Proposition B

Proposition B is a citizen-initiated proposed amendment to the City Charter that would terminate the City's existing voluntary Drought Surcharge Exemption Fee program and establish mandatory drought surcharges for qualifying large industrial water users only during specified drought stages.

If Proposition B is approved:

1. The existing voluntary, year-round exemption fee program would be terminated. The City would be required to give notice of termination within 30 days after voter approval, and termination would take effect no later than the end of a five-year notice period.
   
   
2. Qualifying large industrial water users would be subject to mandatory surcharges on water use above 12,842,000 gallons per month during Stage 2, Stage 3, and Water Emergency conditions, beginning when existing exemption programs end. The amendment sets minimum surcharges of $3.00 (Stage 2), $6.00 (Stage 3), and $12.00 (Water Emergency) per 1,000 gallons.
   
   
3. The proposed mandatory surcharges would not apply during Stage 1 or when no drought stage is declared.
   
   
4. The amendment would prohibit the City and its wholesale customers from creating, renewing, or extending any program that exempts large industrial users from drought surcharges or from drought-stage conservation, allocation, and curtailment requirements.

The Drought Surcharge Exemption Fee (DSEF) is a voluntary fee paid by participating large-volume industrial water customers in addition to their regular monthly water bills.

Under the current program, participating industrial customers pay a fee throughout the year in exchange for an exemption from applicable drought allocation surcharges and from City-imposed curtailment during Stages 1, 2, and 3 (except curtailment required by state law).

Revenue collected through the program is designated for developing additional drought-resistant water supplies.

The Drought Surcharge Exemption Fee was approved by the Corpus Christi City Council and became effective on October 1, 2018, under Section 55-159.1 of the City Code.

The program was established to provide funding to develop additional drought-resistant water supplies.

Since its establishment, participating industrial customers have voluntarily paid into this fund through monthly payments based on their water consumption.

Yes. Participating large-volume industrial customers currently pay a voluntary fee of $0.31 for every 1,000 gallons of water consumed, in addition to their regular monthly water charges.

The City collects these payments year-round, including periods when it is not under drought restrictions.

Not entirely. Paying the exemption fee does not exempt industrial customers from all water conservation requirements. In addition to the applicable surcharge exemption, City Code Section 55-159.1(k) exempts participating industrial customers from City curtailment during reservoir-system Stages 1, 2, and 3, except when curtailment is required by Texas Water Code Section 11.039 or other applicable state laws or regulations.

Customers remain subject to conservation requirements that are not covered by an exemption and to curtailment required by applicable state law.

Termination, which would occur no later than the end of the five-year notice period, would end collections under the existing Drought Surcharge Exemption Fee program, projected to be approximately $6 million per fiscal year.

This amount describes projected collections from the existing fee, not a forecast of the amendment's net financial effect. Depending on future conditions, mandatory surcharge collections could be less than, equal to, or greater than the discontinued exemption-fee collections.

Proposition B would establish mandatory drought surcharges for qualifying large industrial water users only during Stage 2, Stage 3, and Water Emergency conditions. Revenue would depend on future drought conditions, the duration of each drought stage, and the amount of industrial water consumed above the applicable threshold.

The City cannot determine in advance whether the proposed surcharge revenue would offset the projected revenue reduction from elimination of the existing exemption program.

Yes. Implementation would require changes to utility billing systems, contracts, administrative processes, monitoring, and enforcement.

Additionally, the proposed amendment directs the City to impose collection and enforcement obligations on its wholesale customers and on customers of those wholesale customers with whom the City has no direct billing relationship. Wholesale customers and industrial users may challenge the resulting rates and requirements, including by appeal to the Public Utility Commission of Texas under Chapter 13 of the Texas Water Code, and by suit asserting contract and other claims. Typical cost of defending such proceedings would depend on the nature and number of challenges and cannot be predicted in advance. . If the surcharges are ultimately not collected or are held unenforceable in whole or in part, the revenue reduction described above would occur without the offsetting surcharge revenue contemplated by the amendment.