HOUSTON – For decades, every utility running lines under Houston streets has paid the city a fee for using that public space. Houston’s own water system never has.
Now, Mayor John Whitmire’s administration wants to change that, proposing a new fee that could generate roughly $104 million a year.
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“CenterPoint’s a utility and they pay a right-of-way fee. AT&T, Comcast, they pay right-of-way fees” said Steven David, Deputy Chief of Staff for Mayor John Whitmire. “We have never made our wastewater and sewer utility be accountable to the same right-of-way occupancy rental fee into the general fund.”
David says his team found internal memos going back more than two decades recommending the move.
“State law allows it. Other cities do it. And we just never have,” he told KPRC 2 News. “[We] cannot figure out why.”
What the proposal would do
The plan would charge the water and sewer system five percent of its gross revenue, similar to what other utilities already pay to use the city right-of-way.
At five percent, the fee would generate roughly $104 million a year. David said the percentage was chosen carefully. He says, San Antonio’s water system charges four percent. Dallas charges six. What Houston is proposing will land in the middle and it’s before the administration believes the Texas legislature will likely regulate these fees in the next session.
David argues this is not new money coming out of residents’ pockets.
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“The transfer to the right of way is money that Houstonians have already paid the city,” he tells us. “We’re not pulling money out of them. We’re not going to increase these fees. It’s pulling our money to ourself.”
But the money would still come from a system funded by ratepayers.
“The water and sewer utility is a different entity. It is technically a part of the City of Houston, but by state law it is a separate entity,” he said. “It is a lockbox, meaning it is a rate-funded fund. We cannot just transfer money out of there. We have to have a legitimate business reason.”
The right-of-way fee, he said, is exactly that.
Why the water system could absorb it
David pointed to the utility’s financial cushion. Right now, the system holds about 550 days of operating revenues, well above its 300-day policy requirement. Its debt coverage ratio sits at 215 percent against the required 120 percent to 135 percent.
“We have unutilized liquidity,” he said. “Basically, it’s just sitting there.”
Why the city wants the money now
Houston is facing a projected $381 million budget gap in Fiscal Year 2029, growing to $446 the next year.
“I can close a $100 million budget gap,” David said. “I cannot find $381 million. And that’s the problem.”
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City leaders believe this proposal, combined with a separate effort to add a solid waste administrative fee for trash collection, would significantly reduce those deficits.
“What this does is it basically hits, in a permanent way, a reset button,” said David.
Mayor Whitmire’s team says property taxes would not go up. The tax rate would stay at 51 cents.
“We’re not relying on one-time gimmicks,” he adds. “I was apart of administrations where we had a $24 million budget gap and we sold $23 or $24 million worth of land to close it. We’re not doing that.”
The bottom line
The proposal still needs approval. At its core, the plan shifts money from a ratepayer-funded utility into the city’s general fund to help stabilize long-term finances. The real question is whether tapping that money now avoids tougher decisions later, or simply delays them.