Issaquah gets first look at utility rate study; council directs further review by committee

Public Works Director Emily Moon and consultant Sergei Tarasov presented an update on Issaquah’s utility rate study at the March 10 Committee of the Whole, outlining revenue‑requirement scenarios for water, sewer and stormwater and asking council for direction on next steps.

“[The study’s goal is] to develop new rates for our funds that provide for operational and capital needs over the next five‑year period,” Moon said, adding that staff modeled longer forecasts to avoid future “cliff” increases. The presentation included three scenario types for each fund — cash funding, debt‑heavy funding, and hybrid approaches — and called out several drivers: a multi‑year capital program, wholesale supplier increases, and staffing additions.

The water utility’s five‑year capital plan is about $44 million (inflated dollars), with roughly $100 million of additional projects forecast beyond five years. Moon said the study assumed several staffing additions (11.75 FTEs modeled; five included in the adopted 2025–26 budget, with the remaining 6.75 shown for planning). Tarasov summarized key modeling assumptions: 2023 billing data as the revenue baseline, conservative growth assumptions for new connections, escalation assumptions of roughly 4% for general costs and 5% for benefits, and a starting debt‑financing assumption of 20‑year revenue bonds at 5% interest and 1% issuance cost.

Preliminary ranges shown to council: water increases of about 4.75%–6.75% annually under the sample scenarios (hybrid scenario shown near 5.5%); sewer sample scenarios ranged roughly from 3.25% (short‑term 5‑year cash plan) to about 7% (20‑year cash‑funded plan), with a max‑debt scenario lowering near 4.75%; stormwater showed the strongest pressure, with a model that would require about 6.25% to catch up on operations, roughly 10% if non‑critical capital is deferred and about 16.75% if the full 20‑year CIP were cash‑funded. Tarasov also noted King County sewer‑treatment costs and Cascade Water Alliance wholesale charges were forecast to increase substantially in coming years, pressuring the city’s sewer and water rates.

Council members expressed several consistent themes: sensitivity to rate impacts for households on fixed incomes, interest in smoothing increases over time, reluctance among some members to maximize debt because borrowing raises long‑term costs, and requests for staff to identify projects that could be deferred or funded by grants to reduce near‑term rate pressure. Several council members suggested a middle path (hybrid funding) to limit immediate percentage increases while sharing costs with future users through targeted borrowing.

Moon and Tarasov said staff will take the next detailed analysis, including class cost allocations and rate design, to the Mobility & Infrastructure Committee and return a full package to the council later in the spring or summer. The study will also update general facility charges and recommend reserve and debt‑coverage policies; staff modeled an operating reserve target of roughly 90 days and recommended an emergency/capital reserve sized at approximately 1%–2% of plant in service for major repairs.

No formal rate action was taken at the meeting. Council members gave direction on policy preferences and asked staff to prepare detailed options for M&I, including a clearer list of capital projects that could be deferred or grant‑eligible and additional scenarios that hold combined bills to a more modest annual average where feasible.