Issaquah committee reviews updated connection fees; administration proposes phasing water increases over 10 years

The Issaquah Mobility and Infrastructure Committee on June 17 reviewed updated general facility charges (GFCs) — one-time connection fees charged to new development — and heard the administration recommend applying cost-based charges for sewer and stormwater while phasing water increases over a 10‑year period.

Consultant Sergei Tarasov and Public Works Director Emily Moon told the committee the GFCs are intended to allocate the cost of existing and future capacity to new customers and must be tied to system assets under state law. "These charges have to be based on the cost of the system, which implies that they have to be tied to the asset infrastructure," Tarasov said.

The recommendation matters because GFCs are paid at permit/connection and shift some capital costs from ongoing rates to growth. Tarasov cited RCW 35.92.025 as the governing statute allowing Washington cities to impose such fees and limiting the use of GFC revenues to infrastructure and debt service.

In the presentation, Tarasov gave a breakdown of the calculations used to update the fees. For sewer, he reported a net existing cost basis of about $35 million, with roughly $8.6 million of eligible future projects; the consultant used a residential customer equivalency (RCE) denominator of about 17,253 RCEs (3,570 of which represent projected future capacity) and produced a calculated sewer GFC of about $4,410 per RCE. Tarasov noted the calculation deducts contributions in aid of construction and uses historical asset values rather than replacement cost; he also referenced a court case memory as a limiting precedent for using original cost (noting the case name from memory).

For stormwater, Tarasov reported an existing cost basis of about $106 million and a future eligible amount of about $8.1 million; the study used equivalent service units (1 ESU = 2,000 sq. ft. impervious area) and estimated a cost‑based ESU charge of about $4,697 compared with the current local ESU charge cited in the presentation. For water, the update separated a potable component and a fire‑protection component. Tarasov reported roughly $120 million in existing water asset value split about $77 million potable / $43 million fire, and about $32 million of future eligible costs (about $25 million potable and $6.8 million fire). Using meter‑capacity equivalents (about 22,000 meter capacity equivalents with roughly 6,000 future capacity), he reported a combined average cost‑based residential connection charge of about $11,299 versus a current combined residential connection charge of about $7,880; Tarasov summarized the increase for a baseline single‑family meter as approximately $3,400. He said irrigation (which does not include a fire component) would increase by roughly $940 for the smallest meter size.

Moon and Tarasov underscored policy choices the council must make: set GFCs at the full cost‑based level now, defer revisions, or phase increases. The administration's recommendation was to apply the updated cost levels for sewer and stormwater and to phase water GFC adjustments in over 10 years to reduce near‑term impacts on new housing and construction. Moon said the city will continue the current practice of indexing charges to an inflationary construction index.

Committee members asked how the charges affect housing affordability and middle‑housing initiatives such as accessory dwelling units (ADUs). Moon clarified that GFCs are one‑time charges typically paid by the developer or property owner at connection; if an existing meter is upsized the owner receives credit for prior payment and pays the difference for the larger meter. Committee members requested an analysis showing how phasing water GFCs would reallocate costs to existing ratepayers and how much additional rate revenue would be needed during the phase‑in.

No formal motion or council vote occurred; staff said the next substantive conversation on monthly rate design is scheduled for July, with a full package to return in September and, if approved by the council, rate adoption in October. Moon said the administration will bring modeling of the fiscal impact from various phase‑in schedules to the July meeting.

The committee's discussion included concern about impacts on smaller housing types: "What is the impact of the GFCs on our middle housing initiatives with ADUs and cottages?" Council members asked for figures specific to ADUs and attached versus detached units.

Staff said the updated GFC calculations and assumptions will be included in the July rate‑design discussion and that they will provide a model showing how different phase‑in schedules shift capital recovery to ongoing rates while preserving compliance with the RCW requirement that GFC revenues be used only for capital or debt service.

Next steps: staff will return in July for a final rate‑design conversation and will include modeling of phase‑in scenarios and the estimated amount reallocated to ongoing rates during a 10‑year phase. The administration also plans to package the full study for committee review in September and to forward recommendations to the full council for potential adoption in October.