Title
Preliminary 2027 Utility Operating Budget, Rates, Capital Facilities Plan, and General Facility Charges
Recommended Action/UAC Deliverable:
Discuss staff’s recommendations on preliminary 2027 Operating Budgets, proposed utility rates, general facility charges (GFCs), and capital facilities plans and provide recommendations to City Council
Issue:
Review and provide a recommendation on the 2027 utility rates (including LOTT), operating budgets, 2027-2032 Capital Facilities Plan and General Facility Charges (GFCs). The UAC will forward formal recommendations to the City Council in October for consideration during its budget deliberations in November/December.
Staff Contact:
Gary Franks, Public Works Water Resources Director, 360.753.8164
Mike Vessey, Public Works Drinking Water Utility Director, 360.753.8318.
Ron Jones, Public Works Waste ReSources Director, 360.753.8780
Presenters:
Same as above
Background and Analysis:
The Utility Advisory Committee (UAC) annually reviews City utility finances, customer rates, the capital facilities plan and general facilities charges.
City Utilities provide critical public health and environmental services. These services are delivered through four enterprise-funded utilities: Drinking Water, Wastewater, Storm and Surface Water, and Waste ReSources (i.e. solid waste) as well as through Olympia’s partnership in the LOTT Clean Water Alliance for wastewater treatment. Each utility plays a distinct role in meeting community needs and ensuring regulatory compliance with state and federal agencies. City Utility responsibilities include:
• Delivering clean and reliable drinking water in sufficient quantity.
• Safely conveying wastewater to the LOTT Alliance for treatment and discharge.
• Managing solid waste and recycling systems for collection, diversion, and disposal.
• Reducing flooding risks, treating and protecting water quality, and preserving aquatic habitat.
These essential services protect Olympia’s neighborhoods, infrastructure, and environment, while also building resilience to changing climate conditions such as increased rainfall intensity and frequency.
The City Utilities are municipal enterprise funds that are self-supporting through customer rates and fees, with no reliance on general tax revenue. Conversely, Utility revenue does not support general fund programs. Utilities contribute to citywide overhead costs (e.g., building mortgage, legal, and executive services) and any year-end savings remain within the Utilities to support future operating or capital needs.
Long-Term Utility Financial Planning
The City’s three water-related utilities; Drinking Water, Wastewater, and Storm and Surface Water have retained a financial consultant (i.e. HDR) to develop a long-term, sustainable financial plan. The intent of this work is to evaluate the utilities’ longer-term financial needs and help inform potential future rate strategies and rate packages beginning with the 2028 Operating Budgets,Capital Budgets, and General Facilities Charges.
HDR met with the Utility Advisory Committee in June 2026 to discuss the financial planning effort and receive UAC input. HDR is scheduled to brief the UAC on the project in March 2027 in preparation for the 2028 budgeting process. At that time, recommendations on how to balance utility service levels, infrastructure needs, regulatory requirements, affordability and rate stability over a ten-year period will be presented.
Proposed 2027 Rate Adjustments:
Staff will present proposed 2027 utility rate adjustments at the meeting, along with the summary of historical bi-monthly residential utility bills. The total anticipated increase is approximately 5.5%. For 2027, staff recommend:
• Drinking Water - 4.5% Rate Increase
• Wastewater - 9.5% Rate Increase
• Stormwater - 8.7% Rate Increase
• Waste Resources 6.5% Rate Increase
• LOTT Alliance - 3% Rate Increase
General Facilities Charges
GFCs are one-time charges assessed on new development to reflect the financial value of the existing infrastructure and its benefit to new connections. For 2027 staff recommend:
• Drinking Water GFC: 2% increase, based on a 2022 financial analysis
• Wastewater, GFCs: 5% increase based on a 2019 GFC update analysis
• Storm and Surface Water GFCs: 5% increase based on a 2017 financial analysis
• LOTT Clean Water Alliance proposes a 3% to its Capacity Development Charge (CDC)
Capital Facilities Plan (CFP) 2027-2032 - City Utilities Overview
On September 3, 2026, staff presented the preliminary 2027-2032 Capital Facilities Plan (CFP) to the Utility Advisory Committee (UAC), with a focus on the four City utilities. The CFP is developed in alignment with the Utilities’ Management Plans and the growth, development, infrastructure, and service-level goals established in the City’s Comprehensive Plan.
Over the last few budget cycles, reductions in operating budget transfers to the Wet Utilities’ capital funds have reduced available CFP balances. These reductions have helped moderate near-term rate impacts for customers but have also reduced the financial capacity available to fund future capital needs.
This approach is intended as a short-term measure to manage near-term rate impacts while maintaining essential capital investments. Over time, additional rate revenue and other sustainable funding sources will likely be needed to maintain adequate capital funding to address the Utilities’ long-term infrastructure needs.
The UAC will be asked to consider the proposed 2027-2032 CFP and provide recommendations to the City Council regarding the capital investment priorities and associated financial considerations.
The UAC will be asked to submit a recommendation letter to the City Council addressing:
• The 2027-2032 Capital Facilities Plan
• The 2027 Utility Operating Budget
• The 2027 General Facility Charges (GFCs)
Climate Analysis:
While utility budgets do not directly impact greenhouse gas emissions, they fund infrastructure investments that increase climate resilience by reducing risk and vulnerability to climate related issues.
Equity Analysis:
Utility budgets, rates and fees can disproportionately impact low-income and vulnerable community members. At the same time, utility services provide critical environmental and public health protection for all community members.
The City Utilities offer Utility Assistance Programs to mitigate affordability concerns. Capital projects implemented by the three water-related utilities (Wastewater, Storm and Surface Water and Drinking Water) may both benefit and burden communities depending on location and design.
Potential burdens may include temporary construction disruptions or longer-term changes such as increased property values and associated tax or rent pressures. Potential benefits, burdens, and disparities are assessed during the initial planning phase of each project to:
• Minimize unintended harm
• Promote equitable distribution of benefits
Neighborhood/Community Interests:
City Utilities are foundational to community health, environmental quality, and livability in Olympia.
Financial Impact:
Final UAC recommendations on utility rates and charges will guide City Council budget decisions later in the year. Utility rates provide ongoing funding for utility operations and capital projects.
The long-term financial planning work being conducted by HDR will also help inform future utility financial decisions, including potential rate strategies beginning with the 2028 Operating and Capital Budgets.
Attachments:
Proposed 2027 Residential Utility Rates, GFC’s and CDC’s
Proposed 2027-2032 Wet Utilities Capital Facilities Plan 6-Year