Water and sewer have been one of the hottest topics of conversation for the Bonney Lake City Council over the last few months.
At the end of May, the council voted to raise the city’s water rates by 9 percent and the sewer rates by 5.5 percent.
And it’s possible those rate increases are only the beginning.
Back in November 2016, Bonney Lake hired FCS Group to study the city’s water and sewer utility rates to see if they need to be increased to keep up with rising costs and fund capital projects.
The consulting firm recommended Bonney Lake increase its water and sewer rates by 54 and 30 percent respectively between now and 2022, phasing in the increases over time.
After much deliberation, the city decided to adopt FCS’s proposed initial rate increases (9 percent for water, 5.5 percent for sewer) for the rest of 2017.
The water rate increase was approved 4-3 and sewer rate increase 6-1. The increases will go into effect July 1.
But the council also decided to postpone discussion of the rest of FCS’s recommended rate increases in order to look at how the city could save money for residents by cutting costs to some capital projects the water and sewer utilities help fund.
For water, the firm recommended another 9 percent increase in 2018, 8 percent increases in 2019 and 2020, a 6 percent increase in 2021 and a 5 percent increase in 2022.
For sewer, FCS recommended another 5.5 percent increase in 2018, a 5 percent increase in 2019, two 4 percent increases in 2020 and 2021, and a 3 percent increase in 2022.
Without these rate increases, FCS said during its April 18 presentation, the city should not expect to be able to maintain or operate its water utility or pay off debt that has been collecting in the sewer utility by 2022.
Additionally, FCS forecasted the city will need to spend more than $34 million in water and sewer capital projects, some required by the state Department of Health, over the next five years — something the city will be unable to do if its water and sewer utilities don’t bring in more revenue.
If the city goes with the recommended increases, the average total water and sewer bill is expected to jump from $107.14 to $145.28.
FCS based their estimations on the average water usage of single-family home: 5236 gallons of water (7 centum cubic feet, or ccf) per month with a 5/8-inch meter.
City Administrator Don Morrison said council discussion on this issue seems to indicate the city will increase utility rates, but less than what FCS recommended.
“It won’t be because the utility really need the funds, but because some of the recommended capital improvement programs have been pushed further out into the future,” he said.
IS BONNEY LAKE’S WATER EXPENSIVE?
A quick glance at Facebook may show that Bonney Lake residents believe they already pay too much for water and sewer.
But according to a voluntary Association of Washington Cities survey, Bonney Lake’s water bills are below average — it’s the sewer bills that are more expensive than some other cities.
The average water bill (for a single-family home using 7480 gallons of water a month, or 10 ccf), is around $49.05, based on the 78 cities that responded to the survey.
This puts Bonney Lake’s comparative water bill, $26.81, below average for the state and less expensive than 44 cities in the survey.
The average sewer bill for 10 ccfs of water in the state comes out to $53.19, putting Bonney Lake’s comparative bill of $88.35 above average, coming behind only Seattle, Enumclaw and two other cities.
Based on the AWC survey, the state’s average combined sewer and water bills is around $99.30.
Bonney Lake’s average combined bills is around $115.16, making the city the 15th most expensive in the state in regards to sewer and water bills, according to the survey.
The 2015 study was the most recent study published by AWC, and Bonney Lake has raised both utility rates since it was published.
WHY IS SEWER SO EXPENSIVE?
According to Bonney Lake City Administrator Don Morrison, the city’s topography is a key factor for why Bonney Lake’s sewer bills are more expensive than many other cities around the state.
Bonney Lake’s hills and valleys means the city needs more sewer lift stations than average to be able to direct sewage around the city and eventually into Sumner, where it’s treated.
Morrison said the city has 25 lift stations that cost more than $1 million each and also require funds to operate and maintain.
In comparison, Sumner only has 15 lift stations.
“We also have a number of force mains that are more expensive than forced or pumped lines, due to our topography,” Morrison continued. “Finally, the upgrades to the Sumner wastewater plan has driven up costs (loan payments for the improvements).”
Sumner’s 2017-2018 biennium budget included measures to hire three new operators at the wastewater plant. This means Bonney Lake is expected to pay more money to Sumner for those new full-time workers, on top of what the city already pays Sumner for its services.
Capital project upgrades at the plant further increased sewer treatment cost to Bonney Lake.
WHAT ABOUT RESERVE MONEY?
According to Morrison, Bonney Lake typically aims to have money left over in water or sewer utility fund balances.
“These can be accumulated over time as a result of unspent System Development Charges (SDCs) or taking in more revenue than funds expended,” Morrison said. “The American Water Works Association recommends that in order to meet cash flow and miscellaneous unforeseen requirements, that 25 percent of operating expenses be held ‘in reserve.’”
Based on that recommendation, Bonney Lake’s water reserves should total around $1.4 million and $1.2 million for sewer reserves.
These reserve funds can be used to help pay for capital improvement projects or pay off utility loans or bonds, but generally, “I think it is fair to state that reserves have been used to defer rate increases rather than undertake needed system improvements,” Morrison said.
While this has kept water and sewer rates lower in the past, Morrison expects capital project needs in the city’s utility systems to heavily rely on those reserve funds for the next several years.
Unfortunately for current city residents, these reserve funds have already dwindled due to falling SDC revenue.
According to city documents, the city was booming between 2003 and 2007, before the recession hit the country. During this time period, the city was seeing sewer SDC revenue come in between $1.5 million and $2.7 million per year and between $2.7 million and $6 million per year for water SDCs.
Comparatively, when the recession was in full swing from 2007 to 2011, SDC revenue dropped to below a million for sewer SDCs per year and around $1.5 million per year for water SDCs.
“During the Great Recession a lot of local development slowed dramatically. Accordingly, our system development charges (connection fees) dropped significantly as nobody was building too much,” Morrison said. “This significantly reduced funding for capital projects. However, Public Works only slightly scaled back capital spending. This also contributed to the drawing down of ‘reserves.’”
Presently, the city hasn’t seen a return to pre-recession SDC revenue levels, as fewer lots are now available for developers and there is no development activity in Eastown.
Even with Costco and other developers moving into the former WSU forest area in the future, “I don’t expect SDC fees from this new development to replenish much of the reserve fund,” Morrison said.
With a lack of recent development in Bonney Lake affecting the city’s dwindling utility reserves, Morrison continued, reserve funds will now rely on utility rate charges, which means he expects reserve fund levels to remain at low levels for the next few years, especially as capital projects get underway.
WHAT CAPITAL PROJECTS?
According to the Feb. 14 DOH letter, the city has been putting off various capital projects for close to 10 years.
“The deferred maintenance and capital projects for infrastructure replacement over the past decade are only getting the water system into a deeper hole,” Kropack and Ryding wrote.
Morrison said some of the projects — which include the Lakeridge water tank project, the Tacoma Point water tank project, the new Public Works Center, water main replacements at Cedarview, and upgrades to Grainger Springs — were deferred because of a lack of funding or other constraints, such as the recession.
FCS Group estimated the city needs to spend roughly $36 million on various capital projects between now and 2022.
Kropack said Bonney Lake’s case isn’t unique, and many communities put off capital projects in order to save money during the recession.
“We know people were trying to struggle through the best they could,” she said, adding that now the recession is over, the DOH wants to help cities get back on track with utility maintenance and upgrades.
The discussion over water and sewer rates are far from over, and Morrison expects the conversation to pick back up again in the fall.
“I think what we will come back with is a plan that addresses the most critical infrastructure needs, along with some increased level of preventive maintenance — sufficient to satisfy the Department of Health,” Morrison said. “That will require a series of water and sewer rate increases each of the next four or five years, but increases that are more manageable for our customers — likely in the 3 percent to 5 percent range, not the 8 to 9 percent range anticipated for the water rates.”