Rate Study Presentation

NewGen Water & Wastewater Cost of Service & Rate Design Study

October 14, 2025
The Truth or Consequences City Commission reviewed the final presentation of a comprehensive Water and Wastewater Cost of Service and Rate Design Study, conducted by NewGen Strategies & Solutions. This report will mark a multi-year effort to address aging infrastructure, rising operational costs, and long-term financial sustainability for the city’s utility systems.

Background and Purpose
City Manager Gary Whitehead opened the discussion by highlighting the years of work that led to the study. The city has been working to resolve ongoing water system challenges and ensure that rates are consistent with other systems across New Mexico. A key goal is to organize the city’s accumulated funds in a way that responsibly manages its high debt load. Currently, the city operates with a 25% debt-to-grant ratio.

The study is designed to determine whether future debt obligations can be met through rate adjustments or if support from the general fund will be necessary. Whitehead emphasized the importance of fairness and transparency in the process and noted that the consultants have been pushed hard to produce accurate and actionable reports.

He introduced Dave Yanke and Cari Anderson from NewGen, explaining to the Commission that accepting the report would allow the city to complete its contract with the consultants. Public hearings will follow, giving commissioners time to digest the findings and public comment before considering implementation in the next budget cycle. If adopted, new rates would take effect July 1^st of the year they are set into place.

Presentation Highlights
Cari Anderson, representing NewGen, outlined the methodology and goals of the study. The purpose was to create a four-year forecast of the revenue requirement for operating and capital costs, covering fiscal years 2026 to 2029. The team gathered financial data and conducted a billing analysis to align customer accounts and consumption with a typical year, factoring in rainfall data to improve accuracy.

The study evaluated revenue sufficiency under current rates and used that analysis to propose rate structures that would ensure financial integrity for the utility. Key concepts explained in the presentation included:

Revenue Requirement: The amount the utility must collect through rates to cover operating and maintenance expenses, capital improvements, and infrastructure upgrades.
Test Year: An adjusted fiscal year (FY) used as a baseline for setting rates. FY 2026 was selected and adjusted for inflation in areas like electricity, chemicals, and contractual services.
Capital Planning: An additional $50,000 was added to reserves to support future capital needs.

Rate Scenarios and Recommendations
Dave Yanke presented proposed rate scenarios for both water and wastewater services. No rate changes are recommended for FY 2026, but increases are proposed beginning in FY 2027. Both scenarios include a phase-in of meter equivalent rates and a phase-out of 2,000 gallons included in the minimum bill.

Water Services

Scenario 1:

3% annual increase for Residential and City customers
5% annual increase for Commercial and Industrial customers

Scenario 2:

6% annual increase for Residential and City customers
8% annual increase for Commercial and Industrial customers

Both scenarios include a phase-in of meter equivalent rates and a phase-out of the 2,000 gallons included in the minimum bill. Yanke emphasized the importance of water conservation, understanding normal consumption patterns, and preparing for aging infrastructure. Building reserves is essential to respond to equipment failures and maintain service reliability. Yanke recommended Scenario 2.

Wastewater Services

Scenario 1: 15% increase on minimum bill and volumetric rates
Scenario 2: 25% increase on minimum bill and volumetric rates

Yanke “100%” recommended Scenario 2 for wastewater, noting that significant rate increases are needed to bring equipment and facilities into compliance. Completing these upgrades proactively is more cost-effective than being mandated by state or federal authorities for compliance.

He explained that while the full 25% increase may not be necessary long-term, it is critical to begin generating revenue. Many municipalities revisit their rate structures every five years, adjusting as needed. Even as repairs are made, other parts of the system continue to age, requiring ongoing investment.

Sample Bill Comparisons
Water Services (Residential, 6,000 gallons/month):

Current (FY 2026): $33.11
Scenario 1 (FY 2027): $37.62 → 13.6% increase
Scenario 2 (FY 2027): $38.72 → 16.9% increase

Wastewater Services (Residential, 6,000 gallons/month):

Current (FY 2026): $44.95
Scenario 1 (FY 2027): $51.69 → 15.0% increase
Scenario 2 (FY 2027): $56.19 → 25.0% increase

Long-Term Vision and Financial Strategy
Whitehead elaborated on the city's strategic goals. On the wastewater side, the city plans to make repairs that will extend the system’s life by five to seven years. The long-term vision includes securing enough revenue to support a $5 million loan for renovating the wastewater treatment plant within the next three to five years. Scenario 2 supports this goal, though if grant funding is secured, the rate increase could potentially be reduced to 15%.

On the water side, the city faces $400,000 annually in debt service, much of it tied to 40-year loans. The city has received approximately $43 million in grant funding, equating to $7,000 per resident. While water rates are unlikely to change significantly, wastewater rates have more flexibility for adjustment.

The city currently holds about $1 million in reserves for both water and wastewater. Compared to 116 systems across New Mexico, Truth or Consequences ranks in the bottom 25% for rates, with an average water bill of $50/month. Whitehead cited another utility with bills averaging $275/month as a point of comparison, although he mentioned we are not close to that point.

Commissioner and Mayor Comments
Commissioner Fahl acknowledged the challenge of communicating the rate increases to the public and stressed the importance of clearly explaining the reasons behind possible rate changes.

Commissioner Mitchell emphasized the urgency of addressing infrastructure issues, noting that the community has been vocal about water leaks and system failures. She stated that if the city is committed to fixing the problems, it must also commit to funding the solutions.

The Mayor called for aggressive efforts to secure funding, retire debt, and plan for the sewer plant renovation. He raised concerns about meter replacement and its impact on billing. Yanke explained that older meters typically underreport usage, which can affect revenue projections.

The Mayor also noted that the city is replacing 35,000 feet of water lines near Veater and that 20–40% of water is lost through leakage. He urged the city to engage with legislative committees about infrastructure challenges in small communities and to seek general debt relief. His goal is to come as close to break-even as possible while maximizing efficiency.

Why the Water and Wastewater Rate Increase Matters
The proposed water and wastewater rate increases in Truth or Consequences are about more than just numbers, they’re about protecting the health, safety, and future of our community. Our utility systems are aging, and many parts of the infrastructure are in disrepair. Leaks, outdated meters, and deteriorating pipes are costing the city money and risking service interruptions. By adjusting rates, we can fund the repairs and upgrades needed to ensure reliable service and avoid more expensive emergency fixes down the road.

Rate changes help the city stay ahead of state and federal compliance requirements. Wastewater systems must meet strict environmental standards, and falling short can lead to court orders or fines. It’s far more cost-effective to make improvements now than to be forced into them later. Proactively investing in our systems also opens the door to significant grant opportunities. Many infrastructure grants require matching funds, and by generating revenue through rates, we position ourselves to qualify for millions in outside funding, stretching every local dollar further.

Financially, the city carries long-term debt from past infrastructure investments, much of it tied to 40-year loans. Rate increases help us manage this debt responsibly, without pulling from general funds that support other essential services. They also allow us to build reserves for future needs, so we’re prepared when equipment fails or emergencies arise.

Even with the proposed increases, Truth or Consequences remains among the most affordable communities in New Mexico when it comes to water rates. We currently rank in the bottom 25% across 116 systems statewide. The city is committed to transparency, and the rate study ensures that every dollar collected is tied directly to the cost of providing service.

We know that any increase is a tough sell. But the reality is that our community has been asking for solutions to water leaks, infrastructure failures, and aging systems. These rate adjustments are a necessary step toward fixing those problems. By investing now, we avoid larger costs later, and we ensure that our water and wastewater systems can continue to serve residents safely and reliably for years to come.