Denton utilities present preliminary FY2027 budget and proposed rate steps; board raises concerns about reserves and large CIP

Seth Harrell, interim budget manager, presented the fiscal year 2027 preliminary utility budgets and rate assumptions to the Public Utilities Board on July 13, outlining revenue and expenditure pro formas, five‑year capital plans and recommended base‑rate changes. "For the 2027 fiscal year, preliminarily, we have $514,900,000 in revenue and $498,700,000 in expenditures" for electric pro forma figures, Harrell said while reviewing fund projections and the five‑year forecast.

Staff proposed base‑rate changes intended to help the utilities meet reserve targets and pay for upcoming capital: electric 3%, water 5%, wastewater 9% and drainage 12% (presentation noted the 12% figure was chosen for the board presentation over a previously circulated 13.5% schedule while the cost‑of‑service study is finalized). Harrell said the forecast assumes WIFIA (Water Infrastructure Finance and Innovation Act) federal financing for large projects is in underwriting and that some impact fees will be held to offset later WIFIA/WTD debt service.

Board members questioned several items in detail: a roughly $10 million rise in administrative transfers to the general fund, the basis for interfund transfers, the large multi‑year swings in fund balances, and whether projected reserve recovery depends on successive rate increases. One committee member said, "That's a lot of assumptions," asking whether meeting reserve targets relied on a string of future rate increases; staff responded that the five‑year forecast is revisited annually and that future adjustments would be reconsidered as conditions evolve.

Staff also discussed capital items tied to growth and reliability: a planned AMI system replacement in the 2029–2030 timeframe with an anticipated roughly $40 million price tag in the CIP, watershed functions moving to environmental services, and a new Home Business Unit for electric planning and inspections. The combined five‑year capital plan presented across water, wastewater, drainage, electric and solid waste was approximately $2.4 billion, with staff explaining much of the near‑term burden stems from major plant expansions and infrastructure to serve growth.

On solid waste, Bridal Haney, solid waste director, described a planned land swap and a $1,000,000 transfer line to retire debt on a parcel held for a future transfer station; solid waste is proposing revenue funding of vehicle replacements and supplemental personnel tied to transfer‑station operation.

Board members asked staff to provide additional supporting detail for the July 27 follow‑up, including the basis for usage assumptions, peer comparisons to other utilities, detailed interfund transfer schedules, and clearer DSCR reporting. Staff said they would update the board July 27 and provide the requested backup.

The meeting closed with staff reminders of the schedule: budgets return to the board July 27; council budget workshop on August 8; budget tax‑rate public hearing on September 15; and budget and tax‑rate adoption on September 22.