SAWS board backs $608m capital budget amendment and 7.9% rate hike to avert critical system failures

SAWS board backs $608m capital budget amendment and 7.9% rate hike to avert critical system failuresFacing aging infrastructure and the risk of severe regulatory penalties, the San Antonio Water System is advancing a four-year rate plan to fund a massive expansion of its 2026 capital improvement program, heavily targeting wastewater treatment upgrades and main replacements.

The board signaled support for "Option 3," which expands the 2026 CIP from a previously approved $258 million to $607.8 million.

The expanded budget requires a 7.9% residential rate increase in 2026 to fund critical projects, including major upgrades at the Steven M. Clouse Water Recycling Center.

Without the investment, staff warned the utility faces the risk of federal consent decrees, state enforcement actions, and critical system failures.

The plan also doubles the eligibility pool for the utility's Uplift affordability program by raising the qualifying threshold to 150% of the federal poverty level.

The San Antonio Water System (SAWS) Board of Trustees has signaled strong support for a major budget amendment that will more than double its 2026 capital improvement program (CIP) to $607.8 million, backed by a proposed 7.9% rate increase. Discussed during the utility's March 3 meeting, the proposed 2026 budget amendment addresses deferred maintenance across the utility's network. Staff presented three rate options to the board, with the recommended "Option 3" adding $349.8 million in CIP costs and $15.6 million in operations and maintenance (O&M) expenses to the previously approved baseline budget of $258 million. Over 66% of the amended $607.8 million budget is dedicated to "critical projects" that staff warned could result in system failure if left unaddressed. A massive portion of the funding is targeted at the Steven M. Clouse Water Recycling Center. The facility requires over $500 million over a five-year period to replace infrastructure dating back to 1987, including a $170 million biosolids project to construct a new centralized solids processing facility, and an $84.1 million rehabilitation of return activated sludge pumps and filter equipment. Staff noted that failing to amend the budget and advance these projects could attract negative attention from credit rating agencies and risk state and federal enforcement actions, including the possibility of a federal consent decree. SAWS previously negotiated its wastewater treatment plants out of a 2013 consent decree to maintain affordability, which consequently deferred major facility improvements over the past decade. The budget also targets the replacement of 77 miles of water mains over the next five years to meet the industry standard of 30 breaks per 100 miles, an effort estimated to cost $230 million. Staff noted that utilizing AI predictive modeling has dramatically improved the utility's ability to target the worst mains, with the model accurately predicting 33% of main breaks in 2025. To offset the 7.9% rate hike, Option 3 expands the utility's Uplift affordability program. By raising the eligibility threshold from 125% to 150% of the federal poverty level, the program will double its reach from 30,000 to approximately 60,000 customers. Rates for Uplift participants will remain unchanged under the proposal. The board chair expressed full support for the comprehensive four-year rate plan, which will set firm rates for 2026 and 2027 while establishing "up-to" amounts for 2028 and 2029. SAWS staff plans to hold public hearings next month before bringing the final recommendation to the board in May, with City Council consideration expected in late May or early June.