Corpus Christi advances water rate hikes as it eyes borrowings to increase supply

Adobe Stock

The Corpus Christi, Texas, City Council gave initial approval on Tuesday to higher water rates that would support future debt issuance to boost water supply, as well as existing debt and system operations.

Rate increases that would take effect Jan. 1, which passed in an 8-1 vote, will return for final approval next week. 

A rate hike presentation showed debt issuance for the city's $1.1 billion of ongoing water supply projects at $292 million in fiscal 2027, $428 million in fiscal 2028, and $364.5 million in fiscal 2029, as well as projected rate increases for residential, commercial, large-volume, and wholesale customers through 2036. 

Up to $500 million of utility system senior lien revenue bonds for water and wastewater projects and $113.17 million of refunding bonds the city council approved in May could be sold as soon as August in a deal led by BofA Securities, according to a notice on the Municipal Securities Rulemaking Board's EMMA website.

Not included in the city's projections is debt that could be issued for a controversial Inner Harbor seawater desalination plant that carries a preliminary cost estimate of $978.77 million.

In June, the city council postponed until September consideration of a $78.6 million contract with Corpus Christi Desal Partners for 60% of the project's design and construction of a demonstration plant.

Mayor Paulette Guajardo, who is in the throes of a process seeking to remove her from office, cast the sole vote against the rate hikes, citing a "tremendous financial burden" faced by families and businesses and the council's rejection of grant funding.

Council Member Carolyn Vaughn pushed back on the mayor's opposition, contending that projects approved by the council have to be funded. 

"So here you have the mayor, the face of this city, saying she's not going to vote for that," Vaughn said. "You've got the credit rating people looking at us. You don't do that." 

A looming Level 1 emergency, indicating Corpus Christi's regional water system is 180 days from supply not meeting demand, sparked rating downgrades and negative outlooks affecting the city's general obligation and utility system bonds. Recent rainfall eased drought conditions, allowing the city to delay the projected onset of a water crisis to September 2027 from this December. 

In a statement, the city said rating agencies "recognize the city's willingness to adjust rates as needed to maintain the financial stability of the water and wastewater enterprise funds and to support the city's strong credit profile." 

Corpus Christi Water, a city agency, is the primary water supplier for a seven-county region, which is experiencing stage three drought conditions that triggered water-use restrictions.