13 North Texas cities end their decadeslong water war and agree to new and fairer rate structure

Granddaddy suburbs and up-and-coming boomtowns across North Texas ended their decadeslong water war Thursday and unanimously agreed to a new wholesale rate structure that will determine each city’s fair share.

This history-making regional cooperation to write an amended contract with the North Texas Municipal Water District won’t show up in residents’ water bills anytime soon. Reaching a compromise that all 13 member cities could live with will require a gradual yearslong phasing in of the changes, not an abrupt rejiggering.

This is a very big deal: It took substantial political courage from each of the cities and the water district to even seriously discuss a new rate structure — much less actually overhaul the “take or pay” system.

The 13 cities, just north and east of Dallas, are each in a different point on the growth runway — some only beginning to boom and others all but built out. Yet representatives of each one symbolically linked arms Thursday morning outside the water district’s massive Wylie complex to declare a new era of partnership and unity.

The deal also officially ends the rate case that the granddaddy suburbs of Plano, Richardson, Garland and Mesquite filed with the Public Utility Commission in late 2016.

While the litigation was officially aimed at the water district, it indirectly targeted the other nine member cities: Allen, Farmersville, Forney, Frisco, McKinney, Princeton, Rockwall, Royse City and Wylie.

After Thursday’s contract signing, McKinney city manager Paul Grimes said, “You can’t get deals without a compromise — a concept too many people have forgotten these days.”

In the first eight years of the new methodology, the changes will be incremental and not even noticeable in some of the cities. That’s by design, Grimes said, to allow time for the booming communities to adopt pricing, conservation and efficiency strategies to soften the impact on growth communities such as his.

Grimes, in McKinney’s top job for four years and a relative newcomer to this debate, said his message to the group was that, over time, agreements fall out of balance.

“That requires a rebalancing so all parties feel we are in a good place going forward,” he told me Thursday.

The long-running dispute centered on the cost-sharing “take or pay” methodology that member cities first agreed to back in 1953: Each is billed an amount based on its highest year of usage. That wholesale charge matters a lot, because it is passed along to residents as part of their monthly bill.

The four granddaddy cities have argued for almost 20 years that the rate structure was outdated because — especially as a result of conservation — they no longer need nearly as much water as they’re contractually obligated to buy.

Given that the job of every city manager is to look out for residents’ best interests, particularly how they are hit in the wallet, it’s easy to see why changing the formula wouldn’t be popular in communities that might see their wholesale rates rise.

The new methodology announced Thursday, already approved by the water district board and the 13 city councils, will be implemented in different ways, but generally it will work like this:

Over the next eight years, each member’s annual minimum — officially, its contractual funding commitment — will gradually be adjusted to align its portion of overall costs with its historical actual consumption.

Beginning in 2029, the allocation method will transition to a combination of the newly established annual minimums and actual water used.

Starting in 2033, the annual minimum for each city will be based on a five-year rolling average of actual consumption.

How much these wholesale-cost changes affect suburban water bills will vary, depending on the retail customer rates that each city sets.

The 13 member cities are among 80 communities — home to about 1.8 million customers — that get their water, directly or indirectly, from the North Texas Municipal Water District.

Rodney Rhoades, the district’s interim executive director since former boss Tom Kula resigned in April, said customer communities also will be allowed to revise their contracts along the same lines that the 13 member cities have chosen.

Rhoades said the amended contract is the result of thousands of hours of work from member city mayors, council members and staffs, consultants, and the water district staff. “It is yet another example of our long history of coming together to serve the needs of our communities,” he said after the ceremony.

Given the inability of our national and state representatives to work together these days, it’s refreshingly hopeful — and a much-needed reminder of how government is supposed to work — to see community leaders come together like this for the good of the region.

As Frisco city manager George Purefoy reminded me, “Politics used to be the art of compromise. … This one took a while. It’s good to get it done,” he said.

Formal discussions among the cities, working under a strict confidentiality agreement, began in early 2016. City managers I talked with Thursday acknowledged that new leadership and the state’s threatened involvement played a role in breaking the logjam. But they said the bigger factor was finding ways to ease an amended contract’s impact on the growth communities.

The agreed-to eight-year transition period that will precede rolling out changes over five years gave the granddaddy suburbs what they needed and allows time for the other cities to put strategies in place to mitigate potential increases.

Plano city manager Mark Israelson, who has been in these discussions almost since they began, is appreciative that the cities and water district came together to get the new methodology implemented.

“We think this will be meaningful for the next 50 years. It will encourage conservation and will be important to Plano residents for generations to come.”

In a big victory February for Garland, Mesquite, Plano and Richardson, the Public Utility Commission voted that the district’s water rates were adverse to the public interest and reluctantly indicated that it would call for a cost of service review.

The state agency has never before reviewed a wholesale water rate case, and prior to the February decision, the commissioners had repeatedly made clear that they wanted the dispute settled in North Texas, not Austin.

Less than 24 hours after Kula’s April 16 resignation from the water district, the Public Utility Commission did an about-face and ordered the member cities to return to their own negotiations.

That led to the latest round of talks, this time with a new district leader in the room and the knowledge that Austin might step back in if a deal weren’t done.

Items on last month’s executive session agenda of the North Texas Municipal Water District board hinted that an amended contract was near, but no details were available. Now we know that “take or pay” is about to get a radical overhaul.

This wholesale billing formula was part of the contract signed by the original 10 member cities when the district was created in 1953. Years later, Richardson, Allen and Frisco joined the group, bringing it to 13.

The terms of the deal were set to ensure that infrastructure and resources grew as the communities did. Amended only once, in 1988, the system always favored growth.

But the model didn’t make much of a case for conservation. While the cities and district have long talked about treating water as a fragile resource, the system provided little incentive for cities to do so.

In the water district’s early decades, all its member cities were booming, so everyone was happy with the deal. By the early aughts, the granddaddy suburbs began to bristle against what they now considered an outdated rate system unfairly weighted against them.

Their steady chorus of concern resulted in the 13 member cities agreeing to meet monthly, starting in March 2016, to work toward contract changes. By December of that year, with a compromise looking about as unlikely as Christmas Day snow in North Texas, the four largest suburbs filed their case in Austin.

In the end, it looks like the Public Utility Commission was right: With a nudge from Austin, North Texas communities resolved this contentious water rate formula right here at home.

Richardson city manager Dan Johnson put it best: “Each of us thinks we’re the center of the universe every day — and we have to for economic development and all kind of other purposes. But we know the rich tradition of interdependence is key to our success.

“It took us all being a little tired, having quietly finally dumped our buckets and doing the powerful work of listening … then it was time to get this figured out.”