Amarillo braces for 8.4% annual utility revenue hikes to fund $1.5B wastewater plant

Amarillo braces for 8.4% annual utility revenue hikes to fund $1.5B wastewater plantThe Texas city is evaluating steep rate increases to support a major wastewater treatment plant overhaul and rising wholesale water costs from the Canadian River Municipal Water Authority.

A rate study by NewGen Strategies projects the utility will need 8.4% annual revenue increases from 2026 to 2036 to fund a $1.5 billion wastewater treatment plant and other capital needs.

The city expects to bring a design engineer on board by June 2026 for a two-year design process, aiming to refine the $1.5 billion maximum estimate through value engineering.

Rising costs from the Canadian River Municipal Water Authority (CRMWA) are exacerbating the financial strain, with wholesale water rates expected to jump 6% in 2027 and 9% in 2028.

The council directed the city manager to explore appraising the city's water rights, which council members suggested could be worth up to $80 billion, to potentially leverage for better borrowing rates.

The City of Amarillo, Texas, is facing a decade of significant utility rate increases as it prepares to finance a $1.5 billion wastewater treatment plant overhaul and absorb rising wholesale water costs. During an April 14, 2026, meeting, the Amarillo City Council received a rate study update from Chris Eckert of NewGen Strategies. The study projected that the city's water and wastewater utility will require an average annual revenue increase of 8.4% from 2026 through 2036 to maintain adequate debt service coverage and cash reserves while executing its capital improvement plan. The primary driver of the projected rate hikes is a massive $1.5 billion wastewater treatment plant project. City officials noted that the city expects to bring a design engineer on board by June 2026 for a two-year design process. The $1.5 billion figure currently serves as a maximum estimate that encompasses the treatment facilities, interconnections, and new interceptors required for regional growth. Staff emphasized that value engineering and new technologies—such as energy-efficient variable frequency drives—will be evaluated to reduce the final price tag as the project approaches the 30% design milestone. Adding to the financial strain are anticipated cost increases from the Canadian River Municipal Water Authority (CRMWA), the city's wholesale water provider. Eckert noted that wholesale water costs are expected to rise by 6% in 2027 and 9% in 2028, with double-digit increases projected in subsequent years. Without rate adjustments, the utility's cash on hand—currently estimated at just 41 days—would be quickly depleted, and debt service coverage would fall below the 1.5 target recommended by the city's financial advisors. 'If we were to not adjust rates but move forward with these projects, we simply can't do it. We don't have the cash on hand to do that,' Eckert told the council. In an effort to improve the city's borrowing position ahead of the massive debt issuance, the council discussed the possibility of appraising the city's extensive historical water rights. While the rights are currently listed on the city's balance sheet at approximately $71 million, council members suggested the market value could be exponentially higher, potentially between $60 billion and $80 billion. City Manager Grayson Path was directed to work with financial advisors to determine if an updated appraisal of these water rights could be used as collateral or leverage to secure lower interest rates. NewGen Strategies is expected to return to the council later this year to present a formal rate design, which will allocate the required revenue increases among residential, commercial, and industrial customer classes. The city is targeting October 2026 for the first phase of the rate adjustments to align with the adoption of the new fiscal year budget.