Tacoma Water customers can expect rate hikes of at least 6 percent next year – and possibly more than 10 percent – under a budget proposal presented to the Tacoma Public Utility Board this week.
“There’s never a good time to do a rate increase, and this is probably a really unfortunate time to do one,” Tacoma Public Utilities Director Bill Gaines said Thursday.
But, facing unavoidable costs due to federal mandates and aging infrastructure amid a tough economy, utilities officials had little choice, Gaines said.
The $164 million budget proposal for the water utility offered two rate-increase alternatives to help balance its 2011-12 spending plan, TPU officials said.
One option proposes a big, one-time rate hike next year – increasing water rates by 10.6 percent in 2011 with no increases in 2012.
That alternative would raise the average monthly water bill in 2011 for a household in the city by an estimated $2.95, or by about $3.54 for customers outside the city.
The other option – identified as the recommended choice by water management – calls to spread smaller rate increases over each year of the two-year budget. It would increase rates by 6.5 percent in 2011, followed by rate hikes of 6 percent in 2012.
That option would increase the typical Tacoma household’s monthly water bill during both years by an estimated $1.75 per month for each year, TPU spokeswoman Chris Gleason said. Outside the city, the average customer’s bill would go up by about $2.20, she said.
The average in-city household now pays about $28 based on a consumption rate of 10 units per month, with the average outlying water customer paying about $33.50 per month, TPU officials said.
Tacoma Water serves about 95,000 customers in Tacoma, University Place and parts of Pierce and South King counties, according to its website.
Utility board chairman Bob Casey said Thursday a preference among the alternatives “wasn’t discussed” by the board when it received Tacoma Water’s proposal on Wednesday. The five-member board will review both options over the next few weeks when considering the overall budget proposal, he said.
“I think my personal preference would be to spread it out over two years,” Casey added.
TPU officials say the prospective rate hikes are necessary to balance the water utility’s budget given three hard realities: government mandates, aging infrastructure and the dour economy.
“We don’t take these lightly,” Gaines said. “We know this is tough on customers and we know these are tough times.”
Among other requirements, Tacoma Water faces constructing a new filtration plant to meet a federal mandate at an estimated cost of $200 million in the coming years. It also will seek to replace $42.5 million of aging pipes and equipment over the next two years, officials said.
At the same time, projected utility revenues fell below expectations and aren’t projected to readily pickup, they said.
To hold down expenses as much as possible, water managers said they’ve looked to cut as much the utility’s “non-fixed” costs as possible without impacting services.
“Everywhere we can reduce costs, we have without putting services to our customers at risk,” said Chris McMeen, Tacoma Water’s water quality manager.
Such cost-cutting measures include eliminating 30 positions over the next two years, trimming operating expenses by 2 percent for an overall savings of $3.2 million; refinancing debt to save an estimated $4 million; and downsizing the utility’s vehicle fleet.
Cutting field crew positions potentially poses some risks, if harsh winters hit the region during the next two years, McMeen said.
“The challenge there will be if we have difficult climate conditions that lead to main breaks, we’ll be stretched very thin,” he said.
The utility board “felt good about how hard Tacoma Water worked to keep the (rate) increase down,” Casey said.
“We knew there had to be an (rate) increase, just with all the big capital projects going on,” he added. “There was just no way you could avoid it.”
Even with the proposed hikes, Casey said, Tacoma Water will still provide some of the lowest water rates in the region.
Tacoma Power, which is facing similar budget issues and prospective rate increases, is expected to present a budget proposal to the utility board Sept. 22. The board expects to approve the budgets in October, Casey said, with the Tacoma City Council tasked with giving final approval by year’s end.
Lewis Kamb: 253-597-8542 lewis.kamb@thenewstribune.com blog.thenewstribune.com/politics
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