Water & Wastewater Rate Study – Overview
The City of Hereford completed a comprehensive Water & Wastewater Rate Study in January 2026 with assistance from NewGen Strategies & Solutions. The purpose of the study is to ensure the City’s utility system remains financially stable, reliable, and capable of supporting future growth, while continuing to provide safe drinking water and effective wastewater treatment for the community.
Why the Study Was Needed
Like many Texas communities, Hereford faces:
- Aging water and wastewater infrastructure
- Rising construction, energy, and operating costs
- Increasing regulatory requirements
- Major upcoming capital needs, including a potential new wastewater treatment plant
The rate study evaluates current revenues and expenses and recommends rate adjustments that allow the City to responsibly plan for the future while minimizing sudden impacts to customers.
What the Study Found
1. Infrastructure Investment Is Critical
- The City plans to cash-fund approximately $11.2 million in water and wastewater capital improvements over the next six years.
- A $62 million wastewater treatment plant is being evaluated for future construction, which would require long-term debt financing if pursued.
2. Two Financial Scenarios Were Evaluated
The study analyzed two possible paths:
- Scenario 1: No New Wastewater Treatment Plant
- Focuses on maintaining and upgrading existing facilities.
- Requires gradual rate increases to keep revenues aligned with operating and capital needs.
- Scenario 2: Construction of a New Wastewater Treatment Plant
- Includes significant debt service beginning in FY 2027.
- Requires higher rate increases to support long-term system capacity, regulatory compliance, and growth.
In both scenarios, rate increases are phased over multiple years to reduce rate shock.
3. Rate Structure Remains the Same
- The study does not recommend changing the rate structure.
- Adjustments are made to existing base charges and usage tiers.
- Residential, commercial, and industrial rates increase proportionally.
- Outside-city customer rates are held flat until the current multiplier is reduced.
4. Financial Stability Improves Under Proposed Rates
With the proposed rate adjustments:
- Revenues are sufficient to cover operating costs and capital needs.
- Debt service coverage meets recommended targets.
- Utility reserves improve, strengthening the City’s financial position.
- The system is better prepared for emergencies, repairs, and future investment.
How This Affects Customers
- For a typical residential customer using 5,000 gallons of water and wastewater, monthly bills increase gradually over time.
- Even with the proposed increases, Hereford’s utility rates remain competitive with surrounding communities.
- The City’s goal is to balance affordability with responsible infrastructure investment.
What’s Next
City leadership will continue:
- Evaluating the timing and funding of major capital projects
- Seeking grants and outside funding where possible
- Providing transparency and public communication before any rate changes are implemented
Community input remains an important part of the process.
Questions?
Residents and customers are encouraged to contact City Hall with questions about the study, rates, or upcoming projects. The full Water & Wastewater Rate Study presentation is available upon request.
Frequently Asked Questions (FAQs)
City of Hereford – Water & Wastewater Rate Study
1. Why did the City conduct a Water and Sewer Rate Study?
The study ensures water and wastewater rates generate enough revenue to operate the systems, maintain infrastructure, build reserves, and plan for major capital needs—while keeping rates fair and comparable to the region.
2. When was the study completed and who prepared it?
The study was prepared by NewGen Strategies & Solutions and finalized in January 2026.
3. What major challenges does the study address?
- Aging water and wastewater infrastructure
- Ongoing maintenance and reinvestment needs
- Long-term financial stability
- Potential construction of a new wastewater treatment plant
4. What capital projects are planned?
Over the next six years, the City plans to cash-fund approximately $11.2 million in utility capital projects. In addition, a $62 million wastewater treatment plant is being evaluated as a future debt-funded project.
5. Does the study recommend building a wastewater treatment plant?
The study does not decide whether to build the plant. Instead, it evaluates two financial scenarios:
- Scenario 1: No new wastewater treatment plant
- Scenario 2: Construction of a new wastewater treatment plant
This allows City officials to understand rate impacts under either option.
6. Will water and sewer rates increase?
Yes. Rate adjustments are recommended under both scenarios to maintain system sustainability. Any increases are phased in over multiple years to reduce rate shock.
7. How will rate increases be phased?
Rate changes are spread over three to four years, rather than implemented all at once.
8. How will a typical residential bill be affected?
For a household using 5,000 gallons of water and 5,000 gallons of wastewater per month, bills will gradually increase over time. Bills are higher under Scenario 2 due to the cost of a new wastewater treatment plant.
9. How does Hereford compare to nearby cities?
Even with proposed rate adjustments, Hereford’s utility bills remain competitive and comparable with other Panhandle communities.
10. Are industrial and commercial customers affected?
Yes. Industrial and commercial rates increase proportionately with residential rates. No changes to the existing rate structure are recommended at this time.
11. What about customers outside the city limits?
Outside-city rates are currently higher. The study recommends holding those rates flat until the outside-city multiplier is reduced from 1.50 to 1.15.
12. What happens if rates are not adjusted?
Without adjustments, revenues will not keep pace with expenses and debt needs, leading to declining reserves and reduced ability to maintain and improve critical infrastructure.
