Olympia Utility proposes rate hike to fund projects, operations

At Monday's Olympia City Council meeting, utility department directors proposed rate increases to fund ongoing operations and critical projects.

Water Resources Director Jesse Barham presented the budget overview drivers that affect all utility departments, explaining that they are trying to hold down rates for customers as salary and benefit costs increase across the utilities. They have increased materials and contract costs, along with a couple of budget enhancements proposed for critical needs.

Waste Resources

Gary Franks, Waste Resources director, discussed issues affecting the residential recycling program and mentioned that the residential program has not rebounded since the recycling crisis in 2018.

Franks noted that the city has expense contracts for residential recycling. He said the city pays for "transloading" service through an expense contract tied to the Consumer Price Index (CPI), resulting in increasing costs.

"If you recall, last year, CPI was high. We've been seeing those costs have been increasing. And then also, with Pioneer, the company that separates our material into like categories and sells it to market, there's a cost for processing as well,” Franks pointed out.

Franks added that recycling revenue has been highly volatile since 2018 and that he projects that recycling revenue will be down next year. These fluctuating revenues and increasing expenses from the transloading contract tied to the CPI are creating a significant difference, or "delta," in the residential recycling program budget.

In discussing plans for the upcoming year, Franks mentioned that the waste resources utility wants to hire a financial consultant to review the residential rate class structure. That would include looking at the potential for "rate bundling" of organics collection.

Franks emphasized the goal of completing demolition and remediation at the old Carpenter Road maintenance facility in 2024. He stressed the need for an adequate budget next year to fully fund the work required at the site.

In terms of expenditures and revenue, Franks reported that expenditures are down 1% for a total of $15.2 million. Revenue remains flat, up to $14.8 million. The difference between revenue and expenditures is negative, around $418,000.

Franks recommended a rate increase of 3.5%.

Drinking Water

Mike Vessey, Drinking Water Utility director, announced that the final payment of a loan will be completed this year.

The utility is paying $925,000 per year from a loan issued in 2013 to change all the water meters in the city. Vessey said paying this down should get capital funding to a normal level.

Vessey noted that the drinking water utility continues to face some cost increases from the pandemic. Specifically, chlorine costs, essential for water treatment, have remained elevated. Other expenses include Puget Sound Energy's (PSE) increasing charges and an ongoing upgrade to the Supervisory Control and Data Acquisition (SCADA) system, a computerized operations program, which is scheduled to finish in 2024.

Vessey reported that drinking water utility expenditures are projected to increase by 2% to $15.7 million for the upcoming year. Revenue is anticipated to grow by 1% to $15.4 million, a hike attributed to customer growth. The proposed 2% rate increase would cover the $300,000 difference between expenditures and revenues.

Wastewater utility

Barham discussed key points for the wastewater utility budget drivers, saying they have potential staffing needs as the utility grows and the community continues to grow.

Barham mentioned that revenues had been overestimated in the past few years, and his department will hold the revenue projection flat to allow the actuals to catch up.

He reported that expenses were projected to rise 1.7% to $9.3 million while revenue remained flat at over $9 million, leaving a $240,000 difference. A 4% rate increase was proposed to cover this and the utility's tax payments

Barham additionally requested a half-time supervisor to resolve “span of control” issues in a combined operations unit comprising wastewater and stormwater operations, referring to number of employees per manager.

Storm and surface water utility

For the storm and surface water utility, Barham noted revenue support from other city departments for vegetation management and street sweeping services.

The utility aimed to address the above span of control concerns and rising sediment disposal costs with a new commercial rate category.

"We have some increasing sediment disposal costs. Sediment is the largest way to remove pollutants from the system. We're collecting sediment through street sweeping and taking it out of the system, and the disposal costs for that have gone up over the years. We're proposing a new commercial rate category for industrial stormwater permits with advanced treatment systems," Barham said.

The utility expenditures were projected to be up 2.5% to $7.5 million, while revenues grew 1% to $7.3 million, leaving a $225,000 difference.

Barham requested adding a program specialist and operations supervisor to fulfill permit obligations. A 6.5% rate increase was proposed to cover needs and two critical staffing requests.

"The total increase of the typical municipal or typical residential bill would be just under three and a half percent, about $10 every two months," Barham said.