How to best address future sewer rate increases topic of Sept. 10 council meeting

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An update on possible options for sewer rate increases that will help fund upcoming capital projects — but also minimize the impact on taxpayers — was the highlight of Tuesday night’s Edmonds City Council Parks and Public Works Committee meeting.

The presentation by Public Works Director Phil Williams was a followup to a June 25 city council discussion of a draft combined utility (water, sewer and stormwater) rate study prepared by consultant FCS Group. During that meeting, several councilmembers raised the possibility of turning to bond funding for capital projects to cover rising costs. These include not only inflation but increased maintenance and operations costs, wholesale cost increases from Alderwood Water and Wastewater District (which sells water to the city), and the replacement of aging and failing water, sewer and storm infrastructure.

The city sets its utility rates in three-year cycles, so the rates being discussed would go into effect from 2020-2022.

Tuesday night’s focus was on sewer rates because the city has three major sewer-related capital projects it needs to fund in next approximately 12 years, Williams said. The first of these is a replacement system for the city’s aging sludge incinerator, which will cost the city an estimated $10 million. It  will involve a two-step process of drying and pyrolysis — the chemical decomposition of organic materials at high heat with little to no oxygen. .

Construction on the pyrolysis system is set to start next year, so it will be funded during the 2020-2022 rate cycle. That will be followed by two other major capital projects — an estimated $6.7 million Lake Ballinger trunk sewer project and an estimated $15 million to replace the city’s lift station No. 1.

The city in recent years has implemented a “pay as you go” model of rate increases to fund annual maintenance and replacement projects. However, since interest rates for bonds are extraordinarily low, city officials are eying that option for capital projects to lessen the burden on ratepayers.

Williams Tuesday night presented the council with a list of scenarios for annual sewer rate increases. These ranged from continuing the ratepayer-funded model for both capital and maintenance and operations costs, which would increase sewer rates 8% annually from 2020-25, to issuing a $10 million bond to cover capital costs coupled with an annual percentage increase to cover maintenance and operations. Under the second option, the percentage increases would vary — from 0 to 11% — based on when they began and ended.

The same rate scenarios were taken out even further — to 2050 — so councilmembers could see what Williams described as “the idea of spreading the pain over many more years.”

Williams said his current recommendation would be to issue the $10 million in bonds now to fun the pyrolysis project at the wastewater treatment plant, coupled with sewer rate increases of between 3% and 5% annually in 2020-22. The city should also consider issuing additional revenue bonds in later years to cover the Ballinger and pump station projects, he added.

Williams said he also supports the 3-year rate plan, presented June 25, to raise water rates by 5 percent annually and stormwater rates 9.5 percent annually from 2020-22.

The full council will hear the revised rate increase proposal, although that may not occur until after 2020 budget presentations later this fall. Prior to council approval of any rate increases, citizens will also have an opportunity to comment on them during a public hearing.

— By Teresa Wippel

 

One Reply to “How to best address future sewer rate increases topic of Sept. 10 council meeting”

  1. 5% increase annually for water? 9.5% annually for sewer? No wonder us folks on fixed income feel we are being forced to move out of the area.

    Ignored

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