Title
Approval of an Ordinance Relating to Utility Rates, Fees, and Charges
Recommended Action
Committee Recommendation:
The proposed rates and charges reflect recommendations from the Finance Committee and the Utility Advisory Committee.
City Manager Recommendation:
Move to approve on second reading, the ordinance adopting the 2024 utility rates, general facilities charges, and increases to LOTT Clean Water Alliance rates and capacity development charges.
Report
Issue:
Whether to approve on second reading, an ordinance adopting the 2024 utility rates, general facilities charges, and increases to LOTT Clean Water Alliance rates and capacity development charges.
Staff Contact:
Jesse Barham, Water Resources Director, Public Works Department, 360.753.8164
Mike Vessey, Drinking Water Utility Director, Public Works Department, 360.753.8318
Gary Franks, Waste ReSources Director, Public Works Department, 360.753.8780
Presenter(s):
None - Consent Calendar Item.
Background and Analysis:
There were no changes to the ordinance from first to second reading.
Utility Rates
City of Olympia provides vital utility services to our community. For 2024, staff is proposing revenue increases (rounded) as follows:
• Drinking Water 2.0%
• Storm and Surface Water 6.5%
• Wastewater 4.0%
• Waste ReSources 3.5%
• LOTT 3.0%
• Combined 3.45% or $10.26 bi-monthly/single family account.
Key financial drivers for the proposed 2024 rates include:
• Cost of living adjustment.
• Changes in how interfund transfers are determined, reducing overall costs to the utilities (administration, utility billing, financial services, rent, insurance, computer services, etc.).
• Increases in materials and contract costs.
• Waste ReSources Capital funding for Carpenter Road facility.
• Staffing needs in Stormwater and Wastewater utilities.
A new stormwater rate category for sites with advanced stormwater treatment and industrial stormwater permits from the State of Washington is also included to account for the reduced services provided by the utility to these sites.
General Facilities Charges
Consistent with rate consultant financial analyses, staff is proposing increases in general facilities charges (GFCs) for Drinking Water (7.4%), Wastewater (8.4%) and Storm and Surface Water (17.3%) in 2024. GFCs are a one-time charge collected from new development. The charges reflect the financial value of the existing utility infrastructure and the benefits the system provides to new development. A new 50% GFC reduction for eligible low-income rental housing is included in these changes and offset by a 2% increase in charges.
LOTT Clean Water Alliance Rate
Lacey, Olympia, Tumwater and the Thurston County (LOTT) Clean Water Alliance Board of Directors approved increases for both monthly wastewater treatment rates and their capacity development charge (CDC). The CDC is similar to the City's GFC. The City collects monthly rates and CDCs for LOTT through the utility billing and development permitting processes. LOTT is also implementing a 2-year pilot program to provide a 50% rebate on CDC charges for eligible low-income housing projects.
• The LOTT Clean Water Alliance capacity development charge (CDC) is proposed to increase 3.5% ($240) to $7,081.
Climate Analysis:
Utility budgets do not have an immediate impact on greenhouse gas emissions. However, utility budgets and rates allow adaptation to address risk and vulnerability of utility infrastructure to climate impacts. The low-income housing discount of GFCs encourages the development of more high-density housing and reduces urban sprawl as multi-family development is subject to higher costs, as these are calculated on a per unit basis.
Equity Analysis:
Utility budgets and rates have potential impacts on the most vulnerable portions of the Olympia community with those least able to pay. Utility services funded by rates also protect the environmental and human health of these communities. Utility assistance programs and discounts offset these impacts for eligible customers. A GFC discount for low-income housing makes it more cost efficient for property owners to develop their property into housing that is affordable for the City’s low-income residents. Creating more affordable housing is a racial justice issue; black, indigenous, people of color, and other historically marginalized groups are over-represented in Thurston County’s homeless population and homeless crisis response system.
Neighborhood/Community Interests (if known):
City utilities provide important public health services for Olympia residents. Utility rates are set to ensure reliable, uninterrupted levels of service. City Council received a briefing regarding utility rates and related changes on October 30, 2023 and public hearings on the operating budget on October 27th and November 14th.
Financial Impact:
The proposed rates and GFCs will generate revenue to implement Council-adopted utility master plans and ensure financially responsible management of City utilities.
Options:
1. Approve the ordinance adopting the 2024 utility rates and general facilities charges on second reading. This supports essential City public and environmental health services, modestly increases rates for customers and charges for new development and provides a discount on charges for low-income housing development.
2. Modify the proposed 2024 rate increases and general facilities charges and related items in the ordinance. This avoids or lessens additional customer costs, but there is a risk of failure in fulfilling City public and environmental health responsibilities.
3. Do not approve the ordinance. Rates and related items would not be updated, making it difficult for the City to meet our public and environmental health responsibilities.
Attachments:
Ordinance