PRESENTER: Presenter
Jared Werner, Assistant City Manger
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SUBJECT: Title
Presentation, discussion, and possible direction to staff regarding proposed Solid Waste Rates
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DEPARTMENT: Public Works/Solid Waste and Recycling Division
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COUNCIL DISTRICTS IMPACTED: All
BACKGROUND INFORMATION:
The Solid Waste and Recycling Division provides an integrated municipal collection system serving approximately 34,000 single-family households and more than 2,000 commercial, governmental, and multifamily accounts. Residential customers receive weekly garbage collection and every-other-week recycling and green waste collection, together with access to the City Recycling Center, drop-off events, green waste bags, extra recycling carts, new-resident cardboard collection, and seasonal Christmas tree mulching.
The combined residential rate is currently $17.66 per month and has not changed since 2010. During that same period, disposal, fleet, employee expenditures, fuel, recycling, and facility costs have increased substantially. Although staff has implemented operational efficiencies and service modifications to control costs, residential revenues are no longer sufficient to support the projected cost of providing residential services. Without corrective action, the residential program will increasingly rely on fund balance and ultimately place pressure on the overall Solid Waste Fund. The following report explains this in further detail and ultimately recommends a phased rate increase that is designed to restore long-term financial sustainability while avoiding a much larger one-time adjustment in the future.
ISSUE:
The Solid Waste Fund began experiencing significant financial pressure as several changes occurred at the same time.
One major change occurred in FY 2022, when multifamily tenants were transitioned from residential customers to commercial customers to remain consistent with the City's ordinances. That change resulted in an approximate $300,000 loss in revenue.
At the same time, recycling economics changed significantly. Historically, recycling disposal had generated revenue for the fund. Between FY 2022 and FY 2023, however, that changed from approximately $200,000 in revenue to a processing cost. The FY 2026 recycling disposal expenditure estimate is approximately $330,000. The challenge is not simply that expenses have increased, but rather the revenue and cost structure itself has changed.
In 2023, staff analysis identified concerns about the long-term solvency of the Solid Waste Fund. Employee expenses, disposal costs, fuel costs, and changes in the commodities market were all contributing to the pressure. At current rates and service levels, the fund balance would continue to decline significantly over time.
Disposal Costs
Disposal is one of the largest recurring expenditure pressures. Refuse disposal costs increased from approximately $2.0 million in 2021 to $3.1 million in the FY 2026 budget and are projected at approximately $4.7 million by 2031. Recycling costs are additionally affected by CPI, commodity values, and contamination, making that portion of the expense less predictable.
Fleet Costs
Collection vehicles are essential service assets and have also become substantially more expensive. Average vehicle purchase costs have increased approximately 44% from the baseline years to 2026, and the Division anticipates approximately $3 million in average annual replacement-vehicle expenditures over the next five years. Delaying scheduled replacements can defer capital expense temporarily, but it also increases maintenance, downtime, and service-reliability risk.
Green Waste Services
Green waste illustrates how costs can increase even when the City does not expand service. When the Comal County Recycling Center discontinued free acceptance of City green waste bags in May 2025, the City was required to direct-haul material to Mesquite Creek Landfill. Green waste disposal therefore moved from a historically free outlet to approximately $73,184 in FY 2025 disposal expense and approximately $95,000 in FY 2026.
Operational Efficiencies Implemented Before the Rate Proposal
Before recommending a residential rate adjustment, staff pursued measures within its control to reduce cost and improve productivity. Routeware technology has improved route efficiency, service verification, training, workforce interchangeability, and customer-service information. A FY 2024 commercial rate restructuring strengthened commercial cost recovery. Residential recycling and green waste were moved from weekly to every-other-week collection, better aligning collection frequency with participation while removing funding for five full-time positions. Staff also negotiated a local recycling outlet at the Mesquite Creek Recycling facility, eliminating routine recycling disposal trips to San Antonio and reducing non-collection travel time, fuel use, and driver fatigue.
Five-Year Financial Forecast
The five-year forecast incorporates projected customer growth, approximately 3% annual employee-cost growth, a 2% operating inflation factor, scheduled fleet replacement, administrative and debt obligations, and an additional residential route anticipated by FY 2029 based on route growth. The forecast also includes estimated Solid Waste participation in the FM 306 facility renovation debt beginning in FY 2029. These assumptions are intended to show the recurring cost of maintaining the existing service system as New Braunfels grows.
The City's financial targets are approximately 100% cost recovery and a 25% fund balance. The current fund balance is sufficient to absorb the shortfall for a period of time, but the underlying structural imbalance remains. By 2031, continuing at current rates would require the fund to draw beyond its available balance. At that point, General Fund support would be necessary to maintain solvency.
At the current residential rate, ongoing operating costs are projected to exceed recurring residential revenues, resulting in a gradual use of the existing fund balance over the forecast period. For residential services specifically, cost recovery is projected to decline from approximately 88% in FY 2027 to 70% by FY 2031 under the current rate structure. Over the same period, the residential fund balance is projected to decline from approximately 52% to negative 65%. These projections indicate a growing difference between residential service revenues and the projected cost of providing those services under the current rate structure.
Commercial services contribute positively to the enterprise fund and help stabilize the overall position. However, commercial revenue cannot sustainably absorb the projected residential deficit.
The following proposed rate structure gradually increases residential revenue to better align with the projected cost of providing residential services. The phased approach allows the City to use a portion of the existing fund balance during the transition, rather than making the full rate adjustment at one time.
The rate analysis uses both the Division's five-year financial forecast and a benchmark review of comparable municipal systems. Benchmarking provides context, not a claim that every city offers identical services or funds them in the same way.
Rate Recommendation:
Staff considered two primary factors in developing the recommendation: how New Braunfels’ current residential rate compares with other Texas municipalities, and the level of revenue needed to support existing services and projected costs over the next five years, without relying on a single, large corrective increase in the future.
The benchmark review is a point-in-time affordability and market-context tool; the financial forecast is the primary basis for the recommended rate path. Rates among comparator cities are not directly interchangeable because service frequency, cart sizes, diversion programs, fees, and tax-supported services vary by community.
New Braunfels' current $17.66 monthly residential rate has remained unchanged since 2010. In the 25-city comparison, the average current rate is approximately $24.67; excluding Austin, the average is approximately $23.03. Nineteen of the 25 benchmark cities (approximately 76%) have increased rates since 2024, with an average increase of approximately 6%. This does not mean New Braunfels should simply match another city's rate; it demonstrates that the cost pressures affecting this enterprise are not unique to New Braunfels.
Staff recommends a phased residential rate path beginning at $20.00 per month on April 1, 2027, followed by $2.00 monthly increases each October 1 through 2030. The resulting scheduled rates would be $20.00 on April 1, 2027; $22.00 on October 1, 2027; $24.00 on October 1, 2028; $26.00 on October 1, 2029; and $28.00 on October 1, 2030.
The first adjustment is $2.34 per month, or $28.08 on an annualized basis compared with today's rate. Each subsequent step is $2.00 per month, or $24.00 annually. Relative to the current $17.66 rate, the fully implemented $28.00 rate would be $10.34 more per month, or $124.08 more per year. Stating the full schedule at the outset gives residents visibility into the proposed path rather than returning annually with an unplanned corrective increase.
Comparison to Inflation
As mentioned earlier, the residential rate has not been increased since 2010. Another useful point of reference is inflation. Had the residential rate been adjusted annually for inflation since 2010, the rate would exceed the proposed FY 2027 rate and would reach approximately $30.72 by FY 2031. While inflation alone is not the basis for the recommendation, this comparison illustrates how long the residential rate has remained unchanged despite rising costs throughout the economy.
FISCAL IMPACT
The phased structure of this rate modification leverages a portion of the existing fund balance to create a gradual path toward the City’s financial targets rather than waiting until a large, one-time corrective adjustment is required.
Under the proposed rate structure, overall cost recovery is projected to increase from approximately 90% in FY 2027 to 106% in FY 2031 (average - 100%). At that time, the overall fund balance is projected to be approximately 44% (average - 41%), remaining above the City’s 25% target.
Under the proposed rate structure, residential cost recovery is projected to reach approximately 104% by FY 2031 (Average - 97%), with a residential fund balance of approximately 28% (Average - 32%).
The recommendation is intended to preserve the current service model, fund scheduled fleet and operating obligations, accommodate projected residential growth, and reduce the likelihood that future Councils and residents face a much larger one-time correction. The proposal does not add new collection programs or expand collection frequency; it aligns recurring revenue with the projected cost of the services already being provided.
The proposed structure addresses the central financial issue by bringing residential recurring revenue into alignment with the projected recurring cost of residential service over the forecast period while retaining an appropriate enterprise reserve.
A phased approach provides residents with advance notice and spreads the adjustment over multiple budget years. As mentioned during the October 12th presentation, the rate recommendations are based on the assumptions included in the five-year forecast. The phased approach allows City Council to consider deferrals of the rate increases in the event that the assumptions prove to be too conservative. These conversations can occur annually when the five-year forecast is updated and proposed budget presented.
The proposal therefore uses two tools together: a measured drawdown of accumulated fund balance and a predictable increase in recurring residential revenue. By FY 2031, the model places the overall enterprise at its long-term financial targets rather than exhausting reserves.
This approach is intended to balance near-term affordability with long-term service reliability and financial sustainability.
STRATEGIC PLAN REFERENCE:
☐Economic Mobility ☐Enhanced Connectivity ☐Community Identity
☒Organizational Excellence ☒Community Well-Being ☐N/A
FISCAL IMPACT:
Referenced above
Recommendation
RECOMMENDATION:
Staff recommends the implementation of the proposed residential rate increase. If Council provides direction for staff to move forward with the proposed rate structure, there are several important next steps.
The first is the formal ordinance process. The current schedule calls for a public hearing and first reading of the ordinance amendment to update Chapter 110, Appendix X, on December 14 with the second and final reading to occur on January 11. This process provides the formal opportunity for Council consideration and public input.
The next major component is public outreach. Beginning in January and continuing through March, staff will work with Communications to develop an outreach campaign. The goal will be to clearly explain the rate change, why it is necessary, how the phased increases work, and what services the residential rate supports.