Title
Preliminary 2025 Utility Operating Budget, Rates, Capital Facilities Plan and General Facility Charges
Recommended Action/UAC Deliverable:
Briefing only. No action requested. Review staff’s briefing on preliminary utility rates, capital facilities plan and operating budget for 2025.
Issue:
Review 2025 preliminary utility rates (including LOTT), operating budgets, capital facility plans (CFP) and General Facility Charges (GFCs). In October, the UAC will forward their recommendations to the City Council for review during their budget deliberations in November/December.
Staff Contact:
Gary Franks, Public Works Waste ReSources Director, 360.753.8780
Jesse Barham, Public Works Water Resources Director, 360.753.8164
Mike Vessey, Public Works Drinking Water Utility Director, 360.753.8318
Presenters:
Same as above
Background and Analysis:
The Utility Advisory Committee (UAC) reviews City utility finances, rates, capital facilities plan and general facilities charges annually. The 2025-2030 Preliminary CFP for each utility is attached and consists of ongoing programs, such as aging water main replacements and neighborhood sewer extensions, large scale projects spanning multiple years and new projects.
City Utilities are expected to provide uninterrupted public health services for our community. Our responsibilities include ensuring that drinking water supplies are safe and adequate quantity, sewer infrastructure safely conveys wastewater to the LOTT treatment facility, solid waste is managed for reuse or disposal, flooding is minimized, and water quality and our urban natural resources are protected. As municipal utilities meeting the needs of our community while maintaining and upgrading our increasingly aging infrastructure is the core of our mission. Utility staff focus on effectiveness and efficiency in the delivery of these services.
The City Utilities are municipal enterprise funds. They are financially self-supporting without the input of general tax funds. Conversely, Utility revenue does not support tax-based City programs. However, the Utilities pay a fair share of various City overhead costs (e.g., building mortgage, legal and executive services). Annual savings remain in the Utilities and carry-over to the following year or are diverted to the capital budget.
Proposed 2025 Rate Increases:
Staff recommendations for utility rate adjustments will be provided along with a summary of historic bi-monthly residential utility rates at the meeting. The overall increase is anticipated to be 5% or less.
General Facilities Charges
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. Each of the water-related Utilities collects a unique GFC. Consistent with recent financial consultant fiscal analyses, staff is proposing to increase general facility charges (GFCs) for Drinking Water (5.1%) in 2025. A 2% increase is recommended for Wastewater and Storm and Surface Water utilities. A nominal increase is proposed for these two utilities in 2025; an updated financial analysis is planned in the next year. A 2% GFC increase was also included to offset the cost of providing a 50% discount to low-income housing projects beginning in 2024 as recommended by the UAC. The LOTT Clean Water Alliance (LOTT) collects a similar fee called a capacity development charge (CDC). LOTT proposes a 5% increase in the CDC for 2025, which includes a 2% increase to offset lost revenue for their affordable housing discount program. A summary of historical and proposed residential GFCs and CDCs (2020 - 2025) is attached.
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.
Equity Analysis:
Utility budgets and rates have potential impacts on the most vulnerable portions of the Olympia community with this least ability to pay. Utility services funded by rates also protect the environmental and human health of these communities. Utility assistance programs offset these impacts for eligible customers. Capital projects implemented by the three water-related utilities (Wastewater, Storm and Surface water and Drinking Water) have the potential to both benefit and burden people who live, work, or visit proposed project areas during and after construction. Burdens may include road closures and other daily stressors associated with infrastructure construction projects. Some projects, such as green stormwater infrastructure and water and sewer extensions, may increase property values over time. This will benefit property owners, while burdening such owners with increased property taxes and renters with the potential for displacement. Potential benefits, burdens, and disparities will be further assessed during the initial planning phase of each project in the CFP, at which time strategies to minimize unintended harmful impacts, while working toward equitable distribution of benefits, will be identified.
Neighborhood/Community Interests:
City utilities provide essential public health and environmental services to Olympia residents.
Financial Impact:
None at this time. Utility rates provide the funding for utility operations and are paid by customers. Final recommendations in October will provide guidance for City Council budget deliberations and approval before the end of the calendar year.
Attachments:
Summary Historical and Proposed Residential GFCs and CDCs (2020 - 2025)
CFP tables for the Storm and Surface Water Utility, the Drinking Water Utility and the Wastewater Utility