment.
“The district contracts 100% of the water supplied to its customers to the Brazos River Authority. Currently; the district has no underground water supply,” the website states.
With Brazos River Authority, Bell County WCID #1 has two surface water contracts – “one dating from 1966 and reissued in 1992 for election/option water and the other dating from July 2006 for 13 000 acre-feet of water ‘system’,” according to the district’s website.
The system water contract expires in 2031. The election/option water contract is due to expire in 2042.
“Bell County WCID No. 1 is a Regional Conservation Recovery District that is formed under the state constitution,” Kalisek said. “It is a separate political subdivision of the state – just like a city, county or other special district. It has its own set of statutes which are applicable to it under the special local laws of the district.
The district was created to provide a municipal water supply in the area and to serve Fort Hood. And his contract can’t just be canceled by Killeen or any of the wholesale customers in the district.
No “unilateral termination”
“The contract prohibits unilateral termination by the city and unconditional payment provisions,” Kalisek said. “The reason for these provisions is the protection of district bondholders. The revenue stream it secures through its contracts with its wholesale customers is what underpins its bond issues. This contractual revenue stream must be fairly well protected in its contracts with its wholesale customers.
The district board in April approved its budget for the 2022-23 fiscal year, with Killeen and other towns paying an additional 6 cents per 1,000 gallons of fresh water, up from 72 cents.
Cities that pay for district wastewater services pay an additional 10 cents per 1,000 gallons, up from 96 cents. This is mainly due to the rising cost of chlorine and gasoline. Another factor in the budget was La Nina projections, which means drought conditions play a role.
“The more rain we get, the less water we sell and the more wastewater we treat,” WCID Chief Executive No. 1 Ricky Garrett said in April. “So in that aspect, we are like farmers. We kind of depend on the weather to know how good our projections end up being.
The district’s wastewater budget is about $5.58 million, up from about $4.95 million in fiscal year 2021-22. Its freshwater budget is approximately $9.5 million, up from $8.5 million the previous fiscal year. The district’s fiscal year runs from May 1 to April 30, and the new rates would come into effect on October 1, when city budgets go into effect for their new fiscal years, for the district’s total budget of approximately $14.5 million. of dollars.
The terms of the contract include “operating and maintenance expenses as well as debt service,” Kalisek said. They are “commonly found in water supply contracts for regional networks. The contract allows for sub-contracts with other wholesale customers to transfer capacity reservation with district approval and consent.
Council members did not respond to messages seeking comment on the terms of the contract and whether they intended to negotiate new terms. But on Tuesday, Councilman Michael Boyd thanked Kalisek for providing “clarity.”
“This information is clear and gives the board and the public … the facts (about) our contractual relationship with WCID #1 since the mid-1950s,” he said. “Now I have clarity. I am better informed to make decisions based on WCID in the future.
“Negotiate the price”
Mayor Debbie Nash-King asked Kalisek how to change the city’s contract with WCID #1.
“What is the process if you want to negotiate the price of water or the amount of water use?”
Kalisek said the effort needs to start at the city staff level.
“Changes to the contract require a written amendment executed by both parties,” she said. “You would enter into negotiations with the district.
Councilman Ken Wilkerson asked Kalisek to explain how the district uses city money to fund its operations.
“They charge wholesale customers a volumetric rate, the amount of water you use,” she said. “They also charge a booking fee. It’s a different process than a city because there are no tax-funded fiscal obligations. These are contractual income bonds. When a wholesale customer agrees to enter into a contract with the district, you agree that your earnings will be used to pay for the bonds that will be issued by the district.
And the bond issue is being done after district officials notify its customers, including Killeen.
“It seems every time the district asked for bonds, they consulted wholesale customers,” Kalisek said. The contract “defines each’s pro rata share of debt service on the capital project. Also, I guess the district wouldn’t be able to size a capital project…unless they talk to their wholesale customers about what those needs are.
The analysis of Kalisek’s contract comes four months after Austin’s Freese and Nichols provided an “assessment of water and wastewater treatment facilities” to council members in May.
“On May 17, 2022, City Council received a water report from Freese and Nichols,” City Attorney Holli Clements said. “During this presentation, the board indicated that you wanted a better understanding of the commitments we currently have with WCID #1, and you asked staff to hire a consultant to conduct research on our contracts. water.”
During that workshop in May, Freese and Nichols said it would cost the city about $569 million to build plants, pump stations, transmission lines, ground storage tanks and other infrastructure and to pay for engineering, design and land acquisition for a water treatment facility. .
It would cost more than $359 million to build a sewage treatment plant and to engineer, design and acquire land for a sewage treatment plant – for a nearly $1 billion project of dollars.
And at an average salary of $50,000 to $70,000 a year for 20 to 40 employees, that would cost the city $500,000 to $1.4 million.
Regarding water supply, the city would have two options – maintain the existing 39,964 acre-feet and contract directly with the Brazos River Authority, with no surface water rights available from other sources or request proposals for water supplies that would likely come from wells a “significant distance” from Killeen.