About one-third of Bainbridge Island residents using the city’s water, stormwater and sewer provider may see a rate increase of up to $25 per month in 2026, if the city council approves it.

Public Works director Chris Wierzbicki presented the 2024-25 findings of the city’s Utility Rate Study at the BI City Council meeting May 13, explaining that the city’s current charges for amenities like water and sewer use are not enough to cover the actual cost of infrastructure updates — in part because rates have remained unchecked for over a decade.

“No one likes increases to utility rates. Nevertheless, the Utility Advisory Committee finds the recommended rates and [fees] to be necessary and prudent based on the projected operating and capital needs of the utilities,” wrote the advisory group.

The UAC and BI’s utility consultant, FCS, recommended that 2023 water rates be hiked by about 26% annually between 2026-2028, with additional increases potentially necessary through 2030. Sewer rates may go up 15.5% in the same timeframe, and stormwater and surface water will rise with inflation.

Since 2010, city water charges have been out of step with inflation, per the study by the UAC and FCS, but the funding issues originated farther upstream. A series of council decisions between 2008-2011 provided cheap utility rates to consumers, but mired the city in lawsuits and drained Public Works of capital funding, forcing present-day consumers to pick up the pace.

“The water rates were lowered in 2011, and they were not increased for a number of years until almost 2020. Interestingly enough, if we had raised water rates by inflation every year since 2010, we would be somewhere right around where we need to be right now,” said Wierzbicki. “It’s unfortunate that we’re catching up right now, but it is clear that this money was needed to be able to do the capital projects and maintenance-type work for this utility, and that we’re making up for that loss now.”

For three years between 2008-2011, the city shorted the fees it pays for stormwater and surface water management on city property, undercharging itself by about 70% for a total of $2 million, which council illegally redirected to the general fund. Ratepayers on BI sued, and in 2011, council approved a 45% cut to utility rates to adjust to charges of adjacent providers.

Until 2023, city water consumers on BI were paying between $18-$44 less per month than inflation-adjusted costs for water services.

At current charging rates, the city draws in about $10.8 million annually from its utility services, including potable water, sewer system use and storm and surface water management, but its revenue margin is slim. Operations and management of each system combined will cost about $8.4 million in 2025, and the city’s debt service fund will consume about $2.3 million.

Operations and maintenance costs will remain relatively steady in the next five years, but the city’s debt service and capital funding needs will increase as projects like the Winslow water tank (currently estimated at $12.5 million) and the wastewater treatment plant (estimated at $17.8 million) move forward and new costs arise, Wierzbicki explained.

Slow development — about 14 new water line connections per year, or less than one percent per year, at a conservative estimate — means existing customers must take on higher rates, but the city may offset the charges by raising fees for new connections.

“We’re assuming very conservative growth rates — for water, about 14 new connections per year, which is less than one percent growth rate per year,” Wierzbicki said. “This is intentional; the committee wanted to explore methods for placing some of the burden of the cost for new improvements to the system onto new growth and new customers in the system, and this is a primary way of doing that.”