Washougal officials mull utility rate adjustments

The city of Washougal should implement utility rate adjustments that would increase the average customer’s bi-monthly bill by $8 and maintain current rate structures for all classes of service in each utility from 2024 to 2028, according to a rate study compiled by a consulting firm with input from a group of local residents.

Members of a citizens action committee (CAC), appointed by the City earlier this year to “act as a sounding board throughout the study,” and Sergey Tarasov, a principal with FCS Group, a Redmond, Washington-based consulting firm, presented the study and issued recommendations to the Washougal City Council during its Nov. 13 workshop.

“I go into (the rate study) not wanting to like it or anything about it, (but) I really don’t have any complaints,” City Councilwoman Michelle Wagner said during the workshop. “It was a very thorough job by the administration, staff, and our community advisors. I feel like we’re doing what we can for the community. Even though it might not be exactly what they want, which is no increase, we’ve done the best we can do under the circumstances. Certainly the City staff has helped us out with the huge amounts of grant dollars and the low-interest rate loans that they have been pursuing. (They) are really making a difference for the public.”

The City Council will review a draft ordinance during its workshop on Monday, Dec. 4, and could vote on the new utility rate proposal during its meeting on Jan. 8, 2024.

If adopted, the new rates would go into effect in February 2024.

“Given what’s happening in other parts of the state, and compared to what the difficult decisions that (the Washougal City Council) had to make in prior years, when there were some more significant increases, personally, for me, there was a sense of relief when I saw these results that we are able to move at less than inflation for the next five years and (implement) our capital facilities program and have utilities that are in good fiscal shape and meet our fiduciary responsibilities,” Washougal City Manager David Scott told Council members Nov. 13, during the workshop. “I was really pleased to see those results.”

In 2021, the Washougal City Council approved a contract with FCS Group to analyze the city’s utility rates and prepare a study to evaluate the City’s utility revenue requirements; recommend rates necessary to fund the city’s water, wastewater and stormwater systems for the next five years; provide a comparison of current water, wastewater and stormwater system costs and operations against industry benchmarks; and propose a plan for communicating information about utility costs, financing and funding, operations, rate structure, and rate changes to customers throughout the process.

“What we’re really trying to accomplish through this analysis is to make sure that (the City’s) current rate levels are what they need to be to support their obligations on a standalone basis,” Tarasov said. “We’re focusing on not only covering operating costs and debt service with capital, but also making sure (that the City’s) policies are appropriate and will sustain (its) utilities, not just today but into the future.”

The CAC met six times over a nine-month period to receive information, ask questions and provide feedback and input. The group then summarized its recommendations in a letter, which was sent to City leaders in October.

CAC members Tom Carroll, Joan Ellis, Paul Greenlee, Debra Itzen, Brian Johnson, Bolt Minister and Jerry Shivley “have diverse backgrounds, experience and expertise,” and are “long-time and new community members, as well as individuals with experience in government, finance, and business, and administration,” according to the letter.

“This is the No. 1 concern,” Washougal Mayor David Stuebe said during the workshop session. “If you ask anybody (in Washougal), it’s always about water. It’s a really tough topic, so that’s why we wanted to have (community members be) a part of it and maybe come up with some solutions.”

The FCS Group and the CAC recommended that the City should implement 3.8% annual rate increases for the water and stormwater utilities and a 2 % increase for the sewer utility.

The CAC was presented with several options for rate scenarios to meet revenue requirements for the three utilities between 2024 and 2028, according to the letter. For all utilities, the scenarios included an option with no increase in rates and another with a 10% decrease in rates over the five-year period. A third option sought to build and maintain “replacement reserve funding” (RRF) at 100% of targets during the five-year period. This option resulted in cumulative increases ranging from 10% to 38% over the five-year period, varying between utilities, according to the CAC.

“In considering these options, the CAC sought to find a balance that would work financially for the City and that would not be overly burdensome for ratepayers,” the letter stated. “Based on the information presented, we believe that the ‘no increases’ and ‘decreases’ scenarios would not be a responsible long-term strategy for the City, specifically because there are negative impacts on RRF and on the operations and maintenance budget under both scenarios. The cuts required to the operations and maintenance budget are untenable.

“We also believe that the cumulative increases required to achieve 100% of RRF targets in the 2024-2028 period would be overly burdensome to ratepayers and feel strongly that the cumulative rate increase over the five-year period should be no more than 15% for the combined utilities.”

The City should implement a phased-in cost-of-service water allocation that includes average annual increases of 3.8% for the residential class, 2.5% for the multi-family class, 4.8% for the commercial class and 5.0% for the large commercial class.

“The results presented to the CAC indicated that the sewer utility classes of service were paying rates within an acceptable range of reasonableness and did not require any additional adjustments,” the letter stated. “The results for the water utility identified that adjustments were warranted. In particular, the multi-family class of service has been paying more than their allocated share of costs and the commercial classes have been paying less than their allocated share.

“The CAC indicated agreement that rates should be set to follow cost-of-service but did not want to significantly impact a particular class all at once. A phase-in strategy was developed to start transitioning the multi-family and commercial classes towards cost-of-service. The phase-in adjusted residential customers at or slightly below the overall average increase identified in the revenue requirement, multifamily 1.3% below average and commercial classes at 1.0%-1.2% above average.”

The City should maintain its current rate structures for all classes of service in each utility, adjust the water fixed charges by the overall average increase, and adjust the volume rates for each class of service to collect the cost-of-service phase-in specific revenue targets.

“With the recent implementation of the previous rate structure changes, it was proposed to defer any additional modifications to rate structures,” the letter states. “The CAC agreed with the staff recommendation, and in addition requested to evaluate modifying existing tiers in the residential rate structure for the water utility. A working session was held to evaluate a number of alternatives. Based on the working session, and in light of potential disproportionate impacts that some customers may experience, the CAC recommended keeping the current residential rate design in place.

“The CAC reviewed a range of rate designs presented by the consultants. The current rate design rewards conservation, while it also leads to increased bills for customers who use a lot of water during a billing cycle. Given the fact that the current rate design fully phased-in this year and that the alternatives the CAC reviewed held significant implications for changes to customer bills, the CAC is advising that the current rate design be maintained for now and re-evaluated in the next rate study.”

Scott: Residents’ claims ‘not true’

The City has posted frequently-asked-questions and answers to its website and scheduled an open house from 6 to 7:30 p.m. Wednesday, Nov. 29, at the Washougal Community Center, and is planning to send a mailer, all in an effort to provide residents with information about its utility rates.

“One of the frequently asked questions is if our rates are the highest in the state,” Scott said. “We hear this feedback, and it gets out on social media, (but) it’s just not true. This corner of Washington is the ‘low rate’ corner, and we have the highest (rates in) the ‘low rate corner,’ so that puts us in the middle of the pack statewide. There are some communities that have significantly higher (rates) than we have. That puts it into perspective. It’s not an excuse or a distraction. It’s just facts. (We want to make) sure we all have broad context as we think about this issue.”

The current utility rates, adopted by the Washougal City Council in 2018, will remain in place through 2023. The average bi-monthly utility bill in Washougal is $153.84, according to the city of Vancouver website. Rates for other cities in Clark County are between $90 and $110.

“(Other cities are) all looking at their rates, too. They’ll all be going up some percentage,” Scott said. “What Sergey is finding is that (other cities’) percentages are going up more than what we’re looking at, so the gap will close.”

Washougal residents have criticized the City’s utility rates in recent years, claiming that their bills are excessively high and at times unpayable.

“I don’t know what the answer is, but I feel like (the City) can do something,” Washougal resident Randall Crane told the Post-Record earlier this year. “I mean, just saying, ‘Your water bill $700, tough luck,’ that’s not realistic. When you go to buy a car, it’s like, ‘Well, I can’t afford the Mercedes, so I’m going to go look at the Kia.’ With water, (there is no other less-expensive option). You either pay (the bill) or they’ll turn your water off.”

Scott said a variety of factors, including a city’s topographical dynamics, size and composition of customer base, methods for providing and treating its water, rate policies, and federally funded improvements cities have to make, can have a significant impact on utility rates.

“One of our goals is fiscal responsibility, and that’s not a one-way street where we run everything into the ground in order to save people money,” Councilwoman Janice Killion said. “I mean, fiscal responsibility also means having a self-sufficient utility and being responsible to our bondholders.”