Water rates likely to go up annually for several years
December 29, 2012
By Caleb Heeringa
New: Dec. 29, 11:14 a.m.
Sammamish Plateau Water and Sewer District is trimming its staff by three and a half positions. But customers are still likely to see annual rate increases of up to 5 percent for water and 17 percent for sewer in the coming years as the district puts money away for future replacement of its infrastructure and pays off debt from old projects.
The district’s board of commissioners unanimously approved the agency’s $25.1 million budget for 2013 at a Dec. 3 meeting. The budget calls for three full time positions to be cut, including a finance analyst, an engineer and a planner. An executive assistant position will also switch from full-time to half-time. The district also recently froze the salaries of several top managers after a market analysis showed them to be 12 percent to 17 percent higher than average compared to neighboring water districts and cities. These measures will save the district approximately $330,000 in personnel costs.
But with labor costs only making up about 21.5 percent of the district’s budget, those savings only make a dent in overall costs. The district plans to increase its contribution to its’ capital replacement fund by $458,000 – from approximately $3.11 million per year to $3.56 million, bringing the fund’s total up to $13.36 million by the end of 2013. The fund reflects the commission’s policy choice to save now for the eventual replacement of pipes and other infrastructure, rather than hit customers with a large bill when those pipes fail.
The district is also dealing with a proposed assumption of some of its service area by the city of Issaquah. Earlier this year Issaquah commissioned a study on the impact of providing water service to neighborhoods in its city limits that are currently served by the district. The results are expected early next year. The district and city of Issaquah have sent each other dueling public disclosure requests in recent months, something the budget notes has been a “drag on staff time.” With the assumption in mind, the district’s budget calls for an additional $350,000 to be budgeted for legal help above and beyond the $150,000 a year the district pays its normal attorney, John Milne. In September, the board also approved spending up to $50,000 on a public relations consultant.
The district also continues to grapple with the fact that the revenues it collects from new development, and new connections to its system, don’t measure up to the debt payments it incurred to pay for past projects, much less the capital investments it expects to have to make in the coming years. The district brought in $392,320 in revenue for sewer facilities from connection fees in 2012. In 2013, it expects to pay $430,000 on debt for similar projects it finished in recent years and has $995,960 in sewer projects earmarked to begin in 2013.
Commissioner Lloyd Warren said he was hopeful that an updated sewer comprehensive plan process, due next year, would help address that shortfall. He said he wanted the district to be careful not to assume all of the capital projects on its five-year plan would end up being built when adjusting the district’s rates for sewer and water.
“I don’t think we should plug every single capital project into the rate model – not every one is going to be built,” Warren said.
The district has seen annual rate increase between 7 percent and 13 percent every year since 2009. It made a fundamental change to its rate structure earlier in 2012, opting for a higher base charge but charging customers less per cubic foot of water. Comm-issioners were hopeful that it would help stabilize the district’s revenue stream, which tended to fluctuate significantly depending on how much water residents were using – something that varies depending on the weather. The district is withholding judgment on whether the new rate structure worked, since it only went into effect in the middle of last year.
The rate change also reflected the district’s continued desire to separate the sewer and water sides of its business model, which had been intermingled in years past. The district’s water only customers have typically seen their rate payments subsidizing the district’s water and sewer customers.
Despite the personnel cuts, district customers will likely see rate increases next year and in the years beyond because of the continued disparity between sewer revenues and sewer expenses and an increasing amount of revenue being squirrelled away for future replacement projects. A rate forecast provided at the Dec. 3 meeting calls for water rate increases of around 5 percent a year and sewer rate increases of around 17 percent a year for the foreseeable future. Those rises would be closer to 6 percent and 18 percent, respectively, if the district hadn’t eliminated positions in the 2013 budget.
Rate adjustments are expected to occur in the spring.