Lacey City Council seeks more analysis before approving stormwater rate increases 

Stormwater rates in Lacey could start climbing in 2027 in order to finance infrastructure projects and additional utility needs through 2035. 

The Lacey City Council, however, wants additional financial analysis before deciding on the amount of the proposed increases.  

Council members are questioning the assumptions behind the rate projections, particularly customer growth and state grant funding. The city council reviewed a stormwater rate study during a work session on Aug. 25, and asked staff to return with additional projections. 

The study supports an update to Lacey’s Stormwater Strategic Plan, which guides stormwater programs and capital projects through 2035.

The recommended service level accounts for requirements in the 2024-29 Western Washington National Pollutant Discharge Elimination System Phase II Municipal Stormwater Permit, as well as preventive maintenance, flood reduction and environmental protection work.  

Lacey's stormwater system includes about 7,140 catch basins and storm drains, 150 miles of pipe and 65 outfalls, all financed through monthly service charges on properties within city limits. 

Rate options 

Consultant FCS Group presented two scenarios based on the recommended service level, with grant funding being the difference between the scenarios. 

The grant scenario calls for annual rate increases of 9.5 percent from 2027 through 2034. Without grant funding, the annual increase rises to 11 percent for the same period.

Staff recommend the 11 percent scenario because it provides enough revenue for the planned capital program without depending on future grant awards.  

For customers, the difference would begin next year. 

A single-family customer pays $15.46 a month in 2026. The monthly charge would increase to $16.92 in 2027 with the grant assumption or $17.16 without it. By 2035, monthly charges are projected at $32.58 and $36.33, respectively.

Council members, however, challenged the 1.25 percent annual customer growth assumption used in the study. FCS Group Consultant Amanda Levine said the estimate was based on the average from the previous three years. 

Mayor Andy Ryder said the estimate may be too low and asked staff to show how higher growth assumptions could change the rate projections. 

“I have a real hard time passing double-digit rate increases, even when we’re talking at this level, and especially doing that for a 10-year period,” Ryder said. “I don’t agree with the 1.25 percent population growth at all.” 

Council member Lenny Greenstein asked to see projections using growth rates of 1.5 percent and 1.75 percent, while Ryder suggested examining a rate closer to 2 percent. Staff agreed to prepare additional calculations. 

The length of the proposed rate schedule also drew questions.

Ryder and Greenstein favored considering a shorter period instead of approving annual increases through 2034, giving the council another opportunity to review utility finances before later increases take effect. 

Grant funding 

Grant availability remains a key difference between the two scenarios. The 9.5 percent scenario assumes grants will pay 85 percent of the cost of four capital projects, reducing rate-funded expenses by about $5.1 million through 2035. 

The city may seek money through the Washington State Department of Ecology’s Stormwater Financial Assistance Program. About $15 million has been awarded annually in recent years, with applications ranked based on factors, including water quality benefits and construction readiness. 

However, Stormwater Engineering Manager Ryan Jewell said he was aware of only one Lacey capital improvement project receiving stormwater grant funding since 2016.

He said staff spoke with the Department of Ecology the week before the council meeting. Staffers were advised that projects still in the planning phase may face strong competition for fiscal 2028 funding from multimillion-dollar projects already prepared for construction. 

Recent awards also show how competition can vary from year to year. The program awarded funding to 33.1 percent of requests in fiscal 2026, compared with 85.1 percent in fiscal 2025, according to a staff report.  

The outcome could determine the timing of some flood reduction work. 

If anticipated grants are not received, projects responding to community reported flooding may be delayed until future rate increases provide enough money, according to a staff report. The 11 percent scenario avoids that dependency by financing the planned capital program without assuming grant awards. 

Greenstein said a shorter rate schedule could also give the council room to reconsider later increases if the city receives grants. 

“You do five years, and then if you do happen to get some grants, maybe you’re able to adjust down from there,” Greenstein said. 

Staff will prepare additional customer growth scenarios before the proposal returns to the council. Final action is expected later this year.