City may cut water rates by 25 percent

A unanimous City Council vote at Wednesday's meeting means city water ratepayers may have some extra pocket change in their pockets during the next month or two.

The council asked city staff to prepare an ordinance to reduce all water rates across the board by 25 percent. This comes after last week's Utility Advisory Committee (UAC) decision that the city should reduce water rates and/or issue a refund to ratepayers immediately.

The UAC also asked the council and staff to provide more information – including staff recommendations and the consultant's final report – before making a final recommendation.

"The city is often criticized for extensive process, consultants and delaying decisions," said Councilor Bob Scales. "This is one of those times we can take some immediate action and we have enough information to make a decision that is an interim step. It’s a safe and prudent decision for immediate relief to ratepayers.”

Council asked city staff to return with an ordinance at the Aug. 24 meeting. The council will also consider a larger rate reduction at the time the UAC submits its recommendation on a rate reduction and/or rebate.

UAC Chair Dan Mallove estimates that recommendation will be ready by mid-September.

According to a 2010 study by the Association of Washington Cities, the average monthly residential water rate for a single family was about $35; city ratepayers dish out an average of about $64. The 25 percent rate reduction will bring rates down by $16, on average, to $48.

UAC member Andy Maron, told the council on Wednesday that the committee was eager to get more detailed information from staff since the consultant’s report is taking far longer than anyone anticipated. Maron said the UAC wants information such as the city’s long-term plans for capital, before making its final recommendation on how far the city could drop water utility rates without compromising service.

In its initial report, the consulting team GHD said rates could drop by 34 percent immediately, without compromising service. The consultants also said the city could “optimize” utility function by reducing customer service amenities and eliminating another 2.5 full-time equivalent (FTE) employees worth $230,000 in salaries and benefits to drop rates by 45 percent.

City staff has yet to formally comment on whether the “optimized” scenario is realistic. In the meantime, both the council and the UAC agree that ratepayers shouldn’t have to continue waiting when it has been made clear that the water rates are collecting a substantial surplus.

“We have taken political heat for the water rates and it’s something we wanted to tackle all last year,” said Mayor Kirsten Hytopoulos. “We are the final decision makers and we are the ones blamed for not reducing water rates. ...It’s rare when I don’t need staff weighing in and don’t need an expert opinion. It’s clear and that’s why I ask for a 25 percent rate reduction today.”

Councilor Hilary Franz said it was obvious a refund was in order, as did Councilor Bill Knobloch, who said a 25 percent rate reduction was almost an insult to ratepayers considering how long they have been paying bloated utility rates. Knobloch suggested the council wait for the UAC to finish its recommendation process before the council targets a reduction percentage.

UAC member Arlene Buetow said the magnitude of a rate reduction and a customer refund weren’t on par. She said that providing a refund from the excess reserves collected in just 2010 may equal a check of about $450 or more, per customer.

“If you reduce rates by $10 a month for the next six months I don’t think it’s worth it,” said Buetow.

The water fund is estimated to end the year with $4.4 million in unrestricted cash, which more than doubles the 2010 year-end balance of $1.8 million, according to the mid-year financial report. Katy Isaksan, a member of the consultant team, estimated the reserves target should actually hover around $980,000.

City Manager Brenda Bauer said the council will likely need advice on issues associated with a rebate because it can be “a complicated and expensive” process to identify which customers get a rebate as opposed to current ratepayers, etc.

The council did not request a staff opinion on the rebate.

Staff will bring back a rate reduction ordinance at next Wednesday’s meeting, and the council will vote on its approval. If passed, rates will be adjusted on the next billing cycle.

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