A usage rate surcharge in place since 2004 for water and wastewater customers located outside Puyallup city limits may soon be a thing of the past.

The Puyallup City Council voted 4-2 on Feb. 5 to pass the first reading of an ordinance that would eliminate the usage rate surcharge for water and wastewater customers within the service area but outside city limits.

Mayor Rick Hansen and council member John Palmer voted against the ordinance.

Since 2004, the usage surcharge rate imposed has been 50 percent more than the city rate for unincorporated customers. During its Jan. 15 study session, the city council determined the use of a cost allocation model, rather than a usage rate surcharge, would satisfy the requirements to provide water and wastewater service.

Rob Andreotti, public works director, told the council Feb. 5 that providing service to customers outside the city limits would come at the same price as providing service to those who live within the city limits.

Several council members argued differently, saying there is a slight differential. Council members John Hopkins and Palmer said a 10 percent to 20 percent increase above the base rate for customers outside the city would be more reasonable.

“Removing the surcharge will result in a 33 percent reduction in revenue to the utility fund, or $95,000,” Palmer said.

City Finance Director Cliff Craig said eliminating the surcharge would be the equivalent of reducing water revenue by 1 percent and sewer revenue by a 0.5 percent.

Palmer said he would like to set a slightly higher rate for customers outside the city but within the service area to reflect the indirect benefits, such as increased property values, that outside city residents receive from using city water.

“Providing water supports their property value,” Palmer said. “They get an indirect benefit, but the city doesn’t get an indirect cut of that benefit.”

Palmer also said general-fund revenue supported by city residents has helped to support the building and maintaining of city utilities.

“It would make sense for non-city residents to pay for that benefit,” Palmer said.

Hopkins said his preference would be to have a small differential, something in the order of 10 percent.

“My reasoning is there is actually a difference in the cost that the city has for servicing those areas outside the city,” Hopkins said in a later interview.

Hopkins said he voted for the ordinance because he doesn’t believe the current 50 percent differential is fair. He added the differential was put in place by the city council many years ago to “encourage people to annex into the city.”

“There was a deliberate attempt by the previous administration to force annexation,” Hopkins said.

He added the current city council members don’t see it that way.

Meanwhile, the cost allocation model set in place would determine a base rate by calculating the shared costs to the different city departments that provide services to the utility fund.

“Because state law forbids cities to charge utility funds for more services than what they get, auditors are very mindful for how much we charge utilities for general administrative costs,” Craig said.

City Council agenda

An interdisciplinary team will report to the Puyallup City Council during the Feb. 19 meeting regarding its findings about resources allocated to parks and recreation programs and the costs associated with providing services.

“I’ve told this group to be bold and not pull any punches,” interim City Manager Bill McDonald said. “We give recommendations to council, and they make the policy decisions.”

McDonald said the team is designed to give the council a better understanding of what services cost. Council members can determine whether there is enough public benefit to justify the cost, or if there is a better way to do it, he said.

The regular meeting will begin at 6:30 p.m. Tuesday in the city council chambers on the fifth floor of city hall.