Title
Financial Rate Study (wet utilities)
Recommended Action
Briefing Only
Report
Issue:
Receive briefing on proposed scope of work and timeline for a multi-year financial rate study for the City’s Drinking Water, Wastewater, and Storm and Surface Water Utilities
Staff Contact:
Gary Franks, Public Works Water Resources Director, 360.753.8780
Mike Vessey, Public Works Drinking Water Utility Director, 360.753.8318
Susan Clark, Planning and Engineering Manager, Public Works Water Resources, 360.753.8321
Presenter:
Susan Clark, Planning and Engineering Manager, Public Works Water Resources,
Background and Analysis:
Following the release of a Request for Proposals and a selection process, the City contracted with HDR Engineering, Inc. to complete a comprehensive, multi-year Financial and Rate Services Analysis for its wet utilities. This effort is designed to support long-range financial planning, rate setting, and capital funding strategies.
The study will evaluate revenue and General Facility Charge (GFC) requirements and conduct a cost-of-service and rate design analysis to ensure the three utilities remain financially sustainable, equitable, and aligned with growth and regulatory needs. A key outcome will be development of rate and fee models that City staff can use annually for budgeting and rate-setting.
The work is structured as a phased effort from 2025 through 2028 to align with the City’s budget cycle and allow for iterative review, policy development, and to build support for long-range financial planning in decision-making.
Key phases include:
• 2025 - June 2026 (Foundational Analysis):
Data collection, financial policy review, and development of baseline revenue requirements and GFC methodologies. Additional white papers will address affordability, customer assistance, and funding strategies for climate-related infrastructure (e.g., sea level rise).
• June - December 2026 (Alternatives & Draft Rates):
Development of revenue requirement scenarios, cost-of-service analysis, and draft rate designs. Updated GFCs and initial presentations to the Utility Advisory Committee (UAC), Finance Committee, and City Council.
• 2027 (Final Recommendations):
Refinement and adoption of final revenue requirements, cost-of-service analysis, rate designs, and GFCs. Final reports, decision-maker presentations, and delivery of rate and fee models with staff training.
Throughout the project, HDR will coordinate closely with City staff and provide regular opportunities for UAC and Council input.
Climate Analysis:
The study will evaluate funding strategies for climate-related infrastructure, including stormwater system demands and sea level rise protection for downtown Olympia. These considerations will be incorporated into long-term capital and financial planning.
Equity Analysis:
Equity and affordability are key components of the study. The analysis will evaluate rate impacts across customer classes, explore customer assistance program strategies, and support development of rate structures that balance financial sustainability with community affordability.
Financial Impact:
This is a multi-year professional services effort shared equality by the three utilities. Annual costs will be incorporated into each utility’s budget during the City’s annual budget process. The study will directly inform future rate adjustments, capital funding strategies, and financial policies for all three utilities.
Attachment:
Phase II Scope of Work