First, it is important to note the City of Irving is nonprofit entity. Water and wastewater rates are intended to recover the full cost of operating the water and wastewater utilities.
Although there are innumerable details in rate making, the concept is actually quite simple: The City of Irving aims to break even. To determine how much to charge for water and wastewater services, staff must first project how much revenue will be collected in the upcoming year at the current rates, including customer base growth.
Projections are calculated on expenses through the public budgeting process. These expenditures consider all the costs to function each utility, including operations and maintenance expenses, debt payments, water source expenses, future water resource development and all other expenditure matters. Then, a rate is generated that make the two - projected revenues and projected expenditures - break even. A detailed description of the city's projected revenue and expenditures can be found in the Annual Operating Budget.
Because of general inflation, the costs for goods and services, and other factors, projected expenditures often rise from year to year, and as a result, outpace the system’s customer base growth. In these cases, a rate adjustment is required in order to balance the budget. Management will make a recommendation for the amount and timing of the rate adjustment, and the Irving City Council makes the final rate decision.
However, projected revenues rarely end up exactly matching actual revenues for a given year. Unpredictable rainfall and human behavior make this impossible. The same is true of projected and actual expenditures. In the years that revenues are less than expenditures, the system draws on accumulated reserves to meet its cash and debt obligations. In the years that revenues are greater than expenditures, revenues are reinvested in the system’s aging infrastructure, are used toward securing future water rights, or in some other way that directly benefits the system. In any event, when the amount collected exceeds the amount spent, the benefit goes to the citizens of Irving.