Plan surfaces to revive Corpus Christi desalination project

Corpus Christi, Texas, which was hit with negative rating outlooks after stopping design work for a costly seawater desalination plant, could revisit the project under a plan the city council is expected to consider next week.

In September, the council voted to effectively terminate the Inner Harbor Water Treatment Campus project by declining to authorize further work by design-build contractor Kiewit Corp., as the estimated cost climbed to nearly $1.2 billion.

A plan recommended by City Manager Peter Zanoni calls for Corpus Christi Desal Partners ? which had been ranked second in the city's procurement process for the project ? to develop, at no cost to the city, design and construction options over the next six months using Kiewit design data, according to a statement.

If approved by the council on Nov. 18, a final design-build contract could potentially move forward in March or April, leading to a competitive process for a 30-year operations and maintenance agreement, the statement added.

"This approach ensures an experienced desalination operator will manage the plant," the statement said. "Structuring the project in this manner enables the city to shift certain costs from debt to a long-term, manageable position within the water rate structure, providing rate stability for all customers."

The termination of the project, which would have been the first seawater desalination plant for municipal use in Texas, sparked concern from rating agencies over how Corpus Christi will increase its dwindling water supply.

Moody's Ratings on Sept. 10 put its ratings for the city's approximately $2.1 billion of general obligation, sales tax revenue, and utility system revenue bonds under review for a potential downgrade.

In October, outlooks on Corpus Christi's utility system revenue bonds were revised to negative from stable by Fitch Ratings and S&P Global Ratings, which both rate the debt AA-minus.

Moody's revised its outlook last week for the Port of Corpus Christi Authority to stable from positive, citing acute regional water supply challenges.

"A stage four drought mandate, currently forecasted by the city to occur in November 2026, that causes operational shutdowns of key industries would negatively affect port volume and revenue," the rating agency said.

Corpus Christi Water, which is the primary water supplier for a seven-county region, expected the seawater desalination plant to produce up to 36 million gallons of potable water daily. The area is experiencing stage three drought conditions that triggered water-use restrictions.

A water supply dashboard on the city's website indicates two western reservoirs will be depleted during the first half of 2027.

The city council took action in October to boost water supplies, approving agreements to procure groundwater, as well as to secure 50 million gallons of water daily from the Nueces River Authority's proposed seawater desalination plant.