Mason County staff recommend phased utility rate changes to cover operations, build reserves and fund capital work

Mason County staff on May 20 presented a set of financial scenarios and rate recommendations for the county’s small water and sewer systems, saying some rates will need to rise to cover operations, build capital reserves and handle major maintenance needs.

The presentation, delivered by Stephanie, a Mason County utility finance staff member, and Richard, a Mason County utilities operations staff member, walked commissioners through five to six modeled rate scenarios for each system (North Bay, Russellwood, Beards Cove and Belfair). Staff emphasized smoothing rate changes over a 10-year outlook so customers face predictable increases rather than sudden, large jumps.

Why it matters: Several county-managed systems are aging, have small customer bases and face significant future capital costs. Staff argued that without a planned reserve and steady revenue, the county risks shifting large replacement costs onto future customers or scrambling for grants when pumps or mains fail.

Key points from staff presentations

- Metering and billing: Staff reported all county-managed water customers now have meters and that the county has about a year of consumption data since metered billing went live. Leak-notification and leak-credit processes were implemented; staff said they issued high-usage notices and verified leaks before bills were finalized. Staff described plans to move toward fully automated meter reading to give customers near-real-time usage access.

- Rate design goals: The county has moved to consumption-based (tiered) billing for water so customers who use more pay more and conserving customers receive a benefit. Staff said rate scenarios test whether rates cover (1) operations and maintenance (O&M), (2) required reserves and (3) capital needs projected in the county’s Capital Facilities/Improvement Plan (CIP).

- Affordability benchmarks: Staff used median household income (MHI) as an affordability reference. For the county area cited in the presentation, an MHI of $66,325 yields a 2%-of-MHI affordability threshold for water of about $110.54 per month and a 2.5%-of-MHI threshold for sewer of about $138.18 per month. Staff compared each utility’s present and proposed rates against those thresholds.

Selected system findings and scenario highlights

- North Bay: Staff reported North Bay’s current combined rate had been reduced the prior year and that modeled scenarios generally meet O&M and debt-ratio checks under the staff-preferred options. Staff noted that the last comprehensive facilities plan for North Bay dated from 1998 and that updated engineering and risk analyses will add detail to future capital needs.

- Russellwood (water and sewer considered separately): Russellwood Water currently charges $55 as the base rate; staff calculated that following the county’s older CPI-based code increases since 2009 would have produced a rate near $79.90. Staff presented five scenarios (including a 10% increase and CPI-following alternatives) showing that some level of outside subsidy would still be needed in the near term to cover O&M and debt service unless rates rise further or grant funding continues. For Russellwood Sewer, staff noted several scenario outcomes in which the system would still need an annual subsidy (tens of thousands of dollars depending on the chosen rate) unless long-term revenue increased or capital/subsidy sources were identified.

- Beards Cove: Staff described aging distribution pipe and difficult repair characteristics (breaks that can trigger other failures) and noted the system carries loan-related reserve requirements. Scenario modeling for Beards Cove included projected grant funding and showed the need to maintain a sizeable capital reserve to be competitive for grants and to provide required local match amounts.

- Belfair (sewer and water): Belfair is a larger system with a broader customer base; staff modeled six scenarios for Belfair sewer and water, including a break-even option that would cover O&M and build reserves without continued reliance on the county’s REET/0.09 subsidies. Staff noted historical decisions and different ERU assumptions for commercial users had produced billing disparities that staff propose to revisit; staff has compiled parcel-level usage data to permit residential/commercial billing separation options in future analyses.

Funding sources and grant work

Staff said the spreadsheets incorporate planned and potential external funding, including ARPA, FEMA reimbursements for damage, USDA loans (and their reserve/loan covenants), and state legislative rate-reduction funds that have been used historically. Staff reported approximately $1.6 million in grant funding and other external resources were included in multi-year projections for some systems; exact amounts depend on future awards and match requirements.

Process and next steps

Staff said they will place the detailed spreadsheets on the county’s shared drive and offer commissioners time to review and ask follow-up questions. Commissioners agreed staff should return with updated numbers and a community-outreach plan in roughly two weeks to meet the county’s timeline for July preliminary budget submittal. If the commission gives direction, staff will schedule a public hearing on proposed rate changes and conduct targeted outreach similar to last year’s meetings.

What staff asked commissioners to consider

Staff asked the commission to consider: (1) a rate path that smooths increases and meets long-term debt and reserve targets, (2) whether to separate residential and commercial billing in higher-use systems such as Belfair, and (3) how much subsidy (if any) the commission is willing to apply in the short term while grant and CIP work proceeds.

Ending note

County staff framed the May 20 workshop as a technical review and a request for direction on timing and outreach, not a final decision. Commissioners and staff set an expectation that staff will post the full spreadsheets, return with answers to commissioners’ questions and present outreach materials before the July budget submittal.