At a Sept. 16 meeting of the Port Orchard Finance Committee, Finance Director Noah Crocker and Public Works Director Dennis Ryan reviewed the city's General Sewer Plan (GSP) and related rate study and asked the committee for direction ahead of a public hearing next Tuesday and an ordinance scheduled for council consideration Oct. 14. If adopted, staff said the changes could take effect Jan. 1, 2026.

The conversation centered on three items: (1) a consultant recommendation to set a capital reserve target in the sewer capital construction fund (Fund 433), (2) a staffing recommendation for two additional operations FTEs to support lift-station maintenance, and (3) proposed rate designs and timelines. The city hired FCS Group in July 2023 to prepare the rate study and worked in parallel with the GSP consultant (referred to in materials as Consort) to complete the capital outlook and operational recommendations.

Why it matters: sewer enterprise rates pay for sewer operations and capital projects and cannot be commingled with water or storm funds. The committee's decisions will determine how the city finances both routine maintenance and larger capital work, and they will directly affect residential and nonresidential customers.

Noah Crocker summarized the timeline: the rate study and GSP were completed this year, staff routed the materials through the utility committee and work-study sessions over the summer, and the city will accept public comment at a hearing next week before formal ordinance action in October. Crocker said staff aims to make any rate changes effective Jan. 1, 2026.

On reserves, the FCS study recommended establishing a capital reserve target for Fund 433 equal to at least 2% of original cost of fixed assets. Crocker said that recommendation would equate to roughly $1,200,000 for Fund 433 and clarified the proposal as a policy benchmark rather than an immediate rate-driven cash transfer. "I don't think it's looking to add any additional rates," Crocker said, adding that the fund's primary revenue source is capital facility charges (CFCs) and that transfers from operating would be required if the council wanted to increase the cash balance beyond current levels. Committee members noted Fund 433 currently holds about $13,000,000, and staff said the recommendation is intended to prevent budgeting the fund down to zero during capital spending cycles.

On staffing, Consort's GSP identified a gap between the city's existing maintenance workforce and the number of lift stations and other assets to be maintained. Public Works Director Dennis Ryan said the plan found the city averages roughly 0.2 FTE per lift station and recommended adding two operations positions (one in 2026 and one in 2027) plus a vehicle and fueling capability. "The more folks we have doing the general maintenance, the preventative maintenance, you're gonna limit costly repairs over time," Ryan said, and he urged that staffing investments reduce long-term risk. Ryan also framed the capital list as enabling credits or city-led projects to fix capacity constraints that otherwise would hinder development. He told the committee, "pay me now or pay me a lot more later."

Crocker presented rate scenarios tied to whether the council funds the two new FTEs. Using the updated table prepared by FCS, Crocker said the residential rate projected to about $1.51 per unit without the two FTEs and roughly $1.53 with them; the study showed a simplified nonresidential design at about $2.37 per ERU under the same scenario. Crocker noted the proposal would also shift more costs to nonresidential customers to make residential bills lower in the near term. Councilmember John Morrissey suggested an alternative: set a single flat residential rate (he proposed $1.67 as an illustrative fixed rate) for several years so customers can budget more predictably. Morrissey said, "I like your idea of a fixed rate, John. I think that's very attractive when people know what it is for the next 5 years." Other councilmembers expressed concern about cumulative increases across utilities and asked for clearer comparisons of staffing and miles of pipe versus peer agencies before committing to hires.

Staff emphasized policy choices embedded in the rate design. Crocker said the exercise began by forecasting expenses and debt service, including upcoming debt payments tied to the marina project, then translating the revenue requirement into a rate design that simplified a previously complex 20+ category nonresidential structure into two broad classes. He said the study did not tie ongoing annual increases automatically to CPI; instead, it modeled specific expense and capital assumptions over a six-year period.

Next steps: staff asked the committee for direction to finalize the ordinance for public comment at next Tuesday's hearing and for council adoption consideration Oct. 14. The committee did not take formal action Sept. 16; several members said they were generally supportive of adding the two FTEs but wanted additional clarifying data during the council meeting and from Consort, who will attend the work session.

The committee also requested updated connection-growth numbers for the system's last three to five years and projections for the coming three to five years to help refine revenue forecasts and CFC assumptions.

For the public: the GSP and rate materials are in the committee packet and staff said Consort will be present at the full-council work study to answer technical questions before the public hearing.