Tacoma Water is projecting that it will receive about $800,000 in annual revenue should a California-based water-bottling company become one of its customers.
That money from a deal with Niagara Bottling LLC could help keep water rate increases for residential customers in check, utility officials told the Tacoma City Council at a study session Tuesday.
“For us to sell our surplus supply is a good deal, and it will allow us to mitigate rate increases,” said Tony Lindgren, Tacoma Water’s distribution engineering manager.
Should Niagara’s water consumption reach the projected level of one million gallons per day, the company would also pay Tacoma Water about $3.2 million in one-time fees, which could be used for capital projects such as replacing a water main or building filtration systems, said Sean Senescall, Tacoma Water’s rates and financial planning manager.
Tacoma Water is seeking the City Council’s approval to sell water at a discounted rate to Niagara, which is looking to build a $50 million, 311,111-square-foot bottling plant in Frederickson.
About a quarter of the 1 million gallons the Niagara plant is expected to consume each day would be sold at an 8 percent discount under the proposed contract. For any water consumed beyond that, Niagara would pay the standard rate Tacoma Water charges large-volume commercial and industrial users.
Niagara’s rate would still be more than double what Tacoma Water charges Simpson Tacoma Kraft, which uses 16.06 million gallons of water daily and is the utility’s largest customer.
The deal with Niagara would help offset Tacoma Water’s recent decline in commercial and industrial water sales, Lindgren said.
Even before the Niagara bottling plant is operating at full capacity, its consumption would make up for the departure of Nalley’s Fine Foods, which Tacoma Water officials say consumed about 400,000 gallons of water a day before the company left Tacoma in 2011.
“Part of the pressure on our rate increases has been the loss of manufacturing and industrial users,” said Robert Mack, deputy director of government affairs for Tacoma Public Utilities. “If we can get some of that back, it should relieve the pressure.”
The contract with Niagara wouldn’t threaten Tacoma Water’s ability to serve existing residential and commercial customers, Lindgren said. He said Tacoma Water has the capacity to supply about 110 million gallons of water per day, but its average daily use is only about 55 million gallons.
The Tacoma Public Utilities board approved the five-year contract with Niagara at a June meeting. If the City Council also approves it, the company would begin construction of the bottling plant along Canyon Road East in Frederickson this fall, Lindgren said.
Niagara is hoping to begin operating the facility in April 2014, he said. Under the proposed contract, Niagara’s discounted rate would take effect July 1, 2014. Any water the company bottles before that would be subject to the standard commercial rate.
Tacoma Mayor Marilyn Strickland said Tacoma Water’s pending deal with Niagara Bottling is “underscoring (that) having a publicly owned utility can be an asset to economic development.”
The City Council is expected to vote on the Niagara contract later this month.Melissa Santos: 360-357-0209 firstname.lastname@example.org